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 Sons wife, so before death, Dad and Older Son owned the house as tenants in common (IE. No right of survivor ship). Dad dies.

Dad neglected to consider: Evil Younger Son now has a quarter interest (via the half interest he inherited of the fathers half interest) in Older Son and Older Sons (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 survivor ship.

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.

This article was written by Dara Berger. Mrs. 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.

^[1] A bypass Will or Credit Shelter Trust provides that when the first spouse passes away, an amount up to the exemption amount will go into a trust for the surviving spouse so that when the second spouse dies, he/she gets the benefit of both the first spouses exemption amount and his/her own exemption amount, thereby preserving more for the children or other beneficiaries.

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 Husbands 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 doesnt own one hundred percent. Then it becomes a matter for the probate judge to decide what part of husbands interest in the item is permitted to go to the sibling and what part is not included in the decedents 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 husbands sole intestate heirs might be his own children from a prior relationship. Without careful drafting, all of Wifes property could go to Husbands children from a prior relationship and none to her own children.

The State Bar of Georgias 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.

This article was written by Dara Berger. Mrs. 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.

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 Grantors estate for tax purposes, which may increase the Grantors 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 Grantors 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 Grantors 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 Grantors estate tax liability.

A testamentary trust is a trust that is created during the Grantors 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 doesnt 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.

This article was written by Dara Berger. Mrs. 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.

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 isnt whether you need a Will, but how do you get started?

This article was written by Dara Berger. Mrs. 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.

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.)

Living Wills

First, you need a written statement that details the type of care you want (or don’t want) if you become incapacitated. This document is most often called a living will, though it may go by a different name in your state. A living will bears no relation to the conventional will or living trust used to leave property at death; it’s strictly a place to spell out your health care preferences.

You can use your living will to say as much or as little as you wish about the kind of health care you want to receive.

Powers of Attorney for Health Care

You’ll also want what’s usually called a durable power of attorney for health care. In this document, you appoint someone you trust to be your health care agent (sometimes called an attorney-in-fact for health care, health care proxy, or surrogate) to make any necessary health care decisions for you and to see that doctors and other health care providers give you the type of care you wish to receive.

Who Can Make Health Care Documents

You must legally be an adult (18 years old in most states) to make a valid document directing your health care. You must also be of sound mind — that is, able to understand what the document means, what it contains, and how it works.

When Your Health Care Documents Take Effect

Your health care documents take effect if your doctor determines that you lack the ability — often called the “capacity” — to make your own health care decisions. Lacking capacity usually means that:

* you can’t understand the nature and consequences of the health care choices that are available to you, and

* you are unable to communicate your own wishes for care, either orally, in writing, or through gestures.

Practically speaking, this means that if you are so ill or injured that you cannot express your health care wishes in any way, your documents will spring immediately into effect. If, however, there is some question about your ability to understand your treatment choices and communicate clearly, your doctor (with the input of your health care agent or close relatives) will decide whether it is time for your health care documents to become operative.

In some states, it is possible to give your health care agent the authority to manage your medical care immediately. If your state allows this option, you may prefer to make an immediately effective document so that your agent can step in to act for you at any time, without the need to involve a doctor in the question of whether or not your health care document should take effect.

Making your document effective immediately will not give your agent the authority to override what you want in terms of treatment; you will always be able to dictate your own medical care if you have the ability to do so. And even when you are no longer capable of making your own decisions, your health care agent must always act in your best interests and diligently try to follow any health care wishes you’ve expressed in your health care declaration or otherwise.

When Your Health Care Documents End

Your written wishes for health care remain effective as long as you are alive, unless you specifically revoke your documents or a court steps in (but court involvement is very rare). Here are a few specifics about when your health care documents are no longer effective:

* You revoke your document. You can change or revoke a health care document at any time. Just be sure that your health care providers and your agent know of your intention to cancel the document.

* A court invalidates your document. Most judges recognize that a court is normally not the right place to make health care decisions. However, if your health care is the subject of a dispute and someone questions the validity of your health care directives, the matter may end up before a judge.

If someone doubts that you had the mental capacity to prepare a legally valid health care document, that person can ask a court to invalidate your document. Such lawsuits are rare, but they do sometimes occur. The burden of proving that you were not of sound mind when you made your document falls on the person who challenges its validity. (In other words, the law presumes that you had the mental capacity to make your health care documents.)

It is also possible that a court could invalidate your document if it wasn’t properly completed — for example, if you did not meet your state’s requirements for having the document notarized or witnessed. If this happens, however, it is still likely that any wishes for health care you set out in the document will be followed — as long as they are clearly expressed and you were of sound mind when you wrote them down. In the famous case of Cruzan v. Director, Missouri Dept. of Health, 497 U.S. 261 (1990), the U.S. Supreme Court said that any strong evidence of someone’s wishes for care should be honored. Your directions won’t be ignored simply because of a technical error.

* A court revokes your agent’s authority. If, after your health care documents take effect, someone believes that your health care agent is not acting according to your wishes or in your best interests, the concerned person can go to court and ask for an investigation of your agent’s behavior. If a court finds that your agent is acting improperly and revokes his or her authority, the job will go first to an alternate agent you named in your document. If there is no available alternate — or if the court invalidates your entire document for one of the reasons discussed just above — a conservator or guardian will be appointed to make health care decisions for you.

* You get a divorce. Getting divorced has no effect on your written directions for health care (your health care declaration). But if you named your spouse as your health care agent, his or her authority is automatically revoked in a number of states. In that case, if you named an alternate agent, that person will take over.

If you get a divorce before your health care directives take effect, it’s wise to eliminate confusion by starting over. Even if you named an alternate agent, make a new document and name someone else as your agent.

* After your death. Generally, your health care documents are no longer necessary when you die. In some states, however, your health care directives remain effective after your death for some very limited purposes. Your agent may be permitted to supervise the disposition of your body, including authorizing an autopsy or organ donation, unless you specifically withheld these powers when you made your health care documents.

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.

Avoiding Conservatorship or Guardianship Proceedings

If you don’t have a durable power of attorney and you become incapacitated, your relatives or other loved ones will have to ask a judge to name someone to manage your financial affairs. Depending on where you live, the person appointed to manage your finances may be called a conservator, guardian of the estate, committee, or curator.

Conservatorship or guardianship proceedings can be expensive and embarrassing. Your loved ones must ask the court to rule that you cannot take care of your own affairs — a public airing of a very private matter. Court proceedings are matters of public record; in some places, a notice may even be published in a local newspaper. And if relatives fight over who is to be the conservator or guardian, the proceedings will surely become even more disagreeable, sometimes downright nasty. All of this causes costs to mount up, especially if lawyers must be hired.

If You Think You Don’t Need a Durable Power of Attorney

You may not think that you need a durable power of attorney for finances if you’re married or if you’ve put most of your property into a living trust or you hold it in joint tenancy. But the truth is that in all of these situations, a durable power of attorney can make life much easier for your family if you become incapacitated.

If You Are Married

If you are married, your spouse does have some authority over property you own together — for example, to pay bills from a joint bank account or sell stock in a joint brokerage account. There are significant limits, however, on your spouse’s right to sell property owned by both of you. For example, in most states, both spouses must agree to the sale of co-owned real estate or cars. Because an incapacitated spouse can’t consent to such a sale, the other spouse’s hands are tied.

When it comes to property that belongs only to you, your spouse has no legal authority without a durable power of attorney.

Example: New York residents Michael and Carrie have been married for 47 years. Their major assets are a home and stock. The home is owned in both their names as joint tenants. The stock was bought only in Michael’s name, and the couple has never transferred it into shared ownership. Michael becomes incapacitated and requires expensive medical treatment. Legally, Carrie cannot sell the stock to pay for medical costs.

If You Have a Living Trust

A living trust isn’t a complete substitute for a durable power of attorney for finances, but it can be helpful if you become incapable of taking care of your financial affairs. That’s because the person who will distribute trust property after your death (called the successor trustee) also, in most cases, has authority to take over management of the trust property if you become incapacitated.

However, the successor trustee has no authority over property not held in the trust. Few people transfer all their property to a living trust; most transfer only assets that are expensive to probate, such as real estate and valuable securities. A durable power of attorney ensures that someone will be on hand to take care of other property, as well as day-to-day financial tasks.

If You Own Joint Tenancy Property

Joint tenancy is a way that more than one person can own property together. When one owner dies, the other owners automatically inherit the deceased person’s share of the property.

But if you become incapacitated, the other joint tenant owners have very limited authority over your share of the joint tenancy property. For example, if you and someone else own a bank account in joint tenancy and one of you becomes incapacitated, the other owner is legally entitled to use the funds. The healthy joint tenant can take care of the financial needs of the incapacitated person simply by paying bills from the joint account. But the other account owner has no legal right to endorse checks made out to the incapacitated person. In practice, it might be possible to get an incapacitated person’s checks into a joint account by stamping them “For Deposit Only,” but that’s not the easiest way to handle things.

Matters get even more complicated with other kinds of joint tenancy property. Real estate is a good example. If one owner becomes incapacitated, the other has no legal authority to sell or refinance the incapacitated owner’s share. By contrast, with a durable power of attorney, you can give your agent authority over your share of joint tenancy property, including real estate and bank accounts.

When You Shouldn’t Rely on a Durable Power of Attorney

The expense and intrusion of a conservatorship or guardianship are rarely desirable. In a few situations, however, special concerns justify the process.

You Want Court Supervision of Your Finances

If you can’t think of someone you trust enough to appoint as your agent, with broad authority over your property and finances, don’t create a durable power of attorney. A conservatorship or guardianship, with the built-in safeguard of court supervision, may be worth the extra cost and trouble.

You Fear Family Fights

A durable power of attorney is a readily accepted and powerful legal document. Once you’ve finalized yours, anyone who wants to challenge your plans for financial management will face an uphill battle in court. But if you expect that family members will challenge your document or make continual trouble for your agent, a conservatorship or guardianship may be preferable. Your relatives may still fight, but at least the court will be there to keep an eye on your welfare and your property.