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.

Dear Liza: A friend of mine recently had a stroke and cannot sign her name, nor make an X, and her conversation is garbled. She doesn’t have a Will, a Living Trust, or a Durable Power of Attorney. How can we get something in place to take care of her financially? It sounds like you are going to need a conservatorship for your friend. This is a court proceeding where a judge appoints a responsible person or organization (that’s the ‘conservator’)  to care for another adult (that’s the ‘conservatee’) who is no longer able to care for himself or herself or manage his or her finances. Here’s a link to the California Courts website on conservatorships. If your friend had signed a Durable Power of Attorney for Finances before she had that stroke, you wouldn’t need to go to court–which is why a Durable Power of Attorney is such an important document. Conservatorships are generally handled by elder law attorneys, and sometimes (but not always) by estate planning attorneys.  California Advocates for Nursing Home Reform (CANHR) has a good directory of elder law attorneys. Hope this helps.

Hi Liza,  I read from FAQ on the nolo website, “The $5 million exemption applies to property you give away during life or leave at your death. In other words, you can transfer, either while you are living or at your death, up to $5 million of property tax-free.” So, does it mean that I can pass a $1 million house to my children without any costs? now? If yes, what time is used as the tax basis? Yes, until the current law expires at the end of 2012, you could absolutely give that house to your children free of gift tax. But they would also get YOUR basis in the house for capital gains tax purposes. In other words, if you purchased that house for $25,000 in the 1970′s and now it’s worth $1 million, if you give that house to your kids, and they sell it, they will owe capital gains taxes on all of that gain. If you give them the house only upon your death, their basis in that property would be the fair market value of the property at your death, so all of that gain goes away.  If you make the gift now, also, don’t forget to file a gift tax return by April 15th of the following year.  You are still required to file that return, even though no tax is due.

Dear Liza, is it necessary to have both a last will and testament if you have a living trust? Yes, that’s the way it is usually done. There are two main reasons for this.  First, if you have minor children, the Will is where you nominate guardians for them.  But also the Will provides an important way to make sure your trust is the one set of instructions for who gets what and how it’s managed.

 Here’s why: your trust holds the property that you transfer into it during your lifetime. You do this by either recording a deed (for real property) that transfers ownership from you as an individual to you as Trustee, or, in the case of a brokerage or bank account, by filing out paperwork that states that the account is owned by you, as Trustee.  (These are called Change of Title Forms at most institutions; sometimes Trust Account Applications or something similar.) However, most people don’t actually transfer all of their assets into such a trust.  When they die, often there are everyday checking and savings accounts, cars, or other assets outside of that trust.  Sometimes they have simply forgotten to transfer accounts that should have gone into the trust or refinanced a house and taken that house out of the trust in the process, then forgotten to put it back in. So, that’s where the Will comes in–it’s usually a special kind of Will, called a ‘pour-over Will’–and it says that all such property should be poured into the trust/transferred into the trust after a person’s died. That way all of a person’s property will be distributed via the trust.  A note of caution: if too much property is held outside of the trust, you will need a probate proceeding before you can transfer ownership to the trust (the trigger amount varies from state to state). So, don’t rely on that Will to make things work–make sure that your major assets are held by the trust during your lifetime.

Dear Liza:  My mother in law passed away a couple of weeks ago, she lived in Nebraska.   But I am aware Mom had a will, and although we are on good terms, as the sister in law, I did not mention the reading of the will as it sounded like this would happen.  Do my daughters have a right to know what the will says and can we get a copy of the will from the court or where ever it was filed?  In movies there’s a dramatic reading of the Will. In real life, that doesn’t happen hardly ever. Instead, the Will is supposed to be filed in the probate court in the county where the person died. Once filed, that Will is a public record and anyone can get a copy. Here’s a link to information about Nebraska probate law. Good luck.

Dear Liza: Does a gift to a living trust (with children and grandchildren – total of 9 beneficiaries) take a total of $13k annual exclusion or is the annual exclusion based on the beneficiaries?  Good question. Before I answer it, a little background for my loyal readers: the annual exclusion is the amount of money you are allowed to give to someone free of gift tax.  As we reach the end of the year, now is a good time to make such gifts, since each year you get a new exclusion to use. These annual gifts are in addition to the amount of money you are also allowed to give away free of gift tax over your lifetime (currently $5 million).  By skillfull use of the annual exclusion, you can transfer a lot of money to those you love without ever having to use up that lifetime exclusion–it’s a great idea, if you can afford it.

You are allowed to give $13,000 free of gift tax to EACH recipient each year. So, one person could, if they wanted to, give each person in their city $13,000 (or less) without having to report any of the gifts. However, if any one gift is more than $13,000, all of the gifts would have to be reported on a gift tax return by April 15th of the following year. And, a gift has to be a completed gift to count–a gift to a living trust is not a completed gift (because the donor could always revoke the trust at a future point).  That’s why, if a person wants to make annual gifts to children and grandchildren in trust, that trust has to irrevocable and has to be what’s called a “Crummey Trust”–which means that each beneficiary has a certain amount of time to withdraw that annual gift after it is made. If they don’t (and, of course, they don’t), the money stays in trust and the donor gets to use that annual exclusion from gift tax for each trust beneficiary.

Dear Liza: My wife and each have two children from prior marriages. One of her children is a homeless alcoholic who has no desire to become sober.  I wish to prevent the 401k money from going into my wife’s estate which would have only her two children as default beneficiaries. This would allow the irresponsible child to inherit half of the estate. I want the to have the final beneficiaries to be the 3 responsible children. Can I do that?  401(k) plans are regulated under federal law.  You must name your spouse as your primary beneficiary, unless she signs an effective waiver.  (But if she needs that money to live on after your death, she probably would not agree to waiving her rights in that way.)  You could name a trust as your secondary beneficiary, and,  the three ‘responsible’ children could be the beneficiaries of that trust, but, if you do that, you are going to limit their ability to withdraw that money in a tax-efficient way. They will have to use the age of the oldest trust beneficiary to determine how much money they have to withdraw each year: which means that the younger ones will have to take money out more quickly (and pay more tax) than they otherwise would.  And, if your spouse survives you, she will be able to roll that 401K into her own IRA, and then name whichever beneficiaries she chooses.   But she doesn’t have to name both of her children as her beneficiaries.  She can structure her estate in a way that makes sense for both of her children.  She could, for example, name only her responsible child as the beneficiary of her IRA, or she could leave the share for her troubled child in trust for his or her benefit via a living trust or a Will.

Dear Liza:
I live in Massachusetts as well as my 3 other sisters and our parents who are in their 80s live in Florida. My father’s only  brother from South Carolina passed away 3 years ago (they were very close) We recently learned from a friend in SC of a CD in the amount of 67k that was my uncle’s. This CD was in a bank in Connecticut. We assumed this money belonged to my father being the only immediate family (next of kin). However since we did not have a will (the Will is lost) my father was not able to directly receive the money. So one of my sisters took it upon herself to take some legal action and moved that money into “an estate” checking account. She is the “owner” of this estate. I don’t have all the details from her as she is being very secret about it. I do know that she said she has to go to “probate court”? My dad is a vulnerable and passive type of person and unfortunately my dad and I are not fully clear on how this works and having a hard time understanding the process that my sister is doing. My dad being elderly is confused (I’m confused a little too) yet wants to trust my sister that she is doing the right thing and not spending that money.  Based on what you’ve outlined here, it sounds like your sister petitioned the probate court in South Carolina to be named the administrator of your uncle’s estate. (That’s like being the executor, but when there’s no Will; also called the Personal Representative).  And that would make sense, because you’d need a probate to transfer an asset that large.  If that’s what she did, and the court did appoint her administrator, she could take the paperwork issued by the court, and use it to open an estate account. But she’s NOT the owner of the money, she’s in charge of safeguarding it until the probate process is completed.  That process requires that all creditors be notified, all assets identified, all heirs be notified, and all debts paid.  At that point, the court will issue an order distributing that money to the appropriate people under that state’s law of intestacy.  What’s confusing is that your father, as the only living heir, should have received notice from the court of your sister’s petition to be named administrator.  To find out what’s actually happened, you should call the probate court in the county where your uncle died to find out about any proceedings there under his name.  Here’s a helpful article on settling an estate in South Carolina as well.

Dear Liza,
 My husband and I are both in our mid-60s and both retired. We want to put a living trust together.  My husband has two daughters (and two grandchildren) from his previous marriage.  I have no children of my own, but have a sister and nieces and nephews.  My husband feels that his daughters should receive two-thirds of our estate, and my family (nieces and nephews) should divide the remaining one-third.  In your opinion, do you think this is fair?  I feel that I have contributed as much as he has over the years and that it should be a 50/50 split.  I hope you are able to give your opinion.  I can, and I will: I’m on your side, if you feel that you’ve each contributed equally to the property you’ve accumulated together during your marriage.  If you lived in a community property state, that’s how you’d have to divide your assets: 50/50.    But it’s not easy to discuss equity with a spouse, and he may feel that his children ‘deserve’ more somehow than your nieces and siblings.  Still, it’s worth working it out together so that your estate plan reflects your wishes, rather than state default rules, which will kick in if you die without a plan at all.   Maybe if you work with a compassionate and wise attorney (honestly, there are some….) he or she can help you two to articulate your views and come to a fair resolution.

Dear Liza: I want to buy a home in Arizona and my Mom wants to loan me the 40k for my 20% down. It’s from her savings account. My broker said she should do a letter saying she is “gifting” it to me.  She lives in California. Will this cause her any issues with the IRS? can she loan it instead? Your Mom can give you the money or loan you the money, it’s up to her.  If she gives you the money, she will need to file a gift tax return next year.  But, she won’t owe any gift tax because each person is currently allowed to give (I kid you not!) five million dollars, free of gift tax.  Her 40K gift to you will mean that she only has $4,960,000 left of her lifetime gifting credit. This shouldn’t cause her major trouble, right? If, instead, she’d rather make a loan to you, she can do so. But the loan should be in writing, the interest rate must be at least equal to the published federal rate (AFR) for that month, and the loan should be secured by the property. Here’s a good article on family loans that you might find helpful.