Estate Planning & Probate

A will is simply a written directive to the probate court as to how property is to be distributed at death, who should be the personal representative (previously called an executor) to manage the estate, and who should be the guardian of minor children. Wills do not avoid probate! They plan for probate. Wills have to be probated to be given effect. They also provide no protection against incapacity.

A “Simple Will” is a will that passes the assets to a named individual or individuals and generally contains no tax planning trust provisions or testamentary trusts for minors. The usual simple will is set up to distribute to the survivor of the couple and then, after the death of the survivor, to the children equally.

A “Complex Will” is a will that contains testamentary trust provisions. A complex will will create a trust at the death of the testator (the person making the will) which may help avoid taxes, provide for a delay in distributions, or other goals that cannot be accomplished with a simple will alone. Most people want a complex will when the differences between the types of wills are explained.

A “Pourover Will” is a will that is used in conjunction with a living trust. It acts as a safety net to ensure that the testator’s wishes as set forth in the trust are carried out, even if the assets are not placed in the trust. Ideally a pourover will sits dormant and is never used.

A trust is an entity (like a corporation) established to hold and manage property. It has its own separate existence apart from the grantor or creator of the trust. Trusts can be established during one’s lifetime (a “living” trust) or they can be established at death through a will (a “testamentary” trust). Living trusts can be either revocable or irrevocable. There are three major participants to a trust: a grantor who is the person creating the trust (sometimes called a “settlor” or “trustor”); a trustee who is the person who manages the trust; and a beneficiary who gets the benefits of the trust. Dividing the benefits from the control can be a powerful concept. It allows us to place a responsible individual or institution in charge of the assets for someone else’s benefit. A revocable living trust is the most commonly used vehicle for estate planning today. At the death or incapacity of the grantor, the trust continues on and the backup trustees simply carry out the grantor’s wishes set forth in the trust without probate or court involvement.

A revocable living trust continues on upon the death or incapacity of the grantor, and the backup trustees simply carry out the grantors wishes set forth in the trust. Since the trust does not die or become incapacitated, no probate is necessary to authorize a person to act in the deceased or incapacitated person’s place. The trust is totally revocable and amendable by the grantor during his or her lifetime. Since the grantor usually serves as the trustee and beneficiary during lifetime, the grantor also maintains total control over the assets.

Medical science can keep a person alive almost indefinitely, even when their quality of life has severely deteriorated through a terminal illness or other accident causing loss of brain function. Most people do not wish to be kept alive unnaturally under these circumstances. They want to die with dignity. Besides the dignity issue, the medical costs associated with a terminal illness may entirely deplete an estate.

Planning can be done to direct what type of care you desire. Most individuals desire that the dying process not be prolonged if there is no hope of recovery or they are in a comatose state and there appears to be no chance of their extrication from this state.

An Advance Health Care Directive is a directive to physicians and other care providers which states that life sustaining procedures should not be applied under circumstances you specify. It also directs who you want to make medical decisions for you should you be unable to direct your own care for any reason, even if you are not dying. I highly recommend this document for all of my clients. The power holder should be carefully informed about your wishes so that will know how to respond and follow them should you be unable to direct your own care.

The federal government and many states have established taxes which apply to the gifting of property during lifetime and at death. Utah currently has no estate tax, therefore the discussion here will focus on the federal estate and gift tax. This tax can be avoided by most people with early planning. Most individuals do not need estate tax planning since the amount that a person can pass without federal estate tax has been raised to $15 million. If your estate exceeds this number (adjusted for inflation), then proper steps should be taken.