Archive for the ‘Wills / Estates’ Category
How Did I Arrange to Pass on my House? It’s in my Will! Wait, is it?
One of the most common areas of estate planning that is overlooked seems to be the actual ownership interests in property. Oftentimes, a couple will arrange to have a will drafted or arrange to go online and draft one themselves, and in their minds, they need the simplest of arrangements. It is possible that they do only need a simple arrangement. However, simple needs to still include an examination of in whose name the assets and debts are titled. An examination of where the asset or debt is located is necessary. I come across many people that simply think that once the paperwork is prepared, the Will takes care of everything. The problem with this misconception is that although someone may have every intention to pass an asset to another person, they neglected to consider the actual ownership interest they may have in a certain piece of property, or where it may be located and the potential aggravation they are creating in not reviewing this aspect of their estate plan.
Title to Property Among Family: Older and Widowed Dad leaves all property to two sons equally. During his life, Dad gave to Older Son a 50% interest in the house Older Son now lives in with Older Son’s wife, so before death, Dad and Older Son owned the house as tenants in common (ie. No right of survivorship). Dad dies.
Dad neglected to consider: Evil Younger Son now has a quarter interest (via the half interest he inherited of the father’s half interest) in Older Son and Older Son’s (and family’s) house. Evil Younger Son now has the power to make life miserable for Older Son and his family.
Easily Preventable Problem: Dad could have reviewed the title to the house when preparing his will and arranged to own the house jointly with Older Son with rights of survivorship.
Title to Property and Federal Estate Tax Considerations: In considering the Federal Estate tax and exemption, there is a great deal of uncertainty with what may happen with the exemption amount and rule allowing a step up in basis for property. In considering the uncertainty, people are still arranging to set up Bypass Wills, or Credit Shelter Trusts for their families.[1] When a trust like this is set up, it is vital to review the title of assets. Oftentimes, a family could spend a decent amount to set up this type of arrangement only to discover later that the entire plan was defeated because all property was owned jointly between them, so that no property would go through probate and no property would then be passed into the Credit Shelter trust that was set up in the Will.
Title to Property Located Out of State: If you own real property in your personal name but you reside in another state, a separate probate process will need to take place for that out of state property. If you have property that you own outside of the state in which you reside, it is important to consider the cost of the sale or transfer of real estate during a probate process in the state where the real property is located. In some states, the transfer of property during the probate process is an expensive hassle, no matter how simple your estate. In Georgia, if a matter is uncontested, and there is a Will in place, the probate process can be a relatively smooth and inexpensive one. There are several easy solutions to avoid a separate probate process, but the main point is, the issue needs to be identified and addressed. Even if you do discover that you have no complications, it is worth the hour or two to find out.
Dara Berger is an estate planning and immigration attorney in Atlanta, who occasionally contributes to this blog. She can be reached at dara@dlb-legal.com.
Is There A Conflict Of Interest For A Lawyer In Drafting Wills For Spouses?
When couples consult a lawyer about a prenuptial agreement, they are usually surprised to hear that the lawyer can only represent one side and not both. Spouses and partners are usually even more surprised to hear that the lawyer may need to identify and clarify who he/she represents in Estate Planning. Oftentimes when there are shared responsibilities in the household, only one party will want to appear for the meeting to determine the estate plan. This is not advisable. Ideally, both spouses should meet with the attorney so that the information they receive can be discussed and decisions can be made based on the same information.
Married people have conflicting opinions you ask? How could that be? One partner or spouse may think that he or she has determined who the appointed representatives are and fails to fully discuss this decision with the other partner or spouse. At that point, the representative chosen by one spouse may be the very last person the other spouse would have chosen for that role.
Another possible conflict could be how the estate should be distributed. For example, the husband may wish to leave an investment property he owned to one of his siblings. During the marriage, he pays for the mortgage of the investment property out of joint funds. Now the wife has an argument that a portion of the investment property is marital property and not the Husband’s to give away. The wife now has an equitable interest in the item. The husband cannot bequeath one hundred percent of this item to his beneficiaries since he doesn’t own one hundred percent. Then it becomes a matter for the probate judge to decide what part of husband’s interest in the item is permitted to go to the sibling and what part is not included in the decedent’s estate. This is an easily preventable problem through open communication between the parties.
Second spouses with children from a prior relationship will oftentimes have inherent conflicts in that the wife may leave property to her current spouse. In that case, as opposed to when her spouse is the child(ren)’s father, there is a conflict. The wife and husband may leave all property to each other with no back up beneficiary. If the wife passes first, the husband’s sole intestate heirs might be his own children from a prior relationship. Without careful drafting, all of Wife’s property could go to Husband’s children from a prior relationship and none to her own children.
The State Bar of Georgia’s Rule 1.7 Conflict of Interest Rule Number Thirteen provides specifically, “Conflict questions may also arise in estate planning and estate administration. A lawyer may be called upon to prepare wills for several family members, such as husband and wife, and, depending upon the circumstances, a conflict of interest may arise. In estate administration the identity of the client may be unclear under the law of a particular jurisdiction. Under one view, the client is the fiduciary; under another view the client is the estate or trust, including its beneficiaries. The lawyer should make clear the relationship to the parties involved.”
Planning together is especially important. There is often a great deal of discussion and negotiation in getting to the decision of who to appoint as an executor, or guardian, and if necessary, trustee. If you are meeting with an attorney to discuss these issues, take advantage of that time to ask the questions that may be important to you in making each decision. Oftentimes, the attorney will be able to provide information about the powers and responsibilities of each representative that may even persuade you to choose a certain person over another.
Dara Berger is an estate planning and immigration attorney in Atlanta, who occasionally contributes to this blog. She can be reached at dara@dlb-legal.com.
Why Trust a Trust?
What a boring topic you think! Maybe so, but you may come out of this with more questions than answers. If so, then I’ve achieved my goal, and that is, to encourage you to learn more! Ask questions!
In any case, why do you need to learn about trusts you wonder, as you continue to skim these lines? There are many reasons to create a trust. Some of the reasons to have a trust include protecting your assets and reducing tax liability. Another reason is to provide for children in a more specific way such as naming a trustee to distribute funds to the children in their interest, with a set schedule of specific distributions as opposed to the children receiving a lump sum all at once at a certain (and some may say very young) age of eighteen. Although setting up a trust in certain specific situations is very beneficial, it is more important that the Grantor (the person who is the original owner of the funds placed in the trust) understands all of the pros and cons of doing so. It is also very important that the Grantor is careful with the language contained in the trust and can ensure that it shall meet all of his/her needs and needs of the family.
A living trust is a trust that is created and funded while the Grantor is still alive. Two basic types of living trusts commonly used in Georgia are the revocable and irrevocable trusts. A revocable trust is a trust where the Grantor retains control. The Grantor can avoid probate of certain assets by transferring these assets to a revocable trust during his/her lifetime. The Grantor can also direct a more specific distribution of assets within this trust. The Grantor can keep the direction of his/her trust estate private after he/she passes away (as opposed to a Will, which becomes a public record once filed in the probate court which is required at the time of death).
The Grantor may always cancel or revise a revocable trust. On the down side, because the Grantor retains control over the revocable trust, the funds the Grantor places in the trust are still considered within the Grantor’s estate for tax purposes, which may increase the Grantor’s estate tax liability. They are also possibly reached by creditors, even if they are a bit harder to find, by being in the trust.
An irrevocable living trust is a trust that is set up and funded during the Grantor’s lifetime, but the Grantor does not retain control over the trust after it is created. The funds that are transferred to this trust (very often as a life insurance policy) are considered outside of the Grantor’s estate for tax purposes, and the Grantor can still arrange and direct the funds to be distributed in stages as opposed to a lump sum distribution to the spouse and/or children. One of the common purposes of setting up an irrevocable trust like this is to reduce a Grantor’s estate tax liability.
A testamentary trust is a trust that is created during the Grantor’s life (often within a Will document) but funded only after the Grantor is deceased. This type of trust, if created and drafted properly, also allows the Grantor to provide for his/her children or other beneficiaries in a more specific way but doesn’t have the lifetime maintenance of a living trust. This type of trust can also be created for the purpose of potentially doubling the exemption amount of the estate tax for a married couple if prepared properly.
Dara Berger is an estate planning and immigration attorney in Atlanta, who occasionally contributes to this blog. She can be reached at dara@dlb-legal.com.
Do You Need a Will?
At least half or more of the U.S. population doesn’t have a Will. So why should you? There are several reasons why you may wish to have a valid Will in place. First, if you want to be the one to decide who should receive your personal and real property (your house or investment property), then it is important to execute a Will. Without one, the State of Georgia makes these decisions for you, after the estate pays your creditors.
Another reason to consider having a Will executed, is so that you can be the one to determine who will care for your children should something happen to you. Without a Will, the decision is made by the Probate Court in the county you reside within the State of Georgia. Any funds you may have been setting aside for your child or children that are subject to probate will generally be given directly to each respective child upon their turning the age of twenty-one. If it is your opinion that a twenty-one year old may not exactly know what to do with all of your funds upon receipt, you are not alone. Putting a Will in place will enable you to place those funds in a testamentary trust and provide more specific instructions to the Trustee as to how to handle those funds for the child until he/she is old enough to receive them. Further, choosing that Trustee becomes your decision as well, so long as you include that in your Will.
Not having a Will in place can also increase the costs of administering the estate. Without a Will, a Court must appoint a personal representative. This representative may not be someone you would have chosen, and they have a right to demand payment out of the estate for performing this duty. If real estate needs to be sold, the agent will be chosen by this personal representative and can charge as much in commission as is “reasonable.” Further, the personal representative will have to put up a bond in most cases for the approximate value of the estate, so that they are accountable for the assets that will be distributed. If they use a bond company, these funds often come out of the estate as well. All of these fees and expenses may be avoided or substantially decreased by having a Will in place. The Federal Estate Tax is another issue for discussion regarding costing you a chunk of the estate, but that will be discussed in detail in another blog.
These are only a few of the reasons why one would choose to execute a Will. Other reasons may include asset protection, tax planning, to set up testamentary trusts for a disabled relative or friend, the list goes on. The question really isn’t whether you need a Will, but how do you get started?
Dara Berger is an estate planning and immigration attorney in Atlanta, who occasionally contributes to this blog. She can be reached at dara@dlb-legal.com.
The Living Will and Power of Attorney for Health Care: An Overview
By Shae Irving, J.D.
Republished with Permission © 2009 Nolo.
It’s smart to make documents setting forth your wishes for health care in case you are ever unable to speak for yourself.
If you’re like most people, you aren’t eager to spend time thinking about what would happen if you became unable to direct your own medical care because of illness, an accident, or advanced age. However, if you don’t do at least a little bit of planning — writing down your wishes about the kinds of treatment you do or don’t want to receive and naming someone you trust to oversee your care — these important matters could wind up in the hands of estranged family members, doctors, or sometimes even judges, who may know very little about what you would prefer.
Types of Health Care Documents
There are two basic documents that allow you to set out your wishes for medical care: a living will and a durable power of attorney for health care. It’s wise to prepare both. In some states, the living will and the power of attorney are combined into a single form — often called an advance directive. (In fact, both of these documents are types of health care directives — that is, documents that let you specify your wishes for health care in the event that you become unable to speak for yourself.)
Continue reading “The Living Will and Power of Attorney for Health Care: An Overview” »
Financial Powers of Attorney: Do You Need One?
By Shae Irving, J.D.
Republished with Permission © 2009 Nolo.
Financial Powers of Attorney: Do You Need One?
Creating a durable power of attorney for finances — sometimes called a financial power of attorney — is a good idea for almost everyone with property or an income. It’s particularly important, however, if you fear that health problems may make it impossible for you to handle your financial matters.
Why Sign a Power of Attorney
Making a durable power of attorney ensures that someone you trust (usually called your “agent”) will be on hand to manage the many practical, financial tasks that will arise if you become incapacitated. For example, bills must be paid, bank deposits must be made, and someone must handle insurance and benefits paperwork.
Many other matters may need attention as well, from handling property repairs to managing investments or a small business. In most cases, a durable power of attorney for finances is the best way to take care of tasks like these.
Continue reading “Financial Powers of Attorney: Do You Need One?” »
