Monday, November 23, 2009

Common Wills, Trusts, and Estate Planning Questions


1. What is the difference between a will and trust?

A will is a written instruction explaining one’s wishes upon death. In contrasts, a Revocable Living Trust “Living Trust” (or otherwise called a trust) is a written agreement that operates during your life and upon your death. There are several differences:

• Simple and easy to create;
• Must go through probate court, which is supervised by a judge;
• Guardianship provision can describe who shall be your guardian for your children;
• Inheritances are subject to divorce or creditor proceedings for your beneficiaries;
• Public information, which means anybody can know what you inherited.

• Avoids the pain and expense of probate court;
• Inheritances are not subject to divorce or creditor proceedings;
• Private proceeding where only the beneficiaries know the written details;
• Can require inheritances to be disbursed at different times or have strings attached to an inheritance such as go to college;
• Operational during your lifetime and avoids guardianship court, which reduces headaches, significant expense, and hassle associated with court proceedings.

2. What is probate court?

Probate court is the court where a person’s assets are distributed. Most people falsely assume that a will does not go through probate court. A will must undergo probate court and probate court invites conflict due to mailing out certified notices to potential beneficiaries. This creates conflict and family feuds. If you do not have anything in writing, this is called intestate succession, which simply means that the State distributes your assets according to the state succession formula. There are no exceptions to the succession formula.

3. Why do most people have to go through probate court?

Most people go through probate court because they own real estate. By law, real estate cannot be sold without providing proper legal title. Many heirs do not realize that have to go through probate court until they get ready to sell their family home. Probate court can be expensive because if there is more than one heir, the family is required to have an attorney, pay court costs, and may have to pay an annual surety insurance bond.

4. What typically happens to a husband and wife that own property?

Generally, the surviving spouse inherits one hundred (100) percent of the house after their spouse dies. Thus, the surviving spouse does not go through probate court because they have proper title. However, upon the surviving spouse’s death, probate court becomes necessary for most people.

5. What if we add somebody’s name to our title, will this avoid probate court?

No, adding somebody else’s name, which is recommended by many attorneys are not a good strategy to avoid probate court. In fact, adding somebody else’s name could cause you problems because their creditors could sell your home at public auction to pay off any credit card, medical bills, or other bills that a person has. Thus, if a person gets sued and loses, their creditors may force you to sell your home to satisfy their debt. Additionally, adding another’s name to your title increases your risks of probate court because if any title holder dies or becomes incapacitated, this could cause you to undergo probate court prior to selling your home.

6. Why do most husband and wives have their property titled in the wrong manner?

In today’s economy, people are faced with increasing debts, which they cannot handle. Most husbands and wife’s title their home where if one spouse dies, than the other spouse automatically inherits the home. This is called Joint Tenants with Right of Survivorship. The benefit is avoiding probate court. However, if one spouse has creditor problems such as business debts, credit cards, medical bills, or any debt related debts than your creditors can force the public sale of your home despite being current with your mortgage. The main point is title your home as Tenancy by Entirety. With Tenancy by Entirety, one spouse can have a judgment against them and the creditor cannot force the husband or wife to sell their home. Please note that you must have a will or trust to distribute your property upon your death, or you will go through probate court. There are other strategies to titling your home to avoid probate court as well that are beyond these questions.

7. Do you have to undergo probate court for each state where you own real estate or property?

Generally, you must undergo probate proceedings wherever you own property such as real estate. For example, Bob and Sue own a house in the Western Suburbs and have an investment or vacation property in Wisconsin. In this example, Bob and Sue must undergo probate court in Wisconsin and Illinois if they do not have a proper succession plan.

8. Can a Will or Trust Avoid My In-laws From Gaining Access to My Inheritance?

An inheritance distributed by a will is subject to your children’s creditors including a divorce spouse. A creditor also could involve a business dispute, credit card companies, hospital or medical collections, or any other debts. A trust has a spendthrift provision, which prevents a beneficiary’s inheritance being subject to a divorce or credit proceeding.

9. How Much Will An Estate Plan Costs Me?

Our law office cannot access your specific circumstance without a consultation asking you about your wishes or concerns. Generally, most families have issues that must be addressed to provide a smooth transition upon death or incapacity. As a rule, an estate planning cost a minimum of $500 to $3,000. To receive a free initial consultation at your home, please call Robertson Law Group, LLC at 630-364-2318 or 312-498-6080.