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Clear Counsel Law Group / Estate Planning

What is the Difference Between a Revocable and Irrevocable Living Trust?

 

What to know about a revocable and irrevocable living trust

Transcript:

Hi, I'm Jordan Flake, managing partner of Clear Counsel Law Group. A lot of our clients ask us what's the difference between a revocable trust and a irrevocable trust. As the names imply, a revocable trust you can revoke it. That includes amending it, changing it. Altering it over time, adapting it to your life circumstances. One other subtle feature of a revocable trust a lot of people don't know about is that you can access the assets that are held in the trust at any time. You can liquidate them and use them however you want.

An irrevocable trust is very different because, as the name also implies, you can't revoke it. Once it's created and once you place assets in that box that is the irrevocable trust, they're gone. They can still be used for your healthcare benefit, maintenance, support, things like that; but the reality is, under almost all circumstances with the irrevocable trust, you can no longer reach into that box, grab out those assets and use them however you like. In a sense, you've disclaimed ownership or some control over assets in an irrevocable trust.

Because of this, a lot of people opt for the revocable trust. There's a lot more flexibility. Why would you ever want an irrevocable trust? The irrevocable trust has a really big advantage over the revocable trust because it is also much more creditor protected. If you properly place assets away into an irrevocable trust and you do it correctly and the right amount of time passes, and you go through all the formalities, those assets can actually be kept out of the hands of your creditors to where they can no longer collect against them. In a sense, you think about it, you don't have access to those assets and neither do they. That's the give and take of irrevocable trusts.

Revocable trusts, you have access to the assets, so do your creditors, but it comes with the advantage that it's amendable, changeable, and you can reach in grab those assets. That's the difference between revocable trust and an irrevocable trust. We'd love to talk to you about both those options.

Estate Planning / Nevada Law / Probate / Probate Videos - 09/26/2015
mental capacity, undue influence, ernie banks, Baseball Field

Mr. Cub’s Legacy, Mental Capacity, and Undue Influence

Hall of Famer Ernie Banks, “Mr. Cub,” played 19 seasons with the Chicago Cubs, averaging more than 30 home runs and 100 RBI per season. He played from 1953 to 1971 with the Chicago Cubs. Banks captured the National League MVP in 1958 and 1959. He was inducted into the National Baseball Hall of Fame in 1977 and named to Major League Baseball All-Century Team in 1999.

Ernie Banks was a world class athlete and regarded by many as one of the greatest baseball players of all time. A statue of Ernie Banks currently stands at the entrance of Wrigley Field.

His physical and mental strength is obvious from his many accomplishments. Unfortunately, his health deteriorated quickly at the end of his life. He was diagnosed with moderate to severe dementia and later died by a heart attack in January 2015. Yet his death was not accompanied by mourning and celebration of his lifelong accomplishments, but was entangled with a potential legal battle regarding his testamentary wishes.

Court records show that in 2008, Mr. Banks prepared a will and trust to distribute his assets or estate to his wife and three children. He also requested that his ashes to be scattered at Wrigley Field “when the wind is blowing out.” However, the source of controversy is predicated on a second will and trust that was prepared in 2014 that disinherits his wife and children and bequeaths the entire estate to his then caretaker, Regina Rice. According to Ms. Rice, Mr. Banks entrusted her to carry out his wishes and wanted to make sure his estranged wife did not share in his estate after he passed.

An individual has the right to bequeath his or her legally owned property to anyone he or she wishes. However, each state in the US has certain requirements that must be met in order for any testamentary document, such as a Last Will and Testament or a Trust, to validly transfer property from the decedent to the beneficiaries or heirs after passing. There are two issues that highlight the disputes between Ms. Rice and Mr. Bank’s family:

  1.  Did Mr. Banks have the mental capacity to change or alter his Testamentary documents in 2014?
  2.  Was Mr. Banks unduly influenced by his caregiver to change his documents for her benefit?

 

Mental Capacity

An individual must have his or her legal mental capacity in order for the testamentary documents to be valid after his or her passing. In Nevada, courts have held that for a person to be of sound mind while executing a will, a person must:

  1. Know what a will does;
  2. Know generally who are his heirs;
  3. Have a general understanding of his assets; and
  4. Decide how he wishes to distribute those assets after his death.

In this case, court filings indicated that Mr. Banks meet with a neuropsychologist at the University of Illinois Medical Center on October 14, 2014 and the evaluation “specified that Ernie exhibited significant cognitive impairment that indicated a presence of dementia of moderate to severe degree.” In the petition to contest the validity of Mr. Bank’s 2014 will, his family presented evidence that Mr. Banks' health, both physically and mentally, was deteriorating rapidly. In October, just prior to his visit to the University of Illinois, he fell at his home and was lying on the floor for several hours. He was taken to the hospital and later released to Ms. Rice under orders that he be constantly supervised.

However, the two witnesses to the will, employees of the attorney’s office that prepared the will, have indicated that Mr. Banks was lucid and was able to communicate his desires without assistance.

If Mr. Banks family can convince the court that the mental examination only weeks before the execution of the will is valid and performed under normal circumstances, Mr. Banks family will have a strong case to have the 2014 will deemed invalid.

 

Undue Influence

A will can likewise be declared invalid if the individual was influenced by someone who occupies a position of trust1)Caregiver or housekeeper for example that manipulates the vulnerable person to change his testamentary documents to benefit the caregiver or housekeeper.  In Nevada, when a will devises property to a person’s caregiver those transfers are presumed void. The basis is that a vulnerable person, elderly or mental incapacitated, relied on the caregiver and the caregiver used her position to coerce the vulnerable person into naming her as the beneficiary contrary to his true wishes. The caregiver must rebut this presumption with clear and convincing evidence that the gift of the property through the will was truly the wishes of the vulnerable person and not the product of undue influence.

Mr. Banks’ family has evidence to show that Mr. Banks was vulnerable to his then caregiver and that through her influence and position, she was able to coerce him into changing his will for her benefit. As the case stands, the caregiver has not presented any evidence to show anything to the contrary.

Mental diseases can occur at any time, regardless of age. If you believe your loved one has been unduly influenced or you simply want to ensure your estate planning is handled before it is too late, please do not hesitate to contact Clear Counsel Law Group for a free consultation.

Footnotes

Footnotes
↑1 Caregiver or housekeeper for example
Estate Planning / Probate - 09/15/2015
undue influence, probate, estate planning, parents, elderly, mother and daughter

Top 10 Ways to Protect Yourself Against Claims of Undue Influence

If you are taking care of your elderly mother or father, especially if your parent is living in your house with you, pay attention: Your siblings will claim that you exerted undue influence on your parent. I am probably being a little overly cynical, but claims of undue influence, both before and after mom or dad have passed away, happen all the time and keep many lawyers in business with tens of thousands of dollars in legal fees paid pursuing and defending against claims of undue influence.

Unfortunately, the elderly in our society are susceptible to influence. In general, the elderly want to be liked and do not want to upset their children by disagreeing with something that the child proposes, particularly if the elderly parent is living with or dependent upon the child. Even when the child has no bad intentions, suggesting a course of action that the parent would not agree with is a type of influencing of the parent. And, even when the child has no bad intent at all, a suspicious or jealous sibling will do everything in his power to make those actions look as nefarious as possible.

If you are the primary caregiver for your parent or if your elderly parent lives with you, here, then, is the top 10 list1)Given the limitations of this medium, you will just need to imagine me throwing a note card/the crashing glass sound upon completion of each point of things that you absolutely must do to protect yourself from the inevitable claims that you have unduly influenced your parent2)"Paul, hit the music!" and stay tuned next week for a our new segment "Will this legal concept float?".

The Top 10 Ways to Avoid an Undue Influence Claim Against You

#1: Be Transparent

Undue influence and particularly the suspicion of undue influence, grow in the shadows. Your siblings will become more and more suspicious if they have no idea what is happening with your parent’s health care and financial situations. Share financial statements and medical information with your siblings. “But wait a minute,” you say. “This is none of their business. What Mom and I do with her money is her business. I don’t have to tell my brother what we are doing.” You may feel this way and you may be right. However, if you choose to keep your siblings in the dark about mom’s health care and finances because it is not their “business,” just know that an eager lawyer will make it their business soon enough.

 

#2: Have a Written Agreement

You might think this is silly and overly formal, but make a written agreement with your parent about your arrangement with him/her. If Mom is going to contribute $200 per week for the joint household expenses, write it in an agreement. If Dad is going to pay you $1,000 per month for your caregiver services, write it in an agreement. If Mom and Dad are paying you back for expenses you incurred, write it in an agreement. When your brother sues you for undue influence (and he will) and the only thing that he sees is a check coming out of Mom or Dad’s checkbook written to you, he will naturally assume you were just cashing in at Mom or Dad’s expense. You might be able to convince the judge, eventually, that the arrangement with Mom and Dad was always on the up-and-up, but it will cost you much more in legal fees to do so than Mom or Dad ever paid to you. Write it down, have everyone sign it, and preferably have an independent third party (someone outside the family) be a witness to the agreement.

 

#3: Keep a Paper Trail

Receipts, receipts, receipts. Keep a receipt for every penny of your mom’s money that is spent. If Mom likes to pay with cash only, make sure you get a receipt for every cash purchase. If checks are written, make sure there is written documentation of the purpose of the check, especially if the check is to you3)see #2 above, your spouse, or to another person that would not be obvious what the check is for.

 

#4: Do Not Use Cash

Many elderly people like to operate only in cash. Trust me: cash causes problems. The only thing that your sister sees when she claims to everyone on Facebook that you are exploiting Mom is a bank account statement showing hundreds or thousands of dollars in ATM cash withdrawals every month. Sister is also likely to claim that you were the one using Mom’s debit card to make the withdrawals (which is probably true). It looks bad for you even if you did nothing wrong and even if you really did give all of the cash to Mom. Strongly encourage Mom to use a debit card or write checks4)I know, I’m old fashioned. A debit card purchase will at least show the payee on the bank statement if you forget my advice in #3 to keep receipts. If Mom insists on using cash, remember to keep receipts for every penny.

 

#5 Document Gifts or Avoid Gifts Altogether

Just as cash causes problems, so too do gifts. Mom may want to give you a couple hundred dollars here or there to thank you for your hard work. Or, Mom may give you an item of jewelry (usually the coveted diamond wedding ring). It is best to avoid gifts prior to death altogether, but if Mom insists on giving you something (whether it has a lot of value or just sentimental value) you need to protect yourself because Sister is not going to be happy when you claim that Mom gave you the diamond ring. Make written documentation of the gift and have Mom sign it. Document what the item is, when Mom gave it to you, and, in the best case scenario, a statement of why she is giving you the gift. More importantly, have an independent third party (someone outside the family, like an attorney, and preferably not one of your friends) also sign a statement about the gift. It would be most effective if the third party witness talked with Mom outside of your presence about the gift and could sign a statement explaining why Mom is making the gift. The more documentation you have, the better it will be for you when Sister sues you for taking Mom’s jewelry or stealing Mom’s cash.

 

#6: No Joint Bank Accounts

If Dad suggests that he wants to add your name to his bank account, urge him not to do so. When a bank account is held in joint ownership and one of the joint owners dies, the law presumes that the surviving joint owner is the 100% legal owner of the bank account and has no legal obligation to share the account with anyone else. Brother will claim that you wrongfully convinced Dad to put your name on the bank account so that you could claim surviving ownership of the account when that is not what Dad intended. Instead of joint bank accounts, Dad should consider adding your name to the account as a power-of-attorney5)but remember that all authority as power of attorney terminates upon Dad’s death, or Dad may consider creating a revocable living trust and placing the account in the trust with you as a trustee. Which brings me to …

 

#7: Proper Estate Planning

Hopefully, far in advance of you taking care of Mom full time or having Mom live with you, Mom established a relationship with a good estate planning attorney and has signed power of attorney documents and possibly, created a revocable living trust. If Mom has not yet done so, Mom should do so as soon as possible. WARNING: This is a sticky process. If you find the attorney for Mom, set up the appointment with the attorney, drive Mom to the appointment, or sit in with Mom and the attorney in the consultation and signing appointments, these facts will be used as evidence that you unduly influenced Mom to make the power of attorney, will, and/or trust that benefits you. Be helpful, but not overreaching. If Mom does need help getting to the attorney’s office for the meeting, do not sit in any meeting with Mom and the attorney. If Mom disinherits any of your siblings after she has started to live with you or after you are her caregiver, just know that you will be sued for undue influence even if you had nothing to do with the decision or process of your Mom disinheriting your sibling. I repeat, if Mom disinherits one of your siblings, you will be sued. In any event, even with potential problems, it is far better for Mom to have met independently with a good estate planning attorney who can do an independent analysis of Mom’s situation and assist her in making her wishes known.

 

#8: Do Not Use Fill in the Blank Estate Planning Forms

Dad probably does not want to pay for an expensive attorney to do estate planning for him (see #7). You cannot make him do so. But, please do not make the situation worse by buying Dad the fill-in-the-blank forms that are available at office supply stores. More often than not, these forms are completed incorrectly or signed, notarized, or witnessed incorrectly, both of which could cause the forms to be invalid. In any event, Sister will claim that you unduly influenced Dad to sign these forms, especially when everything is filled in in your handwriting, not Dad’s.

 

#9: Do Not Isolate Your Parents

It is crucial that you allow your siblings access to your parent, including phone access, email access, and in-person access. Even if you cannot stand to see your brother’s face, if he feels like you are preventing him from seeing Mom, he will sue you for undue influence. Be overly accommodating and go out of your way to make time for Mom to spend time with your siblings or to speak with them on the phone. To protect yourself even further, keep a log if your mother’s visits with her other children and keep track of the phone records that show calls to and from Mom with her other children.

 

#10 Repair Relationships

This may be the most difficult advice to give and for you to receive. If you are reading this blog post, and you are concerned about what your siblings will claim about you and your relationship with your parents, then you might have a dysfunctional relationship with your siblings. These could be deep-rooted issues and you may not like each other as much as you used to. As much as we all dislike minor children being a pawn in a divorce proceeding, it is equally bad when an elderly parent is used as a pawn in a power struggle between feuding adult siblings6)who often times are not acting very much like adults. This is a great opportunity to heal with your siblings and bring everyone around to supporting Mom or Dad in their later years. Swallow the bitter pill, be the better person, and make that most difficult first phone call to bury the hatchet7)It seems so much worse in theory than in practice. If you think your relationship with your siblings is bad before Mom or Dad pass away, just wait until Mom or Dad have died and you are sued for undue influence to see how much worse it can get.

Unfortunately, most people who care for their parents as a primary caregiver, or who have their parents living with them, are unaware of the undue influence risk. Relying on the well-worn statement of “I didn’t put a gun to her head” is not a very effective defense when your siblings – or rather your siblings’ attorney – come calling to claim that you exerted undue influence on your parent. The last person you will want to see while grieving your loss is a process server.

 

Footnotes

Footnotes
↑1 Given the limitations of this medium, you will just need to imagine me throwing a note card/the crashing glass sound upon completion of each point
↑2 "Paul, hit the music!" and stay tuned next week for a our new segment "Will this legal concept float?"
↑3 see #2 above
↑4 I know, I’m old fashioned
↑5 but remember that all authority as power of attorney terminates upon Dad’s death
↑6 who often times are not acting very much like adults
↑7 It seems so much worse in theory than in practice
Estate Planning / General Interest / Probate - 09/02/2015
digital property, computer files, probate, estate planning

What Happens to Your Digital Property After You Die?

 

Our digital worlds (and digital property) are ever expanding. From Facebook, Twitter, and Instagram to downloaded music and movies, many people have a considerable amount of information stored online that needs to be accounted for after death. May these accounts, music or movies be passed to your surviving heirs or beneficiary? The answer depends upon the digital property in question.

Most of the information and accounts on social networking sites such as Facebook, Twitter and Instagram is not owned by the individual but licensed for his or her use. The license is not transferable, and thus, may not be willed or transferred upon death. Each site has different regulations on how it handles the license upon the death of a user. Facebook for example, will allow for the account to go into “memorial” status and allow others to view the account for some time after your passing.

For all social media accounts and emails, list all the accounts, users name, and passwords in your testamentary document or on a separate document, in order for your executor or administrator to have easy access to the accounts. You can instruct your executor or administrator to notify your followers of your death and possibly have your executor post your obituary or final words to the social network site.

 

Digital Property like Music, Movies and Photos

Music and Movies are increasingly purchased on the internet and downloaded to a computer or a cloud-based service. Some collections can be quiet extensive and worth a considerable amount of money. You want to be sure to make these collections available to your heirs and beneficiaries. For content that is downloaded and stored on your computer or external hard drive, those items will be easily transferable to your beneficiaries. Your testamentary documents can specifically list albums or movies to be distributed or just generally as percentage to your beneficiaries. For the content stored in cloud based services, it is important that you list the account name and password in the testamentary document or separate document for easy access and distribution to your beneficiaries.

 

Financial Accounts and Utilities

A very difficult part of initiating a probate proceeding is gathering the valuation of the assets of the estate. In this day and age, there are few individuals that receive in the mail a paper statement from the bank each month detailing the account balance and activities. Statements are now delivered via email or an email notification is sent that the statement is now available online.  In order to initiate a probate proceeding, the executor or the administrator will need to prove to the court the value of the estate assets. Banks have implemented very strict privacy regulations that make it very difficult to receive any account information unless you are listed on the account. Therefore, in order to help your executor or administrator, it would be extremely helpful to document each account with accompanying user name and password for easy access. Your executor would then be able to print off a statement of the account to prove to the court the value of the accounts and potentially save your estate further probate expense.

With the ever changing internet landscape, it is important to have a well-drafted will or trust to assist your executor on distributing your digital property in the manner you desire. If you feel that you need direction or assistance with creating a testamentary document to help facilitate the distribution of your internet content, please contact us for a free consultation.

Estate Planning / Probate - 08/24/2015
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

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
Estate Planning / Probate / Trusts - 07/28/2015
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

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.
Estate Planning / Nevada Law / Probate - 07/24/2015
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

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
Estate Planning - 07/08/2015
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

Footnotes
↑1 real estate
Estate Planning / Probate - 06/18/2015
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

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
Estate Planning / Nevada Law / News - 06/12/2015
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

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 Planning / Nevada Law - 06/04/2015
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