Did You Inherit a House with a Mortgage?

Estate Planning, Finance, Inheritance, Probate, Trusts, Wills / Estate Planning Attorney, Heirs, St. Petersburg Estate Planning Attorney, Surviving Spouse, wills and trusts

When a loved one dies, there are always questions about wills, inheritances and how to manage all of their legal and financial affairs. It’s worse if there’s no will and no estate planning has been done. This recent Bankrate article, “Does the home you inherited include a mortgage?,” says that things can get even more complicated when you inherit a house with a mortgage.

inherit a house with a mortgage — There are several options available to anyone who inherits a house with a mortgage.

Heirs often inherit the family home. However, if it comes with a mortgage, you’ll want to work with an estate planning attorney. If there are family members who could become troublesome, if houses are located in different states or if there’s a lot of money in the estate, it’s better to have the help of an experienced professional.

Death does not mean the mortgage goes away. Heirs need to decide how to manage the loan payments, even if their plan is to sell the house. If there are missing payments, there may be penalties added onto the late payment. Worse, you may not know about the mortgage until after a few payments have gone unpaid.

Heirs who inherit a house with a mortgage have several options:

If the plan is for the heirs to move into the home, they may be able to assume the mortgage and continue paying it. There may also be an option to do a cash-out refinance and pay that way.

If the plan is to sell the home, which might make it easier if no one in the family wants to live in the home, paying off the mortgage by using the proceeds from the sale is usually the way to go. If there is enough money in the estate account to pay the mortgage while the home is on the market, that money will come out of everyone’s share. Here again, the help of an estate planning attorney will be valuable.

Heirs who inherit a house with a mortgage also have certain leverage when dealing with a mortgage bank in an estate situation. There are protections available that will provide some leeway as the estate is settling. More good news—the chance of owing federal estate taxes right now is pretty small. An estate must be worth at least $11.58 million, before the federal estate tax is due.

There are still 17 states and Washington D.C. that will want payment of a state estate tax, an inheritance tax or both (Florida is not one of them). There also might be capital gains tax liability from the sale of the home.

If you decide to take over the loan, the lender should be willing to work with you. The law allows heirs who inherit a house with a mortgage to assume a loan, especially when the transfer of property is to a relative. Surviving spouses have special protections to ensure that they can keep an inherited home, as long as they can afford it. In many states, this is done by holding title by “tenancy by the entireties” or “joint tenants with right of survivorship.”

When there is a reverse mortgage on the property, options include paying off or refinancing the balance and keeping the home, selling the home for at least 95% of the appraised value, or agreeing to a deed in lieu of foreclosure. There is a window of time for the balance to be repaid, which may be extended, if the heir is actively engaged with the lender to pay the debt. However, if a year goes by and the reverse mortgage is not paid off, the lender must begin the foreclosure process.

Nothing changes if the heir is a surviving spouse, but if the borrower who dies had an unmarried partner, they have limited options, unless they are on the loan.

What if you inherit a house with a mortgage that is “underwater,” meaning that the value of the inherited home is less than the outstanding mortgage debt? If the mortgage is a non-recourse loan, meaning the borrower does not have to pay more than the value of the home, then the lender has few options outside of foreclosure. This is also true with a reverse mortgage. Heirs are fully protected, if the home isn’t worth enough to pay off the entire balance.

If there is no will, things get extremely complicated. Contact an estate planning attorney as soon as possible.

Reference: Bankrate (Oct. 22, 2020) “Does the home you inherited include a mortgage?”

Do I Need to Name a Guardian for My Children in the Will?

Estate Planning, Guardian, Protecting Children, Wills / Estate Planning Lawyer, Guardianship, Probate Attorney, St. Petersburg Estate Planning Attorney, Wills, wills and trusts

Many young couples with children and bills, when asked about estate planning and say, “what estate?” However, a critical part of having a will—one frequently overlooked—is naming a guardian for minor children. If you don’t name a guardian, it could result in issues for your children after your death.

For a young family, naming a guardian is one of the most important reasons to draft a will. If you and your spouse die together with no guardian designated in a will, the guardian will be chosen by the court.

In a worst-case scenario, if you have no close family or no one in your family who can take your child, the court could even send them to foster care until a permanent guardian can be named.

The judge will collect as much information as possible about your children and family circumstances to name a guardian for your children.

However, the judge won’t have any intimate knowledge of who you know or which of your relatives would be good guardians. This could result in a choice of one of the last people you might pick to raise your children.

Try to find common ground by agreeing to a set of criteria you want in a guardian. This could include:

The potential guardian’s willingness to be a guardian
The potential guardian’s financial situation
Where the child might live with that person
The potential guardian’s values, religion, or political beliefs
The potential guardian’s parenting skills; and
The potential guardian’s age and health.

Next, make a decision, get the chosen guardian’s consent, write it all down, and then set out to create a will so you can legally name a guardian.

Ask an experienced estate planning attorney to help you do it correctly.

Reference: Lifehacker (Oct. 27, 2020) “Why You Should Name a Guardian for Your Kids Right Away”

Can I Leave My Pet Some of My Estate?

Estate Planning, Probate, Trust, Trustee, Wills / Estate Planning Lawyer, Inheritance, Pets, Probate Court, St. Petersburg Estate Planning Attorney, Trustee, Trusts, Wills

Pet Trusts — Pet trusts are a great option for making sure your four-legged family members are cared for if something happens to you.

The Minneapolis Star Tribune’s article entitled “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts” reports that Minnesotans are setting up trusts to care for their pets in the event they survive them. Floridians can do the same.

With a pet trust, there’s a guarantee that the money earmarked to care for the animal will be there for the animal as intended. A trust can designate a separate caretaker and trustee to care for the animal, manage the money, and make certain the care is being provided as instructed in the trust.

A pet trust can contain instructions on the type of food, medical care, exercise and housing the pet will get, as well as the pet’s end of life and burial or cremation directions.

A pet trust can also be used to care for an animal before the owner dies but is disabled or incapacitated. When the pet dies, depending on how the trust was created, the money left in the trust would be distributed to heirs or could go to another designated person or charity.

In states where this is not an estate planning option, a person could write in their will that a relative will inherit a pet, and the pet owner could also leave the person money to pay for the animal’s care. However, because pets are legally considered personal property, they cannot own property or inherit assets themselves. As a result, you’ll want to choose a person who will abide by your wishes and not spend the cash on themselves.

A pet trust can provide a plan for animal lovers who want to own pets late in life but may be concerned the pet might outlive them. Talk to an experienced estate planning attorney about pet trusts in your state.

Reference: StarTribune (Sep. 23, 2020) “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts”

Prince’s Estate Hits the IRS with a Million Dollar Lawsuit

Estate Planning, Probate, Wills / Estate Planning Attorney, IRS, Prince, Probate, Revocable Trust, St. Petersburg Estate Planning Attorney, Will

Filing probate documents was just the beginning of process that still hasn’t ended the bad news from the Prince estate. He did not have a spouse or children, but Prince had half-brothers and half-sisters, says a recent article from Forbes titled “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value.” There were a number of claims against the estate, and claims by the estate as well, including a wrongful death action that was eventually dismissed.

However, just like anyone else who dies without a will, probate takes a long time and is expensive. Things also get complicated quickly, especially with an estate of this size.

One of Prince’s half-sisters, Tyka Nelson, sold a portion of her share of the estate to Primary Wave, a music publisher. So did another sibling. And then the tax troubles began. Cash poor or not, estates must pay a federal estate tax of 40%. A federal estate tax return needs to be filed, and while audits are rare, almost every estate of this magnitude is audited by the IRS. The estate reported a taxable value of $82 million, but the IRS isn’t satisfied.

Estate tax fights with the IRS can go on for a long time. Michael Jackson’s estate battle with the IRS is still going on—and he died in 2009.

Papers filed by Prince’s estate in the U.S. Tax Court show that the estate reported a taxable value of $82 million, but the IRS claims that the value is really $163 million and wants an additional $38.7 million. In every case, Prince’s estate has obtained appraisals to support its reported values, but the IRS has its own appraisers who disagree.

Even if Prince had a will, there still could have been problems. Heath Ledger had a will, but it was five years old when he died and there was no provision made for his daughter. James Gandolfini had a will, but his estate gave the IRS $30 million of his $70 million. These stories make estate planning attorneys cringe. Seymour Hoffman, Heath Ledger, and James Gandolfini’s estates all ended up with wills in probate, which is public, expensive, time-consuming and unnecessary. A will does have to go through the court process, but the use of a revocable trust could have disposed of their assets outside of probate. A simple pour-over will would have given everything to the revocable trust, simply, and privately in terms of the ultimate inheritance disposition.

Estate planning attorneys advise clients to update wills and trusts every time there is a birth, marriage, divorce, etc. It is good advice for both celebrities and regular people.

You can give an unlimited amount to your spouse during life or on death. Prince’s estate may face a 40% estate tax, but if he had been married and left his estate to his spouse, there would not have been any federal estate tax until the death of the spouse.

A lesson for the rest of us: have an estate plan, including a will and make sure that it includes tax planning.

Reference: Forbes (Oct. 7, 2020) “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value”

Why Everyone Needs an Estate Plan

Estate Planning, Guardian, Health Care, Living Will, Power of Attorney, Wills / Advance Medical Directive, Estate Planning Lawyer, General Power of Attorney, Guardians, Last Will and Testament, Living Will, St. Petersburg Estate Planning Attorney

Many people think you have to be a millionaire to need an estate plan and investing in an estate plan is too costly for the average American. Not true! People of modest means actually need an estate plan more than the wealthy to protect what they have. A recent article from TAPinto.net explains the basics in “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive.”

Everyone needs an estate plan that includes the following documents: a Last Will and Testament, a General Durable Power of Attorney and an Advance Medical Directive or Living Will, and a HIPAA Release.

Unless your estate is valued at more than $11.58 million, you may not be as concerned about federal estate taxes right now, but this may change in the near future. Some states, like Florida, don’t have any state estate tax at all. There are states, like Pennsylvania, which have an “inheritance” tax determined based on the relationship the person has with the decedent. However, taxes aren’t the only reason to have an estate plan.

If you have young children, your will is the legal document used to tell your executor and the court who you want to raise your minor children by naming their guardian.

Why do you need a General Power of Attorney? This is the document that you need to name a person to be in charge of your affairs, if you become incapacitated and can’t make or communicate decisions. Without a POA in place, no one has the legal authority to manage your financial and legal affairs. Your family would have to go to court and file a guardianship action, which can be expensive, take time to complete and create unnecessary stress for the family.

An Advance Medical Directive, also known as a Living Will, is used to let a person of your choice make medical decisions, if you are unable to do so. This is a very important document to have, especially if you have strong feelings about being kept alive by artificial means. The Advance Medical Directive gives you an opportunity to express your wishes for end of life care, as well as giving another person the legal right to make medical decisions on your behalf. Without it, a guardianship may need to be established, wasting critical time if an emergency situation occurs.

Most people of modest means need only these three documents, but they can make a big difference to protect the family. If the family includes disabled children or individuals, owns a business or real estate, there are other documents needed to address these more complex situations. However, simple or complex, your estate and your family deserve the protection of an estate plan.

Reference: TAPinto.net (Sep. 23, 2020) “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive”

Reviewing Your Estate Plan Protects Goals, Family

Asset Protection, Estate Planning, Health Care, Power of Attorney, Wills / Assets, Beneficiary Designations, Estate Planning Attorney, Powers of Attorney, St. Petersburg Estate Planning Attorney, Trusts, Will

Regularly reviewing your estate plan and transferring the management of assets if and when you are unable to manage them yourself because of disability or death are basic components of estate plan maintenance. This goes for people with $100 or $100 million. Maintaining your estate plan can be simple, explains the article “Auditing Your Estate Plan” appearing in Forbes.

To take more control over your estate, you’ll want to have an estate planning attorney create and review an estate plan to ensure it continues to achieve your goals. To do so, you’ll need to start by defining your estate planning objectives. What are you trying to accomplish?

Provide for a surviving spouse or family
Save on income taxes now
Save on estate and gift taxes later
Provide for children later
Bequeath assets to a charity
Provide for retirement income, and/or
Protect assets and beneficiaries from creditors.

A review of your estate plan, especially if you haven’t done so in more than three years, will show whether any of your goals have changed. You’ll need to review wills, trusts, powers of attorney, healthcare proxies, beneficiary designation forms, insurance policies and joint accounts.

Preparing for incapacity is just as important as distributing assets. Who should manage your medical, financial and legal affairs? Designating someone, or more than one person, to act on your behalf, and making your wishes clear and enforceable with estate planning documents, will give you and your loved ones security. You are ready, and they will be ready to help you, if something unexpected occurs.

There are a few more steps, if your estate plan needs to be revised:

Make the plan, based on your goals
Engage the people, including an estate planning attorney, to execute the plan
Have a will updated and executed, along with other necessary documents
Re-title assets as needed and complete any changes to beneficiary designations, and
Schedule a review of your estate plan every few years and more frequently if there are large changes to tax laws or your life circumstances.

Reference: Forbes (Sep. 23, 2020) “Auditing Your Estate Plan”

What’s Involved in the Probate Process in Florida?

Estate Planning, Personal Representative, Probate, Trusts, Wills / Beneficiary Designation, Estate Planning, Personal Representative, Probate Court, St. Petersburg Estate Planning Attorney, Trusts, Wills

SWAAY’s recent article entitled “What involved in the Probate Process in Florida?” says that while every state has its own laws, the probate process can be fairly similar. Here are the basic steps in the probate process:

What's involved in the probate process in Florida — The basic steps involved in the probate process are similar in most states.

The family consults with an experienced probate attorney. Those mentioned in the decedent’s will should meet with a probate lawyer. During the meeting, all relevant documentation like the list of debts, life insurance policies, financial statements, real estate title deeds, and the will should be available.

Filing the petition. The process would be in initiated by the executor or personal representative named in the will. He or she is in charge of distributing the estate’s assets. If there’s no will, you can ask an estate planning attorney to petition a court to appoint an executor. When the court approves the personal representative, the Letters of Administration are issued as evidence of legal authority to act as the executor. The executor will pay state taxes, funeral costs, and creditor claims on behalf of the decedent. He or she will also notice creditors and beneficiaries, coordinate the asset distribution and then close the probate estate.

Noticing beneficiaries and creditors. The executor must notify all beneficiaries of trust estates, the surviving spouse and all parties that have the rights of inheritance. Creditors of the deceased will also want to be paid and will make a claim on the estate.

Obtaining the letters of administration (letters testamentary) obtained from the probate court. After the executor obtains the letter, he or she will open the estate account at a bank. Statements and assets that were in the deceased name will be liquidated and sold, if there’s a need. Proceeds obtained from the sale of property are kept in the estate account and are later distributed.

Settling all expenses, taxes, and estate debts. By law, the decedent’s debts must typically be settled prior to any distributions to the heirs. The executor will also prepare a final income tax return for the estate. Note that life insurance policies and retirement savings are distributed to heirs despite the debts owed, as they transfer by beneficiary designation outside of the will and probate.

Conducting an inventory of the estate. The executor will have conducted a final account of the remaining estate. This accounting will include the fees paid to the executor, probate expenses, cost of assets and the charges incurred when settling debts.

Distributing the assets. After the creditor claims have been settled, the executor will ask the court to transfer all assets to successors in compliance with state law or the provisions of the will. The court will issue an order to move the assets. If there’s no will, the state probate succession laws will decide who is entitled to receive a share of the property.

Finalizing the probate estate. The last step is for the executor to formally close the estate. The includes payment to creditors and distribution of assets, preparing a final distribution document and a closing affidavit that states that the assets were adequately distributed to all heirs.

Reference: SWAAY (Aug. 24, 2020) “What is the Probate Process in Florida?”

Dividing Pablo Picasso’s Estate, a Disaster

Estate Planning, Power of Attorney, Probate, Wills / Estate Planning Lawyer, Power of Attorney, Probate Court, St. Petersburg Estate Planning Attorney, Will Contest, Wills

When he died, Pablo Picasso’s estate contained 1,885 paintings, 1,228 sculptures, 7,089 drawings, as well as tens of thousands of prints, thousands of ceramic works and 150 sketchbooks when he passed away in 1973. He owned five homes and a large portfolio of stocks and bonds. “The Master” fathered four children with three women. He was also thought to have had $4.5 million in cash and $1.3 million in gold in his possession when he died. Once again, Picasso did not leave a will. Distributing his assets took six years of contentious negotiations between his children and other heirs, such as his wives, mistresses, legitimate children and his illegitimate ones.

Celebrity Net Worth’s recent article entitled “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will” explains that Picasso was creating art up until his death. Unlike most artists who die broke, he had been famous in his lifetime. However, when he died without a will, people came out of the woodwork to claim a piece of his valuable estate. Only one of Picasso’s four children was born to a woman who was his wife. One of his mistresses had been living with him for decades. She had a direct and well-documented influence on his work. However, Picasso had no children with her. Dividing his estate was a disaster.

A court-appointed auditor who evaluated Picasso’s assets after his death said that he was worth between $100-$250 million (about $530 million to $1.3 billion today, after adjusting for inflation). In addition to his art, his heirs were fighting over the rights to license his image rights. The six-year court battle cost $30 million in legal fees to settle. But it didn’t settle for long, as the heirs began fighting over the rights to Picasso’s name and image. In 1989, his son Claude sold the name and the image of Picasso’s signature to French carmaker Peugeot-Citroen for $20 million. They wanted to release a sedan called the “Citroen Xsara Picasso.” However, one of Picasso’s grandchildren tried to halt the sale because she disagreed with the commission paid to the agent who brokered the deal—but oddly enough, the consulting company was owned by her cousin, another Picasso.

Claude created the Picasso Administration in Paris in the mid-90s. This entity manages the heirs’ jointly owned property, controls the rights to exhibitions and reproductions of the master’s works, and authorizes merchandising licenses for his work, name and image. The administration also investigates forgeries, illegal use of the Picasso name and stolen works of art. In the 47 years since his death, Picasso has been the most reproduced, most exhibited, most stolen and most faked artist of all time.

Pablo Picasso’s heirs are all very well off as a result of his art. His youngest daughter, Paloma Picasso, is the richest, with $600 million. She’s had a successful career as a jewelry designer. She also enjoys her share of her father’s estate.

Reference: Celebrity Net Worth (Sep, 13, 2020) “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will”

How Can Siblings Settle Disputes over an Estate?

Estate Planning, Inheritance, Wills / Distribution of Estate Assets, Estate Planning Lawyer, Inheritance, St. Petersburg Estate Planning Attorney, Wills

When a parent passes away, their assets are often divided between their children. However, if there’s no will to answer any legal questions and disputes over the estate, siblings can argue over the assets. Some even take the matter to court. It would be great to avoid disputes over the estate because, in many cases, a fight between the siblings can end their good relationship and enrich attorneys, instead of family members.

The Legal Reader’s recent article entitled “Tips to Help Siblings Avoid or Resolve an Estate Battle” says that the following tips can help people avoid disputes over an estate or assist them in preventing the fight entirely.

Use a Family Auction. With a family auction, siblings use agreed upon “tokens” to bid for the estate items they want.

Get an Appraisal. The division of an estate between the siblings can get complicated and end in a fight if the siblings want different pieces of the estate and have to work out the value difference. If, for example, the siblings decide to split the estate unevenly, and one gets a car and another a house, it’s worthwhile to engage the services of an appraiser to calculate the value of these assets. That way, those pieces of smaller value can be deducted from ones of higher value for fairer distribution.

Mediation. If siblings historically don’t get along, they may battle over every trinket left as an inheritance, no matter how immaterial. In that case, you should use a mediator to help divide the estate fairly without a court battle.

Take Turns! Sometimes, if there are several siblings involved in the division of assets, they can take turns in claiming the items within the estate. All siblings naturally have to agree to the idea with no hard feelings involved. Just like Mom would have wanted!

Asset Liquidation. If everything else fails, the easiest way to divide the assets and the estate between the siblings is to go through asset liquidation and split the proceeds.

As you can see, there are a number of ways to deal with the division of the estate and assets and prevent the legal battle between the siblings. To avoid hard feelings, stay calm, be reasonable and ask your siblings to act the same way.

Reference: The Legal Reader (Aug. 24, 2020) “Tips to Help Siblings Avoid or Resolve an Estate Battle”

What Does an Executor Do?

Estate Planning, Executor, Probate, Wills / Asset Distribution, Estate, Estate Planning Attorney, Executor, Income Tax, Inheritance, St. Petersburg Estate Planning Attorney, Will

Being asked to serve as the executor of a loved one’s estate is flattering, but it is also a big responsibility and a lot of work. So, what does an executor do? As the executor, you are responsible for taking care of all of the financial and legal matters of the estate, explains the article “An executor’s guide to settling a loved one’s estate” from Review Times. The job will require a lot of time and, depending upon the complexity of the estate and the family situation, could be challenging.

What does an executor do — The job of being an executor has many aspects.

Some of the tasks include:

Filing court papers to start the probate process to determine whether the will is valid.
Making a complete inventory of everything in the estate.
Obtaining an estate tax ID number, opening an estate bank account and using the estate funds to pay bills, including funeral costs and medical bills.
If the estate includes a home, maintaining the home and paying the mortgage, taxes, etc.
Terminating credit cards, notifying banks and government agencies—including Social Security—and the post office.
Preparing and filing income tax returns for the last year of the person’s life, unless they filed them already, and for the estate.
Distributing assets, as directed by the will.

Your first task is to locate the will and any important documents and financial information. You will need the will, deeds, titles, brokerage statements, insurance policies, etc.

If the estate is complicated, you will want to work with an estate planning attorney, who can guide you through the process. The estate pays for the attorney, and you work closely with them. Every state has its own laws and timetables for the executor’s responsibilities, which the attorney will be familiar with.

If possible, find out if there are any family conflicts, before the loved one passes. If there are potential problems, it may be better for the loved one to tell who will be inheriting what before they die. If there is no plan for asset distribution, the person who is asking you to be the executor needs to meet with an estate planning attorney as soon as possible and have a plan created, with all of the documents necessary for your state.

The executor is entitled to be paid a fee, which is paid by the estate. In most states, that fee is set at a percentage of the estate’s value, depending on the size and complexity of the estate. If you are both an executor and a beneficiary, you may want to forgo the fee, because fees are taxable, but in most states, inheritances are not.

Reference: Review Times (Sep. 6, 2020) “An executor’s guide to settling a loved one’s estate”