Category: Probate

When and How to get Letters of Testamentary

When and How to get Letters of Testamentary

The executor manages assets until the probate process is complete. They also need proof of their authority to do so. The court-issued Letter of Testamentary provides evidence of their authority and explains a recent article from Forbes, What Is A Letter Of Testamentary?” The article details how this document works and when and how to get Letters of Testamentary.

A decedent’s last will and testament names their executor, who will manage their estate. Their duties include filing probate paperwork with the court, notifying potential heirs and creditors of the probate process and managing assets, including paying bills from the estate’s bank account. The executor is also the one to set up the estate’s bank account. When the estate is nearly completed, assets are distributed to beneficiaries.

Third parties need to know who the executor is. The executor also needs proof of their authority to carry out their job tasks. The letter is a simple document issued by the probate court and typically includes the following information:

  • The court issuing the letter.
  • The name and contact details of the executor (also referred to as a “personal representative” of the estate).
  • That the personal representative was named in the will of the decedent
  • The date the executor was granted authority to manage the decedent’s estate.

What is the difference between a Letter of Testamentary and a Letter of Administration? A letter of administration can be used during the probate process. However, it serves a different process. The court uses the letter of administration if a person dies without having named a personal representative or executor. The court appoints a person to manage the estate and probate process, and the court then creates a Letter of Administration giving this individual the authority to act.

There is no guarantee or requirement for the court to appoint a family member to serve in this role. This is another reason why having a will that names an executor is essential if the family wishes to be involved in settling the estate.

What if there is no will? Without a will, there is no executor. Someone is still needed to manage the decedent’s assets and take care of the steps in probate. A surviving family member or loved one may open a probate case after death, even when there is no will. This involves filing court documents and attending a hearing. The court will then appoint an administrator, determining who has the desire and ability to serve in the role.

What about assets held in trust? If assets have been placed in a trust, a trustee has been named and is in charge of following the trust’s directions. There is no probate court involvement, which is why so many opt to place their assets in a trust as part of their estate plan. The trust becomes the legal owner of the assets once they are placed in the trust. The trust creator often acts as the trustee during their lifetime and names a successor trustee who takes over in case of incapacity or death. That person has the authority to manage the trust assets and transfer them through the trust administration process without any involvement from the court.

However, if assets were not placed in the trust, they must go through the probate process, and an executor or personal representative will need a letter to manage them.

If you have lost a loved one, or are choosing an executor, ensure you have a complete understanding of when and how to get letters of testamentary. Work with an experienced estate planning attorney familiar with your state’s laws and the court process of probate. If you are interested in learning more about probate, please visit our previous posts.

Reference: Forbes (Jan. 17, 2024) “What Is A Letter Of Testamentary?”

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A Subtrust is a Multi-Tool that serves various Purposes

A Subtrust is a Multi-Tool that serves various Purposes

A subtrust is a separate entity created under the umbrella of a primary trust or a will. A subtrust becomes active based on the terms of the trust or will when certain events happen, such as the death of the primary grantor, or creator. Subtrusts are used by estate planning attorneys to help families pass on inheritances and protect their heirs from creditors or issues such as lawsuits or divorce. A Subtrust is a multi-tool that serves various purposes, depending on the beneficiaries’ specific needs and the grantor’s goals.

A subtrust is created as part of a primary trust, often a revocable trust. The primary trust acts as a container for your assets, answering critical questions about who gets them, what they receive, when and how. The subtrust, on the other hand, is like a specialized compartment within this container, designed for specific purposes or beneficiaries. Subtrusts remain dormant within the primary trust until a triggering event, typically the death of the grantor. Upon this event, the subtrust becomes active and, in most cases, irrevocable. This means that the terms of the subtrust cannot be changed.

The activation of a subtrust initiates a process known as trust administration. This process involves naming the subtrust, obtaining a tax ID and setting up a bank account. In addition, an appointed trustee will need to manage the trust assets, including making distributions to beneficiaries, filing tax returns and ensuring that the trust operates according to the trust provisions and the grantor’s intentions.

How Do Subtrusts Work If Created Under a Will?

Subtrusts can also be effectively created under a will, offering a flexible approach to estate planning. The will itself can directly establish these trusts or designate a revocable trust as the beneficiary in what is known as a “pour-over” will. This method ensures that the assets are transferred into the trust upon the grantor’s death.

How are Subtrusts Different from Revocable Trusts?

Subtrusts offer enhanced protection for your assets and beneficiaries. Unlike a revocable trust, which can be altered during the grantor’s lifetime, a subtrust becomes irrevocable upon activation, providing a firmer legal structure. This irrevocability protects the assets from the beneficiary’s creditors and in cases of legal challenges, such as divorce or lawsuits.

What are Subtrusts Commonly Used for?

Subtrusts serve various purposes, depending on the beneficiaries’ specific needs and the trustor’s goals. They can be used to protect beneficiaries who are minors, financially irresponsible, or have special needs. Subtrusts can also safeguard assets from beneficiaries’ creditors, ensuring that the inheritance is used as intended by the grantor.

Subtrusts have many different names and types, each serving a unique purpose in estate planning, as outlined in an article by the American Academy of Estate Planning Attorneys titled Basics of Estate Planning: Trusts and Subtrusts.

How Do Subtrusts Avoid Probate?

A Subtrust is a multi-tool that serves various purposes, but one of the primary reasons is to avoid the lengthy and often costly process of probate. Having assets in a subtrust bypasses the court-supervised distribution process, making things smooth, quick and easy for your family and heirs after your death.

Subtrusts provide a layer of protection for beneficiaries against their creditors or their own irresponsibility. This is particularly important in cases where a beneficiary may face financial difficulties, divorce, legal disputes, or even car accidents. The subtrust provides a shield for the assets to protect them from external claims. If you would like to learn more about trusts, please visit our previous posts. 

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Estate Planning for Unmarried Senior Couples

Estate Planning for Unmarried Senior Couples

An increasing number of couples at various stages of life are choosing to live together without marrying, making estate planning a bit more challenging. This is especially true when considering estate planning for unmarried senior couples, according to a recent article from Kiplinger, “Estate Planning and the Legal Quirks of Retiree Cohabitation.”

From one perspective, living together without being legally married provides an advantage: you have your own estate plan. You may distribute assets after death with no obligation to leave anything to a partner or their biological children. In many jurisdictions, the law requires spouses to leave a significant portion to their surviving spouse. This doesn’t apply if you’re cohabitating.

However, there are downsides. For example, a surviving unmarried partner doesn’t benefit from inheriting assets without estate taxes. A non-spouse transferring assets may find themselves generating sizable estate or income taxes. To avoid this, your estate planning attorney will discuss tax liability strategies.

Owning real property together can get complicated. Consider an unmarried couple buying a property solely in one person’s name, excluding the partner to sidestep any possible gift taxes. If the sole owner dies, the partner has no claim to the property. The solution could be planning for property rights in the estate plan, possibly leaving the property outright to the partner or in trust for the partner’s use throughout their lifetime. It still has to be planned for in advance of incapacity or, of course, death.

Regarding healthcare communication and directives, special care must be taken to ensure that the couple can be involved in each other’s care and decision-making. By law, decision-making might default to the married spouse or kin. Without a designated healthcare proxy, a cohabitating partner has no legal authority to obtain medical information, make medical decisions, or, in some cases, won’t even have the ability to have access to a hospitalized partner. A healthcare power of attorney is essential for unmarried couples.

For senior couples living together, blending families can be challenging. However, blending finances can be even more complex. Living together later in life can create many concerns if there are former spouses or children from a prior relationship. If a senior decides to marry, they are advised to have a prenuptial agreement so children from previous unions are not disinherited. If a potential spouse has big issues signing such a document, it should raise a red flag to their motivation to marry.

Living together without the legal protection of marriage is an individual decision and may be seen as a means of avoiding legalities. However, it needs to be examined from the perspective of estate planning for the unmarried senior couple, to protect both parties and their families. Couples must prepare for the future, for better or worse, in sickness and health. If you would like to learn more about estate planning for unmarried couples, please visit our previous posts. 

Reference: Kiplinger (Dec. 6, 2023) “Estate Planning and the Legal Quirks of Retiree Cohabitation”

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Trusts Work for Multi-State Property Owners

Trusts Work for Multi-State Property Owners

If you own real estate when you die, it is most likely your estate will be required to go through probate. This can take months to years and becomes expensive, as explained in the article “Why a trust is so useful for those who own real property in multiple states” from Coeur d’Alene/Post Falls Press. However, here’s the thing to be aware of: if you own property in more than one state, your estate must go through the probate process in every state where you own property. Trusts can work very well for multi-state property owners.

A few strategies must be considered for snowbirds with homes in northern and southern regions or who own out-of-state rental property.

Some families will add an intended heir to the title (deed) of the real estate while the primary owners are still living. This is rarely recommended, since it can open the door to any number of problems. If the intended heir has a financial crisis, like a lawsuit, divorce, creditor issues, etc., the jointly owned property is an attachable asset.

Another solution people try is the “Pay on Death Deed.” This is a special type of deed where the recipient gets the real property on the death of the owner. This strategy has a few problems. However, the main one is that not all states allow these types of deeds to be used.

An experienced estate planning attorney will know whether or not your state allows the Pay-on-Death-Deed.

The best solution for most people owning property in multiple states is using a living trust.

The living trust provides the same directions as a last will and testament about who should receive what assets from your estate after your death, including real property. It also names a trustee, who manages the assets in the trust and distributes them after your death.

A key reason to use a living trust is the assets owned by the trust are outside of the probate estate. These assets pass to beneficiaries according to the terms of the trust and do not go through the probate process.

Once the living trust is established, the trust may hold title to any real property, regardless of where the property is located. The trustee does not have to deal with the courts in multiple states.

There is a tendency to think trusts are only used by the very wealthy. However, this is not true. Anyone who owns real property and doesn’t want it to go through one or more probate proceedings benefits from using a trust.

Trusts can work very well for multi-state property owners. An experienced estate planning attorney can establish the trust and guide you through putting assets into the trust. If you would like to learn more about managing real property in an estate plan, please visit our previous posts. 

Reference: Coeur d’Alene/Post Falls Press “Why a trust is so useful for those who own real property in multiple states”

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Marital Trusts Help Protect Blended Families

Marital Trusts help protect Blended Families

Marital trusts help protect blended families from complicated family dynamics. Understanding marital trusts is crucial for couples looking to secure their financial future and provide for the surviving spouse tax-efficiently. This article is a guide to marital trusts, how they work and their advantages and disadvantages. With the potential to safeguard assets and ensure that they reach the intended beneficiaries, marital trusts can be an effective part of a comprehensive estate plan, particularly for those in a second marriage or a blended family.

What Is a Marital Trust?

A marital trust is a type of irrevocable trust and is crafted to benefit the surviving spouse. It allows for the managed distribution of assets, potentially safeguarding against financial imprudence or external influences.

Consider that while many couples are just fine with everything going to the surviving spouse directly and outright after one spouse dies, in some cases, there may be concerns related to the surviving spouse not being able to manage the money effectively. What would happen to the money if the surviving spouse is not good with money or is vulnerable to financial predators? Perhaps giving the entire estate outright to the spouse would run the risk that all of the money would be spent irresponsibly. A marital trust allows for both tax benefits and protections for the couple’s estate to prevent these issues from happening.

How Do Marital Trusts Work?

There are three parties involved in setting up, maintaining and ultimately passing along the trust, including a grantor, who is the person who establishes the trust; the trustee, who’s the person or organization that manages the trust and its assets; and the beneficiary. That person will eventually receive the assets in the trust once the grantor dies. The surviving spouse must be the sole beneficiary of a marital trust. Once the surviving spouse dies, the assets in the trust typically pass to surviving children. A marital trust also involves the principal, which are assets initially put into the trust.

How Do Marital Trusts Assist Blended Families?

For blended families, using a marital trust is becoming more popular as a means to help protect assets to a surviving spouse, and the inheritance of children from previous marriages. If one or both spouses in a second marriage have children from a prior marriage, both spouses typically want to ensure that their kids get an inheritance at some point in the future. While most married couples prioritize their spouse as the primary beneficiary, after the surviving spouse passes away, if the couple’s estate plan gives everything directly to the surviving spouse, that arrangement would run the risk that the children from a prior marriage of the deceased spouse would be cut off from receiving an inheritance.

While couples want to assume that a surviving spouse will protect the rights of children from their spouse’s previous marriage, without legal safeguards, the estate of the surviving spouse can be changed to cut out individuals named as beneficiaries after their spouse’s death. Having a marital trust for the surviving spouse ensures that this change can’t happen.

What Are Other Situations in Which a Couple Should Consider Using a Marital Trust?

Additional situations in which a couple might consider using a marital trust include wanting to prevent undue influence of an outside person or party over the surviving spouse. This usually is a concern for older couples when the surviving spouse is in declining health or may have early onset of dementia, and there’s a concern they may be vulnerable to being taken advantage of financially. Another motivation for a marital trust includes a spouse who has an addiction that prevents them from making sound financial choices.

Did Actor Tony Curtis Disinherit His Children Due to Undue Influence?

In 2010, when Actor Tony Curtis died, his five children were left out of their father’s inheritance in a last-minute decision shortly before his death, notes MoneyWise article, “Hollywood legend Tony Curtis cut his kids out of his will and $60 million fortune when he died. Here’s how to avoid leaving behind messy inheritance disputes.” While Curtis did have a will, he decided to leave the majority of his assets to his fifth wife, Jill, and intentionally disinherit his children. The change to his estate plan came only a few months before his death, which raised suspicions within the family. Some of the Curtis children opened estate disputes in the years following his death to challenge the disinheritance, causing additional pain and separation within their family. If Curtis were subject to the undue influence of his fifth wife, Jill, as some of the Curtis children claimed, then a trust could have protected them from being disinherited.

What Are the Benefits of Having a Marital Trust?

  • Marital trusts are significant in estate planning for high-net-worth individuals, serving as a tool to minimize the estate tax burden by taking advantage of estate tax exemptions. A married couple can significantly reduce or eliminate estate taxes by utilizing a marital trust.
  • The surviving spouse can receive income and financial stability from the trust.
  • Assets are kept in the family, and the inheritance intended for children from previous marriages is protected.

Estate Tax Exemptions with a Marital Trust

One of the most significant benefits of a marital trust is its impact on estate taxes. A marital trust effectively doubles the estate tax exemption for a married couple, ensuring that a more significant portion of their wealth can be transferred tax-free. In the context of the federal estate tax, this can result in substantial tax savings and financial security for the surviving spouse and any other designated beneficiaries.

The Unlimited Marital Deduction in Action

The unlimited marital deduction is a cornerstone of marital trust planning. It allows the first spouse to pass assets to the surviving spouse without incurring estate taxes at the time of the first spouse’s death. This deduction is a critical aspect of marital trusts, ensuring that the income to the surviving spouse provides the necessary financial support without an immediate tax burden.

Are There Disadvantages of Using a Marital Trust?

While a marital trust offers many benefits, it’s essential to consider any limitations or drawbacks, such as loss of flexibility once established.

  • Once established, an irrevocable trust cannot be easily altered or terminated.
  • Estate tax exemption is limited based on the federal estate tax threshold.
  • Marital trusts, like other types of trusts, require that assets be moved into the trust, a process that can be lengthy or overlooked.

Establishing a Marital Trust with an Experienced Estate Planning Attorney

Setting up a marital trust is a complicated form of estate planning that involves several steps, including choosing a trustee to manage the trust assets, determining the terms under which the trust assets will be managed and distributed and ensuring that the couple’s property is held in trust. When couples have complex family situations, including blended families or a spouse with vulnerabilities, a marital trust provides for the financial well-being of the surviving spouse. It also ensures that assets are preserved for future generations.

An experienced estate planning attorney can help a couple assess if a marital trust is the right instrument to help protect their blended family as a part of a comprehensive estate plan. If you would like to learn more about planning for blended families, please visit our previous posts. 

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The Estate of The Union Season 3|Episode 2

The Estate of The Union Season 2|Episode 11 is out now!

The Estate of The Union Season 2|Episode 11 is out now!

Sylvia Holmes makes a fabulous guest! She is a Travis County Justice of the Peace and she does much, much more than marry people. In this edition of The Estate of the Union, she describes what happens in the “Peoples Court” in an entertaining and insightful way. It’s everything from evictions to speeding tickets to truancy.

If you’ve ever wondered about where Judge Judy gets her cases for her TV show, Judge Sylvia shares that secret too!

We’ve got more than 30 other episodes posted and more to come. We hope you will enjoy them enough to share it with others. If you would like to learn more about Judge Holmes and JP Court, Precinct 3, please visit their website: www.traviscountytx.gov/justices-of-peace/jp3. The Travis County, Precinct 3 live stream can be found here: justiceofthepeacetraviscou8356

 

 

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 11 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 to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

The Estate of The Union Season 2|Episode 4 – How To Give Yourself a Charitable Gift is out now!

 

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.

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Beware of Social Security Scams using AI

Beware of Social Security Scams using AI

Beware of Social Security scams using AI. Seniors now need to be extra careful about Social Security scams since fraudsters have embraced AI (Artificial Intelligence) to manipulate people into revealing secure information, says a recent article from U.S. News & World Report, “AI and the Risks of Social Security Fraud.” The schemes are sophisticated and appear entirely legitimate, making them harder to discern from real messages from the Social Security Administration.

The Office of the Inspector General recently launched a task force to investigate the use of AI and deter AI-related Social Security scams. The OIG recognizes the risk of criminals using AI to make their schemes easier and faster to execute and the deceptions more credible and realistic.

You’ll want to know about AI risks if you receive Social Security benefits. Here are some guidelines to keep both your identity and finances safe.

Criminals commonly use robocalls or chatbots. The messages sound as if they come from legitimate government representatives and trick seniors into disclosing personal information or even making fraudulent payments using voice synthesis and natural language processing. This can also happen on a website, with an AI-generated video of the U.S. president or an official with the Social Security Administration announcing a new Social Security benefit and encouraging retirees to sign up by following a link on the video. The link takes the user to a fraudulent website, where they are asked to provide essential information, including their Social Security number and other details. Once the information is provided, thieves can re-route the monthly benefit to an unauthorized account.

Be wary if you receive an email from a source you don’t recognize. Don’t respond to text messages from people or organizations you don’t know. If you receive a suspicious phone call, hang up. If someone claims to be calling from Social Security, hang up, call the local Social Security office yourself, and explain what happened.

If you haven’t already, set up a my Social Security account online at ssa.gov. That’s where you’ll indicate the bank account to receive your benefit, and you can tell SSA not to change it unless you appear in person at the local SSA office.

The SSA doesn’t initiate contact with recipients by email, text, or phone. Anyone saying they are from the SSA using these methods is a scammer. Even if your phone displays the call is coming from the SSA, know that it’s very easy for criminals to manipulate caller ID to make the call appear to come from whomever and whatever number they want.

Thieves now use digital technology to trick seniors into revealing personal information. As technology changes, so do the means of stealing. Beware of Social Security scams using AI. Stay current on common scams and protect your retirement benefits and finances from AI-driven fraud. If you would like to learn more about social security benefits, please visit our previous posts.

Reference: U.S. News & World Report (Sep. 29, 2023) “AI and the Risks of Social Security Fraud”

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Life Insurance should be Major component of Estate Plan

Life Insurance should be Major component of Estate Plan

We never know what the future may bring, and waiting too long to investigate life insurance could leave loved ones in a financial bind, according to a recent article from Money, “What Is Joint Life Insurance and How Does It Work?” There are plans ranging from term and whole to individual and joint, and you’ll want to understand how each works before determining which policy best fits your needs. Life insurance should be a major component of your estate plan.

Joint life insurance is a single plan covering the lives of two people with one premium, with the policyholders becoming each other’s beneficiaries or passing benefits to their heirs. Depending on your coverage, these types of life insurance pay out death benefits when one or both of the policyholders dies.

This eliminates the need for separate policies for spouses or partners and minimizes paperwork and the underwriting and administrative costs associated with life insurance policies. This type of plan is often used for business partners, who can use the death benefit to fund the company if one of them dies unexpectedly.

Joint life insurance plans are usually permanent or whole-life policies and stay in effect as long as premiums continue to be paid or until the policy pays out. Investing in joint whole life insurance has certain advantages because it provides long-term certainty.

There are two kinds of joint life insurance-first to die and second to die.

A first-to-die life insurance policy pays a death benefit to the surviving policyholder when the other party dies. This ensures the living policyholder receives a payout, which can be used for living costs if the family’s primary income source is the first to die.

Situations where one spouse doesn’t qualify for life insurance may also make first-to-die life insurance a good idea. Insurance companies may be more willing to insure someone with pre-existing health conditions because there’s only one payout between two policyholders. However, the healthier spouse will most likely incur higher cost premiums with a joint policy than an individual plan.

The first-to-die joint policy terminates once the payout occurs, leaving the surviving spouse or partner without life insurance unless they have an additional individual plan. If the surviving party doesn’t have their own policy, they must purchase a separate policy to ensure their beneficiaries receive a death benefit.

Second-to-die life insurance, or survivorship life insurance, doesn’t pay out until both policyholders die. These plans are often used to leave money for beneficiaries or pay for funeral expenses. A second-to-die policy can be helpful with estate planning because heirs don’t pay estate tax on the death benefits unless they exceed estate tax thresholds.

Determining which policy best suits your family depends on several factors, including how you expect beneficiaries to use the proceeds. Life insurance policies should be a major component of the discussion with your estate planning attorney, and align with your overall estate plan. If you would like to read more about life insurance, please visit our previous posts. 

Reference: Money (Sep. 15, 2023) “What Is Joint Life Insurance and How Does It Work?”

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Choosing an Executor can be a Difficult Decision

Choosing an Executor can be a Difficult Decision

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

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

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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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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