Legal

Want to learn more before you purchase a pre foreclosure property? In this blog, we explain is what is pre foreclosure, and what it means to buy a house in pre foreclosure.

Pre-foreclosure

Most property buyers take home loans from financial institutions to buy property. Financial institutions or lenders have conditions like how much money needs to be paid every month. If the borrower defaults on three or mortgage payments, the lender issues a notice of default. The property is pre foreclosure, and the lender may reclaim it if the payment trends don’t improve.

Also read: How much money should I save before buying a house? | A financial guide

What does pre foreclosure mean?

It is vital to understand what does pre foreclosure mean? Pre foreclosure is the legal proceeding that can conclude in a property being repossessed from default borrower. In pre foreclosure, the lender files a notice of default if the borrower has defaulted on payment for30 to 90 days. The notice informs the borrower owner, that the lender is pursuing legal actions towards foreclosure. The borrower has some options after they receive the notice. The lender may be willing to negotiate with them to avoid moving forward with foreclosure.

Pre foreclosure vs Foreclosure

Pre foreclosure vs foreclosure can be confusing but are very different. The difference between pre foreclosure and foreclosure is as follows. 

Pre foreclosure	Foreclosure
Pre foreclosure means when the owner defaults on their mortgage payments and is at risk of being foreclosured upon.	Foreclosure properties are those which have been reclaimed by financial lenders. Once it is back in the lenders possession it is often listed for sale.
Pre foreclosure properties are listed higher price because the property has still not been foreclosed. Real investors can get a good deal from seller.	Lenders have a vested interest in selling the property quickly. The properties are listed at a lower price.
Pre closure properties are generally better maintained.	Foreclosure properties can be abandoned and may be deteriorating. Foreclosure process may take months and the property will not be inhabited or maintained for months.
Real estate investors interested in buying a pre foreclosure houses look at renting properties or Airbnb investments. Investors will not have to spend on repairs or upgrades.	Real estate investors looking to flip properties often prefer foreclosure properties. Investors purchase the property at low cost and they can use the money saved on repairs.

Also read: 5/1 ARM | What is it and is it a good idea for you?

Preforeclosure process

Preforeclosure is the first step to the foreclosure process. While the pre foreclosure notice is serious, there are ways to prevent foreclosure of your home. Pre foreclosure process encompasses of a few steps, and begins when the borrower misses their mortgage payment and lender issues a notice of default. The notice means the lender has begun the legal process. 

How do pre foreclosures work?

If you have received a pre foreclosure notice, you may want to know how do pre foreclosures work. The legal requirements may vary depending on where you reside, but preforeclosure process is fairly consistent. The steps are as follows –

• Mortgage default – Pre-foreclosure can begin 90 days after the borrower misses their first mortgage payment, or they have not made three consecutive monthly payments. The borrower is in default on the loan. 
• Notice of default – The pre-foreclosure notice begins after the lender sends the borrower a certified letter that they plan to begin the foreclosure procedure within 30 days.
• Public notice – In several states the lender is required to issue pre-foreclosure notice and the borrower’s name is posted to a public listing of individuals whose properties have been foreclosed.

How long does the foreclosure process take?

A foreclosure occurs when homeowner defaults on a mortgage payment, but how long does the foreclosure process take? The length of the foreclosure process depends on state laws and factors like whether the borrower and lender are negotiating to stop or stall the foreclosure procedure. The entire foreclosure process can take anywhere from 6 months to more than a year.

Also read: How can you reduce your total loan cost | Paths to debt-free life

Buying pre foreclosures

The easiest way of buying a pre-foreclosure home is to help the seller make up the pending mortgage to the lender and then buy their home. Some sellers are unwilling to sell their homes. If a seller is willing to sell their home, it can be profitable because the seller may be unaware of how much their property is worth. Top tips for buying pre foreclosure property are –

• When you start looking for a preforeclosure home, contact a lender to get a preapproved loan, it will give you an edge in a competitive market. Preapproved loans mean you have got your finances from a vendor. Sellers like seeing preapproved letter because it lends credibility to your offer.
• Earnest money is the deposit you offer along with the purchase and is the easiest way to prove you are earnest. Good faith deposit or earnest money deposit shows you are serious about buying the property. Earnest money is usually 1% to 3% of the purchase price. 
• You should get the property inspected. Having a comprehensive report on the property can help you determine if the property is worth it and do a title search to know if there are potential liens of the property. 
• When you and your agent check everything and are satisfied and the homeowner is willing to sell. You can negotiate terms favorable to both parties, you can purchase the property.

Also read: Purchase and sale agreement | Everything you need to know

How to find homes in pre foreclosure?

Pre foreclosure investing is become popular. Buying pre foreclosure can be tricky but rewarding if you do your research well. How to find homes in pre foreclosure? There are many options you can explore, and the strategy you use will depend on the time you are ready to invest. The best places to find homes in pre foreclosure are –

• Online Directories are the best place for foreclosure leads. You get the listings of several properties in one place containing descriptions and photographs. Real estates websites such as Zillow, Trulia, Realtor.com, Homes.com, Movoto, and LoopNet list preforeclosure properties. You may have to pay a small fee to use the services.
• Accredited real estate agents can access multiple listing services (a database for homes for sale). Your real estate agent can access the MLS to find a pre-foreclosure listing. Agents can help you get appointments with property owners and negotiate deals on your behalf. They can research properties and find information such as property tax, property prices in the area, and the previous sale price.
• The county record office maintains pre foreclosure listing. In the public record section, you can look for Notice for Sale, Lis Pendens, or Notice of Default.
• Local newspapers provide pre foreclosure leads.
• Real estate attorneys represent people whose property is in pre-foreclosure and can provide leads. Some attorneys charge you a referral fee for every pre foreclosure lead.

How to negotiate a pre foreclosure?

Owners prefer pre foreclosure sales to prevent their property from going into foreclosure. They prefer pre-foreclosure sales to protect their credit ratings. Their ratings would be severely affected if their property is foreclosed. How to negotiate a pre foreclosure? Under pre foreclosure sale the owner usually accepts less than the remaining balance on the property. Investors prefer negotiating directly with the seller.

We recommend you consult an attorney before making an offer. Factors like – the condition of the home and present property prices in the area affect the property price. It is advisable to get it professionally inspected to know any underlying problems with the property.

Also read: Estate planning attorney | Top things know before hiring an estate planning attorney

Preforeclosures listings – where to find them

Investors can preforeclosure listing through online directories, real estate agents, public records, local newspapers, attorneys, and real estate wholesalers. The top 5 places to find pre foreclosure listings are –

• Online Directories provide preforeclosure and foreclosure listings along with property details like the condition of property and pictures.
• Real estate agents help you find preforeclosure deals. 
• County record sections maintain public records of pre-foreclosed properties in the area.
• Local newspapers publish the address of homes at different stages in the foreclosure process.

How to find out if a home is in foreclosure?

As a new investor, you may want to invest in a foreclosed property, but you are unsure where to begin. There are unverified websites that maintain inaccurate or outdated records. Here are some resources you can use to find if a home is in foreclosure. 

• Foreclosure real estate agents specialize in foreclosed properties. 
• Visit your local county’s record office. They have information on all homes in the community. You can search for the property with the owner’s name, and the records may be in print or digital form.
• Check the public auction listing are available online or in newspapers and your county’s record office. 
• Websites like MLS or online real estate databases like Zillow have accurate listings. 
• Bank websites often maintain an inventory of foreclosed properties on their website. 
• Tour neighbourhoods you like and look for signs similar to real estate signs, and you may see some properties marked foreclosure or bank repo.

Also read: How long does it take to build credit? | Build credit fast 

Should I buy a foreclosed home?

As an investor, you may be wondering should I buy a foreclosed home. The biggest advantage to buying a foreclosed home is that most foreclosures are at a sizeable discount lower than market value. You can make additional savings in reduced down payments, lower interest rates, or elimination of appraisal fees and certain closing costs.

There are some risks of buying foreclosed homes. 

• The homes are sold in as-is condition, and the property condition can be grim. 
• You may need to spend on repairs and maintenance to make the property livable. 
• Auctioned properties often have back taxes and liens attached to them. 
• Foreclosed properties are complicated may mean extra paperwork. 
• Other interested parties may increase the price of the property.

Common questions on Preforeclosure

Preforeclosure gives the homeowners some options to stay in their homes before a foreclosure. As a homeowner, the jeopardy of losing your home can be devastating. Understanding what is a preforeclosure, and a foreclosure is vital. Real estate owners can get a great deal in preforeclosure property. In this section, we answer common questions on preforeclosure.

What is a pre foreclosure auction?

Many new real estate developers ask What is a pre foreclosure auction? And what is a pre foreclosure sale? When the defaulting borrower and lender cannot work out a repayment plan, the lender may allow a short sale as a last resort.

Foreclosures are expensive, and the lender agrees on a short sale, or pre foreclosure sale. The homeowner lists the home as they try to recoup the loan amount as much as possible, and the lender will let him off the hook. The house may be sold at a pre foreclosure auction.

Can you buy a pre foreclosure home with an FHA loan?

Can you buy a pre foreclosure house? Yes. Are you wondering, can you buy a pre foreclosure home with an FHA loan? Yes, you can buy a preforeclosure home with an FHA loan. Even if your credit score is less than perfect, you can get an FHA mortgage with low down payments (as low as 3.5%). FHA mortgage has more stringent property requirements compared to a mortgage loan. Buyers can buy a pre foreclosure home assuming that the house meets the FHA standards.

Should I buy a foreclosure for my first home?

If you are wondering, should I buy a foreclosure for my first home? Yes, the main benefit of buying a foreclosed home is savings. Depending on present market conditions, you can purchase a foreclosed home for a lower amount than you would pay for a non-foreclosure home.

There are some risks you take when you purchase a foreclosure home. Foreclosure homes are sold in “as-in” condition, and you generally cannot walk through the property before purchase. The homes may have been unoccupied for years before the sale, or the past owners neglected or vandalized the property. You may need to spend on repairing the property.

Can you buy a pre foreclosure home with a loan?

Can you buy a pre foreclosure home with a loan? Yes, you can get a loan for pre-foreclosure, but if there are many offers for the house, a cash buyer will get the first preference. We recommend prequalifying for the loan before you make an offer. You will know how much you can spend on the property and repairs. Banks are willing to offer loans on unlisted properties.

What happens after the foreclosure sale date?

As a homeowner, you do not want to think about losing your home. If you are unable to pay the mortgage, your property heads for foreclosure. What happens after the foreclosure sale date? After the foreclosure sale date passes you go from owner to tenant, as the title deal passes to the new owner.

Some owners may agree to rent the property, but most of them want to take possession of the property. States have their laws about foreclosure, including the amount of time you are entitled to vacate the property. If you are unwilling to move out legally, you may need to be evicted from the property.

Also read: How many stocks should I own for an ideal portfolio – Explained

Is it bad to buy a foreclosed home?

Many homeowners wonder, is it bad to buy a foreclosed home? Buying a foreclosed home is a good idea if you have some extra financial resources. If you are not worried about potential problems or repair costs foreclosed properties are a worthwhile investment. You may have to spend between 1 to 4% on repairs.

If you are not in a hurry to move into the house it can be a great idea. Repairs are time-consuming, and if you do not have any time constraints, you can purchase a foreclosed property. Foreclosed homes can be a nightmare if you have a tight budget and want to move into the home quickly.

How long does a foreclosure take?

How long does a foreclosure take? A foreclosure can take anywhere from six months to several years. Some milestones are –

• For missed mortgage payments, the lender contacts the borrower encouraging them to get their payments back on track. If the borrower misses four consecutive payments, the mortgage is in default. 
• The lender sends a legal notice indicating they will begin the legal foreclosure procedure in 90 days.
• If the borrower fails to make payments, the lender approaches the courts to begin foreclosure. The court appoints a trustee to oversee the auction.
• Several weeks before the auction, the trustee posts signs and publishes local news giving details about the property and auction. 
• The trustee puts the property for auction with a minimum base price, and the highest bidder takes ownership of the property.
• As soon as the property is sold, occupants are issued an eviction notice.

How long does foreclosure stay on your credit report?

If your property has been foreclosed, you may wonder, how long does foreclosure stay on your credit report? A foreclosure has a major negative impact on your credit report and can lower your credit score, impacting your ability to qualify for credit or apply for new loans.

A foreclosure entry remains on your credit report for seven years after the first missed payment that led to the foreclosure. After seven years, it is removed legally from your report. If it persists longer, you can approach the credit bureau to remove it.

How long can you not pay your mortgage before foreclosure?

If you are behind in your mortgage payment, you may wonder how long can you not pay your mortgage before foreclosure. Under federal law, the lender cannot start foreclosure proceedings until the borrower is more than 120 days overdue on mortgage dues. The 120 day pre foreclosure period gives the homeowner two options –

• A grace period to get caught up on the loan
• Apply for and work out loss mitigation options like mortgage modification. 

Applying for a foreclosure avoidance option can delay the start date by 120 day period.

If my house is foreclosed do I still owe the bank?

After your property is foreclosed you may wonder, if my house is foreclosed do I still owe the bank. It is a common misconception, that you do not owe your lender anything after foreclosure. The lender is obligated to apply the sale price of your home to the mortgage debt.

If your house is sold for less than the mortgage amount, you owe the lender the remaining money after the sale. The remaining debt is called a deficiency. The lender can sue you to recover it. If the deficiency amount is large, many borrowers opt for bankruptcy to protect their assets. 

Want to learn what is a hold harmless agreement is and how it works? In this post, we take a deep dive into hold harmless agreements with types & examples. Read on!

Hold harmless agreement

Hold harmless agreement is a legal contract stating that a company or a person will not be held liable in case of injury, risk, or damage caused to the other party. This agreement is a decision between two people or groups. It may either protect one party or both.

What is a hold harmless agreement?

Hold harmless agreements protect a business or a person from getting sued in case the other party suffers damages, financial losses, or physical injuries on the business premises or while using a service. Hold harmless meaning states that one party will not hold the other party liable for risk. The hold harmless agreement can either be unilateral (one-sided indemnification clause) agreements or it can be a reciprocal (mutual indemnity clause) agreement.

Also read: Legal consulting | Top 7 types of legal consulting firms

Hold harmless clause example

A good hold harmless clause example is when a sports club prevents its members from suing in case of injury during the course of participating in any sport. In such a case, the hold harmless agreement will state that the signing party has accepted all kinds of risks associated with the activity, including the risk of death. The owner of the sports club or any of the staff involved will not be held responsible if the signing party suffers injuries during their participation in sports activities.

Indemnify and hold harmless

Indemnify clause or agreement is often used interchangeably with the hold harmless agreement or clause as they both help your business to reduce liability in case of accidents. While they both are practically the same, some experts suggest that “hold harmless” protects the party from both loss and liability whereas indemnify agreement only gives protection against losses. Indemnify and hold harmless are often seen together in the contract language.

Hold harmless vs indemnify

The difference between indemnify and hold harmless may vary from state to state. Many experts treat both indemnify and hold harmless agreements as to the same. The main difference is that “hold harmless” majorly protects a party against actual losses and potential losses while indemnification protects only against actual losses.

Sample indemnification clause

To the fullest extent permitted by law, the seller agrees to indemnify, defend and hold harmless the purchaser and his insurers, successors, representatives, attorneys and assigns from and against any and all expenses (including reasonable attorney’s fees), losses, costs, deficiencies, liabilities, and damages arising out of or due to

1. Breach of any of the representations, warranties or covenants of Seller contained in this Agreement
2. Default in the performance of any of the covenants or agreements made by Seller in this Agreement

Also read: Purchase and sale agreement | Everything you need to know

How does the hold harmless clause work

The hold harmless clause or agreement works as a release of liability that provides protection to one party from the damage or injury caused by the second party. Businesses who have a hold harmless agreement clause have more chances of escaping unnecessary lawsuits and saving their business reputation.

For example, if an independent contractor is working at your property, the contractor company might have you sign the hold harmless agreement to avoid being liable for any accidents that may occur due to the construction work. It means you can not sue the contractor in case of damages.

When to use waiver of liability

The most significant use of a waiver of liability for business users is to save themselves from damages claims and lawsuits associated with high-risk activities. Waiver of liability or hold harmless agreement is a protection cover that shields a company’s profitability along with its business reputation. These are also used to save a business from unnecessary legal disputes.

There are several situations where an individual or a party may require the need of having a waiver of liability in place. In the below section, we have tried to cover five such scenarios where a waiver of liability can be put to good use.

Also read: Estate planning attorney | Top things know before hiring an estate planning attorney

Personal injury waiver

A personal injury waiver is used by businesses that offer high-risk activities. Waiver of liability is a legal contract that is used by parties to protect themselves and their businesses. It states that the provider is not to be held liable in case of personal injuries while using the owner’s facilities.

Contractor liability waiver

A contractor liability waiver is a legal contract that is used by contractors and subcontractors to release their clients from liabilities in the event of damages, injuries, accidents, or losses. This waiver of liability or hold harmless agreement sets clients free from any legal responsibilities and claims.

Homeowner liability waiver

A homeowner liability waiver is a legal contract where a homeowner agrees not to sue the party working on their premises in case of accidents, damages, and losses. Such kind of waiver of liability protects the working party from getting involved in legal complications.

Several liability clause

Under several liability clause, each person or party involved is responsible for their portion or obligations as specified in the agreement or based on the nature of their dealings. If one member of the party fails to meet its obligations the others will not be held liable.

Property liability waiver

The property liability waiver is used where the property owner is allowing other people or parties to use their facilities. The waiver of liability states that the owner is not to be held responsible in case of any injuries suffered during the use of the owner’s facilities or property.

Types of hold harmless agreements

There are a few basic types of hold harmless agreements, including:

• General: General hold harmless agreements protects a party from being held liable in specific situations that are clearly mentioned in the agreement description.
• Property Use: If an owner of the property rents their space to the other party, they will often ask the renting party to sign a hold harmless agreement to release themselves from any liability in case of accidents.
• Services: This type of hold harmless agreements come into the picture when a service is being provided to protect the offering party from any liability.

Also read: How to write a will | All you need to know about preparing a will

What does the hold harmless provision include?

Hold harmless provision requires certain types of hold harmless clauses based on the extent of liabilities transferred. There are three most commonly used types of clauses:

• Broad form

When a Party A holds Party B harmless for suits against Party B based on sole negligence of either Party A or Party B, and joint negligence of both Party A and B.

• Intermediate form

When party A holds Party B harmless for suits against Party B based on sole negligence of Party A or joint negligence of both the parties.

• Limited form

When Party A holds Party B harmless for suits against Party B based on sole negligence of Party A.

Hold Harmless agreement for businesses

Hold harmless agreement for business is a legal contract that releases the business owner from any liability such as damage, injury, loss, etc. Business owners especially involved in high-risk activities must consider getting a hold harmless clause in place to protect their business and avoid lawsuits. Hold harmless agreement can save businesses from getting sued by a third party, or getting involved in expensive litigation. Business owners must ensure that they hold harmless agreement is specific, and clear so that it is accepted by the judge in the court of law.

Which types of business use hold harmless agreements?

There are several businesses that can make use of hold harmless agreements but it is often used in service industries where subcontractors come into the picture. The indemnification hold harmless clause is also highly useful when a service provider is offering a service with high risks involved.

Hold harmless agreement real estate

Hold harmless agreement in business of real estate means that the liability is removed from the seller and is passed on to the buyer. After transferring the responsibility to the buyer, a seller is free from any property claims or related issues that may arise.

Also read: How to get out of a lease fast | All your options

Contractor hold harmless agreement

Hold harmless agreement for business as a contractor can be highly beneficial. As a contractor who often hires subcontractors, a hold harmless agreement releases you from the liability for the injuries, losses, or work accidents caused during the contract period. It saves contractors from unnecessary claims.

Benefits of hold harmless agreements

There are several benefits of a hold harmless agreement for business:

1. Reduce the liability of the requesting party
2. Makes your business insurable
3. It leads to fewer lawsuits and legal battles
4. With fewer lawsuits, your business reputation will soar high
5. Helps you get more business opportunities

The sample hold harmless agreement

Let us take a look at a sample hold harmless agreement below:

Purchaser shall fully defend, indemnify, and hold harmless Seller from any and all claims, lawsuits, demands, causes of action, liability, loss, damage and/or injury, of any kind whatsoever, whether brought by an individual or other entity, or imposed by a court of law or by administrative action of any federal, state, or local governmental body or agency, arising out of, in any way whatsoever, any acts, omissions, negligence, or willful misconduct on the part of Purchaser, its officers, owners, personnel, employees, agents, contractors, invitees, or volunteers.

Hold harmless language

Generally, a hold harmless agreement will use a specific language. You can take the help of an attorney or a reviewer to help draft the specific language. Before finalizing your hold harmless agreement template be sure to verify the validity of your clause and contract language.

Each country has their own guidelines in terms of hold harmless language. Hold harmless indemnification clauses are often mentioned under broader clauses such as expenses, payment, liability, notices, jurisdiction, general provisions, etc. In terms of wording, each clause is almost similar.

Also read: What is Contingent Beneficiary | Everything you need to know

Information needed to make a hold harmless agreement

If you are planning to make a hold harmless agreement, here is what you would need:

1. The name and address of the party who will not be held liable in case of risk.
2. The name of the person or the party who will be providing protection.
3. The date upon which the hold harmless agreement will be signed and go into effect.
4. The name of the state whose laws will be governing.
5. The type of protection being provided under the hold harmless agreement.

Common questions on hold harmless agreement

In the below section, we have answered some of the common questions on hold harmless agreement for better clarity. If you are thinking of signing or getting signed a hold harmless agreement then these questions will help you gain more information about the entire process.

1. What does hold mean in real estate?

Putting a property on “hold” in real estate means that the house is still available but for several reasons, the agent or the house owner are unable to cooperate with showings for a short duration of time. A property on “hold” is still available for sale.

2. Can hold harmless agreements cause legal problems?

Hold harmless agreements are legal tools that most judges find acceptable. However, if your hold harmless agreement is improperly written or is in violation of public property, it will be rejected by the judge and expose you to legal problems.

3. Should I sign a hold harmless agreement?

While signing a hold harmless agreement, the signing party accepts the risks involved in the services they are availing and are agreeing to not sue the provider in case of any injuries, damages, or losses. You should sign a hold harmless agreement if you accept the risks involved.

4. Does a Hold Harmless Agreement stand up in court?

A Hold Harmless Agreement is a legally binding contract that states that one party cannot hold the other party accountable for the risk of physical or property damage. However, there are several rules and regulations one must follow in order for the agreement to stand up in court.

When setting up your insurance, will or trust you are likely to come across the term Contingent Beneficiary. In this post, we’ve put together everything you need to know before choosing a contingent beneficiary.

Contingent Beneficiary

Contingent Beneficiary is common terminology used in the insurance sector, related to a will or trust of a person after demise. In this article, we will discuss elaborately both contingent and beneficiary, the different types of beneficiaries with their distinguishing characteristics and some frequently asked questions on the contingent beneficiary. 

What is a beneficiary?

Firstly, let us try to understand what is a beneficiary. A beneficiary can be a person or a legal entity in an insurance deal or agreement; entitled to receive the death benefits in the form of money or any other medium. The person or legal entity received the amount as a contingent beneficiary after the demise of the primary beneficiary.

Also read: Estate planning attorney | Top things know before hiring an estate planning attorney

What is contingent? with example

In the literal sense, if you want to understand what is contingent. Then it implies being dependent on certain conditions being fulfilled. For example when we speak of the contingent beneficiary, then it implies the payment of insurance to the beneficiary only on the death of the primary beneficiary; provided the name of the beneficiary is mentioned in the will or trust. The payment is also made to the beneficiary if the insured person is missing or cannot be traced.

What is a contingent beneficiary?

Now let us focus on what is a contingent beneficiary.

The contingent beneficiary definition states that the entity is a beneficiary of the payouts or payments or proceeds in the event of death of the primary beneficiary. The payment is also made to the contingent beneficiary if the primary beneficiary is untraceable or refuses to accept the payment. But it is crucial that the name of the contingent beneficiary for life insurance must be mentioned clearly in the will.

Primary Beneficiary

In a life insurance policy or will or trust, the primary beneficiary is the first person to receive the benefits or the payments in case of the death of the insured person. It is usually the immediate family member like a spouse, children, or any other family member. If the primary beneficiary is also deceased, then the benefits are passed on to the secondary beneficiary. There can be multiple primary beneficiaries in a will as specified by the insured person.

Also read: How to write a will | All you need to know about preparing a will

Secondary Beneficiary

A secondary beneficiary is also referred to as the contingent beneficiary. 

Now, what is a secondary beneficiary?

The person’s name must be specified in the will or trust and can receive the money or the benefits of life insurance only based on certain conditions. The conditions are the death of the primary beneficiary, absence of the primary beneficiary or even refusal of acceptance of payment by the primary beneficiary within a certain time limit.

Tertiary Beneficiary

In the event of death or absence of both the primary and the secondary or contingent beneficiary, the benefits of the insurance or the money go to the tertiary beneficiary. An insured person may or may not name the tertiary beneficiary in the will or trust. Without the name, the legal department tries to access the immediate beneficiary after the primary and second beneficiaries and grants the amount accordingly.

Insurance Beneficiary

An insurance beneficiary is a person who receives the benefits or money from a life insurance policy only on the demise of the insured person. The name of the beneficiary is mandatorily mentioned in the policy documents by the insured person. It’s good to mention both primary and secondary beneficiaries named in a life insurance policy. That helps to smoothly carry out the legal proceedings in the future.

What does contingent mean in life insurance?

If you want to understand what does contingent means in life insurance, it is almost the same as that of any other sector related to will, trust, or retirement account. It is the situation in which both the insured and primary beneficiary ceases to exist due to death or demise. The contingent beneficiary is granted the benefits or money in turn. For a life insurance beneficiary minor, a legal guardian is assigned or named in the will. That’s what does contingent means for beneficiaries.

Why should you name contingent beneficiaries?

You may be often in a dilemma as to why should you name contingent beneficiaries. It is a good practice to name a contingent beneficiary to avoid probate expenses and time after the death of the insured person. Without a name in the will or trust, a legal process is needed for the distribution of the assets belonging to the deceased person. Besides, it is good to mention certain conditions related to age while maintaining a contingent listing of names.

Trustee vs beneficiary

While talking about trustee vs beneficiary, we need to understand the underlying concept of the terms.

A trustee is a person, who can be an attorney, accountant, a trusted company, a panel of banks, etc, entitled to be in complete charge of the beneficiaries’ assets. He or she is required to best utilize the assets for the beneficiary.

A beneficiary is the person or group of persons whose name is mentioned in the Trust deed and is/are benefitted by the trust earnings.

Primary vs contingent beneficiary

Let us now focus on primary vs contingent beneficiary, two very important concepts in a life insurance policy, trust or will.

A primary beneficiary is the first person entitled to receive the benefits and the money after the demise of the insured person. 

A contingent beneficiary is a person who comes next in line to the primary beneficiary and receives the benefits only if the primary beneficiary is deceased, missing or refuses to accept the entitled amount.

Also read: 25 Essential questions to ask a financial advisor | Know your advisor

How does contingent beneficiary work?

It is very important to understand how does contingent beneficiary work. 

In the event of inheriting assets, a person usually names his or her spouse as the primary beneficiary who received 100% of the assets. And in addition, can name a person or a group of persons as contingent beneficiaries or beneficiaries in case of death of the primary beneficiary. In the majority of the cases, child or children are named as contingent beneficiaries and are allotted contingent percentage based on the details mentioned in the will.

The insured person can name a non-profitable organization as the contingent beneficiary and the organization receives the beneficiary percentage as mentioned in the will. In the case of a minor, the name of the legal guardian needs is mentioned.

Pros and Cons of Contingent Beneficiaries

Here are the pros and cons of contingent beneficiaries for you to take note of. 

Naming a contingent beneficiary in a will or trust is helpful while paying out the benefits in the absence of the primary beneficiary. Else the legal proceedings demand a process of probate for determining to whom the assets need to be transferred.

The disadvantage is that, if there is any potential beneficiary to any will or trust then there can be cases of disappointment due to the appointment of a contingent beneficiary. Often the contingent beneficiary may not be an appropriate person in receiving the benefits.

Also read: Reddit personal finance | 21 Best Subreddits on Personal Finance

Frequently asked questions on Contingent beneficiary

Often there are multiple queries on the contingent beneficiaries. In this section, the frequently asked questions have been conglomerated in a single place for your quick reference and guidance. 

1. Who should be contingent beneficiary?

If you want to know who should be contingent beneficiary, then it should be the immediate family members. It can be one or multiple persons. Besides you can also select close family members or friends as a contingent beneficiaries.

2. What is the primary percentage/contingent percentage?

Primary percentage/contingent percentage is the percentage of proceeds that are paid to a primary or contingent beneficiary. 100% of the benefits go to the primary beneficiary. In the absence of whom, the full % of the proceeds is granted to the contingent beneficiary

3. How many beneficiaries can you have?

If you want to know how many beneficiaries can you have, it’s multiple. But it is recommended to decide the number of beneficiaries depending on the assets you have. The reason is you need to mention a noticeable amount of % to be granted to each beneficiary.

4. What happens if one primary beneficiary dies?

Now, what happens if one primary beneficiary dies. Its the secondary beneficiary who received the benefits or the proceeds of the asset. But if there is no mention of a secondary or contingent beneficiary, then there needs to be a probate to decide the person inheriting the assets.

5. What information is a beneficiary of a will entitled to?

Receiving the assets entitled to, the income, expenses, and distributions from the proceeds, receiving the information about the administration and management of the assets. These are the details you will receive and are obliged to be acquainted with if you want to know what information is a beneficiary of a will entitled to.

6. What is estate beneficiary?

A person who is entitled to be benefitted from an estate after the demise of the insured person; that’s what is estate beneficiary or can also be called a trust or will beneficiary. There are primary and contingent beneficiary who can be named in the will of the estate.

7. What is a contingent beneficiary for 401k?

It is very important to know what is a contingent beneficiary for 401K. Well, it’s the spouse of the insured person who should be the contingent beneficiary 401K. The child or any other family member can also be assigned but the spouse would need to sign an agreement to it.

Also read: 5/1 ARM – What is it and is it a good idea for you?

8. What Happens if There is No Contingent Beneficiary?

You need to undergo the process of probate if you want to know what happens if there is no contingent beneficiary. Through the legal proceedings, the assets are distributed to the determined beneficiary; be it a life insurance contingent, retired account contingent, etc.

9. Can the Same Person be My Primary and Contingent Beneficiary?

If you are in a dilemma as to, can the same person be my primary and contingent beneficiary? Yes, they can be. This includes spouse, child, immediate family members, relatives, and even friends.

10. Can a beneficiary be a trustee?

As an answer to the question, Can a beneficiary be a trustee, it is Yes. But the trustee cannot involve in actions that violate the trust, by placing personal interests above the entitlement requirements of the beneficiaries.

Find out all you need to known about Purchase and sale agreement. What is it? What to include in it? fo you need a lawyer to make it and more questions are answerd in this post. Read on!

Purchase and sale agreement

A purchase and sale agreement is a legal contract that binds a seller to sell and a buyer to buy the said service or product. These are typically common in real estate transactions but can be found in all areas of business. In this blog, we will learn more about the different aspects of purchase and sale agreements.

What is a purchase agreement?

A purchase agreement is a legal contract that contains the terms and conditions related to the sale of a product. A purchase agreement covers transactions of multiple types of products. Usually, a purchase agreement comes into the picture when the purchase price is higher than $500 but it can also be used for smaller transaction values. While purchase agreements can be used in a variety of industries, they are more commonly found in real estate and telecommunications.

Also read: Estate planning attorney | Things know before hiring an estate planning attorney

Examples of Sales and purchase agreement

Sales and purchase agreements are usually seen in real estate and business transactions. There are several other industries where having a SPA can prove beneficial but these are the two examples that find the most extensive use of purchase and sale agreement.

What is a PSA in real estate?

Purchase and sale agreement in real estate is essential when a buyer is buying a property from a seller. Using a PSA contract ensures that the rights of both the buyer and seller are secured. It also gives both parties a sense of security.

SPA in business

A purchase and sale agreement in business is required when a company is being sold by an owner or a group of owners to a buyer. The transfer of company rights is legally binding when a SPA is signed by both the parties involved in the business transaction.

Also read: How to write a will | All you need to know about preparing a will

What does a sale and purchase agreement include?

If you are ready to draft a purchase and sale agreement, let us tell you what does a purchase and sale agreement include in order to protect both the buyer and the seller.

1. Purchase price and terms

A purchase and sale agreement should include the offered price by the seller along with the mention of the mode of payment.

2. Closing date

The closing date marks the transfer of property from the seller to the buyer. This transfer may eventually be recorded in a bill of sales.

3. Addendum

An Addendum is an additional document that gets added to the purchase and sale agreement. It includes additional requests or information that the buyer hasn’t mentioned in the actual agreement.

4. Contingencies

Sellers and buyers can agree upon certain conditions that must be met before the property is sold. A few of the common contingencies may include product inspection, appraisal, necessary funding, etc.

Also read: How long does it take to build credit? | Build credit fast

Common provisions of a SPA for a business

Common provisions of a SPA for a business are:

• Agreement to sales and purchase

The shortest, smallest, and most important provision in the SPA, as it ensures that the full ownership of the business is properly transferred to the buyer.

• Restrictive covenants

Restrictive covenants restrict the seller from establishing any new competitive business that may hamper the value of the company being sold.

• Agreement parties 

There are only two parties to the agreement if the business is wholly owned by the seller and bought by a single buyer. In case, there are multiple shareholders involved, each of them must enter into the SPA to sell the shares.

• Completion

When legal ownership of the business is transferred to the buyer

Asset purchase agreement template

ASSET PURCHASE AGREEMENT 

This Asset Purchase Agreement (this “Agreement”) dated as of [DATE] is entered into between [SELLER NAME], a _____________ (“Seller”), and [BUYER NAME], a ______________ (“Buyer”).

WHEREAS, the Seller desires to sell to the Buyer a comprehensive collection of ___________________ (“Collection”), which is more particularly described in the attached inventory, Attachment A, which is incorporated herein by reference.

Capitalized terms used in this Agreement have the meanings given to such terms herein and are identified by the cross-references set forth in Exhibit A attached hereto.

Also read: How much money should I save before buying a house? | A financial guide

PSA in real estate – Provisions and FAQ

PSA can be intimidating with a lot of information, contingencies, disclosures all rolled up in one contract. Purchasing a real estate property involves a huge amount of money and can be quite confusing for a first-timer. There are several questions that a buyer or a seller faces while signing a purchase and sale agreement.

Below, we have tried to answer some of the frequently asked questions that are common while signing a PSA in real estate to help your journey slightly easier.

1. Who orders the survey when buying a house?

Once the buyer’s offer is accepted by the seller, the buyer will order the survey of the house to ensure that the property is a worthy investment. The seller may recommend an independent surveyor but they will not be the one arranging it.

2. Can the seller sue the buyer for backing out?

There might be several circumstances under which a buyer has to back out of the deal. For e.g., If a buyer is unable to arrange for a down payment or if the bank rejects the home loan application. Under such scenarios, the seller can forfeit the buyer token money, but he can not sue the buyer.

3. Is the closing conducted by the seller’s agent?

No, the closing is not conducted by the seller’s agent. The closing is conducted by a closing agent who usually is an attorney or official from a title or mortgage company. During closing, all the participants review, authorize and date several legal documents.

4. How long after the closing date will the seller receive money?

In wet funding states, the seller receives money on the day of the closing. Whereas, in dry funding states it may take up to 4 days for a seller to receive money from the day of closing. 

5. How to get out of a realtor contract?

If you are unhappy with your realtor’s services you may want to get out of the contract. If talking to your realtor and broker is not working out, read the entire contract thoroughly to understand the terms of breaking the contract.

Also read: 25 Essential questions to ask a financial advisor | Know your advisor

6. Can I sue my lender for not closing on time?

Lender liability gives borrowers the right to sue lenders in case of breach of contract. As a borrower, you can sue the lender for not closing on time if the lender has guaranteed you a loan commitment within a certain timeframe in writing and fails to do.

7. When to get a real estate lawyer?

It is a good idea to get an expert opinion while making huge life-changing financial transactions. A real estate lawyer is a licensed practitioner who is familiar with all aspects of the real estate purchase process and is eligible to represent buyers, sellers, or lenders.

8. Can the seller back out if the closing date is not met?

When the buyer misses out the closing date, the seller has the right to back out of the agreement and re-list the house for sale. However, this is only possible if the closing date was determined beforehand and the contract was signed by both parties.

9. Does a contract have to be notarized?

Under contract law, a contract does not need to be notarized in order to be legally binding. But a notarized contract can help a great deal if either of the two parties who signed the agreement decides to dispute that agreement in court.

10. Do you get due diligence money back?

The due diligence money is non-refundable. If a buyer decides not to go ahead with the purchase, the due diligence money is forfeited. Otherwise, it will be used as a buyer’s closing cost or down payment at the time of the purchase.

Also read: How can you reduce your total loan cost | Paths to debt-free life

11. How to write a purchase agreement for land?

1. Identify the address of the property being purchased
2. Identify the name of both buyer and seller
3. Detail the price and terms of purchase
4. Set the closing date and closing cost
5. Detail taxes and additional charges, and determine which party will be paying these costs along with the mode of payment
6. Include any mandatory disclosure related to the property
7. Detail out the sale contingencies, such as pending inspections, appraisals.

Setting up a will for the first time can be a daunting experience. Do you need a lawyer? Can you do it yourself? There are many things to keep in mind while drafting your will. We will take you through the most important things you need to know starting from how to write a will.

How to write a will?

Writing your will may not be a priority in your life. You can protect your family by writing your will. You may find the prospect of drafting a will daunting task, but you need not be worried. In this blog, we will let you know how to write a will?

What is a will & testament?

What is a will and testament? The last will and testament is a legal document that contains details of the testator’s final wishes regarding their assets and dependants. The document specifies how possessions will be handled and distributed. The will has information about the dependents and the handling and management of accounts and financial interests.

Also read: Estate planning attorney | What you need to know before hiring one

What is a testament?

Testament or will is a legal document made by a person called testator wishes on how their property will be distributed after their death and the person (executor) who will manage their property until the final distribution of the property as the terms of the will. Historically, the will applies to real property, while testament applies to personal property. 

What is a will?

But what exactly is a will? A will is a legal document wherein the testator declares who will manage their estate after they die. It contains information regarding distribution details of assets, possessions, and property. The executor manages the estate and executes your wishes. The document can declare who will be guardians for children or aged parents. Persons that receive the assets are called beneficiaries.

Living will vs. will

The difference between living will vs. will is as follows

Living Will	Simple Will
Living will is a legal document specifying your healthcare preferences in case you are not able to communicate them.	Will is a legal document specifying how your property and assets will be distributed after you die.
The person who implements the provision of the living will is called healthcare proxy.	The person who implements the provision of the will is called executor.
It comes into effect if you are incapacitated.	It comes into effect after you die.

Also read: 25 Essential questions to ask a financial advisor | Know your advisor

Living will vs. last will and testament

Living will and last will and testament should be considered by everyone. The difference between living will vs. last will and testament is as follows- 

Living Will	Last will and testament
Living will is a legal document that details medical directions a person wants followed in case they are seriously ill or medically incapacitated.	Last will and testament is a legal document that details how a person want their property distributed after they die. They can name guardian for your minor children and executor.
The will becomes effective when the person who has written it becomes incapable of making medical decisions. An individual can be authorized to tell the doctors what treatment protocol can or cannot be followed.	It comes into effect after the person who has written or testator dies. The will names the executor who will manage and distribute the assets as per provision of the will.

When should you make a will?

As an adult, you may be wondering when you should make a will? Do you need a will? 

• You can start will preparation when you turn 18 in most states in the US. 
• Write your will if you have accumulated some assets or money. In case you die without a will, the state will decide how to distribute your assets. 
• Prepare a will if there is a change in your significant relationships (marriage, divorce, remarriage).
• You need to think of a succession plan if you start a business.
• If you are buying a home or there is a significant change in your assets.

Read: Business Lawyer | How to find a business lawyer?

Types of wills

The last will and testament are vital estate planning documents. You can leave detailed instructions on where your property will go after you die and help you feel less anxious. There are many types of will like holographic or handwritten wills or oral will the main types of wills are –

1. Simple Will

A Simple or basic will is the most common type of will available and is a legal document that explains the distribution of your property and assets after you pass. A simple will do not have many clauses and is the best option if your estate is not complicated. You can appoint a guardian for minors and an executor and is effective in most cases.

2. Testamentary Trust Will

A testamentary trust will or will trust or trust under will places some assets into a trust for your beneficiary and appoints a trustee to handle the trust. A will trust is an option if your beneficiaries are minors, and you do not want them to handle your assets alone. You can place conditions on inheritance.

3. Joint Will

A Joint will is a document signed by two or more people, where they sign a combined will as a last will and testament. Married couples commonly use joint will because spouses are better protected. Assets get transferred to the surviving spouse, and the children are beneficiaries when both parents die. You cannot change the will without permission from both parties, it can be problematic if the surviving spouse changes their mind.

4. Living Will

Living Will has nothing to do with the distribution of your wealth after you pass. The document allows you to choose medical treatment if you become incapacitated, and you can name someone as your medical proxy to make medical decisions on your behalf. You may have to use a durable power of attorney (DPOA) along with a living will in some states.

How to make a will without a lawyer?

Common questions about will are – Do you need a lawyer to make a will- No, you do not. Can you write your own will? You can write your will by yourself if your estate plan is simple. Even simple wills drafted by a lawyer can cost hundreds of dollars. You should use online templates or will kits to draft the document at a lower cost. We will let you know how to make a will without a lawyer.

Can you just write a will and get it notarized?

Can you just write a will and get it notarized? Notarizing a will is unnecessary if you draft it properly and sign it by witnesses. Court will view it as a valid document. Notarize the will, if you want it to be self-proven and hasten the probate process. Notarized wills are tougher to contest and cost around $15. The notary ensures the signers know they have signed and have done so voluntarily.

Diy will

DIY will or do-it-yourself will is the last will and testament created entirely online, is the last will and testament created entirely online by the person writing the details. Several DIY will services are available, you need to fill the all the relevant information in the forms and print out the results. It is easy, and you can create the will in a few minutes.

Creating a will online costs less than getting an attorney involved in drafting the will and is ideal if you have a small estate. Drawbacks to DIY will – the will validity may be contested, it may take longer to resolve in probate courts, and some states may not consider DIY will valid.

What should be included in a will?

A will is the foundation of a strong estate plan. Here is what should be included in a will are –

• Personal information includes your full name, date of birth, and address. Include, the name of your spouse and family members and their relationship with you.
• The will must have proper legal language. You can use a sentence like, – “This my last will and testament“, or it can be a sentence that shows your intention to pass your property after your death. Testamentary intent is one of the mandatory requirements of a will.
• An essential component of the will is the assets you want to give away and who will get them. Assets can be money, personal belongings, assets, and property. Your beneficiaries can be family members, friends, charity, businesses, and trust. You should add contingency beneficiaries if the beneficiaries named are unable to receive the asset.
• Appoint an executor to carry out the terms mentioned in the will. They settle all debt, distribute assets to the beneficiary, and file your final tax return. 
• If you have minor children, you need to appoint a guardian in the event your spouse passes away. You may need to name a guardian if you have an adult child with disabilities or elderly parents.
• Most states require the will to be signed by the testator and two witnesses. Witness’s signatures confirm the testator’s intent, and that they are in sound mind and the document was signed voluntarily. What is a handwritten will called? It is called a holographic will, and it does not require witness signatures. Holographic wills are not valid in all states.
• You can attach a self-proving notarized letter if allowed by your state. Notarizing your will is inexpensive and costs less than $15.

Also read: Reddit personal finance | 21 Best Subreddits on Personal Finance

What you should never put in your will?

Leaving certain things from your will benefit your heirs because they will get their inheritance faster. What you should never put in your will are –

• Something you do not own completely, if you jointly own assets with someone, they are the new owners. 
• Do not include properties that are outside of probate. 
• Certain assets and financial instruments are payable or transferable. It is paid out directly to beneficiaries mentioned in the document after your death. Adding them in the will is unnecessary. 
• When your title property into the trust, it is subject to trust rules. 
• Conditional wishes because it is difficult to enforce.

Preparing a will checklist

Preparing a will checklist will help you ensure nothing is missed. Things you need to be careful about – 

• List out your assets and think about your final wishes. It may be property, intangible assets like stocks and bonds, intellectual property like patents and copyrights, cash in savings, digital assets like websites and social media accounts, and valuables like collectables, jewellery, and family heirlooms. After you have identified the assets, make your intentions clear. Specify the beneficiary you wish to bequeath the item. 
• Gathering documents needed for will preparation will streamline the process. You will need – 

• • Birth/death certificate
  • Marriage license and divorce certificate
  • Deeds to the property
  • Mortgage information
  • Insurance policies – each policy has a beneficiary
  • List of all bank account numbers – bank accounts should have beneficiaries
  • Funeral plans and information
  • Names and contact details – Lawyer, insurance agent, CPA, banker, and financial advisor
• Choose an executor to settle your estate. The person should be trustworthy capable of handling financial, legal, and moral obligations. Nominate guardians for your child – minor or adult dependent.  
• Ensure you have signed your will accurately as required by your state. Many states require two witnesses and a notary. 
• Store your will in a safe place along with the other estate documents.

Where to file a will?

After you find the will, where to file a will? Reading of a will after death is not a formal event, you need to file the will in the courthouse of the country where the deceased person resided. Most states impose a 10 to 90 day period after death to file the will for the probate process. Depending on the county, you will have to deposit the document with the probate court, county clerk, or register the will. 

Witnesses to a will

If you are planning to on learning how to do a will yourself, remember you need to meet several requirements like a witness to a will. The witness certifies the testator made the will, in sound mind, and was not under duress. Witnesses can be friends and relatives who are not receive anything from the estate, neighbours, coworkers, your attorney, and doctors. Witnesses to a will must meet the following criteria –

• They are legally adults
• They do not have a direct interest in the will. 
• Lawyers who have drafted the will.

Also read: Legal consulting | Top 7 types of legal consulting firms

Simple will template

The simple will template for last will and testament California will have the following details-

1. Appoint an executor – The executor is the person who will settle your affairs and fulfill the terms of your last will.
2. Designate a guardian – A guardian takes responsibility for your minor children or elders to take care of your children if you and your spouse are deceased.
3. Categorize assets – Identify your assets, both tangible assets (property, money, and house) or digital assets (social media account, website, and other online accounts. 
4. Name beneficiaries -Beneficiaries are people and organizations you want to receive your assets. You can plan your pay for your funeral. 
5.  You and two witnesses must sign the will.

When do you need to get a will and trust lawyer?

But when do you need to get a will and trust lawyer? Consult a lawyer if your assets and estate are complicated or you want to set up a trust. It is risky if you do not consult a lawyer. You can contact your lawyer in the following circumstances –

• Make special provisions for minor children, special needs children, stepchildren, or blended families.
• Have complicated assets.
• Large sums of money and multiple bank accounts.

How does a will work?

How does a will work? We are here to answer the question. People write their will in their lifetime to be implemented after they die. The legal document names an executor or the person who administers the estate. A probate court supervises the executor to ensure they carry out the instructions. The will contains details on settling the estate. and the probate court uses it as a guide to settle the estate and identify the beneficiaries and how much they will receive. It establishes guardian arrangements for children or ageing parents.

How to execute a will?

Being an executor of someone’s will is a big responsibility. The testator believes you can fulfil their last wishes. Here is how to execute a will –

• You need to find and review the last will and testament of the deceased. 
• Create an inventory of assets, notify people involved and submit papers in probate court. Courts examine the validity of the will and authorize you to act as the executor. The process can take 10 to 90 days.
• You need to contact creditors to collect the outstanding debt before distributing the remaining assets and properties to the beneficiaries. You need to open an estate bank account for all financial transactions, use the account to pay off the debts, and collect capital if you are selling property or liquidating assets. Track the deposits and disbursements through the account.
• You will need to distribute the remaining property and assets to the beneficiaries as specified in the will.
• You need to file the final income tax for the deceased.

Also read: How can you reduce your total loan cost | Paths to debt-free life

How to update a will without a lawyer?

You may need to update your will for several reasons like a change in marital status, any new addition to the family due to the birth of children or grandchildren, or the beneficiary dies. Three ways how to update a will without a lawyer are –

• Creating a codicil is like a quick, easy update or making changes in your will. First write all the required updates carefully, you and the witness should sign the document. Keep the newly written amendment with the original.
• Write a new will entirely if there are substantial changes in the will. By revoking the previous will, you eliminate any potential confusion. 
• Make a personal property memorandum. Property memorandum is similar to codicil with a separate document accompanying the will.

Who should be the executor of your will?

Who should be the executor of your will? The answer is complicated because every state has laws about executor qualities. An executor, must-

• Above 18 years (21 years in some years in some states)
• Does not have a felony record
• Is a US citizen
• No judgment about becoming incapacitated by the courts.

Executors to an estate have a lot of work and responsibilities. They are responsible for everything from filing your will with the court, paying off debts, closing accounts, and distributing assets as per the will. They should be willing to act on your behalf and be trustworthy.

What’s the cost of will preparation?

The cost of will depends on the complexity of your estates and if a will lawyer writes it. Writing a will without a lawyer may cost you $150 or less. You can purchase will kits online or in-store, these are simple templates where you can fill in the required information. Hire a lawyer to write a will near me, if your estate’s valuation is high or complicated. The average cost of a simple will if you hire a lawyer ranges from $300 to $1500. If your estate is simple, your lawyer charges range from $150 to $600.

Are you in the process of hiring an estate planning attorney? In this post, we take you through what estate planning attorneys do, the cost involved, questions to ask your trust attorney and more.

Estate planning attorney

Estate planning attorneys, or estate lawyers, or probate lawyers specializing in state and federal laws and how to affect your estate will be catalogued, valued, dispersed, and taxed after your death. They draft wills and power of attorney on your behalf. They help maintain your estates, handle disputes on your behalf. They execute your will according to your instructions.

What is an estate planning attorney?

Let us first start with what is an estate planning attorney? What does an estate planning attorney do? An estate planning lawyer helps to how their client’s assets will be preserved, managed, and distributed after death. They help manage their client’s assets if they are incapacitated.

Also read: 25 Essential Questions to ask a financial advisor | Know your advisor

What does an estate lawyer do after death?

Common questions about the death of loved ones- Do you need a lawyer when someone dies? And what does an estate lawyer do after death? While you do not need a lawyer after someone passes away, it makes things easier. Estate lawyers can help you take the correct steps after a loved one dies. Administrating the estate is complicated.

In the preliminary conference, the lawyer meets the family and business associates to advise beneficiaries and determine their immediate needs. The first step is to protect assets and determine assets and debts. Obtain grant of probate and attend to legal formalities.

What is an estate plan?

Do you need to understand what is an estate plan? Or what is estate planning? Estate planning refers to the process of determining how assets will be preserved, managed, and distributed after death. It helps pass assets from one generation to the next. It helps manage a person’s assets and financial obligations should they become incapacitated. Estate planning is tedious; the top estate planning attorneys can walk you through the process. They can help you strategize and limit tax liability on the estate.

Estate planning vs will

Estate planning and wills are two processes and are related. But many people use it interchangeably. The difference between estate planning vs. will is as follows –

Estate planning is a detailed plan that incorporates documents that are valid in your lifetime and the ones that become into effect after you die. These documents contain details that will make financial and healthcare decisions on your behalf if you are incapacitated and who will receive your assets when you pass.

A will is a document drafted by an estate planning attorney. It details where you want your assets to go after your death and who will serve as a guardian to your children.

Also read: 10 Recession proof businesses that have stood strong for over a century

Trust for estate planning

People usually associate trust with wealth. But trust for estate planning is a comprehensive way to protect your family if you are a homeowner with assets worth $160,000. A trust is a fiduciary document that is part of your estate planning, it holds the assets of one or more beneficiaries, and offers significant tax and other protective benefits. There are many types of trust – living trust, revocable living trust, irrevocable trust, and joint trust. The best estate planning lawyers can help you with trust and estate planning.

Estate planning documents

A comprehensive estate plan includes six estate planning documents. These are a will, a financial power of attorney, beneficiary designations, letter of intent, healthcare power of attorney, and guardianship designation. In addition to this document, your estate plan should purchase insurance products. 

1. Wills and trust documents are the main components of any real estate plan. These are essential parts of any estate plan, even if you do not have substantial assets. 
2. The durable power of attorney is a person you assign to act on your behalf when you cannot. If you do not have the document, the court may decide on your behalf if you are mentally incompetent. 
3. Beneficiary designations are the possession that can pass to your heirs without being dictated in the will. The court may decide if it is not mentioned.
4. A letter of intent is a letter left for your executor or beneficiary.
5. Healthcare power of attorney designates someone, usually a spouse or family member, to make healthcare decisions.
6. The guardianship designation clause is in many wills. This clause is important if you have minor children. Make sure the couple or individual you choose is financially sound.

Online estate planning

It is now possible to create a will online. Online estate planning is feasible if you have a simple estate. Some portals help you with estate planning. The cost of online estate planning depends on factors like the plan selected, the complexity of the estate, and your state of residence. Before you start, you might want to meet an estate planning attorney to guide you. Get organized before you begin to save time and money. Start by making a list of your assets, power of attorney, and beneficiaries.

Also read: Hire the best CPA in 2021- A complete guide

What is a living trusts attorney?

A living trust or trust is a legal entity that owns your assets (property, money, stocks, and bonds) that you transfer to it in your lifetime. A trust fund definition is as follows, it is an estate planning tool to hold property or assets for a person or an organization. A neutral third party called trustee manages the trust. After your death, the property is distributed to your beneficiaries. You can create the trust document yourself, but it is better to ask a living trust attorney to create it for you in some situations.

1. How does a living trust work?

Let us explain how does a living trust works? Or how does a trust account work? When a living trust is formed usually by the trust administration attorney, the guarantor transfers the ownership of the assets to the trust. A trust account is an account held for a minor or an estate. A trustee is appointed to manage the trust, and they have a fiduciary duty to work it in the best interests of the beneficiaries. After the grantor dies, the assets go to the heirs as per the provision of the trust. The trust can have conditions, which need to be fulfilled before the heirs receive the inheritance.

2. Do I need a trust?

Do I need a trust? A trust can be a fantastic real-estate planning tool for some people. There are considerable expenses associated with opening a trust, and it may not be worth it unless you have a lot of assets. You can consider starting a trust if you have assets valued at least $100,000 or have specific instructions on how you want your assets distributed. Trust is complicated but offers you greater flexibility. Ask your trust and estate attorney for more details.

3. Should I have trust or a will?

Several people wonder should I have trust or a will? Most people have wills, but not everyone needs to set up living trusts. If you have lots of assets and property and have minor children, consulting a real estate trust attorney to set up a living trust makes sense. The trust will streamline the transfer process and avoid costly litigation if there is a dispute. Some people can both trust and will. Trust is an expensive and complex document, while will is a more straightforward document. Trust litigations are tough to contest and win.

4. Client trust account

A client trust account is a way to separate client funds from the law firm operating the funds. The client trust account ensures the client’s money cannot be taken by law office creditors or due to personal financial problems of the lawyer. It helps to guarantee that the client’s money will be secure and not taken away prematurely before the client’s legal issues are settled. The client trust account keeps a distinction between client money and the corporate accounts of the law firm.

5. Reading of a will after death

When a loved one dies and leaves a will or last testament behind, you will have to take several steps before the will is probated. The length of the probate directly affects the beneficiary. Probate is the process of the court accepting the will and putting it into effect. The executor files the last will of the deceased in court.

The executor moves the will through the probate process and manages and distributes the assets. Heirs and beneficiaries have an opportunity to contest the will. They make an inventory of the estate and pay off all accumulated dues from creditors and tax authorities before distributing the assets.

Also read: Legal consulting | Top 7 types of legal consulting firms

How much does estate planning cost?

A common question asked is how much does estate planning cost? Estate planning cost depends on several factors. An attorney can charge under $1000 for a living will cost and power of attorney. The cost of estate planning can go as high as $7000 to $10000 for complicated cases. The executor oversees the distribution of the assets, deals with creditors, and be a guardian if children are involved.

1. How much does an irrevocable trust cost?

An irrevocable trust can help remove the property from your possession and avoid estate and gift taxes in the future. An estate planning attorney can help you draft an irrevocable trust. Setting up an irrevocable trust can be costly. A lawyer can charge $900 for a simple irrevocable trust and $3,500 for a complicated irrevocable trust.

2. How much does it cost to amend a trust?

You may want to modify your trust periodically to modify your estate plan. Different estate planning attorney costs for modification can vary. Several factors can impact costs

• Number of changes and depth of changes required
• Whether your trust is simple or complicated
• If you and your spouse have a joint trust or different trusts
• When was the trust established?

Typically it can cost $300 to amend the nomination of successor trustees and executors. It can cost approximately $400 to amend gift, inheritance, and beneficiary provision, and around $450 to do both.

Also read: Tax accounting | Basics on tax accounting

Questions to ask estate planning attorney

Estate planning questions will help determine if the attorney is a good fit for you. Before you finalize your attorney, you may want to know what happens if your lawyer dies? The top questions to ask an estate planning attorney are –

• How much of your practice involves estate planning?
• How long have you been practising?
• How to get the power of estate after death?
• Do you conduct periodic reviews?
• Will you go over the plan documents with me before they go into effect?

Questions to ask a lawyer about a will

Here are some recommended questions to ask a lawyer about a will in the first meeting. These questions will help you understand how they can help. 

• Will you be executing the will?
• What should I include in the will?
• What assets will need to be probated, and which assets will pass outside a will?
• Who will receive my assets, and how much will they get?
• What happens to the power of attorney after death?

Questions to ask an attorney about settling an estate

One of the benefits of hiring a real estate attorney is you will not have to deal with some of the decisions associated with the process. You must hire the right attorney. Here are some questions to ask an attorney about setting an estate. 

• What is the firm’s legal experience?
• Does the firm offer an updating and maintenance program?
• Is there help available when I need it?   
• How can we avoid the probate process?
• Do you offer documentation for review?

Questions to ask a trust attorney

A living trust allows you to place your assets in a trust while you are alive. You can continue to use the assets, but the assets are in the name of the trust. 

Trust questions can help you shortlist the best trust attorney. Some questions to ask a trust attorney are –

• What can I put in my living trust?
• Who should I appoint as my trustee?
• What is the difference between a living trust and will?
• If I set up my assets in a trust, how will the trust be set up? And what powers will I be giving up on my assets?
• I have a minor child, what kind of trust would need to be set up to protect them? What would I look for in a trustee?

Questions to ask a probate attorney

Nobody wants to contact a probate lawyer. People usually contact them when they have lost a family member and need help with the procedure involved. Here are some essential questions to ask a probate attorney –

• What are the areas of law you practice?
• What are the potential issues that may arise in my case?
• What is the approximate time frame for completion?
• Have you handled similar cases in the past, and what was your experience?
• What are the estimated legal fees and other fees?