|8 ways to leave a
mess behind for your heirs
|Page | 1 | 2 | 3 | 4 | 5 |
"If you get that property as
a gift while a parent is alive, you
take over your parent's cost basis,"
Orman says. If the property has appreciated
in value since your parents bought
it, you're on the hook for the gains,
which will be taxed when you sell
If you live in a community
property state such as Arizona, California,
Idaho, Louisiana, Nevada, New Mexico,
Texas, Washington or Wisconsin, the
rules for property ownership are different
"You have people
who think that you can hold property
in joint tenancy, which is not valid
in community property states. But
they think you can just own something
together and it goes automatically
to the other person. That's not a
good idea for estate planning,"
says Christner. "If you have
a very small amount of assets and
live in a state that allows joint
tenancy with right of survivorship,
that may work, but it's basically
not a good idea."
4. Dawdle indefinitely
Procrastination may be forgivable for young singles with no dependents, but if you never get around to doing anything, the grief experienced by your survivors will be compounded.
Inaction all but guarantees that tensions will run high after you pass.
"The biggest single mistake is
avoiding the subject altogether. There are a couple
of reasons that people do that. For one, it's not
fun and I can't make it fun. Secondly it's procrastination,
(caused by) fear of thinking about your own mortality,"
"The rules for
probating, or, in effect, determining
whether you have a valid will, are
somewhat different in every state.
And if it's not valid in your state,
then the intestate laws in your state
determine how your property is distributed,"
Some people may put off doing anything because they don't feel it's the right time. But anyone with assets and a family to protect should at least have a will. "Everyone needs to do some estate planning. The only problem is when to do it," says Christner. "The day you should do it is the day you die because then nothing can change very much."
Failing that, "anyone with a significant
amount of assets, who has children or a spouse should
make up a will probably in their 30s or 40s or --
as I say -- the day they die."
5. Don't trust trusts
Going through probate, a necessity if you die intestate (or without a will), will result in your estate paying too many fees. Though often discussed, federal estate taxes won't even touch most estates, but court costs definitely will if not planned for. Why fritter away as much as 10 percent of your assets built throughout a lifetime of hard work?
"The whole purpose of having a
trust is to avoid probate, because that allows your
estate to pass to your loved ones without having to
employ an attorney or go to the court. It just goes
directly to your heirs and minimizes many of the expenses
to your estate," says Berkley.
"A trust doesn't
save taxes but it does save probate
costs," says Christner. "Depending
on the state, it probably saves between
8 (percent) and 10 percent of the total estate.
If you leave everything you own in
your estate and it all goes by will,
then maybe 10 percent of it will go
to attorneys, appraisers and executors."