Your estate consists of all the property that you own upon your death. This can be either real or personal property. Real property will include land and improvements, plus any mineral interests. Personal property will include cash, bank accounts, clothing, household furnishings, motor vehicles, stocks and bonds, life insurance and retirement or employee benefits.
If you die without a will the state will designate your heirs for you. The assets will be divided in predetermined ways depending on whether they are community or separate property. Separate property is property that you owned prior to your marriage, or that you acquired via gift or inheritance during your marriage. Separate property will also include personal injury settlements, except any portion that is for loss of earning capacity.
A will can provide numerous benefits to you and your family. First of all it lets you determine who will receive your property upon your death. It also permits you to determine who will be responsible for your children and their property and give that person the ability to manage the kids' estate without court intervention. Another benefit is that you can take steps to minimize estate taxes.
There are certain assets that are not part of your estate, except perhaps for tax purposes. These assets will contractually pass to the designated beneficiaries. Non-probate assets include life-insurance proceeds, IRA's, and employee benefits. You should review your beneficiary designations periodically to make sue that the designations are up to date.
A will can be used to reduce or minimize federal estate taxes and state inheritance taxes. These taxes will be assessed if the value of the estate exceeds the Federal Estate Tax Exemption amount for the year in which death occurs. This valuation is based upon all of your separate property and 1/2 of the community property that you and your spouse have acquired. Life insurance and non-probate assets are used in determining the total value of the estate, even though they do not pass under your will. Federal tax rates range from 37 to 55 percent. The only way to take full advantage of estate tax planning is to have a will.
When drafting a will you will have to determine who you want to control your estate and the estate of your children. The executor is the person that you designate to marshal your assets, pay off the debts and distribute the assets to your beneficiaries. This person will make the court appearance, prepare the formal inventory for the court and handle the transfer of assets. Typically your surviving spouse will be designated as your executor, but this is not required.
To some degree that depends upon the complexity of your estate and whether or not estate tax plannng is involved. Typical wills for a husband and wife with minor children, that we prepare, will cost about $1,000 for the pair.
A living will is also referred to as a Directive to Physician. This document allows you to instruct your physician to withhold or withdraw artificial life-sustaining procedures if you have a terminal condition. In the directive you can designate a person to make treatment decisions if you become incapable of making those decisions yourself. Another alternative is to designate a specific physician who will make those determinations on your behalf.
A power of attorney is a document that you can sign which gives someone else the authority to act on your behalf. A Health Care Power of Attorney gives you agent the authority to make health care decisions for you if a physician certifies that you do not have the capacity to make those decisions. This can be revoked at any time.
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