Can I take it with me? The definitive answer to this question is “no.” You will never see a funeral procession that includes a moving van or a hearse pulling a trailer. All the things you have accumulated over the course of your lifetime must be left behind when you pass away.
So the real question becomes: “How do I go about disposing of everything?” The good news is that you have a number of options you may consider, but understand that there is no one answer that is best for every situation.
None of us know how much time we have left, and whether we have weeks or months or years or even decades to address this issue. Your projected life expectancy may make you believe you have ample time to devise an estate plan, but bear in mind that a tragic car accident or sudden heart attack could precipitate the issue much sooner than you would like. Because of that uncertainty, the best advice is to take action now. Putting your wishes in writing can give clear direction that will avoid confusion and the possibility of family fights.
A good starting point is to eliminate some of the clutter. We all have things that have been sitting around the house for years with nothing more than sentimental value to us, and even less value to our beneficiaries. Outdated video tapes, owner’s manuals for appliances you no longer own, old birthday cards, ancient paperbacks, clothes that are way out of style and plain old junk sitting in the basement or garage are just a few examples of stuff you may want to dispose of. Separating the wheat from the chaff while you are still around will make the estate settlement process considerably easier for whomever you select to handle your affairs.
Once you have reduced the rubble and refined what your personal property consists of, you basically have four options on what to do with it:
- Give it away now. Under the tax law as of 2023, you could give up to $17,000 (or a married couple could give a total of $34,000) in annual exclusion gifts to any child, grandchild or other person.
- Draft a will that names the beneficiaries you want to receive the residue of your estate and directs the percentage share each person is to receive. The will also allows you to nominate the individual that is to be appointed by the probate court to act as your executor or personal representative with full power to transfer the title to vehicles, bank accounts, stocks, bonds, real estate and any other assets.
- Get a revocable living trust to avoid the expense and delay commonly encountered with probate proceedings and fund the trust by transferring your assets into the name of the trust, while still keeping them under your control.
- Do nothing, and let the laws of intestate succession in your state determine who gets what.
Can I give away estate assets without penalty while I’m alive?
Let’s look at these options in a little more detail. First, making a lifetime gift of a particular item can be a far more meaningful moment than would occur after you are gone. For example, presenting your granddaughter at Christmas with that pearl necklace she so often admires allows you to see her smiling face and witness her grateful show of appreciation, giving you both a special moment to remember that is much more personal than if the administrator of your estate handed it over and asked her to sign a receipt.
Cash gifts can also be made that will immediately benefit the younger generation recipient with little net worth, while reducing the taxable value of your estate. The gift and estate tax exemption is the amount you can transfer during your life or at your death without incurring gift or estate tax. For 2023, the gift and estate tax exemption is $12.92 million ($25.84 million per married couple). On January 1, 2026, the exclusion amount will “sunset” and revert back to the 2017 amount of $5 million, adjusted for inflation. Again, there is the potential for and likelihood of a joyful expression of gratitude when you make a cash gift in any amount to a family member, church or other charitable organization. This kind of action can bring great satisfaction and enhance your personal reputation and legacy.
Why should I draft a will?
If you would rather not make a current disposition of your possessions, a last will and testament allows you to specifically direct the distribution of all that you own after you are gone. A properly drawn document that is dated, signed and witnessed in accordance with local law lets you nominate who you trust to handle the settlement of your estate, and can detail which items go to which person, or simply state the percentage share that each named beneficiary is to receive. The latter option allows the beneficiaries to collectively decide who takes the car, or refrigerator or TV for example, as part of their share, before the remainder is sold or auctioned off.
A will can be scrawled out in your own handwriting, which is called a holographic will, or nowadays you can download a blank form to print and then fill in the blanks. Many states also offer a statutory will form that you can ask your legislative representative to send you. The problem with attempting to draft a proper legal document is that after you have passed, this type of homemade paperwork is more likely to be challenged in court than would a document prepared by a licensed professional. Just as doctors would not recommend that you perform surgery on yourself, lawyers do not recommend that you attempt to craft such an important writing, and then hope that you did it right.
What many people are not aware of is the fact that all wills require probate. Wills are not self-executing; they must be admitted to probate in the county of the decedent’s residence and an executor or personal representative must be appointed. The individual or bank nominated in the will has no authority to act until a letter of authority is issued by the court. Filing fees, publication fees and inventory fees have to be paid, and the entire process can take anywhere from six months to a year, or longer.
Statutes and court rules dictate all the steps that must be followed to open and complete the entire process, and the assistance of a lawyer experienced in this area is advisable to make sure all the legal requirements are followed. For this reason many people prefer to avoid probate to save the time and expense involved.
The reason we go through probate is to transfer title. If you are no longer around to sign off on a deed or other document of title, it has to be done by your appointed representative or by court order.
One advantage of the probate process is that it is under the supervision of the court, and this can be very reassuring for you to know that everything you direct in your will is carried out. The court also provides a forum in which heirs are determined, and if necessary, disputes over the capacity or intentions of the testator, interpretation of the document, and disagreements among beneficiaries can be resolved. The disadvantage is that all of this takes time and money, and each dollar spent on the probate process reduces the amount of inheritance that your beneficiaries will end up receiving.
Why get a revocable living trust?
A popular alternative to the probate process is to create a revocable living trust, and transfer your major assets into the trust while you are still alive and fully capable. This type of arrangement allows you to retain control over all the assets you place in the name of the trust, so that you will still be able to receive the income they may produce and sell the asset if you choose to do so. In the event of your incapacity or death, the person or people you designate as successor trustee will be able to immediately take control and do as directed by the trust document without the delay or expense of initiating probate proceedings.
So how do I create a trust? This is where the skillful folks at the Legacy Assurance Plan can connect you with a qualified and licensed attorney to draft a comprehensive estate plan that includes:
- A revocable living trust.
- A declaration of intent transferring all household furnishings, automobiles, farming equipment, jewelry, bank accounts, securities, bonds, clothing and other personal property and business property out of your name and into the trust.
- Durable powers of attorney for financial and health care decisions.
- A living will describing your wishes for life support.
- Deeds to convey real estate into the trust.
- Funeral and burial wishes.
All of the paperwork is professionally prepared and delivered to your door. Each document you sign will be witnessed and notarized and left in your possession. Having such a plan in place gives you and your heirs peace of mind knowing there is guidance in the event of an unexpected emergency or your death.
It is important to note that nothing is carved in stone, and all of these documents can be amended at any time in the future should you change your mind about any of the provisions.
What happens without an estate plan?
The final option we described is to do nothing. We all know that death is inevitable, and that if we do not put a plan in place we will die “intestate,” and our entire estate will end up in probate. Instead of your choice of who will receive your assets, the laws of your state will determine who is appointed as executor or personal representative and who receives everything. This is not always consistent with your wishes but is a necessary last resort.
This last option reflects poorly on your character, as instead of leaving your family with a detailed plan and any measure of instructions, you leave them with a mess of uncertainty. At a time when they are mourning your loss they are also likely to be cursing your name for not giving them any direction on your burial wishes or how you want your lifetime trove of assets distributed. This is not the way you want to be remembered.
The author is an estate planning attorney based in Michigan.