Estate Planning

Mortgage REITs primarily buy commercial and residential mortgage-backed securities. Many of the 33 mortgage REITs focus on mortgage securities that are government guaranteed by Freddie Mac and Fannie Mae.

An adult child may want to consider funding an upward trust for a parent who needs income. The parent lives off the income and may or may not have access to trust principal, depending upon trust document wording. Ideally, when the parent dies, the ultimate trust beneficiary is the adult child’s loved ones. If assets in the upward trust eventually revert to the grantor (adult child), such assets could subject the grantor’s estate to taxes—assuming the $5.25 million limit (2013) is surpassed. 

The proceeds of a life insurance policy are not subject to probate unless you the estate is named as a beneficiary. If anyone else, including a trust, is the beneficiary of the policy, proceeds are not included in the probate estate and are paid to the beneficiary without delay. There is no good reason for naming an estate as beneficiary of an insurance policy. Unless life insurance proceeds are used for estate costs, they will be distributed to someone, eventually.

If you die with assets in a retirement account, the important issue becomes how the beneficiary will receive payment. Usually, a lump-sum payment is undesirable, because that money is subject to income tax in that year. There is a tax advantage to naming a designated beneficiary. A designated beneficiary must be a natural person (not a trust or charity).

Joint tenancy is a way co-owners (joint tenants) can own property together. Under some circumstances, it is a useful probate avoidance tool, because all property held in joint tenancy carries with it the right of survivorship.

As a general rule, property left in a will must go through probate. However, there are exceptions; many states allow small estates to be transferred free of probate or under a very simplified probate process. Many estates—worth hundreds of thousands of dollars—legally qualify as “small” and eligible for special transfer procedures that speed up the delivery of property to inheritors. There are two basic kinds of probate shortcuts for small estates:

The executor is responsible for arranging probate and supervising the transfer of the will property to the beneficiaries. This may be simple or complicated. Locating the property may not be easy. More commonly, distributing property can become difficult. If a will writer leaves general instructions to divide property—such as heirlooms or photos—between beneficiaries, the executor may become embroiled in personal dramas.

Will challenges, particularly successful ones, are very rare. The legal grounds for contesting a will are limited to extreme circumstances. Basically, a will can be invalidated only if one were under age when it was made, mentally incompetent or if the will was procured by fraud, duress or undue influence.