Estate Planning Frequently Asked Questions
Estate planning is about stopping the Government from interfering in your and your family’s private affairs!
Estate planning is arranging for the control of your decisions and distribution of your property when you are unable to be in control for any reason during your lifetime and beyond. That is, if you can’t make the decisions, who will? Will they have the legal authority? What power will they have? Did you pick them, or a Judge? Do you want a Judge to oversee the management of you and your money?
Estate planning is more than just a Will. A Will alone requires probate. An effective estate plan prevents probate and prevents many more legal problems. Problems that can cost you and your family a lot of money. Problems that can cause you to lose what you have…even if it’s not your fault!
If I had to summarize all of estate planning in one word, that word would be “control.” With a plan, you control who’s in charge. You control your privacy. And you control who gets what, when, how, and how much.
Estate Planning = Peace of Mind and Certainty.
Estate Planning reduces the uncertainty and costs of dealing with lifetime incidents and accidents.
Estate Planning reduces the uncertainty and high cost of dealing with your final estate.
Estate Planning is arranging for the care and management of your personal property and real estate during and and after your lifetime. An estate plan should be tailored to each family’s unique needs, goals, and desires.
If you should be unable to make decisions during your lifetime, an Estate Plan tells the world who can make decisions for you, manage your money, and more instead of a Judge.
A trust is a contract (legal document) between the Grantor (the person who creates the trust), the Trustee (the person who controls and manages the trust) and the beneficiaries (those entitled to benefit from the trust). You, as Grantor, determine how the trust will be operated by the Trustee and who benefits, how and when.
During your lifetime, you are the Grantor, Trustee, and Beneficiary! That means you maintain full control of the Trust unless you are incapacitated. In that case, you’ve already named the next Trustee (manager)!
We have several trusts available and one of them will meet your needs.
If you have minor children, the best way to protect them and their assets is with a trust.
With a Will, you decide who gets your assets and on what terms. Pick who gets what, when, how, and how much.
A Will is a legal document that lists who you want to get what, when, how, and how much.
If you don’t have a Will (or Trust), then the State decides who gets what, when, how, and how much.
Determine who will take care of underage children and who will administer your estate – known as the executor or personal representative.
A “Beneficiary Plan” uses a combination of methods and tools available to keep the majority, if not all, of your estate out of Probate without the expense and complexity of a Trust.
Many people often write just a Will and forget there are other better ways to handle their bank accounts. With a plan your bank accounts, investments, savings accounts, financial accounts, retirement plans, life insurance policy, and retirement accounts will be shielded from the rigors of probate.
If you become sick or disabled, either temporarily or permanently, who will make decisions for you?
A Power of Attorney, perhaps the most important legal document, lets you appoint someone (your Agent) you know and trust to manage your affairs if you can’t.
If you can’t pay bills, get records or make other decisions, your family will be prevented from helping you get treatment, pay doctors, pay bills, sell assets, or work with Medicare.
If your loved one becomes incapacitated and does not have a Power of Attorney, your family may have to file what is known as a Guardianship Proceeding to obtain guardianship of the incapacitated person. This process involves the Court, several lawyers, doctors and usually costs three thousand dollars or more. A Power of Attorney costs a fraction of that.
A properly drafted, comprehensive Power of Attorney lets your Agent to preserve your assets in the event that you need nursing home care for your loved ones.
It is important that you give your family the tools to help you if you cannot help yourself.
Make your wishes clear and binding for life support, organ donation, and who has access to your medial records.
Control Where Your Assets Go – and who is responsible for making sure that they go where you want and how you want.
Control Important Healthcare Decisions – your plan includes your wishes should you be incapacitated for any reason
Control Personal, Legal, and Financial Decisions – and who you want to handle your finances and legal matters if you should be incapacitated for any reason
For most people, estate tax is not a concern. Arkansas has none.
The federal estate and inheritance taxes start, in 2022, at $12.06 million of assets. A couple, because of the rules, can have double that. That means that a couples total taxable estate doesn’t begin until $24.12 million. Your total taxable estate includes everything you own, including proceeds form life insurance.
You really want to avoid estate taxes because the estate tax rate is 40%.
You need to be careful, because this is tied very closely to the gift tax. For every $1.00 of gift you give during your lifetime, you lose $1.00 of estate tax exemption. Another reason to watch the gift tax is because of Medicaid.
What Happens Without a Plan?
- Probate is the default. Without your plan, your estate will have to go through Probate and all the hassles that brings.
- Decisions made without your input! If you can’t make your own decisions, a Judge gets the final say.
- You don’t decide who gets what, when, how, and how much…the State does.
- You don’t decide who manages your personal, legal, financial and healthcare choices…the State does.
- You lose control
With a Plan
- Save Your Family From the Aggravations of Probate. Take control so the law doesn’t take control from you. Know who will get what, when, how, and how much
- Take care of yourself – Know who will make decisions for you in a health or personal crisis
- Care for your family – Pick the people you trust the most to take care of your loved ones
- Experience peace of mind and relief you deserve
- Feel good knowing you’ve just finished a major step in protecting you, your family, and your money
We all have a window of opportunity to plan our affairs. Don’t wait too long and let your window close.
The estate planning deadline is now. Why? Because tomorrow’s not promised. The next minute isn’t promised.
Once you need a plan it’s too late to create a plan.
Estate planning is about more than who gets your stuff. It’s about preventing lifetime problems too. If you are in an accident or have a medical incident, then you and your family will be glad you have a plan. Because if you don’t have a plan, then your family most likely will have to get a Judge’s permission to help you and manage your affairs while you can’t.
We can’t predict the moment we will need a plan, so it’s best to create an effective estate plan before you need one.
1. A Will. Everybody should have a Last Will and Testament. If you don’t have a trust, this document is used to distribute your estate as you want. If you have a trust, the will is there as a safety net to catch anything that might not have made it into the trust. But, your Will doesn’t give you any lifetime protection. However, a Will requires probate. However with proper planning, this is minimized if not eliminated.
Other than a Will, what should you have? What would happen to you and your family if your were suddenly unable to make your own decisions? Here are what you should have in place to protect everybody and make decisions easy and clear.
2. A Durable Power of Attorney. This names the people you want to manage your affairs when you aren’t able to (or don’t want to). You get to make the choice of who manages your affairs instead of a Judge. You get to limit their power to what you want.
3. A Healthcare Power of Attorney. A healthcare power of attorney names the people you want to make your healthcare decisions when you can’t. If you don’t, then family will need to go to court to let a Judge name the person who will be in charge.
4. A Protected Healthcare Information release or HIPAA waiver. Without this, even your family doesn’t have the legal authority to get information about your health information or records. Without it, they may have difficulty making healthcare decisions for you when you can’t. It would take a court order instead and that means a trip or trips to court.
5. An advance directive or “Living Will.” Don’t confuse this with your last will and testament. This is a healthcare document. In it you make the decision now if you want to be kept alive artificially if nothing else can be done.
The Government has an estate plan for you, your family, and your stuff already written!
This isn’t a conspiracy theory. It is all written down in the Arkansas statutes in Title 28. You can read it if you want.
You probably won’t like the “Default Plan” The Government Already Has for You and Your Family.
The government’s plan includes Probate and other court proceedings. These are time consuming and expensive as well as hard on you and your family.
Let me ask you some questions:
Do you think the government’s plan is always in your best interest?
Do you think the government’s plan is going to be the least expensive option for your family?
Is their plan the one that saves the most in taxes, takes the least amount of time, keeps your family out of the courts, keeps everything private, and is the least likely to cause family disputes?
I think you know the answer to those questions.
If you don’t want the Government in complete control of you and your stuff, you need to write your own plan to override theirs. If you want to decide who gets what, when, how and how much, you plan. If you want to decide who’s in charge when you can’t be, you plan.
The only way to override the state’s plan is to legally create an effective estate plan of your own. Your plan that protects you, your family, and your money the best way possible.
Far too many people think that a Will alone eliminates probate.
I want you to understand that a Will DOES NOT eliminate probate or provide any lifetime protections. A Will requires probate and does nothing during your lifetime! And probate is a waste of time and money your family doesn’t need.
To eliminate probate and other legal nightmares, you need more than a Will alone.
You need to make sure everything you own passes outside of probate. You do this with a combination of deeds, beneficiary designations, and maybe even a trust depending on the complexity of your situation.
To eliminate lifetime problems you want to
1. Keep you children off the accounts and deed to your house. If you put them on the accounts or deed, then their financial troubles become your financial problems. It can lead to you losing a lot of money or even your house. If they get sued, have IRS issues, run into credit problems, run up high healthcare costs, and more then your accounts with their name on them could be used to pay their bills.
2. Create powers of attorney for finances, legal decisions, personal decisions, and healthcare. Without these powers of attorney your family ends up in court to get permission to make decisions for you if you are unable to.
You can look on the internet and in the yellow pages. The best thing is to ask for referrals from friends, family, and allied professionals such as CPAs and attorneys that practice in other areas of the law. These are the best ways to find your Trust attorney. Don’t forget that you should take the time to “interview” your attorney before signing with them.
During your lifetime you control your stuff such as money, real estate, and personal belongings. You can give to anybody you want. You can give it to them physically or sign it over to them.
When you aren’t there to give your property away, somebody else, a Judge, has sign over the property to those you want it to go to. Or, if you didn’t leave a Will, then State law, the Government and a Judge, decides who gets what, when, how, and how much. The Judge may even order it all sold!
Probate Frequently Asked Questions
Probate is the process of settling a person’s final estate who did not have a plan setup. If an individual dies without a proper plan in place and owned assets, probate is necessary. Working with an attorney takes away any guesswork, potential for errors, and makes the entire process faster and easier.
- File a petition with the probate court to open the probate case. Give notice to heirs and beneficiaries.
- If there is a Will, the Judge will validate it is a legal Will
- The probate court appoints an Executor or Administrator for the deceased person (also called a personal representative)
- The executor named gives notice to creditors and heirs of the deceased person
- Make sure life insurance and other accounts had beneficiaries
- Take inventory of estate assets and real estate
- Final bills are verified and paid
- What’s left of the decedent’s estate and decedent’s property is distributed to the beneficiaries
- The probate court closes the probate administration
Fees for probate in Arkansas are set by statute to a percentage or “other contractual agreement” if everybody involved agrees to the terms.
Fees are typically paid by the estate. From time to time, if the family is keeping all the property and there is no cash, then the family will pay the fee out of pocket.
The percentage works out to about 3% of the gross estate. The 3% is calculated before debts are subtracted out. It is actually a graduated scale, but 3% is a good estimate.
In addition to this fee, the executor is due their fee which is about 3% of the value of the personal property of the estate.
Also, you can expect the estate to pay the filing fee, travel costs, newspaper publications, appraisers, and more.
Arkansas does have a simplified probate process, but the requirements are strict. The deceased person’s estate must owe no money to creditors and be worth under $100,000.00. Also, it must have been at least 45 days since the deceased person passed away.
If there is a valid will, the rules in it are still used for distribution.
May title insurance companies will no longer accept a small estate affidavit. If real estate is involved, then a full probate is highly recommended.
If everything was done properly the following avoids probate:
- Life Insurance Proceeds
- Jointly Owned Property or property owned in joint tenancy (with right of survivorship) including accounts and real estate
- Retirement Accounts with beneficiary designations
- Other property with beneficiary designations
During your lifetime you can give away your stuff. You can give what you have to whoever you want. It just takes your signature or physically giving it somebody else.
When you aren’t able to sign or understand what you are signing, for any reason, including dementia and incapacity, then the Judge must sign for you during probate.
If you leave a Will, then the Judge will follow your wishes as to the distribution of your stuff.
It takes more than a Will alone to avoid probate. A Will alone requires probate and does nothing for you during your lifetime.
Here are some reasons you want to avoid probate for you and your family:
1. It is public. Your and your family’s addresses, at a minimum, are published in the public record. The basic value of your estate is published in the public record. This can lead to “financial predators,” con men, preying on your family. They may come in the form of financial investments.
2. It is exorbitantly expensive. It will cost at a minimum 3% of your gross estate. That is the total value of the estate without subtracting debts.
3. It takes a long time. In Arkansas, you can plan on a minimum of 8 months until money is available to your family.
The purpose of probate is to make sure all the decedent’s assets are accounted for, their debts are paid, all taxes are paid, and what is left is distributed to their heirs. If they left a Will, then the distribution happens according to the Will. If there wasn’t a Will, then the distribution is decided by State law in what is called intestate succession.
Business Frequently Asked Questions
What is an LLC?
In business law, a LLC is a Limited Liability Company.
LLC’s separate business assets from personal assets. So if the business is sued, only the assets of the business can be used to pay for the judgement. Your personal assets are shielded under most circumstances.
They are typically simpler to operate than a corporation.
A limited liability company (LLC) is the specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under state law; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states (for example, Texas), businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).
An LLC is a hybrid legal entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC is a type of unincorporated association distinct from a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. As a business entity, an LLC is often more flexible than a corporation and may be well-suited for companies with a single owner. https://en.wikipedia.org/wiki/Limited_liability_company
What is a Corporation?
A corporation is a legal entity that stands apart from its owners.
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law “born out of statute”; a legal person in legal context) and recognized as such in law for certain purposes. Early incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered based on two aspects: by whether they can issue stock, or by whether they are formed to make a profit. Depending on the number of owners, a corporation can be classified as aggregate (the subject of this article) or sole (a legal entity consisting of a single incorporated office occupied by a single natural person).
One of the most attractive early advantages business corporations offered to their investors, compared to earlier business entities like sole proprietorships and joint partnerships, was limited liability. Limited liability means that a passive shareholder in a corporation will not be personally liable either for contractually agreed obligations of the corporation, or for torts (involuntary harms) committed by the corporation against a third party. Limited liability in contract is uncontroversial because the parties to the contract could have agreed to it and could agree to waive it by contract. However, limited liability in tort remains controversial because third parties do not agree to waive the right to pursue shareholders. There is significant evidence that limited liability in tort may lead to excessive corporate risk taking and more harm by corporations to third parties. https://en.wikipedia.org/wiki/Corporation
What is an “S-Corporation?”
This is not a corporation or LLC. Rather it is a tax election to have income taxes passed to the owners.
An S corporation, for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes. Instead, the corporation’s income and losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.
S corporations are ordinary business corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. The term “S corporation” means a “small business corporation” which has made an election under § 1362(a) to be taxed as an S corporation. https://en.wikipedia.org/wiki/S_corporation
What is a C Corporation?
A C corporation, under United States federal income tax law, is any corporation that is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. Many companies, including most major corporations, are treated as C corporations for U.S. federal income tax purposes. C corporations and S corporations both enjoy limited liability, but only C corporations are subject to corporate income taxation.
Generally, all for-profit corporations are automatically classified as a C corporation unless the corporation elects the option to treat the corporation as a flow-through entity known as an S corporation. An S corporation is not itself subject to income tax; rather, shareholders of the S corporation are subject to tax on their pro rata shares of income based on their shareholdings. To qualify to make the S corporation election, the corporation’s shares must be held by resident or citizen individuals or certain qualifying trusts. A corporation may qualify as a C corporation without regard to any limit on the number of shareholders, foreign or domestic. https://en.wikipedia.org/wiki/C_corporation
What is a Partnership?
Anytime 2 or more people agree to run a business together, a partnership is formed. It doesn’t require formal paperwork to be formed.
A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract. https://en.wikipedia.org/wiki/Partnership