February 2011 Archives

February 27, 2011

You Can't Give Away What You Don't Own

red car.jpgDear Liza: My husband and I lent my father our car after his was stolen. We continued to maintain the vehicle and it is still in my husband's name. My father made partial payments on it while he used it, but we'd paid for the first three years on the loan. Everybody in the family knew that if anything happened to my father, we were supposed to get the car back. My father recently died, and in his Will he left his property and his vehicle to my brother. Does my brother get our car?  You can't give away what you don't own. If the car is still registered to your husband, your father's Will certainly can't 'give' it to your brother. Your father's Will only applies to the property owned by your father at his death. This sort of situation is one of the many reasons that it's a terrific idea to write down interfamily loans and arrangements like this car loan--what 'everybody knows' sometimes changes after there's been a death in the family.
February 22, 2011

Gifts that Keep on Giving

gift.jpgDear Liza: My elderly parents are contemplating accelerating gifting of considerable assets to their children to take advantage of the current $5 million personal exemption in place through 2012. What are the consequences if they gift based on this exemption level and it is reduced before they die? Would the estate tax rules at the time of death apply regardless of what gifting was already conducted under the current law? I don't have a crystal ball, that's for sure. And many of the details about how this is going to work are yet to be worked out, to put it mildly.  And most estate planners are currently advising clients who can take advantage of the incredible gift tax break to do so.  Under existing law, your parents' gifts wouldn't be retroactively taxed if the rules change after they've made those gifts. It's just like income taxes -- you pay under the rules in place in the year that is relevant. If later on tax rates change, you haven't been required to repay taxes that would have been due in a previous year under then-current law. If your parents made any taxable gifts during their lifetimes, though, these have been part of the estate tax calculation that's made, but they get a credit for any gift taxes already paid. One of the areas of uncertainty, certainly, is what would happen should the gift tax exclusion be significantly reduced in future years--and I wish I could give you a better answer. For now, your parents, and everyone else,  are going to have to make a decision with imperfect information.
February 20, 2011

When Divorced Parents Disagree on Guardians

Will being signed.jpgDear Liza: What if divorced parents disagree on a guardian? In the case of joint legal custody, with visitation for one parent, are the wishes of the parent with physical custody granted, or does it solely depend on who dies first? Or does it also depend on which state? It is always unfortunate when divorced parents cannot agree on who should take care of minor children. I always encourage my clients to try and find common ground on that, at least. But here's what happens: the first parent to die isn't going to have a say in the matter in most cases. Unless there's some compelling reason not to let the surviving parent take custody (they are in jail; they don't want to take custody; history of abuse), the surviving parent will be in charge of raising the children. That parent's Will, subsequently, will control who is then nominated to be a guardian for minor children. If you have good reason NOT to want a divorced spouse take custody should you die first, you can put that information into your Will (which will be public after your death), or put it in a side letter to be opened only upon your death. If you are seriously concerned about this, please see a good estate planning attorney in your state, so that your estate plan can appropriately document your concern and your reasons for such concern.
February 18, 2011

Trustees Decide When Beneficiaries Don't Agree

happy family.jpgDear Liza: I am one of 5 beneficiaries of a living trust.......my grandparents are both deceased now.  Everything is to be divided equally 5 ways.  There are several properties involved that need to be sold etc. One property in particular is a "cabin" in a small town. How do you decide who "gets" it if more than one party is interested, but not all interested parties want to share? As a general rule, unless the trust instrument itself says something differently, it's up to the Trustee to decide how to make the shares equal in a situation like this. Of course, it's always better if everyone can agree. And, as a beneficiary, you are entitled to full disclosure of the values of the assets so that you can make sure that the shares are equal, or very close to equal (it's sometimes hard to match up perfectly). If you disagree with an appraisal, you could request that another appraisal be made. Though I don't recommend it, you can even retain your own counsel to advocate for you in the settlement process.  Like most family situations, though, working it out is generally a better idea than getting "lawyered up."
February 13, 2011

Write that Will, Really

Will being signed.jpgDear Liza: My husband and I have two kids, aged 5 and 2. We don't have a Will or anything written down. Most of our friends don't either. Is that so bad? You know, I totally have sympathy for you. And, believe me, you are not alone. But here's the thing, you really, really should take a little bit of time and write a Will. It doesn't have to be elaborate. It doesn't have to be expensive. For less than the cost of a date night, you can go to www.nolo.com and  write a simple, effective Will that nominates guardians for your children and puts a simple plan in place to manage assets for your kids until they're old enough to manage those assets for themselves. You can go to the library and create a Will with a book for free. You can work with a lawyer and put together an estate plan. But, here's the thing: Without a Will, a judge would have to decide who to appoint as guardians for you children until they turn 18. Without any sort of plan in place, your children would inherit everything you've left to them (equity in your house, life insurance, and anything else youv'e managed to save) when they are only 18--which, honestly, is way too young, isn't it?

There are lots of reasons responsible, caring parents such as yourselves don't get this done. Procrastination is only part of it. There's also denial, exhaustion, not knowing who to pick as a guardian; not knowing how to do it, not knowing what to do. I recently wrote a longer blog at Mamapedia.com about exactly this that I think you'll find helpful. But whatever is holding you back, please commit to getting this done, soon. In an ideal world, it will never matter. But, if it does matter, the people you love the most will so appreciate your thoughfulness in planning ahead. Think of it like that car seat, those immunizations, those trips to the dentist--one more parental thing your kids need you to do for them.



February 8, 2011

Selling Mom's Home

house from mom.jpgDear Liza: My mother passed away in April 2010.  Her home (and a separate parcel of land) was left to my brother and me.  We have not hired an attorney to transfer the title into our names.  I was told that we can sell the property with the letters of testamentary only.  Is this correct or do we need to hire an attorney to transfer the title?   That sounds right, but I don't have all of the facts. If your mother died with a Will, and the Will says that the property is to go to you and your brother, you need to go through the probate process in your state before you can sell the property. Letters Testamentary are granted by the court during that process--basically they say who has the legal authority to represent the estate and do things necessary to settle the estate like pay bills, sell assets, and file taxes. If your mother had created a living trust, and the house was owned by that trust, you wouldn't need to go through probate, and you could hire an attorney to assist you in this transfer.