Salines-Mondello Law Firm, PC

Making Inheritance Talks Easier

“Wealth coaches and financial advisers talk about how to avoid some uncomfortable situations.”

Conversations about money and finances can be problematic for many families. Those very same people you grew up with, aren’t always on the same page, especially when the inheritance is the topic, says The New York Times in a recent article “Tips to Ease Family Inheritance Tensions.”

Find a common interest. You may be very different, but you also have a lot in common. The sibling relationship is a long-running one, so focus on preserving or repairing that relationship.

Bring in help to facilitate discussions. If family history makes it too difficult to manage, bring in an estate planning attorney or financial advisor to mediate the conversation. Having an unbiased person to run the show can keep things on track, make sure all viewpoints are recognized and help the group get to a productive conclusion.

Listen to each other. The simplest task may also be the hardest. It’s so easy to fall into old behavior patterns (i.e., the bossy older sister, the brother who goes along to get along). Don’t interrupt each other and check in to make sure everyone is feeling okay about how the conversation is going.

Advice to parents. Even if you don’t have a mega-wealthy family, you may all benefit from having an outside person, like an estate planning attorney or corporate trustee, to be named as a trustee. The more financially competent sibling could be the trust advisor, who can give advice but does not make the final decision. This keeps everyone a little more arm’s length from the decision making.

Talk with your family about money. Inheritances are frequent sources of friction among siblings. Not knowing how they are going to share in the family assets, how it is going to be structured and what expectations are, can create considerable tension within the family. Many families do not talk with their children about money, but that’s a big mistake. Not comfortable with the idea of a conversation? Then write down your motivation for your decisions about how the family wealth is going to be distributed and ask your estate planning attorney to make it part of your documents. It won’t be legally binding, but it may provide your children with some further insights.

Reference: The New York Times (Nov. 6, 2019) “Tips to Ease Family Inheritance Tensions.”

If my spouse is going into a nursing home, can they transfer all of their assets to me and qualify for Medicaid?

 

click on the clip above to watch the short video

Whether they can transfer all of their assets to the healthy community spouse is somewhere dependent on the total value of the assess and the type of assets they are. In many cases an elder law attorney can review the portfolio and can make transfers to protect the majority of the marital assets.

What is the difference between a will and a trust?

 

Click the link above to watch the short video clip

A will describes the disposition of assets at a person's death, but does not hold assets during lifetime. Irrevocable trust, or living trust, can hold assets during a person's lifetime and describe the disposition of assets on the death of the person who created the trust, or on some other event.

Irrevocable Trusts Can Protect Family Assets

Irrevocable trusts can also offer flexible solutions.

Irrevocable trusts can protect the assets created by a family over a lifetime, according to The Chattanoogan in “Keeping Your Family from Losing Its Inheritance.” They can also provide protection from events, such as divorce and substance abuse.

If we are lucky, we are able to leave a generous inheritance for our children. However, that doesn’t necessarily mean we should give them easy access to all or some of the assets. Some people, particularly younger adults who haven’t yet developed money management skills, or others with problems like a troubled marriage or a special needs family member, aren’t ready or able to handle an inheritance.

In some cases, like when there is a substance abuse problem, handing over a large sum of money at once, could have disastrous results.

Many people are not educated or experienced enough to handle a large sum of money. Consider the stories about lottery winners who end up filing for bankruptcy. Without experience, knowledge or good advisors, a large inheritance can disappear quickly.

An irrevocable trust provides protection. A trustee is given the authority to control how funds are used, when they are given to beneficiaries and when they are not. Depending on how the trust is created, the trustee can have as much control over distributions as is necessary.

An irrevocable trust also protects assets from creditors. This is because the assets are owned by the trust and not by the beneficiary. An irrevocable trust can also protect the funds from divorces, lawsuits and bankruptcies, as well as manipulative family members and friends.

Once the money leaves the trust and is disbursed to the beneficiary, that money becomes available to creditors, just as any other asset owned by the person. However, there is a remedy for that, if things go bad. Instead of distributing funds directly to the beneficiary, the trustee can pay bills directly. That can include payments to a school, a mortgage company, medical bills or any other costs.

The trustee and not the beneficiary is in control of the assets and their distributions.

The person establishing the trust (the “grantor”) determines how much power to give to the trustee. The grantor determines whether the trustee is to distribute funds on a regular basis, or whether the trustee is to use their discretion, as to when and how much to give to the beneficiary.

Here’s an example. If you’ve given full control of the trust to the trustee, and the trustee decides that some of the money should go to pay a child’s college tuition, the trustee can send a check every semester directly to the college. The trustee, if the trust is written this way, can also put conditions on the college tuition payments, mandating that a certain grade level be maintained or that the student must graduate by a certain date.

Appointing the trustee is a critical piece of the success of any trust. If no family members are suitable, then a corporate trustee can be hired to manage the trust.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include irrevocable trusts.

Reference: The Chattanoogan (July 5, 23019) “Keeping Your Family from Losing Its Inheritance.”

 

Should I just give all of my assets to a relative to hold for me?

 

CLICK ON LINK ABOVE TO WATCH THE SHORT VIDEO CLIP

Giving your assets away to a relative to hold them for you may make them unavailable to you in the future. If your relative is sued or they get divorced or they die or they go bankrupt, those assets won't be available to you. It's a better idea to see a certified elder law attorney to assist you with planning to help you preserve your assets for your future.

Will I still have control over my property if I have a living trust?

 

click on above link to watch the short video

A living trust or a revocable trust is what's called a grantor trust which means that the creator of the trust creates the trust, funds the trust, has the power to amend or revoke the trust and controls all the assets during his lifetime through his death unless he becomes disabled or incapacitated and is unable to manage his assets.

Beneficiary Designations Should Be Current

A will is crucial to asset distribution. However, so is a beneficiary designation.

 

A will is a key tool for distributing your assets. However, it doesn’t always have the final word. Why? Because beneficiary designations trump a will, according to Kiplinger in “Beneficiary Designations: 5 Critical Mistakes to Avoid.”

The beneficiary designation is the form that you fill out, when opening many different types of financial accounts. You select a primary beneficiary and, in most cases, a contingency beneficiary, who will inherit the asset when you die.

Typical accounts with beneficiary designations are retirement accounts, including 401(k)s, 403(b)s, IRAs, SEPs, life insurance, annuities and investment accounts. Many financial institutions allow beneficiaries to be named on non-retirement accounts, which are most commonly set up as Transfer on Death (TOD) or Pay on Death (POD) accounts.

It’s easy to name a beneficiary and be confident that your loved one will receive the asset, without having to wait for probate or estate administration to be completed. However, there are some problems that occur, and mistakes get expensive.

Here are mistakes you don’t want to make:

Failing to name a beneficiary. It’s hard to say whether people just forget to fill out the forms or they don’t know that they have the option to name a beneficiary. However, either way, not naming a beneficiary becomes a problem for your survivors. Each company will have its own rules about what happens to the assets when you die. Life insurance proceeds are typically paid to your probate estate, if there is no named beneficiary. Your family will need to go to court and probate your estate.

When it comes to retirement benefits, your spouse will most likely receive the assets. However, if you are not married, the retirement account will be paid to your probate estate. Not only does that mean your family will need to go to court to probate your estate, but taxes will be levied on the asset. When an estate is the beneficiary of a retirement account, all the assets must be paid out of the account within five years from the date of death. This acceleration of what would otherwise be a deferred income tax, must be paid much sooner.

Neglecting special family considerations. There may be members of your family who are not well-equipped to receive or manage an inheritance. A family member with special needs who receives an inheritance, is likely to lose government benefits. Therefore, your planning needs to include a SNT — Special Needs Trust. Minors may not legally claim an inheritance, so a court-appointed person will claim and manage their money until they turn 18. This is known as a conservatorship. Conservatorships are costly to set up. They must also make an annual accounting to the court. Conservators may need to file a bond with the court, which is usually bought from an insurance company. This is another expensive cost.

If you follow this course of action, at age 18, your heir may have access to a large sum of money. That may not be a good idea, regardless of how responsible they might be. A better way to prepare for this situation is to have a trust created.  The trustee would be in charge of the money for a period of time, that is determined by the personality and situation of your heirs.

Using an incorrect beneficiary name. This happens quite frequently. There may be several people in a family with the same name. However, one is Senior, and another is Junior. The person might also change their name through marriage, divorce, etc. Not only can using the wrong name cause delays, but it could lead to litigation, especially if both people believe they were the intended recipient.

Failing to update beneficiaries. Just as your will must change when life changes occur, so must your beneficiaries. It’s that simple, unless you really wanted to give your ex a windfall.

Failing to review beneficiaries with your estate planning attorney. Beneficiary designations are part of your overall estate plan and financial plan. For instance, if you are leaving a large insurance policy to one family member, it may impact how the rest of your assets are distributed.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

Are there ways to protect my assets other than using a trust?

 

click the link above to watch the short video

Yes. Assets can be protected in many different ways. How you protect your assets is somewhat dependent on the type of asset, whether it's real property, real estate, or if it's a cash asset, it could be a brokerage account or an IRA, so in order to determine what's going to work best for each type of asset, it's best to talk to a professional to assist you.

Taking Care of Your Grandchildren in Your Estate Plan

You can leave financial help or other assets to your grandchildren but consider the laws

If you want to leave assets to children under the age of 18, it would be wise to visit an estate planning attorney because it can become very complicated, according to the Cherokee-Tribune & Ledger News in “Gifts from Grandma, and other problems with children owning property.”

If a child under age 18 receives money as an inheritance through a trust, or if the trust states that the asset will be “held in trust” until the child reaches age 18, then the trustee named in the will or trust is responsible for managing the money.

Until the child reaches age 18, the trustee is to use the money only for the child’s benefit. The terms of the trust will detail what the trustee can or cannot do with the money. In any situation, the trustee may not benefit from the money in any way.

The child does not have free access to the money. Children may not legally hold assets in their own names. However, what happens if there is no will, and no trust?

A child could be entitled to receive property under the laws of intestacy, which defines what happens to a person’s assets, if there is no will. Another way a child might receive assets, would be from the proceeds of a life insurance policy, or another asset where the child has been named a beneficiary and the asset is not part of the probate estate. However, children may not legally own assets. What happens next?

The answer depends upon the value of the asset. State laws vary but generally speaking, if the assets are below a certain threshold, the child’s parents may receive and hold the funds in a custodial account. The custodian has a duty to manage the child’s money, but there isn’t any court oversight.

In Georgia, the threshold is $15,000. Check with a local estate planning attorney to determine your state’s limitations.

If the asset is valued at more than $15,000, or whatever the threshold is for the state, the probate court will exercise its oversight. If no trust has been set up, then an adult will need to become a conservator, a person responsible for managing a child’s property. This person needs to apply to the court to be named conservator, and while it is frequently the child’s parent, this is not always the case.

The conservator is required to report to the probate court on the child’s assets and how they are being used. If monies are used improperly, then the conservator will be liable for repayment. The same situation occurs, if the child receives money through a court settlement.

Making parents go through a conservatorship appointment and report to the probate court is a bit of a burden for most people. A properly created estate plan can avoid this issue and prepare a trust, if necessary, and name a trustee to be in charge of the asset.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: Cherokee-Tribune & Ledger News (March 1, 2019) “Gifts from Grandma, and other problems with children owning property”

Are New Technologies Acceptable for Creating Wills?

A will traditionally has to be in writing.

New technologies, such as cell phones and videos, make our life easier. However, are they acceptable for creating wills or estate plans? The question signifies some real issues being presented to courts, according to My San Antonio in “Can a video be used as a Will?”

The article concerns the questions of a grandmother making a statement, while in an intensive care unit, that she wanted everything she owned to go to a grandchild and a brother-in-law, and what if that statement was captured on a cellphone as a video?

There are two reasons why a cellphone video is unlikely to be accepted as a will by any court. One is that the cellphone video does not follow the formality of how a will is created and executed. Another is the statue of frauds, which basically says that to be lawfully valid, certain promises must be in writing.

Not only does a will need to be in writing, it must show clear intent to dispose of assets after death. The writing must be dated and signed by the person who is making the promise (the testator). If the will is written by the testator in his or her handwriting, it is known as a “holographic” will. If the will is typed or in someone else’s handwriting other than the testator, which is known as a “formal will,” then it must also be signed by two independent witnesses and must be notarized. The person who is having the will created (again, the testator), must also have legal capacity for the will to be valid.

In some states, including Texas, there was a time when a spoken will, known an a “nuncupative will” could have been recognized. However, that is no longer the case and a verbal will is no longer valid. Even when a nuncupative will was accepted, it was only accepted for inexpensive personal effects, not large assets or real property.

Some states, including Florida and Nevada, now allow a person to make a will online or on their computer and never have it transferred to paper. These are called “digital” or “electronic” wills. In these cases, e-signatures are allowed to be used. Other states have considered bills allowing digital wills, but the bills did not pass. The Florida law allows the digital will to be e-signed, but it must be witnessed by two independent individuals and it must be e-notarized. It should be noted that the will process is not permitted to be used by a person, who is in an end-stage illness or who is legally considered a “vulnerable adult.”

In the state of Texas, the grandmother in the example above is considered to have died without a will, meaning that she died “intestate.” Texas law will determine how her assets are distributed, and that will depend on her relationships and her survivors. If she was married and all children are from that marriage, her assets go to her spouse. If she was married and had children from a prior marriage, her assets are split unevenly between those children and her spouse. If there is no spouse, assets go to her children. There is a tremendous burden placed on the heirs of those who die without a will, since it does take a long time to figure out who their heirs are.

Reference: My San Antonio (Feb. 18, 2019) “Can a video be used as a Will?”