How Do I Get an Executor to Sell My Mom’s Home? – Annapolis and Towson Estate Planning

It’s not uncommon for a parent to leave his or her home to their children in equal shares.

Let’s assume that two sisters are both equal beneficiaries of their mother’s estate in New Jersey. Each adult child has retained an attorney. The executor, who’s a family friend, is moving slowly with the probate process, and it’s been more than a year of waiting. The executor of estate is the individual who is specifically designated in the deceased’s will to manage the estate.

In this case, the glacier-like progress of the executor is causing a strain on the sisters’ relationship. This results in the sisters fighting over the estate. One sister is in no hurry to sell the house, and the other feels frustrated and may have to just give her everything and walk away to save her sanity.

nj.com’s recent article on this topic asks “My mom’s executor won’t sell the house. What can I do about it?” The article says that these sisters probably tried to negotiate a resolution. However, there’s no reason to think the only way to resolve this is for you to “give her everything and walk away.”

The executor should sell the home and distribute the proceeds to the sisters.

If one of the children, her attorney, or the executor object to the sale of the home, a judge may need to intervene.

If there’s no issue, and the executor won’t act, a beneficiary can apply to the court to remove the executor. The judge may then name the two sisters as co-executors, so they can sell the home.

Although there would be legal fees and costs to go to court to get some action, if the executor won’t move, there may not be any other choice.

In addition, the sisters could ask the judge to decrease any executor commission that would be owed to the original slow-moving executor to cover the legal fees, if the judge agrees that the executor was acting improperly.

Reference: nj.com (August 10, 2019) “My mom’s executor won’t sell the house. What can I do about it?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Do I Discuss My Parents’ Long-Term Financial Goals With Them? – Annapolis and Towson Estate Planning

A recent study by Ameriprise Financial found that more than one-third of adult children say they haven’t had a conversation about their parents’ long-term financial goals. Even though discussing this delicate topic may seem uncomfortable, addressing it now can help avoid challenges and uncertainty in the future.

To that end, the Ameriprise Family Wealth Checkup study found that those who talk about money matters, feel more confident about their financial future.

The Enterprise’s recent article, “Four financial questions to ask your parents,” provides some questions that can help you start the dialogue.

“What do you want to achieve in the next five or 10 years?” Understand your parents’ aspirations for the next few years. This includes their personal and financial goals and when they plan to retire (if they haven’t already). Do they want to move closer to their grandchildren or to warmer weather? Getting an idea of how they want to spend their time, will help you know what to expect in the years ahead.

“Where is your financial information located in case of an emergency?” An incident can happen at any time, so it’s essential that you know how to access key personal, financial and estate planning documents. You should have the contact info for their financial adviser, tax professional and estate planning attorney, and be sure your parents have the right permissions set, so you can step in when the need arises. You should also ask your parents to share the passwords for their primary accounts or let you know where you can find a password list.

“How do you see your legacy?” Talk to your parents about how they want to be remembered and their plans for making that happen. These components can be essential to the discussion:

  • Ask them if they have an updated will or trust, and if there’s anything they’d like to disclose about how the assets will be distributed.
  • Health care choices and expenses are often a big source of stress for retirees. Talk to your parents about their current health priorities and the future and have them formalize their wishes in a health-care directive, which lets them name a loved one to make medical decisions, if they’re unable to do so.

“How can I help?” Proactively offering to help, may get rid of some of the frustrations or relieve stress for even the most independent and well-prepared parents. The assistance may be non-financial, like doing house projects or giving them more time with their grandchildren. You should also look into including an attorney in the discussion, if your parents have estate planning questions.

Retirement and legacy planning can be complex. However, taking the time to have frequent conversations with your parents, can help you all prepare for the future.

Reference: The Enterprise (August 19, 2019) “Four financial questions to ask your parents”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Understanding Why a Will is Important – Annapolis and Towson Estate Planning

These questions presented by The Westerly Sun in the article “Making a will is an important legal step,” may seem very basic, but many people don’t really understand how wills work and why they are such an important part of estate planning. Let’s go through these fundamentals about wills.

A will is a legal document that must be prepared under very strict standards to explain your wishes about how you want your estate–that is, your property, money, tangible possessions, and real estate—distributed after you die.

A will also does more than that.

A will, which is sometimes referred to as a “Last Will and Testament,” also makes clear who you want to be in charge of your minor children, if both parents should die. It also is how you name a person to be in charge of your affairs after death, by naming them as executor of your estate.

A complete estate plan includes a will, and several other documents, including a power of attorney, trusts and a health care proxy. The goal of all of these documents is to make it easier for your surviving spouse or loved ones to take care of you and your possessions, if you become too ill to speak on your own behalf, or when you die.

Your will provides instructions about what happens to your estate. Who should receive your money and property? These instructions must be followed by the person you choose as your executor. The local probate court must give its approval, and then the estate can be distributed.

If you have a valid will, it is admitted to probate (a court process) upon your death, and then your wishes are followed. If you don’t have a will, you are said to have died “intestate.” The laws of the state, and not you, and not your loved ones, will decide what will happen to everything you own that is subject to probate. Usually this means that assets are distributed to family members, based on their degree of kinship with you.

This may not be what you wanted. If you have children, and especially if you have children with special needs, the court will appoint a guardian for those children. You may not want Aunt Jennifer raising your daughters, but that may end up happening.

Properly prepared by an experienced estate planning attorney, a will is a binding legal document that carries great significance. No one likes to think about dying, or becoming incapacitated, but by planning ahead, you can determine what you want to happen, and protect those you love.

Reference: The Westerly Sun (August 18, 2019) “Making a will is an important legal step”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Does a Probate Attorney Really Do? – Annapolis and Towson Estate Planning

If you’ve recently experienced the death of a loved one, you may have spent a lot of time and money dealing with their estate and trying to get their assets out of probate.

KAKE.com’s recent article, “Do I Need to Hire a Probate Lawyer?: The Top Signs You Should Lawyer Up” says that trying to do this on your own can often be time-consuming and expensive. That’s why it’s smart to have a probate lawyer working with you.

A probate or estate planning lawyer is one who specializes in issues related to a deceased person’s estate. They have a broad range of responsibilities, which includes the following:

  • Guiding people through the probate process;
  • Advising the beneficiaries of an estate;
  • Representing beneficiaries if they become involved in lawsuits related to the estate; and
  • Helping with challenges to the validity of the deceased’s will.

If you’re unsure about hiring a lawyer, consider whether you’re dealing with any of these issues in your case:

A Will Contest. This is when another beneficiary challenges the will. If someone contests the will, it will drag out the process and could put you at risk of losing what your loved one wanted for you to have.

Divided Assets. When split assets are part of an estate, things get complicated, especially when you have intangible assets. To avoid trouble, hire a lawyer who can help navigate the division of these assets and make certain that everything is handled in a fair manner.

An Estate Doesn’t Qualify for the Simple Probate Process. Probate can be extremely complicated. Depending on the size of the estate, it may qualify for simpler procedures that are completed relatively quickly. If this isn’t the case for the estate at issue, you should get a probate attorney to help you.

There’s Considerable Debt. If your loved one died with many debts, the estate will need to be used to pay those off. This can be tricky to manage on your own. An experienced attorney will help you make sure everything gets paid off and can negotiate debts to ensure you and the other beneficiaries receive as much from the estate as possible.

There’s Estate Tax Due. While most estates don’t have to pay any federal taxes, some states have their own estate taxes that apply to estates worth $1 million or more. It’s not an easy process, so it’s a good idea to work with an experienced estate planning attorney.

There’s a Business in the Estate. You need to ask an attorney to you sort this out because this will include the process of appraising, managing and selling a business of the deceased owner.

If any of these situations apply to you, hire an attorney with the necessary qualifications to deal with estates and the probate process.

Reference: KAKE.com (August 9, 2019) “Do I Need to Hire a Probate Lawyer?: The Top Signs You Should Lawyer Up”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Is a Bypass Trust? – Annapolis and Towson Estate Planning

Creating an estate plan is an essential part of managing wealth. This is especially true if you’re married and want to leave assets to your spouse. Understanding how a bypass trust works will help your planning, says KAKE.com’s recent article, “How a Bypass Trust Works in an Estate Plan.”

A bypass trust, or AB trust, is a legal vehicle that permits married couples to avoid estate tax on certain assets when one spouse dies. When that happens, the estate’s assets are split into two separate trusts. The first part is the marital trust, or “A” trust, and the other is a bypass, family, or “B” trust. The marital trust is a revocable trust that belongs to the surviving spouse. A revocable trust has terms that can be changed by the individual who created it. The family or “B” trust is irrevocable, meaning its terms can’t be changed.

When the first spouse dies, his or her share of the estate goes into the family or B trust. The surviving spouse doesn’t own those assets but can access the trust during their lifetime and receive income from it. The part of the estate that doesn’t go into the B trust, is placed into the A or marital trust. The surviving spouse has total control over this part of the trust. In addition, the surviving spouse can be the trustee of a bypass trust or designate another person as the trustee. It is the trustee’s task to make sure that assets from the couple’s estate are divided appropriately into each part of the trust. The trustee also coordinates asset management as instructed by the trust.

This type of trust can minimize estate taxes for married couples who have significant wealth. For the family or B part of the trust, assets up to an annual exemption limit aren’t subject to federal estate tax. In 2019, the limit is $11.4 million or $22.8 million for married couples. If assets in the B trust don’t exceed that amount, they wouldn’t be subject to federal estate tax.

Holding assets in a bypass trust lets the surviving spouse avoid probate. Any assets held in a bypass or other type of trust aren’t subject to probate.

Work with an estate planning attorney to create a bypass trust. A bypass trust for your estate plan will depend on the value of your estate as well as the amount of estate tax you want your spouse or heirs to pay when you die.

Reference: KAKE.com (August 13, 2019) “How a Bypass Trust Works in an Estate Plan”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Can You Protect Your Home If You Need Medicaid? – Annapolis and Towson Estate Planning

Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?

The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is often the strategies that people come up with on their own. They usually don’t work.

The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.

Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. There is a five-year lookback period. Any assets given away or transferred in that five-year period means that you had the asset under your control. Medicaid will not pay for your care in that case.

There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:

Your spouse. It’s understood that your spouse needs a place to live and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.

A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.

If a child is a caretaker. An adult child who moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. This is another very common mistake that causes adult children to be left without a home.

For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.

Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Happens when Both Spouses Die at the Same Time? – Annapolis and Towson Estate Planning

There are any number of ways a person can inherit assets from another person. They may inherit assets from a trust, through a will, or as a designated beneficiary of an insurance policy or retirement account. However, in each case, says Lake Country News in the article “Simultaneous and close together deaths,” the person inheriting the asset is living, while the person they inherited from has died.

What happens if spouses die either at the same exact time or at a time that is very close to each other? The answer, as with so many estate planning questions, is that it depends.

The first question is, did both decedents have estate planning documents in place? If so, what directions do the wills give? Are there trusts, and if so, who are the trustees? If they served as trustees for each other’s trusts, did they name a secondary trustee?

If assets were owned as joint tenancy with right of survivorship, the estate of each deceased tenant receives an equal share of the asset, unless it can be proven that a joint tenant survived the other.

Here’s an example: if a parent dies without a will, is survived by two children, but one of the two children dies only four days after the parent’s death, i.e., fewer than 120 hours, in California, the law presumes that the deceased child did not survive the mother. The sole surviving child’s estate receives the entire parent’s intestate estate.

A beneficiary who survives long enough to inherit, however, might die before receiving complete distribution of his or her inheritance.

A trust may provide for distributions to alternative beneficiaries. This is another reason why it is wise to have primary and secondary beneficiaries on all accounts that permit secondary beneficiaries. Not all accounts permit this.

Similarly, a trust may provide for distribution to alternative beneficiaries. Otherwise, unless there has been advance planning, the undistributed inheritance becomes part of the deceased beneficiary’s estate where it will be distributed either according to the beneficiary’s will or according to the laws of intestacy of the decedent’s state of residence.

All of these instances are further reasons why it is so important for everyone to have a will and other estate planning documents prepared.

A probate of the beneficiary’s estate may be required as a result of an undistributed inheritance.

The legal and factual analysis associated with the distribution of a couple who die at the same time or in close proximity to each other varies from case to case. Speak with an experienced estate planning attorney to have an estate plan prepared to avoid your family having to unravel the knotty mess that is created when there is no will and no estate planning has been done.

Reference: Lake Country News (Aug. 10, 2019) “Simultaneous and close together deaths”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Can a Trust Be Amended? – Annapolis and Towson Estate Planning

A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.

There is one point to consider from the start. If the son has been involved in the planning from the start, in a family meeting with the attorney and discussions with his parents, he might have less uncertainty about the plan and the details.

As for the details: the parents are in their 90s, with some savings, a few annuities, a CD and a checking account. They also have five acres of land, which has their home and a duplex on it and 12 additional acres, with a rental property on it. Everything they own has been placed in a family trust. The son wants to be able to pay her bills and was told that he needs to have a power of attorney and to be named trustee to their trust.

He reports that his parents are good with this idea, but he has a number of concerns. If they are sued, will he be personally liable? Would the power of attorney give him the ability to handle their finances and the real estate in the trust?

If his parents have a revocable or living trust, there are provisions that allow one or more persons to become the successor trustees in the event that the parent becomes incapacitated or dies.

What happens when they die as they each leave each other their share of the assets? The son would become the trustee when the last parent passes.

Usually the power of attorney is created when the trust is created, so that someone has the ability to take control of finances for the person. See if the trust has any of these provisions—the son may already be legally positioned to act on his parents’ behalf. The trust should also show whether the successor trustee would be empowered to sell the real estate.

Trusts can be drafted in any way the client wants it written, and the successor trustee receives only the powers that are given in the document.

As for the liability, the trustee is not liable to a buyer during the sale of a property. There are exceptions, so he would need to speak with an estate planning attorney to help with the sale.

More specifically, assuming the trust does not name the son as a successor trustee and also does not give the son power of attorney, the bigger question is are the parents mentally competent to make important decisions about these documents?

Given the age of these parents, an attorney will be concerned, rightfully so, about their competency and if they can freely make an informed decision or if the son might be exercising improper influence on them to turn over their assets to him.

There are a few different steps that can be taken. One is for the son, if he believes that his parents are mentally competent, to make an appointment for them with an estate planning attorney without the son being present in the meeting, in order to determine their capacity and wishes. If the attorney is not sure about the influence of the son, he or she may want to refer the parents for a second opinion with another attorney.

If the parents are found not competent, then the son may need to become their conservator, which requires a court proceeding.

Planning in advance and discussing these issues are best done with an experienced estate planning attorney long before the issues become more complicated and expensive to deal with.

Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Should I Know About a Special Needs Trust? – Annapolis and Towson Estate Planning

Your disabled family member may be eligible for a number of government programs. However, Pauls Valley (OK) Democrat’s recent article asks “Can your family benefit from a special needs trust?” The article reminds us that these programs don’t cover everything. You may need to close the gaps.

A few government programs have eligibility restrictions based on the level of financial assets that are available to the recipient. This means the financial help you’re wanting to provide may do more harm than good unless you establish a special needs trust.

As the donor, you supply the funds. A trustee holds and administers them according to your instructions. The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.

When considering a special needs trust, you’ll need to look at several issues with your attorney.  However, there are two that are critical. The first is designating a trustee. You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts. You could also name a trust company. This company can provide professional management, expertise and continuity of administration. A third option is to name an individual and a trust company as co-trustees.

The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.

Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it. The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets.

You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.

Speak with an experienced elder law or estate planning attorney about how you can to make life better for a disabled child or family member with a special needs trust.

Reference: Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What are Some Lifetime Gift Strategies that I Can Consider? – Annapolis and Towson Estate Planning

There are a number of strategies that can help preserve your assets, promote the transfer of wealth, and lessen the tax burden on you and your estate. Forbes’s published an article “5 Lifetime Gift Strategies For You And Your Family To Consider” that discusses five frequently-used lifetime gifting strategies to consider, if you have significant wealth to transfer to future generations.

A grantor retained annuity trust (GRAT) is an irrevocable trust that can be a good choice if you want to transfer hard-to-value assets. A GRAT also lets you keep your income stream, divide property interests and make discounted gifts to future generations. With a GRAT, the grantor transfers assets to a trust but maintains a right to an annual income stream, or annuity payment, for a specific period of time. The income stream’s value is deducted from the value of the transferred assets when determining the gift’s full taxable value. Anything left in the GRAT after the annuity period expires, is given to the trust’s beneficiaries without any more gift or estate taxes. However, if the grantor dies before the end of the trust term, the whole value of the trust will be included in the taxable estate (like the trust had never been created). Therefore, you can see how important it can be to carefully choose the term of the trust, so the grantor is likely to live beyond its termination.

A defective grantor trust strategy is one way to benefit from the differences in income and transfer-tax treatments of irrevocable trusts. This can let you transfer the anticipated appreciation of your assets at a reduced gift-tax cost. Here, the grantor transfers property to a trust in exchange for a note that carries a market rate of interest and a balloon payment at the end of the note’s term. In most cases, the grantor and trust are treated as the same entity for income tax purposes, but they are considered separate for transfer tax purposes. This discrepancy allows the grantor to affect a sale to the trust without any capital gain.

Family limited liability entities are complex strategies that can provide many benefits to high net worth families with personal, business and investment assets. They’re flexible, so it makes them particularly attractive, because their governing documents can be changed as family dynamics and family business structures evolve. These entities are frequently used to help families consolidate investments, share income with family members in lower tax brackets, shield assets from lawsuits and create a long-term estate plan. Speak with an estate planning attorney to see if this strategy makes sense for your situation.

A lifetime credit shelter trust can be a wise vehicle if you want to leverage the increased lifetime gift-tax exemption amount but aren’t yet ready to transfer significant assets. With this trust, the grantor makes a gift to the trust for the benefit of his or her spouse and other family members. Because of the spouse’s rights to the assets in the trust as a beneficiary, the grantor also maintains his or her access indirectly. You can allocate your lifetime exemption while the gifted assets, including any appreciation, stay outside your estate for estate tax purposes. You and your spouse can create lifetime credit shelter trusts, but they can’t be identical.

Another strategy is making an intra-family loan. The tax code lets you make loans to family members at lower rates than commercial lenders, without the loan being considered a gift. You can help your family members financially without incurring more gift tax. The IRS requires that a bona fide creditor relationship with a minimum interest rate be created. This can be a good way to transfer wealth, if the borrowed assets are invested and earn a stronger rate of return than the interest rate on the loan.  The interest must also be paid within the family.

Reference: Forbes (August 5, 2019) “5 Lifetime Gift Strategies For You And Your Family To Consider”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys