Frequently Asked Questions

Why do I need a Will?

Without a Will, the laws of the State of Delaware will determine what happens to your estate's property. Your spouse, children or other heirs could end up with less than you planned, the assets could be poorly managed, your children might not have the guardian you wished, or your estate could end up paying much more in taxes and legal fees than necessary.

What is a Will?

A Will is a legal document that details where you want your estates assets to go (after debts and taxes are paid) and who is going to oversee the execution of the Will. If needed, it may also state who is to care for your minor children.

What is a Durable Power of Attorney?

A Durable Power of Attorney is a lifetime document for estate planning. It allows you to designate a representative; such as your spouse or adult child, to perform certain actions for you should you become ill, incapacitated or otherwise unable to manage your affairs. The representative could, for example, pay bills, manage your property, make gifts, sell securities, deal with government agencies, or make major financial decisions on your behalf, depending on how broad or narrow you limit the powers. Without a power of attorney, your spouse or other loved one would have to go through the delay and expense of seeking approval from the Court to carry out needed financial transactions.

What is a Living Will/Medical Power of Attorney?

A living will is an individual's written declaration of what life-sustaining medical treatments he or she will allow or not allow in the event they become incapacitated. For example, the person may request that artificial nourishment be withheld if he or she is terminally ill or the individual may include a do not resuscitate clause.

The Medical Power of Attorney authorizes a person to make medical decisions on your behalf, ideally to carry out what you have specified in your Living Will. You may want to talk to the person before appointing them to be sure they understand and are comfortable with your wishes. That person needs to be strong enough to carry out your wishes even though some family members may object.

What is a Partnership?

A partnership is the relationship between two or more individuals or entities who join together to carry on a trade or business. Each partner contributes money, property, labor or skills, and each expects to share in the profits and losses. A partner can be an individual person, corporation, trust, estate, or another partnership. All general partners are personally liable for partnership liabilities. There can be no limited partners in a general partnership.

What is a Limited Liability Company?

A limited liability company, like a corporation, is a legal entity existing separately from its owners. A limited liability company is created when proper articles of organization (or the equivalent under the laws of a particular state) are filed with the proper state authority, and all fees are paid. State laws typically impose additional pre or post-creation requirements as well. A limited liability company is not a partnership or a corporation, but it normally combines the corporate advantages of limited liability with the partnership advantage of pass-through taxation.

How is an LLC Structured?

A limited liability company is owned by its members, who may directly manage the limited liability company, or who may appoint managers to manage the limited liability company for them.

The members may also apportion duties amongst themselves as they see fit. They may even appoint one of their members to be an offficer (president, vice president, secretary, or treasurer) with the appointed member having the duties normally associated with such title or titles

One of the virtues of a limited liability company is the ability (in most states) to structure the limited liability company in the matter which the members want it structured.

What are the advantages of forming an LLC?

The primary advantage of a limited liability company is limiting the liability of its members. Unless they personally guarantee them, the members are not liable for the debts and obligations of the limited liability company. In a partnership or sole proprietorship, creditors may seize personal assets of the participants to pay debts of the business.

Additionally, (1) pass-through taxation is available, meaning that (generally speaking) the earnings of an LLC are not subject to double taxation, but are treated like the earnings from partnerships, sole proprietorships and S corporations and (2) the members have greater flexibility in structuring the limited liability company than is ordinarily the case with a corporation, including the ability to divide ownership and voting rights in unconventional ways while still enjoying the benefits of pass-through taxation.

LLC versus S-Corp?

S corporations and limited liability companies both permit pass-through taxation, when properly structured and the proper tax forms are filed, but a limited liability company is more flexible in allocating income amongst the members: (1) a limited liability company may offer several classes of interest while an S corporation may only have one class of stock, and (2) the interest in a limited liability company may be owned by any number of individuals or entities whereas ownership interest in an S corporation is limited both in number and in the entities which may participate.

What are the disadvantages of Probate?

• Impounded or frozen bank and brokerage accounts
• Probate court costs
• Waiting period of six months to two years, or more
• Increased attorney's and administrative fees
• Lack of privacy
• Potential for forced asset liquidations
• Expensive litigation if any aspect of the probate proceedings is challenged

What is a Revocable Living Trust?

In a Revocable Living Trust, you act as your own trustee. Therefore, you do not give up any control of the assets in the trust while living and competent. Since you continue to use your social security number on all your accounts as a tax ID number, there is no additional bookkeeping required. However, a Revocable Living Trust may be advantageous for your loved ones should anything happen to you.

What happens at my death to assets that have been placed into my Revocable Living Trust?

At death, all of your assets transfer immediately according to your wishes, avoiding probate. You may elect to keep assets in trust, away from immature heirs, creditors or spouses, helping to ensure that the assets will be used for the purposes which you intend.

What is Probate?

Probate is the legal process that your family must go through after you die. The Register of Wills' office and, if necessary, the Court of Chancery rules on the validity of a Will, makes certain your debts are paid, establishes clear title to your assets and then allows distribution of what is left. If you have a Will it will be in accordance to your Will. If you do not have a Will, a Personal Representative will be appointed to carry out the task of distribution of your property with the guidelines and supervision of the Court.

What is an Estate?

An estate includes everything that you own. One's estate can include bank accounts and CDs, stocks, bonds, mutual funds, limited partnership interests and other portfolio assets, death benefits from life insurance, real estate equity, your portion of joint tenancy assets, IRA and other qualified plan assets and so on. This does not mean all of your assets will need to go through the Probate process as some of your assets may pass directly to a beneficiary without the need for probate and the expenses associated with probate.