The holiday season is already behind us but that doesn’t mean you still can’t give the perfect gift.

In the financial world, the term gift has a whole new meaning as it pertains to estate planning. Many investors look to “gift” a portion of their estate to prevent having to pay a hefty estate tax down the road.

If you want the bottom line about the gifting tax here it is: If you make gifts to friends or family that is large enough, there is the possibility that you may owe the federal government some tax money.

Of course, you probably want more information about the current regulations of the federal gift tax. Keep reading and I’ll share a few of the major points for 2012 and beyond. Sorry if this isn’t as exciting as the Nutcracker.

First, and perhaps foremost for some, is the fact that you, as the giver, are not going to be taxed (unless you exceed the gift tax exemption). It is the recipients who will have to pay taxes. For taxes to figure into the equation at all, you will have to have given away in excess of $1 million in cash or other assets over the course of your life.

Plus, if you have a spouse they have their own separate exemption for the same amount. What this means is that most people will never have worry about the federal gift tax at all. (Currently $139,ooo up from $136,000 for 2011 tax year)

The gift tax also includes the annual gift tax exclusion. This exclusion allows you to gift up to $13,000 during a calendar year – without counting against that $1 million lifetime limit. Currently, the figure remains the same now for 2010 and there is every indication that this exclusion will remain the same for 2012. If you exceed $13,000 the difference is applied to your lifetime exemption.

Gift Splitting

Another important point is the capabilities of gift splitting. If the husband and wife are both living and one child (for example), the husband can gift $13,000 to the child and the wife can gift $13,000 to the same child and not affect your lifetime income limit. One other important point regarding gift splitting is that for it to work, each spouse must consent to splitting of the gift. This is done with the appropriate form which I’ll discuss next.

IRS Form 709 – Gift Tax Return

Another question that I get is: what paperwork do you have to file with the IRS if you do gift? The good news is that if you don’t exceed the $13,000 annual gifting amount, no paperwork is needed – how sweet is that! The two instances that do require the IRS Form 709 are:

You gave your spouse an interest in property that will be ended by some future event.

You can read more about the IRS Form 709 in IRS Publication 950.

Another regulation concerns the federal estate tax exemption.

This provision allows you to leave up to $3.5 million that is free of federal estate taxes. As with the lifetime federal gift tax exemption, if you have a spouse they are allowed a separate exemption. There are indications that this figure will change much for 2011. Additionally, any gifts that you make during your life will decrease your taxable estate. Those gifts that exceed the yearly exclusion will lower your estate tax exemption. The point here is that if you make annual gifts that fall within the constraints of the exclusion, you can actually reduce your taxable estate without suffering negative repercussions.
Gifting and 529 Plans

There a special provision in the federal gift tax guidelines that address 529 plan contributions. These are college saving plans that can be used by a future student to pay tuition and other educational expenses. The rule allows you to give lump sums as gifts that are then spread over a certain period of time (typically 5 years). This can be done without affecting the lifetime gift tax exemption or the estate tax exemption.

Gifts Can Be Tax Exempt

You will also find a listing of instances where your gifts can be considered tax-exempt. This means you can offer unlimited gifts in these areas without worrying about the gift tax or the estate tax. They include gifts given to spouses (assuming U.S. citizenship), to cover another person’s medical expenses, and someone else’s tuition expenses if paid directly to the college or university (some exceptions may apply).
There are also stipulations for filing a gift tax return.

This applies if you make a taxable gift that exceeds the annual exclusion rate. You would then be required a Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return. You are required to fill it out even if you don’t owe taxes because of the $1 million exemption. There are certain filing rules based on your marital status and any gifts you want to claim on a return. Spouses will have to file their own returns, though some may choose to split gifts on the separate returns.

Gifting Deadline

If you’re planning on gifting assets held at a brokerage firm, I strongly suggest you check their policies regarding gifting certain securities. While you have until the end of the year to technically give the gift, certain firms may have sooner deadlines. Here’s an example of what you might see:

With the process and the desire for clients to complete gifting by year-end, Brokerage XYZ must receive client signed instructions in good order no later than December 17, 20xx, to ensure that the gifting of shares takes place and settles in the desired account. Any requests received on or after December 20, 2010, will be processed on a best efforts basis.

Gifting Strategy Right For You?

If you are considering gifting as part of your estate planning, I strongly encourage you to meet with a qualified estate planning attorney. Recently, I had a client that questions on gifting (more advanced case) and I placed a call to a local attorney. I was dumbfounded on how so many of the rules that I was familiar with had changed. Lesson learned: it pays to have someone on your side who knows what’s going on. Don’t go at it alone.

photo credit: wcn247

As a financial advisor, I do my best to keep up with estate law.  Unfortunately, the laws change constantly.   A recent conversation with an attorney was a quick realization how much has changed in such a short amount of time.   Thanks to the Tax Relief Act of 2010, we now have the lowest estate tax rate in 80 years, with some new rules to be aware of, and some very interesting choices and options affecting estate planning.

New Estate Tax Laws

The federal estate tax is now 35% with a $5 million individual exemption. This is true for 2011 and 2012 – after 2012, estate tax rates could change.

The new $5 million exemption is portable. That is, executors have the option to transfer an unused $5 million individual estate tax exemption (upon the death of one spouse) to a surviving spouse. So with this new portability, a married couple could potentially transfer up to $10 million of assets without incurring federal estate tax.

In 2011, estates may be taxed under the new rules or the 2010 rules. That’s right, an executor has a choice. The executor can elect to:

• Subject the estate to the 2011 federal rules (35% estate tax, $5 million estate exemption, stepped-up basis for appreciated assets per IRC rule 1014)
• Subject the estate to the 2010 federal rules (0% estate tax and the $1.3 million modified carryover basis for appreciated assets in the estate, which becomes $3 million for assets passing to a surviving spouse).

Estates worth more than $5 million will have to consider many factors to determine which choice will give them less of a tax burden.

Federal gift tax exemption is set at $5 million through 2012.

This is a fantastic tax break. Wealthy taxpayers can now plan to transfer significantly greater amounts of wealth within their lifetimes without triggering gift tax. This $5 million exemption is individual and portable, meaning that couples could potentially gift up to $10 million to heirs.

The annual gift tax exclusion is again $13,000 in 2011, so one taxpayer may gift up to $13,000 each to an unlimited number of individuals this year with the lifetime exclusion of $5 million in mind. (Those gifts can include tuition and payments for medical care.)

Charitable IRA donations are again permitted.

This isn’t an estate tax law per se, but it factors into estate planning and it is certainly worth noting. Charitable IRA rollovers are back in 2011 (we don’t know yet if they will be around in 2012). There may be less financial incentive for families to make these rollovers given the much higher gift and estate tax exclusion this year, but others will act on their altruism.

The charitable IRA rollover allows an IRA owner age 70½ or older to gift up to a total of $100,000 in IRA assets to one or more qualified charities or non-profit organizations (a move that can count toward his or her annual RMD). It has to be a direct transfer – the gift must pass directly from an IRA sponsor to the charity. The IRA accountholder doesn’t get a tax deduction, but he or she can potentially bypass the income tax on the distribution.

• Charitable IRA gifts made in January 2011 can count for 2010. The new law says that if you make a charitable IRA transfer in January 2011, you can elect to report the transfer on your 2010 federal return. Additionally, you are free to make another IRA charitable rollover of up to $100,000 at some other point in 2011 for the benefit of your 2011 federal return.7

The GST is back.

The generation-skipping transfer tax was 0% in 2010, but it returns at 35% in 2011. The GST exemption is set at $5 million for 2011 and it will be inflation-indexed for 2012.

In light of these interesting developments, it might be time to review your estate planning strategy.

Citations.

• 1 businessweek.com/investor/content/dec2010/pi20101223_554594.htm [12/23/10]
• 2 online.wsj.com/article/SB10001424052748703675904576063903166546250.html [1/8/11]
• 3 naepc.org/journal/issue07a.web [12/20/10]
• 3 naepc.org/journal/issue07a.web [12/20/10]
• 4 money.usnews.com/money/blogs/the-best-life/2010/12/29/2011-tax-outlook-for-seniors-.html [12/29/10]
• 5 blogs.forbes.com/hanisarji/2011/01/02/new-year-different-rules-2011-estate-tax-gift-tax-gst-tax-rules/ [1/2/11]
• 6 online.wsj.com/article/SB10001424052748703395904576025610771041244.html [12/18/10]
• 7 blogs.forbes.com/ashleaebeling/2011/01/06/taxwise-giving-from-your-ira-the-january-do-over/ [1/6/11]
• 8 blogs.forbes.com/hanisarji/2010/12/23/congress-gift-to-the-wealthy-a-gst-tax-holiday-in-2010-act-before-the-new-year/ [12/23/10]
• 9 montoyaregistry.com/Financial-Market.aspx?financial-market=the-balancing-act-weathering-the-burden-of-sudden-wealth&category=22 [1/11/11]

photo credit: kevindooley

Do you have a power of attorney? Do you think that it’s unneeded, it’s a waste of time? Let me give you one specific instance where a power of attorney is almost essential.

A lot of clients I have are from the baby boomer generation and for a lot of them the husband has been the bread winner. They have worked at their job for a number of years and now we are rolling over their retirement plan into an IRA. For the most part, the spouse has been the homemaker, and there is nothing to knock on homemakers because I know what a tough job that is.

What Happens if….

An instance came up where a client asked me what happens if something happen to the husband where he is incapacitated, in a coma and he can’t sign, and we need money out of his IRA and we don’t have a power of attorney.

It was such a good question. It’s funny, I don’t get that question a lot. Here is the thing; if you’re a spouse of your husband and he is in a coma and you are not power of attorney on his accounts, then you are not able to sign for him and you are not able to draw money out of that. You actually have to go to the court house and apply for a temporary power of attorney.

Typically, it depends, it could be a week, could be two weeks. Then, over and above that you have to keep applying – showing that you’re using that money for your husband. It’s just a long complicated process. And there are fees involved.

Get The Power

All of this could be avoided if you had a simple, durable power of attorney. They are very inexpensive. If you are drafting you’re will, typically most people will have one of those included. If you haven’t drafted a will I encourage you to do that too. If you are considering or haven’t considered doing a durable power of attorney yet, please do.

P.S.

Like us on Facebook!

If you are on Facebook be sure to visit our Facebook fan page and give us the big thumbs up, give us the big like there. We’ll be chatting with you soon. Take care!

There comes a time when minors, senior citizens, or disabled persons might need someone to manage their money. In these cases, a guardian will be appointed by the court to control guardianship of the persons accounts. While you want to think that every one who is appointed a guardian of an account is trustworthy and will manage the accounts ethically and wisely, that is not always the case. That is why there are rules governing the control of guardian accounts. From who has access to the account, to who owns it, and how money is spent, courts monitor these accounts.

Children and Guardianship Accounts

Children are not legally allowed to open a bank account or manage their own money in an account. Sometimes a parent or guardian might jointly open an account for a child to save money for college or to just help to teach the child about saving. In this case the parent is the actual owner of the account and has control over the money, and may do what they wish with the funds.

This is different then a guardianship account. With a guardianship account the money does belong to the child. The guardian of the account manages the money for a child but doesn’t not have any ownership over that money. The most common reason for a child to have an account with guardianship is that the parents are deceased and have left money or property for the child and someone, the guardian, needs to control that account until the child is of legal age.

Elderly or Disabled Individuals and Guardianship Accounts

Sometimes adults do not have the physical or mental capacity to manage their finances and a guardian needs to be appointed. As with children, the guardian does not gain any ownership of the persons finances, they just manage the account. The court chooses an appropriate guardian for someone who has been deemed unable to manage their finances.

The Rules and How it all Works

As mentioned, the guardian of an account controls the funds and must report all receipts and disbursements to the court on a periodic basis. The guardian handles the account but had no ownership of the account, meaning the money or property in the account.

photo credit: The Labour Party

Nobody wants to think of themselves being incapacitated or unable to make medical decisions on their own behalf. However, there comes a time in most everyone’s life where they reach a point where they can not make decisions for themselves. This might either be because a person no longer has the mental capacity to do so, or they have been in a crisis or emergency that renders them unable. Regardless, it is a good idea to have someone trustworthy have a healthcare durable power of attorney to help make those decisions.

What is Power of Attorney

A durable healthcare power of attorney is a legal document that allows someone that you designate to make healthcare decisions for you. The difference between a living will and a power of attorney, is that a living will is a directive expressing your wishes concerning life sustaining procedures. A power of attorney gives someone else control over making decisions regarding your healthcare.

How to Select Someone

Giving someone the power to make life or death decisions about your healthcare is not something to be done lightly. It is important to carefully select a person who you trust, usually a close friend or family member.

Completing the Process

Once you have selected someone to be your power of attorney, you must complete the proper paperwork. You can obtain the forms from your legal representative, a hospital, or online. They must be completed in full, signed by you, and notarized. A copy of your power of attorney should be kept in a safe place where several people have access to it if needed. The person or people you’ve granted power of attorney should also have a copy, and if appropriate your family lawyer should have a copy.

photo credit: dno1967b

Lawyers can be expensive. I know because there are two (soon to be four) lawyers in my family circle. I’m fortunate, since my law advice comes either free, or very cheap. However, I’ve often thought about what I’d do if I needed a little more law help. For the most complex issues, there is very little that can match up to a competent lawyer, face to face and on your side. However, there are a number of issues you can resolve on your own — if you have the right knowledge and know which forms or documents to use.

Luckily, there are quite a few legal resources online that can help you put together paperwork for starting a business, as well as put together estate planning documents like a trust or a will. You can also find well-organized information about different statutes and procedures. Here are 7 of my favorite free and cheap legal resources:

1. LegalZoom

The services offered by LegalZoom are not free. However, the pricing is often lower than what you find if you went and visited an attorney. I’ve been told by some of my lawyer friends/family that they know attorneys who have charged good money for relatively simple documents (such as a will or a living trust) and then used LegalZoom to quickly create the paperwork at a fraction of the cost, banking a big profit.

2. CivilAnswers

If you have questions about civil law and procedures, you can ask vetted experts in the law at CivilAnswers. Ask your question about small claims, divorce, incorporation and more, and provide your email, and you will receive an answer. You can also look through recent answers to questions that might be related to what you want to know.

3. TheLaw

You can have your case reviewed for free, by lawyers, or ask questions of the community at TheLaw. Browse the popular topics, including bankruptcy, labor law, taxes, family law, criminal law, and other topics. You can also download forms and templates, as well as do your own research on various law topics.

4. FreeAdvice

A site that allows you to browse law topics, as well as ask legal questions, FreeAdvice provides you with a number of resources. Some of these resources are free, as the name implies, but others cost a little bit. You can also look for a lawyer in your area. Also includes sections on insurance.

5. Nolo

If you are interested in law, and want a good place to research, Nolo is a good place to start. You can find free information for your researches, as well as get access to discount legal services. You can also search for consumer friendly attorneys on the site. A good resource, with plenty of news and analysis, as well as tips.

6. LawGuru

Ask your legal question at LawGuru, and someone will answer. You can get free help, or you can get paid help. You can also search different legal forms, and use the legal research tool available on the site. I also like the legal dictionary, which can help you understand legalese.

7. FindForms

The FindForms site is very simple and straightforward. You can browse by state to find examples of specific forms for different localities, or you can browse by category. Example forms and documents can provide direction if you want to prepare your own legal documents. You can also get access to premium forms and services related to storage and editing for a monthly subscription.

This is a guest post. Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She has been a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial.

The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.

Are you one of the 55% of the U.S. population that has not made a will?*Are you under the impression that you have to be super rich and have tons of money to have a will or do any sort of estate planning? I assure you that is not the case.

If you answer yes to one of the three following questions than I strongly encourage you to consider having a will:

1. Do you care who gets your property after you die?
2. Do you care who gets your money after your gone?
3. Do you care who’s appointed guardian of your minor children if you die?

These are three easy and essential questions when it comes to estate planning and if you answered yes to any one of them then continue reading see why making a will makes “cents” for you.

Who Needs a Will?

As I mentioned earlier it’s not just for the super rich. If you want to have any discretion or any decision in the process of who gets your property or who gets your money or who is in charge of your kids in the event of an early passing, then you need to seriously consider having a will. Essentially that’s all a will does. You are putting a document into place while you’re still living that makes these decisions for you. If you don’t have a will in place, then you leave it up to the courts to decide how to handle your affairs after you’re gone. I don’t know how you feel, but I would rather have somebody I know, that I have personally put in charge of my estate and my affairs rather than letting a court decide how those issues should be handled.

If you have minor children then it’s imperative that you have a will. You want to assign a guardian who is ultimately responsible for your children and for their future endeavors. I love my kids, and I know that I want to have somebody that I love, that I trust, that I know will have their best interests in mind. Imagine leaving that decision up to a court. I couldn’t imagine leaving it to a court to decide how they are to be raised and other issues like that. That is another important aspect of having a will.

Do you need a lawyer to draft a will?

In all actuality you don’t. A will can be a simple document and by using some great online resources, you can actually draft a will yourself. For your more advanced estate planning techniques, such as doing a bypass trust and other more advanced complex strategies as such, then yes hiring an estate-planning attorney is strongly encouraged. By drafting a will, it’s simply getting a document in place and choosing the right executor, choosing the right guardian for your children. Those are really the most important aspects of the will that you’ll want to encounter.

Disclaimer: I did hire an attorney to draft our will.  While places like LegalZoon.com are definitely cheaper, I felt more comfortable shelling out a few hundred bucks to an attorney that I knew and trusted make our wills for us.

How do you get started when drafting a will?

Drafting Your Living Will

As I mentioned earlier, the most important process is just getting started, and the way you do that is trying to figure out who you want to handle your affairs in the case that you are gone. In that case that will be your executor. The executor will be that person that you’ve deemed worthy enough or responsible enough to execute the will the way that you deemed it to be distributed. The other aspect if you have minor children is deciding who that guardian is going to be. By naming that guardian in the will, that will be the person that is ultimately responsible for your children and for all their future endeavors.

Lastly, it’s just deciding to whom you want your property or any assets to be distributed. If you want it divided equally, if you want to set certain parameters as to how that money can be distributed amongst your children, these are the kind of things that you’ll want to have laid out in your will.

Information Needed to Draft a Will

As far as any information that you’ll want to have before drafting your will, you’ll just need a lot of the basic information of names, addresses, dates of birth. You’ll want a list of all your assets, all your investments, all your property, IRAs, any real estate, any of that sort. You’ll also want a list of all your expenses or debts. That could be your mortgages, your car notes, student loans, etc. Just by compiling all your different assets, all your different liabilities, and devising a check list of all your items, so therefore your will will address all of those.

As you can see there is an inherent need of having a will as part of your estate plan and you don’t have to be super rich to have to need one. If you are one of the 55% that don’t have a will, I highly encourage you to go out, start seeking some information, and putting some of that information together as far as getting your estate planning in order.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

* According to a report done by Consumer Reports

Today I want to stress why it is so important to review the beneficiary designation forms on your individual retirement accounts, your life insurance policies, and even your 401K at your present job. Don’t think reviewing your beneficiaries is a big deal?  Let me share a quick story of why that is so important and how one little oversight can make a huge difference for your family.

Several years ago I was conducting a first meeting with a  potential new client. The man had come in because he had inherited some money from his recently deceased mother. He was a brother of three, and was sharing with me the details of the inheritance. We started talking about that and then the story really came out about what had happen and what ripped their family apart.

Review Your Beneficiaries: Trust Me!

Their mother had a decent amount of money and it was spread out among a few different places. She had some at the bank. She had some in her IRA, and she also had some in an annuity. Whenever she set up all her beneficiary info her intent was to make sure that all of it went equally to her three sons. She even set up her will to where it would be divided into three equal parts. She just assumed that everything was okay.

Her IRA was fine. Her checking and savings accounts were fine. Her CDs at the local bank were fine. The only thing that she overlooked was the annuity. She had listed her oldest son as the primary and only beneficiary of the annuity. Now if you didn’t know this, even if you have a will and it says you want it to go into three equal parts to whomever, the beneficiary designation on that annuity overrides that. So it doesn’t matter. She just overlooked it.  Her oldest son was the executor of the will so I’m sure she just thought that the will would take care of it.

Splitting Heirs

One would conclude that even though the will said that it was to be split three different ways that oldest brother would just do what mom wanted and to split it evenly. Right? Well, he didn’t. He ended up taking all of that money to himself.

Now it probably wouldn’t have been as big a deal, but on the total dollar amount that the mom had in her entire estate with everything added up together, that annuity represented 75% of her entire estate. The brothers split everything else in three equal parts, but the annuity; that brother kept it all for himself.

It was such a large chunk of money he actually took that money and bought an airplane with it. I kid you not. Was he a pilot? No. Did he know how to fly? No. It was a hobby that he wanted to get into so instead of splitting that money with his two remaining brothers he used that to buy an airplane.

Did you catch that? An airplane.

I wish I was making this story up. It is the absolute truth and is just another reminder of why it is so important to review your beneficiaries. Remember that goes not only on annuities. That also goes to life insurance policies. That also goes to your 401K at work.  That goes for your IRA’s.

Can Happen to The Best of Us

One thing that I almost did before I was deployed to Iraq; I had just recently got married to my wife and prior to me getting married I had both my mom and my dad as my primary beneficiaries on my life insurance policies. Had I not made that important change and something happened to me, that all would have went to them and left my wife with nothing. I would like to think that my parents would have done the right thing, but I tell you what; anytime you put a big chunk of money in front of somebody that has a lot of zeros behind it you never know how they are going to act. You always want to be hopeful that they will act in the best interest, but you never know. That is why it is so important to review your beneficiaries.

Take 2-0

If you haven’t reviewed those in a while…. take a look. It takes maybe 15-20 minutes to check everything. Just jot all the things down that could have a beneficiary designation on there to make sure that you’ve reviewed it and that it is as current as you need it to be, to make sure the right people are on there. Do not pass go, go check your beneficiaries today and make sure that you’re all up to date.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

When facing the loss of a loved one, the last thing someone wants to think about is the expense related to the funeral. Often the cost comes as a shock to the family.  When I lost my father in 2006, it was up to my step-mom and I to go about planning his funeral arrangements.  I guess I always knew that the cost of a funeral could get pricey, I just never realized how much!

The cost of the average funeral has dramatically increased in the last 25 years. However it’s an expense that we can’t avoid. Being prepared and understanding the costs involved can help the process of planning for a funeral a little bit easier.

Breaking Down the Costs

From death to burial, and all the steps in between, today’s average funeral can cost upwards of $10,000. There are a few areas where the expense can be cut, such as in choosing the style and extravagance of the casket.  But some basic services, such as the cost of the funeral directors services can not be avoided.  There are two areas that need to be looked at in terms of expense:  the funeral service/funeral home fees, and the burial/cemetery fees.

The Funeral Services

According to the National Funeral Directors Association, the average funeral cost is around $6,500. This does not include the burial fees, including plot and headstone.

Here’s a look at some of the fees broken down and what they cover:

• Non-declinable basic services fee, $1800 – this fee can include the cost of the funeral directors services in securing permits, overhead, arranging the funeral plans, and coordinating services
• Removal/transfer of remains to the funeral home, $250 – while your loved one may pass at home, in a hospital, or someplace else, their body has to get moved to the funeral home for the services
• Embalming, $625
• Other preparation of the body, $200 – this may include dressing the body, grooming, or applying make-up
• Use of facilities/staff for viewing, $395 – average cost, but can change based on the duration of viewing hours and space needed
• Use of facilities/staff for funeral ceremony, $450 – lets face it, those folks who drive the hearse, open the doors for visitors, fetch more tissues, etc… need to get paid
• Use of a hearse, $275 – includes a driver and their services as well
• Use of a service car/van, $125 – this is usually a limousine used to transport the family from the funeral home to the church and/or cemetery
• Memorial printed package, $125 – can include programs and mass cards

The Cemetery Costs

Costs related to the burial are separate then those of the funeral.  The burial costs include:

• The cemetery plot, $1000 – this is the area of land purchased in the cemetery for burial of the body
• The vault, $700 – an airtight container is required to hold the casket, cost can vary based on material used
• Headstone, hundreds to thousands of dollars – this cost varies greatly based on the size, material chosen, engraving and details.

Regarding the headstone, I have to emphasize “cost varies greatly”.  I was unaware of all the subtle differences that can go into selecting a headstone and much the cost can escalate.  For example, by having smooth sides or edges really jumped the price up considerably.

Planning Ahead

It is common now for people to plan ahead for their funeral services and even pre-pay.  Arrangements and payments can be made over time with the funeral home to help family members not be burdened with the costs and details of funeral arrangements in their time of grief.  Even if your loved one hasn’t paid ahead, taking the time to consider what costs are really necessary and where you might be able to save is a good idea.

Word of caution on pre-paying funerals: make sure you know where the money is going.  An estate attorney that I work with shared a story of a funeral home that was selling pre-paid funeral plans.  Those plans became obsolete, when the funeral home went bankrupt.

Did you have to bury a loved one and get shocked on how much it cost?

Sources:

http://www.whathappensnow.com/articles_show.cfm?id=37&cat=8&sub=1

http://www.ftc.gov/bcp/edu/pubs/consumer/products/pro19.shtm

photo credit: swanksalot

This is one of the most common questions asked around the idea of wills. I’ve heard numbers all over the board. Some saying that 1 in 4 people currently don’t have a will. I’ve also heard 1 in 3, and recently heard a statistic that 300,000 people die without a will every year in Britain.

Now, I can’t vouch for the truth of these stats,  there is one stat that I did find:  according to Harris Interactive® for Martindale-Hubbell® conducted a research study finding that for the last three years, 55% of all adult Americans do not have a will.  And you know what is also true about that? That’s way more people that die without a will each year than really should.

Given the relative ease of creating a will, and new ways (like low-cost online services) that make it less expensive, creating a will has never been easier. This is one of those financial things that, with a little education, most people could exercise control over.

So What Happens if You Die Without a Will?

First, let’s understand what it means to die without a will. To die without a will, the legal term refers to dying “intestate”, which means that you didn’t have a will drafted before you died, or your will doesn’t meet the requirements of the state law that you’re residing. When dying without a will, almost everything is subject to probate. In a previous blog post, I had interviewed a local estate attorney, Carey Gill, and this was her remarks regarding what really happens when you die without a will,

“While probate is usually the standard, you may also pass $100,000 with a small estate affidavit with or without a will”.

Probate allows for clean titling of your assets to go directly to your next of kin. One potential downside of probate is that your matters are made public and anybody is allowed to make a claim against your property. Another way of looking at probate is that basically everything that you have left over, you are leaving subject to your state government’s laws and regulations to determine how you wanted your property distributed. So, if you are comfortable having the state determine how your assets get split up, then probate might be okay for you. That still doesn’t mean you shouldn’t have a will.

What Does a Will Really Do?

Many people don’t seek out getting a will drafted because they don’t understand what it really does or they think it’s only necessary for people with tons of money – not the case!  Here are the 3 main functions that a will allows you to do:

Of course, if you do not have a will, then none of these will be accomplished in the way that you will see fit and will be subject to your state laws and regulations.

What are Some Repercussions of Dying Intestate Between States?

Between different states, there are different rules, although many stick to a loose sense of how money should be distributed. Additionally, your marital status, and whether you have children or not (also how many children you have) affect where your belongings go.

If you’re married and have children, often the money is split up into half between your spouse and children. Often the spouse will get one third to one half of the total sum, and the rest is split among the children. This is usually done regardless of the age of the children. So if you have a child who is 15 and another who is 30, they’re probably going to end up with the same amount.

If you’re married but you don’t have children, your spouse gets about the same amount as if you did have children (one third to one half). The difference is that the remainder often goes to the parents of the deceased. If the deceased has no remaining parents, the siblings of the deceased share the money equally among them. It’s interesting to note that even half siblings receive a share, no different than siblings that come from the same set of parents.

If you’re single but have children, the law tends to be very clear. The entirety of the sum often goes to the children, who split it evenly. Usually there’s no provision for the other parent of the deceased’s children. This is one of the more frustrating aspects of the law for people who have been in long term relationships, yet remain unmarried. No matter whether they have had children or not, the state almost always regards them as single entities.

If you’re single and have no children, your possessions usually go to your parents. If they are deceased, property is typically split evenly among any siblings you have. The same rule of half-siblings being treated the same as full siblings tends to apply.

What About Other Circumstances

Family circumstances can be extremely complex, and the explanations above are not meant to cover every person in every state (or country). There are frequently extenuating circumstances that make each probate case a little more finicky.

For cases outside the above stated circumstances, there are clauses that suggest money should go to grandparents, aunts and uncles, children of a deceased spouse, relatives of a deceased spouse, and finally to the state you were considered a legal resident of.

Do You Really Need a Will?

Hello? Did you not just read the post?   Listen, from my experience it’s not worth leaving your estate up to chance or the courts.  Probate isn’t the four letter word that many people claim it is, but you still don’t want to put your family in a situation that could potentially haunt them and make your passing that much more complicated.  Seek the counsel of a qualified attorney and get your will drafted.

Sources:

http://wiki.answers.com/Q/What_percentage_of_people_in_the_US_die_without_a_Will#ixzz18cOOHe54

photo credit: albertizeme