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Monday, November 7, 2016

Frequently Asked Questions About Probate

Joseph D. FairbankWhat is probate?

Probate is the court-authorized process for proving a will or distributing an intestate estate. When a person dies, they usually leave assets behind that are officially titled in their name. The most common examples of this are real estate, financial accounts, and vehicles. For example, if you own a house when you die and your spouse or children try to sell the property, they won’t be able to do so without your signature. Proving that you are deceased won’t waive this requirement—someone has to be authorized to sign the deed on your behalf to convey ownership of the house. This is the most important thing the probate process does: it authorizes someone to sign in your name, pay your debts, and distribute your property to your loved ones. The person authorized to settle your estate, your Personal Representative, is required to follow your directions in your will, if you have one.

Don’t I want to avoid probate?

In some states, the probate process is long, complicated, and very expensive. But Idaho follows the Uniform Probate Code, which has greatly simplified the process and reduced the time and cost of probating a typical estate. However, there are still factors that can motivate you to do planning to avoid probate. One such factor is concerns about privacy. If you go through probate, then your will must be filed with the court, and will become public record. The laws of probate also require a full inventory of your assets, but the inventory doesn’t always need to be filed with the court. If you don’t want your will (and possibly a list of your assets) to be available to the public, then you will want to plan ahead to avoid probate.

Another factor is ownership of real property in other states. If you own real property in more than one state when you die, your estate will need to be probated in every state in which you own property, multiplying the cost of probate. This can make things especially difficult (and expensive) where the property is located in a state with complicated probate laws, such as California or Illinois. If you own real property in more than one state, consider putting the property into a trust to eliminate the need for multiple probates.

Who should be my Personal Representative?

If you have a will, it will designate a person as your Personal Representative. You should choose someone responsible, whom you trust to follow your wishes in your will and treat your beneficiaries fairly. If you anticipate disagreements about division of your property, you should consider your Personal Representative’s relationships with the other beneficiaries and their ability to deal with that kind of pressure. Your Personal Representative does not need to be a beneficiary of your estate, though they certainly can be. You can even select a professional Personal Representative to handle the estate. A professional is paid for their time, but under certain circumstances their added experience and impartiality can make a big difference in making the division of your estate run smoothly.

If you don’t have a will designating a Personal Representative, then any related party may apply to be the Personal Representative. Competing applicants are measured based on their degree of relationship to the deceased. Spouses are given preference, then children or parents.

Do I have to go through probate more than once?

The general rule is that each person’s estate must be probated once, but there are exceptions. Some estates don’t have to be probated at all, such as where all assets of the estate are held in a trust, or where the estate is small enough to be handled by affidavit or summary administration (see below). Sometimes a probate can be effectively postponed, such as when one spouse of a married couple passes away and the entire estate goes to the surviving spouse. In this case, there’s typically no need for probate during the surviving spouse’s lifetime unless the surviving spouse takes some action requiring probate, such as a sale of real estate. Often the couple’s heirs can simply do a joint probate after the second death.

A second or third probate will also be necessary where the deceased person owned real estate in more than one state (see above).

Are there any shortcuts to probate?

If your estate is small enough, the estate can be essentially probated by summary administration. There’s also an abbreviated procedure where the spouse is the only beneficiary of the estate. Whether one of these shortcuts applies to your probate depends on the specific assets and liabilities of the estate. Talk to a probate attorney to see what approach best applies to your circumstances.

How can I keep my loved ones from fighting?

We’ve all heard stories of families that fell apart over who gets to keep Dad’s favorite hat, Grandma’s wedding band, or the mountain cabin. It’s difficult to make rational decisions about ownership of property during the emotional weeks following the death of a loved one, especially when the property holds high sentimental value to everyone involved. The emotionally charged nature of this process is unavoidable, but there are ways to plan or work around the worst of it.

The most important thing is to be clear in your will or other estate plan documents what your wishes are. If you clearly say your brother should inherit your best saddle, then your other beneficiaries will probably respect your wishes. Most wills provide for a separate “personal property memorandum” that allows you to keep a list of items and who should inherit them. Avoid vague devises like “my piano to whoever plays the best,” which can invite competition and resentment. And don’t be afraid to talk to your children and other beneficiaries about what you’ve decided. If they’re going to be surprised or disappointed, it’s better for them to hear it from you.

After a person’s death, during the probate process, there are ways a Personal Representative can deal fairly with multiple interested beneficiaries. Some groups of beneficiaries gather and take turns picking single items from the estate, following a fairly determined order or drawing names from a hat. Other families hold an auction with fake money. If you are a Personal Representative dealing with fighting family members, talk with your probate attorney about ways to settle things fairly.

What records do I need to keep?

If you are planning for your own probate, you should keep a record of your major accounts and property in a safe place. It’s also a good idea to keep a list of important usernames and passwords for online accounts, as well as combinations to any safes. Many Personal Representatives have been frustrated by a will locked in a safe, or important papers stuck in a safety deposit box. Plan for your Personal Representative to be able to access your important documents.

If you are a Personal Representative of an estate, you need to keep track of the deceased person’s assets from the date of death until the assets are distributed to the beneficiaries. Account for money spent on the funeral, taxes, final medical expenses, and miscellaneous bills. You will eventually need to provide the beneficiaries with a final accounting that shows what assets the deceased owned at death, expenses paid, and the division of remaining assets among the beneficiaries according to the will or laws of intestacy. Nothing frustrates a lawsuit against a Personal Representative better than clear, thorough recordkeeping. 

Do Personal Representatives get paid for their time?

The Personal Representative is entitled to “reasonable compensation” for his or her services. What constitutes reasonable compensation depends on the Personal Representative’s professional background. Most Personal Representatives have no training or experience in this type of work, and their time is compensated at a nominal hourly rate, around $10 per hour. If he or she is a CPA or attorney, or if he or she is a professional Personal Representative, then compensation will be higher. This compensation is considered an administrative expense of the estate and will be paid out of the entire estate, before dividing assets between the beneficiaries.

If you are serving as a Personal Representative, be cautious not to overpay yourself or pay for an unreasonable amount of time. Beneficiaries have been known to sue the Personal Representative for taking unreasonable compensation.

Do I really need a probate attorney?

Yes. If your loved one died and you are serving as Personal Representative, call a probate attorney today. It’s better to take control of the situation early rather than waiting until after family members have begun taking matters into their own hands. While it is possible to handle an estate without an attorney, it is very easy to make mistakes that open you to liability later or cause problems within the family. The cost of a probate attorney usually amounts to a very small percentage of the estate and makes the process go far more quickly and smoothly.

It’s also a good idea to get an estate planning attorney to help you prepare your own will or trust. See my article, What Happens If I Die Without a Will?

Joseph D. Fairbank at 9:34 AM No Comments | Post a Comment
Estate Planning
Monday, September 26, 2016

What Happens If I Die Without a Will?

Most people don’t really think about making a will until they reach retirement age, and even then, many put it off until it’s too late. But if you were to die without a will, have you ever thought about what would happen to your assets? Who would take care of your minor children? How necessary is a will, anyway?

If you die without a will, you’re said to have died intestate. Without a legally binding will to tell the world what you want done with your property, we have to guess. But a court can’t simply take statements from your family and friends about what they think you would have written in a will if you had one, based on your values and priorities. Instead, we have a set of laws that apply the same values and priorities to anyone who dies without a will. These are the laws of intestacy.

What happens to my property?

For example, suppose you have a girlfriend you love like a wife and a best friend you love like a brother, but you have a bad relationship with your family. If you wrote a will, you’d probably leave most of your property to your girlfriend and a special gift or two to your best friend. If you die without a will, however, the laws of intestacy decide where your property goes, and the laws of intestacy assume you want to give your property to your blood relatives. In Idaho, all your property would go to your parents. If your parents were not living, then your property would go to your parents’ other children (your siblings).

Think about the blended family, with the couple who each want to leave their property to their separate children. Under the Idaho laws of intestacy, the spouse would inherit one half of the dead spouse’s separate property and all of the “community property” (everything acquired or earned during the marriage except gifts or inheritance). What if a parent in this couple wanted to treat all of the children as his or her own? Without a will (and without legally adopting the children), the property would go only to the parent’s spouse and own biological children.

Or what about a couple who are living together but not married? Idaho doesn’t recognize common law marriages after 1995. So if someone in one of these types of relationships dies without a will, their partner can’t inherit. The law sees them as unmarried, so all the property would go to blood relatives. In fact, if a couple is married, it doesn’t matter how close they are. Even if the couple has separated, the spouse would take all of the community property and half of the dead spouse’s separate property without a will. If there are no children or living parents, then the spouse would take the entire estate.

Many people want (or need) to treat different children differently. Whether wealthy or poor, close or estranged, gifted or disabled, the laws of intestacy give each of your children the same equal share of your property. And that’s only if they’re your biological or legally adopted child. Even if you raised the child, without that legal relationship, the child will inherit nothing.

If you make a will, however, you can decide exactly who gets your assets when you die. You could leave everything to your neighbor and disinherit your entire family if you so choose. That’s the beauty of the will—it lets you keep control of your assets even after your death. 

What happens to my children?

If only one of the children’s parents dies, then the surviving parent continues to care for them. But if all parents are dead or otherwise disqualified as parents, it gets more complicated. The court can appoint legal guardians for children whose parents have died, but the process can be long, expensive, and messy. There could be many people angling for guardianship of your children when you die. Idaho law permits any family member or any “person interested in the welfare of the minor” to apply to the court for appointment as guardian. If a child is fourteen or older, then even the child may appoint someone to act as guardian.

Once the applications have been made, the court has to choose the guardian that would be in the best interests of the children. As you might guess, arguing over which applicant is best for the children can be complicated and emotional. Meanwhile, the court might have to appoint a temporary guardian, and choosing that guardian can take time. And the court may very well appoint a guardian ad litem for the children to work with the attorney hired to represent the children’s interests in court.

This is usually not what the parents would want for their children. If you make a will, you can designate a guardian for your children in the event of your death. As long as the person(s) you designate accept the appointment as guardian, and as long as they are not unfit to care for children, then the court will follow the will. Even if someone else could prove they would be a better guardian, the court will follow your wishes as expressed in your will.

Don’t wait to make your will. Talk to an estate planning attorney today about taking control of your assets and providing for your children. 

Joseph D. Fairbank at 8:38 AM No Comments | Post a Comment
Estate Planning
Monday, August 8, 2016

The Five Smartest Ways to Use IRAs (in estate planning)

One- Streeeeeeeeetch it Out

      The benefit of putting your retirement savings into a traditional IRA (as opposed to an ordinary savings or brokerage account) is that you can contribute your earnings pre-tax. Yes, you will have to pay income taxes on the money eventually. But the longer the money is invested in the account, the longer you put off paying the taxes. That means you can invest that money you would have paid taxes on, earning more money over time. And it means that when you do eventually have to pay the taxes, you might very well be in a lower tax bracket than when you’re at the height of your earning power. You can wait all the way until you turn 70½, when you have to start taking mandatory distributions. But even then, if you take the minimum required distributions, you can leave the rest of your money in there even longer, stretching out that tax benefit.

      So when you’re thinking about dipping into your IRA to buy that Corvette, think again. If you take the money out before you have to, you give up the benefits of putting off those taxes as long as possible. And if you’re younger than 59½ you’ll also have to pay a 10% early withdrawal penalty on top of the income taxes.

      The stretching concept also applies to someone who inherits your IRA after you die. If you leave your IRA to someone younger than you are, they’ll have a better chance to stretch out the tax deferral over time, maximizing the benefits of the IRA.

 

Two- Give it All to the Wife

      When you fill out the beneficiary designation form provided by your IRA account administrator, you can name anyone to receive the funds in your IRA when you die. You can give your hard-earned pre-tax cash to your kids, your brother, your favorite elementary school teacher—anyone you want. But if you’re smart, you’ll probably give your IRA to your spouse.

      When you die, your IRA will change to an “inherited IRA.” That means that whoever inherits the account will immediately have to start taking mandatory distributions that grow larger over the course of his or her life. And the payments get locked into that beneficiary’s life expectancy. That means that if you leave your IRA to your sister, and she dies and leaves your IRA to her kids, the IRA will still be making mandatory distributions over your sister’s life expectancy, even though it’s her younger kids who own it now. This is true for anyone who inherits your IRA, young or old.

      Anyone, that is, except your spouse.

      Your spouse can treat your IRA not as an “inherited IRA,” but as his or her own IRA. Your husband can roll it over and keep it until he turns 70½ just like you could. And when he leaves the IRA to your daughter, the IRA will make distributions according to your daughter’s life expectancy, not your husband’s. Making your spouse the beneficiary of your IRA is like getting a free extension on the tax benefits. And besides, you were going to leave most of your property to your spouse anyway, right?

 

Three- Give your Taxes to Charity

      Many people want to give to charitable organizations when they die. You might have a favorite charity, educational institution, hospital, or church that you want to support. You can’t take it with you, so you may as well do some good with it, right? If you do plan to give to a qualified charity, the smartest thing to give them is your IRA. A traditional IRA (not a Roth IRA) is composed of pre-tax income. By holding the funds in your IRA you can put off paying taxes on any of it until you turn 70½, but you still have to pay income taxes on every dollar you pull out.

      The great thing about charities, however, is that they are exempt from incomet taxes. Smart planners who want to give to a charity give from their IRAs, because the charities can take all the money and not pay a dime in taxes. For example, suppose you have an IRA worth $500,000 and other investments worth $500,000. Congratulations—you’re a millionaire. You could give your investments to your church and your IRA to your son. The church would get $500,000 but your son would get an account worth much less after he’s paid taxes on it, especially if he decides to withdraw it all at once, rather than stretching it out (see above). However, if you’re smart, you’ll give the investments to your son and the IRA to the church. The church still gets no less than $500,000 because the church pays no income taxes, and your son gets $500,000 in investments he can spend right away.

      It’s very smart to give your IRA to a charity, but be careful. It only works if your charity qualifies as tax-exempt by the IRS. And you want to give the whole account directly to the charity, taxes and all, rather than making taxable distributions to yourself and then giving the money to the charity.

 

Four- Split it Up

      If you want to leave your IRA to more than one person, or to a trust for the benefit of more than one person (more on that in a minute), then you should split up the account. If you don’t do it carefully, then an IRA left to John and his son John Jr. will use John’s life expectancy for both beneficiaries. The way the IRS regulates inherited IRAs, you have to take bigger distributions the closer you are to death (which according to the IRS is age 85). Since John is older, his life expectancy is shorter than Junior’s, so John’s mandatory distributions will be bigger. That means fewer funds stay in the IRA tax-deferred, and the tax benefit to John Junior is reduced.

      However, if you intentionally split the IRA into two accounts at death, one for John and one for John Junior, the separate accounting rule allows them to each use their own life expectancy for required minimum distributions. So John Junior can take substantially smaller distributions than his father, leading to overall tax savings for the family. A smart planner makes sure the account gets split between multiple beneficiaries to maximize tax savings. 

 

Five- Use a Trust

      Sometimes it’s smartest to leave everything to your spouse. But a lot of the time, it makes more sense to use a special, qualifying trust. It’s no wonder every professional estate planner makes a ton of trusts for clients—trusts are usually the most versatile and cost-effective way to plan where and how your wealth will be distributed when you die. It’s no different when planning where to leave your IRA.       Normally, it’s not a good idea to leave your IRA to a company, as opposed to a person. The two exceptions to this rule of thumb are charities (discussed above) and qualifying trusts. As long as your trust meets certain technical qualifications to qualify as a “conduit trust,” you can leave your IRA to your turst, the trust itself is ignored for tax purposes, and your IRA passes to whomever you designate in your trust. That way, your trust doesn’t pay income taxes.       So why is it sometimes smarter to leave your IRA to a trust than to the people you want to receive it? Three reasons:

  1. Creditor protection. If your beneficiaries have debts, a trust can protect the IRA from their creditors. Even in bankruptcy, where IRAs are usually protected, inherited IRAs are not. A trust can keep the money safe.

  2. Family complications. If you leave your IRA to your spouse and your spouse gets remarried to Jacque the pool boy, there’s nothing to stop Jacque and his kids from getting your IRA. A trust can be designed to keep the funds in your family, even if your spouse’s situation changes.  

  3. Simplicity. If you’re smart, you’re already setting up a trust to govern how your wealth is to be distributed, so why wouldn’t you want your IRA handled in the same way, as part of the same plan?

        Whenever you are planning for your future and finances, it is important to have the help of competent professionals. Contact an attorney for personalized advice and documents to get the most out of your IRA. 

 

Joseph D. Fairbank at 2:03 PM No Comments | Post a Comment
Estate Planning
Wednesday, October 1, 2014

Insight into Estate Planning

Insight into Estate Planning Seminar
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Events, Estate Planning
Monday, July 29, 2013

Gun Trusts

My dad recently sent out a family-wide email wanting to know which of his five boys had an interest in his guns when his time on this earth ended.  My immediate reaction was not, “I want the bazooka,” but rather “Is dad about to die?”  You see my dad is the type of guy that could be terminally ill and he would not tell anyone about it.  In this case, he was healthy but really did want to know whom he should transfer his guns to.  To his credit, he was trying to take care of things ahead of time (hopefully many-many years ahead of time). Some of the guns in question were owned by his father and have great sentimental value.

My dad’s inquiry caused me to think about the best way to transfer the guns.  Federal and state gun control laws contain many prohibitions on the transfer and possession of guns.  My dad lives in Washington and some of his sons, including me, reside out of state.  We would be dealing with interstate transfers.  Having missed 36 years of NRA meetings, I was not intimately familiar with federal gun transfer laws, but I knew enough to know that interstate transfers are problematic and often times illegal.  There is a legal solution to this problem – gun trusts.

Gun trusts are designed to allow for the access and transfer of firearms without dealing with unnecessary red tape.  Similar to trusts set up for the purposes of estate planning, a gun trust is established specifically to deal with guns, silencers, or other weapons subject to regulation under the National Firearms Act.  A gun trust can protect you from unnecessary and unintended law-breaking while allowing you to transfer guns to those you desire.

Gun trusts are also helpful in dealing with situations in which you want to allow others to have shared access to your guns.  Due to federal regulation, even allowing access can be problematic. The problems of federal regulation are solvable with a gun trust. 

Unlike Lieutenant Commander Galloway from A Few Good Men, I was not sick the day they taught law at law school.  However, I must admit I am no expert on the particulars of lawfully transferring firearms or drafting gun trusts.  There are local attorneys who can assist you in dealing with your guns including my partner, Michael Brown.  Not only an excellent tennis player with a defensive game akin to Novak Djokovic, Michael is an accomplished estate planner who can assist you in drafting a gun trust.     

Do not let the potential for federal interference obstruct your desire to carry on the legacy of your guns.   Get a gun trust.  By doing so you will be able to trust that your guns will be safe for generations to come.

Jeffrey D. Brunson at 11:27 AM No Comments | Post a Comment
Estate Planning
Friday, March 8, 2013

Estate Planning Independence

Fifth-grade girls basketball is more intense than most of my courtroom battles. In a recent game my daughter, the point guard for her team, got into foul trouble. One more foul and she would be gone.  Her team’s seemingly insurmountable lead of seven had dwindled to two points with about three minutes left in the game.  My daughter tried to make a steal, got the ball, and then was whistled for a reach-in foul (the moral – never trust a referee who looks older than Yoda and is wearing protective goggles to officiate a basketball game of 11 year-olds).   I felt powerless as she was shown her seat on the bench after fouling out.  She sat there with tears running down her face as the other team won and advanced to the championship. 

Any parent whose child participates in sporting events knows that once their kid is on the court the parent is no longer in control.  Watching my daughter learn through adversity on the basketball court without stepping in is difficult but necessary for her development as a player and person.  Giving up control may be a hard choice to make but undoubtedly is the right choice. 

As part of the estate planning process, families need to decide who will be in charge of taking care of their estate after they are gone.  If you are forming a trust this person is known as the successor trustee.  If you are forming a will this person is known as the personal representative.  For simplicity’s sake I will refer to such person as the trustee in this article.  Most people appoint another family member as the trustee.  Perhaps, this is because they want to keep control of the estate in the family or because they believe it is the privilege of their oldest child.   

While there are some benefits to appointing a family member as trustee, such as understanding family dynamics, there are disadvantages.  Most family member trustees are inexperienced with the legal and financial implications of dealing with a trust or estate.  Errors in judgment or mismanagement of trust property can leave a trustee personally liable to the other beneficiaries of the trust.  Inadvertent mistakes can lead to litigation and unnecessary stress.  Litigation will deplete the assets of the trust.  Other family members may perceive that the trustee is acting on his or her own behalf, leading to family strife and conflict that could last many years.  Being the trustee of a trust is a difficult job.

Fortunately, there are independent trustees such as financial institutions who are capable of acting as trustees.   A competent estate planning attorney can recommend a good independent trustee.   Good independent trustees are professionals who understand the process of being a trustee.  They know how and under what circumstances to make investments.  A good independent trustee is skilled at dealing with the legal process and beneficiaries who do not always see eye to eye.  Appointing an independent trustee gives the trust maker the best opportunity to make sure his or her intent is carried out in an impartial fashion.  Appointing an independent trustee removes the risk of a cherished family member getting sued when all he or she is trying to do is carry out the intent of the trust maker.

Just as I give up some control over my daughter every time I allow her to walk on the basketball court, families give up some control when they appoint independent trustees.  Giving up control may lead to tears and thoughts of “did she not trust me enough to appoint me as trustee?”  Just as my daughter will be better off from participating in sports, in most circumstances your family members will be better off not carrying the weight of a trustee’s obligations.  One of the main purposes of estate planning is to protect your family.  Appointing an independent trustee provides that protection and grants your family freedom from unnecessary strife.  If only there were a way to protect unsuspecting fifth-graders from goggle-wearing octogenarians. 

Jeff Brunson is an attorney and shareholder at Beard St. Clair Gaffney PA.  The opinions contained are his own and nothing written should be construed as legal advice.  Jeff's practice involves litigation, business disputes, and estate disputes.  He can be reached at his Rexburg office, 520 First American Circle, (208) 359-5883, jeff@beardstclair.com or follow him on Twitter @jeffbrunson.

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Estate Planning
Wednesday, February 13, 2013

Fairness and equality in estate planning

When meeting with me to establish or update their estate plans, my clients often ask me for advice on how to treat their children “fairly” or “equally.” The meaning of these terms depends on a client’s value system, financial condition, family circumstances, and a variety of other factors. For some parents, it is “fair” to disinherit a son from their estate because he never repaid substantial loans. For others, it is “fair” to leave a family business to a daughter because she played a significant role in making it successful. Decisions on how to treat children fairly are among the most difficult and stressful in designing an estate plan. While every situation is unique, below are some helpful tips parents should consider when deciding how to leave their assets to their children.

Parents are under no obligation to treat their children exactly equally.

It is important for parents to remember they accumulated their wealth and it is their prerogative to transfer it however they wish. Now, I do not recommend that parents arbitrarily favor one child over another in their estate plan. Transparently unequal treatment of a child in a will or trust can cause hurt feelings or damage relationships among siblings. However, I do encourage clients not to worry themselves sick about making sure that every last penny is divided in exactly equal amounts and on equal terms among their children. Anyone who has raised teenagers knows it is nearly impossible to treat them equally. Not surprisingly, teenagers that have run-ins with the law generally are not allowed to take summer road trips to Las Vegas. Responsible teenagers, on the other hand, generally avoid a strict curfew. Just as teenagers occasionally require different treatment, it may be wise to treat adult children differently in an estate plan. For example, an adult child constantly living on the brink of bankruptcy should probably not receive a large inheritance all at once. Instead, it may be preferable to leave his inheritance in a trust from which he is restricted from demanding distributions.

Leaving real estate equally to multiple children can cause headaches.

Clients frequently insist that a particular piece of property “must be kept in the family.” They want to be fair to all of their children, so they ask me draft a will leaving a 500-acre piece of farmland equally to all six of their children. There are situations in which joint ownership of property produces fine results. However, in my experience, it often leads to frustration and discord in families. What happens when three of the children wish to sell the property for cash, but the other three wish to “keep it in the family?” The answer is not always pleasant. If they own the property as tenants in common, a child wishing to sell her interest could sue her siblings and force a partition – a legal division – of the property. These disputes are costly, not only in terms of the dollars spent on legal fees and court costs, but also in terms of the emotional toll they take on families. Through thoughtful estate planning, it is usually possible to find a satisfactory solution that avoids intra-family conflicts while providing for all of the children.

Make an estate plan.

If you do not have a will or a trust, you actually do have an estate plan, believe it or not. Your estate plan is the law of intestacy, which is a collection of statutes that determine what happens to a person’s property when he dies without a will. These statutes are designed to approximate what the Idaho legislature believes most people would have done if they had left a will. Generally, these statutes divide property equally among a deceased person’s children (unless there is a surviving spouse). While this result may be perfectly acceptable to some, it may be disastrous for others. For example, if a Medicaid recipient’s parent dies without a will, the Medicaid recipient could immediately lose Medicaid eligibility due to an inheritance from the parent’s estate. While a statutorily required equal distribution of assets may appear “fair” at first blush, the Medicaid recipient could be required to spend his entire inheritance in order to regain Medicaid eligibility. The parent should instead establish a supplemental needs trust for the Medicaid child in order to avoid loss of eligibility upon the parent’s death.

While there is no universal answer to the question of what is fair in estate planning, discussing your particular situation with a qualified professional is an excellent first step in discovering the best solution.

Michael W. Brown is a shareholder with the law firm of Beard St. Clair Gaffney PA. He concentrates his practice in the areas of trusts, wills, estate administration, and business succession planning. He can be reached at (208) 523-5171 or mbrown@beardstclair.com
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Estate Planning
Saturday, November 19, 2011

Personal Representatives, Family Feuds

 

“It’s time to play the Feud!”  If that phrase does not conjure up some type of emotional reaction out of you, then you probably have not turned a TV on in many years (or you’re dead inside). The game show Family Feud has been gracing the television air waves since 1976.  It is mildly surprising that a show which pits two families against each other by requiring them to guess the most popular answers to survey questions has been able to stick around for so long.  The appeal of Family Feud is not the silly hosts and the snappy music, although that is certainly a contributing factor to its brilliance, it’s the families.  Family members working together in perfect harmony, often times even huddling like some type of weird family football team, occupy a special place in the American consciousness.  Families become stronger in their unified quest for cash. The viewers yearn for that type of family connection.

Sadly, in the real world, the opportunity for cash or other assets drives many families apart.  The most common situation where family feuds arise is estate disputes.  It is common for a family member to be the personal representative (commonly known as the executor) of the estate.  The personal representative is the person charged with administering and distributing the estate and is similar to the trustee of a trust.  The law imposes certain duties on the personal representative, and if the duties are not met the personal representative may be personally liable to the beneficiaries of the estate.

One common pitfall personal representatives fall into is the self-interested transaction.  Mom and dad die leaving the family farm in equal shares to the sole heirs, brother and sister.  The will is silent as to who operates the farm.  Sister is the personal representative and buys the farm from the estate.  Brother sues sister because he believes he was supposed to run the farm and disagrees with the purchase price paid by sister.  Sister could have avoided this situation if she obtained brother’s approval in advance or if she obtained court approval before the sale.  Mom and dad could have avoided the situation if they had provided specific direction about the operation or sale of the farm in their wills.  

Personal representatives are required to deal with estate assets as a “prudent” person would deal with the property of another.  The problem with prudence in most situations is that the personal representative is not “dealing with the property of another,” but the property of a loved one.  Personal representatives have to deal with family members, some of whom are likely resentful because they were not the ones chosen to be the personal representative.  It is easy for the personal representative to become a scapegoat of the other family members.  A personal representative should hire counsel to help navigate this process if for no other reason than lawyers excel at being scapegoats.  Most of us even do so with a smile.

So what is the best way to get back at a child who gave you the most difficulty in raising him?  Survey says – make him the personal representative of your will.

Jeff Brunson is an attorney and shareholder at Beard St. Clair Gaffney PA.  Jeff is a trial lawyer who specializes in business disputes and estate litigation.  He can be reached at his Rexburg office (208) 359-5883 or jeff@beardstclair.com

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Estate Planning
Saturday, December 17, 2011

Taking control of your legacy

There I was with my mother-in-law’s recently purchased refrigerator ready to return it to the retailer where it was purchased.  A friend and I had successfully transported it back to the store.  My marching orders were clear: I needed to be prepared to press hard for a return because my mother in-law had already plugged in the refrigerator, an occurrence that ordinarily triggers a restocking fee.  After I presented the receipt, the clerk kindly informed me that a return was no problem but they would have to charge the dreaded 15% restocking fee.  My normal stoic, reserved public demeanor was transformed as I became a crusader for the oppressed everywhere who were being forced to pay restocking fees.  What happened next is somewhat of a blur, but it involved screaming on my part, a phone “conversation” with the manager who was out of the office at his child’s sporting event, and a forceful argument by me that said policy was unenforceable in a court of law.  My friend, who was by my side at the start of the conversation, suddenly began to distance himself from me and to feign interest in the oven-cleaning kits that were on the complete opposite end of the store.  The clerk stood his ground and refused to waive the fee.  I had no choice but to return the refrigerator and pay the restocking fee.  The store had all of the control.  As I was fretting over my inadequacies as son-in-law and attorney, the clerk told me he was unable to get the computer to process the restocking fee and as a result there would be no restocking fee.

When you die without a will, you lose control of something much more significant than a restocking fee; you lose control of your legacy.  Misinformation abounds about what happens when you die without a will, i.e. dying intestate.  Idaho’s intestacy statute details what happens in such a situation.  In law school, flow charts are created and studied to try to learn all of the possibilities.  If you are married, then your spouse will likely get the bulk of your property.  If you are single, then it will likely go to your kids, and if you have no kids then it will likely go to your parents.  If you die without a will, you lose control of what you want to happen.  If you and your spouse both die and have kids under the age of 18, then you lose control over who will look after them.  While your relatives are grieving, they are left in the unfortunate position of trying to agree on what you would have wanted to happen.  Ultimately, a judge who knows nothing about you and your family may end up deciding what he thinks is best for your kids.

The time of year where gym activity increases and self-improvement activities recommence is at hand.  Making a will is a resolution worth committing to.  The best practice is to consult with an attorney who focuses on estate planning.  However, if you are of limited means, allergic to attorneys, or just do not want to be in the same room as one in fear something undesirable might rub off on you, there is another way.  Idaho, like most other states, recognizes holographic wills.  A holographic will is a will made in your own handwriting and signed by you. You can dictate where your stuff goes and who you would like to take care of your kids if both you and your spouse die.  Similar to the computer glitch that ended up doing away with my mother-in-law’s restocking fee, a holographic will is not the best medium to accomplish the sought after result, but it is better than nothing.

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Estate Planning