June 8, 2011

We've Moved!

Ask Liza's new URL is http://blog.nolo.com/estateplanning/.

See you there!

June 3, 2011

Surgery and Procrastination

surgery.jpgSo, I have a weird job in that I, literally, talk to people about getting their estate plans up to date many times a week. And I've done this for TEN YEARS. Over and over, people tell me that they've been procrastinating and feel badly that they haven't gotten things taken care of. And I listen. In fact, my first question is almost always what prompted my clients to finally make the appointment and get the job done. It's almost always one of these four things:

  • An upcoming trip.
  • A scary diagnosis or test.
  • A death in the family or a death of a friend.
  • The birth of a child.

Let's face it, these are the things that get our attention in a deep way. They make mortality real and make us want to do what we can to get things in order. Until something like this grabs us, there are always 200 other 'important' things to capture our time and energy.

And here's my confession: despite my professional focus on estate planning, my family's estate plan has been out of date for at least four years! Really. Our guardian got divorced; her kids grew up to not get along with mine; our financial situation changed drastically. Every single thing about the plan wouldn't work.

And guess what? Do you know what made me fix it? It certainly wasn't because I knew we should. It was reasons one and two on the above list. Not only had we planned our first family trip that required airplane travel to a distant and slightly tropical local, but the week we got back my husband faced major spine surgery. Nothing like filling out hospital admittance papers to get those mortality juices flowing.

So, we redid our plan. We changed our guardians. We simplified our trust for tax planning. We updated our Durable Powers of Attorney and our Advance Health Care Directives. And it felt GREAT to finally fix it. Next up: the earthquake kit, also woefully out of date.

Believe me, I get it if you can't focus on estate planning right this second. But, please, next time life reaches out and grabs your attention, jump on it. You'll feel better, I can almost promise.

June 2, 2011

Writing a Simple Will

Will being signed.jpgDear Liza: My best friend of 26 years would like to write up a will. She has a 5 year old daughter, whom does not have a god mother. Both of my best friends parents are dead and the daughters father is not in her life, nor has he been since her birth. My best friend asked my husband and I if we would be her daughters "guardian" if anything should happen to her. We were honored and happily accepted! The problem is, how do we word the will so it is legal? The good news is that it's pretty easy to write a valid Will. There are not a lot of hidden 'gotcha's' in doing a Will (unlike a living trust, as you can see from the blog post immediately before this one). Your friend should go to www.nolo.com and use their simple online Will, or purchase WillMaker software, or purchase or go to the library and get a Nolo book like, Nolo's SImple Will Book, and use their suggested language. Your friend needs to say that she wants you and your husband to serve as the guardians of her minor child and that her child's biological father is not part of her daughter's life, and that placement with him would not be in the child's best interest.

Both of you need to know that she is only nominating you two to serve in her Will -- if your friend were to die, a judge would ultimately have to make the guardianship appointment in the best interest of the daughter. A judge will certainly try and honor a parent's nomination via a
Will, but when there's a living parent out there, unless they've legally abandoned that child (which this father may in fact have done), a judge has to take their parental rights into account as well. If that parent doesn't want to take custody of the child, the court can certainly also appoint a guardian without severing that parent's parental rights.

The bottom line is GET THAT WILL DONE. Writing down her wishes for her daughter is the best way your daughter can try and make sure that the right people take care of her daughter if she can't.

She should sign the Will in front of two witnesses who don't benefit from the Will in any way. And all of these self-help resources can walk you through the process.

May 31, 2011

Madame Clark-Reclusive Heiress to Huge Fortune Dies at 104

french doll.jpgEstate planning in the news. This week, Huguette Marcelle Clark, heiress to her father's copper fortune, thought to be close to one-half a billion dollars, died at 104, after living for decades in New York hospitals. Reportedly, her accountant and lawyer were the only people in close contact with her. Her passion was for fine French dolls. No news yet on the fate of her fortune. Stay tuned. There will almost certainly be more on this story in the coming weeks. It has it all: a recluse; a fortune; close advisors; an estranged family; a vulnerable old person.
May 29, 2011

Joint Accounts and the Estate Tax

tax man.jpgDear Liza: If I have all of my $ assets (savings accounts, money market s, IRA' stock)) in joint accounts with my children, (excluding real estate) will these funds be exempt from any inheritance taxes upon my demise? Nope. Your children will inherit those assets from you as the surviving joint tenants, without having to go through probate. But all of the value of each asset will be in your taxable estate for estate tax purposes, unless your children can prove that they made contributions to those accounts. If they are owners in name only (which is quite common between parents and children) it's all taxed to you.
May 24, 2011

Did My Mom Have a Valid Trust?

trustee certfication.jpgDear Liza, My mother passed away last year. She had a living trust prepared in January of that year by an online provider of legal forms. Before she died, she had the abstract of trust and bill of transfer listing all properties to be transferred into her trust signed and notarized which I have a copy of. She did not have the declaration of trust signed or if she did I cannot find a copy. Is the living trust still valid? I am hoping that you can find that trust. It would make your job a lot easier. Have you checked with the online provider to see if they have a copy of what she prepared with them? Because if all that you can find is the trust abstract, which is usually an excerpt listing the trustees and their powers, you'd have to try and make an argument that the summary itself is a valid trust under state law, and I'm not too sure that would work. The requirements vary by state, but in general, a trust must state the Grantor's intention to create a trust; identify the property held by the trust; state the trust's purpose, and identify a beneficiary (these last two are probably not in that summary). (The Grantor must also have the legal capacity to make such a document, but that's not the issue here.)

I would check with a trust and estate lawyer in your state to see if there's any state law to support your argument that the excerpt itself, plus the document listing the properties to be transferred, could somehow be construed to create a constructive trust or somehow avoid probate via a court petition to that effect.

While I love providing people with information and tools to get legal work done on their own (obviously, since I write for Nolo) -- this kind of story just kills me. I've seen it too many times -- without guidance, people forget to sign the right thing, or do the required follow-up. Estate planning doesn't have to be complicated, but it does have to be done right. If you can't make the trust valid, and your mother didn't prepare a Will, then you'll have to get her estate probated and her property will pass via your state's intestacy laws (which state who gets what if there is no Will).

April 21, 2011

Does a Living Trust protect against creditors?

safe.jpgDear Liza: My wife is in the middle of her medical residency.  With the risk of future lawsuits, do Living Trusts or other vehicles help protect family assets from Malpractice or other law suits? Nope. Sorry. A revocable living trust does not protect assets from creditors. A revocable trust's purpose is to provide tax planning at the death of the first spouse, and probate avoidance at the death of the second. Both are worthy goals and I do not in any way feel that I spend my working life selling snake oil. But during your lifetimes, those assets are fully reachable by creditors. Asset protection trusts are different beasts entirely. There's a large industry of lawyers out there, figuring out clever ways to protect doctors from law suits, but they are not estate planners, as a rule.
April 18, 2011

When does it make sense to do a Living Trust?

happy family.jpgDear Liza: We are a young family with significant debt  and very little in tangible assets (we completely own just one car -- we rent our house).  However, my wife and I have plans of significantly decreasing debt and increasing assets/wealth in the future.  Is it worth the time/costs to create a Living Trust now?  Or should we wait until we actually have assets?  Does it matter? Because you have a young child, what you really need right now is a Will, naming guardians for your kids and putting a plan in place to manage assets for those kids until they grow up. If you don't own a house right now, or more than 100K in the bank, I'd say, wait on the trust. The purpose of a trust is to transfer what you've got to your kids efficiently and inexpensively. But if you've really got nothing to transfer, the trust doesn't buy you much at the moment. You could certainly create a living trust now, in anticipation of your future wealth, but if there's nothing to fund that trust with at the moment, I'd say hold off. But do get that Will done.:)
April 13, 2011

Your Husband's Debts--the Gift that Keeps on Giving

blankcheck.jpgDear Liza: My brother died recently. He owned community property with his Wife. Is she now responsible for his debts? Most likely, yes. In community property states, debts incurred during the marriage are the responsibility of the community. So, after the death of a spouse, the surviving spouse is liable for those debts. I can't tell from the question whether or not your brother lived in a community property state, or in a state with common law rules, and signed an agreement making their property community. If so, it depends on what that Agreement actually says--sometimes Agreements specifically keep debt separate.

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can sign an agreement making their assets community property, but few people choose to do this.) The common law states are everywhere else. Nolo has a great article on this: "Debt and Marriage." Here's a helpful excerpt :

In states that follow "common law" property rules, debts incurred by one spouse are usually that spouse's debts alone, unless the debt was for a family necessity, such as food or shelter for the family or tuition for the kids. (These are general rules; some states have subtle variations in how they treat joint and separate debts.)

April 10, 2011

Durable Powers of Attorney: Not Dead Yet Documents

Will being signed.jpgDear Liza: My brother died a few days ago and hadn't updated his will since the 80's. His wife has Alzheimer's. They named each other as executrix, however they did durable POA on each other naming my sister-in law's cousin. Do we need to go to court to be able for her(representing my sister in law) to access the deceased accounts that are in his name only? Like so many of the excellent questions that I get on this blog, the answer is, I'm afraid, "It depends." Your sister-in-law is the executor of your brother's Will. Your sister-in-law is incapacitated by Alzheimer's. So, you are correct in looking to her Durable Power of Attorney to see who is legally authorized to act on her behalf. I always tell my clients that the Durable Power of Attorney is the "not dead yet" document--for those who grew up, like I did, watching Monty Python, you'll get the reference. My point is that a POA is to be used when the Principal, the person who signed it, is not dead, but unable for some reason to manage their own affairs. You do not need to go to court for the Agent (your sister-in-law's cousin) to have authority to act for your sister-in-law with respect to her assets, provided the POA is valid and authorizes her to do so.

But, here's where it gets a bit more complicated: the assets in your brother's name may need to go through probate before they can be transferred, or used for, his wife's benefit. He's dead, so his POA no longer is the controlling document (the Will is). What you need is someone legally authorized to act on behalf of your brother's estate--and that depends on whether or not you need a probate. If you do, the court has to appoint that person. If you don't, your sister-in-law's cousin may be able to act on your sister-in-law's behalf under that POA, but only if the POA authorizes such action.

The necessity of a probate depends on how much he had, where you live, and what his Will says. You need to find out what the 'small estates' procedure is for your state--in my state (California) assets worth less than $100K in total (with an exception for real property which I won't get into) can be transferred without a probate procedure, but that limit is different in each state. It also matters what your brother's Will says--did he leave everything to his wife? Did he give it to her outright or in a trust? This will also determine whether or not a probate is required and what kind of probate (many states have an expedited procedure for surviving spouses). If a probate is required, your sister-in-law's cousin could petition to be named as the executor, since your brother's wife isn't capable. But again, it depends whether he named a second choice in his Will, and whether or not that person wants to serve. 

 If it turns out that your brother's estate doesn't require a probate, your sister-in-law's cousin, acting on behalf of your sister-in-law as her Agent under the POA, may be able to transfer the assets, but you'll need to use your state's small estates procedure to do that and the POA would have to permit such action.

 It sounds like consulting with an attorney would be worth it, since you've got several issues to unravel. Good luck.

April 8, 2011

Worries About My Husband's Inheritance

historic house.jpgDear Liza: My father in-law passed away 3 years ago. Since then, the other siblings have been given their share of their inheritance. My husband will get the family home when Mom goes.  Mom came to us to say that she has made another adjustment to the will to state that... "if son (my husband) predeceases her then the home will go to our daughter and I will have life rights." Couldn't his Mom simply leave the home to her son (my husband) with no strings attached and if he were to predeceases her, would his inheritance still go to him or his estate so that our will will dictate our wishes for the home to go to our daughter when I die? Or would the remaining three siblings get the house and my daughter and I get nothing? Keep in mind the motive is that this is a historic home that everyone wants to stay in the family, yet there is no family money. This is one of those questions that I can't begin to answer specifically because there are so many things that I don't know. Most of the answer lies in the specifics of your husband's mother's estate plan. But here are two pieces of general advice:

1. Your mother-in-law's estate plan is HER estate plan and, until she dies, you really have no control over what she decides to do and how she decides to do it, unless her husband's share of the historic house is in some kind of trust that would prevent her from making an amendment and changing what would happen upon her death. Even if this were the case, that's a limitation that her estate planning attorney would be advising her about. In my state, beneficiary's are required to get notice if they are beneficiaries of an irrevocable trust like this, and have the right to see the trust, but this is not true in all states.

2. As a general matter, if your mother-in-law did leave the house to your husband without any limitations,  and if he were to die before your mother-in-law, what happens next would depend on what the estate plan said. It may pass directly to his surviving children, to you in a life estate of some sort, or to his surviving siblings, again, that's up to your mother-in-law. Honestly, she could leave it to charity if that's what she felt like doing.

It sounds like she's been willing to share her plan with you. Perhaps you need to have a frank family discussion and discuss your concerns with her. Good luck. These are not easy discussions to have, which is one reason that so many people keep their plans confidential until they've died (when they don't have to deal with the howls of outrage, disappointment, or glee that their plan may evoke). But if the family really wants to keep the house, and there's truly no money to maintain it, that's not a problem easily solved by avoidance. Perhaps the use of life insurance or other financial products could help with the issue, or perhaps the family needs to face reality now, rather than later.

April 6, 2011

The Golden Rule: Dealing With Banks and Custodial Accounts

golden rule.jpgDear Liza, After petitioning a local county court, I was awarded legal guardianship of my mother due to her Alzheimer's.  Now I would like to open a custodial bank account for her so I can electronically pay her bills.  Some banks will allow me to designate beneficiaries of the account, thereby avoiding probate for the funds in the account.  Others will not allow this, saying my status as her fiduciary doesn't enable me to make decisions that "go beyond the grave," possibly contravening my mother's will, despite being able to produce her original will to show that the beneficiaries are in accordance with her wishes.  What is the correct answer here?  Or does it depend on the state code and -- gasp! -- the bank lawyers' interpretation of those applicable laws? In this case, I would apply the "Golden Rule" of estate planning--The One With The Gold Makes The Rules. Find a bank that allows you to do what you need to do, and move her money there. In the end, that will be a lot easier than trying to convince a recalcitrant bank's legal department (which most likely will only communicate with you via the branch manager, so it's already bad telephone) that you are allowed to do what you are trying to do. Really. Sometimes being right doesn't matter--if one bank will allow you to set up a payable on death account, and that's what you want to do, you've already solved the problem.

April 3, 2011

Nursing Homes, Medicaid, Personal Liability

nursing home.jpgDear Liza: It is time to place my 94yr old mother in a nursing home we live on Long Island N.Y.  my question is this, she does have a small pension and has social security benefits but still not enough  for the cost of the nursing home so she will need to apply for Medicaid. We were told  it takes anywhere from three to six months to determine her eligibility for the program. If she  is denied Medicaid while in the nursing home are we responsible for paying them back? Yes. If your mother does not qualify for Medicaid, she will be responsible for the bills that she's accrued up until the time that her eligibility was denied, because then she will be a private-pay client of the nursing home. A person is only eligible for Medicaid when his or her income is low and assets few. That's why your mother needs to qualify to receive that assistance. This will require filing out forms that ask a lot of questions and require her to disclose all of her assets. If she is denied coverage, you do have the right to a fair hearing to determine if that decision was correct. Every state offers medicaid assistance through the Health Insurance Counseling and Advocacy Program (HICAP). Here's link to the New York program.  Elder law attorneys also work with clients to make sure that their applications are complete and correct. The National Academy of Elder Law Attorneys (NAELA) is a good place to start looking for a reputable elder law attorney in your area.

March 23, 2011

What to Do with Power of Attorney and Health Care Directive?

courthouse.jpgDear Liza: I created the Durable Power of Attorney and Health Care Directive (Living Will and Power of Attorney) documents using Quicken WillMaker software.  I recognize that I at least need to have them signed/notorized by the parties identified in the documents.  Now what do I do? Am I required to register these or send these documents to a local authority to make them "official"?  I'm sure it's more than just having them saved in my safe deposit box.  So, guess what? Actually you generally DON'T record these documents or register them with any state authority. The only time I've ever done so is when a client needs to sign a property deed using their authority as an Agent under a Power of Attorney--in that case, you need to record the Power of Attorney in the same county as you've recorded that deed. But, otherwise, you can give a copy of your Health Care Directive to your doctor and a copy of your Power of Attorney to your bank (if they'll accept it). You definitely should make sure that your named Agents have copies. These documents, which give a third party the power to act on your behalf if you're unable to do so, are generally simply used when needed. If your Agent for Property, for example, needs to transfer money from your bank account, they'd take the Power of Attorney to the bank at that time and get the job done; if your Agent for Health Care needs to make medical decisions for you, they'll need to show the Health Care Directive to the hospital or doctors in charge of your care. I do know of two states that require a Durable Power of Attorney to be recorded to be valid upon your subsequent incapacity: North and South Carolina, but unless you live there, these documents do not need to registered to be 'official," just properly signed and notarized (or witnessed, depending upon your state's rules.) Nolo does a really great job at keeping up with the rules in all 50 states, so I'd also check WillMaker's help section to see if it has specific rules for your state.
March 20, 2011

Finding a Professional Fiduciary

professional fiduciary.jpgDear Liza: We're in the process of establishing a Child's Trust as part of our estate planning; the Trust would exist until our daughter turns 35 (32 years from now; we're both about to turn 50).  We have created a list of four Successor Trustees, but each one is either our age or slightly older. Nolo's advice is to list a last choice a "private trust company." What's that?  It's great that you're thinking about how old your trustees are going to be when you daughter is 35--sadly, our trustees age right along with our kids. I am not familiar with the term 'private trust company' but I think Nolo may be suggesting that you consider naming a private fiduciary as a backup trustee. This is someone who is licensed to serve as a trustee, but is not a bank or a large corporate institution. Such people are licensed in California via the Department of Consumer Affair's Professional Fiduciaries Bureau. Alternatively, you might consider allowing your daughter to become the Trustee if none of the above can serve and she is over a certain age, say 28. (Serving as her own Trustee would give her management control over the trust, but still protect the trust's assets from her creditors or a bad marriage.) You might also, though, check with the bank where you do most of your business, you might find that their rates are competitive for trust services.