The estate’s gross income includes everything owned at the decedent’s death using a fair market value in most cases. The federal tax definition of fair market value is the price a willing and reasonably informed buyer would pay for the specific item during an arms-length sale (not forced). The gross estate includes cash, investment securities, real property, personal property, trusts, business assets, retirement annuities, insurance proceeds and any other assets. The federal income tax definition of gross estate also typically includes non-probate property in addition to probate property.

You should make sure you speak with an estate planning attorney or certified public accountant to understand your federal income tax responsibilities as a personal representative appointed to administer an estate. You can contact our office, and we can help you determine whether your estate is complex enough to warrant hiring a certified public accountant or other tax professional. An accountant can help you find ways to reduce the estate’s tax liabilities by taking certain deductions. Keep in mind that all estates are not liable for federal estate taxes, and typically, only larger estates will have to pay them.

As an executor of an estate, you have a legal right to ask the Internal Revenue Service (IRS) for a prompt federal tax assessment. A federal tax assessment is a calculation of the estate’s total federal estate tax liabilities, usually based on the fair market value of the total property and assets within the estate. The gross total value of an estate does not include certain types of property owned solely by the decedent’s spouse or other third parties. It does not include lifetime gifts the decedent made or any other property which the decedent has no legal obligation or ability to control. It may also exclude certain charitable bequests and dispositions. Speaking with an estate planning attorney can help you understand your tax responsibilities.

A personal representative must first apply for a federal tax identification number on the estate’s behalf. Once you receive the estate’s tax identification number, you must file an IRS Form 56, Notice Concerning Fiduciary Relationship, with the IRS. By filing this form, you are notifying the IRS of your appointment as the personal representative of the estate. Until you request a discharge, the form remains effective, and you remain a fiduciary of the estate for federal income tax purposes. If you are a personal representative, you must pay estate taxes on the estate’s behalf and you will be responsible for filing all of the estate’s tax returns. Because you are entrusted with fiduciary responsibilities, you may want to contact an estate planning attorney to help you comply with your legal responsibilities. Our office can help you understand your legal responsibilities. Note the IRS recommends that large estates or those valued at over $1 million seek professional tax advice from a certified public accountant or tax attorney.

Only a licensed attorney can help you decide if a living trust would appropriate serve your estate planning needs and only after carefully discussing your goals with you.

Although living trusts can provide some tax benefits, so can other estate planning tools, including making lifetime gifts. Unfortunately, not all consumers understand the specific legal advantages to creating living trusts. Without proper legal training and consulting, consumers often unintentionally overemphasize the utility or benefits to creating living trusts. These myths helped fraudulent and deceptive businesses devise living trust scams. Scaring consumers, mainly elderly consumers, into believing they should create living trusts, living trust scam artists sell fake living trust forms and kits.

Con artists selling living trust kits or forms may scare you into believing that using wills instead of living trusts will save you years in unnecessary probate court procedures or thousands of dollars in court costs. You should realize that will contests or claims challenging the validity or authenticity of a probated will are very unlikely. Only a probate law attorney can decide if a living trust is suitable for your estate planning needs, and only a licensed attorney should help you draft this document tailored to your individual needs. A salesperson selling fraudulent living trust services may face criminal or civil sanctions by practicing law without a professional license.

A living trust is not a one-size-fits-all solution to estate planning. Typically, a living trust is only one part of your estate planning documents, which also includes a written will. Furthermore, a living trust must comply with specific state laws, and in Texas, the Probate Code establishes the statutory requirements when creating a valid living trust. A living trust does not help you avoid probate; since a will and a living trust is not the same thing, although they may serve similar purposes. An attorney licensed to practice law in Texas will probably not use prepackaged living trust forms and will help you create a specifically tailored document.

If you fall victim to a living trust scam, you may have a right to cancel your transaction within three days under federal law if you entered into it during a door-to-door sales transaction.

When creating a will (as well as creating a trust, if applicable), write out your healthcare directive as part of your estate planning process. Estate planning goes beyond that of assignment of assets and properties following your passing, but it is also necessary to maintain your well being until your passing. Without this document, or set of documents depending on how many components you include, your estate plan is incomplete because your health care decisions are not being addressed.

Be aware that there are two types of directives and each should be handled as either separate or combine parts the estate plan. The living will is the first type of healthcare directive, and is an instrument created providing information to your primary care physician, or other health care provider, with your medical wishes. Laws vary from state to state with regard to how to handle a living will, so be sure to confer with your estate planning attorney about how to incorporate this legally into your estate plan. Remember, though, that this document merely provides healthcare providers with instructions regarding your care when you are unable to make decisions or give direction.

The second type of healthcare directive is the assignment of a medical power of attorney. During the creation of a medical power of attorney document, you must name an “agent.” The agent is the person who signs the medical power of attorney document stating they are willing and able to sign documents, speak to health care providers, make medical decisions and seek second opinions when you are incapacitated. Like living wills, laws vary from state to state regarding the rights and responsibilities regarding the medical power of attorney. Before assigning an agent, be sure to hold a conversation with then to ensure they are able to handle this responsibility and are willing to do so.

By neglecting to draft a will, you cannot select who will be responsible for administering your estate. If you drafted a will, you could select your attorney, a family member or trusted confidante to administer your estate. If you die intestate, a court may have to appoint an individual to act as your personal representative, and the appointed individual may not have any relationship to you. Furthermore, if a court appoints a family member to serve as the personal representative of your estate, she may have to post a bond with the court to ensure timely payments to creditors and distributing your property to your heirs. This may be expensive, depending on the size of your estate, and it may be difficult for her to afford without her inheritance.

Dying intestate may lead to unnecessary delays during the probate process, and a significant amount of time may pass before your heirs will receive their inheritances. In the interim and during the delay, your heirs may no longer be alive to receive their property. A probate court may have to locate missing heirs and confirm their family ties to you before making distributions. Your heirs could also contest their intestate shares by filing challenges with a probate court.

There are many disadvantages to dying without a validly created will. A common disadvantage is that you retain almost no control as to which heirs inherit your property. If you wanted to leave certain friends, colleagues and charitable organizations property, you need to create a valid will, since the state’s intestacy rules do not include them. By creating a valid will, you can avoid most of these pitfalls. Scheduling an appointment with our office is the first step in helping you avoid them by creating a will.