Frequently Asked Estate Planning Questions
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 |
|
2010 |
Repeal of estate tax or $5,000,000* |
$2,000,000 |
|
2011 |
$5,000,000 |
$2,000,000 |
|
2012 |
$5,000,000 |
$2,000,000 |
|
2013 |
Unknown at this time |
$2,000,000 |
*An election is available for 2010 deaths to select the more favorable tax system.
For the purpose of calculating the size of your 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, which apply for each of your gift recipients, are as follows:
|
Date Gift Made |
Annual Exclusion Amount |
|
Prior to 1982 |
$3,000 |
|
1983 to 2001 |
$10,000 |
|
2002 to 2005 |
$11,000 |
|
2006 to 2008 |
$12,000 |
|
2009 to 2011 |
$13,000 |
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.
I am a member of the National Academy of Elder Law Attorneys, and have been helping Clark County seniors with their Estate Planning needs since 1976. My practice emphasizes Estate Planning, Probate, Guardianships, and Medicaid planning.
I would be happy to have you contact me to schedule an appointment for individual advice regarding your situation. I can be reached at (360) 816-2485.
The above should not be construed as specific legal advice and is intended for general information purposes only.
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