Does a Beneficiary of an Estate Need to Live in the U.S.? – Annapolis and Towson Estate Planning

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.

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?”

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

Don’t Forget to Update Your Estate Plan – Annapolis and Towson Estate Planning

There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life or after they were diagnosed with a serious disease.

However, even if your family life and finances are pretty basic, there are still changes in the law that you may need to incorporate into your estate plan.  Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your will in a while, do it now.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

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

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

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

Should You Contest a Will? – Annapolis and Towson Estate Planning

The cases that generate headlines are just the high-profile ones, and they don’t include the hundreds, if not thousands, of inheritance claims being brought every year that never make it to the courtroom, says FT Advisor in the article “When and how clients can contest a will?” What we don’t read about are the family fights, the settlements and the eventual distribution of a loved one’s estate.

What’s behind this uptick in inheritance disputes?

One answer has to do with the increased complexity of families. Having a second, or even a third, family is no longer as unusual as it once was. The division of assets when there are children and stepchildren create more chances for someone to feel wronged. A second reason is that the value of individual property overall has increased. Relatively modest estates with a home that’s now worth half a million dollars, means there’s more to fight over.

Add to that a generally more litigious society, and you have an increase in estate battles.

There are two general areas of estate battles: one concerns wanting a greater portion of an estate, and the second centers on whether the will is valid. The second can bring allegations of undue influence, lack of capacity to create a will and even forgery.

Challenging the validity of a will is difficult, since the person who made the will has passed and they can’t speak for themselves. However, there are certain presumptions in favor of upholding a will that helps the courts. For one thing, the will must be in writing and there must be two people witnessing the signing.

Taking the position that the person was incapacitated and not legally able to create a will is another way that wills are challenged. The older the person is when the will was created, the more likely this is. One way to address this in advance, is to have a medical opinion documenting the person’s mental capacity.

While it is impossible to make any will completely immune to any challenges, there are a few things that can be done to make it less likely that the will is contested.

Write a letter or have a video made that speaks to the family, explaining what your wishes are for your property and for the family. This is not legally binding but could be used to show that you were thinking clearly when you had your estate plan done.

Communicate openly and with great transparency to all members of the family, so there are no surprises. If everyone knows what you have in mind and an opportunity to voice their opinions, there may be less potential for fighting.

Finally, be sure to work with an estate planning attorney who will know the laws of your state, so there are no legal errors that would lead to the will being deemed invalid by the courts.

Reference: FT Adviser (July 3, 2019) “When and how clients can contest a will?”

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

Elder Law Estate Planning for the Future – Annapolis and Towson Estate Planning

Seniors who are parents of adult children can make their children’s lives easier, by making the effort to button down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are planning for disability, protecting assets from long-term care or nursing home costs and minimizing costs and stress in passing assets to the next generation. Here’s what you need to do, and how to do it.

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf, if and when you become incapacitated, gives those you love the ability to take care of you without having to apply for guardianship or other legal proceedings. Advance directives include powers of attorney, health care powers or attorney or proxies and living wills.

Your power of attorney will make all and any legal and financial decisions on your behalf. In addition, if you use the elder law power of attorney, they are able to make unlimited gifting powers that may save about half of a single person’s assets from the cost of nursing home care. With a health care proxy, a person is named who can make medical decisions. In a living will, you have the ability to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and may be avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that is used to protect assets in the trust from nursing home costs, after the assets have been in the trust for five years.

The third thing that will make your adult children’s lives easier, is to have a will. This lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. Work with an experienced estate planning attorney to have a will created.  If your attorney advises it, you can also consider having trusts created, so your assets can be placed into the trusts and avoid probate, which is a public process. A trust can be easier for children, because estates settle more quickly.

Think of estate planning as part of your legacy of taking care of your family, ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death, or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

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

Is My Irrevocable Trust Revocable? – Annapolis and Towson Estate Planning

Irrevocable trusts aren’t as irrevocable as their name implies, according to Barron’s recent article, “Are Irrevocable Trusts True to Their Name?” The article says that for both new and existing trusts, there are ways to build in flexibility to make changes to a grantor’s wishes if terms are no longer appropriate or desirable for beneficiaries.

However, there are strict rules that apply. These rules vary between states. One of the main reasons for an irrevocable trust is to remove assets from an estate for estate tax purposes. If the rules aren’t followed carefully, a trust can be rendered unlawful. If that happens, the assets may be returned to the grantor’s estate and estate taxes may apply.

If you want to be certain that beneficiaries have some discretion in the future if circumstances change, grantors should build flexibility into the trust when it’s established. This can be accomplished by giving a power of appointment to beneficiaries. However, if the beneficiaries are looking to change the terms or the structure of an existing trust, the trust must be modified according to state law.

Most states allow trusts to be decanted. When you decant a trust, you pour its terms into a new trust and leave out the parts that are no longer wanted. Just like decanting a bottle of wine, it’s like the sediment left in the wine bottle.

In a state that doesn’t permit decanting, a trustee can ask a judge to allow it. You should be careful with decanting because you don’t want to do anything that would adversely affect the original tax attributes of the trust.

The power of appointment in a trust or the ability to decant can’t be given to the person who set up the trust. Thus, grantors can’t have a “re-do” or rescind the terms. It’s only trustees and the beneficiaries that can do that.

If you and your attorney create a trust with a lot of flexibility for the trustee, you may want to appoint an institutional trustee from a bank, trust, or other financial services company.

They can be either the sole trustee or serve as co-trustees with a personal, non-institutional trustee, like a family member. This can help to eliminate future conflicts.

Reference: Barron’s (June 18, 2019) “Are Irrevocable Trusts True to Their Name?”

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

What Debts Must Be Paid Before and After Probate? – Annapolis and Towson Estate Planning

Everything that must be addressed in settling an estate becomes more complicated when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses before property can be transferred to beneficiaries. Dealing with the debts of a deceased person can be started before probate officially begins.

Start by making a list of all of the decedent’s liabilities and look for the following bills or statements:

  • Mortgages
  • Reverse mortgages
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The executors and heirs should not pay any bills out of their own pockets. The executor deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The executor decides what bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

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

Is it Wise to Have Three Grown Children Named Co-Executors of Your Will? – Annapolis and Towson Estate Planning

Is it a good idea to have your three grown children listed as co-executors of your will? This may get somewhat confusing when probating a will if there are multiple executors.

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?”

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