Your Estate Planning Questions Answered
Frequently Asked Questions About Estate Planning and Wills
Why is estate planning important?
Estate planning is the process that enables a person to make advance planning about the distribution of assets upon passing, but also is just as important during a person’s lifetime because it documents your wishes as to how you want your financial and medical decisions handled in the event that you cannot handle these matters yourself.
What is empathetic and compassionate estate planning?
Planning for the distribution of a family estate can be arduous and daunting. It involves documentation and conflict resolution within families. Providing empathy and compassion are paramount in my practice because I truly care about my clients. My ability to understand and share the feelings of another is a basic requirement for families navigating through this process. I learned how important both empathy (understanding another) and compassion (showing understanding to another) is as a child because it helped me connect with multi-generations in aging and death.
I was formidable in high school and college, so I delved into this career half a generation before my time. Estate planning can be time consuming and tricky given the wishes of the ill or aged when it does not conflate with the wishes of the family. While this is common, my ability to show families sympathy and concern differentiates me from other estate planning attorneys because of my family and career history.
Why is estate planning important, especially in a life changing situation?
In a life changing situation, it is important to not procrastinate in creating or updating an estate plan. Planning for incapacity means having structure in place to make sure that the right person is designated to properly handle your medical and financial decisions so that bills are paid on time. Your financial legacy is also protected by minimizing taxes and simplifying the distribution of your assets at death. Furthermore, it can help manage family relationships, which can become strained during the end-of-life transition.
What is a will?
A will is a document that allows you to communicate your wishes in terms of how you want your estate distributed once you have passed on. Normally, a will includes the designation of a Personal Representative, beneficiaries, as well as guardians for minor children.
Is it ever too late to create a will?
When a person does not have capacity, it can be too late to create a will. When an elderly person has cognitive issues and is thus unable to manage their affairs, it can be too late. When preplanning matters are delayed, this can have consequences during the end-of-life stages and at death.
The general elements for testamentary capacity at the time of executing a will are that the (a) the testator knowing the natural objects of their bounty; (b) the testator understanding the extent and value of their property; (c) the testator knowing that they are signing their will and what that intends to convey, etc.; and (d) the testator has the ability to connect these elements to for a plan for the distribution of property.
The capacity to execute a power of attorney is a bit different and has a higher level of capacity than testamentary capacity. This is referred to as contractual capacity, which generally means that a person has the ability to understand the nature and effect of the business that is being transacted, as well as the act.
You or someone you know, has just been given a terminal diagnosis, what is the first step in protecting your family?
Whether you are in the middle of a dire health crisis or someone in your close immediate family has a life changing condition, I’m here to help navigate through that experience. When dealing with terminal illness, the last thing you want to do is worry about an estate. If you have any questions or would like to schedule a free consultation, please call our office today at 206-250-3997.
What happens if you pass away without a will?
Washington state intestate succession laws will dictate who will inherit, and consequently, your assets might not be distributed according to your wishes if you pass away without a will. Under Washington state intestacy law, distribution can depend on on your marital status, children, parents, and siblings. See generally RCW 11.04.015.
How often should a will be updated?
Estate planning is an ongoing process as family structures grow and change, so it is important to regularly revisit your estate plan to ensure that your documents still align with your wishes.
A few life events that may trigger a need to update documents include:
· Terminal illness or life changing diagnosis
· Change to your marital status such as divorce, marriage, or remarriage
· New children or grandchildren, by birth, marriage, or adoption
· Relocation to a new state
· Death or incapacity of a named beneficiary or named agent
· Substantial change to the value of your assets
· Serious falling out with a beneficiary and/or named agents
· Upcoming retirement
· The simple passage of time
Is estate planning only for those who are rich?
No, estate planning is not just for the wealthy or for multimillionaires as those with moderate means can also be impacted. Estate planning can help make arrangements in the event of incapacity, as you can designate someone to make medical and financial decisions if you are unable to do so yourself. Furthermore, you could also benefit from having an estate plan in place by properly putting your wishes in writing to transfer assets to your intended beneficiaries upon passing. However, we recommend against a do-it-yourself approach as these documents can miss important elements to the estate planning process, thereby failing to protect your interests and wishes. Thus, we recommend consulting with an experienced estate planning attorney to ensure that your specific need and goals are met.
What are digital assets and are they part of an estate plan?
Examples of digital assets include, but are not exclusively limited to, websites, social media accounts, digital documents, as well as other relevant digital data that are or will be stored on digital appliances such as tablets, laptops, personal computers, portable media players, data storage devices, etc.
The estate planning process can include making arrangements for digital property and assets at death, with appropriate language included in documents such as a in the Last Will and Testament and the Durable Power of Attorney. It is also useful to prepare a detailed inventory that includes online accounts, passwords, as well as other digital property that can assist your Executor in locating important online accounts and digital assets in the administration of your estate. The inventory should be placed in a secure location and updated regularly as needed.
What is a codicil?
A codicil is an amendment that supplements a will. Generally, a codicil is used to make minor updates to a will. However, to prevent any confusion, we usually just make the simple update and have our client execute a new will.
Frequently Asked Questions About Durable Powers of Attorney
What makes a power of attorney durable, especially in a family health crisis?
A power of attorney is durable if it is intended to continues to be effective even after the Principal becomes incapacitated. To make a power of attorney durable, language must be appropriately included such as “this power of attorney shall not be affected by the disability of the Principal.” RCW 11.125.040.
What is a power of attorney?
A power of attorney is a document in which a Principal appoints an Attorney-in-Fact and may provide for health care and financial decision making.
What is a Principal?
A Principal is defined as the individual who prepares the legal document.
What is an Attorney-in-Fact?
An Attorney-in-Fact is defined as the agent.
How is incapacity defined?
Under the Uniform Power of Attorney Act, incapacity is defined as follows:
(5) “Incapacity” means inability of an individual to manage property, business, personal, or health care affairs because an individual:
(a) Has impairment in the ability to receive and evaluate information or make or communicate decisions even with the use of technological assistance…. RCW 11.125.020.
What does a “springing” power of attorney mean?
A “springing” power of attorney means that the document is effective only upon the Principal’s incapacity.
What is an immediate durable power of attorney?
An immediate durable power of attorney takes effect immediately upon the signing and proper execution of the document.
Upon the signing and proper execution of an immediate durable power of attorney, do I give up my right to make decisions?
Upon signing and execution of an immediate durable power of attorney, you do not give up the right to make decisions. Instead, this process authorizes the attorney-in-fact to make decisions on behalf of the principal. Decisions can be made by both the principal and the attorney-in-fact.
Can a durable power of attorney be changed, altered, or revoked, even for immediate powers?
A durable power of attorney is revocable, and also, can be changed and altered by the principal.
Frequently Asked Questions About Health Care Directives
What is a “Living Will”?
The term “Living Will” is an older term that gave rise to confusion, so in 1979, the legislature adopted the new title of “Directive to Physicians”. RCW 70.122.030. And again in 1992, it was amended and retitled to “Health Care Directive” to describe a directive no only to physicians, but to all other health care providers. Id.
What is a health care directive?
A Health Care Directive is a legal document that dictates a person’s desires in terms of life sustaining treatments in the event of a terminal illness or coma with no reasonable hope of recovery.
What is the purpose of a health care directive?
The purpose of a health care directive is to allow a person the right to decide in advance whether to refuse medical treatment in the event of a terminal condition or persistent vegetative state. Additionally, a health care directive specifies whether artificial means are not to be used to extend life and can instruct a physician to withhold or withdraw life-sustaining treatment in the event of a terminal condition or permanent unconscious condition. This document, however, does not allow in the assistance of suicide by health care provider. Also, this document becomes effective only when a person is expected, with reasonable judgment, to pass away within a reasonable amount time.
Frequently Asked Questions About Separate and Community Property
Is Washington a community property state?
Yes, Washington is a community property state.
What is a community property?
Other than by gift or inheritance, property that is acquired during a marriage is presumptively community property. See generally RCW 26.16.030. The way that spouses are named in a document provides little evidence as to the character of the property, and it is not determinative of whether the property is separate or community property. Burgess v. Crossan, 189 Wash. App. 97, 103, 358 P.3d 416 (2015).
What is separate property?
In general, separate property is defined as property that is acquired prior to marriage or registration of domestic partnership, as well as property that is acquired during marriage or registration domestic partnership via gift, bequest, devise, descent, or inheritance, including rents, issues, and profits generated by that separate property. RCW 26.16.010; RCW 26.16.020.
How much community property can a spouse dispose of at death?
No more than one-half of the community property interest by each spouse can be devised or bequeathed by will. RCW 26.16.030.
What is a basis step up at death?
At death, the capital gains basis step up to the date of death value. Upon the passing of the first spouse, the full value of the community property gets a step-up in basis.
What obligation does my spouse have for debts that were incurred prior to marriage?
A spouse is typically not liable for debts that were incurred prior to marriage. RCW 26.16.200. These premarital debts are considered separate debts. Id.
Is there liability for acts of the other spouse?
Unless there would be a joint responsibility, Washington law provides that there is no recovery against the separate property of the other spouse. RCW 26.16.190.
What are the community liabilities at death?
Not just the decedent’s half, but the whole of the community estate is subject to probate administration for all purposes for claims that are asserted after death. RCW 11.02.070. This includes the payment of debts and obligations of the community, allowance for family support, awards in lieu of homestead, as well as any other matter that the property would be either liable or responsible for if the decedent were still alive. Id.
How are separate liabilities charged at death?
For separate debts, a decedent’s separate community property is charged first and then, after community debts and liabilities are satisfied, against the decedent’s half share of community property. RCW 11.10.030(2). Washington law further provides that “community debt or liability that is also the separate debt or liability of the decedent is charged first against the whole of the community property and then against the decedent’s separate property.” RCW 11.10.030(3). Additionally, to the extent tort claims must be asserted against the community such claims, if a creditor claim was not filed in the decedent’s estates, cannot be asserted against a surviving spouse in the future. Graham v. Radford, 71 Wn.2d 752, 431 P.2d 193 (1967) (judgment could not be sought from separate property of the surviving spouse when the plaintiff failed to pursue remedy against the community).
What is a committed intimate relationship?
Washington state does not have common law marriage, but the Washington Supreme Court does, however, recognize committed intimate relationships for the division of assets between the estates of committed partners. Olver v. Fowler, 161 Wn.2d 655, 671 P.3d 348 (2007). For committed intimate relationships, distribution of property is applicable only to property that would otherwise have been community property, and it is not applicable to separate property. In re Marriage of Byerley (Byerley v. Cail), 183 Wn. App. 677, 685, 334 P.3d 108 (2014).
Factors that establish a committed intimate relationship include:
· relationship length;
· amount of time parties cohabitated;
· nature of the relationship;
· extent of commingled property; and
· intent of the parties.
Connell v. Francisco, 127 Wn.2d 339, 346, 898 P.2d 831 (1995). See also Muridan v. Redl 3 Wn.App. 2d 44 (2018).
Frequently Asked Questions About Disclaimer Trusts and Credit Shelter Trusts
What is the Washington estate tax exemption?
As of 2023, the Washington estate tax exemption is $2.193 million per person, and it is a “lose it or lose it” exemption. Given that Washington does not have portability, we recommend a disclaimer or credit shelter trust. By using it to transfer property into trust for the surviving spouse, the deceased spouse’s exemption is thereby preserved.
What is portability?
In broad terms, portability is defined as a method for spouses to combine their estate and gift tax exemptions. Put another way, a surviving spouse can utilize a deceased spouse’s unused exemption by transferring the unused tax exemption of the deceased spouse to the surviving spouse. This means that the surviving spouse can utilize their own estate and gift tax exemption in addition to the deceased spouse’s unused estate and gift tax exemption.
As of 2023, the federal gift and estate tax is $12.92 million; however, after 2025, the exemption will sunset back to approximately $5 million (adjusted for inflation). For married couples where their estates exceed the federal gift and estate tax amount, if the first spouse does not utilize the full exemption, then portability will allow the surviving spouse to utilize the unused exemption.
What is a disclaimer trust?
At the death of a spouse, a disclaimer trust provides the option to surviving spouses to elect to create a trust, such as a credit shelter trust. A disclaimer must be filed by a surviving spouse within nine months such that ownership interest in the estate assets that are enumerated in the disclaimer document are irrevocably eliminated. For the designated beneficiary, the disclaimed assets are thus put into a trust. If the disclaimer, however, is not filed, then the assets ultimately get included in the surviving spouse’s taxable estate.
What is a credit shelter trust?
Trust assets are not a part of the estate given that the spouse does not exercise control over assets inside a credit shelter trust. Assets within the trust pass to named beneficiaries at the death of the spouse. To limit the estate tax liability, remaining assets in the estate can use the tax exemption.
A credit shelter trust can be beneficial in cases where parties have previous marriages given that a current spouse can be taken care of during their lifetime by a deceased spouse. For the ultimate beneficiaries of the trust, children from previous marriages can be named.