St. Petersburg Estate Planning Attorney

What Is a Pour-Over Will?

If the goal of estate planning is to avoid probate, it seems counterintuitive that one would sign a will, but the pour-over will is an essential part of some estate plans, reports the Times Herald-Record’s article “Pour-over will a safety net for a living trust.”  So, what is a pour-over will?

What is a pour-over will
A pour-over will works in conjunction with your trust to make sure all your assets are distributed according to your wishes.

If you pass away with assets in your name alone, those assets will have to go through probate. The pour-over will names a trust as the beneficiary of probate assets, so the trust controls who receives the inheritance. The pour-over will works as a backup plan to the trust, and it also revokes past wills and codicils.

Living trusts became very common, and widely used after a 1991 AARP study concluded that families should be using trusts rather than wills, and that wills were obsolete. Trusts were suddenly not just for the wealthy. Middle class people started using trusts rather than wills, to save time and money and avoid estate battles among family members. Trusts also serve to keep your financial and personal affairs private. Wills that are probated are public documents that anyone can review.

Even a simple probate lasts about a year, before beneficiaries receive inheritances. A trust can be settled in months. Regarding the cost of probate, it is estimated that between 2—4% of the cost of settling an estate can be saved by using a trust instead of a will.

When a will is probated, family members receive a notice, which allows them to contest the will. When assets are in a trust, there is no notification. This avoids delay, costs and the aggravation of a will contest.

Wills are not a bad thing, and they do serve a purpose. However, this specific legal document comes with certain legal requirements.

The will was actually invented more than 500 years ago, by King Henry VIII of England. Many people still think that wills are the best estate planning document, but they may be unaware of the government oversight and potential complications when a will is probated.

Speak with an experienced estate planning attorney to discuss how probate may impact your heirs and see if you agree that the use of a trust and a pour-over will would make the most sense for your family.

Reference: Times Herald-Record (Sep. 13, 2019) “Pour-over will a safety net for a living trust.”

Why Advance Directives are Needed

There are two sad parts to this story that illustrates why advance directives are needed. The first was that the family panicked and had a feeding tube put in, despite their mother’s wishes. The second, says WRAL in the article “Advance directives lift burden of tough decisions at end of life,” was that after the woman died several years later, her family found the advance directive.

Why Advance Directives are Needed
Advance directives are only useful if your family and friends know where you keep them.

Without knowing about a loved one’s wishes for their end-of-life care, it’s hard to honor them. That’s why documentation, like advance directives, are so important. So is telling your family where your important legal documents are.

What is an advance directive?

An advance directive is a broad legal term that can include several different documents, but mostly refers to a Living Will and a Health Care Power of Attorney. These documents give you the ability to express what medical care you want and don’t want.

Cases like the women mentioned above highlight the importance of this kind of document. While her advance directive was misplaced, many people don’t have them at all. These are important to address non-financial end-of-life issues, both for you and for your families.

Most people would prefer not to have life-prolonging measures implemented. Without advance directives, the decision to remove a breathing machine or a heart machine can be even more difficult for a spouse or a child. The burdens are not just emotional.

If there is no decision maker named and family members disagree about what you would have wanted, a battle may break out in the family that results in a court fight.

A few notes on advance directives:

  • They can be created at any time, but most people tend to consider them at midlife or close to retirement.
  • The document can be amended at any time and should be reassessed through the course of your life.
  • One decision maker should be appointed to avoid arguments.
  • A HIPAA release should be included with the advance directives so the decision maker can fully informed of your medical condition by your healthcare providers.

Health care agents, doctors and loved ones should all be provided with copies, and the originals should also be accessible.

Talk with your estate planning attorney about including an advance directive and a health care power of attorney among your estate planning documents. This is a burden that you can make lighter for those you love.

Reference: WRAL (Sep. 18, 2019) “Advance directives lift burden of tough decisions at end of life”

How Do I Transfer My Home into a Trust?

Say that a husband used his inheritance to purchase the family home outright. The wife signed a quitclaim deed to him to put the property into his living trust with the condition that if he died before his wife, she could live in the home until her death.

However, a common issue is that the husband or the creator of the trust never signed the living trust. So what would happen to the property if the husband were to die before the wife?

How do I transfer a home into my trust
Transferring your home into your trust isn’t a complicated matter as long as you know the pit-falls to lookout for.

This can be complicated if the couple lives out-of-state and it’s a second marriage for each of the spouses. They both also have adult children from prior marriages.

The Herald Tribune’s recent article, “Home ownership complications need guidance from estate planning attorney,” says that in this situation it’s important to know if the deed was to the husband personally or to his living trust. If the wife quitclaimed the home to her husband personally, he then owns her share of the home, subject to any marital interests she may still have in the home. However, if the wife quitclaimed the home to his living trust, and the trust was never created, the deed may be invalid. The wife may still own the husband’s interest in the home.

It’s common for a couple to own the home as joint tenants with rights of survivorship. This would have meant that if the wife died, her husband would own the entire property automatically. If he died, she’d own the entire home automatically. She then signed a quitclaim deed over to him or his trust.

First, the wife should see if the deed was even filed or recorded. If it wasn’t recorded or filed, she could simply destroy the document and keep the status of the title as it was. However, if the document was recorded and she transferred ownership to her husband, he would be the sole owner of the home, subject to her marital rights under state law.

If the trust doesn’t exist, her quitclaim deed transfer to an entity that doesn’t exist would create a situation, where she could claim that she still owned her interest in the home. However, the home may now be owned by the spouses as tenants in common, rather than joint tenants with rights of survivorship.

To complicate things further, if the husband now owns the home and the wife has marital rights in the home, upon his death, she may still be entitled to a share of the home under her husband’s will, if he has one, or by the laws of intestacy. However, the husband’s children would also own a share of his share of the home. At that point, the wife would co-own the home with his children.

You can see how crazy this can get. It’s best to seek the advice of a qualified estate planning attorney to guide you through the process and make sure that the proper documents get signed and filed or recorded.

Reference: The (Sarasota, FL) Herald Tribune (September 8, 2019) “Home ownership complications need guidance from estate planning attorney”

What’s the Difference Between a Quitclaim and a Warranty Deed?

When you buy, sell, or transfer ownership of a property to another, you need to be aware of what type of deed a property has, and what type of deed to use when you transfer your interest in a property to someone else. It’s most helpful to know the difference between a quitclaim and a warranty deed.

the difference between a quitclaim and a warranty deed
Two of the most commonly used deeds in property transfers are the quitclaim deed and the warranty deed.

Bankrate explains in its recent article, “Quitclaim vs. warranty deed: What you need to know,” that a quitclaim deed is a deed that transfers the actual legal rights to a property that the grantor has to another person. That is without any representation, warranty, or guarantee. A quitclaim deed gives no guarantee of the title status of a property, any liens against it or any encumbrances. It really means that you get only what a grantor may have—nothing more. Therefore, if the grantor has nothing, you get nothing.

A quitclaim deed may work well, if the grantor indeed has the legal rights to a property, and there are no liens.

Quitclaim deeds are used in safer situations where there’s little question about the ownership interest in a property. They can be used when a person is transferring ownership of real estate to family members. However, a warranty deed is generally used in more complex situations, including when someone is getting a mortgage to buy a home.

With a warranty deed, the seller is guaranteeing that she has a defensible ownership interest in the property being transferred and can legally transfer her ownership interest to the buyer.

Warranty deeds are the better option, when you’re purchasing property. Buyers want to be certain that you own the property, so they want you to sign a warranty deed. If you don’t actually own the property, the buyer can sue for a breach of warranty.

If you’re transferring property to your child or your revocable trust agreement as part of an estate plan, a quitclaim deed would be just fine because it accomplishes the change of ownership, but you’re not providing any warranty for the transaction.

All real estate transactions that are arm’s length transactions, use warranty deeds.

You should be aware and understand the type of transaction into which you’re entering and the difference between a quitclaim and a warranty deed.

Reference: Bankrate (September 4, 2019) “Quitclaim vs. warranty deed: What you need to know”

Estate Planning Is for Everyone

As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, it’s important to remember that estate planning is for everyone, and having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.

Estate planning is for everyone
Estate planning is the most effective way to protect against life’s unforeseen events, no matter what stage of life you may be in.

For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.

Here are some milestones in life when an estate plan is needed:

Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, as proof that estate planning is for everyone, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All young adults need a general power of attorney and health care directives to allow their parents to step in and help, if something happens.

That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should also be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.

Getting married. Marriage unites individuals and their assets. For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be merged, and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.

When a child is born. When a new child joins the family, having an estate plan becomes especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.

Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.

If a divorce occurs. Divorce is a sad reality for about half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any beneficiary designations are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.

Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.

Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”

What Do I Need to Know About Powers of Attorney?

Powers of attorney typically grant the agent specific powers to conduct financial matters for the principal. A healthcare power of attorney grants the agent the authority to make specific medical decisions for the principal, typically at a time with the principal is unable to do so, due to medical incapacity.

what you need to know about powers of attorney
There are several different types of powers of attorney. Each is used for a specific purpose.

The Aitken (SC) Standard’s recent article, “The durable power of attorney,” explains that there are three different types of powers of attorney: nondurable, springing and durable.

A nondurable power becomes operative right away, when executed by the principal. It remains in effect until it’s revoked by the principal, or until the principal becomes mentally incapacitated or dies.

The durable power of attorney states that it is to be revoked neither by the subsequent incapacitation of the principal, nor by the passage of time. The principal can change or revoke a durable power of attorney at any time, before the onset of mental or physical incapacity. Death of the principal terminates a durable power of attorney.

Springing powers of attorney are effective at a future date: the power “springs up” into existence when a specific event happens, like the illness or disability of the principal. An issue with springing powers that take effect when the principal is disabled, is that it may be hard to prove conclusively that the disability has actually happened.

The big advantage of the durable power of attorney is that it stays in effect after the principal has become impaired. The agent can act without court approval. It’s a good idea (and in some states the law) that you draft a different power of attorney document for financial matters and another, separate one for those powers pertaining to healthcare decisions.

Have this document in place long before a person begins having trouble handling certain aspects of life. Without a durable power of attorney, family would be precluded from making many important financial decisions or important healthcare decisions on behalf of the loved one.

Talk to an experienced estate planning attorney about all types of powers of attorney.

Reference: Aitken (SC) Standard (August 24, 2019) “The durable power of attorney”

Does a Beneficiary of an Estate Need to Live in the U.S.?

When a person dies without a will, the distribution of his or her estate assets is governed by the state’s intestacy statute. All states have laws that instruct the court on how to disburse the intestate decedent’s property, usually according to how close in relationship they are to the person who passed away.  But what happens when a beneficiary of an estate doesn’t live in the U.S.?

Does a beneficiary of an estate have to live in the US?
Different states have different laws, but, in general, beneficiaries of an estate don’t have t live in the United States.

A recent nj.com article responded to the following question: “My ex’s new wife isn’t a citizen. Does she get an inheritance?” The article explains that under the intestacy laws of New Jersey, for example, if the deceased had children who aren’t the children of the surviving spouse, the surviving spouse is entitled to the first 25% of the estate but not less than $50,000 nor more than $200,000, plus one-half of the balance of the estate.

Also, under New Jersey law, aliens or those who are not citizens of the United States are eligible to inherit assets.

In California, if you die with children but no spouse, the children inherit everything. If you have a spouse but no children, parents, siblings, or nieces or nephews, the spouse inherits everything. If you have parents but no children, spouse, or siblings, your parents inherit everything. If you have siblings but no children, spouse, or parents, those siblings inherit everything.

Also in California, if you’re married and you die without a will, what property your spouse will receive, is based in part on how the two of you owned your property. Was it separate property or community property? California is a community property state, so your spouse will inherit your half of the community property.

In that case, an ex-husband’s wife who lives in and is a citizen of the Philippines doesn’t need to be physically present in the state to inherit assets from her husband.

If the deceased owned property in the Philippines, the distribution of those assets would be according to the laws of that country.

Reference: nj.com (August 28, 2019) “My ex’s new wife isn’t a citizen. Does she get an inheritance?”

5 Good Reasons to Update Your Estate Plan

Most people already know that there are lots of good reasons to update your estate plan, and every estate planning attorney will tell you that they meet with people every day, who sheepishly admit that they’ve been meaning to update their estate plan, but just haven’t gotten to it. Let the guilt go.

Attorneys know that no one wants to talk about death, taxes or illness, says Wicked Local in the article “Five Reasons to Review Your Estate Plan.” However, there are five good reasons to update your estate plan and even an appearance before the Queen of England has to come second.

Reasons to Review Your Estate Plan
The number one reason to have your estate plan updated is to make sure your minor children will be taken care of if something happens to you.

You have minor children. An estate plan for a couple with young children must do two very important things: address the care and custody of minor children should both parents die and address the management and distribution of the assets that the children will inherit. The will is the estate planning document used to name a guardian for minor children. The guardian is the person who will determine where your children will live and go to school, what kind of health care they receive and make all daily decisions about their care and upbringing.

If you don’t have a will, the court will name a guardian for you. You may not like the court’s decision. Your children might not like it at all. Having a will takes care of this important decision.

Your estate is worth more than $1 million. While the federal estate plan exemptions currently are at levels that remove federal tax from most people’s estate planning concerns, there are still state estate taxes. Some states have inheritance taxes. Whether you are married or single, if your assets are significant, you need an estate plan that maps out how assets will be left to your heirs and to plan for taxes.

Your last estate plan was created before 2012. There have been numerous changes in state estate planning laws regarding wills, probate and trusts. There have also been big changes in federal estate taxes. Strategies that were perfect in the past, may no longer be necessary or as productive because of these changes. While you’re taking the time to update your estate plan and making these changes, don’t forget to deal with digital assets. That includes email accounts, social media, online banking, etc. This will protect your fiduciaries from breaking federal hacking laws that are meant to protect online accounts, even when the person has your username and password.

You have robust retirement plans. Your will and trust do not control all the assets you own at the time of death. The first and foremost controlling element in your asset distribution is the beneficiary designation. Life insurance policies, annuities, and retirement accounts will be paid to the beneficiary named on the account, regardless of what your will says. Part of a comprehensive estate plan review will also cover beneficiary designations on each account.

You are worried about long-term care costs. Estate planning does not take place in a vacuum. Your estate plan needs to address issues like your plan, if you or your spouse need care. Do you intend to stay in your home? Are you going to move to live closer to your children, or to a Continuing Care Retirement Community? Do you have long-term insurance in place? Do you want to plan for Medicaid eligibility?

All of these issues are great reasons to update your estate plan. If you’ve never had an estate plan created, this is the time. Put your mind at ease, by getting this off your “to do” list and contact an experienced estate planning attorney.

Reference: Wicked Local (Aug. 29, 2019) “Five Reasons to Review Your Estate Plan”

How Does a Probate Proceeding Work?

A Will, also known as Last Will and Testament, is a legal document that is used in probate court.  It’s used when a person dies with assets that are in their name alone without a surviving joint owner or beneficiary designated, says the Record Online in the article “Anatomy of a probate proceeding.”

So, how does a probate proceeding work?

How does a probate proceeding work
Probate has been referred to as the law suit you file against yourself after you pass away.

Probate is a judicial or court proceeding, where the probate court has jurisdiction over the assets of the person who has died. The court oversees the personal representative’s payment of debts, taxes and probate fees, in addition to supervising distribution of assets to the person’s beneficiaries. The personal representative of the will has to manage the probate assets and then report to the court.

Without a will, things can get messy. A similar court proceeding takes place, but it is known as intestate succession, and the assets are distributed according to state law.

To start the probate proceeding, the personal representative completes and submits a Petition for Administration with the probate court. Most personal representatives hire an estate planning attorney to help with this. The attorney knows the process, which keeps things moving along.

The probate petition lists the beneficiaries named in the will, plus certain relatives who must, by law, receive legal notice in the mail. Let’s say that someone disinherits a child in their will. That child receives notice and learns they have been disinherited. Beneficiaries and relatives alike must return paperwork to the court stating that they either consent or object to the provisions of the will.

A disinherited child has the right to file objections with the court, and then begin a battle for inheritance that is known as a will contest. This can become protracted and expensive, drawing out the probate process for years. A will contest places all of the assets in the will in limbo. They cannot be distributed unless the court says they can, which may not occur until the will contest is completed.

In addition to the expense and time that probate takes, while the process is going on, assets are frozen. Only when the court gives the all clear does the judge issue what are called Letters of Administration, or “Letters Testamentary,” which allows the executor to start the process of distributing funds. They must open an estate account, apply for a taxpayer ID for the account, collect the assets and ultimately, distribute them, as directed in the will to the beneficiaries.

Now that you know a little about how a probate proceeding works you’re probably asking whether a will contest, or probate be avoided? Avoiding probate, or having selected assets taken out of the estate, is one reason that people use trusts as part of their estate plan. Assets can also be placed in joint ownership, and beneficiaries can be added to accounts, so that the asset goes directly to the beneficiary.

By working closely with an estate planning attorney, you’ll have the opportunity to prepare an estate plan that addresses how you want assets to be distributed, which assets may be placed outside of your estate for an easier transfer to beneficiaries and what you can do to avoid a will contest, if there is a disinheritance situation looming.

Reference: Record Online (August 24, 2019) “Anatomy of a probate proceeding”

What Happens to Credit Card Debts After You Die?

Can you imagine what people would do, if they knew that credit card debt ended when they passed away? Run up enormous balances, pay for grandchildren’s college costs and buy luxury cars, even if they couldn’t drive! However, that’s not how it works, says U.S. News & World Report in the article that asks “What Happens to Credit Card Debt When You Die?” 

What Happens to Credit Card Debt When You Die?
A common misconception is that your debts are wiped out when you die.

The personal representative of your estate, the person you name in your last will and testament, is in charge of distributing your assets and paying off your debts. If your credit card debt is so big that it depletes all of your assets, your heirs may be left with little or no inheritance.

If you’re concerned about loved ones being left holding the credit card bag, here are a few things you’ll need to know. (Note that some of these steps require the help of an experienced estate planning attorney.)

Who pays for those credit card debts after you die? Relatives don’t usually have to pay for the debts directly, unless they are entwined in your finances. Some examples:

  • Co-signer for a credit card or a loan
  • Jointly own property or a business
  • Lives in a community property state (Alaska, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin)
  • Are required by state law to pay a debt, such as health care costs, or to resolve the estate.

A spouse who has a joint credit card account must continue to make on-time payments. A surviving spouse does not need the shock of learning that their spouse was carrying a massive credit card debt, since they are liable for the payments. A kinder approach would be to clear up the debt.

How do debts get paid? The probate process addresses debts, unless you have a living trust or make other arrangements. The probate court will determine the state of your financial affairs, and the personal representative named in your will (or if you die without a valid will, the administrator named by the court), will be responsible for clearing up your estate.

An unmarried person who dies with debt and no assets, is usually a loss for the credit card company, if there’s no source of assets.

If you have assets and they are left unprotected, they may be attached by the creditor. For instance, if there is a life insurance policy, proceeds will go to beneficiaries, before debts are repaid. However, with most other types of assets, the bills get paid first, and then the beneficiaries can be awarded their inheritance.

How can you protect loved ones? A good estate plan that prepares for this situation is the best strategy. Having assets placed in trusts protects them from probate. A trust also allows beneficiaries to save time and money that might otherwise be devoted to the probate process. It also puts them in a better position, if the personal representative needs to negotiate with the credit card company.

Talk candidly with your estate planning attorney and your loved ones about your debts, so that a plan can be put into place to protect everyone.

Reference: U.S. News & World Report (August 19, 2019) “What Happens to Credit Card Debt When You Die?”

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