Choosing an Executor can be a Difficult Decision

September 13, 2023

Choosing an executor can be a difficult decision. Planning for death-related events isn’t as much fun as planning a weekend getaway. Therefore, you’d be forgiven for procrastinating. However, that doesn’t mean you can put off naming an executor forever, says a recent article from AARP, “7 Things to Know About Appointing an Executor.”

Your executor needs to possess the stamina, patience, and persistence to complete the tasks of this role. If they don’t, having your estate administered may become difficult or impossible. Serving as an executor can be harder than people think. Problems begin when someone names a family member just because they are family—which is not the best reason.

It’s best to name someone rather than no one, advises the article. You can always change the executor if they decide they don’t want the responsibility or die before you. If you don’t name anyone, the court will decide for you, It may not be someone you know or the last person you want to handle your estate.

Things can get even more complicated if you don’t leave clear instructions, including where to find your important documents, the keys to your home and car and usernames and passwords to various digital assets. Instead of making everything harder for the ones you love, it’s best to make it easier.

There are seven main tasks for the executor to complete. The first is planning the funeral. You can make that easier by expressing your wishes to your executor and leaving the information in documents. Don’t add it to your will—the executor may not see the will until long after you’ve been buried or cremated.

The executor must obtain a death certificate, find the will and retain an estate planning attorney. The death certificate is issued by your county of residence and is signed by the physician who verified your death. If you’ve had a valid will prepared, your property will be distributed according to the terms of the will. Assets in trusts or accounts with beneficiary designations will go directly to your heirs. Everyone should review their beneficiary designations regularly and update as needed. The beneficiary designations surpass any wishes in the will.

Notify the probate court. Your executor or attorney will need to petition the probate court in the area where you live. They’ll complete a form to obtain a Letter of Administration or Letters Testamentary. These are used to prove that they are the court-approved executor.

Inform all interested parties. Deaths must be reported to employers, Social Security, friends, and family members. Anyone who might have an “interest” in the estate needs to be notified. In some jurisdictions, this requires publishing a death notice in the local paper several times shortly after the person has passed. Banks and other financial institutions also need to be notified.

Pay all debts and file taxes. If applicable, the executor must settle all obligations with creditors and file income, inheritance, or estate taxes.

Create an inventory of assets and plan for distribution. This includes probate and non-probate assets. This includes assets that are jointly owned or held in trust. Next, the executor determines what is sold, kept, donated, or discarded.

Distribute assets among beneficiaries. This occurs only after any estate liabilities, including taxes and paying creditors, are settled.

Complete the final accounting and all required forms. Your executor must dissolve existing accounts and ensure that the court has everything needed to settle your estate.

Your will helps your loved ones navigate the process of settling your estate. Include clear instructions in a letter of intent, so they know what accounts they must deal with. Above all, make sure that the person you name to serve as executor can handle the tasks and the family dynamics accompanying grief.

Choosing an executor can be a difficult decision to make. Consult with your estate planning attorney. He or she will have the experience and expertise to help you make an important decision. If you would like to learn more about the role of the executor, please visit our previous posts.

Reference: AARP (Aug. 8, 2023) “7 Things to Know About Appointing an Executor”

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Lady Bird Deed is a Tool to transfer Real Property outside of Probate

September 12, 2023

Enhanced life estate deeds, also called Lady Bird deeds, can be a great tool to transfer ownership of real property at death outside of probate. This type of deed got its nickname when President Lyndon B. Johnson used one to convey property to his wife, Lady Bird.

Florida Today’s recent article entitled, “Real estate transfers: Is a ‘Lady Bird deed’ right for me?” explains that Lady Bird deeds are a type of life estate deed designed to automatically transfer property ownership upon the death of the original owner to another individual. However, they don’t require the original owner to give up use, control, or ownership of the property while alive.

The beneficial receiver of the property upon death doesn’t get any immediate rights or ownership interests in the property. Their consent isn’t needed to sell, convey, or change the use of the property while the original owner is alive. The Lady Bird deed is rendered obsolete if the original owner sells or conveys the property in their lifetime. However, if the original owner passes away, the property subject to the Lady Bird deed is automatically conveyed to the beneficial recipient without needing to pass through probate.

With a traditional Life Estate deed, the original owner must give up control when adding a beneficial recipient. This means the original owner is prohibited from selling, conveying, or encumbering the property without explicit consent from the beneficial recipient. The original owner also can’t change or end a traditional Life Estate deed without consent from the beneficial recipient.

Here are the benefits of a Lady Bird deed:

Properties can be conveyed at death without having to pass through probate.
The original owner remains in full control of the property while they’re alive.
Recording a Lady Bird deed doesn’t impact the current owner’s homestead protection and exemptions.
Any property subject to a Lady Bird deed doesn’t violate Medicaid’s five-year look-back period and isn’t subject to gifting taxes or penalties, since the beneficial owner doesn’t immediately possess any ownership rights.

Here are the downsides of a Lady Bird deed:

Doesn’t circumvent the Florida statute that requires homestead property to be conveyed first to a surviving spouse or minor children.
Doesn’t protect non-homestead properties from any judgment liens issued against the original owner during their lifetime.

A Lady Bird deed can be an effective tool to transfer real property outside of probate. However, as in any real estate transaction or estate planning endeavor, it is necessary to have a knowledgeable estate planning attorney to discuss your desired outcome and best course of action for your specific situation. If you would like to learn more about real property and estate planning, please visit our previous posts.

Reference: Florida Today (June 9, 2023) “Real estate transfers: Is a ‘Lady Bird deed’ right for me?”

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How Parents can Help Children Buy a Home

September 6, 2023

The Millennial generation has come of age, and Generation Z is following right behind them. Kiplinger’s recent article, “Four Ways Parents Can Help Kids Be First-Time Home Buyers,” discusses how parents can help their children buy a home in this landscape of high real estate prices and rising interest rates.

Lend them the money as an intrafamily loan. One strategy is to act as your children’s “bank” and lend them the money. This is known as an intrafamily loan. By serving as their lender, you skip their having to meet banks’ asset and income requirements. However, to avoid gift tax implications, parents should formalize the loan with a promissory note and charge a minimum interest rate called the applicable federal rate (AFR).
Use an intrafamily loan in another way. Another way parents could help by using this intrafamily loan strategy is to provide strategic funding when needed. A borrower on a mortgage who doesn’t put down a 20% down payment would likely need to purchase mortgage insurance, which could be expensive. So, instead of the child incurring that additional fee, the parent could issue an intrafamily note for the gap amount in the down payment. Regarding tax consequences, as the lender of an intrafamily loan, the parent would have to report income on the interest earned on the note.
Give money as a gift. Parents may want to give their children the money toward the home. If so, they can use a gifting strategy called the annual exclusion gifting. Each year, an individual may give up to the annual gift tax exclusion amount to any individual without tax consequences. That amount is currently $17,000 per year and, if left unused, can’t be carried over to the following year. The amount is available per recipient, so if you have more than one child, you could give up to $17,000 yearly to each child. If the parent is married, both spouses together could gift $34,000 per year for each child. This could be used as an outright gift or in the form of loan forgiveness.

Parents may also opt to forgive some of the note’s principal over time by utilizing the balance of the annual exclusion gift yearly or, for a larger amount, the lifetime gift exemption. But unlike the annual exclusion, the lifetime gift exemption is cumulative from year to year and applies to all recipients. The federal lifetime gift exemption is now $12.92 million per person or $25.84 million for a married couple. Still, it’s scheduled to decrease to $5 million (or $10 million for a married coupled), indexed for inflation, starting in 2026.

Co-sign a loan. Another way a parent can help is to act as a guarantor or co-signer on a loan. So, a parent can help a child who may not have established credit and, in some cases, may also help secure better terms on the loan. But if the child fails to make timely payments, the parent could be contractually obligated under the loan terms.

There are options for how parents can help their children buy a home in this difficult financial climate. Speak with your estate planning attorney about these options and if they are a good choice for your family. If you would like to learn more about real property and estate planning, please visit our previous posts.

Reference: Kiplinger (June 27, 2023) “Four Ways Parents Can Help Kids Be First-Time Home Buyers”

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The Safe way to Pass on Family Heirlooms

August 30, 2023

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama. The safe way to pass on family heirlooms is via a trust of will.

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

The safe way to pass on family heirlooms is via a trust of will. Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes. If you would like to learn more about personal property, please visit our previous posts.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

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The Estate of The Union Season 3|Episode 3

The Estate of The Union Season 2|Episode 9 is out now!

August 29, 2023

The Estate of The Union Season 2|Episode 9 is out now!

All good musicians eventually have a Greatest Hits album. We’ve got one too!

We send our blog out most business days and we track which blog entries are the most popular. The posts we did on the new tax rules regarding “Grantor Trusts” and our article on “How to Leave Assets to Minors” were the BIG Winners. Given how popular each of the posts were, we have dedicated an entire episode of our podcast to them.

In this edition of The Estate of the Union, Brad Wiewel expands on both of these topics in a way that makes them a bit easier to understand and perhaps implement.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 9 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links below to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

Complexities of Determining Who is a Descendant

August 28, 2023

Not using specific names and terms open to definition could significantly impact who might inherit from your estate or trust. The complexities of determining who is a descendant can make beneficiary distribution more difficult. There are situations where some people may choose to deliberately restrict or expand the definition of the group, which might be included in these definitions, explains the article “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust” from Forbes. For some people, creating a new role of a special trust protector who holds a limited or special power of appointment to determine who should be included or removed from the definition of “issue” or descendant is worth considering.

What might arise if the wish only considers children descendants if they belong to a particular faith? Is this type of legal restriction permitted? Clauses limiting heirs to members of a particular faith or a sect within the faith may raise questions about the constitutionality of the clause. Potential heirs excluded under such provisions have argued that a religious restriction on marriage violates constitutional safeguards under the Fourteenth Amendment protecting the right to marry.

Courts have held clauses determining if potential beneficiaries qualify for distributions based on religious criteria enforceable, if the potential beneficiaries have no vested interest in the assets. Another court upheld the provisions of a will conditioning bequests to their sons as long as they married women of a particular faith.

These decisions are narrowly tailored to the specific fact patterns of the cases, since individuals are generally allowed to disinherit an heir with the exception of a spousal elective share or a community property interest. The courts have reasoned that the restriction is not on the heir to marry but on the right of the testator to bequeath property as they wish.

An alternative approach to addressing the complexities of determining who is a descendant is to create a single trust for all heirs, mandating the funds in the trust be used for the cost of religious education, attending religious summer camps, taking relevant religious studies, religious institutional membership, etc. The trust could use the assets to encourage religious observance. However, it may only partially address the question. What about the remainder of the assets—should it be used for all heirs regardless of religious affiliations?

An estate plan compliant with Islamic law may involve a different determination of who is a descendant. The Sharia laws of inheritance are similar to the intestacy statute. One-third of the estate may be distributed as the decedent wishes. However, the remainder must be distributed as mandated under Islamic law. The residuary inheritance shares after the first third are restricted to Muslim heirs. Additional laws prescribe specified shares of the estate to be distributed to certain heirs, depending upon which heirs are living at the moment of the decedent’s death.

Suppose you or a family member is lesbian, gay, bisexual, transgender, or queer (LGBTQ). The law may not address the unique considerations regarding who may be considered a descendent. Special steps may be needed to carry out your wishes as to who your descendants are. What if you view a particular child as your own, but share no genetic material with a child? Children may be adopted or born through surrogacy, so neither parent nor only one parent is biologically related to the child. While some states may recognize an equitable parent doctrine, this may be limited and not suffice to protect the testator.

The many new complexities of determining who is a descendant are complicated and evolving. Changing family structures and religious beliefs based on different values all impact estate planning. A special trust protector may make decisions when uncertainty arises from provisions in a will designed to carry out the wishes. This is a relatively new role and not permitted in some states, so speak with your estate planning attorney to protect your wishes and heirs. If you would like to learn more about beneficiary designations, please visit our previous posts.

Reference: Forbes (Aug. 4, 2023) “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust”

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Consider Hiring a Lawyer for Medicaid Applications

August 24, 2023

Medicaid can be a complicated and ponderous process to navigate. As with many government programs, it is easy to make mistakes that could potentially devastate your family’s finances. You might consider hiring a lawyer for Medicaid applications. Film Daily’s recent article, “Do You Need a Lawyer to Apply for Medicaid?” says that hiring a lawyer for Medicaid applications can provide many benefits. Let’s look at some of the big ones:

Expert Knowledge: Attorneys specializing in Medicaid are well-versed in the complex rules and regulations of the program. They stay updated with policy changes and can provide accurate guidance based on your unique circumstances.

Maximizing Eligibility: An experienced elder law lawyer can help structure your finances and assets to maximize your eligibility for Medicaid. They can also advise you on strategies to protect your assets, while satisfying the program’s requirements.

Streamlined Application Process: A Medicaid application can involve a ton of paperwork and documentation. A lawyer can help you gather the necessary information, complete the application correctly and submit it on time, reducing the chances of delays or mistakes.

Handling Complex Situations: If your situation is complicated, like owning a business or having multiple sources of income, a Medicaid lawyer can work through the intricacies and ensure that all relevant information is presented correctly in your application.

Appeals and Legal Support: If your application is denied or there are other issues, a lawyer can represent you in appeals or hearings. They can advocate for your rights and help resolve any disputes that arise during the application process.

While hiring a lawyer when applying for Medicaid is not mandatory, their expertise can be invaluable in navigating the complexities of the program.

A lawyer specializing in Medicaid can provide guidance, streamline the application process, and help you maximize your eligibility.

Sit down as a family and consider hiring a lawyer for your Medicaid applications. Depending on your circumstances, hiring a Medicaid attorney can be beneficial in complex financial situations, long-term care planning, dealing with denied applications, or staying informed about changing regulations.

With the right legal support, you can also increase your chances of a successful Medicaid application. If you would like to learn more about Medicaid and estate planning, please visit our previous posts.

Reference: Film Daily (July 25, 2023) “Do You Need a Lawyer to Apply for Medicaid?”

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Avoid Pitfalls when Transferring Property to Heirs

August 21, 2023

It is not difficult to ensure the smooth transfer of ownership of your property to a spouse, children, or other heirs, as long as you have an estate plan created by an experienced estate planning attorney and know what pitfalls to avoid. Most importantly, you want to avoid these pitfalls when transferring property to heirs, says the article “I’m a Financial Planner: Here Are 5 Mistakes You Must Avoid When Transferring Property to Heirs” from GoBankingRates. If you die without a will, your state’s intestate succession or next-of-kin laws will determine who inherits your house if yours was the only name on the deed.

Next-of-kin succession varies by state, but for the most part, the priority order is first the surviving spouse, biological and adopted children, parents, and siblings, followed by grandparents, aunts, uncles, nieces, nephews, cousins and extended family members.

You’ll want to know how your state treats intestate property to avoid unwanted surprises for your family. For instance, in some states, full siblings are prioritized over half-siblings, while in other states, they are treated equally.

The biggest mistake is dying without a will and an updated deed. In some states, the property will need to go through probate if the surviving heir is not in co-ownership of the house, regardless of what’s stated in the will.

The solution is simple. Add an adult child or the person you intend to be your executor to the property’s deed via a warranty or quit claim deed. This prevents the family home from going through probate and seamlessly transfers to the individual you want to handle your estate after you’ve passed. In particular, this should be done once one spouse in a joint-owning couple dies.

There are four general types of property ownership. The legal system treats them all differently. They are property with the right of survivorship, property held in a trust, property subject to a will and property for which the spouse does not have a will.

If two spouses purchase and jointly own a property, the right of survivorship dictates that the surviving spouse automatically receives the decedent’s half and becomes the sole owner. This is the simplest and easiest outcome, since it avoids probate and the need to alter the deed. However, it’s not always the case.

A surviving spouse might need to change their deed if a partner dies and the deed didn’t automatically transfer property after death. If only one spouse was on the deed, they may have to go through probate (if there was a will) to transfer the home into the surviving spouse’s name. The spouse may need to file a survivorship affidavit and a copy of the death certificate to ensure that the title is properly in their name.

Should you transfer property while you’re still living? It may solve some problems but create others. If a primary residence is transferred to an adult child and they sell it not as their primary residence, it could lead to a large capital gains tax bill. However, if the child inherits the property after your death, the heir will enjoy a stepped-up tax basis and avoids capital gains taxation.

Before taking any steps to arrange for the transfer of the home after passing, talk with the person or people to make sure they want it and the responsibilities associated with owning a home. This is especially true if there’s more than one heir with different opinions.

If children don’t get along or are in different financial positions, leaving one property for all of them to manage together could lead to family fights. Talk with them before putting your wishes into your estate plan to avoid unnecessary resentment and, in the worst case, litigation. Working with an estate planning attorney can help you avoid these pitfalls when transferring property to heirs. If you would like to learn more about property management in your estate plan, please visit our previous posts.

Reference: GoBankingRates (July 26, 2023) “I’m a Financial Planner: Here Are 5 Mistakes You Must Avoid When Transferring Property to Heirs”

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An Attorney can help when applying for Medicaid

August 16, 2023

Medicaid is a vital program that provides healthcare coverage for individuals and families with limited income and resources. Hiring an attorney can help when applying for Medicaid. Their expertise can be invaluable in ensuring a smooth and successful application process.

Film Daily’s recent article, “Do You Need a Lawyer to Apply for Medicaid?” says that applying for Medicaid involves gathering the necessary documentation, filling out an application form and submitting it to the state Medicaid agency.

The application typically requires information about your income, assets, household composition and medical expenses. It’s important to provide accurate and complete information to avoid delays or potential issues with your case.

A lawyer specializing in Medicaid can walk you through the application process, ensure that you meet all of the requirements and provide the correct documentation.

A Medicaid planning lawyer can also help you understand any legal implications and address any concerns that may come up during the application process.

Here are some scenarios where hiring a lawyer might be a wise move:

Complicated Financial Situations: If you have complex financial arrangements or significant assets, a Medicaid planning lawyer can help you navigate the Medicaid eligibility requirements while protecting your interests.
Long-Term Care Planning: If you or a loved one requires long-term care services, a lawyer with expertise in elder law and Medicaid planning can help you develop a strategy to protect your assets while accessing the necessary healthcare services.
Denied or Delayed Applications: If your Medicaid application has been denied or delayed, a Medicaid planning lawyer can help you appeal the decision or address any issues that may have caused the delay.
Changing Regulations: The program rules and policies can change over time. An experienced Medicaid lawyer can ensure that you stay informed about any updates that may affect your eligibility or benefits.

Consider hiring an Elder Law attorney to help when applying for Medicaid. He or she may be the difference between receiving benefits and being denied. If you are interested in learning more about Medicaid planning, please visit our previous posts.

Reference: Film Daily (July 25, 2023) “Do You Need a Lawyer to Apply for Medicaid?”

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Irrevocable Funeral Trust helps Families with expenses

August 14, 2023

Yahoo Finance’s recent article, “Pros and Cons of an Irrevocable Funeral Trust,” explains that an irrevocable funeral trust is a legal entity that helps families with end-of-life costs, such as funeral and burial expenses.

With this trust, you’re establishing a formal trust fund, a separate legal entity that owns the money you contributed to it. The purpose is to hold your money until you die. It then releases the funds to pay for your funeral, burial and other end-of-life expenses.

As with all trust funds, the trust has a trustee who manages its money. Here, the trustee is determined by an insurance company or funeral services company through which you set up the trust. It will usually hold as its single asset a life insurance policy that you’ve purchased.

The trust fund owns this life insurance policy and is named as the sole beneficiary. When you die, the fund collects the policy’s payment and uses this money to pay for your end-of-life costs.

A funeral trust may also name a specific funeral home as the trust’s beneficiary. For example, a given funeral home may agree to a fixed price for a funeral and burial.

When you die, the trust pays out its funds to the funeral home to cover the costs of your funeral, burial and any associated services.

As with most trusts, you can establish both revocable and irrevocable funeral trusts.

With a revocable funeral trust, you maintain ownership and control of the money and can withdraw it anytime.

However, with an irrevocable funeral trust, you no longer own the money, so you can’t withdraw it.

While an irrevocable funeral trust helps families pay for potentially expensive end-of-life expenses, it locks up your money for good and can’t be amended. If you would like to learn more about funeral planning, please visit our previous posts.

Reference: Yahoo Finance (April 29, 2023) “Pros and Cons of an Irrevocable Funeral Trust”

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Category: Family

Choosing an Executor can be a Difficult Decision

Lady Bird Deed is a Tool to transfer Real Property outside of Probate

How Parents can Help Children Buy a Home

The Safe way to Pass on Family Heirlooms

The Estate of The Union Season 2|Episode 9 is out now!

Complexities of Determining Who is a Descendant

Consider Hiring a Lawyer for Medicaid Applications

Avoid Pitfalls when Transferring Property to Heirs

An Attorney can help when applying for Medicaid

Irrevocable Funeral Trust helps Families with expenses

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