I’m now single with few relatives left. Also, like everyone else, I’m getting older, not younger. Also, accidents happen.
I’m in the process of doing all this stuff. Power of attorney for finances, medical rep if I’m incapacitated, and finalizing my will. Not that I have a lot of stuff, but I’d like people to know what I want done with a handful of valuables I have.
Should have it all signed and official by the end of the month.
It can be hard to make these documents because it involves considering yourself in dire straits or dead, and most people don’t want to do that. I found the mental hurdles to that the hardest part of the process.
I wasn’t going to bother with the will but the attorney had it as part of a package. I am much more concerned about a situation where I can’t speak for myself, that was the main reason I did this.
Here inheritance is tax free up to a fairly large value - much larger than I have to worry about. And adjusting the cost basis is important. Right now we can’t afford to sell our house because it has appreciated so much our gain would be way above the cap. (I know, first world problems.) However if one of us dies, or both, it gets reset to the current value and there would be no capital gains problem.
Same goes for investments.
Inheritances aren’t considered as gifts, and gifts to your heirs get treated as gifts to anyone else. Is it different where you are?
This is partly a creature of local law and of how the property is titled, but in many US jurisdictions if one of an owning couple dies, one half the accumulated capital gain is re-basised and the other half is not. When the second-to-die dies, the whole thing is re-basised again to the heirs.
But between the two deaths that may leave the inheriting / surviving member of the couple still sitting on a white elephant with a big tax bill due upon sale. Yes, they’ll have the money to pay the tax, but it’ll still be a big hit to their pre-sale net worth.
My advice: Make sure you accurately understand the situation you really have. That could be a 6-figure misunderstanding.
I don’t have a will. I am single and have no kids and in this state everything goes to my parents. (I think my father, to be specific.) If I outlive him I dunno where it all goes. It probably doesn’t matter anyway.
begbert2, it’s still a good idea to make up a will, even if it’s a very simple one and you don’t have much in the way of assets.
We do have wills but we need to revisit them. At the time we drew them up (20+ years ago), we had half our assets going to a special needs trust for our son (who had been diagnosed with autism), and the other half going to a regular trust for our daughter. We need to revise that so that hers also goes to a special needs trust.
We also need to make provision for a condo we own in Florida, to set up a “life estate” (or whatever it’s called) so the in-laws have a place to live for as long as they need it. I think if we both croaked right now it would simply get lumped in with the rest of our assets, and distributed to the two trusts, and that would be a hassle. We don’t want to leave the place to them - as if they ever go into a government-funded nursing home, the place would have to be sold to reimburse the government for their care, and it’s OUR money, doggonit.
FinsToTheLeft: what you describe with your father and his house would be a bad idea, in the US, for tax purposes - as the people he deeded it to would inherit his basis in the place. If he paid 100,000, and the house was worth 500,000 when the family members sold it, they’d have capital gains on 400,000 worth of income. Whereas if they inherited it from him when he died, their basis would be the full 500,000. Certainly there could be inheritance tax concerns - so anyone thinking of deeding a house to the family would need to consult with a professional to decide whether that was in fact the best thing to do.
Some people do give away their primary residence without thinking of that - and of course there’s the mess if the person then needs to go into a Medicaid-funded nursing home within the next couple of years.
Certainly the laws in Canada would be very different - I have no idea what happens (like you mentioned the capital gains - he’d have to pay taxes when he gives it away??).
Got it. I wish we didn’t have gift taxes - though I understand the reason for them. I’ve had to spread large gifts that weren’t really gifts out over several years, and had my wife give up to the limit also. Pain in the butt.
About the only reason I can see to write a will is to be slightly less of an arsehole when I outlive my parents and my siblings have to then spend ten minutes deciding that my brother (who lives in town) gets to handle everything. By writing a will I can save them those ten minutes.
Of course the downside is that if I write the thing based on the presumption of who is going to be most conveniently positioned to handle everything, then everybody is going to promptly move around or die or something to screw up my plans.
In Canada there is no capital gains tax on your primary residence, so no issues. You can only designate one primary residence for a single person or married couple, so things with a cottage or vacation property need a lot of planning. My parents owned their condo jointly with rights of survivorship, so it avoids probate completely.
We had wills and trusts drawn up when our children were small. It also identified guardians for them in case we were to both die (our lawyer helpfully called it the “‘drive over a cliff’ scenario”).
There is a lot of stuff that can go wrong if you don’t set up estate plans and you really don’t want your relatives to have to deal with that.
You don’t really have to spread them out. In the end, the only thing that really matters is the value of the estate when you die plus all the gifts you have given. The amount of the gift triggers a requirement to file a gift tax return, but basically that just means that it counts against the tax-free portion of your estate. It doesn’t create a tax liability at the time you give the gift. Few people will exceed the $11.2M exemption.
I have a will and left everything to my cousin. My mother was a good example.
My mother arranged Payment on Death for most of her accounts so I would receive the money after she died and not have to go through Probate. She didn’t have a house or a car, so she thought she had everything arranged. Before she died I had Durable Power of Attorney,Medical Power of Attorney, and those are essential. They allowed me to arrange things with her insurance, especially her long term care insurance and pay bills and sign medical decisions. She also pre-arranged her funeral.
She updated her will over the years, and left me as the executor at the end.
The problem was she had a bank account she didn’t set up as Payment on Death, or Joint account with inheritance. That threw things to a Probate. My lawyer and the bank’s lawyer agreed to a Muniment of Title, which means mostly settling all the bills dealing with a limited number of beneficiaries.
Yes, we both have wills. We also have designated my nephew as our executor in the unlikely event that we both die in a flaming crash of some sort. All documents are in our fire safe, along with a check for my nephew in the amount of $10,000 to cover any travel or other costs incurred.
This is a really good way to have your family self destruct, if that’s your goal. My mother and her sister were estranged for decades after their mother died intestate and the sister decided that everything was hers. As a result, my mother made sure that she had an itemized will that specified exactly what went to whom.
Of course we (my wife and me) have a will. Otherwise the inheritance would be reparted according to the law, this is clearly regulated in Germany, in a very detailed way. And there are some people we do not want to profit from out demise. The only way to avoid that is a will.
In the US, you can typically specify death beneficiaries for financial and real estate accounts independent of a will. This may be simpler and more convenient since you can easily change them at any time without having to get your will updated. Financial account beneficiaries can typically be done online. Log in and you can set the beneficiaries and what percentage each person should get. For deeded property like houses and land, you can file a Transfer on Death Deed with the county. It is a simple form which you can fill out and file yourself. This way the will can just cover the miscellaneous possessions like household contents, cars, boats, etc.
If you don’t have a will and just plan to go by the default distribution, be sure you check what the rules are for your state. Each state will have defaults which specify who counts as an heir and what percentage of the estate they will get. You may be surprised to find out that an estranged relative would be entitled to a big chunk of your estate.