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Estate planning means planning in advance for the distribution of your property upon your death. The most common way to plan for the distribution of your property is what is known as a Last Will and Testament. However, a will is not the only way to plan in advance and every person is unique and may require a different estate plan.
First, determine who you want to inherit your property and how you want it distributed. For example, do you want your property to go entirely to your spouse or your children? Or perhaps you want to give everything to a charity? It is entirely up to you.
Second, list all your property and place a fair market value on the assets. Subtract the sum of your debts from the value of your assets to determine your net estate. The value of your estate will help you determine what estate plan if best for you.
- An asset is something you could sell for cash.
- Fair market value means what you could obtain for the item of property if you sold it.
Third, prepare a list that contains the following information:
- People to contact
- Location of important papers
- Location of bank accounts and investments
- Tax information
- Information regarding insurance
- Information regarding your house
- List of credit cards
- List of monthly expenses
- List of benefits from employers or fraternal organizations
- Automobile papers
- Information regarding funeral arrangements
Whether you plan or not, everyone has an estate plan. With no written estate planning documents (i.e. a will) in place, Intestate Law will decide who gets your property when you die. This means that the property is divided among specified relatives according to specific formulas. You property could potentially end up in the hands of distant relatives that you have never even met. If you have no relatives, all of your property will be turned over to the state for education purposes.
- Intestate Law -- state laws governing the distribution of property if someone dies without a Will or other estate plan.
- One of the most common forms of Estate Planning tools is a Will. Simple, a Will is a written document that takes effect upon your death and tells everyone how to distribute your property. You can revoke or change it at anytime during your lifetime.
The primary reason for making a Will is to provide written instructions on how your assets are to be distributed among your beneficiaries. A properly drafted Will accomplishes the following:
- Outlines how you wish to distribute your assets including specific gifs of your tangible personal property.
- Designates a Personal Representative, also known as an Executor, who is responsible for taking inventory of your property, preserving your estate, paying creditors, administrative expenses and death taxes, and disposing of the remainder of your property among your beneficiaries.
- If necessary, appoints Guardians for minor children in the event of the death of both parents.
- In order for a Will to be valid, it must conform to certain laws. Most people do what is called a “formal” will, which is a typed document, witnessed by two other people and a Notary Public.
- Nevada law also recognizes what is known as a “Holographic Will”. A Holographic Will is a handwritten will. In order for it to be valid, it must be entirely in your own handwriting, dated and signed. It does not need to be witnessed or notarized. The writing must clearly state that you intend for it to be your Will. You should write it on plain paper. Do not do it on paper that has any other markings such as letterhead. If done properly, these Wills are just as valid as formal wills.
What is Probate?
- Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person’s property under the Will or intestate laws.
- Court supervision of the probate process helps ensure that the directions left in your Will are carried out properly.
- The probate process can take as little as four months or as long as several years. Things that can significantly delay the process include if your Will is contested or if you own real property in other states.
- The costs of probate are usually made up of attorney’s fees, executor fees, and court costs.
- A will substitute is an alternative to a will. A will substitute allows for property to pass to a designated beneficiary without passing through probate. For example, if you have a life insurance policy you can designate a beneficiary to receive the proceeds from the life insurance policy. This is a will substitute because the property will pass to your chosen beneficiary but will not have to pass through probate prior to being transferred.
What are other will substitutes?
Deed Upon Death
- Allows you to transfer real property upon your death to your designated beneficiary or beneficiaries through preparation and recording a special deed.
- To be effective, the deed must be signed, dated, and notarized in compliance with state law. The deed must include an accurate legal description of the property to be conveyed. Finally, the deed must be recorded in the county where the real property is located prior to the death of the owner.
- Upon the death of all owners, the beneficiary will need to file a certified death certificate for each owner and a Affidavit attesting to the fact that the owner has died and that he or she is the designated beneficiary.
- The owner retains full ownership of the property while living, and can revoke the Deed Upon Death at any time.
- The interest transferred to a beneficiary under a Deed Upon Death is transferred subject to all mortgages, liens, judgments, and other encumbrances, if the assets of the deceased owner’s estate are insufficient to pay the amount of such claims.
Payable on Death (POD)
- Of course, it is well known that you can also designate a beneficiary for the proceeds for a life insurance policy, an annuity, and retirement accounts.
- Likewise, most financial institutions and banks allow you to establish a payable on death designation for bank accounts.
- Contact the appropriate institution holding your account to arrange for a Payable on Death designation.
Transfer on Death (TOD)
- For most securities and brokerage accounts you can establish a transfer on death designation.
- Contact the appropriate institution holding your account to arrange for a Payable on Death designation.
Vehicle Transfer on Death
- Transfer on Death allows motor vehicle owners to add or remove a beneficiary to the title of a motor vehicle, trailer, or semitrailer.
- Ownership of the vehicle passes to the beneficiary upon the death of all legal owners. The beneficiary must apply for a new title to complete the process.
- Vehicles with a lienholder, lessor, or titled as Tenants in Common may not have a transfer on death beneficiary.
- Beneficiaries have no ownership interest in, or control of, the vehicle until after all the owners have died.
- Please contact the Nevada Department of Motor Vehicles to add a beneficiary to the title of your car or trailer.
- Joint tenancy is a form of joint ownership that is created by a written instrument indicating joint tenancy. In the case of real property, a deed would provide, “John Doe and Mary Doe” as joint tenants. Upon the death of a joint tenant, the survivor would become the sole owner by recording at the County Recorder’s Office an Affidavit Terminating Joint Tenancy. Joint tenancy may be created in numerous assets, including automobiles, stock certificates, brokerage accounts, and bank accounts.
- Deed Upon Death
- A Revocable Trust is a legal document that goes into effect during your lifetime. The trust states how your property is to be managed while you are alive and how it should be distributed when you die. In the trust you name someone to manage the trust, who is known as the trustee. The trustee can be yourself or someone else, such as a relative or a bank.
- A Revocable Trust avoids probate if it is properly funded. In order for a revocable trust to be properly funded, the assets of the creator have to actually be transferred to the trust. The trust, and not the person owns the assets, therefore, there are no assets to probate. Remember, probate is the court process that happens after you die and results in your property being distributed to your heirs by the court.
- The cost of preparing a trust can range from $1500.00 to $3000.00. We recommend that you investigate a trust if everything you own is worth more than $200,000 or own real property in two or more states because there will be a need for a probate action in each state.
- However, many people may be wasting their money by doing a trust if their estates are small or their property is held in joint tenancy with the right of survivorship or some other form of ownership that does not require probate, such as will substitutes (See section titled “Will Substitutes” on this page).
- If your estate is worth less than $200,000, or the portion of your estate subject to the probate process is worth less than $200,000, it may be less expensive to do a will and use other legal mechanisms instead of a full-blown trust.
- Please be aware that if you or your spouse end up in a nursing home and need Medicaid assistance to pay for the costs, a home, which has been placed in a Living Trust, may disqualify you from getting that assistance.
- If you decide to do a trust, remember that all of your property must be transferred into the trust or your estate will wind up in probate. About one third of the people who do trusts do not transfer all of their property in the trust. You should also have any trust, no matter where it was drafted, reviewed at least every five years.
- An Estate Tax is a tax on your right to transfer property at your death.
Will I have to pay estate taxes?
It depends on the value of your estate upon your death.
- Nevada does not have an estate tax or inheritance tax.
- As of 2014, a Federal Estate Tax filing is not required for estates worth less than $5,340,000.
- It depends on the value of your estate upon your death.
- Please note, if necessary the personal representative of the estate may have to file a final individual income tax return for the deceased.
- Also, if the estate generates income while it is being administered, it may be necessary to file an income tax return just like a person would. The personal representative should obtain a Tax Identification Number for the estate as soon as they are appointed by the court.
- The most immediate concern for those who are left behind when you die is the matter of your burial or cremation.
- Traditionally, your final wishes regarding your burial or cremation would be placed in your Last Will and Testament. However, oftentimes, your Last Will and Testament is not found until after your remains are handled. Therefore, it is much more practical to make arrangements for your burial or cremation in advance and to speak about them with your family and personal representative or executor.
- Ideally, you should prepay your funeral expenses and make the desired arrangements yourself. Alternatively, you can consider opening a savings account in your personal representative or executor’s name in which you deposit enough money to cover the anticipated funeral expenses.
- Additionally, you should sign a Burial or Cremation Affidavit before a notary public that authorizes a specific person, such as your executor or personal representative, to order the burial or cremation of your remains upon your death.