September 2010 Archives

September 25, 2010

A Permanent Record: Ashes to Vinyl

iStock_000005824100XSmall.jpgLiza: Is it possible to press my ashes into a record after I die? Why, yes! Funny you should ask. I just saw an article in Wired.uk.com about a British company that will allow you to have your ashes pressed into a vinyl recording as a special keepsake for your loved ones. Really. The record can have your favorite songs, your voice, or simply the pops and crackles made by your last remains. This could be just the thing for that Nick Hornsby fan, or the person for whom scattering their ashes in an exotic local is just too much of a cliche.
September 24, 2010

The Dead Hand: Controlling Things After You Die

 dead hand.jpgLiza: Can a person writing a will or trust set any rules about when a piece of property in the will or trust should be sold? For example, I want my two children to share in the rental income from some property but I don't want them to sell it unless they can receive a certain amount. So, I love your question. Because it comes up so often in estate planning and it raises a great issue: how much can we, or should we, try to control what's going to happen after we're gone? I'm the kind of mom who insists on packing my children's lunches for school so that I have a handle on what they're eating while I'm not around. (Of course, they sometimes trade their lunches, or don't eat them at all, but I like to think I know what's going on.) So, I get the whole 'control freak' impluse (Just ask me kids!) The answer is that, yes, you can place that property in trust. You can even make those kids the trustees. And you can absolutely specify that they cannot sell the property unless they get a certain price. But, is that really a great idea? Here's the thing: you're going to be dead. And, if the last two years hasn't taught you that WEIRD STUFF HAPPENS ALL THE TIME THAT WE CAN'T ANTICIPATE , I don't know what will (Think of the poor bond traders at Lehman Brothers....). The price you specify might be insanely high, or ridiculously low. Your children may have a medical emergency and really need to sell the property, even at a less than fabulous price. If you were my client, I'd want to know what's driving your concern and think of a more flexible alternative. Are you worried your kids don't know how to drive a good bargain? (Maybe name someone else as the trustee.) Are you worried they don't value the property as much as you do? (Maybe don't give it to them.) Do you feel that you can't talk this over with them now and let the document just give them discretion to do what's right under the circumstances as they actually play out? (If so, again, perhaps they're not the right people to manage the property.) When working with clients, I try to help them understand that after they're gone it's hard to know what is going to make sense over the long run. It's best to pick good people for the decision-making roles and write a document that is flexible enough to let them accomplish your goals in a way that makes sense at that time, rather than try and  be a control freak from the grave.
September 22, 2010

Anticipating the angry relative

  angry lady.jpgDear Liza: What steps can you take ahead of time when drafting a will or trust if you anticipate that a hostile family member will take steps to fight it? If you are concerned that a hostile family member is going to challenge your estate plan, you are already taking a good first step: thinking about it. Here's the deal: it's actually pretty hard to WIN a challenge against an estate plan: you have to prove that a person was either mentally incompetent (didn't understand what they were doing) or was being placed under pressure from a third party (was being forced to do an estate plan against their free will). Both of these factors are based on the facts: the who, what, where, why, and when that's the staple of TV cop shows. But even though it may be hard to win such a case, sadly, it's not that hard to start one--all you need is a grievance and a lawyer who doesn't really care if your case is good or not. So, here are some specific things you can do discourage that lawsuit. First, write your will or trust carefully. If you intend to disinherit someone, say so. If you want people to know the reason, add that too. Don't take the chance that someone will say you accidentally 'forgot' them. If you are worried about an upset grandmother who didn't get custody of your lovely child, consider leaving a letter behind, to be opened only upon your death, explaining why you choose another guardian. If you are concerned that someone will challenge your competency at the time you signed your documents, consider videotaping the ceremoney and make sure that your witnesses are going to be willing to state that you were very clear about what you were doing and why. Also, make sure that the witnesses don't benefit in any way from your estate plan (this, of course, is true for any witness, but you want to be extra careful when there's a sticky wicket out there). And finally, use a no-contest clause in your documents. This is a statement in your will and/or trust that says that your estate plan absolutely reflects your intentions and that you ask your family and friends to honor it. It also says that anyone who challenges your estate plan will lose whatever you've left to them (although if the person's beef is that they got nothing from you, this isn't really that effective). I also think that the prospect of a challenge is a very good reason to consult a competent estate attorney in your area, as state law varies on the no-contest language that's required and because they can help you to draft a document that is hard to challenge.
September 19, 2010

Giving (and Leaving) Money to Kids

giving kid money.jpgLiza: Is there a rule as to how much money a child can own? And if so, how do I figure out what I can give to a child in my estate? Minors can only own a small amount of money in their own names, it varies from $2,500 to $5,000, depending on your state. But that's just the limit of what a child can own directly. You are free, of course, to leave your children as much of your assets as you want, you just have to make sure that the money is going to be managed for them properly. If you don't make any arrangements, and you die, a judge will have to appoint a property guardian to look after the minor's money until that minor is an adult (18 in most states). This isn't the best solution for several reasons: 1) the property guardian can usually make only limited investment choices; 2) the property guardian will have to report to the court on those investements; and, worst of all from most parent's perspective, 3) the child gets full control over all of the money when they become a legal adult. (I have heard stories about the kid who bought the entire neighborhood motorcycles). A better way to leave money to your children is to make an estate plan. In either your will or living trust, you can leave the money in trust for your children to whatever age you think makes the most sense (maybe 25 or 30), and appoint someone you trust to serve as the trustee (manager of the money) until that time. If that sounds too complicated, you can leave your children money in your estate plan under what's called the Uniform Transfer to Minor's Act (UTMA). This law, which is enacted in every state except for South Carolina and Vermont, makes it easy to leave property to children. You state in your will or trust that the gift to your children is under the Uniform Transfer to Minor's Act in effect in your state, and you name a custodian to manage the money for your kids (a person you trust to take care of the money until your child gets it). State law determines how long this custodial account can last, and it varies from 18 to 25. No separate trust account has to get created, your custodian can open a bank or a brokerage account for your children's benefit,and the money can be used for school, books, bubbles, and whatever else they'll need growing up.

September 12, 2010

Self-Proving Affidavits: Avoiding a Trip To Court


self-proving Will.jpgLiza: Help. What is a self-proving affidavit why do I need one? A self-proving affidavit is a statement, sworn to be true under penalty of perjury, signed by the witnesses who watched you sign your Will. The affidavit says that they swear that you signed the will according to law. In California this means that you appeared to be of sound mind (i.e. not crazy) and that no one made you sign the Will under duress. If it's there, then you have what's called "A Self-Proving Will."  It's nice to have a self-proving Will because later, hopefully much later, when you die and the Will is submitted to probate, your witnesses won't be called to testify to prove that your Will is valid. It's "self-proving" because the affidavit stating that the Will is valid is already attached to the Will itself. If there's a challenge to the Will's validity in probate, the witnesses might be called in to testify, but that's up to the judge, and most Wills aren't challenged anyway. Look to see if the Will you're about to sign has an extra page after your signature where the witnesses swear that you appeared to be of sound mind and not acting under duress.  If it's there, you're set; If it's not there, you don't have a self-proving Will. Nolo's Online Will and WillMaker software will create the affidavit, as will any estate planning attorney.
September 8, 2010

55% Estate Tax? Say it isn't so.

tax dollars.jpgLiza:  I heard that in 2011 a person who dies will have to pay 55% in estate taxes. That couldn't be true, is it? That seems like an awful lot of taxes. is there a way around this? Sorry, but at this point, that's the plan. Unless Congress acts to change the law, the estate tax is scheduled to be 55% as of 2011. The amount that each of us can give away at death free of tax is scheduled to be $1 million, so the tax won't touch everyone, but it will hit many people, since life insurance proceeds are subject to the estate tax. As for getting around it: the obvious answer is don't die in 2011 and hope Congress raises the amount that's excluded from the tax before you do die, but I suppose that's not helpful. You can make charitable gifts, which, in addition to supporting good work in your community will reduce your taxable estate dollar for dollar. If, for example, you have $3 million dollars in assets and give away $2 million to Doctors Without Borders upon your death, you would not have a taxable estate. Also, gifts to your spouse are estate tax free--although their estate will be subject to tax when they die, so that just defers the tax, but doesn't reduce it.

September 5, 2010

Annual Gifts: Yes You Can!

gift tax check.jpgLiza: My mom wants to gift me with a $15,000 check before the end of the year but my husband says that will violate the gift tax rules. I thought the limit was $1 million. What's the rule and who pays the gift tax? You have a very nice Mom. I'm sure your husband is very nice, also, but he's got it wrong. To quote our fearless leader, "Yes, she can!" But she should write that check for $13,000. Here's why. You are totally correct that current tax law allows people to make lifetime gifts up $1 million before they have to pay gift tax. Think of that like a Jamba Juice card, each gift you make gets reported on a 709 gift tax return, and that uses up some of the credit (like buying a smoothie with a $30 card, leaving you with $25 and change left for the next time.) But, your mother and everyone else, is also allowed to make annual gifts of up to $13,000 per person per year, free of the gift tax. (This number is adjusted for inflation now and then.) How cool is that? As long as your mother doesn't give more than $13,000 to any one person, she can give $13,000 to everyone in Cleveland if she wants to, without having to pay a penny in gift tax AND without using up even $1 of that lifetime million dollar gift credit. But $15,000 is over that limit, so unless she wants to give you $13,000 and your nice, but misguided, husband $2,000, she'd have to report it and use up some of her lifetime credit.

September 1, 2010

Wills: Tell Mom to Make One

insurance contract.jpgLiza: My mother has a life insurance policy and that's it. She has no property anymore except for a few odds and ends - she lives with my family. Does she need a will? Yup. It's true that your mother's life insurance policy will go directly to the people she's named as beneficiaries for her policy, but what about those odds and ends?


Creating a will lets your mother name an executor, who will file her last tax returns, notify social security and the state department of health after her death, cancel her cable subscription, and deal with her overdue fines at the library. It's just good house keeping and will (no pun  intended) make it easier for you to tidy up her affairs after she's gone. More than that, you may not know everything about your mom--some of those odds and ends may surprise you. 

Having a will in place will make it possible for you to deal with whatever she leaves behind. My very own Dad, for example, left my sister and I an oil and gas lease in Oklahoma (we call it 'the gusher') that we had NO IDEA he owned. Wills aren't complicated, she can do one herself using Nolo's online Will or Nolo's Quick and Legal Will book. And here's something else she needs: a Durable Power of Attorney and an Advanced Health Care Directive. These documents will help you to take care of her when she gets sick. The Power of Attorney allows you to take care of her financial matters: the Advance Health Care Directive gives you the authority to make medical decisions for her if she can't communicate directly with her doctors. You can make both of these using Nolo's WillMaker, and local senior centers can often help you get free forms to fill out as well.