Dear 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.
Dear Liza: I’ve read that I could create a trust for my children in a Will, then name that trust as a beneficiary of my retirement account. That way, as I understand it, my successor Trustee could manage those retirement assets for my children until they grow up. But if I do that, will my estate have to go through probate before that trust can be established? Yes, in order to establish a trust that’s created by a Will, your estate would have to go through probate first. What you are describing is called a ‘testamentary trust’ because the trust is created by a Will. The order issued by the court at the end of the probate will incorporate the terms of that trust.
To avoid probate altogether, you should use a living trust to create a trust for the benefit of your children, and put your assets in that trust before you die. You can name that trust as a beneficiary of your retirement account, and, after your death, the successor Trustee will work with the plan administrator for that retirement account to transfer the assets into the trust for your children. That being said, if your children are over eighteen, it’s easier to name them directly as beneficiaries, rather than work through the medium of a trust–which has a slightly different set of rules for how the required minimum distributions are calculated.
Dear Liza: My grandmother passed in May 2012 and left my mother and I as equal beneficiaries of her estate. The lawyer that we’ve been working with hasn’t been responsive to our questions or concerns. After eight months of working with him, it seems that not much has happened. My mother and I don’t feel that he is giving our case an appropriate amount of attention. Should we fire him? Probably. Certainly if you’re not happy with the care with which you have been treated you should at least have a candid discussion with your attorney about it. If you can’t come to a reasonable resolution of the issues, you absolutely have the right to seek other counsel. Your attorney is, after all, your attorney–and owes you a duty of loyatly and a duty to communicate adequately and keep you updated on the progress of the trust administration. If you do seek other counsel, you have the right to your client file as well. Good luck.
Dear Liza: My brother gave me two checks totaling $200,000 in 2012 as a gift. Who pays the tax on that? You have a generous brother! And, in the no good deed goes unpunished department, it is the DONOR of the gift (your brother) who is responsible for reporting the gift and paying the tax due, if any. You, the DONEE, receive the gift free of tax because gifts are not ordinary income under the income tax rules. In 2012, gifts under $5.12 million dollars are not subject to gift tax, but any gift over $13,000 must be reported on a gift tax return by April, 2013. Your brother must file that return, which tells the IRS that he made you a gift of $200,000. Assuming he hasn’t made other gifts that exceed that $5.12 million, though, no tax will be due. Instead, by reporting the gift, your brother has used up some of his lifetime gift tax credit–the tax that would otherwise be due on a gift of $200,000.
Dear Liza: I have been wondering if my husband dies, do I have to be on the deed to our house to have right of survivorship? We have been married 5 yrs., his name only is on the deed, he has no ex-wife or children. Yes, if you want to inherit that house without a probate proceeding, you do need to be on that deed in a way that provides you with right of survivorship–which means that upon your husband’s death, you are the sole owner by operation of law alone. Property owned in this way passes to the surviving owner without any probate requirement. Any two people can own property with right of survivorship as Joint Tenants. But married couples have special ways of owning property together. In Alaska, Arizona, California, Nevada, Texas, and Wisconsin, they can own property as Community Property with Right of Survivorship–which combines right of survivorship with a special tax advantage available to surviving spouses who own community property. In many other states, married couples can own property in Tenancy by the Entirety, which combines right of survivorship with certain creditor protections. Without such a form of property ownership, you would inherit the property as your husband’s surviving heir (if he has no kids), but that will require a probate proceeding, which will cost you both time and money.
Dear Liza: My grandfather died in 2008. My mother is the first successor on the trust. We did all the post administration for the trust or so we thought. I recently read that my mother should have filed a deed to get the house placed into her name since that is what the trust called for. We have not done this. My question is the following…My mother wants the house to go to me, her son. What process would we have to do in order to get it from the trust to me? Your grandmother can file the deed she didn’t file after your grandfather died, getting the house into your grandmother’s name, as Trustee of the trust created by your grandfather. Once that’s done, her ability to give that house to you during her lifetime depends upon the terms of the trust your grandfather set up. She may be able to give it to you during her lifetime, in which case you will receive it at the value that it had in 2008, when your grandfather died. She may only be able to transfer it to you at her death, in which case you will inherit it at the value the house has at her death. She may not be able to give it to you at all, because, as you said, the terms of your grandfather’s trust became irrevocable at his death. I would advise you to see an estate planning attorney in your state to review your grandfather’s trust and advise your grandmother on the best strategy to accomplish her goals.
As for that mortgage, if you get the property transfer completed, you’ll have to request that the lender assume the loan in your own name, which they may or may not do, that depends on their calculations and your credit history.
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.
Dear Liza: My dad just received about $200,000 in cash from his recently passed-away friend’s trust. I wonder how he should file his tax for 2012? I found several documents discussing about inheritance tax exemption being $5 million. Does that only apply to family members and spouses? I love getting questions with clear answers! Your father’s inherited gift from his generous friend does not affect his income tax return for 2012. Gifts are not ‘ordinary income’ under the tax code. He gets that money TAX FREE. It doesn’t matter what his relationship was to the generous friend. But, if his generous friend’s estate was over the applicable federal exclusion from the estate tax ($5.12 million in 2012), his estate would have had to pay estate tax due. That’s why it’s called the ‘estate tax’ and not the ‘inheritance tax’–the tax, if over the amount excluded from federal estate tax, falls on the estate of the decedent, not on those who inherit the assets.
Dear Liza, The only asset funding my Mother’s Trust is her primary residence. However, she recently moved from CA to live with me in WA. My sister would like to purchase the home but doesn’t have the full amount. She would pay a down payment of $150,000 which would assist with my Mother’s caregivers and in-home health care. The balance approx. $150,000-$200,000 would be recorded as a Deed of Trust naming the Trustee of the Trust as the beneficiary. Would this affect or invalidate the Trust in any way? I have to give you a sort of lawyerly answer on this one: probably this is just fine, but you should have an attorney take a look at the trust to make sure that your mother, as the grantor of the trust and current trustee of the trust, has the power to sell trust assets and the power to loan trust assets. A well-drafted trust would certainly permit this, but I’ve seen trusts that aren’t well drafted to be sure. Also, sales of assets between family members should be for fair market value (in other words, your sister should be willing to pay what a third-party buyer would be willing to pay). Otherwise, your mother would be making a taxable gift to your sister of the difference between that fair market value and the price she actually paid. Your mother should get the house appraised to document this value before the sale occurs. Finally, the interest rate on the loan must be at least the applicable federal rate (AFR) for loans of that sort in the month the loan is made (this is published monthly by the IRS.) If the loan’s interest is too low, the difference between that rate and the AFR is also considered a taxable gift from your mother to your sister.