Executor

How Do I Leave My Home to My Family?

Figuring out what will happen to your assets after you pass away, is an unpleasant but necessary task. This ensures that your assets are distributed to the people you want. The publication, the day, recently published a story, “Planning to leave your home to your heirs,” that reminds us that it’s best to begin your estate planning, as soon as possible.

Death can unexpectedly impact young or middle-aged families, and your family may not be sufficiently prepared, if you don’t have a will. Estate planning can make certain that your wishes are clearly stated and executed.

Real estate is frequently given to an adult child, grandchild, or is divided among several heirs. Once you know who will receive the property, discuss your plans with these people to keep them apprised of your plans and avoid any unpleasant surprises.

If you include your home in the will, you can stipulate precisely who should benefit from it. You can also say if you want the home to stay in the family or be sold.

Dividing the interest in a property evenly among beneficiaries might seem fair, but it can also create some unexpected complications. If one beneficiary wants to move into the home and another wants to sell it and split the proceeds, things could get dicey. Discuss this issue with your beneficiaries to resolve this potential conflict in advance. One beneficiary could buy out the other beneficiaries’ shares in the property to take sole possession of it. However, you may need a life insurance policy to be sure that the cash is there for a buyout.

A will is also used to delegate responsibilities to certain heirs. You select an executor to oversee the disposition of your estate after your death.

An outstanding mortgage balance can cause some trouble, when passing on a property. Any debts you have at the time of your death, need to be paid before your estate can be settled. If you were still making mortgage payments, be sure your beneficiaries have a plan to avoid a default. Beneficiaries, a surviving spouse, the executor of estate, or any other party can continue to make payments to your bank to avoid a foreclosure process. There are several ways that your beneficiaries can resolve a mortgage, after they take possession of the home. In addition to just selling the property, they can refinance the loan or pay off the mortgage with any assets they have or receive from your estate. That way, they would own the home free and clear.

Review your will regularly to keep it up to date. Make a change if a beneficiary dies, if your own circumstances change, or if your relationship with an heir goes bad.

You can also transfer your home to a living trust. This lets you use and benefit from the asset while living and then transfer it to beneficiaries upon death. This will avoid the probate process and save heirs time and money. The trust document identifies beneficiaries and determines how the estate will be distributed after death. It can also name a trustee to oversee this process and avoid conflict among beneficiaries.

One downside of a living trust is that any outstanding debts must be taken care of before the home and any other assets in the trust can be transferred to beneficiaries.

If a beneficiary is comfortable with assuming some responsibility for owning your home, you can also update the deed to include them. This can be especially helpful, if your spouse isn’t currently on the deed. This will make transfer of the home easier. If the deed says: “transfer on death,” you own the home outright until your death, then it passes to any beneficiaries you name in the deed. When the deed includes the words “joint tenant with right of survivorship,” ownership of the home automatically transfers to any other co-owners on the deed, when you pass away.

Reference: the day (February 15, 2019) “Planning to leave your home to your heirs”

Why Do I Need Estate Planning If I’m Not Rich?

Most people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t the most enjoyable activity, without it, you don’t get to direct who gets the things you’ve worked so hard for after you pass away.

Estate Planning isn't only for the rich
An Estate Plan will protect your assets and your loved ones

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets and a guardian for your minor children. Without an estate plan, the courts will decide who will receive your property and raise your kids.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will with a guardianship clause, a judge will decide this important issue, and the results may not be what you would have wanted.

Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax that beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe he or she deserves more than another. This type of fighting happens all the time, and it can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you’re unable to manage your own assets or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

A Will is an Essential Component of Estate Planning

Drafting a will is a fundamental and essential component of estate planning.

Drafting a will with an experienced estate planning attorney helps avoid unnecessary work and perhaps some stress, when a family member passes away. A will permits the heirs to act with the decedent’s wishes in mind and can make certain that assets and possessions are passed to the correct individuals or organizations.

The Delaware County Daily Times’ recent article, “Senior Life: Things people should know about creating wills,” says that estate planning can be complicated. That’s the reason why many people use an experienced attorney to get the job done right. Attorneys who specialize in estate planning will typically discuss the following topics with their clients.

  • Assets: Create a list of known assets and determine which of those are covered by the will and which have to be passed on according to other estate laws, such as through joint tenancy or a beneficiary designation, like life insurance policies or retirement plan proceeds. A will also can dispose of other assets, such as photographs, mementos and jewelry.
  • Guardianship: Parents with minor children should include a clause regarding whom they want to become the guardians for their underage children or dependents. (For more about this, download Mastry Law’s FREE report A Parent’s Guide to Protecting Your Children Through Estate Planning.
  • Pets: Some people use their will to instruct the guardianship of pets and to leave assets for their care. However, remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in a will.
  • Funeral instructions: Finalizing probate won’t occur until after the funeral, so wishes may go unheeded.
  • Executor: This individual is a trusted person who will carry out the terms of the will. She should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This results in the estate being settled based upon the laws where that person lived. A court-appointed administrator will serve in the capacity to transfer property. This administrator will be bound by the laws of the state and may make decisions that go against the decedent’s wishes.

To avoid this, a will and other estate planning documents are critical. Talk to an estate planning attorney or download a FREE copy of our estate planning book, Failing to Plan is Planning to Fail.

Reference: The Delaware County Daily Times (January 7, 2019) “Senior Life: Things people should know about creating wills”

Get These Three Estate Planning Documents In 2019

These may not be the first things you are thinking about as we launch into a brand-new year, but the idea is not to wait until you’re not thinking clearly or when it’s too late and you don’t have what you need to protect yourself, your family and your property. The details, from the Fox Business news article, “3 financial documents everyone needs,” are straightforward. Put this on your to-do list today.

A Will. The essential function of a will is to ensure that your wishes are carried out, when you are no longer alive. It’s not just for rich people. Everyone should have a will. It can include everything from your financial assets to life insurance, family heirlooms, artwork and any real estate property.

A will can also be used to protect your business, provide for charities and ensure lifelong care for your pets.

If you have children, a will is especially important. Your will is used to name a guardian for your minor children. Otherwise, the state will decide who should raise your children.

Your will is also used to name your executor (referred to as the Personal Representative in Florida). That is the person who has the legal responsibility for making sure your financial obligations are honored and your assets are distributed according to your wishes. Without an executor, the state will appoint a person to handle those tasks.

An Advanced Medical Directive. What would happen if you became ill or injured and could not make medical decisions for yourself? An advanced medical directive and health care proxy are the documents you need to assign the people you want to make decisions on your behalf. The advanced medical directive, also called a living will, explains your wishes for care, including end-of-life care. The healthcare proxy appoints a person to make healthcare decisions for you. As long as you have legal capacity, these documents aren’t used, but once they are needed, you and your family will be glad they are in place.

A Durable Power of Attorney. This document is used to name someone who will make financial decisions if you are not able to do so. Be careful to name a person you trust implicitly to make good decisions on your behalf. That may be a family member, an adult child or an attorney.

Once you’ve had these documents prepared as part of your estate plan they documents should be reviewed and updated every now and then. Life changes, laws change and what was a great tax strategy at one point may not be effective, if there’s a change to the law. Your estate planning attorney will help create and update your estate plan.

Reference: Fox Business (Dec. 19, 2018) “3 financial documents everyone needs”

Why Do I Need an Estate Plan?

Investopedia’s recent article, “4 Reasons Estate Planning Is So Important,” says you should think about the following four reasons you should have an estate plan. According to the article, doing so can help avoid potentially devastating consequences for your family.

  1. An Estate Plan Keeps Your Assets from Going to Unintended Beneficiaries. A primary part of estate planning is choosing heirs for your assets. Without an estate plan, a judge will decide who gets your assets. This process can take years and can get heated. There’s no guarantee the judge will automatically rule that the surviving spouse gets everything.
  2. An Estate Plan Protects Your Young Children. If you are the parent of minor children, you need to name their guardians, in the event that both parents die before the children turn 18. Without including this in your will, the courts will make this decision.
  3. An Estate Plan Eliminates a Large Tax Burden for Your Heirs. Estate planning means protecting your loved ones—that also entails providing them with protection from the IRS. Your estate plan should transfer assets to your heirs and create the smallest tax burden as possible for them. Without a plan, the amount your heirs may owe the government could be substantial.
  4. An Estate Plan Reduces Family Headaches After You’ve Passed. There are plenty of horror stories about how the family starts fighting after the death of a loved one. You can avoid this. One way is to carefully choose who controls your finances and assets, if you become mentally incapacitated or after you die. This goes a long way towards eliminating family strife and making certain that your assets are handled in the way you want.

If you want to protect your assets and your loved ones after you’re gone, you need an estate plan. Without one, your heirs could face large tax burdens and the courts could decide how your assets are divided or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Where Do I Start as an Executor if There’s a House in the Estate?

Handling an estate can be a monumental task. The Greater Baton Rouge Business Report explains the details in its article that asks “So you inherited a house … now what?

For instance, an executor’s immediate worry might be the safety of the house. One of the first questions an heir might ask, is whether there’s a security company involved that has a contract for monitoring. If so, contact the company to see where to call should there be a security breach and change the security passwords. Another suggestion is to change the locks on the house, because who knows who has been given keys to the home over the years. Siblings might want to place valuable items in safety deposit boxes or remove them from the house, as soon as they can.

The key to this entire process among heirs is communication. Keep everyone up-to-date. This alone will reduce the risk of misunderstanding, mistrust and frustration in the family.

Different interests among siblings often creates tensions after inheriting a house. A house may have sentimental value to the heirs, but the executor must stay objective about the situation. Reducing the house to cash by selling it and dividing the proceeds, typically makes the most financial sense.

It’s costly to maintain a house in an estate and insurance and court proceedings can also be expensive. Come to an up-front agreement on terms of the sale, when drafting an estate plan, because disagreements among siblings can sometimes lead to costly and lengthy court proceedings.

Heirs might decide to keep a house, especially if it’s a beach house or mountain retreat. You’ll then need someone to be the manager. One way to accomplish this is to establish a limited liability company (an LLC) with the other heirs. This gives the heirs a more stable, corporate management structure, while allowing for more flexibility. Place a year’s worth of cash to cover of expenses into the LLC and sign an agreement between heirs that states what happens with repairs, renting the property and other scenarios.

If you do sell, the sooner you sell it and the closer to the time of death, the less likely you’ll have to pay taxes on any appreciation since the time of death and have to worry about what the value was at the date of death. Inherited assets get a new tax basis, known as the date-of-death value. Use a qualified real estate appraiser to value the property, because the beneficiaries need to know the house’s most recent value to calculate capital gains tax later, should they choose to sell it.

Reference: Greater Baton Rouge Business Report (November 13, 2018) “So you inherited a house … now what? Here’s some advice

What Will Happen to Paul Allen’s Vast Fortune?

The co-founder of Microsoft serves as an excellent example of advance planning, maintaining privacy and creating a legacy.

Though a trust established years ago and several companies, Paul Allen began building his legacy of philanthropy long before his death. His last will and testament was a simple six-page document, according to an article from The Seattle Times, “Paul Allen’s will sheds little light on what will happen to estate.”

Paul_allen_bhudlnThe will was filed with King County on October 24—the same day his sister Jody announced she was named the executor and trustee of his estate.

Allen died on October 15 at age 65, from complications of non-Hodgkin lymphoma.

He was a Microsoft co-founder, who operated a long list of business and philanthropic initiatives that helped shape the Puget Sound region. His business concerns included owning the Seattle Seahawks, donating significantly to the arts community and scientific research, and running the multifaceted Vulcan Inc., which reshaped the real-estate landscape of South Lake Union.

Allen’s will places his assets into a 25-year-old living trust, where their disposition is not expected to be made public. It is important to remember that wills are public records, but trusts are not.

Forbes estimated his wealth at roughly $20 billion.

The will also sets out a list of successors, if Jody Allen declines or is unable to serve as executor.

Jody can appoint someone, or it would next fall to Nancy Peretsman, the managing director of investment firm Allen & Co., which is not connected to Allen. After him, the duty would fall to lawyers Allen Israel and Nicholas Saggese.

Jody Allen said in October that she “will do all that I can to ensure that Paul’s vision is realized, not just for years, but for generations.”

Many tributes to Allen have taken place since his passing. In early November, buildings in Seattle and throughout the state were lit up in blue, his favorite color and the color of the Seattle Seahawks, the football team he owned.

Reference: The Seattle Times (November 8, 2018) “Paul Allen’s will sheds little light on what will happen to estate”

Spiderman Creator Stan Lee’s Estate Needs Untangling

It’s going to take more than a super hero to unravel the mess that Stan Lee left behind.

The passing of Stan Lee, famed Marvel Comics publisher and chairman, was sad for his legions of fans. For his 68-year-old daughter J.C., there’s grief and a challenging estate to be settled. His last years were hard, with ill health, the passing of his wife of nearly 70 years and accusations of sexual harassment from nurses and home aides.

Stan-leeIn addition, Lee reportedly said that $1.4 million dollars was missing from his bank accounts and that a large chunk of the money had been used to purchase a condo.

MarketWatch’srecent article, “Stan Lee’s tangled web of estate planning and how to avoid it in your own life,”reports that Lee had also hired and fired several business managers and attorneys in this time.

“I learned later on in life, you need advisors, if you’re making any money at all,” he told the Daily Beastin a 2018 interview. He also remarked that he’d done much of his own money management at the start of his career.

“But then, a little money started coming in, and I realized I needed help. And I needed people I could trust. And I had made some big mistakes. And my first bunch of people were people that I shouldn’t have trusted.”

It’s not known at this point, if Lee had a will or any trusts in place. If he did not, then he’s joining other late celebrities like performers Aretha Franklin and Prince who failed to draft these documents. As a result, their heirs and potential beneficiaries have had to go to court to straighten things out.

Keeping track of an estate plan can become harder as a person ages, because he or she could suffer cognitive decline, or a professional or family member may think he or she is suffering from this. Stan Lee was the subject of this type of inquiry: in February, he signed a document declaring that his daughter spent too much money, yelled at him, and befriended three men who wanted to take advantage of him, the Hollywood Reporterreported. However, a few days later, Lee took it back.

Seniors can become get less confident in what they’re doing, and they are more susceptible to the influence of others who may not have the best of intentions. However, you can easily create an estate plan with which you’re comfortable, with the help of an experienced estate panning attorney.

A big rat’s nest that will need to be addressed by Lee’s daughter will be dealing with the many business documents that may be floating around from his current and past business managers and attorneys. To avoid this, work with an estate planning attorney and ask some specific questions, such as:

  • How do we organize and simplify my assets?
  • Will we need a trust, and how will they be managed?
  • How will you coordinate with my executor and/or attorney-in-fact while I’m well, and after I’m sick or gone?
  • How do you determine cognitive decline in an individual? What would you do, if you believed my ability to answer questions and manage my funds was diminished? What would you do once you’ve made this decision?
  • How often will we review my beneficiary designations and estate planning documents?
  • How should we coordinate a team of financial and legal professionals to make sure all are working towards the same goals?
  • How much or how little information about my estate should be discussed with family members?

Reference: MarketWatch(November 17, 2018) “Stan Lee’s tangled web of estate planning and how to avoid it in your own life”

When a Sibling Executor Goes Rogue

It’s one thing to fight with a sibling over toys when you are young. However, as adults, and more to the point, as an executor, there’s no room for tantrums or not acting in the best interests of the beneficiaries.

An executor who refuses to sell an inherited home, is opening themselves up to legal actions. Beneficiaries have rights, and one of those is to have an executor fulfill his or her legal obligations.

Bigstock-Young-man-holding-a-trash-bin--26453660nj.com’s recent article, “What happens when siblings can't agree about selling parents' home” explains that even though an executor has some discretion in administering the estate, she has a duty to settle and distribute the estate expeditiously and efficiently for the best interest of the beneficiaries.

Unless the parent’s will has specific instructions for the home, the executor—at her discretion—has two choices. She may sell it and distribute the net proceeds. The other option is to distribute the home "in kind" to the beneficiaries. That means retitling a deed from the estate to the beneficiaries as tenants in common. If the property is distributed in kind, the beneficiaries will then own the property jointly and will be jointly obligated on the home equity loan. State law may dictate that this loan isn’t not paid off with other estate assets, unless specifically instructed in the will.

Creditors have a specific time period in which to present a claim to the executor. As a result, many executors won’t make distributions before that time has concluded. At that point, like in New Jersey, if there are any beneficiaries who aren’t Class A beneficiaries (grandparents, parents, children, stepchildren, grandchildren, spouses, or domestic partners) or if there is a trust, then a New Jersey Inheritance Tax Return must be filed within eight months of death. Thus, many executors won’t make distribution before a Notice of Assessment (showing that no additional tax is due) is received from the Division of Taxation.

If the parents passed away in 2017 in New Jersey, and if either estate exceeded $2 million, there may have been a state estate tax return to be filed and possibly taxes owed. There is now no New Jersey estate tax for decedents dying after 2017. Even if there is no tax and all the beneficiaries are Class A beneficiaries, the state requires that a waiver be obtained from the Division of Taxation to release its lien on the property of a decedent.

 However, if an estate has been open for a very long period of time, and family members think that the executor isn’t fulfilling her obligations, they may sue to have the executor discharged and a new one appointed. The court may discharge an executor for not obeying a court order, like filing an accounting or an inventory of estate assets.

Once the court gets involved, things can turn ugly for the family. Heirs can ask the court to direct the executor to perform specific actions, and the hope is that the executor will wake up and take the court’s order seriously. It’s a terrible legacy for a family, but unfortunately one that does occur often enough.

Reference: nj.com(October 4, 2018) “What happens when siblings can't agree about selling parents' home”

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