Estate Planning in GeorgiaWhy You Need a Will
A good estate plan with a good will is essential to ensure
the distribution of your property pursuant to your wishes and to save
unnecessary expense, attorneys' fees, estate taxes and supervision and
intervention by the probate court. The failure to create a plan for your estate
in a will means that your estate will be distributed according to
Probate Versus Taxable Estate
The first step in developing a plan is to understand that the probate estate and the taxable estate are not identical and can be quite different. Your taxable estate is determined by federal law and Georgia follows the federal law in determining the Georgia estate tax.
Your will controls the distribution of your probate estate. The probate estate under Georgia law does not include (1) joint accounts with rights of survivorship, (2) real property held as joint tenants with right of survivorship, (3) the proceeds of life insurance policies (4) general powers of appointment, (5) assets held in a living trust and (6) retirement plan assets, among others.
Generally speaking, your taxable estate is the net value of all of your assets including (1) assets held in joint accounts, (2) proceeds of life insurance, (3) real property held as joint tenants, (4) assets held in a revocable living trust and (5) retirement plan assets, among others. For more specific information, please contact our offices. In 2016, unless the net value of your estate exceeds $5,400,000.00 there is no estate tax and less tax planning necessary. In order to understand and evaluate these options, a complete analysis of your assets must be made in consultation with your legal advisor.
Wills and Intestacy
The second step in your estate plan should be to make a will. In the absence of a will in Georgia (known as intestacy), your estate passes to your spouse and children equally, with the spouse to receive no less than one third. An administrator must be appointed to administer the estate. The plan provided by state law can often result in the imposition of unnecessary estate tax.
Intestacy also has expensive administrative requirements. The administrator must file an inventory with the court six (6) months after date of death, file annual reports showing all receipts and all distributions while the estate is open, and post a surety bond with an annual premium purchased from an insurance company to guaranty performance. Your estate and assets are then a matter of public record.
Unless the heirs all consent when the administrator is appointed, the administrator must petition the court for the sale of any asset, a time consuming and needlessly expensive process.
In a Will, the testator can waive any combination of surety bond, inventory, and annual reports to the court while requiring annual reports to the beneficiaries as facts and circumstances warrant. This saves unnecessary expense and preserves the estate's privacy. This can result in the savings of attorneys' fees. In addition, the Will can grant various powers to the executor to handle all of the affairs of the decedent without the necessity of having to ask the court for permission. With careful planning, you may only have to deal with the probate court twice: (1) to probate the will; and (2) to petition the court for dismissal as executor.
Living Trusts Versus Wills
One alternative to a will is the revocable living trust. However it is not a complete substitute for a will as there will always be assets that have not been conveyed into the trust, unless of course you consult with your attorney on a weekly basis. In some states, you cannot avoid some or all of the more onerous aspects of probate such as surety bond, inventory and annual reports. In those states living trusts are very popular as a means to avoid the probate process. A living trust is not necessary in Georgia if you have a well designed estate plan and will as most of the problematical areas of probate can be waived and avoided. A living trust does NOT avoid estate tax unless the trust is irrevocable and you give up your assets. If you have questions about living trusts, please contact our offices for more information.
The third step in developing your estate plan is to understand that you can legally avoid unnecessary estate tax. A will is necessary to take full advantage of the marital deduction since property distributed to someone other than the spouse (such as the children in an intestacy) is not eligible for the marital deduction. The problem with a plan that leaves all property to the spouse is that on the second spouse's death, the entire amount is taxable, less the remaining credit available. However, unless your estate exceeds a net value of $5,000,000.00, tax planning may be unnecessary.
Problems With Wills Prepared between the early 1990s and 2012
You may have heard that Congress has eliminated the estate tax for the vast majority of families. In doing so, the applicable estate tax credit was increased to over $5,000.000.00 per person. This creates unintended consequences. The problem is that wills signed between the early 1990s and 2012 often utilized a credit maximizing trust. If you have a will signed between the early 1990s and 2012, you may have a estate tax credit maximizing trust. If so, this may thwart your real intentions by placing all of your assets into a trust that qualifies for the estate tax credit. First, you may not want a trust unless you have to have it to avoid estate tax. (most taxpayers no longer need a credit trust). Second, you may find that the credit trust disinherits the spouse inadvertently, particularly if the spouse is not the primary beneficiary of the credit trust. We recommend you have such a will reviewed immediately if you have a credit trust in your will to determine if there are any issues.
A will is an essential part of any sound estate plan. The failure to include a will in your estate plan can result in unnecessary estate tax and will result in increased and expensive administrative burdens. If you have a current will, you should have it reviewed immediately to avoid unnecessary taxes and inadvertent disinheritance.
Disclaimer: These materials have been prepared by William Woods White, P.C., for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between the sender and receiver. Internet subscribers and online readers should not act upon this information without seeking legal advice from professional counsel