Table Of ContentAvoid probate, reduce taxes, and manage your estate efficiently
and effectively with this comprehensive, easy-to-follow
consumer guide
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Estate
Planning
Made Simple
Merle E. Dowd
Edited and prepared for publication by The Stonesong Press, Inc.
imadei
SIMPLE
BOOKS
A MADE SIMPLE BOOK
DOUBLEDAY
NEW YORK LONDON TORONTO SYDNEY AUCKLAND
This book is not intended as a substitute for legal advice. The reader should
consult an attorney in matters relating to estate planning.
Edited and prepared for publication by The Stonesong Press, Inc.
Managing Editor: Sheree Bykofsky
Editor: Sarah Gold
Production Assistant: Kathryn A. Clark
Design: Blackbirch Graphics, Inc.
A MADE SIMPLE BOOK
Published by Doubleday, a division of
Bantam Doubleday Dell Publishing Group, Inc.
666 Fifth Avenue, New York, New York 10103
made simple and doubleday are trademarks of Doubleday,
a division of Bantam Doubleday Dell Publishing Group, Inc.
Copyright © 1991 by Doubleday, a division of Bantam Doubleday Dell
Publishing Group, Inc.
All Rights Reserved
Printed in the United States of America
November 1991
First Edition
Library of Congress Cataloging-in-Publication Data
Dowd, Merle E.
Estate planning made simple/ Merle E. Dowd; edited and prepared for
publication by the Stonesong Press, Inc. — 1st ed.
p. cm.
A MADE SIMPLE BOOK.
1. Estate planning—United States—Popular works I. Stonesong
Press. II. Title.
KF750.Z9D685 1991
346.7305’2—dc20 90-25010
ISBN 0-385-41638-5 CIP
98765432
CONTENTS
Introduction: The First Step 7
Chapter 1: Why You Should Plan Your Estate
Estate Planning—What Is It? 11
Will You Leave an Estate? 12
Why You Need an Estate Plan 13
Conclusion 19
Chapter 2: Sizing Up Your Estate
Calculating Your Tax Liability 22
Conclusion 44
Chapter 3: Taxes and Costs: Planning to Minimize Both
Three Possible Taxes on Estates 46
Filing a Federal Estate Tax Return 47
Tax-Saving Trust 50
Should You Pay Now or Later? 52
Paying Taxes 52
Conclusion 59
4 ESTATE PLANNING MADE SIMPLE
Chapter 4: Will and Probate
Drafting Your Will 62
Levels of Probate Actions 65
The Truth About Probate 65
Steps in Probate 66
Conclusion 68
Chapter 5: Living Trust
Origin of Trusts 70
Definitions 70
Advantages of a Living Trust 71
How a Living Trust Works 73
When Living Trusts Are Not Suitable 74
Different Types of Trusts 75
Establishing Your Living Trust 78
Changing or Ending Your Living Trust 83
Can You Write Your Own Living Trust? 84
Conclusion 85
Chapter 6: Trusts
Charitable Remainder Trusts 88
Reversionary Trusts 92
Spendthrift Trusts 93
Generation-Skipping Trusts 94
Q-TIP Trusts 94
Other Minor Trusts 95
Conclusion 97
Chapter 7: Joint Ownership
How to Make Joint Ownership Work 100
Joint Ownership Problems 101
Tax Impacts of Joint Ownership 104
Pros and Cons of Joint Ownership 105
Joint Ownership of Securities 106
Contents 5
Joint Ownership by Nonspouses 107
Joint Ownership Is Not a Substitute For a Will 107
Conclusion 108
Chapter 8: Gifts
Gifts to Reduce Taxes 109
Annual Gift Exemption 110
Planning Annual Gifts 111
Gifts of Appreciable Property 112
Giving Your House to Your Children 114
Selling Your House to Your Children 116
Gifts to Minors 116
Net Gifts 119
Charitable Gifts 120
Conclusion 121
Chapter 9: Insurance
Life Insurance 123
Term Life and Cash-Value Policies 124
Insurance in Estate Planning 126
Conclusion 134
Chapter 10: Community Property
What Is Community Property? 136
Separate Property 136
Community Property Agreements 138
Distributing Separate Property 140
Moving from State to State 141
Conclusion 142
Chapter 11: Management of Your Estate
Picking an Executor 144
Anticipating Problems 145
Probating Your Will 146
6 ESTATE PLANNING MADE SIMPLE
Administering a Living Trust 148
Paying Estate Taxes 149
Conclusion 150
Chapter 12: Final Instructions
Documents and Records 152
Advisors and Resources 160
The Final Letter 160
Glossary 165
Index 173
INTRODUCTION
The First Step
Planning your estate simply means pre¬ If you don't prepare a will or living trust,
paring for the orderly transition and distri¬ the state where you live has one already
bution of your assets following your death. written for you. Buried in your states code
The key word is orderly. is a “law of succession," a one-size-fits-all
Your first step in preparing for the inevi¬ plan drawn by your state's legislature to
table is to make up your mind to take action. govern the distribution of a person's
Leaving an orderly trail for others to follow assets if no countervailing legal docu¬
is critical if the transition is to be orderly. ment assumes precedence. That chill¬
Organizing your affairs, leaving a written ing fact alone should motivate you to
record of your wishes, and appointing a direct a personal representative, whether
person to supervise the conveyance of your an executor or trustee, to wind up your
property is really all there is to most estate affairs and distribute your assets ac¬
plans. Yet, only about 3 out of 10 people cording to your wishes—not according
leave a valid will or a living trust to guide to some bureaucrat's uniform applica¬
family and heirs. tion of the law.
8 ESTATE PLANNING MADE SIMPLE
Estate planning is part of your overall Prospect of Death
financial planning efforts. Financial plan¬
Most people recognize the inevitability of
ning is sometimes the object of media hype.
their own death, but thinking about it can
Just as often financial planners are damned
be morbid or depressing for some. Not want¬
by regulators and clients for less than pro¬
ing to face their mortality causes them to
fessional conduct. But if a financial planner
procrastinate. And make no mistake, plan¬
can attract your attention and motivate you
ning your estate involves thinking about
to develop an estate plan, then he or she has
and accepting your death. The two go to¬
done you a service. A better plan is to use
gether. Not thinking about an estate plan
this book as a guide to help you plan your
accomplishes no useful purpose.
estate yourself.
Financial planning encompasses five ac¬
tivities: Saving, insurance, investment,
Not Needed Now
achieving life goals that require funding,
and estate planning. Investing is the fun “It's too soon to even think about an
part. The possibility of making your money estate plan," is another excuse. How soon is
grow—of jousting or matching wits with too soon? If you could plan how long you
the best brains on Wall Street—can be excit¬ were going to live, waiting until a few weeks
ing. The dream of making money with money or months before that final event would be
attracts millions of investors to the market. okay. But none of us is privy to that infor¬
Capital acquisition (saving) and estate plan¬ mation. Statistics may be in your favor, as
ning comprise the drearier activities. But life expectancies continue to lengthen. But
they can also be the most important. statistics also indicate that many persons
Why do so few persons write even simple are killed in accidents or die from early
wills or develop living trusts? Surveys have onset of heart failure and other diseases.
unearthed a few reasons. The most com¬ Most of us can't be absolutely certain that
mon ones fall into the following categories: we will be around tomorrow. Given this
situation, today is none too soon to begin to
plan your estate. If you are young and
healthy, you may revise your estate plan a
dozen times before death. Better that than
Superstition
dying intestate—without a will.
Some persons actually believe that draft¬ The following chapters outline what you
ing a will or planning their estate might need to know to put your own estate plan
accelerate their death. Just thinking about together. Knowing the size of your estate is
it could make it happen, they think. If su¬ critical, because it affects taxes and what
perstition is keeping you from thinking about you may want to do about gifts and chari¬
what will happen to your property or pre¬ table contributions. Completing the nu¬
paring your spouse to manage your estate, merous worksheets in Chapter 2 will help
you need to face up to the reality of your you assemble the facts and data you need to
situation. If you don't act, the state will. It's get started. Chapter 3 explains federal and
that simple. state estate and inheritance taxes. Chapters
