Wills - What Happens If a Beneficiary Dies Before You?

It is always important to think about the impact of your estate if any of your beneficiaries that you already named, died before you or are unable or unwilling to receive the vested interest. It is even wise to think of these things, even if the beneficiaries are quite a lot younger than you. In usual practice, if a beneficiary dies before you and is actually not a descendant of yours, the gift you have given to them will lapse. If you want the gift to go to his or her spouse or child in the event of his or her death before yours, you should state this in your Will clearly and precisely. However if a son or daughter of yours is going to inherit something of yours under your Will but dies before you have died and has left children, the gift which was meant to go to your children will then go automatically to their children, therefore your grandchildren, unless you have made a special provision in your Will stating otherwise.

If there is a cash legacy (a gift of money) made to a beneficiary in your Will, such as £100 to my daughter Alice Hall, or even a specific bequest (item of property or personal possession), such as my grand piano to my uncle Thomas Cook, there will be no problem. However, if these named beneficiaries die without having obtained their cash legacy or specific bequest, then the gift will revert back to the estate and become part of the residue of the estate, which will go towards the amount of the estate that the beneficiary who is receiving the residue of the estate will receive in the event of your death.

If the main beneficiary who is meant to be receiving the residue of the estate of the testator dies before the testator and is not the testators direct descendant, then that part of the residue of the testators estate will be left indisposed of. This is called partial intestacy. This is where the lapsed share is then dealt with under the intestacy rules. It is therefore advisable to name any alternative beneficiaries in your Will in case the main beneficiary cannot receive the vested interest and is the only residuary beneficiary named in the Will.

However, in the event that the beneficiary to the residue of your estate dies after you, but before the bequest is actually paid to him or her, the beneficiary's estate will still receive that bequest and therefore it will not revert back to the testator's estate and then distributed to other beneficiaries.

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Wills - When Is Inheritance Tax Payable?

Inheritance tax will be due at 40 per cent of a person's estate and is required to be paid on the value of an estate, including certain gifts and assets, that calculate to be more than £325,000 or if you are married or in a civil partnership £650,000. Any estates that are less than the nil rate band at £325,000 will be free of tax. Reducing inheritance tax is one of the reasons why people have Wills drafted for themselves. It can sometimes be charged on your death or later, on the death of a spouse or civil partner, therefore it is important for you to understand the tax well enough to know if you or your spouse or civil partner will be affected by it. There are a number of ways to potentially reduce the chances of inheritance tax but if in doubt, it is always a good idea to contact your solicitor or an independent financial adviser if you decide not to try and organise your finances yourself.

Inheritance tax is charged on the value of a person's net estate when it is in excess of the nil-rate band, and will only be payable on the person's death. Therefore a person will need to take into account all their property, assets less any liabilities and debts. Any funeral costs will also be deducted from the estate that is valued for inheritance tax purposes.

The Inheritance Tax Act 1984 states that it shall be charged on the value transferred by a chargeable transfer. It is therefore imposed that people should be prevented from giving away all their property immediately before they die to then avoid tax. Further to this, the rules provide that inheritance tax is calculated not only on the value of the property that a deceased person has when he or she dies but it takes into consideration the running total of gifts that the deceased has made over the last seven years. Therefore when calculating the size of an estate, it is advisable to look at all the gifts made in the last seven years up to and including the gifts made on death. The tax is first applied to these types of gifts and then on to the estate which is to use up the nil rate band on the gifts so that tax payable on the estate is increased. Inheritance tax is generally more subject to a person's property that is passing on death, but it can also refer to lifetime gifts unless they fall into an exempt category

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Health Care and Living Wills Versus Power Of Attorney

Within your own personal health care there is the end of life issues that can occur. Knowing how you want these handled is important, so that there are not other problems that can arise if the situation were to occur. Even where is a living will in place, a power of attorney should also be in place as well, this helps to ensure that all issues are thoroughly covered and you know you will be taken care of the way you want to in the event of end of life.

Living Will

A living will covers what to do and not do in the event that there are end of life decisions to make. This document only goes into effect when you are no longer able to make decisions yourself and you are incapacitated. This could be for numerous reasons, from a coma to an injury that has occurred. It also covers if you are completely mentally incapacitated as well. A living will typically covers:

Medical Care That Prolongs Life - This is care and treatment that will prolong your life. This could be blood transfers, dialysis, drugs, surgery or respirators for instance. DNR or Do Not Resuscitate Orders - These stipulations work with the above in the sense that you can specify whether you wish to be resuscitated or receive CPR. These types of orders should be specified to the hospital and doctors you work with, as well as wearing a medical alert bracelet that specifies this decision. Food and Water That Prolongs Life - This specifies whether you want to receive food and water through external means. This can happen when there is an injury or a coma and a person can only live through intravenous food and water. Typically when these are stopped a person will pass away from dehydration. You can specify if you want this type of treatment, the conditions when this should happen and for how long this should go on for. Management Of Pain - This is also called comfort care as well and it is when you decide to die naturally, but not in pain. You are kept comfortable while dieing to improve the quality of life and dignity in the event of death. You can specify that drugs do be administered to keep you comfortable, but not in pain.

Power Of Attorney

Even when there is a living will in place, a durable power of attorney for health care decisions is necessary and recommended. The agent is given only as much power as you decide and can cover all decisions that the living will does not cover. If you do not specify the amount of power given, many states allow the agent comprehensive power when it comes to end of life decisions. A durable power of attorney for health care can cover, but is not limited to:

The power to consent to medical treatments. The power to deny medical treatments. This is as long as it does not go against anything that is already in your living will. Making the decision of which medical facility to use. They can make the decision of which doctors and other personnel to use for your treatment. They can go to court on your behalf to determine whether to with hold or continue medical treatment. The power to decide what to do with your remains and whether or not to donate your organs. Make sure to specify your wishes on these matters in the living will and even in the power of attorney document when you have direct feelings about these practices. They can access your medical records. They typically do have visitation rights. What Is The Role Of A Probate Solicitor?   New Year's Resolution: Make or Revise Your Will   How Inheritance Claims Can Prove Very Difficult   10 Top Terms Used In Wills and Will Writing   An Intro Into Properties Planning   Special Needs Trusts - What Are They?   

Avoiding the Pitfalls of Wills and Probate in California With a Revocable Trust

Estate Planning is one of those topics that most people prefer to avoid. It makes them think about their mortality and what the future holds. So individuals who either live in or own significant property in California are often surprised to discover that once they pass away their estates are usually subject to the probate process. A primary value Estate Planning Attorneys can provide to their clients is to explain the difference between Wills and Trusts, as well as the financial and tax implications of probate on their estate. For many clients that are concerned with the negative impact of probate on their estate, Estate Planning Attorneys will often suggest the establishment of a Revocable Trust, which provides the flexibility of a will with the added advantage of private, non-probate administration--thereby avoiding the pitfalls of wills and probate in California when planning one's estate. To understand the benefits of a Revocable Trust, we must first review Wills and the Probate Process.

Wills

Many people, when they think of estate planning, immediately think of wills. A will is basically a letter of instructions about what a person wishes to have done with his estate following his or her death. Wills can be relatively simple, or they can be very complex, stretching over many pages of detailed instruction. Drafting a will allows a person to opt out of the default rules of the intestacy regime. A person can opt not to leave assets to a surviving spouse or child. A person can choose to leave gifts to persons and entities not covered in the intestacy rules, such as a close friend or a church or charity.

In addition, a person can put conditions on gifts in a will. Sometimes a person will have children who have substance abuse problems or mental or physical impairments. In cases like these, leaving a substantial inheritance that child might either enable the child's substance abuse or cause the child to lose state or federal benefits. A carefully drafted will can help a parent to make sure that he or she doesn't inadvertently create or exacerbate problems for his children by making unwarranted or ill-timed gifts.

Pitfalls of Probate

In either of the situations above, where a person dies intestate or with only a will in place, the person's estate needs to be probated if the gross value of the estate exceeds $100,000. Probate serves a useful function in society, by providing an orderly system for notifying heirs of distributions and making sure that estate assets go to the people who are supposed to receive them. However, probates in California are generally considered among the most onerous in the United States, for three main reasons.

1) Probates in California, like almost all court proceedings, are public. Any interested person can stop by the probate court and ask to see a copy of a person's probate file. The file will usually include the person's will, a list of heirs, a list of assets and their approximate values, and a host of other information. Many people consider this a violation of their privacy. 2) Probates in California take a long time-usually somewhere between eight months and two years. Certain assets of the estate are frozen during this time. It is not unusual in a probate for a surviving spouse to have to petition the court for an allowance from the estate to provide for day-to-day living expenses. 3) Probates in California are very expensive. Probate fees, which are the fees paid to the executor and the attorney for the estate, are based on a percentage of the gross value of the estate. These fees routinely run into the tens of thousands of dollars, even for relatively modest estates.

The Benefits of a Revocable Trust

For these reasons, many people in California choose to avoid the probate process by setting up a revocable trust. A trust accomplishes the same goal as a probate: distributing assets to the people who should receive them. However, a trust is generally considered superior to a probate for several reasons.

A properly drafted trust allows a person all the flexibility of a will, but with the added advantage of private, non-probate administration. A trust administration is private-the only people entitled to notice or accounting of trust assets are the beneficiaries of the trust. Distribution of trust assets can often be accomplished within a few weeks of the death of the person who set up the trust. In addition, a trust administration is usually fairly inexpensive compared to a probate. Where a probate might cost the estate almost ten percent of the estate's total value, a trust administration can often be completed for a small fraction of that amount.

Setting Up a Trust in California

Drafting a trust or a will may appear to be relatively simple, and many people use inexpensive forms or computer programs to set them up themselves. However, there are numerous pitfalls that can cause problems for the unwary. Oftentimes people will be unaware of important provisions in the law that may lead to unintended consequences. Sometimes individuals inadvertently disinherit someone they intended as a beneficiary, and sometimes, as mentioned above, individuals cause significant problems for beneficiaries who are receiving state or federal disability or other benefits. An improperly drafted trust can also cause significant tax headaches for a surviving spouse or child.

For these and many other reasons, it is always good practice to consult with an attorney who specializes in trust and estate law. The State of California certifies attorneys in several areas. Every county in the state has at least a few attorneys who have taken the extra training, education, and experience to become certified as specialists in estate law. These attorneys know estate law inside and out and are able to counsel with clients effectively on the potential problems that might await in an estate planning situation.

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