A. Estate Planning Documents
1. Last Will and Testament
What is a Last Will and Testament? A Will is a legal document that states who should receive your property when you die.
What can you do in your Last Will and Testament? In addition to naming the recipients of all of your property, a Will can be used to do such things as designate the guardian of minor children and/or create trusts for your spouse, children or grandchildren. Your Will appoints your personal representative who is the person you want to handle your affairs after your death.
Should I have a Will? Without a Will, your property may go to unintended beneficiaries. You do not need to have a large estate to need a will.
If you do not have a Will, who will receive your property? If you die without a Will, a Washington state statute (RCW 11.04.015) will determine who inherits your property.
Can I change my will? Yes. Your will only becomes effective at your death. You can change your Will as many times as you like before your death, as long as you have testamentary capacity.
2. Community Property
What is community property? Community property is property that is jointly owned by a husband and wife. Each spouse has an undivided one-half interest in the couple’s community property. Generally, all property earned or acquired during a marriage, except property received as a gift or inheritance is community property. Upon death each spouse has the right to dispose of his or her portion of the community property.
What is separate property? Separate property is property that is only owned by one spouse. Separate property includes property owned before a couple’s marriage and property received as a gift of inheritance that is kept in the name of the one spouse who acquired the property. Upon death, each spouse has the right to dispose of all of his or her separate property.
Community Property Agreement
What is a Community Property Agreement? A Community Property Agreement is a document that turns all separate property into Community Property either immediately or on death only. A Community Property Agreement is typically effective upon the first spouse’s death. A Community Property Agreement can allow a couple to avoid probate of the first spouse to die’s estate by transferring all property to the surviving spouse. Typically a Community Property Agreement is not used when you have a taxable
Should I have a Community Property Agreement? Maybe. You should talk to a lawyer to determine if one is appropriate in your situation.
If I have a Community Property Agreement do I need a Last Will and Testament, too? You need a Last Will and Testament even if you have a Community Property Agreement.
3. Living Will
What is a Living Will? A Living Will, also called a Health Care Directive, tells your family and your doctors your wishes regarding life support, resuscitation, and feeding should you be in a permanently unconscious condition.
Do I need a Living Will? We recommend that you have one as long as you have no objection to a Living Will. Having a Living Will ensures that your loved ones do not need to guess what your wishes are.
4. Power of Attorney
What does a Power of Attorney do? A power of attorney gives someone (an attorney-in-fact) permission to take binding actions on your behalf in either the financial area, the health care area, or both.
Do I need a Power of Attorney? In most cases, everyone should have a Power of Attorney, so that someone you trust can act on your behalf if you are not able to. If you do not have a Power of Attorney and become incapacitated, the court will likely need to appoint a guardian to care for your affairs. A guardianship is expensive. In addition, the annual expense is expensive.
Can my attorney-in-fact act on my behalf immediately? It depends on your Power of Attorney. You can choose to have your Power of Attorney effective immediately or only when your physical and/or mental disability happens.
Are there different types of Powers of Attorney and if so, how do they differ? Yes, there are several different types of Powers of Attorney. The most common types are General Durable Power of Attorney, Health Care Power of Attorney and Financial Power of Attorney. The General Durable Power of Attorney gives your attorney-in-fact permission to make health care decisions for you. The Financial Power of Attorney only gives your attorney-in-fact permission to make financial decisions for you.
Can my Attorney-in-fact act after my death? No. Your Power of Attorney expires at your death. Only a personal representative appointed by a court pursuant to your Last Will and Testament may act after your death.
Should I record my Power of Attorney? The Power has to be recorded with the county auditor’s office of the county in which real estate is located if the appointed attorney does any business with respect to real estate. There is usually no need to record a Power if no real estate business will be done by the Power. We recommend that you do not record your power of attorney until such time as there is a specific reason to do so.
5. Revocable Living Trust
What is a Revocable Living Trust? A Revocable Living Trust is a trust that you create and use during your lifetime. You can use the trust to hold your property. The property placed into the trust during your lifetime will not go through the probate process. It will instead go through a trust settlement process upon your death.
Do I need a Revocable Living Trust? Maybe. You should consult with an attorney to determine if one is appropriate for you. The cost and ongoing attention you must pay to a revocable living trust needs to be weighed against its benefits.
If I have a Revocable Living Trust do I need a Will too? Yes. You need what is called a Pour-over Will. At you death, a Pour-over Will transfers any assets you hold outright to your trust.
1. What is Probate? People often refer to the entire estate settlement proceeding as “the probate.” “Probate” is actually the process by which the court determines that the will is properly signed and witnessed and that the person signing the will was of sound mind and acting of free will when the document was signed.
2. Will my Estate require a Probate? Maybe. Washington has several rules that simplify or eliminate the probate process when you are survived by a spouse or have a small estate and do not own real property.
3. What is Personal Representative? A Personal Representative is the person appointed to collect all of your assets, pay all of your debts, distribute all of your assets and wind up your affairs after you pass away.
4. What is a Credit Trust? A Credit Trust is a tax shelter tool. It is established in your Will for the benefit of your Surviving Spouse. The use of a credit shelter trust can reduce payment of estate taxes and provides the ability to avoid paying unnecessary estate taxes upon the death of the second spouse to die. You should consult an attorney if a credit trust is appropriate for you.
5. Will all of my assets pass through my Will? Not necessarily. For the most part, nonprobate assets pass outside of your Will. In general, nonprobate assets are assets that have a designated beneficiary, are held jointly with another person, or are “payable on death” to another person. You should talk to your attorney about your assets to determine how any particular asset will pass upon your death.
6. Taxes Washington State has a stand-alone death tax, which is paid in addition to the federal estate tax. In 2009, the federal exemption was $3.5 million, while the Washington State exemption was $2 million. On January 1, 2010, the federal tax terminated. It is scheduled to return with a $1 million exemption on January 1, 2011, however that may change. The Washington State and Federal taxes are not tied together. Both Washington and federal returns must be filed, if applicable, and the taxes paid, if any, within nine months of the decedent’s death.
In addition to the federal estate tax return and Washington State death tax return, the personal representative may be required to file a final income tax return for the decedent and a personal representative's fiduciary income tax return (Form 1041).
Settlement and Closing of the estate
The time frame for administering an estate is different in each case. In general, if the estate is not taxable, it takes 5 - 9 months to complete the estate. If the estate is taxable, it generally takes 18 - 24 months to complete the estate. Once all of the taxes are paid, the tax closing letters are received, the assets are distributed, the liabilities are paid, the decree of distribution is completed, and all the receipts are filed with the court, the court will close the estate and discharge the personal representative. We recommend that a CPA be involved in all questions about estate tax obligations.
Fees and costs
Attorneys' fees are charged based on the attorney or paralegal's hourly billing rate and the time he or she expended on the matter. Attorneys' costs are billed to the personal representative. The basic costs associated with a probate are the court filing fee; the court's charge for Letters Testamentary, Form K's, and Ex Parte hearings; and Publication fees for the Notice to Creditors and the Notice of Final Hearing (if applicable). There may be miscellaneous other costs associated with a probate from time to time, including recording fees.