Vintage key

Help! My Trustee has Gone Rogue

What is a rogue trustee and how can s/he be stopped? A rogue trustee is someone who stops following the instructions set forth in the trust documents1)Contrary to popular belief, a rogue trustee is not necessarily from Alaska. In legal terms, the failure to follow the trust is termed a “breach of fiduciary duties.” In such cases, the beneficiaries of the trust are responsible for holding the rogue trustee responsible. If the trustee refuses to admit and correct the breach, this process will require the Court’s intervention. The following brief article provides some background on trusts that I hope will protect you from the actions of a rogue trustee.

 

A rogue trustee: what to do next

After reviewing their options, the majority of my estate planning clients choose to prepare a revocable living trust as a means of distributing their property upon their passing. A trust is the best estate planning vehicle for many folks because it does not require probate for the estate to be distributed, and because it is more flexible than other estate planning options. Trusts are flexible, in part, because they allow for the appointment of a successor trustee; an individual who will administer the trust upon the passing of the clients if the primary is unable or unwilling to do so. A trust empowers a trustee to exercise his or her discretion to achieve the objectives of the trust. However, generally, a trustee may not simply decide what s/he would like to do and disregard the instructions of the trust entirely. A trustee who has substituted his or her own wishes in place of the instructions of the trust is a rogue trustee.

Our firm once represented a beneficiary of a trust who was the victim of a rogue trustee. Shortly after our client’s mother passed away, the trustee sent out a letter stating that she was in charge and that she could decide who got how much money and the conditions from which the listed beneficiaries would receive the gifts. The trustee withheld money from our client and our client’s daughter because the trustee felt like the beneficiaries were ungrateful, and because they refused to do exactly what was demanded of them. The problem was, of course, the trustee’s actions were contrary to the language contained in the trust2)The trust contained no language requiring our client-beneficiaries to make the trustee feel appreciated. As to if this type of condition is legally legitimate is another matter. To make matters worse, the rogue trustee took money from the trust and purchased a property for herself. Immediately upon recognizing the problem, we filed a petition to the Court asking that she be removed as trustee and otherwise held accountable for her actions. The Court forced her to provide an accounting showing how she had managed the money. Once the Court saw the extent of her breaches of fiduciary duties, the Court also removed her as trustee and appointed our client in her place.

If you or anyone you know is the beneficiary of a trust, and you are concerned that the trustee is not doing as instructed by the trust’s terms, please let us review the situation to ensure that a trustee has not gone rogue.

Footnotes   [ + ]

1. Contrary to popular belief, a rogue trustee is not necessarily from Alaska
2. The trust contained no language requiring our client-beneficiaries to make the trustee feel appreciated. As to if this type of condition is legally legitimate is another matter
gay marriage, nevada, will, estate planning

Gay Marriage and the Need to Update Your Will

Prior to recent court decisions, including the most recent United States Supreme Court decision in Obergefell v. Hodges, in which the federal courts have legalized gay marriage across the United States, one prominent challenge facing gay couples was the problem of inheritance when one person passed away. Due to laws that prevented unmarried, gay partners from inheriting property from each other, the gay community was particularly conscious of the need to have valid wills and/or trusts in effect prior to death. Now that gay couples may legally marry, it is an important time to review and update any prior estate planning in light of the legal marriage of the couple.

 

How the gay marriage decision could affect your estate planning

However, the more interesting question will arise if a person had previously signed a valid will that does NOT provide for the now-legally married spouse. For instance, let us assume that in 2007, Jane wanted to make sure that whatever property she owned upon her death would be given to her nieces and nephews, and not to certain other family members with whom she had a falling out. Jane drafted a will to ensure that these wishes were known and signed the will in 2007. Later, Jane met Susan and they legally married in 2015. Let us continue our scenario by assuming that Jane completely forgets about the 2007 will and assumes that Susan will simply receive her property when she dies because they are now legally married. When Jane dies and the nieces and nephews come forward with the 2007 will claiming the entirety of Jane’s estate, is Susan left out in the cold to receive nothing from her deceased spouse’s estate?

Luckily for Susan, Nevada law has long provided a remedy for surviving spouses who marry after the deceased spouse had already signed a will. Nevada law provides, “If a person marries after making a will and the spouse survives the maker, the will is revoked as to the spouse.”1)NRS 133.110. There are 3 exceptions to this general rule that would still prevent the surviving spouse from the benefit of this law, but those exceptions will not be discussed in this blog post.. But, what exactly does that mean? What would Susan receive from Jane’s estate and what would Jane’s nieces and nephews receive?

As to Susan, the law provides that she would receive from Jane’s estate the same thing she would receive had Jane died without a will.2)NRS 133.110(2)[a] If Susan had a community property interest in any property that was titled in Jane’s name only, Susan would automatically receive the first one-half of all such community property as the surviving spouse.3)Click here for more on community property The remaining one-half of the community property “is subject to the testamentary disposition of the decedent,”4)NRS 123.250[1] which means that the remaining one-half of the community property is distributed according to the terms of the will. The nieces and nephews win the remainder, right?

Wrong: Remember that the will is revoked as to the surviving spouse and the surviving spouse would inherit as if there was no will. This becomes crucial as to any community property. If a spouse dies with community property and no will, which is how the deceased spouse is treated when there is a marriage after a will is signed, all of the remaining community property goes to the surviving spouse. 5)NRS 123.250(1)(b)[1]. Thus, Susan would inherit the entirety of all community property and the nieces and nephews get none of the community property.

 

What happens to the nieces and nephews?

So, you ask, are the nieces and nephews completely left out? Not necessarily. If Jane had any separate property (generally any property that was acquired prior to the marriage and that was not transmuted into community property during the marriage), the nieces and nephews are going to receive a portion of the separate property. First, Susan will receive the share of the separate property that she would have received if Jane had died without a will. If Jane died with more than one child, Susan would receive one-third of the separate property6)NRS 134.040[2] and the remaining two-thirds of the separate property would pass to the nieces and nephews according to the terms of the will. If Jane died with only one child or with no children at all, Susan would receive one-half of the separate property7)NRS 134.040(1) and 134.050[1]-[2] and the remaining one-half of the separate property would pass to the nieces and nephews according to the terms of the will. Thus, the nieces and nephews will get either two-thirds or one-half, dependent on how many children Jane did or did not have.8) A very LARGE caveat: children born after their parents sign a will are also included in the distribution in a similar fashion to the surviving spouse. Watch for a subsequent blog post about this issue. In any event, the short answer is that the nieces and nephews may actually receive nothing from Jane’s estate even though the 2007 will is entirely valid.

Phew! If you have made it this far in this blog post and not got lost, or even if you got this far and did get lost in those details, give yourself a gold star for perseverance. Then, realize that the main point of the entire blog post is that if you have gotten married and if you did a will prior to marriage, make sure that you come and talk to me about getting it all updated. Now that Jane and Susan have the benefit of legal marriage, it would be a shame to leave their estates in a mess after death due to their failure to revisit their estate planning after the marriage.

#Lovewins

Footnotes   [ + ]

1. NRS 133.110. There are 3 exceptions to this general rule that would still prevent the surviving spouse from the benefit of this law, but those exceptions will not be discussed in this blog post.
2. NRS 133.110(2)[a]
3. Click here for more on community property
4. NRS 123.250[1]
5. NRS 123.250(1)(b)[1]
6. NRS 134.040[2]
7. NRS 134.040(1) and 134.050[1]-[2]
8. A very LARGE caveat: children born after their parents sign a will are also included in the distribution in a similar fashion to the surviving spouse. Watch for a subsequent blog post about this issue. In any event, the short answer is that the nieces and nephews may actually receive nothing from Jane’s estate even though the 2007 will is entirely valid.
Scrivere a mano con penna

Holographic Wills

William Melton.Will

 

A Holographic Tale

Joann’s father just died and she is going through his old papers stuffed away in his desk and filing cabinet. Tucked away in the back of the bottom drawer, buried among old tax returns from the 1960s and utility bills from the 1970s, Joann finds an old, handwritten letter to Dad’s long-time girlfriend. Dad wrote the letter twenty years ago, and Joann enjoys the nostalgia of seeing her father’s handwriting again. Then, Joann re-reads the letter and the color flushes from her face as she begins to wonder if the letter means what she thinks it might:

5-15-95

5:00 a.m.

Dear Susie

I am on the way home from Mom’s funeral. Mom died from an auto accident so I thought I had better leave something in writing so that you Alberta Kelleher will receive my entire estate. I do not want my brother or my daughter or any of my other relations to have one penny of my estate. I plan on making a revocable trust at a later date. I think it’s the 15 of May, no calendar. I think it’s 5:00 a.m. Could be 7 a.m. in the City of Clinton, Oklahoma.

Lots of Love
Bill

/s/ William E. Melton

AKA Bill Melton

 

Whoa! Did Dad really say that he wanted Joann to receive not even a penny of his estate?! This is just an old letter and it does not really mean anything, right? I mean, it was written on hotel stationery after all, not in a formal will prepared by an attorney. And Dad did not put it in his safe deposit box like an old 1975 will that was found. Surely there is no way that this will have any effect on how Dad’s property is to be distributed now that he has died, right?

Unfortunately for William Melton’s daughter and despite her (and other relatives’) arguments that it was just an old letter, not a will, not only did the Nevada Supreme Court find that the old letter written on hotel stationery and found tucked away in Melton’s papers at home was a valid will, but that the effect of the will was that his daughter and all of Melton’s relatives were disinherited by the letter. The Court stated,

The 1995 letter was written, signed, and dated by Melton. It contains the material provisions of a will because it provided that Kelleher should receive Melton’s estate and that his relatives should receive nothing. Although Melton did not store the 1995 letter in the same manner that he stored the 1975 will, its validity as a holographic will does not depend on him doing so. Melton’s testamentary intent is evinced by his references to his mother’s funeral, her untimely death, and his statement that he “had better leave something in writing.” Accordingly, we conclude that the 1995 letter is a valid holographic will. 1)In re Estate of Melton, 272 P.3d 668, 674 [Nev. 2012].

 

Nevada law recognizes the validity of a holographic – or handwritten – will:

A holographic will is a will in which the signature, date and material provisions are written by the hand of the testator, whether or not it is witnessed or notarized. It is subject to no other form, and may be made in or out of this State. … Such wills are valid and have the same force and effect as if formally executed. 2)NRS 133.090

 

Thus, in order for a handwritten will to be valid, there are three important factors that must be present in the document:

(1) the signature,

(2) the date, and

(3) the “material provisions” must all be in the person’s own handwriting.

It is not necessary that the person say that the document is meant to be his last will and testament or make any reference to the document being a will3)remember, it is “subject to no other form”. By “material provisions,” I mean the holographic will must contain an item that names beneficiaries and executors under the will, a la items that show “testamentary intent,” or the intent for the written document to be treated as a will4)even though you do not call it a will.

Because a holographic will is “subject to no other form,” you may write your will on a napkin while enjoying dinner with your son. You may write your will in the grocery store aisle on the back of your shopping list or as you leave the store on the back of your receipt. You may write your will on a notepad during your next boring office meeting. As long as your signature, the date, and the material provisions are in your handwriting, it is a valid holographic will.5)Note that not all states accept holographic wills, this post pertains only to Nevada law

In Melton’s case, his letter written to his longtime girlfriend on hotel stationery was enough to disinherit his daughter and all of his relatives. The kicker, though, is that Melton died with assets in excess of $1.5 million! That is some very valuable hotel stationery!

Footnotes   [ + ]

1. In re Estate of Melton, 272 P.3d 668, 674 [Nev. 2012].
2. NRS 133.090
3. remember, it is “subject to no other form”
4. even though you do not call it a will
5. Note that not all states accept holographic wills, this post pertains only to Nevada law
trust, probate, revocable living trust, estate planning

A Trusted Way to Circumvent Probate

A trust is a legal document that provides for an individual’s testamentary wishes. There are many benefits to creating a trust, irrevocable or revocable, that will aid the family or beneficiaries of the Decedent. This post will highlight only the benefits of creating a revocable living trust.

The main purpose, and likely most popular reason for creating a trust, is that a trust will allow for the transfer of assets upon the death of an individual without the necessity of probate. Probate can be a dreaded word for some, and a trust circumvents the entire probate process.  Probate can be time consuming and expensive, even with a trusted and experienced law firm such as Clear Counsel Law Group. A trust will facilitate the distribution and transfer of assets from a decedent’s estate to his designated beneficiaries without the hassle and expense of probate.

 

A trust illustration

For a more illustrative view of trusts, think of a trust as a large box. The language of the instrument dictates who is to be in charge after the death of the grantor or trustee, (the successor trustee), and who is to receive assets from the grantor’s trust, (the beneficiaries). However, the trust terms apply only to assets that are placed inside the box. Missing this step of actually placing the assets inside of the box can have disastrous consequences for the beneficiaries. An asset that is not placed inside the box will not be under the purview of the trust, and in order for the asset to be transferred to the designated beneficiary, a probate estate would be required in the county that the individual died.

Personal property, such as home furnishings, paintings, televisions, electronics and jewelry are easily transferred into the trust, or placed in the box, without any effort. However, bank accounts or brokerage accounts and real property1)real estate require a bit more effort. In order to move these latter assets into the box, a change of title on the financial account and a change of ownership on the deed is necessary to transfer these assets into a trust. The grantor will have the same power and authority to transfer, mortgage, or sell the assets, but now the assets are owned by the grantor as trustee of the trust.

A properly funded trust will allow for grieving family and friends to fulfill the final wishes of the decedent without the cost and time of a probate.

If you would like to speak with an experienced estate planning attorney about establishing a trust, or if you set up a trust years ago and would like a review of the your trust documents, please do not hesitate to contact Clear Counsel Law Group for a free consultation.

Footnotes   [ + ]

1. real estate
guardianship, Nevada, estate planning, probate

The Risks of Guardianship

Various media outlets in Las Vegas have recently reported on extensive problems with the guardianship system in Southern Nevada. In a most dramatic example of the guardianship system being abused, a private, professional guardian has been accused of improperly taking more than $495,000 from a Las Vegas woman who was under guardianship. This dramatic example of abuse is extremely distressing. However, for most Southern Nevadans the risks of guardianship are not quite as dramatic, but are, nevertheless, still real. Here are some of these risks and how you can protect yourself.

 

What is Guardianship? 

A guardianship generally arises when an adult is not able to manage his own finances or personal matters or is not able to make health care decisions for himself1)Guardianships of minor children may also occur, but I will not discuss guardianships for minors in this article. In such circumstances, Nevada law is very broad, allowing “any interested person” to petition the Guardianship Court to be appointed as the guardian of the “ward” 2)meaning, the person who is in need of guardianship, See NRS 159.044. Interestingly, the Nevada guardianship statutes do not provide any further definition of who is an “interested person”. For all practical purposes, the Guardianship Court has allowed essentially anyone who says they are an interested person to be appointed as a guardian, even if the “interested person” is not related to the ward in any way and even if the “interested person” has never met the ward prior to asking for appointment as the guardian. So long as the interested person can establish that the ward needs guardianship, the Guardianship Court will generally appoint that interested person as guardian of the ward.

 

The Risks of Guardianship 

Once a guardian is appointed, the ward is declared legally incompetent and, thus, loses control of his own decisions. In essence, the guardian is authorized to make all decisions for the ward, including decisions on where to obtain health care, where the ward’s money is invested, whether to sell the ward’s house, where the ward will live, and what the ward can do with his free time. In best case scenarios, the guardian will act more as a mentor and counselor to the ward in making these decisions and will follow the ward’s directions on these decisions to the greatest extent possible. In the worst case scenarios, the guardian runs the ward’s life with no regard for the ward’s own choices.

Nevada law allows the guardian to be paid “reasonable compensation” for the guardian’s services 3)NRS 159.183. It is very important to know that the guardian’s compensation is paid from the ward’s own money, not by the State or County. Similarly, the guardian is entitled to hire an attorney and other professionals to provide their professional services to the guardian. Again, the fees and costs of the attorneys and other professionals are paid from the ward’s own money, not by the State or County. It is commonplace to see combined guardian fees and attorney fees to exceed $10,000 for very routine guardianship matters. In difficult or disputed guardianship matters, these fees can total tens of thousands of dollars.

 

Protect Yourself from Guardianship 

The most simple and effective way to protect yourself from guardianship is to sign power of attorney documents for both financial/general matters and also for health care decisions. Power of attorney documents allow you to decide who you would want to help you manage your financial and general matters and to make health care decisions for you if you were not able to do so. Appointing an agent under a power of attorney performs all of the functions that a court-appointed guardian would perform without the expense and loss of independence that occurs in guardianship. Power of attorney forms can be created relatively inexpensively by experienced estate planning attorneys, so do not leave this to chance by using the fill-in-the-blank forms that are often full of mistakes that render them invalid and unusable.

A revocable living trust is also an important tool to avoid the need for guardianship court. When you create a revocable living trust, your assets are transferred into your trust and are held and used according to the terms that you set up when you create your trust. Such assets in a trust should not require any court intervention or oversight in order for the assets to be used for your benefit. In addition, thoughtful estate planning attorneys can include provisions in the trust that protect you from the risks of the guardianship system and prepare the trust in a way that keeps your assets out of guardianship.

Most importantly, though, is advice that is not legal advice, but the best practical advice you can use to avoid the risks of guardianship. Many elderly people retire in Southern Nevada without any family members who live in Southern Nevada. These retirees are particularly vulnerable to being caught in the guardianship system.

It is crucial for these retirees to be involved in their neighborhood and communities and make friendships and connections that will be able to protect them if the need arises. Make your neighbors aware of how they can contact your family if you are at risk for whatever reason. Be involved in your local church, charity, homeowners association, or senior center. Make sure that your primary care physician and any other doctors that you visit on a regular basis have a copy of your healthcare power of attorney or that they at least have the contact information for whomever it is that you trust most to take care of you if you cannot take care of yourself. Guardianship abuses arise most often when true “interested persons” (children, siblings, friends, etc.) cannot be located or have no idea that you are at risk, thus leaving the potential ward to the whims of an “interested person” who has no interest in you other than as another billable unit in their professional guardianship service.

Footnotes   [ + ]

1. Guardianships of minor children may also occur, but I will not discuss guardianships for minors in this article
2. meaning, the person who is in need of guardianship, See NRS 159.044
3. NRS 159.183
community property, ademption, estate planning, probate

Community Property and Ademption: What You Need to Know

Let me tell you a story of unintended consequences in a recent case that I handled. Jim and Mary (husband and wife) each had children from prior marriages. Jim and Mary had agreed that if Mary died before Jim, the house that Mary and Jim lived in would be divided one-third for Jim, one-third for Mary’s son Michael, and one-third for Mary’s son John. In accordance with their agreement, Mary signed a will in 2001 that included the following gift of their house:

“I give, devise and bequeath my real property located at 1234 Anywhere St., Henderson, Nevada, as follows:

(a) one-third to my husband Jim;

(b) one-third to my son Michael; and

(c) one-third to my son John.”

Mary’s will then provided that all of the “rest, residue, and remainder” of Mary’s estate shall be given to her husband.

 

In 2003, Jim and Mary sold the house on Anywhere Street and purchased a new house located at 5678 Elsewhere Ln., Henderson, Nevada. Jim and Mary agreed that the Elsewhere Lane house should be titled in Mary’s name only as her “sole and separate property”. Mary later died in 2013 having never changed her 2001 will. What happens to the Elsewhere Lane house now that Mary has died? Though totally unintended by Mary, Mary’s sons, Michael and John, face two major problems.

First, Nevada law provides that all property “acquired after marriage by either husband or wife, or both, is community property” unless husband and wife otherwise agree in a written agreement between them or unless a court order says otherwise.1)NRS 123.220 Community property means that both spouses have a “present, existing and equal interest” in the property, even if the property is titled in the name of only one of the spouses. 2)NRS 123.225 Thus, when Jim and Mary purchased the Elsewhere Lane house in 2003, because they were married when it was purchased, Nevada law treats the Elsewhere Lane house as community property even though they agreed to put the deed in Mary’s name as her “sole and separate property”.

 

The first community property problem

Now that Mary has died, the first unintended consequence arises. Even though the Elsewhere Lane house was in Mary’s name only at the time of her death, Nevada law provides that one-half of the Elsewhere Lane house is automatically Jim’s property by virtue of community property. The remaining one-half interest in the house is “subject to the testamentary disposition of the decedent.” 3)NRS 123.250[1] This means that Mary’s will (i.e., her “testamentary disposition”) controls what happens to only the remaining one-half interest4)As a side note, if Mary did not have a will, the remaining one-half interest would have also gone to her husband Jim, thus causing the entire house to be Jim’s property upon Mary’s death.

In other words, Mary’s will does not control what happens with the entire house, just one-half of it.

Thus, even though it appears that Mary intended for her sons, Michael and John, to each get one-third of her house, the most they can get is one-third of the remaining one-half of the house, or, in other words, only one-sixth5)1/2 of 1/3 for those scoring at home of the total house. Meanwhile, Jim gets the first one-half due to community property and at least one-third of the remaining one-half, or, in other words, a total of four-sixths6)1/2 + 1/3 of the house.

 

The second community property problem

Second, it is quite likely that Mary’s sons will receive NO interest in the Elsewhere Lane house, even though Jim and Mary agreed that Mary’s sons should each get one-third, and even though Mary put in her will that they should each get one-third. The problem arises because Mary specifically described which property she was gifting in her will. Mary said, “I give my real property located at 1234 Anywhere St., Henderson, Nevada.”  At the time of Mary’s death, Mary did not own the Anywhere Street house.

A principle of law called ademption provides that if a testator (a person who creates a will) gives a gift in the will of a specifically described property, and if the testator does not own that property at the time of her death, the gift is adeemed and the gift fails. In Mary’s case, because she described the gift as a gift of the Anywhere Street house specifically, the law provides that this gift is adeemed and has no effect at Mary’s death, as if she had never written it into her will. Consider, on the other hand, if Mary had said in her will, “I give my real property to my husband, my son Michael, and my son John in equal one-third shares.” In this situation, because Mary gave “my real property” in general, rather than a specific property, the law determines that whatever real property Mary owned at her death would be subject to the gift.

Thus, the second, and more important, unintended consequence of Mary’s will is that it is very likely that the court will determine that the gift of the Anywhere Street house is adeemed7)It is important to note that there are some narrow exceptions to the doctrine of ademption that could save the gift of Mary’s house to her sons. I will revisit those exceptions in a later blog entry. Mary’s interest in the Elsewhere Lane house would be transferred in accordance with the “rest, residue, and remainder” of her estate, which according to her will goes to Jim. Even though Jim and Mary agreed that Mary’s sons should each receive one-third of her house, and even though Mary signed a will where she surely thought that she was giving one-third of her house to each of her sons, the end result is that her husband Jim will receive the entire house because of the community property and ademption doctrines, while her sons receive nothing.

When creating a will, it is extremely important that you carefully consider the language that you use to avoid unintended consequences. An experienced estate planning attorney should advise you about the effect of the community property, and the effect of specifying gifts of property so that all of the consequences are understood and accounted for within the will.

 

Footnotes   [ + ]

1. NRS 123.220
2. NRS 123.225
3. NRS 123.250[1]
4. As a side note, if Mary did not have a will, the remaining one-half interest would have also gone to her husband Jim, thus causing the entire house to be Jim’s property upon Mary’s death
5. 1/2 of 1/3 for those scoring at home
6. 1/2 + 1/3
7. It is important to note that there are some narrow exceptions to the doctrine of ademption that could save the gift of Mary’s house to her sons. I will revisit those exceptions in a later blog entry
estate tax, estate planning, probate

Will the Estate Tax Apply to You?

There are very few certainties in life, yet the cliche of ‘death and taxes’ seems to be more true with time. After the death of a loved one, many family members are concerned about taxes that may be due; it is not an accident that the disparaging term ‘death tax‘ has caught on with such fervor. This is a real issue for very few, but seems to concern nearly everyone1)As to why, is a pregnant inquiry not relevant to this discussion.

 

Who is affected by the estate tax, and why?

There is a misconception in the United States that every estate will be taxed. The reality is that less than 0.2% of estates actually owe any “death taxes.” The government implemented the estate tax to prohibit wealthy families from continuing to hand down vast amounts of wealth, mostly from unrealized gains on property or equities, to family members for generations without incurring any tax liability.

When property is inherited, it is worth the fair market value at the time of the decedent’s death. Without an estate tax affecting property, the heir could sell the homestead and avoid tax liability. Congress decided that this was an acceptable outcome for many, but truly wealthy families need to pay for this gain in value prior to the transfer of ownership to the heirs or beneficiaries by way of the estate tax.

Congress clearly defines “wealthy” families as those having more than $5.43 million per person (effectively $10.86 million per couple). This means that any individual with more than $5.43 million, or a couple with more than $10.86 million, will incur the estate tax. The amount of the tax is 40% of any amount that exceeds $5.43 million for an individual, or exceeds $10.86 million for a couple.

 

Two examples of estate tax law

Parent A dies with $5 million estate in 2014. Parent B dies with $5 million estate in 2015. The heirs or beneficiaries of the estate for parent A and for parent B would not incur any estate tax.

But the reality is that most married couples own their property as joint owners.

For example, Parent A and B own all property as joint owners and the value of the assets is $10 million. Again, Parent A dies in 2014 and Parent B dies in 2015. The heirs or beneficiaries for Parent A would not owe any estate tax in 2014. Likewise, the heirs or beneficiaries for Parent B would not owe any tax in 2015, even though Parent B’s estate exceeds the individual $5.43 million exemption. Congress allows the exemption from the first Parent A to transfer to Parent B allowing the surviving member of the couple to use the entire $10.86 million exemption.

As indicated above, and as you might have suspected, there are very few families in the United States that have accumulated that amount of wealth during his or her life. However, for those fortunate families that have been blessed with such wealth, there are several large loopholes that have enabled many of the largest estates to avoid or significantly decrease estate tax liability.

Footnotes   [ + ]

1. As to why, is a pregnant inquiry not relevant to this discussion
no contest, will provision, estate planning

What a “No Contest” Provision of a Will Really Means

Occasionally, I receive phone calls from individuals who are dealing with problems with the executor of the loved one’s estate. Sometimes the executor is refusing to divide the deceased’s personal possessions fairly; sometimes the executor is refusing to communicate with the individual or to share information about the deceased’s estate; and sometimes, in a worst case scenario, the executor is blatantly refusing to follow the deceased’s last will and testament. Often, the individual informs me that she hadn’t yet called an attorney because the executor had told her that if she did so she would be “contesting the will” and the executor would make sure she receives nothing from the estate. “Is that true?” she asks. “Can he really cut me out of the will?”

 

What is a No Contest Provision?

First, it is important to know that Nevada law does allow a testator (a person who creates a will) to include a “no contest” provision in the person’s will. Specifically, the law states that the testator may make a gift in a will “conditional … upon the occurrence or nonoccurrence of one or more specified events.” NRS 133.065(1). In other words, the testator can require that if the beneficiary ever claims that the will is invalid for some reason (i.e., “contests” the will) then that beneficiary would lose any gift given to the beneficiary in the will. In fact, Nevada law specifically states that “a no-contest clause in a will must be enforced by the court.” NRS 137.005(1).

Unfortunately, uninformed and sometimes malicious executors too often use the “no contest” provision in the will improperly as a way to scare beneficiaries into not raising valid questions regarding the executor’s handling of the estate. Such scare tactics may be employed by uninformed executors who feel that they are “just doing what dad told me to do before he died,” even though it wasn’t written into the will. In worst case scenarios, these scare tactics are used to cover the executor’s tracks of wrongdoing and sometimes actual theft of estate assets.

 

How to Raise Concerns

Fortunately, Nevada law protects beneficiaries who have legitimate concerns about what is happening with their loved one’s estate and allows the beneficiaries to raise legitimate concerns without being considered to be “contesting the will”.

First, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to enforce the terms of the will.” NRS 137.005(3)(a). For instance, if the will states that a beneficiary is supposed to receive dad’s car, but the executor insists that dad told him to give the car to the beneficiary’s sister, the beneficiary can bring an action in court to ask the court to enforce the gift of the car to the beneficiary.

Second, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to enforce the [beneficiary’s] legal rights in the probate proceeding.” NRS 137.005(3)(b). A common problem in probate proceedings is an executor that refuses to provide a required inventory or accounting of the estate’s assets to the beneficiaries. If a beneficiary files an action in court asking the court to require the executor to report and account for the assets of the estate, the beneficiary is not contesting the will by asking for the accounting that the beneficiary is legally entitled to receive.

Third, a beneficiary will not be considered to be contesting the will if the beneficiary “seeks only to obtain a court ruling with respect to the construction or legal effect of the will.” NRS 137.005(3)(c). Sometimes there are provisions in a will that simply are not clear because the will was poorly written. A beneficiary is entitled to ask the court to interpret the will and determine what the will means without being at risk of having contested the will.

Fourth, and most importantly, Nevada law protects beneficiaries even if the beneficiary actually does file a court action asking the court to invalidate a will if the action is filed in “good faith” and with “probable cause that would have led a reasonable person, properly informed and advised, to conclude that the will is invalid.” NRS 137.005(4).

The Nevada Supreme Court protected a beneficiary from a no-contest clause even though the beneficiary asked the court to invalidate a will because the beneficiary had a good faith belief and probable cause to believe that the testator was legally incompetent at the time that the will was signed. The Supreme Court refused to enforce the will’s no contest clause even though the beneficiary lost his challenge of the validity of the will when the court determined that the testator actually did have proper mental capacity to sign the will. Hannam v. Brown, 956 P.2d 794, 114 Nev. 350 (1998).

 

Do not be Intimidated

If you are a beneficiary of a will and the executor (or anyone else) has told you that you are contesting the will and you are going to lose your inheritance if you continue, the best thing you can do is speak with an experienced probate attorney. The worst thing you can do is to give in to these improper scare tactics by not consulting an attorney. More often than not, you will be protected in seeking to enforce your rights under the will and under Nevada law while it is the executor that faces serious problems with the court for employing these scare tactics to hide improper and sometimes illegal actions by the executor.

estate planning attorney

What Does an Estate Planning Attorney Do?

Most of us prefer not to think about death, or the its implications for our possessions and finances. However, it happens to everyone eventually, and if you are not prepared, you could find that your belongings and wealth go to the state, rather than to your loved ones. One of the best ways to ensure that this does not happen is to work with an estate planning attorney. What do these lawyers do? Actually, they can provide a very broad range of services depending on your situation, your needs, and how diverse your assets are.

 

Services Offered by an Estate Planning Attorney

While most estate planning attorneys will provide the services discussed below, all do not, necessarily. You will need to consult with individual lawyers in your area on the services offered, and how they can help you plan your estate.

 

Estate Tax

One of the most important reasons to work with a competent estate planning attorney is to mitigate or even eliminate the estate tax. This is the money due from your estate at your death to the state and federal governments. With the proper planning and smart decisions in terms of estate vehicles, you can limit your tax liability, or even eliminate it completely in some instances. A qualified attorney will be able to explain your options, as well as the limits of tax liability mitigation.

 

Accounts and Plans

Chances are good that you have an IRA, a 401(k), or some other type of retirement plan. You may also have a brokerage account, a valuable insurance policy and other assets. These can and should be put into trusts or other entities so that they can be transferred to your beneficiaries with the least amount of difficulty. The right structure is required, and a qualified attorney will be able to explain what is necessary and create the best trust for your situation.

 

Property Disbursement

An estate planning attorney can help create the right plan for distributing your property to those you care most about. If you do not have a plan in place, this will be left to a probate attorney, and there is no guarantee that the distribution will be equitable or in line with your final wishes.

 

Specialty Trusts

There is no one-size-fits-all solution when it comes to trusts, and you may need to create any number of special forms, from irrevocable trusts to many others. Your attorney can explain the benefits of each type and help craft the best estate plan for your specific situation.

Meet State Guidelines

All estates must meet specific state guidelines and regulations. If they do not, then you will incur additional costs and additional time will be needed to disburse your estate. It is even possible that your estate will end up in probate. A skilled estate planning attorney can help ensure that all government regulations and requirements are met to avoid these pitfalls.

These are just a few of the areas that a skilled estate planning attorney can assist you. The most important takeaway is to find a qualified, understanding lawyer that can best assist you in getting that estate plan in order.

Pet trust, estate planning, dog trust

Is a Pet Trust Right for You?

 

According to news reports, hundreds of thousands of pets each year are left homeless after their owner dies without specifying how the pet should be cared for.  Certainly, this omission is not a product of pet owners not loving their little, fury family members. Often, it is because pet owners overlooked the matter during estate planning.  Do not let this happen to you! More than forty-five states permit pet trusts (including Nevada), making this a great option for you and your family.

 

Elements of a Pet Trust

A pet trust requires these four elements:

The trustee: The person responsible for the trust.  It is best to select a trustee that will be vigilant in ensuring that the money is being spent responsibly.

The caretaker: The person assigned by the trust to care for your animal(s).  The trustee and the caretaker can be the same person; however, it is advisable for each position to be separate person (for increased accountability, see below).  It is best to designate a second caregiver just in case the first person is unable to care for your pet.  To be even more thorough, you may want to designate an organization, like the SPCA, to care for your pet in case the caretakers selected are unable to carry out their functions.

The pet(s): You will want to be specific in stating if the trust applies to one or all of your animals.  If you want more than one animal included, it is best to describe each and not use broad phrases like “all my pets.”

The remainder beneficiary: The person that will inherit the remaining amount of money once the pet has passed away.  A pet trust may not be extended to cover the living expenses of the offspring of your pet, so this is an important element.

 

How Much Money Needs to Be Allocated?

To determine how much money needs to left in the trust, you will need two estimates:

  1. The approximate life-span of your pet.
  2. The amount of money it costs each year to care for your pet.

An animal healthcare provider can assist you in estimating these amounts, although it is fairly probable that you know better than anyone exactly what your pet’s dietary needs are.  Once you have an estimate of each of these amounts, just multiply to determine the total.   It is best to be conservative in your estimates as you do not want your pet’s living expenses to be underfunded.

 

A Pet Trust Creates a Binding Obligation

If you were to leave instructions with a family member or friend stating how to care for your pet, there would be no legal recourse to ensure that your pet receives the care you desire.  However, with a pet trust, you are creating a legal obligation for the caretaker to follow the terms dictated by the trust.  If the caretaker does not abide by these terms, he or she may be taken to court, where a judge might enforce the terms of the trust, or transfer responsibility of your pet to the other caretaker listed in the trust.

 

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