Advance research helps sort out money, options

Michelle Swafford

Thursday, May 12, 2005 | 8:17 a.m.

There are many components to death planning, including who should receive a person's assets, which could end up in the wrong hands if their wishes are not spelled out, estate planners say.

Preparing the funeral and burial preferences are not the only considerations for death planning. Preplanners also often establish a will or trust, a living trust and power of attorney for health care and other financial arrangements to take care of the person if they become incapacitated or die.

Estate planning is important for anyone who is at least 18 years old because it is uncertain when something could happen and planning establishes what happens to people's assets and how to care for them if they die or become disabled, Las Vegas elder and estate lawyer Jack Fields said.

Wills and trusts

A will spells out how to handle people's assets, liabilities and sometimes their remains; who the executor is who would carry out those wishes; and who the guardian is if the owner of the will's children need to be cared for, Fields said.

The average cost to prepare a will in Las Vegas is between $125 and $200, he said. Once people die, the will is sent to probate court and the legal process typically takes 45 to 60 days when there is less than $75,000 in assets, Fields said, adding that the probate legal fees average between $1,500 to $2,000 if there are no problems.

For cases where there is more than $75,000 in assets - especially when there is more than $200,000 in assets - it often takes between six months and 10 months to process and the legal costs typically range from 5 percent to 7 percent of the value of the estate, Fields said.

"If you don't have a lot of assets and you've got $10,000 or $20,000 in the bank and put your mom as a beneficiary, a will would probably suffice, but things change over time," Fields said. "They're not like a bottle of wine; they don't get better with age. They're like a loaf of bread; they get stale and moldy.

"You need to establish a plan and periodically review it to make sure it stil meets what your wishes are."

Trusts are "more complicated legal tools" that are used instead of wills in complicated situations such as when people have children from a prior relationship or when they have more than $50,000 in assets, Fields said.

They are typically more expensive to set up - $1,100 to $1,800 for the trust, will and power of attorney for health care documents - and they are often processed quicker than a will, he said.

"Wills are still more common for the smaller estates, but trusts have become much more common from when I started practicing in 1987," Fields said, adding that trusts used to be something only wealthy people had. "A will is like a bicycle and a trust is like a motorcycle. A bicycle is less expensive and easier to maintain, but when it comes time to get you from point A to point B, it takes longer.

"A trust is like a motorcycle. It's more expensive to buy and more complicated to maintain, but when it comes time to get you from point A to point B it gets you there more quickly."

If there is no will or trust, Nevada law says the closest relative inherits the estate, Fields said, adding that having no written plans can destroy families.

Another way people can pass on property is through joint ownership such as on a home, but that can be dangerous if one person decides to sell the home or loses it in a lawsuit or divorce, Fields said. Also, joint tenancy can have negative tax consequences, he said.

Living wills, power of attorney

The other major components of estate planning is a living will and power of attorney for health care, which designates who can make decisions should people become unable to make them, Fields said. The living will stipulates whether they want life support or other end-of-life treatments, Fields said.

It also stipulates whether people would accept blood transfusions and other treatments that could save their life, he said.

A living will can also be useful for people who have had a stroke and are not terminally ill, but cannot make health care decisions, Fields said.

Nevada law does not specify how to handle people's desire to die if it's not in writing, but a precedent was set in the U.S. Supreme Court in 1990 when Missouri resident Nancy Cruzan's feeding tube was removed at her parents' request after seven years.

While living wills can designate whether emergency medical personnel should resuscitate a person, they are not the documents that are required by paramedics and medical technicians in Nevada.

There are "do not resuscitate" cards that tell emergency medical personnel not to revive people if they have one of these cards. In Nevada, unlike in some states, the cards are only available to people who are 18 years old or older and have been deemed terminally ill by their physicians, said Rory Chetelat, emergency medical services manager for the Clark County Health District.

The Clark County Health District issues the cards after people complete one of the health district's applications and have their doctors sign it, Chetelat said. There is a $5 fee for the card and the doctor must be a Nevada-licensed doctor, he added.

Specifying whether or not to be resuscitated or placed on life support machines is only one component of health preplanning; the other major one is to establish a power of attorney for health care, Fields said.

"More important than the living will is to designate a trusted person to make decisions for you" such as a friend, spouse, sibling or parent, Fields said. "There are people who have nonconventional lifestyles. They don't have an automatic right to make those decisions. It's absolutely imperative that you look into those documents to protect yourselves and your partner."

Financial preparation

Estate planners say it's important to meet with a financial planner in addition to meeting with a lawyer.

Michael Milano, a financial consultant and principal with Linsco/Private Ledger Financial Services in Las Vegas, said there could be several tax consequences for poorly planned estates.

Estates worth more than $1.5 million in 2004 are subject to an inheritance tax of 47 percent of the estate value, but the people receiving the inheritance do not pay taxes.

The point at which an estate is taxable is scheduled to increase until 2010 and in 2011 the law is scheduled to return to a $1 million exemption and a tax rate of 55 percent.

The IRS reports that funeral expenses and liabilities are deducted from the taxable estate.

If any of the estate's assets are part of a pension or individual retirement account, that money would also be subject to income tax, Milano said.

A way to get around taxes coming out of the estate is for people to set up an irrevocable life insurance trust, which provides life insurance that would be used to pay any taxes -- preserving the estate, he said.

It is important to note that life insurance policies are income tax free, but are subject to inheritance taxes, Milano said.

He said a long-term care insurance policy is another key element to the financial portion of estate planning because the estate would be preserved and the people could still pay for their long-term care.

Milano suggests that people consider separate individual trusts for assets related to a previous relationship and then set up a joint trust for the current relationship, which protects all the parties involved.