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Communication is the key. Talk to your heirs if you are doing something unusual and unnatural regarding the disposition of your estate. An explanation can go a long way in helping to minimize litigation. Especially when you are making an uneven distribution or excluding a child or grandchild. It always helps to explain why you are doing this.
Periodically review your estate planning documents with your attorney. Your estate plan will need to be updated due to a major life change, such as the death of a beneficiary, a divorce or significant change in financial circumstances.
Most states will recognize and honor a “no contest” clause. This can also help minimize or discourage legal disputes.
Disposing of your personal belongings can be critical. Many times it is the insignificant items that can delay the administration of the estate. It’s the items that really have little monetary value that are of more sentimental value to a family member. By specifically mentioning these items in your Will or Trust or having a personal property memorandum that specifically lists your personal belongings and who is to receive what, this can minimize the aggravation and litigation later.
Finally, make sure your estate planning documents are prepared properly. Avoid the do-it-yourself or online kits. These can wreak havoc on your estate and only create litigation later.
Whenever someone disagrees with the decedent’s Last Will and Testament there are numerous grounds on which a Will can be challenged.
Typically a will contest involves an allegation that the testator, or person who made the Will, lacked mental capacity, i.e. that they were not of sound mind due to mental and/or physical illness, or the effects of drugs or alcohol.
A Will can also be challenged if there was fraud, coercion, duress or undue influence. In other words if the person who made the Will was threatened or forced into writing a Will that did not truly reflect what their wishes were, then the Will can be challenged.
Another reason to challenge a Will is that the laws regarding execution and/or witnessing were not complied with. It is not uncommon, especially in today’s day and age with people who decide to write their own Wills, to have the wrong person witness a Will. If this happens, it could prove fatal to the Will and/or the wishes of the decedent.
Whenever someone passes away, the administration of the estate may involve determining whether the decedent’s Will is valid. If an individual dies without a Will, then the State of Ohio determines how the assets are divided under the Statute of Descent and Distribution.
Using a competent Probate and Estate Attorney can help avoid mistakes in the administration of an estate. Using a capable Probate and Estate Attorney can also help to expedite the administration process.
An experienced Probate and Estate Attorney can also help to protect an executor from making mistakes in the administration of the estate. This is important because ultimately the executor is personally liable for any legal or financial mistakes.
A competent and experienced Probate Attorney can help to minimize mistakes, expedite the administration of the estate and ultimately save time and money.
Written by Wilson Stoyanoff, PLC
The most significant part of estate administration is the probate process. Probate is the process of administering your estate through the court system after you die. It is set up to pay the debts you owe and distribute the remaining assets to your beneficiaries. In Virginia, probate is handled in the circuit court of the county or city where you last lived.
During probate, a personal representative is appointed by the court. This will be an executor (if you die with a will) or administrator (if you don’t have a will). Notice of probate will then be filed, your property inventories, your debts paid and your remaining assets distributed.
Beneficiaries must be patient. Distributions from the probate estate cannot be compelled until six months after the appointment of the representative. An accounting must be filed by your personal representative no later than 16 months after appointment. Typically probate takes 9 months to two years to complete. If your will is contested, this process could take years to resolve.
In addition to probate filing fees, your personal representative is entitled to reasonable compensation for the administration of your estate, to be approved by the court. Under Virginia’s guidelines, the fees are calculated on a sliding scale, starting at 5% of the first $400,000. All of this is a matter of public record, available to anyone who is interested.
Not all of your assets are included in the probate process. Assets that pass by operation of law, rather than via your will are called non-probate assets. Non-probate assets include property owned as joint tenants with right of survivorship (typically real estate, but often including joint bank accounts or brokerage accounts). In Virginia, married couples can own property as tenants by the entireties. This form of ownership has the advantage of survivorship and in addition, the creditors of one spouse cannot reach this property. In either case, on death of one tenant (owner), the survivor owns these assets outright.
Other non-probate assets include life insurance, annuities and retirement accounts such as 401(k) and IRA plans, where you name a beneficiary in the contract. Other financial assets may be designated as “pay on death” or “transfer on death,” and will also pass outside of probate.
Written by Andrew Stratton
There is a wide variety of legal specializations that lawyers may choose to focus on including divorce, bankruptcy, criminal proceedings and probate law. A probate attorney is one specialty that many people don’t thoroughly understand. It isn’t as dramatic or glamorous as some of the high profile specialties, but it is an important one, indeed.
Probate is a process of sorting out the financial estate of a person who has died. A probate attorney has the important task of making certain that all claims and divisions regarding the deceased person’s property are done fairly and according to the law. When a person has left a will, there may be questions about validity and proper distribution.
Many times a will includes the appointing of a representative, called an executor, who will help in carrying out the wishes of the deceased. The executor is often chosen because he or she is a trusted family member or business associate.
This law is a complicated component of the U.S. justice system. It is often fraught with emotional upheaval with family members and friends who may already be in an anxious state due to the loss of their loved one.
During this process, creditors will be notified. Legal notices in newspapers and the like are required to be published for certain lengths of time in order for all money owed to be paid out before the remaining assets are divided up between the heirs. At times, real estate property may be willed directly to individuals. In other cases, there may be the need to sell it prior to the division of assets, which can add to the lengthy process.
Taxes must also be taken into consideration and paid during the proceedings. In this extremely complicated legal process, it is important to have an expert overseeing all details in order to alleviate as much stress as possible. Every state has laws that are unique to the region, so it’s important to employ a representative who is well acquainted with the locale.
This situation can last for months or even as long as a year before all is settled and property is fairly divided. Court and lawyer costs that are required can add up to a substantial amount. Many people try to avoid excessive expenses by setting up a living trust. In this case, ownership of property can be transferred while a person is alive via the trust. When a person dies, his beneficiaries will inherit the property in this manner, which can be a more private affair than the public division of proceedings. Whether to use a probate attorney or a living trust option is an individual choice.
Estate and probate litigation is on the rise. Some of it is caused by inadequate or poorly drafted estate planning documents that cause confusion or disagreement among heirs about the decedent’s intentions. Other battles are caused by festering old emotional issues and hard feelings between family members from past slights or, simply due to greed.
In contested estate or probate cases the litigants are usually related. When there is little or no bond, there is usually less incentive to reach a settlement.
As people have aged, accumulated wealth and live longer, they have also created more opportunity for abuse from next of kin helping themselves to their parents’ bank accounts, or even strangers who might prey on the elderly. Self-dealing, fraud, coercion, undue influence, duress, and the abuse of powers of attorney by family members, relatives or friends can all contribute to estate litigation.
As the American family has become more complicated, it has also become more dysfunctional and people are no longer bashful or embarrassed about suing family members. We are simply in a more litigious society than we were in the past. If people feel if they have been cheated, they are more than willing to pursue estate or probate litigation in order to right a wrong or what they perceive to be an injustice.
In estate or probate litigation an experienced attorney who has worked in the probate and estate process can usually predict the outcome. Wills and trusts that are most difficult to challenge are those that have been drafted by an experienced probate or estate attorney. When choosing a lawyer to handle estate or probate litigation ask how the lawyer charges, how long he or she has practiced, why they are qualified, and how much specific experience they have in estate or probate litigation.
Call it fallout from today’s challenging economy. More and more beneficiaries are looking for help after a deceased loved one passes away saddled by debt. When this occurs it must first be decided who, if anyone, is obligated to pay the debt. In most cases the surviving family member may not be personally responsible for the decedent’s debt, but the Estate may be.
If a surviving loved one or next of kin has obligated themselves personally or co-signed for the debt, then they could be liable, and may or may not have a claim for reimbursement from the decedent’s estate.
If someone passes away leaving debt where the surviving family member has not personally obligated themselves, then we must look at whether this particular debt is secured. For example, if there is real estate involved and there is a mortgage, lien or line of credit on the property, then the property is encumbered and that debt is secured. And, the creditor could initiate legal proceedings against the estate assets in order to try to collect the debt that is owed. If there was not enough equity in the assets to satisfy the debt, the creditor could try to pursue the estate for any deficiency.
If a decedent died with credit card debt, typically the credit card should be cancelled (unless the card is held jointly) and the credit card company contacted to see whether any credit life insurance exists to satisfy the debt. If not, the credit card company may file a claim against any joint card owner. If there is no joint card owner, the credit card company may file a claim against the Estate.
In cases where the decedent purchased and/or obtained credit life insurance to cover an obligation or debt, it will be used to satisfy the same. In every case this inquiry should be made.
If the decedent had a life insurance policy with a designated beneficiary, then those life insurance proceeds would not have to be used to satisfy the decedent’s debt. The same goes for TOD (Transfer on Death) or POD (Payable on Death) assets. These kinds of accounts belong to the designated person. The beneficiary of such an account does not have to use these assets to satisfy estate debts. The same goes for joint accounts with rights of survivorship.
If there are medical claims involved, most medical providers will accept insurance coverage payment and may in some cases negotiate the balance due to them with the Estate. The surviving family member or next of kin are not personally responsible, but the surviving spouse may be.
If an Estate is insolvent, i.e. insufficient assets exist with which to satisfy the decedent’s debts, then under Ohio law the debts would be marshaled and prioritized and paid according to Ohio’s priority of claims law.
If there are absolutely no estate assets available to satisfy any of the decedent’s debts, then the estate is considered insolvent. If creditors of the decedent are continually harassing the surviving family members, usually the estate or probate lawyer can send a letter to the creditor stating that the estate is insolvent and to remove them from their debtor file, or attempt to negotiate the claim.
Ohio law states that all creditors having claims against an estate shall present their claims to the Executor or the Administrator in writing. Ohio law further states that all claims must be presented within six months after the death of the decedent. If the claim is not presented within six months, it must be forever barred. This obviously applies only to claims against Probate assets or claims against unsecured assets.
Also under Ohio law an Executor or Administrator may accelerate the bar against claims against the Estate by giving written notice to a potential claimant that informs them that any claim that they may have against the Estate must be presented to the Estate within 30 days after receipt of the notice, or six months after the date of death of the decedent.
When a claim against an estate has been rejected, the claimant must commence an action within two months after the rejection or be forever barred from maintaining an action on the claim.
If the decedent had a fully funded trust at death, there may be provisions in the trust that give the trustee discretion to pay debts of the decedent. If payment of the debts is discretionary, there is Ohio case law that suggests creditors cannot force the trust to pay the claim. While there is not absolute authority on this issue, the likely result in an Ohio court is that, since the decedent did not have assets subject to administration by the probate court, the trust holding non-probate assets cannot be compelled to repay the creditor. Naturally, if payments of the decedent’s debts is mandatory in the trust language, then the trust must satisfy creditors.
The estate administrator has both a fiduciary duty and obligation to the beneficiaries and to the creditors. A basic tenet of estate administration is that debts must be paid before distributions can be made to beneficiaries assuming the estate is solvent. In order to protect the fiduciary of an estate from personal liability, reasonable efforts must be made to locate and satisfy the rights of creditors of the decedent. If the estate makes distributions to beneficiaries without addressing the creditors rights, the fiduciary of the estate may be personally liable unless the beneficiaries return any improper distribution they may have received from the estate to pay for any improperly unpaid debts.
A Will is a document that reflects the planned distribution of your assets.
If you wish to leave your entire Estate to your surviving spouse, you must have a Will. If there is no Will, the State of Ohio will write a Will for you according to the statute of descent and distribution and your surviving spouse may or may not get your entire Estate.
With a Will you can decide who gets your property and how much. A Will can also help reduce family disputes regarding the division of assets.
Most importantly and often overlooked, a Will can also name a guardian for a minor child and hold money beyond the age of 18 up until the age of 21. By having a Will you can help to minimize or avoid the chances of your ex-spouse getting or controlling your child’s money.
When you have no Will, you also lose control over who the fiduciary will be.
The easiest way to avoid Probate is to spend or gift your money to family, friends or charity. However, specifically avoiding Probate after you pass away can be done with the titling of property into joint tenancy with rights of survivorship (J&S), or payable on death (POD) accounts and transfer on death (TOD) accounts.
Beware of the Probate avoidance pitfalls. Keep in mind that a joint tenant/owner can withdraw the money at any time. Joint property can also be exposed to the claims of creditors. In addition, joint and survivorship or payable on death accounts automatically belong to the survivor and are contractual accounts which are outside the control of the Will. In other words, if a Will were to divide the Estate equally, and an individual set up certain accounts as J&S, POD or TOD, then those accounts would pass outside the Will and go directly to the individual.
Avoiding Probate could also cause the loss of what is called a stepped-up cost basis on greatly appreciated property, which would have otherwise gained a stepped-up or date of death value, and could have created significant tax savings and capital gains avoidance.
Probate is the process with respect to wrapping up someone’s affairs after they pass away.
This can include collecting the decedent’s assets, preserving the same, inventorying, insuring, and appraising the assets. It also includes collecting, addressing and dealing with all the debt and payment of debts.
The Probate process also includes admitting the Will if one exists, administering the Trust if properly funded, filing the appropriate tax returns, and finally the distribution of assets according to the Will or law.
The Probate process can involve the aforementioned duties and responsibilities as well as legal paperwork and possibly Court Hearings. The fees associated with Probating the Estate may be paid from the decedent’s Estate.
Written By McNichol & Tillem and Posted on NapaValleyRegister.com
Dear Len & Rosie, Before my dad died, he and my mom set up a living trust. When my husband and I set up our own trust, our attorney advised us to retitle our house in the trust’s name. My mom’s attorney told her that this wasn’t necessary. He said since she’s leaving the house to her trust in her will, she doesn’t have to go through the hassle and expense of changing the title on her house. My parents kept their home in joint tenancy.
Would it be better for her to change the title of her house to her trust? She wants to do the right thing. Would she have to do it in person, or can she do it by mail? She’s in her 80s and she likes to save her energy for going only places she really likes to go. The courthouse isn’t one of them. — Suzanne
Dear Suzanne, Think of a revocable trust as a great big basket that avoids probate. Everything in the basket will pass to your parent’s beneficiaries without the court’s involvement, unless there’s a legal dispute within your family. Everything out of the basket is subject to probate, probate fees, and probate delays, except for assets with pay-on-death beneficiaries, and assets held as Joint Tenants or Community Property With Right Of Survivorship.
Your parents’ home avoided probate because it was titled in Joint Tenancy between your mother and father. But now the property is titled solely in your mother’s name. She could retitle the home in joint tenancy with the children, but that’s a bad idea because she will no longer be in control of her own home, and her home would be subject to claims from her children’s creditors. She needs to put her home into the trust.
If your mother dies and the home is not in the trust, it is possible to obtain a court order declaring the home to be trust property in order to avoid probate. The appellate court decision in a case named “Estate of Heggstad” will allow your parents’ successor trustee to go to court, on bended knee, and say, “Your Honor, my parents spent thousands of dollars creating a trust to avoid probate, but they just didn’t get around to signing a new deed. Please, oh please judge, say that the home is really part of the trust because my parents really, really meant to do it and it’s not their fault.”
The petition is likely to succeed. We do about eight or 10 cases like this each year. It’s good money, for us that is. Your mother can help her children avoid spending this money by funding her trust. It is easy to fund the trust. Any estate planning attorney, even your own attorney, can prepare an affidavit of death of joint tenant, to remove your father’s name from the title of the home, and a deed from your mother conveying the home to herself as trustee of the trust. Your mother can sign the documents at the lawyer’s office, or before any Notary Public, and the lawyer can record them with the county recorder.
While you are at it, you should review your mother’s account statements to make sure that her other assets are in the trust except for her retirement accounts, for which you should also make sure your mother has designated beneficiaries. The whole point of having an estate plan is to make things easier for the children. Creating a trust is only half the job. Your mother should finish the job by funding the trust.
On some occasions the probate process can be avoided. Typically this happens when assets have been transferred prior to death or proper beneficiary designations have been made.
However, the probate process may be necessary where there is an issue involving the validity of a Will or Trust and/or the terms of the same. There may be an issue on whether the Will or Trust was properly executed or whether the testator or grantor had the requisite mental capacity. If there are issues in dispute, then the probate process will be necessary.
Probate may also be necessary if the decedent did not have a Will or Trust and legal process must be followed in order to transfer title to assets that were not transferred prior to death. Probate is also required where assets were owned solely by the decedent and there were no other owners or designated beneficiaries of the asset. Probate may also be necessary in order to get the decedent’s name off of an asset and into a beneficiary’s name, such as real estate, car, or other assets.
Probate may be required if an asset was owned in a tenancy in common or joint tenancy and there was no designation regarding any survivorship interest for the passing of the same.
To summarize, probate is typically required where there is no designated beneficiary or surviving tenant on an account.
Written by Wight Auction
Litigation after the death of a loved one is never easy. It often pits relatives against relatives and can be very stressful. It is not something you want to happen when your loved ones are already dealing with their loss. How can you make sure your loved ones don’t fight or become involved in litigation over your estate?
Here are some things you can do to help avoid litigation:
1. Communication. Inform your heirs if you are making a distribution that is “not natural.” A “natural” disposition is when you leave your estate to your heirs such as your children and grandchildren. An “unnatural” disposition is where you disinherit your natural heirs and leave your entire estate to someone you have known for 6 months, for example, or a caregiver, or other distant family members or charities. It is of course up to you who you choose to inherit your estate but it will help to avoid discord later if you tell your heirs what you are doing. You can discuss it with them or leave them a letter of explanation. Litigation develops when the individuals who thought they would be receiving an inheritance find out after your death that they were disinherited or will not be receiving an asset or a portion of your estate that they thought they were getting. So if you do want to exclude a child, for example, or make an uneven distribution of your estate among your children, tell them about it or in some manner explain it so it doesn’t come as a complete shock.
2. Have properly prepared legal documents. Make sure your estate planning documents are properly prepared. So often, litigation arises because of wills or trusts that were not properly drafted in the first place. If you are concerned about someone contesting your will or trust, you certainly don’t want to do it yourself or use a “trust mill” or online service. You want customized properly drafted documents so there is no ambiguity as to your wishes. Also, most estate planning lawyers also do trust administration. Frequently it is the case that surviving family members will call the lawyer that drafted the estate plan, so choosing a trusted lawyer that you can work with during your lifetime may also be someone that can assist your family upon your death.
3. Keep your estate planning documents up to date. If you have neglected to update your trust to add or remove beneficiaries after a death, divorce, or other changed circumstance, or worse yet, neglected to change payable on death designations, you are asking for trouble. An up to date estate plan (which includes a trust, pour over will, and powers of attorney for asset management and health care) makes it less likely for uncertainty upon your death. Also necessary as part of the periodic review of your estate plan is to have the beneficiaries updated as necessary on life insurance polices, IRAs, pension plans, etc. The last thing you probably want is your ex-spouse receiving life insurance benefits when you were divorced 10 years ago.
4. Include “no contest” clauses in your estate planning documents. Most wills and trusts have a “no contest” clause. This can discourage disputes over a will or a trust because it provides that someone who contests certain provisions in your estate plan will not be entitled to an inheritance. Depending on where you live, some “no contest” clauses can be easily overcome.
5. Don’t forget to provide for your personal property. Dividing up personal property and family heirlooms is another area which, believe it or not, can become a battleground. Family members sometimes hold up the rest of the estate administration over property that has little monetary value but has great sentimental value. Unless you have left specific instructions, your personal property will be divided up among the beneficiaries. But how does you executor or trustee know how to determine an equal distribution of items that have sentimental value? What do you do if both daughers want (and may have been promised) grandmother’s ring? If you have personal property and you want it to go to a certain family member or a friend, there are several ways to do it. You can make a specific bequest of an item in your will or trust. This is a preferable way for items of value. You can also execute a personal property memorandum listing each item and who is to receive it. This can be changed or added to at any time before your death. There are even online auction sites that will divide up the personal property among family members if you sign up before your death.
Taking the time to incorporate some of these ideas into your estate planning can avoid disputes over your estate that are not only costly in terms of money but also in terms of family harmony.
Written By Ashlea Ebeling on Forbes.com
Lawyers see litigation and administrative nightmares resulting from political impasse.
Barring a last-minute political deal, the federal estate tax is set to disappear as of Jan. 1, 2010–for just one year. Democratic leaders of Congress are vowing to resurrect the tax retroactively sometime next year, but the impending lapse has estate planners in a tizzy. They worry the lapse could turn into a nightmare for some families.
“We may have to change every other client document,” laments Carol Harrington, the head of the Private Client Group at McDermott Will & Emery.
The one-year repeal of the estate tax has been a part of the law since the Bush tax cuts were passed in 2001. In 2011, when those tax cuts expire, the estate tax will come roaring back to life with a $1 million per estate exemption from tax and a 55% top rate. By contrast, for those dying in 2009, $3.5 million of each estate is exempt from federal tax and the top estate rate is 45%.
But the reality is that the families of those who die during the lapse–including those who aren’t so wealthy–may not save any tax and could face a real mess. “Beneficiaries will deal with uncertainty for years,” warns Kaye Thomas, a tax lawyer who opines on tax issues at his Web site, fairmark.com. “Having a brief period when the estate tax doesn’t apply will almost surely lead to questions as to whether wills and trusts drafted under the assumption that the tax would remain in force truly reflect the intent of the decedent,” he adds.
An unlimited amount can be left to a spouse tax-free. So estate planning documents drafted for couples often include formula clauses designed to preserve the estate tax exemption of the first spouse to die. But those clauses could spell trouble during the lapse.
Here’s how one such clause might backfire: A man has $6 million in net worth and his will gives his children from his first marriage the “exemption” amount with the rest going to his second wife. If he dies in 2009, when the exemption is $3.5 million, wife No. 2 is left with $2.5 million and the $3.5 million going to the kids is exempt from estate tax. Sounds fair and tax-savvy.
But if the man dies on Jan. 1, his will could be interpreted to leave the entire $6 million to his children with his widow left out in the cold. Imagine the family feuds–and litigation.
Even if the family gets along, and with no second-marriage issue, a will that unintentionally transfers all assets to the kids could create huge problems, including incurring extra state estate taxes (23 states and the District of Columbia have their own estate taxes).
In addition, if Congress reinstates the estate tax retroactively, some heirs of those who die during the no-estate tax time period are likely to put up a fight instead of paying big bucks in estate tax. “If there’s a significant estate, you’re going to have litigation,” predicts Donald Hamburg, an estates lawyer in New York City.
The question for the courts would be: “Is the retroactive estate tax an unconstitutional ex post facto law?” To be sure, a constitutional challenge is a long shot. Taxpayers sued and lost on whether it’s constitutional to retroactively increase the top estate tax rate in Nationsbank of Texas v. U.S. In that case, a woman died in March 1993, when the estate tax was 50%, with a $28 million estate. But as part of the 1993 budget deal, Congress later raised the rate for 1993 deaths retroactively to 55%. Her heirs sued over the extra tax, took it up to a Court of Appeals and lost. They were denied a hearing by the U.S. Supreme Court.
Still, the retroactive imposition of a tax–as opposed to a retroactive tax rate increase–is arguably different, says Blanche Lark Christerson, managing director at Deutsche Bank Private Wealth Management.
Heirs would have to wait until the constitutional issue is resolved in the courts before they get their inheritances. “It certainly will mean that inheritances will be delayed in whole or in part,” says Linda Hirschson, an estate lawyer with Greenberg Traurig in New York.
As a practical matter, people can take the position that the tax is retroactive and they’re not going to fight it, or they can take the position it’s not retroactive and gear up for a fight with the IRS and later in the courts. If they take the latter position, they’d better keep funds in the estate until things have cleared up, Hirschson says.
While only perhaps 5,500 estates over $3.5 million would have a tax problem with the retroactive imposition of the estate tax, tens of thousands of smaller estates still face a logistical and tax mess during the period the law has lapsed. As part of the current law, during the one year that the estate tax disappears, so too does a provision which gives all inherited assets a “step-up” in basis to their value at the time of the owner’s death. (Step-up means heirs can sell right away without owing any capital gains taxes.)
Instead, for the one year of the estate tax lapse, only the first $1.3 million in assets gets a step up in basis. That means heirs of some estates larger than that will have to pay lawyers and accountants extra to figure out which assets to include in the $1.3 million. Moreover, they may not even know what the original cost of various assets was.
Harrington notes that if there’s a surviving spouse, he or she can get an additional $3 million of assets that have been stepped up. So in theory, some estates might be able to shield up to $4.3 million from capital gains, depending on how an estate plan is drafted.
Still, the loss of step-up is a key reason planners assumed the politicians–if they wanted to keep their jobs–would change the law before 2010. Congress actually repealed step-up once before, but never allowed the provision to take effect because of the outcry from families, lawyers and accountants.
With all these problems there is a potentially huge planning opportunity, says Hamburg.
Along with the repeal of the estate tax is the repeal of the so-called “generation-skipping tax” (GST), a stiff extra tax that applies to transfers to grandchildren and others, which is designed to limit multigenerational gifts that skip a generation of tax. Wealthy grandma can make significant gifts to grandchildren using multigenerational trusts, paying a gift tax (which isn’t repealed) but no GST. “Lawyers are talking about setting up these trusts in January,” Hamburg says. It’s not clear if this will work if Congress reinstates the GST retroactively and it is held to be constitutional.
Where will this all settle? An estate tax with a $3.5 million per-person exemption ratcheting up to $5 million over 10 years, and a 35% top rate (or perhaps a top rate tied to the top personal income tax rate), predicts Dean Zerbe, national managing director with the AlliantGroup and former tax counsel to Sen. Charles Grassley, R-Iowa.
“This is a classic football exercise–you get politicians on both sides posturing,” Zerbe says. “The biggest winners out of this are the estate tax attorneys. It’s a sad day for everybody else.”
While planners have bemoaned the uncertainty since 2001, few believed the politicians would be reckless (or deadlocked) enough to let the tax expire and then come back. They always assumed there would have to be some sort of a political deal before time was up.
“I’ve never seen Congress do anything so stupid,” says Harrington. “The uncertainty is paralyzing. We were not cynical enough.”
You might think heirs of those who die between Jan. 1 and the signing of a new estate tax law will be in luck. That’s why there have been jokes about 2010 being the year to “throw mama from the train” or to send Dad hunting with Dick Cheney.
Published on NapaValleyRegister.com By McNichol & Tillem
Dear Len & Rosie, I have heard conflicting information about trusts vs. wills regarding probate. If you only have a will, does it have to go through probate in California? If so, how long does that process take and how much does the family lose to probate? – Charlotte
Dear Charlotte, The answer to the question, “Is my estate going to pass through probate,” does not depend on whether or not you have a will. The need for probate depends on the value of your probate estate, which consists of everything titled in your name upon your death, outside of a trust and without joint tenants or pay on death beneficiaries.
If the total value of your estate is less than $100,000, your heirs can collect your estate 40 days or more after your death, with small estate declarations described in section 13101 of the California Probate Code.
Many banks have their own forms for this, so a lawyer may not be needed at all. Transferring real property of small value is harder. Your heirs will have to have the property appraised by a California Probate Referee and petition the court. But it’s still a lot easier, faster, and cheaper than a full-blown probate.
If the total value of your estate is $100,000 or more, then probate is necessary. Probate is time-consuming and typically takes anywhere from 12 to 18 months. Probate is also expensive. Probate lawyer fees are set by statute as follows:
• 4 percent of the first $100,000
• 3 percent of the next $100,000
• 2 percent of the next $800,000
• 1 percent of the amount above $1 million
The lawyer for a modest $500,000 estate gets paid $13,000. Since the executor gets the same amount, the total fee is doubled to $26,000. And this does not count “extraordinary” fees that are routinely approved by the court for “extra” work such as selling your home.
How can you avoid this? The operative word here is “estate.” Assets in your probate estate must pass through probate or by small estate declarations and petitions. The trick is to hold title to your assets outside of your probate estate so they will not be subject to probate after your death.
You can avoid probate by holding title to your assets in joint tenancy with your heirs, or by using bank account pay-on-death beneficiary designations.
Surviving spouses inheriting an estate can also avoid probate with a spousal property petition. The problem is that joint tenancy can backfire.
Your children may decide to take the money and run — it happens sometimes. Also, if your children are on title to your home, you’ll have to ask them permission if you want to sell your home or take out a new loan. Your home could even be subject to the claims of their creditors.
For these reasons, the best way to avoid probate is with a revocable trust. Trust assets are not part of your probate estate and are therefore not subject to probate.
A revocable trust is also completely under your control so you will not have to seek your children’s approval for what you do with your own property.
From Bryan, TX: My 10 year old son inherited property with his father as trustee. Currently all title and tax papers all show the deceased still as the owner and responsible party. Should the lawyer have changed all this after the will was probated. We used the same lawyer to probate as the one who wrote the will for the deceased. Where do I start?
James P. Frederick, Attorney licensed in Michigan, states: I would call the lawyer first and make sure that things are actually as you believe them to be. Title should be changed as part of the probate process. Indeed, that is generally the only reason to go through probate administration, in the first place. If the estate has been closed, you need to check to make sure the PR still has legal authority to transfer title. If the lawyer does not give you a clear answer, I would consult with another lawyer or go to the probate court. I am not sure what tax papers you refer to, but it is probably that those can be changed, outside of the probate proceeding, once you are sure that ownership has changed.
Steve Fromm, Attorney licensed in Pennsylvania, states: The prior lawyer makes some good points. After the estate administration is completed, it would seem that the property has to be placed into a trust for your son and that transfer of title is imperative. In addition, such trust needs its own employer identification number. You need to ask the attorney for a roadmap of how things will proceed and the timetable he thinks will be needed.
For days a courtroom packed with attorneys and grieving family and friends argued about not only who should have custody of Anna Nicole Smith’s baby girl, but also how and where to bury Smith’s body. The same fight erupted over singer James Brown, whose body wasn’t buried for months because family members fought over his wishes. Such battles are not just for celebrities. Ohio House Bill 426, referred to as the Right of Disposition Bill, went into effective on October 12, 2006, to help prevent legal battles like these.
Have disputes about disposing of bodies been on the rise in Ohio? If so, why?
It is increasingly common for more than one family to have an interest in funeral arrangements when someone dies. Upon a death, a second spouse and children from a first marriage may not agree on these arrangements. If the deceased’s wishes are not spelled out in a legal document, this can lead to a court battle.
What are some of the funeral issues that lead to court battles?
There may be disputes about what type of religious observance, if any, should be performed, where the deceased should be buried, or whether the deceased would have preferred cremation over burial.
How does Ohio law address potential conflicts?
House Bill 426 authorizes individuals to name a person in a written document that meets certain requirements to make their funeral, burial or cremation arrangements. Section 2108.72 of the Ohio Revised Code (ORC) includes these requirements and a specially designed form that can be used specifically for this purpose.
Assuming these requirements are met, a will also may include such an authorization. Be aware, though, that a standard will must be adapted to meet these requirements. Also, people often wait until several days after the funeral to consult a will. If an appointment of an agent with right of disposition is included within a will, close relatives or friends should be informed about the appointment when the will is drafted.
What happens if a person fails to name anyone in a document?
This Ohio law also says that, if a person fails to take this step, then a prioritized list of individuals will be authorized to make such decisions. The first person with such authority is the decedent’s surviving spouse. If there is no spouse, then authority falls, in order, to: adult children, parents, siblings, grandparents, lineal descendents (children, etc.) of grandparents, the person’s guardian, or, finally, to a person willing to accept the responsibility (such as a clergyperson).
Are there any safeguards in place in case the person designated to make such arrangements is no longer the “appropriate person” to do so?
If the person designated to make the funeral arrangements is being charged with murder, manslaughter or domestic violence related to the death of the deceased, then he or she is disqualified. A person may be disqualified if a divorce action is pending at the time of death. The probate court also can step in if the designated person is estranged from the decedent at the time of death.
Does the law allow a person designated as having the right of disposition to make any other decisions after someone has died?
Yes. House Bill 426 gives the designated person the authority to consent to an autopsy or postmortem examination on the deceased person’s behalf.
Can an individual designate a group of persons rather than one person to make decisions?
Yes. A group of persons may be authorized. If the persons in the group or class disagree, however, the decisions of the majority prevail. If, after reasonable efforts, not all of those in the group or class have been located, the decisions of the majority of those who have been located prevail. If a majority of the persons cannot reach a decision, an interested party can ask the probate court to step in. The probate court of the county in which the declarant or deceased person lived at the time of death then decides who should have authority to make a decision after considering the same criteria as when the court assigns a statutory right of disposition.
What criteria does the court consider in deciding whether a particular person should be given authority to make funeral decisions?
The court considers:
- whether the evidence demonstrates a close personal relationship between the deceased and the person(s) seeking authority to make decisions;
- the reasonableness and practicality of that person’s plans for the deceased person’s funeral, burial, cremation or final disposition;
- the willingness of the person to assume responsibility to pay for the funeral;
- the convenience and needs of other family members and friends wishing to pay their final respects; and
- the express written desires of the declarant or deceased person.