Tag Archives: probate

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.

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.

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.

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.

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.

What Do I Put In a Living Trust?

Dear Liza:  I am trying to prepare a living trust on behalf of my father.  He owns his home and vehicles outright and also has two bank accounts.  I am the POD beneficiary of all of his accounts, as well as being a secondary signer on his checking and savings accounts.  My confusion comes from not knowing what assets should be put in the living trust.  Should it just be the home, since that has the highest value?  Or should the cars and bank accounts also be included?  Or can everything but the house be designated in the pour-over will that I also intend to create? Your father’s living trust has just one purpose: to allow his estate to avoid probate upon his death.  If your father’s assets are owned by the trust, not by him, when he dies, then his estate won’t need to go through probate.  Not all items are subject to probate, though: retirement accounts, life insurance policies and bank accounts with designated beneficiaries (that’s what a POD account is), go directly to the named beneficiary. Cars can be transferred via the DMV, and so don’t need to go through probate either. So, for your Dad, that leaves his house. You should transfer legal ownership of the house to his trust by filing a trust transfer deed with the county.  When you record the deed, you’ll also need to file a Preliminary Change of Ownership Form (PCOR).  This form tells the county assessor what kind of transfer just happened; the assessor wants to know if they can raise property taxes on that property, which they can’t, because a transfer to or from a living trust is NOT a change of ownership under Proposition 13. That pour-over Will is just a backup for your Dad. If he doesn’t transfer his house to the trust, and then dies, the Will says transfer whatever property he owned at death to this trust  (that’s the pour-over part). But, if the value of that property is more than $150,000, you’ll need to go through probate to make the transfer.  Put another way, the Will makes sure that all of your father’s assets get distributed as directed by the trust, but it won’t help his estate avoid probate first.

 

 

 

Estate v. Trusts, what’s the difference?

Dear Liza: What distinguishes an Estate from a Trust? A person’s estate is all of their property owned at death.  If they have a Will, that document states who inherits the estate.  If they die without a Will, state law determine who will inherit their estate.   In both cases, if they have enough assets, a probate court has to supervise the settling of the estate.  A trust is a legal agreement in which a person (called a Grantor) states that one or more people (called Trustees) hold the Grantor’s assets for certain people (called the beneficiaries) subject to certain duties and the terms of the agreement.  The most common type of trust is called a revocable living trust, but there are others.  A person may set up a living  trust to hold certain of their assets (like their house) during their lifetime, and then give those assets to others at their death. Assets held in the living trust do not go through probate, which is why most people set them up.

But, that person almost certainly owns other assets in their own name (like their everyday checking account, their car, and their tangible personal property). Those things are part of that person’s estate, not their trust.  They would ordinarily have a special kind of Will (called a pour-over Will) that says that all of these things should be added to their trust upon their death. That way, there’s just one set of instructions about who gets what.

Selecting Professional Executors

Hello Liza, My husband and I need to update our wills, they are terribly out of date.  Our dilemma is around the question of who should be Executor/Co-Executor of the estate. Obviously we would be the executors of one an others estates, however, if something were to happen to both of us, we need a third party Executor/Co-Executor.  We have no obvious relatives, or even close friends that we feel could ask to be an Executor.   We’ve understand that a law firm, bank, financial planner, etc.can act as an Executor (or co-Executor).  Our question is, what is the financial obligation for doing so?  Trust companies, trust departments of banks, and individuals, called professional fiduciaries, can serve as the executor of your estate.  There’s no up front fee for nominating an institution or professional to serve in that capacity. They would charge the estate a fee for their services if they are appointed to serve after the death of the second of you.  Often, these fees are a percentage of the estate. If your estate goes through probate, your executor is awarded statutory fees based on state law, which are usually a percentage of the value of the estate.  Attorneys sometimes serve in this capacity, but, at least in the state where I practice (California) there are strict rules about doing so, because in the past unscrupulous lawyers wrote themselves into client’s documents to generate future fees. Financial advisors often cannot serve due to conflict of interest rules in their companies, but some can.  I would advise you to ask your local bank or financial advisor what their fees would be for this service, or if they can recommend anyone in your area who could serve.

Trusts and Pour Over Wills

Dear Liza,  My husband and I are having a disagreement about how to set up our living trust. (We are using online trust software.) He says that our will designates how to disperse the trust, after both of us die and the two designated trustees who are in charge of the trust will need to follow the will’s direction and that the trust is merely a holder of property and we don’t “need” to add all the beneficiaries to the trust document, that the will suffices. I say that we need to designate all the beneficiaries in the trust itself and clarify that all the property in the trust, unless specifically designated otherwise, will be inherited equally by our six children and that the will is for designating who gets the red pot or the carpet, etc., that sort of thing. Who’s right? So, one of the really nice things about being an estate planning attorney is that I hardly ever have to weigh in on marital disputes. On this one, though, I’m on your side. As a general rule, a living trust is designed to hold your property that would otherwise be subject to a probate proceeding at the death of the second of you–usually your house and your large brokerage and bank accounts. The assets in that trust pass by the terms of the trust itself. The ‘Trustees can’t follow the instructions in the Will, they have to follow what the trust says.

 The Will, in this scenario, is designed to transfer any assets that you owned at death that weren’t in the trust into the trust at that point. That’s why this Will is often called a ‘pour-over’ Will– like the saucer under a teacup, it picks up the property you’ve left outside of the trust and pours it into the trust (the cup) after your death. Often, too, your tangible personal property (jewelry, furniture, red pot, clothes, etc) are distributed under the terms of the Will, but sometimes these assets also pass into the trust to be distributed there.  So, make the trust the document that contains your wishes for the distribution of your estate, and let the Will just do the cleanup job for you.