Estate Planning Questions
By Liz Perry
The following are answers to some of the most common estate planning
questions.
WASHINGTON IS A COMMUNITY PROPERTY STATE. WHY DO I NEED A COMMUNITY
PROPERTY AGREEMENT?
One advantage of having a Community Property Agreement is that a couple
avoids a probate on the death of the first spouse if they have a Community
Property Agreement. Without a Community Property Agreement, a probate will
often be required. (Note: Although Community Property Agreements are helpful
in many situations, they may not be appropriate for second marriages and
tax-sensitive estates and should be used carefully.)
WHAT IS PROBATE?
Probate is the court's supervising the gathering up and distribution of the
assets of an estate. It involves the appointment of a personal
representative by the Court, notification to heirs and creditors of the
death, liquidation of the assets and distribution of the assets to those
legally entitled to the assets. It is important to note that "avoiding
probate" does not mean "avoiding death taxes". Probate and estate taxes are
two concepts people often confuse.
I LIVE IN WASHINGTON STATE. WHAT DEATH TAXES AM I SUBJECT TO?
The following is a chart showing the amount that can pass free from estate
and inheritance tax. With proper planning a couple will be able to utilize
two exemptions. Without proper planning, however, the exemption of the first
spouse to die is often lost.
__________________
According to
current law, the exemptions from estate tax are as follows:
|
Year of death |
Federal Exemption
Amount |
Washington Exemption
Amount |
|
2006-08 |
$2,000,000 |
$2,000,000 |
|
2009 |
$3,500,000 |
$2,000,000 |
|
2010 |
Repeal of estate tax (maybe) |
$2,000,000 |
|
2011 |
$1,000,000 |
$2,000,000 |
For the purpose of
calculating the size of a person’s estate that may be subject to estate tax,
assets on hand are added with gifts made during lifetime that exceed the
annual exclusion amount. The annual exclusion amounts are as follows:
HOW DOES A LIVING TRUST AVOID PROBATE?
You only have to have a probate if you own assets at your death that need to
be transferred to your heirs. A living trust avoids a probate by having you
transfer all your assets to the trust while you are alive. Therefore, when
you die, there is nothing in your name at death that is subject to probate.
WHAT IS A DURABLE POWER OF ATTORNEY AND WHY DO I NEED ONE?
Whereas a Will deals with your assets after death, a durable power of
attorney is a document for use while you are alive. A durable power of
attorney gives your spouse, your children or a trusted friend or relative
the ability to manage your affairs if you become incapacitated through
illness, etc. The term "durable" means that it continues in existence during
incapacity unlike a general power of attorney. It is important to consider
what gifting authority, if any, you want to give to your attorney-in-fact.
Also, naming an alternate attorney-in-fact and carefully choosing the most
reliable people you know to be your attorney-in-fact are important issues to
consider.
WHAT IS THE DIFFERENCE BETWEEN A LIVING TRUST AND A LIVING WILL?
A “Living Trust” is an estate planning document that permits your assets to
transfer on your death to your heirs without a probate. A “Living Will” is
another name for a “Health Care Directive”. A Health Care Directive is the
legal document in which you express your wishes as to the level of medical
care you wish to have at the end of your life.
Elizabeth A. Perry has been helping
Clark County residents with their estate planning and probate needs since
1976. She is a frequent seminar speaker. Her practice emphasizes probate,
Medicaid issues, wills, trusts, incapacity issues, durable powers of
attorney and guardianships. Phone: (360) 816-2485 E-mail: liz.perry@landerholm.com
(The above should not be construed as specific legal advice and is intended
for general information purposes only.)
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