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Probate

Monday, April 20, 2015

Executors Fees

An executor's fee is the amount charged by the person who has been appointed as the executor of the probate estate for handling all of the necessary steps in the probate administration. Therefore, if you have been appointed an executor of someone’s estate, you might be entitled to a fee for your services.  This fee could be based upon a variety of factors and some of those factors may be dependent upon state, or even local, law.

General Duties of an Executor

  1. Securing the decedent's home (changing locks, etc.)
  2. Identifying and collecting all bank accounts, investment accounts, stocks, bonds and mutual funds
  3. Having all real estate appraised; having all tangible personal property appraised
  4. Paying all of the decedent’s debts and final expenses
  5. Making sure all income and estate tax returns are prepared, filed and any taxes paid
  6. Collecting all life insurance proceeds and retirement account assets
  7. Accounting for all actions; and making distributions of the estate to the beneficiaries or heirs.

This list is not all-inclusive and depending upon the particular estate more, or less, steps may be needed.

As you can see, there is a lot of work (and legal liability) involved in being the executor of an estate.  Typically the executor would keep track of his or her time and a reasonable hourly rate would be used. Other times, an executor could charge based upon some percent of the value of the estate assets. What an executor may charge, and how an executor can charge, may be governed by state law or even a local court's rules. You also asked whether the deceased can make you agree not to take a fee. The decedent can put in his or her will that the executor should serve without compensation but the named executor is not obligated to take the job. He or she could simply decline to serve. If no one will serve without taking a fee, and if the decedents will states the executor must serve without a fee, a petition could be filed with the court asking them to approve a fee even if the will says otherwise. Notice should be given to all interested parties such as all beneficiaries.

If you have been appointed an executor or have any other probate or estate planning issues, contact us for a consultation today.


Monday, November 10, 2014

What’s Involved in Serving as an Executor?

An executor is the person designated in a Will as the individual who is responsible for performing a number of tasks necessary to wind down the decedent’s affairs. Generally, the executor’s responsibilities involve taking charge of the deceased person’s assets, notifying beneficiaries and creditors, paying the estate’s debts and distributing the property to the beneficiaries. The executor may also be a beneficiary of the Will, though he or she must treat all beneficiaries fairly and in accordance with the provisions of the Will.

First and foremost, an executor must obtain the original, signed Will as well as other important documents such as certified copies of the Death Certificate.  The executor must notify all persons who have an interest in the estate or who are named as beneficiaries in the Will. A list of all assets must be compiled, including value at the date of death. The executor must take steps to secure all assets, whether by taking possession of them, or by obtaining adequate insurance. Assets of the estate include all real and personal property owned by the decedent; overlooked assets sometimes include stocks, bonds, pension funds, bank accounts, safety deposit boxes, annuity payments, holiday pay, and work-related life insurance or survivor benefits.

The executor is responsible for compiling a list of the decedent’s debts, as well. Debts can include credit card accounts, loan payments, mortgages, home utilities, tax arrears, alimony and outstanding leases. All of the decedent’s creditors must also be notified and given an opportunity to make a claim against the estate.

Whether the Will must be probated depends on a variety of factors, including size of the estate and how the decedent’s assets were titled. An experienced probate or estate planning attorney can help determine whether probate is required, and assist with carrying out the executor’s duties. If the estate must go through probate, the executor must file with the court to probate the Will and be appointed as the estate’s legal representative.  Once the executor has this legal authority, he or she must pay all of the decedent’s outstanding debts, provided there are sufficient assets in the estate. After debts have been paid, the executor must distribute the remaining real and personal property to the beneficiaries, in accordance with the wishes set forth in the Will. Because the executor is accountable to the beneficiaries of the estate, it is extremely important to keep complete, accurate records of all expenditures, correspondence, asset distribution, and filings with the court and government agencies.

The executor is also responsible for filing all tax returns for the deceased person including federal and state income tax returns and estate tax filings, if applicable. Additional tasks may include notifying carriers for homeowner’s and auto insurance policies and initiating claims on life insurance policies.

The executor is entitled to compensation for his or her services.  This fee varies according to the estate’s size and may be subject to review depending on the complexity as well as the time and effort expended by the executor.

   


Monday, October 27, 2014

Planning Pitfall: Probate vs. Non-Probate Property

Transfer of property at death can be rather complex.  Many are under the impression that instructions provided in a valid will are sufficient to transfer their assets to the individuals named in the will.   However, there are a myriad of rules that affect how different types of assets transfer to heirs and beneficiaries, often in direct contradiction of what may be clearly stated in one’s will.

The legal process of administering property owned by someone who has passed away with a will is called probate.  Prior to his passing, a deceased person, or decedent, usually names an executor to oversee the process by which his wishes, outlined in his Will, are to be carried out. Probate property, generally consists of everything in a decedent’s estate that was directly in his name. For example, a house, vehicle, monies, stocks or any other asset in the decedent’s name is probate property. Any real or personal property that was in the decedent’s name can be defined as probate property.  

The difference between non-probate property and probate centers around whose name is listed as owner. Non-probate property consists of property that lists both the decedent and another as the joint owner (with right of survivorship) or where someone else has already been designated as a beneficiary, such as life insurance or a retirement account.  In these cases, the joint owners and designated beneficiaries supersede conflicting instructions in one’s will. Other examples of non-probate property include property owned by trusts, which also have beneficiaries designated. At the decedent’s passing, the non-probate items pass automatically to whoever is the joint owner or designated beneficiary.

Why do you need to know the difference? Simply put, the categories of probate and non-probate property will have a serious effect on how plan your estate.  If you own property jointly with right of survivorship with another individual, that individual will inherit your share, regardless of what it states in your will.  Estate and probate law can be different from state-to-state, so it’s best to have an attorney handle your estate plan and property ownership records to ensure that your assets go to the intended beneficiaries.


Saturday, August 30, 2014

Spendthrift Trusts

Unfortunately, not everyone in the world is responsible with money. Even those who are moneywise can run into bad luck in life which could cause them financial hardship. So when planning your estate, you should think twice about leaving a large sum of money to someone who can’t handle it. For those beneficiaries for whom you have concerns, a spendthrift trust may be an ideal solution.

If a person who is “bad with money”, or who is going through a rough time, gets a large inheritance, odds are that the inheritance will be gone in a matter of a few months or a year or two, with very little to show for it. A spendthrift trust is a trust that is designed to limit a beneficiary’s ability to waste the principal of a trust. The beneficiary of a spendthrift trust is a person who can’t handle money, or is addicted to drugs, alcohol, or another negative behavior. A spendthrift trust could even be used for someone in a destructive relationship.

In a spendthrift trust, a sum of money is set aside in a trust account. The beneficiary is never the trustee of a spendthrift trust. Instead, the trustee can be another family member, a family friend, or even a corporate trustee like a bank. The trustee will spend the money for the beneficiary’s needs or could make payments directly to the beneficiary, as the trust document allows. However, the beneficiary has no right to spend the principal of the trust. The beneficiary also doesn’t have the legal right to pledge the trust as security for a loan.

In some spendthrift trusts, the trustee could have the power to cut off benefits to a beneficiary who becomes self-destructive, such as with the use of drugs or alcohol. The money could then be accumulated for the beneficiary’s use later, or it could be paid to another beneficiary. Another option would be to give the trustee the option to only make payments on behalf of a beneficiary who has become self-destructive, but to withhold cash from that beneficiary.

Spendthrift trusts are a great tool to help potential beneficiaries who cannot handle money for various reasons. However, they aren’t perfect. They may be too strict in situations where the beneficiary may have a legitimate need for more money. If the spendthrift trust isn’t strict enough about what money is allowed to be spent on, that leaves a lot of control in the trustee’s hands, and he may find himself in the difficult position of standing between an erratic beneficiary and his or her money.

If you’re concerned about a particular beneficiary and his or her ability to manage money, be sure to consult with a qualified trust attorney to evaluate whether a spendthrift trust would be an effective tool for your estate plan.


Wednesday, August 20, 2014

Living Trusts & Probate Avoidance

You want your money and property to go to your loved ones when you die, not to the courts, lawyers or the government. Unfortunately, unless you’ve taken proper estate planning, procedures, your heirs could lose a sizable portion of their inheritance to probate court fees and expenses. A properly-crafted and “funded” living trust is the ideal probate-avoidance tool which can save thousands in legal costs, enhance family privacy and avoid lengthy delays in distributing your property to your loved ones

What is probate, and why should you avoid it? Probate is a court proceeding during which the will is reviewed, executors are approved, heirs, beneficiaries, debtors and creditors are notified, assets are appraised, your debts and taxes are paid, and the remaining estate is distributed according to your will (or according to state law if you don’t have a will). Probate is costly, time-consuming and very public.

A living trust, on the other hand, allows your property to be transferred to your beneficiaries, quickly and privately, with little to no court intervention, maximizing the amount your loved ones end up with.

A basic living trust consists of a declaration of trust, a document that is similar to a will in its form and content, but very different in its legal effect. In the declaration, you name yourself as trustee, the person in charge of your property. If you are married, you and your spouse are co-trustees. Because you are trustee, you retain total control of the property you transfer into the trust. In the declaration, you must also name successor trustees to take over in the event of your death or incapacity.

Once the trust is established, you must transfer ownership of your property to yourself, as trustee of the living trust. This step is critical; the trust has no effect over any of your property unless you formally transfer ownership into the trust. The trust also enables you to name the beneficiaries you want to inherit your property when you die, including providing for alternate or conditional beneficiaries. You can amend your trust at any time, and can even revoke it entirely.

Even if you create a living trust and transfer all of your property into it, you should also create a back-up will, known as a “pour-over will”. This will ensure that any property you own – or may acquire in the future – will be distributed to whomever you want to receive it. Without a will, any property not included in your trust will be distributed according to state law.

After you die, the successor trustee you named in your living trust is immediately empowered to transfer ownership of the trust property according to your wishes. Generally, the successor trustee can efficiently settle your entire estate within a few weeks by filing relatively simple paperwork without court intervention and its associated expenses. The successor trustee can solicit the assistance of an attorney to help with the trust settlement process, though such legal fees are typically a fraction of those incurred during probate.
 


Sunday, August 10, 2014

Estate Planning for Unmarried Couples

Estate planning is important for everyone. We simply don’t know when something tragic could happen such as sudden death or an accident that could leave us incapacitated. With proper planning, families who are dealing with the unexpected experience fewer headaches and less expense associated with managing affairs after incapacity or administering an estate after death.

If a person fails to do any planning and becomes involved in a debilitating accident or passes away, each state has laws that govern who will inherit assets, become guardians of minor children, make medical decisions for an incapacitated person, dispose of a person’s remains, visit the person in the hospital, and more. In some states, the spouse and any children are given top priority for inheritance rights. In the case of incapacity, spouses are normally granted guardianship over incapacitated spouse, though this requires a lengthy and expensive guardianship proceeding.

In today’s world, increasing numbers of couples are choosing to spend their lives together but aren’t getting married, either because they aren’t allowed to under the laws of their state, such as in the case of gay and lesbian couples, or simply because they choose not to. However, most states don’t recognize unmarried partners as spouses. In order to be given legal rights that married couples receive automatically, unmarried couples need to do special planning in order to protect each other.

In general, unmarried individuals need three basic documents to ensure their rights are protected:

  1. A Will – A will tells who should inherit your property when you pass away, who you want your executor to be, and who will become guardians of any minor children. These issues are all especially important for unmarried individuals. In most states, an unmarried partner does not have inheritance rights, so any property owned by his or her deceased partner would go to other family members. Also, in the case of many gay and lesbian couples, the living partner is not necessarily the biological or adoptive parent of any minor children, which could lead to custody disputes in an already very difficult time.  Therefore, it’s critical to nominate guardians for minor children.
     
  2. A power of attorney – A power of attorney (for financial matters) dictates who is authorized to manage your financial affairs in the event you become incapacitated. Otherwise, it can be very difficult or impossible for the non-disabled partner to manage the disabled partner’s affairs without going through a lengthy guardianship or conservatorship proceeding.
     
  3. Advance healthcare directives – A power of attorney for healthcare, informs caregivers as to who is responsible for making healthcare decisions for someone in the event that a person cannot make them for himself, such as in the event of a serious accident or a condition like dementia.  Another document, called a living will, provides directions on life support issues.

Estate planning is undoubtedly more important for unmarried couples than those who are married, since there aren’t built-in protections in the law to protect them and their loved ones.  It’s imperative that unmarried couples establish proper planning to avoid undue hardship, expense and aggravation.


Wednesday, July 30, 2014

What happens if you are bequeathed a car that no longer exists? The ABCs of Ademption

If you’re involved in settling a loved one’s estate, you may come across the curious word “ademption”. Ademption describes what happens when something designated in a will no longer exists. Say, for example, your uncle dies and leaves for you in his will an old-school Harley Davidson motorcycle. However, if your uncle crashed the motorcycle two years before the will was probated and there’s nothing to leave, then that gift would be considered adeemed and you would receive nothing. This is why certain wills include language that says, “if owned by me at my death.”

However, it is important to realize that certain items cannot be adeemed. For instance, money. If your uncle died and left $7,000 for you in his will, but left a zero dollar balance in his accounts, your gift of cash would not be adeemed. Instead, the estate would be responsible for satisfying that gift, say for example, through the sale of the house or other such property.

There are exceptions to ademption, however. If the property leaves the estate after the person who wrote the will has been declared incompetent, ademption is waived.  Other states make exceptions for cases where interest in a corporation that no longer exists because the shares were exchanged with that of an acquiring company.  Your state may tackle ademption differently based on its laws, so please consult a qualified real estate or probate lawyer if you want to learn more about ademption and its exceptions.
 


Sunday, July 20, 2014

How Much of Your Estate Will Be Left Out of Your Will? (It’s Probably More Than You Think)

You’ve hired an attorney to draft your will, inventoried all of your assets, and have given copies of important documents to your loved ones. But your estate planning shouldn’t stop there. Regardless of how well your will is drafted, if you do not take certain steps regarding your non-probate assets, you run the risk of unintentionally disinheriting your chosen beneficiaries from a significant portion of your estate.

A will has no effect on the distribution of certain types of property after your death. Such assets, known as “non-probate” assets are typically transferred upon your death either as a beneficiary designation or automatically, by operation of law.

For example, if your 401(k) plan indicates your spouse as a designated beneficiary, he or she automatically inherits the account upon you passing.  In fact, by law, your spouse is entitled to inherit the funds in your 401(k) account.  If you wish to leave your 401(k) retirement account to someone other than a surviving spouse, you must obtain a signed waiver from your spouse indicating her agreement to waive her rights to the assets in that account.

Other types of retirement accounts also transfer to your beneficiaries outside of a probate proceeding, and therefore are not subject to the provisions of your will.  An Individual Retirement Account (IRA) does not automatically transfer to your spouse by operation of law as is the case with 401(k) plans, so you  must complete the IRA’s beneficiary designation form, naming the heirs you want to inherit the account upon your death. Your will has no effect on who inherits your IRA; the beneficiary designation on file with the financial institution controls who will receive your property.

Similarly, you must name a beneficiary on your life insurance policy. Upon your death, the insurance proceeds are not subject to the terms of a will and will be paid directly to your named beneficiary.

Probate avoidance is a noble goal, saving your loved ones both time and money as they close your estate. In addition to the assets listed above, which must be handled through beneficiary designations, there are other types of assets that may be disposed of using a similar procedure.   These include assets such as bank accounts and brokerage accounts, including stocks and bonds, in which you have named a pay-on-death (POD) or transfer-on-death (TOD) beneficiary; upon your passing, the asset will be transferred directly to the named beneficiary, regardless of what provisions are in your will. Depending on the state, vehicles may also be titled with a TOD beneficiary.

To make these arrangements, submit a beneficiary designation form to the applicable financial institution or motor vehicle department. Be sure to keep the beneficiary designations current, and provide instructions to your executor listing which assets are to be transferred in this manner.  Most such designations also allow for listing of alternate beneficiaries in case they predecease you.

Another common non-probate asset is real estate that is co-owned with someone else where the deed has a survivorship provision in it.  For example, many deeds to real property owned by married couples are owned jointly by both husband and wife, with right of survivorship.  Upon the passing of either spouse, the interest of the passing spouse immediately passes to the surviving spouse by operation of law, irrespective of any conflicting instructions in your will.  Keep in mind that you need not be married for such a provision to be in effect; joint ownership of real property with right of survivorship can exist among any group of co-owners.  If you want your will to be controlling with regard to disposition of such property, you need to have a new deed prepared (and recorded) that does not have a right of survivorship provision among the co-owners.

You’ve spent a lifetime of hard work to accumulate your assets and it’s important that you take all necessary steps to ensure that your wishes regarding who will get your assets will be honored as you intend. Carve a few hours out of your busy schedule, several times a year, to review all of your deeds and beneficiary designations to make certain that they remain consistent with your objectives.
 


Thursday, July 10, 2014

Important Issues to Consider When Setting Up Your Estate Plan

Often estate planning focuses on the “big picture” issues, such as who gets what, whether a living trust should be created to avoid probate and tax planning to minimize gift and estate taxes. However, there are many smaller issues, which are just as critical to the success of your overall estate plan. Below are some of the issues that are often overlooked by clients and sometimes their attorneys.

Cash Flow
Is there sufficient cash? Estates incur operating expenses throughout the administration phase. The estate often has to pay state or federal estate taxes, filing fees, living expenses for a surviving spouse or other dependents, cover regular expenses to maintain assets held in the estate, and various legal expenses associated with settling the estate.

Taxes
How will taxes be paid? Although the estate may be small enough to avoid federal estate taxes, there are other taxes which must be paid. Depending on jurisdiction, the state may impose an estate tax. If the estate is earning income, it must pay income taxes until the estate is fully settled. Income taxes are paid from the liquid assets held in the estate, however estate taxes could be paid by either the estate or from each beneficiary’s inheritance if the underlying assets are liquid.

Assets
What, exactly, is held in the estate? The owner of the estate certainly knows this information, but estate administrators, successor trustees and executors may not have certain information readily available. A notebook or list documenting what major items are owned by the estate should be left for the estate administrator. It should also include locations and identifying information, including serial numbers and account numbers.

Creditors
Your estate can’t be settled until all creditors have been paid. As with your assets, be sure to leave your estate administrator a document listing all creditors and account numbers. Be sure to also include information regarding where your records are kept, in the event there are disputes regarding the amount the creditor claims is owed.

Beneficiary Designations
Some assets are not subject to the terms of a will. Instead, they are transferred directly to a beneficiary according to the instruction made on a beneficiary designation form. Bank accounts, life insurance policies, annuities, retirement plans, IRAs and most motor vehicles departments allow you to designate a beneficiary to inherit the asset upon your death. By doing so, the asset is not included in the probate estate and simply passes to your designated beneficiary by operation of law.

Fund Your Living Trust
Your probate-avoidance living trust will not keep your estate out of the probate court unless you formally transfer your assets into the trust. Only assets which are legally owned by the trust are subject to its terms. Title to your real property, vehicles, investments and other financial accounts should be transferred into the name of your living trust.
 


Monday, June 30, 2014

A Living Will or Health Care Power of Attorney? Or Do I Need Both?

Many people are confused by these two important estate planning documents. It’s important to understand the functions of each and ensure you are fully protected by incorporating both of these documents into your overall estate plan.

A “living will,” often called an advance health care directive, is a legal document setting forth your wishes for end-of-life medical care, in the event you are unable to communicate your wishes yourself. The safest way to ensure that your own wishes will determine your future medical care is to execute an advance directive stating what your wishes are. In some states, the advance directive is only operative if you are diagnosed with a terminal condition and life-sustaining treatment merely artificially prolongs the process of dying, or if you are in a persistent vegetative state with no hope of recovery.

A durable power of attorney for health care, also referred to as a healthcare proxy, is a document in which you name another person to serve as your health care agent. This person is authorized to speak on your behalf in order to consent to – or refuse – medical treatment if your doctor determines that you are unable to make those decisions for yourself. A durable power of attorney for health care can be operative at any time you designate, not just when your condition is terminal.

For maximum protection, it is strongly recommended that you have both a living will and a durable power of attorney for health care. The power of attorney affords you flexibility, with an agent who can express your wishes and respond accordingly to any changes in your medical condition. Your agent should base his or her decisions on any written wishes you have provided, as well as familiarity with you. The advance directive is necessary to guide health care providers in the event your agent is unavailable. If your agent’s decisions are ever challenged, the advance directive can also serve as evidence that your agent is acting in good faith and in accordance with your wishes.  


Friday, June 20, 2014

When will I receive my inheritance?

If you’ve been named a beneficiary in a loved one’s estate plan, you’ve likely wondered how long it will take to receive your share of the inheritance after his or her passing.  Unfortunately, there’s no hard or and fast rule that allows an estate planning attorney to answer this question. The length of time it takes to distribute assets in an estate can vary widely depending upon the particular situation.

Some of the factors that will be involved in determining how long it takes to fully administer an estate include whether the estate must be probated with the court, whether assets are difficult to value, whether the decedent had an ownership interest in real estate located in a state other than the state they resided in, whether your state has a state estate (or inheritance) tax, whether the estate must file a federal estate tax return, whether there are a number of creditors that must be dealt with, and of course, whether there are any disputes about the will or trust and if there may be disagreements among the beneficiaries about how things are being handled by the executor or trustee.

Before the distribution of assets to beneficiaries, the executor and trustee must also make certain to identify any creditors because they have an obligation to pay any legally enforceable debts of the decedent with those assets. If there must be a court filed probate action there may be certain waiting periods, or creditor periods, prescribed by state law that may delay things as well and which are out of the control of the executor of the estate.

In some cases, the executor or trustee may make a partial distribution to the beneficiaries during the pending administration but still hold back sufficient assets to cover any income or estate taxes and other administrative fees. That way the beneficiaries can get some benefit but the executor is assured there are assets still in his or her control to pay those final taxes and expenses. Then, once those are fully paid, a final distribution can be made. It is not unusual for the entire process to take 9 months to 18 months (sometime more) to fully complete.

If you’ve been named a beneficiary and are dealing with a trustee or executor who is not properly handling the estate and you have yet to receive your inheritance, you should contact a qualified estate planning attorney for knowledgeable legal counsel.


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