Estate Planning Lawyer

How Long Do You Have to Settle an Estate?

The beneficiaries of an estate are typically eager to receive their inheritance. In a common scenario, a trust was left instead of a will. All the parties received their respective shares, except for the two brothers and a sister who is the executor. The trust instructed the brothers to divide the real estate property in half for each of them. The sister was to get $15,000.

However, one of the brothers lives in the home.

As you may know, the administrator or executor of an estate has the job of collecting the decedent’s assets, paying debts, making distributions to the beneficiaries and finally closing the estate in an expeditious manner.

nj.com’s recent article entitled “How long does it take to pay out a family trust?” tries to sort out what the siblings need to do to settle the estate. The key factor in this scenario is the wording of the trust.

There are situations in which a trust is used as a substitute for a will. In that case, a person’s assets are placed in trust. The trustee pays all the liabilities and administers the assets in the trust in accordance with the instructions of the trust during the individual’s life and after death.

Even when trusts are used as will substitutes, they aren’t always designed to be closed with distribution to happen immediately after the debts are paid, as in the case of the estate. The terms of the trust dictate the trustee’s duties as to the distribution of trust assets.

If you’re a beneficiary of a trust and think that the trustee is breaching his fiduciary duties, you should inform the trustee of the nature of the suspected breach. If nothing is done to remedy this, you may ask the court for help.

One option is that you can request the court to order the trustee to take actions, which you state in your complaint filed with the probate court. Another option is to request that the court direct the trustee to stop taking specific actions that you detail in your complaint.

A third choice is to ask the court to remove the trustee due to breach of fiduciary duties that you set forth in your complaint filed with the court.

However, such court intervention can be expensive. Another thing to consider is that the trustee may petition the court to have his legal fees paid from the trust funds—which will deplete the money in the trust. Because of this, it is usually best to attempt and resolve these issues before getting the court involved.

Reference: nj.com (Feb. 12, 2020) “How long does it take to pay out a family trust?

Is it Wise to Name Three Co-Executors of Your Will?

Is it wise to name co-executors of your will? This is a question that many people ask because the don’t want one of their children to feel “left out” or under appreciated.  This may get somewhat confusing when probating a will, if there are multiple executors.

There are pros and cons to naming co-executors of your will.

What are the pros and cons to choosing one child to act as your executor, instead of selecting all three of your children to act together?

nj.com’s recent article asks “I’m planning my will. Is it bad to have more than one executor?”

The article explains that the duty of the executor is to gather all the decedent’s assets, pay any outstanding debts and liabilities and then account for and distribute the remaining estate to the beneficiaries, according to the instructions in the decedent’s will.

The executor is allowed to hire professionals and others to help with tasks, like completing a decedent’s final income tax return or preparing the home for sale.

When you have multiple executors appointed, these tasks can be assigned to each person to lessen the burden of the many duties and responsibilities that an executor has.

On the downside, if those appointed can’t work together easily and without strife, appointing multiple siblings can make the administration of an estate much more difficult due to arguments, conflicts of interest, one sibling taking the lead to the resentment of the others or one executor undermining another executor’s actions.

The problem is, in situations where the siblings don’t get along, designating one of them as executor can cause hard feelings and conflict. It’s not uncommon for those siblings who aren’t named as executor, to complain about every decision made by the named executor or delay in the administration of the estate.

If there are multiple executors, the majority rules. That can avoid deadlock. Simple math in this case says that you want to avoid naming an even number of executors or name a person who can act as the tiebreaker.

Even with a “majority rules” agreement among the executors, there are some financial institutions and other entities that may require all the executors to sign documents and/or checks on behalf of the estate. This can become burdensome and inefficient, if there are multiple executors.

Speak with your estate planning attorney about your family dynamics and get their opinion about what would be best in your personal situation.

Reference: nj.com (May 22, 2019) “I’m planning my will. Is it bad to have more than one executor?”

What Should I Know about Beneficiary Designations?

A designated beneficiary is named on a life insurance policy or some type of investment account as the designated recipient of those assets, in the event of the account holder’s death. The beneficiary designation doesn’t replace a signed will but takes precedence over any instructions about these accounts in a will. If the decedent doesn’t have a will, the beneficiary may see a long delay in the probate court.

If you’ve done your estate planning, most likely you’ve spent a fair amount of time on the creation of your will. You’ve discussed the terms with an established estate planning attorney and reviewed the document before signing it.

FEDweek’s recent article entitled “Customizing Your Beneficiary Designations” points out, however, that with your IRA, you probably spent far less time planning for its ultimate disposition.

The bank, brokerage firm, or mutual fund company that acts as custodian undoubtedly has a standard beneficiary designation form. It is likely that you took only a moment or two to write in the name of your spouse or the names of your children.

A beneficiary designation on account, like an IRA, gives instructions on how your assets will be distributed upon your death.

If you have only a tiny sum in your IRA, a cursory treatment might make sense. Therefore, you could consider preparing the customized beneficiary designation form from the bank or company.

You can address various possibilities with this form, such as the scenario where your beneficiary predeceases you, or she becomes incompetent. Another circumstance to address, is if you and your beneficiary die in the same accident.

These situations aren’t fun to think about but they’re the issues usually covered in a will. Therefore, they should be addressed, if a sizeable IRA is at stake.

After this form has been drafted to your liking, deliver at least two copies to your custodian. Request that one be signed and dated by an official at the firm and returned to you. The other copy can be kept by the custodian.

Reference: FEDweek (Dec. 26, 2019) “Customizing Your Beneficiary Designations”

Fixing an Estate Plan Mistake

When an issue arises, you need to seek the assistance of a qualified and experienced estate planning attorney, who knows to fix the problems or find the strategy moving forward.

For example, an irrevocable trust can’t be revoked. However, in some circumstances it can be modified. The trust may have been drafted to allow its trustees and beneficiaries the authority to make certain changes in specific circumstances, like a change in the tax law.

Those kinds of changes usually require the signatures from all trustees and beneficiaries, explains The Wilmington Business Journal’s recent article entitled “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess.”

Another change to an irrevocable trust may be contemplated, if the trust’s purpose has become outdated or its administration is too expensive. An estate planning attorney can petition a judge to modify the trust in these circumstances when the trust’s purposes can’t be achieved without the requested change. Remember that trusts are complex, and you really need the advice of an experienced trust attorney.

Another option is to create the trust to allow for a “trust protector.” This is a third party who’s appointed by the trustees, the beneficiaries, or a judge. The trust protector can decide if the proposed change to the trust is warranted. However, this is only available if the original trust was written to specify the trust protector.

A term can also be added to the trust to provide “power of appointment” to trustees or beneficiaries. This makes it easier to change the trust for the benefit of current or future beneficiaries.

There’s also decanting. This is when the assets of an existing trust are “poured” into a new trust with different terms. This can include extending the trust’s life, changing trustees, fixing errors or ambiguities in the original language, and changing the legal jurisdiction. State trust laws vary, and some allow much more flexibility in how trusts are structured and administered.

The most drastic option is to end the trust. The assets would be distributed to the beneficiaries, and the trust would be dissolved. Approval must be obtained from all trustees and all beneficiaries. A frequent reason for “premature termination” is that a trust’s assets have diminished in value to the extent that administering it isn’t feasible or economical.

Again, be sure your estate plan is in good shape from the start. Anticipating problems with the help of your lawyer, instead of trying to solve issues later is the best plan.

Reference: Wilmington Business Journal (Jan. 3, 2020) “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess”

How Do I Incorporate My Business into My Estate Plan?

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about having it continue after you retire or pass away.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that estate planning and getting their affairs in order happens when they’re older. While that’s true for the most part, it’s only because that’s the stage of life when many people begin pondering their mortality and worrying about what will happen when they’re gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one’s mortality to the worry list at the earlier stages in your life.

Business continuity is a big concern for many entrepreneurs. This can be a touchy subject, both personally and professionally, so it’s better to have this addressed while you’re in charge rather than leaving the company’s future in the hands of others who are emotionally invested in you or in your work. One option is to create a living trust and will that outs parameters in place for a trustee to carry out. With these decisions in place, you’ll avoid a lot of stress and conflict for those you leave behind.

Let them be upset with you, rather than with each other. This will give them a higher probability of working things out amicably at your death. The smart move is to create a business succession plan that names a successor to be in charge of operating the business, if you should become incapacitated or when you pass away.

A power of attorney document will nominate an agent to act on your behalf, if you become incapacitated, but you should also ask your estate planning attorney about creating a trust to provide for the seamless transition of your business at your death to your successor trustees. The transfer of the company to your trust will avoid the hassle of probate and will ensure that your business assets are passed on to your chosen beneficiaries.

Estate planning may not be on tomorrow’s to do list for young entrepreneurs and business owners. Nonetheless, it’s vital to plan for all that life may bring.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

How Do I Disinherit a Family Member?

Kiplinger’s recent article, “Four Ways to Disinherit Family Members,” says that quite a few families don’t get along. However, when considering estate planning, the problem is that without a valid will leaving money to other individuals, family members are the “default” recipient of your estate. If you decide to leave any property using your will, your next-of-kin must still be given legal notice of your estate being probated (even if they’re being disinherited), and usually they’re only ones who can legitimately contest your will.

If you do have bad family relations and don’t want family members contesting your will, there are several legal tactics you can use.

  1. Leave property outside of your will. You’ll only need to probate property that’s not already effectively left to someone outside of probate. Therefore, when you name a beneficiary or co-owner on your accounts or real estate, that property won’t go through probate. Similarly, life insurance policies and retirement plans ask you to name a beneficiary, and investment and bank accounts usually let you name a “transfer on death” beneficiary. Finally, any property passing by living trusts also avoids probate.
  2. Add a ‘no-contest’ clause to your will. If you decide to disinherit your family or leave them less than they would be entitled to if you had no will, you can use a “no-contest” (aka “in terrorem”) clause. A no-contest clause states that if someone contests your will, they get nothing. However, people mess up by adding a no-contest clause, then they leave no property to the disinherited family member. Because the disowned family member is getting nothing anyway, he has nothing to lose by contesting the document. Thus, the clause serves no purpose. For a no-contest clause to be effective, leave a more-than-nominal bequest and let the potential contestant know that there’s a decent alternative to receiving nothing. Leaving them an amount acts as an incentive to not contest the will.
  3. Documenting the reasons for disinheriting. Use descriptive letters to supplement (and not supplant) your proper legal documents, and create formal, signed memorandums with notarized signatures to support but not replace those documents.
  4. Create other legal documents to disinherit your spouse. Pre-nuptial and post-nuptial agreements can address what happens, if you get divorced and when you die. You and your spouse may also “waive” estate rights in a separate document that doesn’t even deal with a potential divorce. The only downside with these agreements, is that they require both parties to agree. They also usually require separate legal counsel to make them most effective.

Work with a qualified estate panning attorney when you want to leave someone out of your will.

Reference: Kiplinger (November 13, 2019) “Four Ways to Disinherit Family Members”

Why is the Cars’ Ric Ocasek’s Wife Contesting His Will?

“I have made no provision for my wife Paulina Porizkova (‘Paulina’), as we are in the process of divorcing,” the late Cars’ singer Ric Ocasek wrote in his will.

Wealth Advisor’s recent article, “Cars singer Ric Ocasek cuts supermodel wife Paulina Porizkova out of will,” reports that the will went on to state: “Even if I should die before our divorce is final … Paulina is not entitled to any elective share … because she has abandoned me.”

Porizkova was the one who discovered her estranged husband’s body in September, as she brought him a cup of coffee. Ocasek was recovering in his New York City townhouse from a recent surgery.

The couple had two sons together but ended their marriage in May 2018, after 28 years. They first met while filming the music video for the Cars’ song “Drive” in 1984.

Porizkova said that Ocasek’s death was “untimely and unexpected.”

“I found him still asleep when bringing him his Sunday morning coffee,” she wrote in a statement published to Instagram following Ocasek’s death.

“I touched his cheek to rouse him. It was then I realized that during the night he had peacefully passed on.”

Reports say that Ocasek’s will lists his assets to include $5 million in “copyrights,” but only $100,000 in “tangible personal property” and $15,000 in cash.

The document doesn’t detail what constitutes the “copyrights” assets. Even though $5 million may appear low for a rock-legend like the Cars’ Ocasek, he likely had money stashed away in trusts. One reason why people use trusts, is to protect their privacy.

Ocasek’s will looks to have excluded two of his six sons, but not the children he had with Porizkova. Perhaps these two sons may have been compensated through other financial means.

The document indicates that Ocasek signed the will on August 28, just a month before his death. The 75-year-old died of heart disease on September 15.

Pulmonary emphysema, a type of lung disease, had also contributed to his death, the medical examiner said.

Reference: Wealth Advisor (November 12, 2019) “Cars singer Ric Ocasek cuts supermodel wife Paulina Porizkova out of will”

How Do I Change My Will?

Many people have wills that were drafted years ago. Now they want to leave some specific items to someone who was not included when their original will was drafted. Making changes to a will doesn’t have to be complicated says nj.com’s recent article, “Does my dad need to pay money to get a new will?” However, making changes on your own can cause trouble for the executor if not done correctly.

How do I change my will?
Making simple changes to a will isn’t difficult as long as the correct procedure is followed.

Many times making changes to a will is as simple as creating a written list that disposes of tangible personal property, not otherwise identified and directly disposed of in the original will.

The list must either be in the testator’s handwriting or it can be typewritten, but it must be signed and dated by the testator. This list also must describe the item and the recipient clearly.

This list can be amended or revoked. It should be kept with the will or given to the executor, so he or she knows about it and can ensure it is followed.

It would not be in the interest of the executor and may be perceived as a breach of fiduciary duty to honor such a list and make such a distribution, if the beneficiaries named in the will object. No one wants to cause a fight over the items on the list, after the parent is gone.

Although this kind of change to your will can be done on your own, it would be much wiser to invest in having the items added to a revised will to protect your wishes. If some of the beneficiaries got into a quarrel over the items on the list, it could result in a family fight that a properly drafted and executed revision or amendment could easily prevent.

Reference: nj.com (October 14, 2019) “Does my dad need to pay money to get a new will?”

What Estate Planning Documents Should I Have for My Child Who’s at College?

Kiplinger’s recent article, “Documents that Parents and College Students Need,” explains that many parental rights are no longer applicable, when a child legally reaches adulthood (age 18 in most states).  That makes having the right estate planning documents for a child who’s at college vitally important.

College students are adults, which means mom and dad are no longer in control of decision making.

However, with a few of the right estate planning documents in place, you can still be involved in your child’s medical and financial affairs. Many parents don’t know that they need these documents. They think they can access a child’s medical and other information, because their son or daughter is still on the family’s insurance plan and the parents are paying the medical and tuition bills.

Here are four documents you and your son or daughter will need.

HIPAA Authorization Form. This is a federal law that protects the privacy of medical records. You child must sign a HIPPA authorization form to let you to receive information from health care providers, such as the college’s health clinic, about their health and treatment. If your son or daughter doesn’t want to share her entire medical record, he or she can set restrictions on what information you can receive.

Medical Power of Attorney. This lets your son or daughter name a person to make medical decisions, if they are incapacitated and unable to make medical decisions. Your child should select both a primary agent and a secondary agent, in the event the first one is unavailable.

Durable Power of Attorney. This lets your son or daughter authorize a person to handle financial or legal matters on his or her behalf. A durable power of attorney is usually written, so it takes effect when a person becomes incapacitated. However, if your child would like you to manage his or her financial accounts or file tax returns while away at school, they can make the document effective immediately.

Family Education Rights and Privacy Act Waiver. Once your child is an adult, you’re no longer entitled to see their grades without express permission. It seems a bit crazy that you can be paying for tuition, but you don’t have access to their academic records. This waiver signed by your child will allow you permission to receive his or her academic record. Many colleges provide this form, or you can find it online.

Once you get these documents, make sure you have ready access to them, if required.

Reference: Kiplinger (September 24, 2019) “Documents that Parents and College Students Need”

What Estate Planning Do I Need With a New Baby?

Congratulations, you’re a new mom or dad. There’s a lot to think about, and there is one vital task that should be a priority. That is making an estate plan. People usually don’t worry about estate planning, when they’re young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set him or her up for a secure future.

What estate planning do I need with a new baby
Having an estate plan is the only way to legally name a guardian for your child.

Motley Fool’s recent article, “If You’re a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they’ve protected their child, no matter what the future holds.

  1. Purchase Life Insurance. If a parent passes away, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents pass away, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
  2. Draft a Will and Name a Guardian for your Children. For parents of minor children, the most important reason to make a will, is to name a guardian for your children. When you designate a guardian, select a person who shares your values and who will do a good job raising your children. By being proactive and naming a guardian to raise your children, it’s not left to a judge to make that selection. Do this as soon as your children are born.
  3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you’ll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s passing.
  4. Look at a Trust. If you pass away prior to your children turning 18, they can’t directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children, after they’ve passed away.

When you have a new baby, working on your estate planning probably isn’t a big priority. However, it’s worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

Reference: Motley Fool (September 28, 2019) “If You’re a New Parent, Take These 4 Estate Planning Steps”

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