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ESTATE PLANNING – NOT JUST WILLS AND TRUSTS : Part I

Estate planning is often associated only with very wealthy families and trust funds. While transferring wealth from one generation to the next is generally the brunt of estate planning, it’s far from the only purpose.

Planning for our own financial care once we lose the ability to handle our own finances, and for our health care decisions is an important part of estate planning.

LEGAL CAPACITY

In law, we often refer to one’s legal “capacity.” In this context, it refers to one’s mental capabilities. There are several levels of legal capacity, including but not limited to contractual capacity, testamentary capacity, and the capacity to marry.

INHERITING UNDIVIDED INTERESTS – PARTITION ACTIONS

A partition action or proceeding is an action to divide multiple legal interests in – usually – real property. A partition action is usually appropriate where: a decedent owned an undivided interest in commonly owned property, or; the decedent left undivided interests in property to more than one heir or beneficiary, and they do not want to co-own the property.

COMMON LAW MARRIAGE

Common law marriage is the recognition of a legal relationship between two people who did not actually or formally marry. Many people think that living together for several years will give rise to a common law marriage, resulting in the right to spousal support (alimony) or other rights, including inheritance of property.

POWER OF ATTORNEY – 101

A power of attorney is a written authorization for one person to represent or act on someone else’s behalf in business or other legal matters, and private affairs. The person authorizing the other to act is the principal, grantor, or donor (of the power). The individual granted the power of attorney is the “agent,” or the attorney-in-fact.

FAMILY ALLOWANCE DURING PROBATE

What happens when the wage earning spouse dies? Probate, and settlement of the estate, can take months, or even years. What are the family’s options in the short term?

The decedent’s spouse and minor children can petition the probate court to receive a family allowance.

HOMESTEAD PROPERTY

What happens when a parent and/or spouse, dies, and all of the property is in their name? Probate proceedings can take several months, and sometimes years, before estate property can be distributed. A probate homestead allows a grieving family to remain in the residence, as well as retain household furniture, apparel, and other property (some jewelry, health aids, recent wages, retirement), up to a certain dollar amount within each category.

PHILLIP HOFFMAN’S ESTATE PLANNING LESSONS

Philip Seymour Hoffman died at the age of 46, with a $35 million estate. Mr. Hoffman left a will, giving much of his estate to his long-time partner and mother of his three children, Marianne O’Donnell. Because Mr. Hoffman, who apparently did not believe in marriage, and did not want his children to be ‘trust fund’ kids, left everything by will, his estate paid around $15 million in estate taxes, to the detriment of his heirs.

PROBATE ADMINISTRATION – TESTATE VERSUS INTESTATE

Does having a will mean you can avoid probate? The answer is, unfortunately, no. Having a properly drafted and funded trust is the surest way to avoid probate.

However, having a will (testate) does result in some differences; and having a will is always preferable to not having a will (intestate). With regard to probate administration, having a will means that the Probate Court will know exactly who you want to handle your affairs, and how your want your debts and assets to be handled.