The Washington State Legislature created a relatively simple procedure for helping insolvent decedents. The Washington Creditor’s Claim Procedure allows creditors to settle their debts outside of probate. Often, small estates are not subject to probate procedures pursuant to Washington State law.

Often called a Personal Property Affidavit or Small Estate Affidavit, the Revised Code of Washington sets forth a procedure for individuals with small estates to avoid probate procedures. A Small Estate Affidavit allows a resident to avoid probate using a statutory form if their assets do not exceed $100,000 and only include personal property. In this case, a Washington State resident can devise all of their personal property using the Small Estate Affidavit without going through probate. A resident with more debts than assets cannot use the affidavit to convey property and avoid their creditors. As such, if you are a Washington State resident without real property and your net worth is $100,000 or less, you can use the statutory form if you take care of your debts owed to creditors.

According to the Washington Revised Code, personal representatives or executors of a decedent’s estate must strictly comply with the statute triggering the limited period for creditors to make claims against the estate. Failing to comply with the strict statutory requirements may give creditors up to 24 months to make their claims and prohibit you from making distributions to heirs for the entire period.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Continuing the three-part blog series covering Washington State’s law allowing personal representatives and executors to expedite the allowable statutory limitations period in which creditors can file claims against a decedent’s estate, this final blog covers the mechanics of the Washington State Creditor’s Claims Law.

The Washington Legislature passed the Creditor’s Claims Law that allows creditors to receive their debts within a relatively short period thereby allowing heirs to receive their inheritances quicker. Without the statutory provision, creditors would have 24 months to make their claims for unpaid debts after a decedent’s death. With the statutory provision, creditors have only four months to claim their debts after the estate publishes a Probate Notice to Creditors in a local newspaper of general circulation. Whereas before the state passed this statute, heirs had to wait at least 24 months to receive their inheritances, they are only required to wait four months after the state passed this statute. Creditors have up to four months to perfect or make their claims for unpaid debts against estates.

You can contact our office to schedule an appointment to discuss your estate planning options and potential claims from creditors. We can help you determine if you can take advantage of the Washington State Creditor’s Claims Law.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

When individuals die without sufficient assets to pay their existing debts, funeral expenses, administrative expenses, and burial costs, they are insolvent. An insolvent individual’s beneficiaries will not inherit anything under their Will or under the Washington State intestacy laws.

Most decedents in Washington State are solvent when they pass away and are able to pass at least some of their assets to their heirs and beneficiaries. If your spouse or other loved one dies away without any assets, you may be required to pay creditors for joint debts. However, you are not typically responsible for a decedent’s existing debts without a contractual promise to pay for them. You are not typically required to open a probate case on your insolvent loved one’s behalf without a liability to pay for their debts.

If you are a personal representative responsible for repaying creditors and distributing a decedent’s assets, you may be able to circumvent the normal timeframe of 24 months to repay creditors. By circumventing the 24-month period, you can distribute the decedent’s assets quicker and ask for a personal discharge of your legal duties relatively quickly. Typically, you will have to publish a Notice to Creditors and give the creditor actual written notice of the decedent’s death to trigger the expedited time allowable to file a claim for an unpaid debt.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Making gifts to a trust may or may not impose federal gift taxes. In general, the Internal Revenue Service does not tax gifts made by taxpayer-donors to their irrevocable trusts. An irrevocable trust is one that a grantor cannot change. If a grantor places the gift in the trust without retaining any control of the property and without retaining the ability to change the designation of the gift, the trust may be an irrevocable trust.

Trusts are also useful estate planning tools for certain individuals. For example, if you have a niece who loves to spend money gambling, you may think twice before leaving a significant bequest to her since you may be afraid that she will throw her money away in casinos pretty quickly. However, if you create a trust for her, you may be able to control how much money your trustee gives her to ensure she will not dissipate her inheritance too quickly. As the beneficiary of your trust, your niece will be responsible for paying income taxes on her trust income. However, trusts must pay separate income taxes. Similar to the separate entity rules regarding corporations and shareholders, the IRS considers trusts as separate entities, and trusts retaining property in excess of the federal tax limits will have to pay income taxes on the retained income.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Contrary to popular belief, trusts rarely produce large tax savings. Many people create trusts to avoid placing their assets through probate courts. Thus, although trusts can help you save money on probate expenses, they may not reduce your federal estate taxes. If you create an irrevocable living trust, you may be able to reduce your income tax liabilities because you can effectively remove the assets within your irrevocable trust from your probate assets. You may also want to create a trust to help preserve privacy. Because wills are made as part of public records in probate courts, you can preserve anonymity and the identity of your beneficiaries by creating a trust.

You can create a revocable or irrevocable living trust. An irrevocable living trust is one that is not modifiable. You cannot change the terms of an irrevocable trust instrument or change your beneficiaries. However, if you create a revocable living trust, you can change the terms your trust document or revoke the entire instrument. Although a revocable living trust is more flexible than an irrevocable living trust, you may be able to reduce your tax liabilities by creating an irrevocable trust. This is because the federal tax code considers a gift to an irrevocable living trust as property of the trust since you retain no control over its disposition. However, since you can change the disposition or beneficiary of a revocable living trust, you may not receive any tax benefits. Carefully considering tax implications is an important part of estate planning.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

The Internal Revenue Service (IRS) uses special tax rules for trusts. Understanding these tax rules is imperative for estate planning attorneys. According to the IRS, a trust established under state law must comply with the federal tax laws regarding tax liabilities of trusts. By creating a trust, the owner or grantor of the trust appoints a trustee to become a fiduciary of the trust instrument. A trustee retains legal ownership to administer the assets on behalf of the grantor for the benefit of the trust and its beneficiaries. The written trust document must clearly state the beneficiaries of the trust and appoint a trustee. A trust must also have trust property or assets within the trust. The IRS requires that all trustees or grantors file annual tax returns during tax years in which the trust includes at least $600 of trust assets or income and during each year a beneficiary named in the trust is a nonresident alien.

In limited situations, some trusts are never required to file tax returns. The trust tax return is IRS Form 1041, U.S. Income Tax Return for Estates and Trusts. Contrary to popular belief, an individual cannot impute his tax liabilities to a trust for federal income tax purposes. Because the IRS prohibits assignments of income, individuals are still liable for their income taxes even where their incomes go directly to their trusts.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Many individuals put off their retirement planning needs.  It may seem as if you have all the time in the world to plan sometime in the future; that your current financial needs are more important than future concerns.  Unfortunately, this isn’t the case.  You need to begin thinking about retirement planning needs now, so that your financial needs are always met in the event you would like to retire or cannot continue to work.

Putting your savings on hold can be disastrous.  Take a look at the following information, to learn more.  If you have any questions, or if you’d like to discuss your retirement planning needs, contact an estate planning attorney.

Retirement Planning is Part of Estate Planning

If you choose to put off your retirement planning, you may not have the assets that you need to pay bills in the future.  With the help of an estate planning attorney, you can not only create an estate plan that allows you to achieve your estate planning goals, but you can also successfully plan for future retirement costs.

An Estate Planning Attorney Will Guide You

An estate planning attorney can help guide you so that you’re able to make informed financial decisions.  Your attorney can also help you to determine how much room you have for retirement planning.  You can likely free up some of your assets so that you can better save for the future.

Don’t put off your retirement planning.  Now is the time to plan. As you continue to age, you will have less time to maximize your savings.  By planning as soon as possible, you will make it possible for you to have a financially secure future.

If you have any questions about how to effectively handle your retirement planning affairs, consult with a qualified estate planning attorney.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Many Washington parents find it beneficial to invest in a college saving plan as early as possible.  If you haven’t taken the time to begin planning for your child’s college education, now is a good time to do so.  Luckily, the state of Washington makes it easy with their college savings plan.  Take a look at some of the information below to learn more.  If you have any questions about starting a college savings plan, meet with an estate planning attorney to discuss your options.

The state of Washington offers a 529 college plan called Guaranteed Education Tuition or GET.  This plan has been in existence since 1998 and has offered a way for many Washington families to pay for the costs of college.

How does the GET plan work?

With this plan, you’re able to purchase units that help to pay for the costs of a college education.  A unit cost is determined each year, and may change.  Each unit is worth 1% of the resident tuition at the highest priced Washington public state school, but credits can be used at any eligible institution in the US.

There are several payment plans available that help to make it easier to save.  This includes purchasing units whenever you have the money to do so and also a custom monthly plan that allows you to purchase units on a monthly basis for as long as needed.

You’re able to purchase a maximum of 500 units, or $58,500.

What are some of the benefits of the GET plan?

This plan has many benefits.  For one, you’re able to save for college at your own pace.

Another benefit is the fact that the state of Washington guarantees that your account will increase in value when the costs of tuition also increase.  You won’t have to worry about losing money in this investment.

The money that you invest will grow tax-free and you also won’t have to pay taxes on your qualifying college education expense withdrawals.

This plan is a great way to get started with your college savings goals.  Help your child by saving for the costs of education!  If you have any questions about your college savings plan needs, consult with a qualified estate planning attorney.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

In estate planning, there are ways to keep your financial accounts out of probate. One popular option is a Payable on Death (POD) account. With this type of account you retain control of your funds while you are alive and upon your death your beneficiary can collect those funds.

Name a Beneficiary

To designate a beneficiary, and make an account Payable on Death, ask your financial institution to provide you with a designation form. Most accounts allow you to name more than one beneficiary, if you wish. There are many different accounts including checking, money market, retirement accounts, and savings accounts, which allow you to designate a beneficiary to receive funds if you die.

Check with your financial institution to see which of your accounts can be made payable on death. Having your accounts pay to a beneficiary upon your death can provide your loved ones with easy access to funds if the rest of your estate is in the probate process. Your beneficiaries can use those funds to replace your income, pay your final bills and make funeral arrangements.

Update Beneficiary

Once you have named a beneficiary, your duties are not finished. You must maintain the beneficiary designation on every payable on death account. Every time you update your estate plan, check your POD accounts to ensure your form designates a beneficiary who is alive and well. An account with a deceased beneficiary will have to endure probate. If you have any change of heart about your beneficiary, update your form as soon as possible.

Beneficiary Collects Funds

Upon your death all funds in your Payable on Death account will belong to your chosen heir. Since the account does not need probate if the designation form is up-to-date, your beneficiary has only to provide a certified copy of your death certificate to access the funds in the account.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

A Health Savings Account (HSA) is a savings account for the purpose of paying medical expenses. This special account is used in tandem with a high deductible health insurance plan and is designed to cover medical expenses until your deductible is met and your plan takes over.

Basic Requirements

In order to open a Health Savings Account, you must have a health insurance plan with a high deductible. The current required deductible for a family is 2,400 dollars per year. If you are covered by Medicare or any other medical plan you are not eligible for this special account. You also cannot be a dependent of anyone else.

Benefits

There are quite a few benefits associated with a Health Savings Account. The biggest is the low premiums connected to the required high deductible plan. You also cannot beat the tax savings. Funds deposited into your health savings account may be pre-taxed income. If you deposit post-tax money, you can deduct it on your yearly tax return.

No matter what your income level is, you are eligible for an HSA. Some employers are beginning to offer these accounts as a supplement to their health care plan. If your account is sponsored through your employer, but you choose to move to a new job, you can take your HSA with you.

At the end of the year all money you have deposited into your account is available in the New Year. Starting an HSA when you are young and healthy is a great way to save for medical expenses when you are older and may require more medical care.

Disadvantages

The main drawback to a Health Savings Account is the high deductible plan. If you cannot put enough money into your account each year to pay the deductible, then this type of account and plan may not be right for you.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.