Category: Wills

Mistakes can lead to an Invalid Will

Mistakes can lead to an Invalid Will

One of the many reasons an experienced estate planning attorney is the best resource for creating an estate plan, including a Last Will and Testament, Power of Attorney and Health Care Proxy, is the confidence of knowing your estate plan has been properly prepared. People who believe they know better than an experienced lawyer, often send their families into a legal, financial, and emotional black hole after they die. Mistakes can lead to an invalid will. The article “Red Flags Indicating a Potentially Invalid Will” from The National Law Journal provides a closer look at why it pays to work with a professional.

When a decedent executes a new Last Will near the end of their life and makes a dramatic change to previous estate plans, there may be trouble ahead. When this is the case, several issues need to be examined to ensure that the document is valid. Strong consideration must be given to whether the person had sufficient capacity to execute the document.

When a person is suffering from an illness or near death, they may be susceptible to the improper influence of people who may cause them to make uncharacteristic changes to their estate plan. Any Last Will drafted within the last few months of a person’s life requires careful review.

If, shortly after a person has handed the reins of their financial life to another, using a Power of Attorney in any of its forms (Durable POA, Springing POA) and a new Last Will is created, a red flag should be raised, especially if the Last Will has been changed to benefit this person.

What if a person’s capacity was hovering near the borderline of capacity and incapacity? If a decedent’s mental capacity was questionable at the time the Last Will was executed, the Last Will may not be valid. A person with legal mental capacity must understand the assets they own and clearly understand to whom they are bequeathing assets. The standard for this issue is low, but if the decedent was suffering from a degenerative mental condition or a sudden onset of incapacity due to an illness or accident, the Last Will may be challenged.

If a layperson creates a Last Will or uses an online service to create it and the Last Will does not comply with the state’s estate laws, the Last Will may have technical issues rendering it invalid. When this occurs, it is as if there were no Last Will at all and the estate is distributed according to the laws of the state.

The biggest red flag is the presence of any large changes from the next to Last Will to the final Last Will, with no known reason for the change having been made. This may be a result of changes to mental capacity or undue influence of a third party. An experienced estate planning attorney is the best resource to create a Last Will. They will be among the first to ask why significant changes from a prior Last Will are being requested. Don’t allow mistakes to jeopardize your wishes and lead to an invalid will. If you would like to learn more about drafting a will, please visit our previous posts.

Reference: The National Law Journal (March 30, 2022) “Red Flags Indicating a Potentially Invalid Will”

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Planning for Special Needs Requires Care

Planning for Special Needs Requires Care

Planning for loved ones with special needs requires great care. When a family includes a disabled individual, sometimes referred to as a “person with special needs,” estate planning needs to address the complexities, as described in a recent article titled “Customize estate plan to account for disabled beneficiaries” from The News-Enterprise. Failing to do so can have life-long repercussions for the individual.

This often occurs because the testator, the person creating the estate plan, does not know the implications of failing to take the disabled person’s situation into consideration, or when there is no will.

The most common error is leaving the disabled beneficiary receiving an outright inheritance. With a simple will, or no will, the beneficiary receives the inheritance and becomes ineligible for public benefits they may be receiving. The disruption can impact their medical care, housing, work and social programs. It may also lead to the loss of their inheritance.

If the disabled beneficiary does not currently receive benefits, it does not mean they will never need them. After the death of a parent, for instance, they may become completely reliant on public benefits. An inheritance will put them in jeopardy.

A second common error is naming the caregiver as the beneficiary, rather than the disabled individual. This causes numerous problems. The caregiver has the right to do whatever they want with the assets. If they no longer wish to care for the beneficiary, they are under no legal obligation to do so.

If the caregiver has any liabilities of their own, or when the caregiver becomes incapacitated or dies, the assets intended for the disabled individual will be subject to any estate taxes or creditors of the caregiver. If the caregiver has any children of their own, they will inherit the assets and not the disabled person.

The caregiver does not enjoy any kind of estate tax protection, so the estate may end up paying taxes on assets intended for the beneficiary.

The third major planning mistake is using a will instead of a trust as the primary planning method. A Special Needs Trust is designed to benefit a disabled individual to protect the assets and protect the individual’s public benefits. The trust assets can be used for continuity of care, while maintaining privacy for the individual and the family.

Planning for individuals with special needs requires great care, specifically for the testator and their beneficiaries. Families who appear to be similar on the outside may have very different needs, making a personalized estate plan vital to ensure that beneficiaries have the protection they deserve and need. If you would like to learn more about special needs issues, please visit our previous posts. 

Reference: The News-Enterprise (March 15, 2022) “Customize estate plan to account for disabled beneficiaries”

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Several Ways to Avoid Probate

Several Ways to Avoid Probate

Probate can tie up the estate for months and be an added expense. It can be a financial and emotional nightmare if you have not planned ahead. Some states have a streamlined process for less valuable estates, but probate still has delays, extra expense and work for the estate administrator. A probated estate is also a public record anyone can review. There are, however, several ways to avoid probate.

Forbes’ recent article entitled “7 Ways To Avoid Probate Without A Living Trust” says that avoiding probate often is a big estate planning goal. You can structure the estate so that all or most of it passes to your loved ones without this process.

A living trust is the most well-known way to avoid probate. However, retirement accounts, such as IRAs and 401(k)s, avoid probate. The beneficiary designation on file with the account administrator or trustee determines who inherits them. Likewise, life insurance benefits and annuities are distributed to the beneficiaries named in the contract.

Joint accounts and joint title are ways to avoid probate. Married couples can own real estate or financial accounts through joint tenancy with right of survivorship. The surviving spouse automatically takes full title after the other spouse passes away. Non-spouses also can establish joint title, like when a senior creates a joint account with an adult child at a financial institution. The child will automatically inherit the account when the parent passes away without probate. If the parent cannot manage his or her affairs at some point, the child can manage the finances without the need for a power of attorney.

Note that all joint owners have equal rights to the property. A joint owner can take withdrawals without the consent of the other. Once joint title is established you cannot sell, give or dispose of the property without the consent of the other joint owner.

A transfer on death provision (TOD) is another vehicle to avoid probate. You might come across the traditional term Totten trust, which is another name for a TOD or POD account (but there is no trust involved). After the original owner passes away, the TOD account is transferred to the beneficiary or changed to his or her name, once the financial institution gets the death certificate.

You can name multiple beneficiaries and specify the percentage of the account each will inherit. However, beneficiaries under a TOD have no rights in or access to the account while the owner is alive. An estate planning attorney will be able to identify several ways for you to avoid a costly probate. If you would like to read more about probate, please visit our previous posts.

Reference: Forbes (March 28, 2022) “7 Ways To Avoid Probate Without A Living Trust”

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Things You should Leave Out of a Will

Things You should Leave Out of a Will

We have written many blog posts over the years about ensuring sure certain things are included in your will. Yet, there are things you should leave out of a will. Let’s look at what shouldn’t be in a will, according to Best Life’s recent article titled “Never Include These 2 Things in Your Will, Experts Warn.”

  1. Never include a conditional gift in your will. A conditional gift is when money or property is given only when and if a specific event takes place. For instance, grandpa might leave a conditional gift for his grandchild, if she graduates college or gets married. These provisions are often drafted in the hopes of encouraging or discouraging certain behaviors and have a tendency to get messy.

Even the seemingly basic condition of graduating from college can turn into a major issue, if the beneficiary decides to pursue the trades or accelerates in college and is offered an excellent job before earning her degree.

Similar obstacles—and, frequently, creative workarounds from beneficiaries who want to unlock their inheritance—will also be encountered with other conditional gifts. However, there are still ways to achieve the spirit of the conditional gift without it getting complicated. Instead, give the bequest outright without any conditions but include the encouragement that the beneficiary does something specific.

Another option is to hold the gift in a trust for a beneficiary. With a trust you can designate a trustee to be in control of the assets in the trust after your death. The trustee will have discretion as to the timing and amount of distributions. You can also detail how narrow or broad that discretion should be.

  1. Be careful with dollar amount bequests. The second thing you should never include in your will is a dollar amount bequest.

While this might seem common, it’s not recommended. This also has the potential to create major conflict within a family.

A better option is to use percentages. In this way, your estate will self-correct for size and each beneficiary will get their proper share.

Every will is specific to the person who creates it. In order to ensure that you are not including things you should leave out of a will, meet with an experienced estate planning attorney to create a will that benefits you and your loved ones—without any unexpected problems. If you would like to learn more about drafting a will, please visit our previous posts. 

Reference: Best Life (March 20, 2022) “Never Include These 2 Things in Your Will, Experts Warn”

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Caring for sick Parent can be Challenging

Caring for sick Parent can be Challenging

Caring for a sick parent can be challenging and emotional time. It’s not uncommon for adult children to have to face a parent’s decline and a stay in hospice at the end of their life. The children are tasked with trying to prepare for his passing. This includes how to handle his financial matters.

Seniors Matter’s recent article entitled “How do I handle my father’s financial matters now that he’s in hospice?” says that because of this major task, it is easy to put financial considerations on the back burner. Nonetheless, it is important to address a few key issues with your family.

If a family member is terminally ill or admitted to hospice – and you are able to do so – it may be a good idea to start by helping to take inventory of your family member’s assets and liabilities. A clear idea of where their assets are and what they have is a great starting point to help you prepare and be in a better position to manage the estate.

An inventory may include any and all of the following:

  • Real estate
  • Bank accounts
  • Cars, boats and other vehicles
  • Stocks and bonds
  • Life insurance
  • Retirement plans (such as a 401(k), a traditional IRA, a Roth IRA and a SEP IRA);
  • Wages and other income
  • Business interests
  • Intellectual property; and
  • Any debts, liabilities and judgments.

Next, find out what, if any, estate planning documents may be in place. This includes a will, powers of attorney, trusts, a healthcare directive and a living will. You will need to find copies.

Caring for a sick parent while also managing their financial affairs can be challenging, but it can make the aftermath easier and less stressful for you and your family. If you are interested in reading more about elder care issues, please visit our previous posts.

Reference: Seniors Matter (Feb. 22, 2022) “How do I handle my father’s financial matters now that he’s in hospice?”

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Your Estate Plan can include Grandchildren

Your Estate Plan can include Grandchildren

Wanting to take care of the youngest and most vulnerable members of our families is a loving gesture from grandparents. However, minor children are not legally allowed to own property.  Your estate plan can include grandchildren, with the right strategies and tools, says a recent article titled “Elder Care: How to provide for your youngest heirs” from the Longview News-Journal.

If a beneficiary designation on a will, insurance policy or other account lists the name of a minor child, your estate will take longer to settle. A person will need to be named as a guardian of the estate of the minor child, which takes time. The guardian may not be the child’s parent.

The parent of a minor child may not invest and grow any funds, which in some states are required to be deposited in a federally insured account. Periodic reports must be submitted to the court, and audits will need to be done annually. Guardianship requires extensive reporting and any monies spent must be accounted for.

When the child becomes of legal age, usually 18, the entire amount is then distributed to the child. Few children are mature enough at age 18, even though they think they are, to manage large sums of money. Neither the guardian nor the parent nor the court has any say in what happens to the funds after they are transferred to the child.

There are many other ways to transfer assets to a minor child to provide more control over how the money is managed and how and when it is distributed.

One option is to leave it to the child’s parent. This takes out the issue of court involvement but may has a few drawbacks: the parent has full control of the asset, with no obligation for it to be set aside for the child’s needs. If the parents divorce or have debt, the money is not protected.

Many states have Uniform Transfers to Minors Accounts. In Pennsylvania, it is PUTMA, in New York, UTMA and in California, CUTMA. Gifts placed in these accounts are held in custodianship until the child reaches 18 (or 21, depending on state law) and the custodian has a duty to manage the property prudently. Some states have limits on the amount in the accounts, and if the designated custodian passes away before the child reaches legal age, court proceedings may be necessary to name a new custodian. A creditor could file a petition with the court if there is a debt.

For most people, a trust is the best option for placing funds aside for a minor child. The trust can be established during the grandparent’s lifetime or through a testamentary trust after probate of their will is complete. The trust contains directions as to how the money is to be spent: higher education, summer camp, etc. A trustee is named to manage the trust, which may or may not be a parent. If a parent is named trustee, it is important to ensure that they follow the directions of the trust and do not use the property as if it were their own.

A trust allows the assets to be restricted until a child reaches an age of maturity, setting up distributions for a portion of the account at staggered ages, or maintaining the trust with limited distributions throughout their lives. A trust is better to protect the assets from creditors, more so than any other method.

A trust for a grandchild can be designed to anticipate the possibility of the child becoming disabled, in which case government benefits would be at risk in the event of a lump sum payment.

There are many options for leaving money to a minor, depending upon the family’s circumstances. Your estate can include grandchildren if you do it right. In all cases, a conversation with an experienced estate planning attorney will help to ensure any type of gift is protected and works with the rest of the estate plan. If you would like to learn more about planning for future generations, please visit our previous posts. 

Reference: Longview News-Journal (Feb. 25, 2022) “Elder Care: How to provide for your youngest heirs”

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Do you need an attorney for probate?

Do You Need an Attorney for Probate?

Do you need an attorney for probate? Having an estate planning attorney manage the probate process can alleviate a great deal of stress for the family, says the recent article “Reasons to hire a lawyer for probate” from The Mercury.

For one thing, the attorney will know what your state requires in the way of executing the will. You may need to pay a state inheritance tax, or you may have to file certain documents specific to your state. Even if the surviving spouse is the only beneficiary and all assets are either jointly titled or are distributed through beneficiary designations, there are other details you may miss.

A surviving spouse will certainly appreciate not having to undertake a mountain of paperwork or electronic forms on their own, especially if there are no adult children living nearby to help. Which beneficiary form needs to be completed, and what will financial institutions need to change accounts to the proper ownership? It can be daunting, especially during mourning.

Depending upon the state, there may be exemptions, discounts and deductions from the estate. A layperson likely does not know if their state deducts the attorney’s fees and/or the executor fees. Even attorneys who do not practice estate law do not always know about these potential benefits.

An estate planning attorney will also know how long the probate process will take. If the surviving spouse is the executor and is unable to attend probate court, some cases accept a remote process. There are also COVID-specific procedures in some states, which a layperson may not know about.

If there are family disputes between beneficiaries regarding distribution, an estate planning attorney could be a very important resource. There may need to be a settlement agreement created that conforms to the state’s law. If it is not handled properly, the agreement could be deemed invalid if challenged in court.

What if the family home is being sold? Sometimes executors working without an attorney do not realize the requirements from title insurance companies regarding the sale of a property where one of the parties has passed. Failing to make sure that these requirements are met, could delay the settlement of the estate and put the property sale in jeopardy.

If there are health or creditor issues, or disputes over property, an estate planning attorney is invaluable in protecting the surviving spouse and/or executor. In many cases, the estate is left with substantial medical bills, Medicaid claims or related costs. Executors may not know their rights, or how to defend the estate. A knowledgeable estate planning attorney will. You need an attorney to ensure that all of your bases are covered for your probate hearing. If you would like to learn more about probate and trust administration, please visit our previous posts. 

Reference: The Mercury (Feb. 8, 2022) “Reasons to hire a lawyer for probate”

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Why You should review Estate Planning

Why You should review Estate Planning

There is a line from John Lennon that states, “Life is what happens to you while you’re busy making other plans.” This is especially true when reviewing your estate planning. Maybe your estate plan was created when you were single, and there have been some significant changes in your life. Perhaps you got married or divorced. You also may now be on better terms with children with whom you were once estranged. This is why you should periodically review your estate planning to ensure they are accurate and up-to-date.

Tax and estate laws can also change over time, requiring further updates to your planning documents.

WMUR’s recent article entitled “The ‘final’ estate-planning step” reminds us that change is a constant thing. With that in mind, here are some key indicators that a review is in order.

  • The value of your estate has changed dramatically
  • You or your spouse changed jobs
  • Changes to your income level or income needs
  • You are retiring and no longer working
  • There is a divorce or marriage in your family
  • There is a new child or grandchild
  • There is a death in the family
  • You (or a close family member) have become ill or incapacitated
  • Your parents have become dependent on you
  • You have formed, purchased, or sold a business;
  • You make significant financial transactions, such as substantial gifts, borrowing or lending money, or purchasing, leasing, or selling assets or investments
  • You have moved
  • You have purchased a vacation home or other property in another state
  • A designated trustee, executor, or guardian dies or changes his or her mind about serving; and
  • You are making changes in your insurance coverage.

Your should review your estate planning after every major change of life. Sit down with your estate planning attorney and take the time to review your planning. If you would like to read more about making changes to your estate planning, please visit our previous posts.

Reference: WMUR (Feb. 3, 2022) “The ‘final’ estate-planning step”

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Debt doesn’t disappear when someone dies

Debt doesn’t Disappear when Someone Dies

There are two common myths about what happens when parents die in debt, says a recent article “How your parents’ debt could outlive them” from the Greenfield Reporter. One is the adult child will be liable for the debt. The second is that the adult child won’t. Debt doesn’t disappear when someone dies.

If your parents have significant debts and you are concerned about what the future may bring, talk with an estate planning attorney for guidance. Here’s some of what you need to know.

Creditors file claims against the estate, and in most instances, those debts must be paid before assets are distributed to heirs. Surprisingly to heirs, creditors are allowed to contact relatives about the debts, even if those family members don’t have any legal obligation to pay the debts. Collection agencies in many states are required to affirmatively state that the family members are not obligated to pay the debt, but they may not always comply.

Some family members feel they need to dig into their own pockets and pay the debt. Speak with an estate planning lawyer before taking this action, because the estate may not have any obligation to reimburse you.

For the most part, family members don’t have to use their own money to pay a loved one’s debts, unless they co-signed a loan, are a joint-account holder or agreed to be held responsible for the debt. Other reasons someone may be obligated include living in a state requiring surviving spouses to pay medical bills or other outstanding debts. If you live in a community property state, a spouse may be liable for a spouse’s debts.

Executors are required to distribute money to creditors first. Therefore, if you distributed all the assets and then planned on “getting around” to paying creditors and ran out of funds, you could be sued for the outstanding debts.

More than half of the states still have “filial responsibility” laws to require adult children to pay parents’ bills. These are old laws left over from when America had debtors’ prisons. They are rarely enforced, but there was a case in 2012 when a nursing home used Pennsylvania’s law and successfully sued a son for his mother’s $93,0000 nursing home bill. An estate planning attorney practicing in the state of your parents’ residence is your best source of the state’s law and enforcement.

If a person dies with more debts than assets, their estate is considered insolvent. The state’s law determines the order of bill payment. Legal and estate administration fees are paid first, followed by funeral and burial expenses. If there are dependent children or spouses, there may be a temporary living allowance left for them. Secured debt, like a home mortgage or car loan, must be repaid or refinanced. Otherwise, the lender may reclaim the property. Federal taxes and any federal debts get top priority for repayment, followed by any debts owed to state taxes.

If the person was receiving Medicaid for nursing home care, the state may file a claim against the estate or file a lien against the home. These laws and procedures all vary from state to state, so you’ll need to talk with an elder law attorney.

Many creditors won’t bother filing a claim against an insolvent estate, but they may go after family members. Debt collection agencies are legally permitted to contact a surviving spouse or executor, or to contact relatives to ask how to reach the spouse or executor.

Debt doesn’t disappear when someone dies. Planning in advance is the best route. However, if parents are resistant to talking about money, or incapacitated, speak with an estate planning attorney to learn how to protect your parents and yourself. If you would like to learn more about managing debt and property after a loved one passes, please visit our previous posts. 

Reference: Greenfield Reporter (Feb. 3, 2022) “How your parents’ debt could outlive them”

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A trust provides more flexibility than a will

A Trust provides more flexibility than a Will

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests and digital assets. There is no minimum amount of money needed to establish a trust. A trust provides more flexibility than a will.

US News’ recent article entitled “Trusts Explained” explains that trusts can be structured in a number of ways to instruct the way in which the assets are handled both during and after your lifetime. Trusts can reduce estate taxes and provide many other benefits.

Placing assets in a trust lets you know that they will be managed through your instructions, even if you’re unable to manage them yourself. Trusts also bypass the probate process. This lets your heirs get the trust assets faster than if they were transferred through a will.

The two main types of trusts are revocable (known as “living trusts”) and irrevocable trusts. A revocable trust allows the grantor to change the terms of the trust or dissolve the trust at any time. Revocable trusts avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.

To totally remove the assets from your estate, you need an irrevocable trust. An irrevocable trust cannot be altered by the grantor after it’s been created. Therefore, if you’re the grantor, you can’t change the terms of the trust, such as the beneficiaries, or dissolve the trust after it has been established.

You also lose control over the assets you put into an irrevocable trust.

Trusts provide you with more flexibility to control your assets than a will does. With a trust, you can set more particular terms as to when your beneficiaries receive those assets. Another type of trust is created under a last will and testament and is known as a testamentary trust. Although the last will must be probated to create the testamentary trust, this trust can protect an inheritance from and for your heirs as you design.

Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney. If you would like to read more about trusts, please visit our previous posts.

Reference: US News (Feb. 7, 2022) “Trusts Explained”

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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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