Category Archives: Probate

When do I update my estate plan?

Clients often ask, how often should I review my estate planning documents? The best answer is, when anything major changes in your life, when there are changes to the tax laws, changes with estate related laws, or when you have moved from one stage of life to another.

If you made your will when your children were young and named guardians who would take care of them and handle any assets, and now you have young adult children, the guardians will no longer be relevant. But while we hope our 22 year old children can physically fend for themselves, do we want them inheriting a chunk of money outright? Perhaps not; perhaps a review of your documents is in order. If these same children are now 18 and 19, do you have health care proxies for them? Will the college health service be authorized to speak with you if there is an accident or illness? Time to get some health care proxies in place.

Did you have a power of attorney, health care proxy, or other document drawn up when you were close to someone who is no longer in your life? While a divorce or legal separation may take the spouse out of your documents, breaking up with a significant other does not have the same impact. They could still be in your plans, perhaps in a way you would no longer be comfortable with. (I personally would not want any ex-boyfriends showing up in my hospital room to make decisions for me while I was unconscious!)

Has the probate code just undergone a major overhaul? (Yes, if you live in Massachusetts). Are Federal tax laws changing? (Not really, but we get to worry a lot about that).

Really, there is never a bad time to call your estate planning attorney and just check in as your life changes.

PS: If you move assets into an irrevocable trust, check with your tax specialist about whether you need to file a gift tax return!

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Do We Need a Trust?

Trusts come in different shapes and sizes, and some will work for you and some will not.  A good estate planning attorney, or perhaps your banker or financial planner, will need to know quite a bit about your individual situation before being able to recommend a trust. 

Trusts can be invaluable for asset management purposes.  Suppose for example, that your 25 year old son is not good with money right now. An inheritance held in trust and managed by a family friend or a professional trustee can help him manage his funds so that he has a nest egg for his first home or a bit tucked away to help him through a layoff later in life.  Or perhaps you are concerned that an adult child’s marriage is  rocky, and want to see that your money goes to your children and grandchildren, not to the soon-to-be-former spouse.  A correctly drafted trust can help with that.

It also is a good tool for incapacity planning.   If you create a trust and put assets into it, your trustee can see that the assets are managed if you ever become incapacitated.

Assets held in trust also avoid probate.  Because a trust is an entity, not an individual, when the person who funded the trust dies, the trust can continue to operate according to its terms.  This can provide privacy (probate filings are public), and continuing access to trust assets by the beneficiaries or the  remaining spouse.

Irrevocable trusts (ones that can’t be changed or revoked) can be used for estate tax planning, to hold life insurance policies, for Medicaid planning, or for other types of asset protection. 

When you think about doing a trust, think about your goals, who would be a good trustee, and find someone who is knowledgeable about tax law and estate planning to help you with the process.  Think about what assets should go into the trust, and how the beneficiaries are likely benefit (or not) by having assets held in trust.  Not every situation is right for trust planning; sometimes the simple approach is the best one.  Estate planning, whether trust based or will based, should be carefully tailored to reflect your situation, because each family, each inheritance, and each set of goals are a little bit different.

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Why Women need to think about Estate Planning

Statistically, women outlive men.  That means that the estate plan, or lack of estate plan, will often be played out by us.  If there is no will, no power of attorney, no trust protecting our assets, women are often left holding the bag, with no good results.  Often women do not manage the money side of things, and when pushed into that role by the illness or death of a spouse, all the grief and dislocation can be magnified by a sense of panic – needing to deal immediately with complex legal and financial concepts which can have long term consequences – sometimes impacting the rest of our lives.

Educate yourself, find an estate planning lawyer that you trust, and who can explain your options.  Find a financial planner, again, someone you trust, who will take the time to explain things until they really make sense.  Know who you want to call when you need them; don’t be in the position of having to find an advisor when you are desperate.  Put a plan in place.  This can be easier than you think, and while there will be some costs involved, consider what could happen without any planning.  An old plan (you know the one you did when the kids were little) may not work now that you are 62 and thinking about retirement. 

Start planning now, before there is a crisis,  and save yourself money, stress and time. 

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What IS a Fiduciary?

A fiduciary is someone who is placed in a position of trust, some examples are attorney in fact (under a power of attorney), trustees, conservators, guardians, executors, or attorneys representing clients.  When someone asks you to act as their power of attorney or executor of their will, you are taking on a fiduciary role, and the responsibility that goes along with it.

Relatives of Heiress Huguette Clark Accuse Lawyer and Accountant of ‘Plundering’ Her Fortune; “Attorney Suspended over Will Bequest, Loan”; Northampton Executor Jailed

These cases, a high profile national story, a local disciplinary action, and a British story, have lessons for clients and attorneys working in the estate planning area.  The first is that your actions may well be scrutinized by those who are not favorably inclined towards you, so if you have done nothing wrong, be sure that your record keeping is precise, up to date, and accurate.  If you are acting as a fiduciary (executor, power of attorney, guardian or conservator) keeping accurate records is a DUTY, not something that you can do or not do as the spirit moves you.  A fiduciary’s duties are taken seriously, and if you are not a good record keeper, decline to act as a fiduciary for someone else. 

The other lesson, and perhaps the more obvious one, is that you have an ethical and legal DUTY to act in the best interest of your client (or of the protected person or the heirs), regardless of whether or not it is in YOUR best interest.   Again, this is not optional; if your actions could be misconstrued as not being in the client’s best interest, be meticulous in documenting, bringing in third parties, and recording the set of circumstances that led to such an outcome.  If you are simply a family member trying to do the right thing, get some professional assistance so you don’t wind up in a contentious law suit – or worse.

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Digital Asset Planning

Usually when you visit an estate planning attorney, there is a LONG form to fill out describing family, last wishes, assets and liabilities, and who should be your executor, trustee, or guardian of minor children.  There are often conversations about health care choices, nursing homes, and how the primary residence should be owned.

When was the last time your attorney asked you to write down your Facebook username?  Probably never.  In our rapidly changing relationship with technology, what we own and how we own it is also changing.  I heard on the radio this morning that 60% of bills are paid on-line now (this is why the U.S. Post Office needs to shrink).

Think about how that will affect the person who probates your estate…We used to hope that there would be an organized file with bills and account numbers, we’d count on the mail coming with statements and other account numbers.  How do we find the electronic accounts that “Aunt Edna” kept on her office computer?  How will we find the beautiful photo albums that mom kept in her Flickr account?  What about the software that has three years left on its license – who owns that, and what is it worth?  How on earth do you cancel the monthly Xbox Live account?  (Anyone who can provide this information to currently living mothers will also score some major points!)

Let’s get started on our digital asset planning.  I’ve got another long form that I’m happy to e-mail to anyone who requests one.  Please put “digital asset planning” in the subject line and send a request to bridget@bmurraylaw.com.

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Do we REALLY need two witnesses?

Going through the correct procedures of witnessing and notarizing estate planning documents can seem onerous, but skip it at your peril.  I recently read this in ElderLaw Answers…

 

 

Texas Attorney Disbarred for Attempted Theft Through Improper Will Filing

 

A Texas appeals court affirms an attorney’s disbarment for attempting to steal from an elderly woman’s estate by filing a will that had not been properly witnessed or notarized. Olsen v. Comm. for Lawyer Discipline (Tex. App., 5th Dist., No. 05-09-00945-CV, Aug. 9, 2011).

In 2002, Mary Ellen Logan Bendtsen executed a will that left her entire estate to her daughter and only child, Frances Ann Giron, and named Ms. Giron as executor of Ms. Bendtsen’s estate.  Following a fall in early 2005, Ms. Bendtsen, then 88 years old, was admitted to a hospital where a psychiatrist determined that she suffered from dementia.  While in the hospital, Ms. Bendtsen was visited by attorney Edwin C. Olsen IV and she executed a new two-page will that he had prepared which replaced Ms. Giron as executor and sole beneficiary of her mother’s estate and named a new executor and beneficiaries.

Ms. Bendtsen died on March 2, 2005, and within hours Mr. Olsen filed an application for probate of the new will on behalf of the new executor.  He attached to the application the two pages signed by Ms. Bendtsen and a one-page jurat signed and notarized by a notary.  Ms. Giron filed an application for probate of the 2002 will and a petition contesting the new will’s validity.  Subsequent evidence revealed that Ms. Bendtsen had not signed the will in the presence of both witnesses and that the notary, despite language in the jurat to the contrary, had not witnessed Ms. Bendtsen sign the will and had not signed and notarized the jurat in her presence.  The probate court set aside the 2005 will and admitted the 2002 will to probate.

Ms. Giron then filed a complaint against Mr. Olsen with the state bar.  A trial court granted the Commission for Lawyer Discipline’s motion that Mr. Olsen violated various rules of professional conduct and had committed the criminal offenses of attempted theft and securing execution of documents by deception.  The trial court later entered a final order permanently disbarring Mr. Olsen from practicing law in Texas and ordered him to pay the commission’s attorneys’ fees and costs.

On appeal, Mr. Olsen acknowledged that the jurat falsely stated that Ms. Bendtsen had signed the will in the presence of the notary.  However, he argued that the filing of the three-page will with the notary’s jurat instead of only the two-page will signed by Ms. Bendtsen was not done for dishonest reasons but rather to accommodate the notary, who had refused to go to the hospital to notarize the document.

The Court of Appeals of Texas, Fifth District, affirms Mr. Olsen’s disbarment.  The court concludes that he failed to raise a genuine issue of material fact that would preclude summary judgment on the commission’s claim that by filing the 2005 will and jurat, knowing them to include false information, he violated the rules of professional conduct relating to honesty, deceit and making false representations to the court.

For the full text of this decision, go to: http://www.5thcoa.courts.state.tx.us/cgi-bin/as_web.exe?c05topin.ask+D+769150

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Probate Checklist

If someone close to you has passed away, there are things you will need to gather together to begin the probate process.  Some of these are listed below:

  • Any Bank or Other Account Statements
  • Lists of Stocks, Bonds
  • Location of Safe Deposit Box
  • Last Tax Return
  • Certified Death Certificates If Issued
  • Last Will and Testament
  • Any Trust or other Agreements
  • Copies of Insurance Policies, Annuities, Retirement Plans
  • Copies of Real Estate Documents including Deeds
  • Copies of Divorce Decrees

 

Finding and putting these together will allow your attorney or accountant to help you with the estate efficiently.   Depending on the type of assets and family situation of the person who has passed away, probating an estate can be a long and complex process. 

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Digital Property

What happens to  your Facebook account, Paypal transactions, or Ebay account if you pass away or become incapacitated?  Who has access to that “bill pay” function?  You have beautiful photo albums that you keep and update on-line, will your children still be able to see them?  You do your business back ups to the cloud, can your business partners get to your documents?

There are practical answers and legal answers here.  The legal pieces are probably still a murky tangle.  Presumably title transfers as a type of intangible property in some cases, in others, the cash will flow through probate like other types of financial accounts.

However, some practical steps are necessary before you even get to that point.

  • Make a list of digital accounts and passwords
  • Store them somewhere non-digital (like your desk drawer)
  • Update them when you change your passwords or add accounts

 

In some ways this goes against the grain of keeping our information secure, but I think that it is far more likely that an account will be hacked than that someone will rifle through your desk drawer for the list of digital account information.  (Of course, if you have middle school children and you control the XBox Live account, this may not apply…)

Some financial and legal professionals offer services that store this type of information along with copies of your important documents. It’s a little like a digital safety deposit box, and you create a password and pin that would allow another to see the information in the event of a crisis. 

However you decide to keep track, this type of information gains in importance every day, make sure someone can get to it if they need to.

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But Doesn’t Everyone Need a Trust?

I recently had a client explain that they wanted a trust because Suze Orman said that everyone needed a trust.  Now, in general, trusts meet many needs, and are often a good idea.  Especially if there are minor children, adult children who might do better with structured payments, or long term care planning concerns, trusts can fill a valuable need.  However, just as not everyone NEEDS a prenuptial agreement, not everyone needs a trust. 

Trusts help  you avoid much of the probate process, but there are other ways to do this, too.  If your assets are jointly held with your spouse, and one of you dies, the assets will go “by operation of law” to your spouse without going through probate.  In a similar way, anything with a beneficiary designation (life insurance, annuities, most retirement accounts) will go to that beneficiary directly.  The probate court will oversee any assets that pass through your will, and sometimes this can be a good thing.  It does take time to probate an estate, but if the assets are fairly limited, the cost of setting up a trust may not be appropriate.

Regardless of whether you do or do not need a trust, please call an advisor you trust before you make important estate planning decisions, I know that you aren’t cookie cutter clients, why should you have a cookie cutter estate plan?

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Capacity–Can she really make that decision?

Capacity Requirements

Proper execution of a legal instrument requires that the person signing have sufficient mental "capacity" to understand the implications of the document. While most people speak of legal "capacity" or "competence" as a rigid black line–either the person has it or doesn’t–in fact it can be quite variable depending on the person’s abilities and the function for which capacity is required.

One side of the capacity equation involves the client’s abilities, which may change from day to day (or even during the day), depending on the course of the illness, fatigue and the effects of medication. On the other side, greater understanding is required for some legal activities than for others. For instance, you need to have a higher and clearer amount of “capacity” to enter a contract than to write a will. 

Capacity to make a will was summed up by the Massachusetts Supreme Judicial Court:

Testamentary capacity requires ability on the part of the testator to understand and carry in mind, in a general way, the nature and situation of his property and his relations to those persons who would naturally have some claim to his remembrance. It requires freedom from delusion which is the effect of disease or weakness and which might influence the disposition of his property. And it requires ability at the time of execution of the alleged will to understand the nature of the act of making a will.

This is a relatively "low threshold," meaning that signing a will does not require a great deal of capacity. The fact that the next day the testator does not remember the will signing and is not sufficiently "with it" to execute a will then does not invalidate the will if he understood it when he signed it.

The standards for entering into a contract are different because the individual must know not only the nature of her property and the person with whom she is dealing, but also the broader context of the market in which she is agreeing to buy or sell services or property.  This is a more long range kind of understanding, and requires a more complex ability.

While the standards may seem clear, applying them to particular clients may be difficult. The fact that a client does not know the year or the name of the President may mean she does not have capacity to enter into a contract, but not necessarily that she can’t execute a will or durable power of attorney. The determination mixes medical, psychological and legal judgments. It must be made by the attorney (or a judge, in the case of guardianship and conservatorship determinations) based on information gleaned by the attorney in interactions with the client, from other sources such as family members and social workers, and, if necessary, from medical personnel. Doctors and psychiatrists cannot themselves make a determination as to whether an individual has capacity to undertake a legal commitment. But they can provide a professional evaluation of the person that will help an attorney make this decision.

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney.

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