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“An excellent source of information on wills and estate planning.” NEW YORK TIMES BESTSELLER for OVER 25 16TH EDITION YEARS Plan Your Estate All you need to know about: • wills & trusts • estate & gift taxes • avoiding probate • powers of attorney & living wills Attorney Denis Clifford From the publishers of Quicken WillMaker & Trust Get Updates and More on Nolo.com Go to this book’s companion page at: www.nolo.com/back-of-book/NEST.html When there’s an important change to the law affecting this book, we’ll post updates. You’ll also find articles and other related materials. More Resources from Nolo.com Legal Forms, Books, & Software Hundreds of do-it-yourself products—all written in plain English, approved, and updated by our in-house legal editors. Legal Articles Get informed with thousands of free articles on everyday legal topics. Our articles are accurate, up to date, and reader friendly. Find a Lawyer Want to talk to a lawyer? Use Nolo to find a lawyer who can help you with your case. The Trusted Name (but don’t take our word for it) “ In Nolo you can trust.” THE NEW YORK TIMES “ Nolo is always there in a jam as the nation’s premier publisher of do-it-yourself legal books.” NEWSWEEK “ Nolo publications…guide people simply through the how, when, where and why of the law.” THE WASHINGTON POST “ [Nolo’s]…material is developed by experienced attorneys who have a knack for making complicated material accessible.” LIBRARY JOURNAL “ When it comes to self-help legal stuff, nobody does a better job than Nolo…” USA TODAY “ The most prominent U.S. publisher of self-help legal aids.” TIME MAGAZINE “ Nolo is a pioneer in both consumer and business self-help books and software.” LOS ANGELES TIMES 16th Edition Plan Your Estate Attorney Denis Clifford LAW for ALL SIXTEENTH EDITION APRIL 2022 Editor BETSY SIMMONS HANNIBAL Cover Design SUSAN PUTNEY Book Design SUSAN PUTNEY Proofreading SUSAN CARLSON GREENE Index RICHARD GENOVA ISSN: 1931-7751 (print) ISSN: 2332-6972 (online) ISBN: 978-1-4133-2981-0 (pbk) ISBN: 978-1-4133-2982-7 (ebook) This book covers only United States law, unless it specifically states otherwise. Copyright © 1994, 1998, 2000, 2002, 2004, 2006, 2008, 2010, 2012, 2014, 2016, 2018, 2020, and 2022 by Denis Clifford. All rights reserved. The NOLO trademark is registered in the U.S. Patent and Trademark Office. Printed in the U.S.A. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Reproduction prohibitions do not apply to the forms contained in this product when reproduced for personal use. For information on bulk purchases or corporate premium sales, please contact [email protected]. Please note Accurate, plain-English legal information can help you solve many of your own legal problems. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professional— and we’ll always point out situations in which we think that’s a good idea— consult an attorney licensed to practice in your state. Acknowledgments Even more than most Nolo books, this one would never have seen the light of day without the generous efforts and contributions of many fine people. So my thanks to all those friends who helped me with this book, both putting it together initially and with previous editions over the years: Betsy Simmons Hannibal, my current editor, brilliant, thorough, and a pleasure to work with. My previous Nolo editors, Jake Warner, Mary Randolph, Barbara Kate Repa, and Shae Irving. Mark Peery of Los Angeles, California, a superb estate planning lawyer (and a great friend). All my other friends and colleagues at Nolo. Dorcas Moulton, Amanda Cherrin, and Naomi Puro, for their contri- butions to the cover painting on the original book. Ken Fischer of Concord, California, a fine insurance agent, now retired; Bill Hudspeth of Austin Trust Co., Austin, Texas; Magdelen Gaynor, another fine estate planning attorney, White Plains, New York. And my continued appreciation to other friends who also helped with other editions of this book: David Marcus; Paul Remack, R.G. Financial Service, San Francisco; Dave Brown; Peter Jan Honigsberg; Robert Wood of Athearn, Chandler & Hoffman, San Francisco; members of the Bay Area Funeral Society; Walter Warner; people who helped prepare the manuscript—Sandy Wieker, Christy Rigg, Cathy Cummings, and Bethany Korwin-Pawloski; and Keija Kimura, Carol Pladsen, and Linda Allison. And last but not least, my heartfelt thanks to the many readers who have written me with suggestions, comments, corrections, and other thoughts for improving this book. About the Author Denis Clifford is a lawyer in Berkeley, California, who specializes in estate planning. He is the author of several Nolo books, including Make Your Own Living Trust and The Quick & Legal Will Book. A graduate of Columbia Law School, where he was an editor of The Law Review, he practiced law in various ways and became convinced that people can do much of their own legal work. Table of Contents Your Estate Planning Companion ...........................................................................................1 Part I: Setting Your Goal 1 Your Estate Planning Goals ..........................................................................................................3 Part I: Setting Your Goals .................................................................................................................4 Part II: Laying the Groundwork.....................................................................................................4 Part III: Children ....................................................................................................................................6 Part IV: Wills ...........................................................................................................................................6 Part V: Probate and How to Avoid It .........................................................................................7 Part VI: Understanding Estate and Gift Taxes .......................................................................8 Part VII: Reducing or Eliminating Estate Taxes....................................................................10 Part VIII: Imposing Controls Over Property .........................................................................11 Part IX: Taking Care of Personal Issues ....................................................................................12 Part X: Family Business Estate Planning ..................................................................................13 Part XI: Going Further .....................................................................................................................13 Part XII: Sample Estate Plans ........................................................................................................14 2 Personal Concerns and Estate Planning ............................................................................17 Avoiding Conflict ...............................................................................................................................18 Leaving Unequal Amounts of Property to Children ........................................................21 Providing Care for Minor Children ...........................................................................................24 Subsequent Marriages ....................................................................................................................25 Long-Term Care for a Child With Special Needs ...............................................................26 Concerns of Unmarried Couples ..............................................................................................28 Worries About the Effect of Inheriting Money ..................................................................28 Disinheriting People, Including Children ..............................................................................30 Communicating Your Decisions to Family and Friends .................................................31 Part II: Laying the Groundwork 3 Special Property Ownership Rules for Married People ...........................................35 What You Need to Know..............................................................................................................36 Marital Property in Community Property States ..............................................................41 Marital Property in Common Law States ..............................................................................45 Moving to a Different State .........................................................................................................48 4 Inventorying Your Property ......................................................................................................49 Instructions for the Property Inventory Worksheet .......................................................50 Your Property Worksheet ............................................................................................................60 5 Your Beneficiaries ............................................................................................................................71 Types of Beneficiaries ......................................................................................................................72 Primary Beneficiaries .......................................................................................................................73 Life Estate Beneficiaries and Final Beneficiaries .................................................................76 Alternate Beneficiaries ...................................................................................................................77 Residuary Beneficiaries ...................................................................................................................77 Gifts Shared by More Than One Beneficiary .......................................................................78 Establishing a Survivorship Period ...........................................................................................79 Explanations and Commentary Accompanying Gifts ....................................................79 Disinheritance......................................................................................................................................81 Simultaneous Death ........................................................................................................................82 Property You Give Away by Will or Trust That You No Longer Own at Your Death ...............................................................................................................................................83 Part III: Children 6 Children .................................................................................................................................................85 Naming Someone to Take Custody of Your Minor Children .....................................87 Naming an Adult to Manage Your Child’s Property .......................................................90 How Your Children’s Property Should Be Managed ........................................................93 Tax-Saving Educational Investment Plans .............................................................................99 ABLE Accounts for People With Disabilities .....................................................................104 Naming Children as Beneficiaries of Life Insurance ............................................................104 Leaving Property to Children Who Are Not Your Own ..............................................105 Disinheritance...................................................................................................................................106 Children Conceived After a Parent Dies .............................................................................107 Part IV: Wills 7 Wills ......................................................................................................................................................109 A Will as the Centerpiece of Your Estate Plan .................................................................110 A Backup Will With a Comprehensive Estate Plan .........................................................111 What Makes a Will Legal? ...........................................................................................................112 Types of Formal Wills ....................................................................................................................114 What Property Cannot Be Transferred by Will? ..............................................................119 Explanatory Letters Accompanying Your Will .................................................................120 Can My Will Be Successfully Challenged? ...........................................................................122 Keeping Your Will Up to Date ..................................................................................................123 Part V: Probate and How to Avoid It 8 Probate and Why You Want to Avoid It .........................................................................125 What Is Probate? .............................................................................................................................126 Probate Fees ......................................................................................................................................127 Avoiding Probate ............................................................................................................................128 When You May Want Probate .................................................................................................132 Debts, Taxes, and Probate Avoidance ..................................................................................133 Probate Reform ................................................................................................................................133 9 Living Trusts .....................................................................................................................................135 Does Everyone Need a Living Trust? .....................................................................................137 Living Trusts Explained ................................................................................................................138 Major Decisions in Creating a Living Trust ........................................................................144 Creating a Valid Living Trust .....................................................................................................150 Keeping Your Living Trust Up to Date .................................................................................154 10 Joint Tenancy and Tenancy by the Entirety ..................................................................157 What Is Joint Tenancy? .................................................................................................................158 Joint Tenancy Bank Accounts ...................................................................................................160 Joint Tenancy Safe Deposit Boxes ...........................................................................................160 Tenancy by the Entirety ...............................................................................................................161 Joint Tenancy in Community Property States .................................................................162 Tax Concerns Affecting Joint Tenancy .................................................................................164 Drawbacks of Joint Tenancy ......................................................................................................171
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