Category Archives: Probate

The Right Plan for Now: Living Trust

living trustDear Liza,  I’m a young professional and would greatly appreciate your feedback on what type of trust, if any, would suit me well given my current financial and life position.  I’m single, 29 years old (30 later this year), with cash, stocks, and a stake in a high-growth company.  My goal is to protect my assets while maintaining control and flexibility over their allocation / disbursement over time, especially in the event of unexpectedly passing or a disabling event (transfer to immediate siblings and parents).  I’m single and have no plans for marriage or children within the next 5-8+ years, but I would like to protect these going into a marriage as well as the value will likely be a magnitude greater than they are today). Those are all good questions, and congratulations for asking them way before most people give estate planning any thought (including, to be honest, me!)
A revocable living trust will, combined with a pour-over Will and a Durable Power of Attorney for Property Management,  accomplish most of the goals you’ve listed above. An estate plan like that will provide flexibility for you during your lifetime, keep your property separate when you do marry (if you do marry), allow someone (your successor Trustee and Agent under a Durable Power of Attorney) to manage your assets for you if you are incapacitated and transfer your assets to your siblings and parents if you die an untimely death in an efficient and relatively quick manner.
Here’s what it won’t do: protect your assets from creditors.  Revocable trusts exist to avoid probate upon your death and to allow others to manage assets for your benefit if you’re incapacitated, but, because they can be revoked by you at any time, the assets in that kind of trust are available to your creditors.  Business folks create entities, like limited liability partnerships, and corporations, to shield their personal assets from business risks/creditors, but an estate plan doesn’t do that. Hope that helps. Good luck.

Getting Good Advice When You Are The Beneficiary

Will being signedDear Liza: After dealing with an unexpected death of my spouse my head is still spinning.. My spouse was very private after a divorce  and we kept our affairs separate. Now the Will, of which I was unaware, allows me to stay in our home and if I choose to leave or pass it goes to her children. The attorney who handled the will  said I have control of what happens;

1) I can stay in house till death and take 20% of non probate

2) I can take 1/3 of elective share and no house

3) Or I can select make children offer to buy house based on actuarial tables and 20% of non probate.

How do I get that info to make a good decision? Will says to maintain house in good repair, so does that mean I have to put another $20K for a new roof? I’m sorry that you have to make such important choices and were taken by surprise by them, on top of the grief that comes with losing a spouse. Here’s my advice: hire an attorney to represent you, as the beneficiary under the Will. You need someone who can advise you on your options and explain to you what the Will means — not just in regard to what “good repair” means, but also as to what your elective share rights are, for a start (these are determined by state law).
Please ask that attorney how a Will can offer you twenty-percent of “non-probate” assets, as these generally are assets that pass by beneficiary and are not controlled by a Will at all. If your spouse named you as the beneficiary of her retirement assets or if you owned property with her as a joint tenant, these assets would pass to you by virtue of that, not by the Will at all.

Assets left by beneficiary designation are NOT part of the estate passing under your Grandmother’s Will

old-lady-107404_640Dear Liza: My grandmother passed away peacefully at 97 in February.  I am the executor of her will.  She had changed her will, legally, several times depending on who had made her mad at the time.  Instead of changing it again, she made me the sole beneficiary on some cd’s and mutual funds.  In her will, she left $15k or 15%, whichever was less to my half sister.  Do I have to count the funds that were left to me specifically as part of the estate? Your grandmother sounds like she was pretty sassy.  The assets that were left to you directly by beneficiary designation DO NOT count as part of the lesser of 15% or $15K gift your grandmother made to your half sister.

Only the assets that are governed by the Will count for that calculation and are considered to be part of the “estate.”  The assets left to you by beneficiary designation are separate from the assets that will pass to beneficiaries under your grandmother’s Will. If your grandmother’s Will has to go through probate, the assets that pass by beneficiary designation are not part of the probate estate, either.

Probate for U.S. Assets; Estate Tax for Non-Resident Aliens

pot of goldDear Liza: My brother and I are dual citizens (Japan and US).  We both reside in the US. Our Japanese mother recently passed away. She had some cash/ stock/ annuities/ mutual funds in the US, and some property in Japan that we will inherit jointly, with no disputes. She has a social security number and had a green card at one time, many years ago. She has not lived in the US for over 30 years. There was no will. Given that she was a non-resident foreign national, do we have to go through probate to distribute her US assets (around $650,000)?  Sorry about your Mom. To settle your Mom’s U.S.-based estate you are going to need a probate proceeding to transfer the assets because your mother didn’t leave a Will. This is not because she was a non-resident alien.  This is because she owned significant property in her own name.  That means that you and your brother are going to inherit her property as the intestate heirs (that’s state law for who inherits when someone dies without a Will). Because she owned property worth more than a minimal amount, you will need a court order to get those assets transferred to you, which is the end result of a probate proceeding.

The issues that relate to her citizenship status is this: your mother’s estate is going to have to pay U.S. estate tax.  The rules for non-resident, non-citizen owners of U.S.-based property are complex, but basically, her estate will be taxed on U.S. assets worth more than $60,000. Japan, though, has a taxation treaty with the U.S., so her estate won’t be subject to double estate taxation (in both the U.S. and Japan).   Click here for a link to an IRS summary of these rules.

Capital gains taxes on sale of house

Dear Liza: My daughter is on my deed as joint tenant with me.  If I die and she decides to sell the house,  will she have to pay capital gains taxes? When you die, your daughter will own the whole house, without having to go through probate.   If she then decides to sell the house, she will have to pay capital gains on the increase in value on the one-half of the house that she owned before your death.  The one-half of the house that she inherited from you will get a new tax basis for capital gains purposes, equal to the value of that one-half of the house when you died — this is called a ‘stepped-up’ basis.

Do I Need a Living Trust?

Dear Liza: I am a 61 single retiree who has a single family home, an IRA, life insurance and a small pension. With my siblings as beneficiaries to these instruments. Is a living trust/will needed anyway? So, it’s true that if you have named beneficiaries for your IRA, life insurance and pension, those assets will go to those beneficiaries and your Will or Living Trust would have nothing to say about that part of your estate plan.  But, here’s the thing–in most states you cannot name a beneficiary for a house.  In those states, the only way to leave your house to certain people and avoid having to go through probate to do it, is to set up a living trust and transfer your house to that trust.  Click here for a list of the states that do permit the transfer of a house by naming beneficiaries on a deed–called a transfer-on-death deed. Sadly, California is not one of them.

Recovering Stolen Property in Probate

Dear Liza: I have a sister who came into my father’s house after he passed away and took  the only valuable item in the house.  My grandmother gave it to my father over 30 years ago.  It was in the house as long as I can remember.  I strongly protested and requested for her to return it back to my father’s estate since.  No positive response as to date.  It has been now over 2 years and we are not on talking terms. I have just been appointed as the administrator of my father’s estate. What is the legal solution of resolving this situation? As the administrator of the estate, you have a fiduciary duty to collect all assets owned by the estate.  I don’t know what state you live in.  In California, where I practice, the Probate Code allows you to file a petition with the probate court that requests the court to issue an order to your sister requiring return of the valuable object to the estate.  If the court agrees with your petition, it can issue that Order.  Enforcing the Order, though, is another matter.  (Your sister may just return the object; but, than again, she may not!) I suggest you consult a probate attorney in your area about drafting such a petition.

Using Disclaimers in Estate Planning

Dear Liza: I am the executor of my aunt’s estate in NJ.   She left a number of payable-on-deaht (POD) accounts to me  but her intention was that most of these funds/accounts be given to charity.  I am trying to avoid paying estate and inheritance tax on them, because then the charities will get less.  Is there a way I can redirect them to the charities before they come to me so as to avoid the taxes? When someone gives you something in a Will, or by beneficiary  designation,you can always say, “No Thank You” and not accept the assets, provided you don’t make use of the asset first, and that you do this within 9 months of the death. This is called ‘disclaiming’ the assets. Legally, it’s as if you died first — the asset is then given to whomever is named as the next beneficiary.  In that case, the gift is from the person who died, not from you.  What you can’t do, however, is direct where the assets go next. So, if your aunt left a Will that said everything in her estate was to go to you, then to charity if you did not survive her, your disclaimer would direct those assets to the charity, via that Will. However, if your aunt’s Will did not specify charities as the next beneficiaries, or did not have a Will and simply left those payable-on-death accounts directly to you, and named no second beneficiary, the only way you can give those assets to charity would be to do it directly as a gift from you. If you disclaimed those assets, they would pass to your aunt’s surviving heirs under New Jersey’s law of intestate succession, not to charity. You can give $13,000 per year to any beneficiary free of the gift tax, or $26,000 if you are married and your spouse agrees to make the same gift.

Small Estates: No Probate Necessary

Dear Liza: If there is no or very little property left under a will (because almost all was left under a revocable trust), and there are no known outstanding debts, is it necessary to file the will with the probate court (New York)?  If it is necessary, are probate court proceedings necessary? Check with the probate court in your county (called Surrogates Court in New York) as for Will filing requirements.  But it doesn’t sound like you’ll need to open a probate. Most states have some way for small estates to bypass a full-blown probate proceeding. In New York, if the property left is worth less than $30,000, you can settle the estate with what’s called a summary probate proceeding. Here’s a link to more info.  In other states, like California, if the total value of property is less than a certain amount, you can transfer the assets using what’s called a Small Estates Affidavit, after waiting for a certain number of days after the death.

What if there’s no Will?

Dear Liza: My father passed away last fall and I have not received any notification of a Will.  I am estranged from my family and my brothers have refused to tell me the name of any attorney or executor involved with the estate, and have refused to tell me if there is a Will.  Is there any way to demand this information?  There are state laws that require disclosure to you in certain circumstances, and if your family isn’t cooperating, those provide you the best chance to figure out what is going on.  If your father died and did have a Will, the Will is supposed to be lodged with (filed with) the superior court in the county in which your father died by the executor within a certain period of time (which varies from state to state, but is 30 days in California).  Once filed, the Will is a public record and you can get a copy by requesting it from the probate court.  If there is no Will and your father owned property worth more than a certain amount (this also varies state to state, in CA it is $100,000 now and will be $150,000 as of January 1, 2012) the estate has to go through probate before anything can be distributed, unless your father had a surviving spouse.  Probate is a court supervised settling of the estate: the Will is proven to be valid, the creditors are paid, the assets are appraised, and the estate is settled.  If a probate proceeding is opened, you are required to get notice of it, as a surviving heir.  Here’s a good summary of the California probate process.  But, if your father died without a Will, and had less than the minimum required for probate, I’m not aware of any state disclosure laws that would provide you with information about his assets.  If your father died without a Will,  even if there’s no probate, you would, as a surviving heir, be entitled to a share of his assets, but enforcing that without family cooperation will be difficult.