Category Archives: Wills

What Should I Do About Assets Not Held in Trust?

pot of goldDear Liza: My husband and I married in our 60’s and managed our affairs as “yours, mine and ours”.  He held his assets in accounts named as his trust. All combined assets were joint accounts, joint tenancy , etc. My accounts are either in my IRA or individual bank accounts in my name only. We contributed an equal amount to our joint accounts every month to pay living expenses. His daughters are trustees of his trust and sole beneficiaries. My husband died last week after a long illness. Do I need to go to probate for the assets NOT named by his trust? I’m sorry about your husband. You won’t need to open a probate if the total value of the assets in his name and not held by the trust are below your state’s small estate’s threshold. In California, where I practice, that limit is $150,000, but it differs state-by-state. To find out your state’s small estate threshold, click here. One important thing to remember is that this total doesn’t include the value of any assets that are held in joint tenancy, those assets pass to the surviving joint tenant automatically, because that’s what joint tenancy means–the surviving joint tenant owns the entire asset, whether that’s a house or a bank account. This total also doesn’t include any assets with a beneficiary designation, such as life insurance or a payable on death account. So, if your husband had only a few small accounts held in his own name that didn’t have a beneficiary or weren’t held in joint tenancy with you, you won’t have to open a probate to transfer them.  You will, though, need to follow your state’s rules for small estates– in California, after 40 days, there’s a simple one-page declaration that the executor can sign to transfer these assets.  If your husband had a pour-over Will in addition to his trust (which he should have had), these assets would pass to the trust’s beneficiaries, his daughters.

Will or Trust, Which is Better?

courthouse_2Dear Liza: My husband and I have one adult daughter – 20 years old.  We are in our 60’s and want to set up a will or a trust to ensure that 100% of our property and investments goes to our daughter, and that she inherits the assets with the least amount of taxes/probate as possible. What’s better a Will or a Trust? I don’t know what state you live in, and that makes this a hard question to answer completely. Here’s why: the value of doing a living trust depends on the cost and inconvenience of probate in your state.

Both a Will and a trust can ensure that your property passes to your daughter. Both a Will and a trust can incorporate tax planning to minimize any estate taxes that might be due at the death of the second of you (though these days, you’d have to have more than $10 million before worrying about the estate tax, so let’s assume that this is not an issue for you).  Really, the difference between which kind of an estate plan to create isn’t so much a “what” question; it’s really a “how” question, as in “how much” and “how long” will it take to settle your estates.

This is because a Will requires a probate proceeding before a distribution to your daughter, while a trust will allow you to bypass probate.  This means that if you do a Will, and your estate exceeds the small estates threshold in your state, your daughter won’t inherit anything until the court issues an order for distribution, which is how a probate ends. If you do a trust, and the trust is properly funded at your death, holding title to your major assets, your daughter will be able to inherit those assets as soon as they’ve been identified, taxes and creditors have been paid, and all of the beneficiaries and heirs have been notified.

In states that have adopted the Uniform Probate Code, currently that is 18 states, click here for a list of these, probate has been streamlined and is relatively inexpensive. In states that have not adopted this code, like the one that I practice in,  probate takes longer and costs far more than it costs to administer most living trusts. So, in order to sort out what’s the best estate plan for you, you need to find out the cost and delay in going through probate where you live. If you live in a state where probate is relatively easy and fast, you should be fine with just a Will. If you live in a state where probate is expensive and slow, a trust will be the better choice.

Who Can Order Death/Birth Certificates?

Last WillDear Liza: My uncle just died and I and a cousin are co-executors and equal co-heirs. A will is known to exist in a safe deposit box, but we have neither keys nor legal permission to open the box. There are no disputes and the estate is certainly below the tax level.The Mexican authorities seem to want a Birth Certificate in order to issue a Death Cert. As a niece, I am not entitled to get one, and there is no closer relative. What do I do? While it is true that only close family members can order vital records, you, as the executor, are also entitled to order them. In addition, an attorney that is working with you can also order such vital records. In California, where I practice, you must submit a sworn statement saying that you are the executor, and many states have a similar system.  You can contact the county vital records office where your uncle was born to request his birth certificate. Here’s a link to a commercial service that makes ordering such documents easy as well. Also, I would ask the bank what the rules are in your state for opening that safe deposit box. In my state, there’s a law that allows bank officials to open the box for the sole purpose of removing a Will, since there’s a certain chicken-and-egg problem if the executor must have the Will to be authorized to open that box.

When does a Will Make Sense?


pot of goldDear Liza: A friend of mine is considering a living trust.  The only property he has is a coin collection maybe worth around $15,000.  He has an adult daughter who he doesn’t communicate with and does not want her to get anything.  He would like to leave the collection to me.  Is a living trust a good way to go listing me as the trustee or the beneficiary?  Or is doing a Will just as good? If the only property that your friend has is a coin collection, a simple Will should accomplish his goals.  A Will allows your friend to clearly state who should receive that collection upon his death. Assuming that $15,000 falls below the probate threshold in his state (called the “Small Estates Limit”), no probate would be required upon his death to transfer the collection to you. A living trust is just a way to avoid probate, but really serves no purpose in an estate that’s below the probate limit anyway. To determine the probate threshold in your friend’s state, start here.

Who Inherits When There’s No Beneficiary?

IRA moneyDear Liza: My dad named his mother as his beneficiary, but she passed away in 2004.  My dad died in 2013 but didn’t change his beneficiary. I am my father’s only child and he has no wife, so who gets the money ? When a person dies and there’s no surviving beneficiary named for an account, the assets would go that person’s “estate.” You don’t say what kind of account this is, but the most common kind of account with beneficiary designations would be a retirement account, so I’ll make that assumption (though most beneficiary accounts work the same way).

What that means is that, if your father left a Will, the assets in the account that you are describing would pass to the beneficiaries under that Will. If he had no Will, and you are his only child, you would be the beneficiary under the laws of the state that your father lived and died. (These are called “intestacy” laws, and they spell out who inherits if there’s no Will.)

But here’s the thing, your father’s estate may have to go through probate before the assets can be transferred to you. This depends on the size of your father’s estate, and where he lived and died. All states have what’s called a “small estates limit,” and if an estate falls below that limit, no probate is required.  I can’t tell from your question how big or small your father’s estate was, or where he lived. But that’s the relevant question for you to ask. If you don’t need to go through probate, there’s a way for you to request that the account be transferred to you without a court order; if you do need to go through probate, you’ll need a court order (which is how probate ends) to have the assets transferred to your name.  To find out the probate small estates limit in your father’s state, and how to transfer assets if his estate is under that limit, start here.

How to Store That Plan

punch-402558_640Dear Liza: I’ve just completed my estate planning documents using the latest edition of WillMaker Plus, including the will, health care documents, power of attorney, final arrangements, etc. I think all totaled it comes to over 65 pages. I’d like to leave all the documents well-organized so they’re not just a pile of papers that would overwhelm the executor. I’d like to put the documents in a three-ring binder with a table of contents and tabbed for the different sections. Is it legal to hole-punch these documents, either before or after they’re singed and notarized? Would that vary by state? I have never heard of any law that would invalidate documents that were otherwise valid because there are physical holes in the paper. Sometimes my clients make a copy of their documents, hole punch those, and put the copy in a binder, then put the originals in a safe deposit box or safe in their house. It’s great that you are trying to make things easier on your loved ones. Here’s a few other things you could put in the binder: a list of your passwords to online accounts; a list of your accounts, life insurance policies, and other assets; contact information for your heirs and beneficiaries; and a list of people that you work with, if any, such as tax preparers and financial advisors.

Avoiding a Lump Sum Inheritance

pot of goldDear Liza My father wants to leave some of his assets to my brother and sister, however neither of them is particularly adept at handling money and he doesn’t want to hand them a large, lump sum. Can a Will stipulate that they receive payments on a predetermined basis, almost like an allowance? If not, can this be accomplished through another vehicle?

Your father isn’t the only parent worried about leaving money outright to kids.  He has a few options. Your father can leave money in his Will to a trust for the benefit of your brother and sister, and specify how the money is to be distributed to them. The trust itself is a part of the Will.  Leaving money in a trust by way of a Will is called a “testamentary trust,” because the trust is established after your father dies. This will require a probate proceeding in most states.

Alternatively, your father can create a trust now, and in that trust he can distribute assets to trusts for your siblings as well. This will accomplish the same result, but avoid a probate proceeding at your father’s death. Lastly, your father could, in a Will or a trust, instruct the executor or Trustee to purchase an annuity for your siblings upon his death, that pays out a certain amount of money over a certain period of time, or, he could purchase an annuity like that during his lifetime, to be paid upon his death.

What to Do When One Parent Lacks Capacity

happy father and daughterDear Liza, my parents do not have a living trust in place. I need to help them set one up. My father and mother are 91 and 83 respectively. My father has a form of dementia that prevents him from making decision about his property. My Mother is fully capable. Does my Mother have the right to make decisions about a living trust for both of them? Does my father have to sign anything?  I’m sorry that your father is no longer capable of making decisions about his property. Because your father lacks the capacity to understand the nature and consequences of his decisions, he can no longer do any estate planning on his own, even if he’s physically capable of signing his name.

Here’s my  short answer as what kind of estate planning options are available now: your mother can only create an estate plan that includes your father’s property if your father already has a Durable Power of Attorney in place that authorizes her, as his Agent, to create a living trust on his behalf. Not all Durable Powers of Attorney authorize that power, many authorize an Agent to transfer assets into a trust that’s already been created, but not to create a new one.

If your father didn’t sign a Durable Power of Attorney authorizing the creation of a trust, then your mother has two choices:

1) She can create a living trust that holds her 1/2 of the community property. She can leave your father’s property out of that trust. If he dies first, she can have his property transferred to her via a Spousal Property Petition (this is a very simple probate procedure that a surviving spouse can do), and put his property into her trust at that point. This isn’t a perfect solution, because if your mother dies first, your father has no estate plan in place.

     2) She can go to court and have herself named as your father’s conservator — this is a court procedure that, essentially, strips your father of the ability to make legal decisions and allows someone else, a conservator, to do so for his benefit under the supervision of the court. This is expensive, public, and potentially adversarial, but it’s the only way to create a Will or a trust, for someone who now lacks the legal capacity to make their own decisions.

Sorry that I can’t offer you better news, or more options. Good luck.

Can the Executor Give Away Estate Assets?

historic houseDear Liza: My husband is the sole executor (and only child) of his mother’s Will.  There are no other beneficiaries listed in her Will.  The only asset she had was a home which is valued at about $300,000.  Does he need to probate her Will?  As the executor can he sell the home to one of our children for $1.00? Whether or not your husband has to probate the Will depends upon your state’s small estates limit. In most states, an estate that falls below a certain threshold doesn’t have to go through a formal probate. To find out about your state’s small estate limit, click here. But my guess, is yes, a piece of real property that’s worth $300,000 doesn’t fall below that limit in any state that I can think of.

Whether or not your husband can sell the house for a dollar raises a different issue. The short answer is “No.” Your husband, as the executor, has to follow the terms of the Will (as does the probate court). So, at the end of the probate proceeding, the Court will distribute that house to your husband, since you’ve said that he’s the beneficiary under the Will. At that point, if he wants to sell it for 1$ to your kids, he can do so, BUT, the IRS will consider that a gift of the fair market value of the house, minus that one dollar. Essentially, your husband is giving the house to your kids, and pretending that he sold it to them, right? The IRS gets that, they’ve seen it before.

I’d advise your husband to consult with an estate planning attorney. Depending upon the terms of the Will and the time that’s passed since his mother died, he may be able to disclaim the gift and have it pass directly to your children, as a gift from their grandmother directly. A disclaimer is a legal no-thank-you that must be properly executed within nine months of the date of death and before a person has accepted any benefit from that gift. The house would pass to your children only if the Will says that, if your husband died first, it would then pass to his issue. (Not all Wills would say that, so this depends on what it says.)

If he can’t disclaim, he’s absolutely free to make such a gift himself. He’ll have to file a gift tax return by April of the following year, reporting the gift, but he won’t owe any gift tax on the gift because your husband, like all of us, currently has the ability to give up to $5.34 million during life or at death without paying any gift or estate tax.  The gift of $299,999 will use up that much of his available exemption, leaving him with a bit over $5 million more to use.

You also need to find out whether or not your state imposes an inheritance or estate tax. You’ve told me that you live in Pennsylvania, which does impose such a tax. Click here for a general guide to state inheritance and estate taxes, including Pennsylvania.

Disinheriting a Child

Last WillDear Liza: My husband and I both have a will that states we are each other’s beneficiaries and executor’s and our son as 100% beneficiary of both of us died,. My husband has a daughter by a previous marriage.  If my husband dies before me does she have rights to our assets? I often tell my clients the sad irony of estate planning: You can pretty much do whatever you want to do, you just have to die first.  So, in your husband’s case, he is not legally required to leave any money to his daughter from a previous marriage. I am assuming that she is not a minor and he has no other obligations to provide for her via a divorce settlement or the like.

What he needs to do, though, is acknowledge his daughter as his child in the Will, and then to say, explicitly, that he is deliberately choosing NOT to leave her anything under his Will. That way, she (the excluded daughter) cannot make a claim that he simply forgot to include her and make a claim based on her relationship to him. Mind you, she may very well not be happy about this and she may try and challenge the Will as being invalid in some way, but that’s a pretty hard thing to prove: your husband would either have had to lack the legal capacity to understand what he was signing or have been placed under undue influence to execute that Will (i.e. forced to sign) .

But there’s no keeping unpleasant secrets forever.  She’s going to know that she’s been excluded, when the time comes. Notice requirements vary state to state, but generally speaking, upon your husband’s death, she, as his daughter, will be entitled to notice of the probate proceeding and will be able to see a copy of the Will, even though she doesn’t inherit anything under the Will.