Last Will and Testament Question

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Prudence
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Last Will and Testament Question

Post by Prudence »

My wife and I have wills (also durable POA, durable POA for health care) that were prepared by an attorney in 2003. I am thinking about using a software program (DIY) program to replace these wills now. In our situation, I think we need simple wills. Our existing wills contain a few provisions which I don't think we need. For example, Article IV Residuary Request and Family Trust; any property that my wife would renounce would pass to this trust. The rest of the will has several references to this disclaimer trust. Is it critical that my will include the disclaimer trust?

(We also plan to establish a revocable living trust which will hold our house).
bsteiner
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Re: Last Will and Testament Question

Post by bsteiner »

Prudence wrote: Tue Oct 16, 2018 8:30 am My wife and I have wills (also durable POA, durable POA for health care) that were prepared by an attorney in 2003. I am thinking about using a software program (DIY) program to replace these wills now. In our situation, I think we need simple wills. Our existing wills contain a few provisions which I don't think we need. For example, Article IV Residuary Request and Family Trust; any property that my wife would renounce would pass to this trust. The rest of the will has several references to this disclaimer trust. Is it critical that my will include the disclaimer trust?
...
Only if she might want to disclaim in favor of the disclaimer trust. If she survives you, (i) what will the size of your estate be at your death, (ii) what will the size of her estate be at her death, (iii) what will the estate tax exclusion amount be at her death, and (iv) what will the estate tax exclusion amount be at her death. With the answers to these questions we can predict the likelihood of her wanting to disclaim in favor of the disclaimer trust.
Prudence wrote: Tue Oct 16, 2018 8:30 am ...
(We also plan to establish a revocable living trust which will hold our house).
Why? Revocable trusts make sense in some cases, and in some states, but not in most cases in most states. Is there some reason for creating one in your case? Do you live in a state like California where there's more work in dealing with the courts than in most states?
Topic Author
Prudence
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Re: Last Will and Testament Question

Post by Prudence »

On January 1st, the Maryland estate tax exemption increases to $5 million which is more than our combined assets. The bulk of our assets are in savings accounts, mutual funds/ETFs, CDs and tIRAs; all of these have beneficiaries or TOD/PODs so not much will go into our estate(s), I believe. The reason for placing our house in a revocable living trust is to avoid probate (Maryland); is this a good move?
Ragnoth
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Re: Last Will and Testament Question

Post by Ragnoth »

I’m not a lawyer, but my understanding is Probate can become a long court proceeding, and there are usually formalities involving notice, etc. Assets that pass through a trust can usually be transferred more easily, and are less likely to get tied up in courts. If you have substantial assets (or houses), a trust is usually a good idea.

Also, using a “residuary trust” is usually an OK alternative to a normal “residuary clause.” You should always have one of these in order to act as a “catch-all” and avoid things slipping into intestacy (weird situations can occur when spouses die simultaneously, beneficiaries around around in the future, or if people start disclaiming things based on State law). It might simplify things to use a normal residuary clause... but I would be cautious about removing it entirely.
bsteiner
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Re: Last Will and Testament Question

Post by bsteiner »

Prudence wrote: Tue Oct 16, 2018 9:48 am On January 1st, the Maryland estate tax exemption increases to $5 million which is more than our combined assets. The bulk of our assets are in savings accounts, mutual funds/ETFs, CDs and tIRAs; all of these have beneficiaries or TOD/PODs so not much will go into our estate(s), I believe. The reason for placing our house in a revocable living trust is to avoid probate (Maryland); is this a good move?
She might want to disclaim if she's concerned about Medicaid. If you're leaving your entire estate to her, there's no harm in having a disclaimer trust as backup. Occasionally the spouse disclaims in favor of the disclaimer trust. If she doesn't, there was no harm in having it. It's like having fire insurance on your house and your house didn't burn down.

You need to name beneficiaries for your retirement benefits.

Naming beneficiaries for your other accounts is usually not a good idea, though if your spouse is the beneficiary and you would otherwise leave your entire estate to her there probably won't be any harm.

Probating a Will in Maryland and dealing with the probate court isn't particularly difficult, expensive or burdensome, so that's probably not enough of a reason to create a revocable trust.
Topic Author
Prudence
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Re: Last Will and Testament Question

Post by Prudence »

Thank you for the explanation about disclaimer trust, I was wondering why.
Why is naming beneficiaries for my other accounts usually not a good idea?
I agree with you about probate in Maryland (based on my experience with my mother's estate).
bsteiner
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Re: Last Will and Testament Question

Post by bsteiner »

Prudence wrote: Tue Oct 16, 2018 10:49 am Thank you for the explanation about disclaimer trust, I was wondering why.
Why is naming beneficiaries for my other accounts usually not a good idea?
I agree with you about probate in Maryland (based on my experience with my mother's estate).
If you're leaving your estate to your spouse, there's no harm in naming her the beneficiary of your taxable accounts.

Except for that, and except for life insurance and retirement benefits, it can create lots of problems. There might not be enough assets available to pay debts, expenses, taxes, cash bequests, etc. Our clients generally provide for their children in trust rather than outright, to keep their inheritances out of their estate, and to better protect their inheritances against their creditors and spouses, and Medicaid, and naming beneficiaries will defeat that.
Topic Author
Prudence
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Re: Last Will and Testament Question

Post by Prudence »

Accounts with beneficiaries (including TOD/POD) will not go into the estate, right? They pass immediately to the named beneficiary, right?
My wife is the primary beneficiary (100%) in my accounts where I am the sole owner. Except I have one account where our daughter is the primary beneficiary.
Ben10
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Re: Last Will and Testament Question

Post by Ben10 »

Prudence wrote: Tue Oct 16, 2018 11:13 am Accounts with beneficiaries (including TOD/POD) will not go into the estate, right? They pass immediately to the named beneficiary, right?
Yes, assuming beneficiary survives you. Make sure you name a contingent beneficiary as well.
GrasRootsAdvisr
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Re: Last Will and Testament Question

Post by GrasRootsAdvisr »

I think you are on the right track with setting up your revocable living trust. We put our house, cars, a brokerage account and any other assets we own of value in our trust. Your trust avoids probate which, having been there, done that with my parents is never something anyone wants to go through. Your trust can distribute your assets whenever and however you see fit to whomever you want.

Our revocable living trust becomes irrevocable upon the death or incapacity of the last trustee. We also established pour over wills for any assets we did not add to the trust before we die.
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