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[O273]Online Wills And Trusts

by Michael Goldstein, Esq., Mic

There comes a point in every person's life where it is appropriate and prudent to begin planning for the post death division of property and assets. It is necessary to anticipate and plan for the quagmire that is probate. For many facing the task of planning their estate, the mere idea of paying an estate planning attorney can be painful and many simply choose to forego such a task by using cheap or free online forms. While choosing the easy way out may save you money now, it will cost your estate significantly more in the future. The pitfalls of cheap online wills and trusts writing programs are many.

The premise is simple enough. You want a means of distributing your property after your demise but you do not want to pay more than necessary. The problem is dead serious. On their face, online wills and trust programs appear to be a bargain. You can prepare your own will or create a trust for less than $20.00, a tiny fraction of the cost of a good estate planning attorney. Unfortunately for your family though, the inherent inadequacies of such services are not discovered until after your death. Any remaining heirs will be forced to pick up the remains of your estate and force it through probate, taking substantial amounts of both time and money. The money spent today on a good estate planner will save your estate exponentially more in the future.

Numerous amounts of problems arise when deciding to use online wills and trusts services. Most often these services do not take into account specific state law regarding the administration of probate or trusts. Only an attorney in your state can effectively advise you regarding the various jurisdictional issues that may affect many of your decisions regarding your estate. Many states have varying requirements regarding the number of witnesses that must attest to the creation of a will. Failure to comply with state requirements regarding the order of attestation and witnesses will sometimes lead a court to completely invalidate your will as a means to distribute wealth and property. See, Stevens v. Casdorph, 508 S.E.2d 610 (1998). By refusing to extend the Doctrine of Substantial Compliance, many state courts, like the Casdorph court, have stressed the importance of proper will execution. Online will services do not take into account the varying requirements among states. Only a skilled estate planning attorney can advise you regarding the proper methods to ensure that your will is upheld during probate. Failure to comply with these requirements will force all property through intestacy, which is where the state decides who gets what. Moreover, intestacy is not something that the online services will tell you about. Additionally, the plain meaning rule, which instructs court's to look only at the plain meaning of words contained in the will, stresses the importance of obtaining professional advice. Using an incorrect word or clause can dramatically alter the effect of the will, invalidating the very purpose of its creation.

Trusts are often used as a tool to avoid the probate system completely, and many online services use this very idea as a marketing tool. There are many kinds of trusts used in estate planning (i.e. revocable, irrevocable, discretionary, spendthrifts, marital, special needs and testamentary trusts, to name a few) and only an experienced attorney has the knowledge and ability to advise you regarding the proper form of trust for your desired purpose. In addition, online services do not address the various issues faced when creating a trust. As trustee, beneficiary or settlor, there are various rights and obligations associated with each party. Violation of any imposed obligation or duty can serve to completely invalidate the trust document itself. In order to properly address your needs, an estate planning attorney considers all relevant factors and will recommend the best option for you.

Online services fail take into account all available means of wealth transfers and do not begin to address all pertinent issues, such as tax impacts, ease of administration, imposed rights and duties and the potential pitfalls. Only a qualified attorney can ensure that your estate does not find itself stuck in the murky and troublesome world of probate and intestacy. Wise planning now could spare your family the unpleasant pain of probate in the future.

If you own property or assets of substantial value and have not yet thought about estate planning, it is time to start doing your calculations in order to put a plan in place. If you die having property, the state levies tax on your estate. As of 2007, property worth two million or above is taxed. Whoever is the recipient of your assets has to pay a hefty amount in estate taxes, which may be up to 45 percent of the value of the estate left behind by you. Thus, if you do not have an estate plan, it may lead to a considerable part of the assets you leave behind being soaked up in taxes instead of going to your loved ones.

Estate planning consists of using effective methods to ensure that the estate tax implications are minimized after you death, and that the major part of your property/assets passes effortlessly to the recipients. Forming a bypass trust can be an effective way to reduce estate tax.

This can be better understood with an example. Suppose a husband and wife, Tom and Linda, jointly possess assets worth around $4.5m. If Tom dies first, Linda gets all of the assets of Tom without having to pay any estate taxes by virtue of the provision of unlimited spousal estate tax exclusion. The assets of Linda would be valued at $4.5m thereafter. If Linda dies later, in the same year, when the estate tax rates are the same, assuming there has been no appreciation in the value of her estate, her estate tax on $4.5m would amount to $1, 905,800. Accordingly, her estate would be taxed $1,125,000 (after allowing an estate tax credit of $780,800), which her heirs would have to pay up. Since Linda availed unlimited spousal estate tax credit on the death of Tom, his estate tax credit of $780,000 stands extinguished. (The flat credit of $780,000 on estate tax liability is allowed against the exemption limit of $2m for 2007.)

Now let us see the difference if Tom and Linda had created a bypass trust through a revocable living trust (also called a family trust). A trust can be loosely defined as a legal entity capable of owning property and other assets. Every trust has a grantor, also called a creator or settler, who grants property to a trustee. The trustee cares for and uses the property for a third person or beneficiary. In a trust, a single person can take on many roles. In a revocable living trust, Tom could have been the grantor, trustee, and beneficiary, all at the same time. The trustee is bound to act in strict accordance with the terms of the trust in handling the trust property. In the event of the death of Tom, the owner, i.e. the trust, still survives. So there is no question of probate proceedings arising, and a new successor to the deceased trustee can smoothly take over.

To minimize estate tax, the revocable living trust can contain a provision that on the first death, of either Tom or Linda, a second or bypass trust would be formed. So, in the event of the death of Tom, $2m (equivalent to the estate tax credit for Tom) out of the $4.5m would be transferred to the bypass trust. In such an eventuality, the bypass trust acquires its own identity and irrevocable status, and thereafter would file its own tax returns. The assets of this bypass trust are used for the welfare, heath, upkeep, and maintenance of the surviving spouse, and after the second death, would be available for the subsequent beneficiaries.

Therefore, on the death of Tom, Linda would get the remaining $2.5m without paying any taxes, on account of the unlimited spousal estate tax exclusion. On the death of Linda, the bypass trust and Linda being separate entities, the value of the bypass trust assets would not be taken into consideration to assess the estate tax of Linda. Thus, the estate tax assessed on the estate of Linda at $2.5m, after deducting the estate tax credit of Linda, would come to just $225,000 as against $1,125,000 in the absence of a bypass trust. This is a clear saving of $900,000.

There are other types of trusts that serve the same purpose for other situations.
(All figures are approximate, and relate to 2007).

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Both Michael Goldstein, Esq. & Kris Koonar are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Michael Goldstein, Esq. has sinced written about articles on various topics from Finances, Legal Matters and Finances. This article was written by Nicholas J. Deleault, Pierce Law Center ‘07. Nicholas writes select legal articles for the of Goldstien and. Michael Goldstein, Esq.'s top article generates over 12100 views. to your Favourites.

Kris Koonar has sinced written about articles on various topics from Site Promotion, Certified Public Accountants and Culture and Society. offers . CPA Firm Murr. Kris Koonar's top article generates over 550000 views. to your Favourites.