Mark Tippins - Attorney at Law, Auburn, AL

If you don't have a trust or will, have you asked yourself what will happen to your assets when you die? Many of the people who say, "I'm too young to have a trust or will," or, "It costs too much to have a will prepared," don't know what will happen to their assets when they die.

For instance, married couples are often surprised to learn that all assets do not automatically revert to the survivor in the event of the spouse'sintestate death. They are even more surprised when they learn that their great-grandchildren may receive assets.

DYING INTESTATE
State law will determine how your property is divided if you die without a will or trust (a situation called "intestate). This law controls the disposition of property owned solely by the decedent. It does not control property owned jointly with right of survivorship, or property in which the decedent owned only a "life interest".

ESTATE ADMINISTRATION
If you die intestate (without a will or trust), you lose not only control over who receives your assets, but also control over who administers your estate and who could end up with your children.

In your trust or will, you can designate within your will whom you want to serve as your executor. The executor is the person who is in charge of wrapping up the affairs of the decedent and executing the last wishes and disposition of the decedent. His or her job will end with the closing of the estate in the probate court. If you die intestate, though, a state statute provides a priority list of who has the right to serve as administrator -- without regard to potential administrators' ability to serve in this role or their knowledge about such matters. In a will (but not a trust), you can also designate who is to be the guardian-conservator for your children.

The next matter you may want to consider is a trust within your will. The trust is an artificial entity which is similar to a corporation for the "beneficiaries". It holds money and assets for the beneficiaries (usually minor children or a spendthrift spouse or incompetent relative). The trust has a manager who is called the trustee. The trustee is bound by law to manage and invest the proceeds of the trust and to make it productive for the use of the beneficiaries. The trustee can, according to the particular terms of the trust, pay out income of the trust, principal, or both to a beneficiary in need for purposes such as housing, education of kids, medical needs, etc. At some specific age, such as age 25 or 30, the trustee can pay out the remaining principal (if any) to the beneficiaries in their proportional interest. This is usually such time as the beneficiary is able to be financially responsible.

LIVING TRUST AND POUR OVER WILL
Some people want to transfer assets to a LIVING TRUSTduring their lifetime. In doing this, they hope to avoid probate and conservatorships. On their death, they can have all their assets distributed to their heirs exactly as set forth in the trust instrument. In the event they forgot or simply failed to “fund” the trust with a particular asset, the person needs to have a pour over will. A safety net of sorts. The Pour Over Will is used to direct any asset that was forgotten and left out of the protection and control of your Living Trust. The asset(s) left out of the Trust, will probably be subject to a Probate; however the Probate will only be involved with the specific asset(s) not included in your Trust. Often the Probate will be easier and much faster than the normal process, since the Pour Over Will, informs the court that the deceased's intention was to include the forgotten asset(s) in the Trust and to distribute it as part of the overall Trust estate.

Of equal importance, is the guardian of the children. The guardian need not be the trustee also, but it often ends up that way. The guardian is the legal party for any minor child. The trustee is the manager of the money for the children or incompetent or spendthrift person. The duties are totally different. Again, they can be the same person however.

SAVING ON ESTATE EXPENSES
All estates are subject to payment of debts, claims, administrative expenses, fees, taxes and statutory allowances. Having a will, however, can help your executor (personal representative) save on some estate expenses. For example, executors and administrators of estates are required to post a bond, the annual premiums of which can be quite expensive. This bond can be waived, however, in the will. If you don't want your assets controlled by state law when you die -- and who does? -- then please consider a will.

ESTATE AND GIFT TAX CONSIDERATIONS
Most people are under the impression that each and every estate is a taxable item from which the "State" will extract huge amounts, basically leaving the survivors grappling for funds barely essential to survival. Since the year 1916, Congress has imposed a death duty on the transfer of a decedent's taxable estate. As with all tax laws, the laws in this area of tax have changed since then. Stated simply, an estate is not considered to be a taxable entity until its net value exceeds $2,000,000.00 (2008 figure). The same figure will increase to $3,500,000.00 in 2009. Coupled with the "Estate Tax" is its double first cousin, the "Gift Tax". The gift tax is an imposition of tax on any annual gift made in excess of $12,000.00 per year to any one individual. A husband and wife can therefore effectively dispose of $24,000.00 annually to each and every person in the world that they choose to do so. However, to be practical, the purpose of this law is to restrain them from disposing of a huge estate before death by transferring it to their children.

Property that a decedent owns at death might or might not be subject to the estate tax. This may be his or her home, cars, bank accounts, investments, salary due from an employer and certain types of life insurance policies which are beyond the parameters of this article. Property need not be owned solely by the decedent to have an effect on the taxable estate.

As you can guess, the arena of estate planning and tax planning can be quite a sophisticated matter and certainly not a thing you want to handle from a paperback picked up at the local book store or a form from Office Depot!.

DURABLE GENERAL POWER OF ATTORNEY
What happens if you become mentally incompetent or go into a coma? Well, you automatically lose all your ability (not rights) to sign a deed, handle your banking business, buy or sell stock, and handle all your other affairs. The state has a remedy in this situation called a conservatorship. This is an expensive legal proceeding in which the judge appoints a conservator (usually a family member or even the county guardian) to handle all the business and affairs of the incapacitated person. An expensive insurance bond and periodic accounting to the court are required as well. This is all a hassle if it can possibly be avoided.

To remedy this situation, the general power of attorney is the alternative. This document gives the right to a third party (of your choosing) to handle your business exactly as the conservator appointed by the court would do. The power of attorney instrument prevents the need for going to court to ask for a conservator. The power of attorney can be immediately effective or can be inoperative until such time as you are incompetent and we have letters signed by two physicians treating you that you are indeed incompetent and incapable of handling your business. We heartily recommend that you have a power of attorney.

LIVING WILL
This is an instrument that says that you do not want to be placed on life support systems when you are so totally incurably ill that you have absolutely no chance of survival. It is not a means of suicide or euthanasia. It does however evidence your intentions to prevent further chemotherapy or medication when it is abundantly clear that you have no chance of recovery from cancer or some other type of disease. The person you name in your medical durable power of attorney would be looked to for utilization of your living will. Another example is the prevention of being placed on breathing apparatus when one's brain waves are flat.

This is an instrument of your choice and is not suggested or recommended either way. It is something which we make available to our clients for their preference.

MEDICAL POWER OF ATTORNEY
How many times have you gone out of town leaving the kids with a grandparent? Not all hospitals will treat a child at the grandparent's direction. Consequently, it is important that you have a medical power of attorney to give a friend or grandparent the ability to have your child for medical purposes when you are of town or in a coma yourself. And, what about you when you slip into a coma or alzheimers? Do you have someone picked out that can be legally responsible for your care and best interests? You need a medical power of attorney! This is a matter we do suggest.

IMPORTANT MATTERS TO DECIDE BEFORE COMING TO THE LAWYER'S OFFICE :

Mark Tippins
Attorney at Law
145 E. Magnolia Avenue #201 • Auburn AL, 36830
Phone: (334) 821-3670 • Fax: (334) 821-3671
E-Mail: mtippins@bellsouth.net

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