Category Archives: Wills

Excluding Someone From Your Will

Will being signedDear Liza:  I am helping my friend make a Will. It’s very simple, with one heir. She wants to make sure her brother, who is her only living relative and from who she has been estranged from since they left home (she’s 75 ) is not able to challenge the Will.  She wants to specifically exclude him in the Will. Is there wording for this and is it necessary? It is very nice of you to help your friend draft her Will.  The best way to make sure that her brother can’t challenge the Will is for her to be explicit about excluding him.  She can state simply that she is deliberately leaving nothing to her brother, for reasons know to him, or something to that effect.

As her brother (not her spouse or a child), he can’t make an argument that he has a legal claim to her estate simply by reason of their relationship to each other, however, it never hurts to make it QUITE clear that you are excluding someone if that is important to you.  In addition, your friend should be careful to properly sign her Will before witnesses as required under her state’s laws.  If she has no other legal heirs than her brother, the legal challenge that he might make is simply to invalidate her Will altogether (then inherit as her only legal heir since she would then have died without a Will at all)–so, she should be sure to have the witnesses be able to state that she had the mental capacity to make the Will and that she was under no duress to do so.

Should We Get Married? Estate Planning for Same Sex Couples Now

wedding-91797_150Dear Liza: My long term domestic partner of 30 years and I were registered domestic partners for a few years and then she decided she wanted to be totally financially independent of me so we terminated the agreement last year.  We are still together as a couple and live five minutes away from each other.  Our intention is to leave everything we own to each other and have named each other as executors in our wills.  She owns a house that she may or may not be selling but in general our estates are pretty modest.  I am wondering since we are still a couple is there is an advantage in terms of avoiding probate in getting married versus doing a living trust? First, can I just say I love being able to have this conversation! Now, down to business. There’s a lot packed into your question. I’m going to answer on a general level, but I think it would be worth it for you and your partner to sit down with an accountant and an attorney and see how my advice addresses your particular concerns.

There are three key  estate planning advantages to getting married for same sex couples now, but I wouldn’t frame it as a living trust versus marriage. That’s kind of apples and oranges.  A living trust will still allow you to transfer your assets to each other without probate, regardless of whether or not you marry. But being married has two key federal and one state TAX advantage, all of which you’d realize with or without a living trust.

1.  Married couples get a step up in basis when one spouse dies on all community property assets. That means that the surviving spouse won’t have to pay capital gains on any appreciated assets that she sells after the first death, other than any gain that happened after the death of the first spouse.  For example, if your partner’s house has appreciated a lot since she bought it, and you marry and make that house community property, when one of you dies, that house would be valued at its date of death value, not the original purchase price.

2. Married couples get an unlimited marital deduction from federal estate and gift tax.  That means that you and your spouse can give an unlimited amount of assets to each other, at death or during life, and no federal estate or gift tax will be due for those gifts. For those with modest estates (which are most of us) this isn’t as big a concern now that the federal estate and gift tax exemption is $5.25 million, but that number may be reduced by Congress in the future, and it is a benefit that only spouses receive.  This, in fact, was the basis for Edie Windsor’s challenge to DOMA.

3. Married couples can pass real property to each other in California without a change in property tax rates.  A transfer between spouses is an exception to Proposition 13′s reassessment requirement.  Since you and your partner terminated your Registered Domestic Partnership, and it sounds like she purchased the property alone, her transfer of the house to you via a Will would trigger a change of ownership and reassessment for at least 1/2, if not all, of the property, depending on how she holds title at her death.

My Aunt Just Died. Can I See the Will?

mourning-108781_150Dear Liza: My wife’s Aunt just died. We went to the funeral because they had been rather close and she wanted to represent her mother’s side of the family. While attending there was a passing reference to how she and some other members of her family were in the Will. What should we expect at this point? Whose obligation is it to notify us? Do we have specific rights in this matter? I’m sorry to hear about your Wife’s Aunt. And all of the questions you are asking are such good ones!  Rules vary a bit state to state, but the general idea is that the person who has custody of the Will is required to lodge that Will with the probate court in the county where your Wife’s Aunt lived.  In California, where I practice, this is supposed to be done within 30 days of the death.  Once the Will is lodged (which means filed with the court), it is a public document, so you, your Wife, and anyone else can get access to it.

If your Wife’s Aunt had sufficient assets to require a probate proceeding, again this amount varies from state to state,  the executor named in the Will would petition the court to open a probate proceeding. This will require publication in a newspaper in the town the Aunt lived in — the idea is that probate is a public proceeding and publication gives notice to creditors who may want to file a claim against the estate.  Also, all of the Aunt’s heirs and beneficiaries would be notified of the probate, and, if anyone objects to the appointment of the executor or the validity of the Will, they can file their objections with the court.

If the Aunt’s assets fell below the limit for a probate proceeding, and here’s a list of the limits for various states, then no probate proceeding needs to be opened, but the Will should still be filed.

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.

Can I See the Will?

Will being signedDear Liza: My adult son just passed away.  I would like to know whether, when his Will is probated, I will be able to see a copy?  My condolences on your loss.   Your son’s Will must be filed in the probate court in the county in which he died as part of the probate process. Once it is filed, it is public record and you can request a copy from that court. I don’t know where you live, but here’s how it works in the Santa Clara County Superior Court, where I live, and the process should be similar where you are.

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.

Giving away that family cabin

Dear Liza: I am divorced and own a second vacation cabin that I want my children to have when I die.  Is there a way for me to retain rights, ownership and control while I am alive and of sound mind but pass the property to them when I die that doesn’t have a bunch of overwhelming taxes?  Yes.  Upon your death you can leave the kids the cabin either outright or in a trust. If you leave it to them outright, as tenants in common, each will own 1/2 and can leave their half to whomever they choose when they die. If you leave it to them in trust, you can control how it’s managed and how it would be transferred upon their deaths (as in maybe it has to go to their children or be sold to other family members.) The tax treatment of the gift is that it will go to them free of tax — if there’s a tax to pay, it falls on your estate, but they inherit what’s left free of tax.  The capital gains tax basis on the property will be what it is on your date of death, so if they sell it someday, they’ll owe tax on the gain in value from your date of death to the date of sale. I don’t know what state you live in, but in California, where I practice, a gift from parent to children is also excluded from reassessment of property tax, so they get the property tax rate you were paying.

Planning for incapacity

Dear Liza: My dad recently passed away and he and my mom had no will.  I am the only child and we have had all the bank accounts changed to my moms name and me as beneficiary but I don’t really know where else or what else (will or power of attorney) I should get.  Now that your mother’s just got you to take care of her if she gets sick, you should absolutely get her to sign a Durable Power of Attorney for Property and an Advance Health Care Directive. Both documents can name you as her Agent, the person who can pay her bills or make medical decisions if she’s unable to do so.   You said that she’s healthy now, and that’s great, but all of us get sick now and then and accidents do happen.  A Will is also a good idea, since that will make it easier for her to leave you her assets without your having to go through probate. (When one spouse dies, probate’s not usually necessary.)  All of these documents can be done inexpensively at www.nolo.com. Here’s the link to the Durable Powers of Attorney forms.

Beneficiary Designations Rule

Dear Liza: I live in the state of Oklahoma, my mother passed away unexpectedly. There was a $9,000.00 burial policy and a $12,000.00 life insurance policy, both policies were paid for by her but in my brothers name. Does my brother get to keep the life insurance policy?  Yep. He does. Your mother named him as the beneficiary for those policies, so he gets to keep the money.  Beneficiary designations like this trump whatever your mother’s Will said about her other assets.  If you take this to the probate court, they’ll tell you the same thing. Sorry.