|8 ways to leave a
mess behind for your heirs
|Page | 1 | 2 | 3 | 4 | 5 |
But don't think that scanning a book or two will enable you to do it all yourself. Keep in mind that an estate plan is basically a way to distribute your money after you die, minimizing all taxes and fees. Hiring a good estate planning attorney to do this is highly recommended -- and not that expensive, says Christner.
2. Be clueless about the role of wills
"Where attorneys make money is
in probating the will. They might
do a simple will for you for $300,
but if they probate the will when
you die, they get approximately 2
percent of your assets, depending
on state law," says Christner.
Many people think that a will acts as a free pass around the probate court -- a common misconception.
"People think that wills avoid probate and it's not true at all," says Benjamin Berkley, an attorney specializing in estate planning and administration. "A will is simply a letter of instruction appointing someone to be in charge of your estate and specifying how you want your estate to be distributed or divided, but it doesn't avoid probate."
An author of two estate planning books, "My Wishes" and "The Complete Executor's Guidebook," Berkley says that another misunderstanding people have about wills is thinking that they need to be notarized. "Having it notarized invalidates it. It has to be witnessed, not notarized. It depends on your state: It could be one witness or two witnesses."
Instead of simply writing up a will
-- especially if you own real estate -- experts recommend
putting assets into a living
3. Put your kid's name on the deed
Adding your kid's name on the title of your house is not a good way to pass the old homestead on to the next generation. Tax implications make it a clunky way to pass on assets such as property.
And yet, "so many people do this to avoid having to set up a revocable living trust," says best-selling personal finance author and TV host Suze Orman.
"Your mother or father may say to you, 'Let me put your name on the house with joint tenancy and right of survivorship so that, when I die, it's immediately yours.'"
Several potential problems emerge when someone puts someone's name on a house, she says.
"First, it's a
gift, and the most you can gift to
somebody (without notifying the IRS)
is $12,000 a year. So, if the house
is worth $200,000 and they put your
name on it as a joint tenant with
right of survivorship, they just gave
you a $100,000 gift for which they
have to do a gift-tax report, which
then becomes a matter of public record,"
This means you lose
tremendous tax benefits that you would
have received had you inherited the
"When you inherit property,
you get an incredible step-up in basis
on it. So, if you inherit a house
and the value of it is worth $500,000
on the day you inherit it, and you
then turn around and sell it for that,
you don't pay any tax because that's
your new cost basis.