How Estate Smart Are You? Part 2 of 2

Welcome to Part 2 of How Estate Smart Are You?

Test yourself by selecting True or False for each question. Read the answers below.

6.     I can change my will by initialling the changes on the original documents.
True □  False □

7.     My spouse is eighty-two and is ill.  To avoid probate taxes, I can make all my assets jointly owned with my children.
True □  False □

8.     I am the executor or estate trustee in a relative’s will.  I do not have to use my own money to pay the relative’s debts except income taxes.
True □  False □

9.     We have a legal “first-aid” kit with wills, powers of attorney for property and powers of attorney for personal care.  We don’t need to do anything else to protect our loved ones.
True □  False □

10.     I gave my new spouse an unrestricted power of attorney for property. My spouse cannot use this power of attorney until I am incapacitated.
True □  False □

Answers

6.    I can change my will by initialling the changes on the original documents.

False.  This misconception can lead to a court case to interpret what you did. Never write on your will.

Alterations can invalidate your will even if you and your two witnesses sign in front of each other.  A codicil or amendment to your will is the best way to deal with minor changes.

7.    My spouse is eighty-two and is ill.  To avoid probate taxes, I can make all my assets jointly owned with my children.

False.  This question raises probate tax avoidance schemes. If you jointly own assets, you must consider these dangers:

• theft by a child;
• claims by children’s creditors or spouse in a divorce;
• child’s refusal to cooperate;
• loss of control because decisions must be joint;
• unequal division between children; and
• income tax consequences from the transfer.

8.    I am the executor or estate trustee in a relative’s will.  I do not have to use my own money to pay the relative’s debts except income taxes.

True.  Executors do not have to use their own money to pay any debts or taxes. One exception to this rule is if you hand out money before you pay all bills.

Executors are responsible to pay all bills including income taxes but only from estate assets. You do not have to use your money.

9.    We have a legal “first-aid” kit with wills, powers of attorney for property and a power of attorney for personal care.  We don’t need to do anything else to protect our loved ones.

False.  Your “first-aid” kit is basic protection only if it is up to date.  Don’t forget other steps that impact your estate and may be necessary. You also need advice to reduce probate and income taxes.

10.     I gave my new spouse an unrestricted power of attorney for property.  My spouse cannot use this power of attorney until I am incapacitated.

False.  Okay, it is not a will question. But if you got this far, you need to know this is biggest misconception about powers of attorney for property.

If you want your spouse to have restricted power over your property, you must specify these terms in the document. Otherwise, once it is signed it becomes dangerous like a loaded gun.

To get Estate Smart, peruse through my book, Estate to the Heart: How to Plan Wills and Estates for Your Loved Ones.