May 2009 Archives

May 28, 2009

Can You Probate a Copy of a Will?

This week, a woman called my office and asked if her father could submit a copy of a will to the probate court. An elderly friend of his had recently passed away; during her lifetime she had told her father several times that the will was located in a certain desk drawer. But when he went to look for it after she'd died, all he could find was a copy. No one could find the original.

Rules vary state to state, but generally, if all you can find is a copy of a will, you should still submit that to the probate court. The thing is, you'll have to prove to the court that this is the authentic last will of the person who died and that there wasn't some other original will floating around. To do so, you'll probably have to call witnesses who can testify about the circumstances under which the will was made and provide evidence that the will was never revoked.

None of that is easy -- or cheap. The easiest way to avoid leaving your heirs with this kind of hassle is to make sure you -- and a trusted family member or friend -- know where your original documents are and to keep them in a safe, and accessible, spot.

For a complete guide to collecting and organizing important papers and information, see Get It Together: Organize Your Records So Your Family Won't Have To, by Melanie Cullen and Shae Irving (Nolo).

May 25, 2009

Family Loans: Write Them Down

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These days, cash is king -- and some of us just don't have enough of it. If you need to borrow money from a family member to make it through until times are better, you're not alone. But, please, do everyone a favor and be formal about it. That means put the loan in writing, generating a payment schedule, and agreeing on an interest rate that's at least what the government has published (don't worry, it's really low right now). Here's a good overview.

Why is this an estate planning issue? Because if you die unexpectedly, a loan that's been properly handled is much easier for your family to understand and take account of. It's hard enough to sort out family finances when there's been a death, but when important financial transactions have been handled with a nod and a wink, extremely messy situations can result.

Here are the basics:

  1. For any loan over $10,000, make sure you're charging at least the applicable federal rate for the loan. You can find that rate on the IRS's website.
  2. Write down the terms of the loan in a promissory note. Here's a nifty one you can download instantly.
  3. Print out and follow a loan amortization schedule, so you know what the monthly payments will be. This free program will help you figure it out.

For more information on loans between family and friends, read Nolo's article Promissory Notes: Personal Loans to Family and Friends.

May 22, 2009

Estate Tax Update

capital dome.jpgThe current Congressional Budget Resolution includes a provision that will freeze the current estate tax exemption at current levels, allowing individuals to pass up to $3.5 million of their estate free of the estate tax. The resolution also freezes the maximum tax rate at 45%. Even if it passes, this provision expires after one year, leaving the future of the estate tax uncertain. Here's a link to a great article from Money magazine on rethinking your estate planning options, given the current economy and the uncertainty of future tax rates and exemptions.
May 13, 2009

Not Munchkins, too? Seems Over the Rainbow Somehow

rainbow.JPGIn what's starting to seem like a series on the ways in which powers of attorney can cause heartache -- or worse, elder abuse -- comes a story out of St. Louis. The heirs of one of the last surviving Munchkins from the film The Wizard of Oz, Mickey Carroll (real name, Michael Finocchiaro), are suing his caretaker, Linda Dodge, claiming that she and others took advantage of the actor in his final years.

The heirs claim that Mr. Carroll, who died Thursday, May 7, signed powers of attorney transferring power over his property and health care decisions to Dodge when he was unable to understand what he was signing. They further claim that Dodge then kept him isolated, spent his assets, and kept the money that Carroll made from appearing at events.

Dodge counters that the dispute is just a "family squabble" and that she took good care of Carroll.

To learn more about financial powers of attorney, see Nolo's article Financial Powers of Attorney: Do You Need One?.

May 6, 2009

What to Do When You Move

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People often ask me what to do with their estate plans when they move to another state. Here's the answer: if you think you're going to be in that new state for a while, it makes sense to update your estate plan to reflect that state's laws.

It's not that your estate plan will be invalid in another state. With the exception of gay marriage (in some states), contracts signed in one state are valid in another. But it can create inconvenience for your heirs if they have to administer an estate under, say, California law, if a parent died while residing in Georgia -- especially if the kids live in Georgia too.

Also, powers of attorney, which are important legal documents granting another person the right to act on your behalf with respect to property and health care, are created by state law, and your rights, especially with respect to health care decisions, vary from state to state. For that reason, and additionally because banks and doctors like working with forms that they know, it's a good idea to at least create new powers of attorney if you move to a new state.

For a comprehensive guide to estate planning essentials, see Plan Your Estate, by Denis Clifford (Nolo).

May 4, 2009

Powers of Attorney: Another Sad Tale

blankcheck.jpgThe Seattle Times reports today that a man stands accused of systematically draining his 93-year old mother's bank accounts, racking up charges on her credit card, and mortgaging her paid-off condo. All after his mother had been hospitalized following a stroke.

While she was in a nursing home, he was, the prosecutors allege, spending her money on trips to casinos, country clubs, tanning salons, and his own health insurance, while leaving her nursing home bills unpaid.

How did he pull this off? Simple: She'd named him as her agent under a durable power of attorney the week before her stroke. With it he was supposed to be making sure that she was well-taken care of. But because that document gave him access to all of her accounts and no one was watching over how he used that authority -- allowing a nursing home bill of $37,000 remain unpaid -- he was able to, or rather stands accused of being able to, use that money for himself instead.

And the moral to this sad story? Be careful who you name to act on your behalf in the event of your incapacity. You really are giving that person a blank check.

Here's a helpful article by Ohio attorney Craig Matthews on how to avoid being the victim of power of attorney fraud: Elder Financial Abuse: Power of Attorney Scams.

May 1, 2009

Life Insurance: Big Bang for your Estate Planning Buck

Before I had kids, I thought that life insurance was a boring thing that only other people had to think about. But I was wrong about that. Turns out that life insurance is actually one of those old-fashioned financial products that makes a ton of sense. (Believe it or not, some of them actually do.)

Of course, there are lots of complicated life insurance products out there, too, but for estate planning purposes, term insurance makes the most sense.

Here's how it works: You sign a contract with a life insurance company. You agree to pay them a monthly premium and they agree to pay your beneficiaries a certain amount if you die during the term of the contract. That way, if you get hit by a bus unexpectedly, your loved ones will be provided for.

A twenty-year term policy is perfect for families with young children. You'll lock in a low premium rate for the entire twenty years. And in these days of job insecurity, having a policy outside of whatever your employer offers is a good idea -- even if you do get laid off, you'll still have a policy in place to make sure your family enjoys financial security.

And term insurance is surprisingly inexpensive. The insurance company is betting that you're likely to survive the term of the policy, so their premiums are generally lower than insurance that lasts your entire life (which is sure to be paid out in the end). The younger you are, the less it will cost, so don't put it off for better times.

The New York Times just published a great overview of insurance that you can read to learn more. The Motley Fool has a lot of helpful calculators to help you figure out how much to buy. And to compare rates online, term4sale.com makes it easy to type in your zip code, age, and health history to get an idea of what your policy is likely cost.

To learn more about life insurance as a part of your estate planning, see The Mom's Guide to Wills & Estate Planning, by Liza Hanks (Nolo).

May 1, 2009

Ms. Astor Regrets -- It Can Happen in the Best of Families

This week in New York a trial opened in which, Anthony Marshall, the son of famous socialite Brooke Astor, who died in 2007 at the age of 105, stands accused of exploiting his mother's diminished capacity to steal cash and property worth a whopping $198 million.

The prosecution claims that Marshall, and co-defendant (and attorney) Francis X. Morrissey, had Ms. Astor sign papers and make changes to her will that increased Marshall's share of his mother's estate. In addition, Marshall stands accused of paying himself $500,000 a year as Astor's financial adviser and transferring her property to himself.

The case was prompted, the Washington Post reports, by a court petition filed by Philip Marshall, Astor's grandson. The petition alleged that his father was robbing Astor and "neglecting her health and hygiene."

What can the rest of us learn from this mess? First, family members should pay close attention to their elders and make sure that they are comfortable, safe, and well-taken care of. Second, family members should carefully scrutinize the financial well-being of the elderly and question any suspicious transactions or property transfers.

If you suspect that someone is taking advantage of an elderly family member, find out how they've gained access to that person's finances. If your loved one still has capacity (the ability to understand what they're signing), they can make a responsible person their agent for finance using a durable power of attorney for finances. The agent can then block the evil-doer's access to the money. If an elderly person no longer has mental capacity, you'll have to go to court and petition to be named that person's legal conservator or adult guardian to protect their finances. 

For more information on preventing abuse of powers of attorney, see the article Elder Financial Abuse: Power of Attorney Scams.