The Swier Law Firm Estate Planning and Probate Law FAQs

What Does Codicil Mean In Estate Planning?

A written change to a will.

Example Of Codicil In Regards To Estate Planning

When I wrote my will I named by brother as my executor.  My brother died last year.  I didn’t have any other changes to make to my will, so my estate planning attorney drafted a one-page codicil that allowed me to just name a new executor.

What Does Stepped-Down Basis Mean In Estate Planning?

Same as the stepped-up basis except the asset has gone down in value since it was purchased.  The new owner would take that asset with a new lower (stepped-down) basis.  This depends on the value as of the date of death of the owner compared to the price the owner originally purchased the asset.

Example Of Stepped-Down Basis In Regards To Estate Planning

Dad was convinced that AOL was going to make a comeback.  He bought it for $50,000 and it’s now worth $5,000.  Instead of selling his AOL stock at a loss during his lifetime he held onto it.  I now own it with a basis of $5,000.

What Does Stepped-Up Basis Mean In Estate Planning?

Assets get a new basis when they are passed by inheritance (through will or trust).  These assets will be re-valued as of the date of death of the owner.  If the value of the asset has gone up in value since purchase the new owner will take that asset with a new basis equal to the current value without paying tax on that increase.  This has the potential to save a significant amount of capital gains upon sale in the future.

Example Of Stepped-Up Basis In Regards To Estate Planning

My mom bought real estate in 1950 for $25,000.  When she died last year it was appraised at $500,000.  I received that real estate from her estate and my basis is now $500,000 tax-free.  If my mom had sold this real estate before she died she would have had to pay taxes on $425,000 of gain, but because she died with the property I received a step-up in basis to the current value.

What Does Basis Mean In Estate Planning?

What a person has paid for an asset and sometimes money invested in an asset after purchase (Example: what you paid for your house plus what you paid to update the kitchen). This determines gain/loss for income tax purposes.

Example Of Basis In Regards To Estate Planning

You purchased your house for $100,000, but have since had to put on a new roof for $3,000, you added on a garage for $10,000, and updated the windows for $4,000.  Your new basis in your house is now $117,000 ($100,000 + $3,000 + $10,000 + $4,000).

What Does Assigns Mean In Estate Planning?

Another word for “assignee” and means someone who could possibly have an interest in something in the future.  This could be an interest in real estate, an interest in something subject to an agreement or contract or many other possibilities.  This term is often used in deeds and wills.

What Are Considered Assets In Estate Planning?

Essentially everything you own in any form whether or not they have value.  This includes, but is not limited to: bank accounts, stocks, jewelry, cars, clothes, real estate and even includes digital assets (e-mail, blog, photos etc.).

Example Of Assets In Estate Planning

When my mom died it was difficult to find all of her assets because she didn’t leave a list.  We had to track down life insurance policies, frequent flyer miles, and try to gain access to her computer to retrieve priceless photos.  There was a lot we wish we had thought about before she died.  I didn’t realize she had so many assets we would have to track down.

What Does Ancillary Administration Mean?

When probate needs to open in another state, generally because a decedent owned real estate there.

Example Of Ancillary Administration

I had to open an ancillary administration in Illinois for my mom’s estate because she owned land there.  This was necessary for me to pay off the debt and properly sell the property in Illinois, but the land and the proceeds from the sale were then reported as part of the probate process in South Dakota.

 

People often come in to do estate planning who have already taken steps to simplify their life as daily tasks become more challenging. A common step is to add a child or trusted individual to a checking or bank account to get help with paying bills, buying groceries, or other financial tasks. It seems logical and often accomplishes what is desired, but this simple action can have unintended results. When a person is added to an account, they become a joint owner of those assets. When one joint owner dies, the person still living automatically becomes the owner without passing through a Will or probate.

Thus, if a Will says to divide assets among three kids, but one child has been added to bank accounts for convenience, that child has been given everything in those bank accounts automatically when the parent dies. What a Will says makes no difference. Clearly, this is probably not the intention. To avoid this happening, it is best to have a power of attorney drafted. A power of attorney will allow this child to assist with various aspects of everyday life - financial and beyond - yet the person needing assistance still owns all their property and can pass it as they desire through a Will.

 

Safe deposit boxes have been the go-to for generations for the safekeeping of important documents and property. Safe deposit boxes truly are a great place to keep many important and valuable things. But when it comes to choosing a place to keep your original Will, your safe deposit box is the worst choice.

When a person dies, the bank will freeze that safe deposit box until a person has been appointed as personal representative of the estate. If you have a Will, that original Will must be produced and filed with the state for someone to be appointed as personal representative. This could potentially turn into a time-consuming, confusing and expensive Catch-22 situation. The original Will is needed for a personal representative to be appointed, but a personal representative must be appointed to get the original Will from the safe deposit box.

If you choose to take your original Will after signing, pick a safe location to keep it, other than your safe deposit box, and make sure others know where it is and how to access it when you are gone. A better alternative is to let your attorney keep your original Will. Most attorneys who draft Wills will offer this service. Our office will safeguard your Will free of charge - just let your family know we have it.

Often people consider it an honor to be named as an executor, personal representative or trustee. But along with being named in one of these positions comes a lot of responsibility, liability, attention to detail, deadlines, phone calls, paperwork, and potential family drama. Just because the person who named you thought you would be the best person for the job does not mean you are forced to accept the position.

If you have reservations about serving in these positions then don’t. If you are named in a will or trust and you don’t want to serve simply tell the court that you do not want to serve by filing a renunciation. The court will move on to whoever else may have been named next or if no one else was named, to whoever would have the right to serve in that position under state law. Filing a renunciation does not change anything about the actual estate. Everything in the will or trust will be administered and distributed exactly as written, including to you if you are to inherit. It just means that you have chosen to not be named to take on the responsibility and potential liabilities that go along with these roles.