Elder Law, Estate Planning

Components of Life Care Planning

Estate planning and elder law are two terms that get used interchangeably often, however, there are significant differences between the two. While some overlap exists between the two, learning and implementing strategies from both law practice types is crucial to prepare for successful aging and preserving a family legacy. 

Estate planning lets families:

  • Name guardians for minor children
  • Manage and protect valuable assets
  • Distribute property according to specific instructions after you die
  • Minimize potential estate taxes
  • Simplify or avoid probate
  • Distribute property to beneficiaries
  • Create a business succession plan

Younger people tend to focus on asset protection in their earlier years. They are building their legacy.

Elder law primarily deals with later stages in life and an aging individual’s needs while they are still alive, like:

  • Retirement goals 
  • Paying for long-term care 
  • Protecting the family if they become incapacitated due to an accident, severe illness, or reduced cognitive function 
  • Accessing proper health care without depleting a senior’s resources 
  • Protecting the legal rights of aging adults 
  • Address the needs of persons with disabilities and war veterans, including their spouses, children, and caretakers

Seniors worry about protecting their legacy from medical costs, fraud, or abuse. They want to keep the family home for a spouse or the next generation.

What is Estate Planning?

Estate planning is for adults of all ages. An estate plan determines what will happen to assets upon death. An estate planning attorney can use wills and trusts to ensure your wishes are followed. If there are minor children, a will identifies a guardian to guide and protect them through life until they become adults. Naming a guardian for minors is a crucial aspect of a will.

Estate planning lawyers can structure assets and property to help an estate avoid probate. Various revocable and irrevocable trusts can save money on estate taxes, leaving more to beneficiaries. The probate process is slow, can be very costly, and is a public process, so it makes sense to keep as much of your estate out of probate as possible.

Several assets can pass to heirs without being addressed in a will or a trust through beneficiary designations. Insurance plans, IRAs, and 401(k)s are all examples of beneficiary designation account types. Reviewing your designations is crucial upon major life changes, particularly death or divorce. Update your beneficiaries. If they have changed or are deceased, a court will decide the fate of your funds.

If you have a small business, estate planning is also relevant to the business’s future success. A succession plan helps a future business owner or family member to run the business upon your retirement, incapacitation, or death. An estate planning attorney can help structure inheritance using life insurance policies to balance inheritable assets if one adult child is particularly interested in running the business and others are not.

What is Elder Law?

Focused on later stages of life, elder law anticipates future medical needs, including long-term care, to ensure a senior can live a long, healthy, financially secure life. The goal is to develop a plan to pay for future care that meets their comfort level while preserving as many assets as possible. An elder law attorney knows how to help you qualify for Medicaid or other government benefits while keeping a portion of your assets. In addition, they may support you through Medicaid hearings and appeals.

Elder law attorneys can help protect individuals from elder exploitation or abuse as they become older and caring for themselves becomes difficult. Designating a durable power of attorney (DPOA) for property and financial affairs and another for health and well-being permits representatives to oversee and protect seniors when they are no longer able. DPOAs are documents used in estate planning. Without a power of attorney, elder law and estate planning can assist with guardianship and conservatorship.

What is Life Care Planning?

As an estate grows in value and minor children become adults, it is important to revisit and amend your estate planning documents. Review them regularly as your life evolves, particularly after marriages, births, divorces, deaths, and substantial changes in finances. You may find yourself straddling the needs of children and aging parents. Estate planning shifts as estate planning attorneys consult with you on elder law matters.

Life care planning protects your assets, health, and legacy at every stage of life and addresses common concerns to avoid potential problems. Proactive planning is the key to living your best life, from raising a family to fears of declining health.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Inheritance Distribution Amongst Children

It may seem that the obvious choice is to distribute your assets equally amongst your children. Yet, in some families, each child receiving the same inheritance can be inappropriate, deplete the estate’s assets due to ensuing litigation, or cause other family issues after you are gone.

While the answers depend on your family circumstances and concerns, be aware of several known scenarios to watch out for as you make your decisions. Without a will, there are sure to be problems between family and loved ones. You may find it difficult to sort out, but creating a will is the responsible thing to do.

Equal? Or Fair and Equitable?

Your estate planning attorney will likely point out that there is a difference between leaving an equal inheritance, where each child receives precisely the same amount, and an equitable inheritance, where you determine what is fair for each child, given their circumstances. The obligation is only to yourself as it is your money and your decision. Should circumstances change, you can amend your will.

Special Needs Children

The first and most obvious inheritance issue happens if the family has a special needs child. After minor guardianship, if your adult special needs child can’t care for themselves, you will want to create a special needs trust. Depending on your financial situation, this trust can take up most of your estate to meet basic living expenses and funds for ongoing medical needs. Siblings will often understand and not be offended by receiving less money. However, it is important to let all children know the arrangements.

This third-party-funded special needs trust can also use life insurance policies to preserve a larger aggregate of the parents’ assets for the rest of the children. The special needs child must receive the necessary financial assistance for functional needs without the risk of losing existing or future government benefits. If the special needs child passes, the leftover trust monies can go to the remaining siblings as secondary beneficiaries.

Caregivers

Another situation that may inspire equitable but not equal inheritance is when one of your adult children acts as your caregiver. Often, this family caregiver is uncompensated for their efforts, works fewer hours in their job, or can’t further their career to fund their social security benefits for their retirement. This situation can have disastrous consequences for the caregiver’s future. Therefore, providing more inheritance to this child can compensate for their family support efforts.

Lifestyles and Financial Circumstances

Your adult children may experience different financial needs during your lifetime. A child who marries and provides grandchildren may need your help funding a down payment on a house for their growing family. If this is not a documented loan with the expectation of repayment, it is wise to consider reducing this child’s inheritance proportional to the financial aid provided earlier. Weddings, grad school, and other life events of your adult children may have created a substantial inequity among the siblings that you want to offset in your will. You can easily address the situation by reducing inheritable cash amounts to the child or children who have already received substantial financial help while you are alive.

Blended Families

Suppose you are a blended family comprised of biological and stepchildren. In that case, managing the expectations of non-biological children who may receive less than natural-born children is a crucial conversation. Honest communication between the parents and writing wills that complement one another brings a sense of fairness to inheritable assets. This will go a long way to avoiding a possible lawsuit. What one stepchild loses in one will, they may gain in their biological parent’s will.

Be of Sound Mind and Free from Undue Influence

If you divide your assets unequally among your children, know that you may be putting your estate plans and children at risk of litigation. Heirs can sue to contest a will, but you can mitigate the likelihood with careful estate planning. An estate planning attorney will be familiar with family dynamics if one inheritor feels slighted. Drafting your will while you are of sound mind and without undue influence from one of your children is a good start. If your other children believe or think they can prove in court that you were subject to another’s manipulative tactics while writing your will, they will likely sue. Do your estate planning earlier in life when it is clear to everyone you know what you want.

Incapacitation

Another legal challenge to your will can be for lack of testamentary capacity. This term means you were unaware or did not understand what you were doing when creating or changing your will. Lack of testamentary capacity may be due to mental illness or a physical condition. Always ensure your will is properly drafted and witnessed by an estate planning attorney to help avoid possible challenges to your will.

No-Contest Clauses

Some states permit a no-contest clause combined with at least a nominal gift that can create an incentive for family members not to challenge your will and any estate trusts. The language in the will (or trust) essentially states that any inheritor who litigates the document as written will forfeit any bequests. While this is not the best option, it may help keep your will intact. The enforceability of these clauses will vary by state, so be sure to talk about it with your lawyer.

A few tips that can help avoid challenges to your will include:

  • Having your medical doctor witness your signature to your will to invalidate lack of capacity claims
  • Use a trust to provide structure and limitations for children who may not responsibly manage their inheritance
  • Exclude all children from your estate planning process and will writing to invalidate claims of undue influence
  • Discuss your will with every one of your children to explain your reasoning and avoid surprises

Ultimately this is your money to divide as you wish, and you have every right to do so. However, if your inheritors perceive inequality, they will likely explore legal options to remedy their inheritance. Weighing your children’s temperaments and their relationships with each other will provide insight into whether leaving unequal inheritance poses a risk to your will. Sometimes unequal inheritance may not be worth what you are trying to accomplish. Evaluate your unique family circumstances and financial situation with your estate planning attorney. Doing the work upfront can mitigate issues after you are gone, leaving your family happy and intact.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

A Comparison of Elder Law and Estate Planning  

You may wonder what estate planning and elder law entail and how they differ as you plan for your future, both financially and in terms of health care. Estate planning and elder law also have some similarities.

Even though these two types of law are for different stages in life, they are often handled at the same time. This is because many people wait till later in life to start their estate planning process. When an older person creates an estate plan, they may also need some elder law counseling. To better understand the two areas of the legal field, we will look at the solutions they provide, questions they answer, and how they can work together.

Estate Planning

The main goal of estate planning is to choose legal documents that will determine what will happen to you and your assets once you have passed away or become incapacitated. An estate planning attorney will help you make important decisions, such as:

  • Who makes medical and financial decisions if you are unable
  • Who is allowed access to your medical records
  • How assets are distributed after you are gone
  • Who cares for minor children if you become incapacitated or die
  • Who manages money for your minor children if you are no longer able
  • How to handle your funeral arrangements and burial

Durable Powers of Attorney

By using a general durable power of attorney document, you can name a person, or persons, to make financial decisions on your behalf if you are no longer able to do so. Expressing your end-of-life wishes requires designating a person to make healthcare decisions for you by completing a health care directive. By completing a Health Insurance Portability and Accountability Act (HIPAA) form, you will give your health care providers permission to share your medical records with the people listed on your HIPAA form.

Wills and Trusts

In your will, you can name the beneficiaries of your estate as well as a guardian to care for any minor children you may have at the time of your death. You can also name a conservator to manage the money you leave for their benefit. Some people create a trust, or trusts, to hold their assets during their lifetime and after death. They then sign a pour-over will that moves assets into their trust(s) upon death. You can leave instructions concerning your funeral or memorial service and what you want to happen to your remains in your will or a separate document.

Elder Law

Whereas estate planning focuses mostly on what happens after a person dies, the area of elder law focuses on a person’s last years or months. This can include planning for long-term care and applying for government assistance, such as Medicaid, Medicare, and veterans’ benefits, if applicable. Using elder law tools and strategies, an elder law attorney can help you find ways to preserve your assets while preparing to apply for benefits.

Like estate planning, it is best to start the elder law planning process well in advance. To qualify for benefits, such as Medicaid, you may have to sell or transfer ownership of some assets years before applying for benefits. Gifting or transferring assets out of your name must be done according to government requirements, so applying for benefits can be a complicated process. Hiring a skilled attorney can make the difference between receiving benefits quickly or not at all.

Since seniors are at a greater risk for discrimination, neglect, and abuse, elder law attorneys can help seniors and their family members recognize when a senior’s rights are being violated and take legal action to counter and remedy the situation.

Tying Estate Planning and Elder Law Together

It is best to start your estate planning process as soon as possible since the decisions involved could come at any time due to an accident or an illness. Planning for end-of-life care and the benefits associated with it may come later in life, but preparing well in advance lets you legally reduce assets for an extended period to qualify for benefits, like Medicaid. 

Even younger families just starting their estate planning process may look at elder law planning at the same time for senior family members’ needs. Some estate planning tools, such as trusts, are often used when helping a parent plan for Medicaid and other government benefits for long-term care expenses. An attorney experienced in both estate planning and elder law can advise you in these areas and help you navigate complicated processes. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

How to Understand Probate

You can minimize or avoid probate entirely by working with an estate planning attorney. Probate proceedings are part of the public record and can be very time-consuming and expensive. However, in nearly every case, some probate is necessary, so it is important to understand how to navigate the process.

Probate proceedings seek to validate the decedent’s last will and retitle the estate’s assets into the name of heirs according to the deceased’s wishes. These court-supervised proceedings ensure estate debts are paid and oversee the distribution of assets to heirs. 

After losing a loved one, the family will generally come together and hopefully encounter a properly written will and other crucial estate planning documents. Without a well-organized plan, the probate process can take much longer. Family members will be tasked with gathering information necessary for court.

Probate Court Proceedings

The petitioner, usually the estate executor or personal representative, will begin the process by filing a death certificate and a last will to the probate court. It is also useful to produce a list of know creditors and names and contact data of the decedent’s heirs. Smaller estate probate processes and those estates not contested by heirs can usually work through probate fairly quickly and efficiently.

Laws regarding probate are state-specific, and most states set valuation thresholds. If, for instance, an estate value is less than $75,000 and no one contests the will, less formal probate hearings may move more quickly. Since the advent of COVID-19, these court proceedings may even transact over video calls.

For larger value estates, there is a substantial amount of necessary paperwork to validate the will, determine asset distribution, settle disputes, pay off remaining debts, and ultimately close the estate by paying the decedent’s final taxes. A checklist of documents to gather may include:

  • Death certificates
  • Final will
  • Revocable trust documents
  • Heir and beneficiary contact data
  • Beneficiary designations
  • Pre or post-nuptial agreements
  • Previous three years of federal and state income and gift tax returns
  • Life insurance policies
  • Real estate deeds
  • Vehicle titles
  • Statements of financial accounts
  • Contracts and business agreement documents
  • Appraisals for high-value art, collectibles, or jewelry
  • Other known assets
  • Known debts
  • Ongoing bills
  • Medical and funeral expenses

Probate Proceedings Without a Will

The decedent’s residence states intestacy laws will apply if your loved one dies without a last will (intestate succession). All personal property without a beneficiary designation will be subject to the probate process at the court’s direction.

But some assets will avoid the probate process under state property title, state contract, or state trust law. These assets may include:

  • Beneficiary designate life insurance policies
  • Beneficiary designate retirement funds
  • Beneficiary designate annuities
  • Pay-on-death or transfer-on-death accounts
  • Joint tenancy property with rights of survivorship
  • Tenancy by the entirety
  • All trust property

Cost of Probate

Complex probate processes can be costly and take years to finalize, which is why many individuals retain an estate planning attorney to minimize probate proceedings. Lengthy proceedings can be frustrating for heirs who are rightful beneficiaries but must comply with the probate process. The average cost of probate varies by state; however, five to ten percent of an estate’s value in administrative costs and legal fees is typical. Some estates may lose as much as twenty percent of their value.

Other fees may include executor compensation, court fees for filings and paperwork, and a probate bond. After the probate proceedings are complete, a probate bond may be refunded. The most common reason for high probate costs occurs when beneficiaries contest the will, as ongoing litigation can be expensive. Issues relating to preparing and filing the decedent’s last federal estate tax return and any ensuing audit may also increase the cost of the probate process.

Most individuals will create an estate plan with their lawyer that allows assets to pass outside the probate process, typically through creating a revocable living trust. Depending on your situation, your estate planning attorney may recommend other types of trusts as well as ensure that named beneficiaries on accounts that pass outside of probate are up to date. Regularly reviewing your estate plan with your attorney can help minimize probate court interactions and streamline your heir’s inheritance process. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law, Estate Planning

Medical Advance Directives: Understanding the Different Types

A trauma or illness could incapacitate anyone, and no one likes to think about it. People experience it every day, unfortunately. With this knowledge, many people like to prepare in advance for the kind of treatment they want in the event of cardiac arrest, respiratory failure, stroke, and brain death. Some people would allow doctors to perform “heroic measures,” and others would rather die without significant medical intervention. Medical advance directives are legal documents that outline the details of your advance healthcare planning.

There are a few types of medical advance directives. A durable power of attorney names a person to act as your healthcare proxy or surrogate who can make medical decisions and follow those outlined in your living will if you are incapacitated. A living will tells medical professionals when they should and should not use certain interventions, like intubation, CPR, and IV nutrition. A living will only pertain to saving a life, but a power of attorney can make any decision. For example, if a person is unconscious but not in peril of death, a power of attorney could consent to minor medical treatment that is not life-threatening.

What Happens without Medical Advance Directives

Of course, many people without advance directives get into car crashes or have other accidents and need someone to make medical decisions for them. Without an advance directive, the state relies on a legal hierarchy of next of kin. Legal guardians make decisions for minors and adults with a conservatorship. The state usually recognizes a spouse or domestic partner as the next of kin for most adults. Without a spouse, the responsibility often goes to an adult child, sibling, or parent. For many people, this system works well.

The legal hierarchy presents major problems for others. Sometimes people remain legally married to someone who no longer represents their best interests. At other times your next of kin does not share the same values and would not make the right choices for you. Sometimes, you feel more aligned with a person who is a friend instead. In all of these situations, having an advance directive helps ensure that the medical decisions made on your behalf are the same or similar to those you would make for yourself if you were able.

Items to include in a Living Will

Your power of attorney can express end-of-life wishes that address the use or withdrawal of specific treatments. Likewise, some people may want to plan certain end-of-life decisions while they are still healthy. You can specify the types of medical treatment desired, such as:

  • Pain relief (analgesia)
  • Antibiotics
  • Intravenous hydration
  • Artificial feeding (feeding tube)
  • Cardiopulmonary resuscitation
  • Ventilators
  • Do not resuscitate orders (DNR)

Of course, addressing every possible scenario is impossible, but try to be explicit about your instructions for common life and death scenarios.

Items to Discuss with your Healthcare Proxy or Surrogate

Your power of attorney for medical advance directives affords the same rights to request or refuse medical treatment to the surrogate as if the individual at risk were capable of making and communicating decisions. With this in mind, you want to choose someone you trust and who shares your values. You also want to make your desires clear to that person so they can carry out your wishes. For example, let them know if you strongly oppose donating organs, having a blood transfusion, or certain hospital visitors. Explain your decision-making process to them so they can use that reasoning to figure out what you would want.

Creating Advance Directives

As advance directives are legal documents, lawyers are most effective at writing and reviewing them to reflect your wishes and hold up in court. Something is always better than nothing, so start with the basics and add details as they arise. An estate planning or elder law attorney can help create and review your advance directives. As experts in this area, we know the right questions to ask. We will listen to your wishes and help guide you in making important decisions about your care. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

If You Are Considering Creating an Estate Plan by Yourself, Think Twice

This question is asked all the time: “Wouldn’t it be easier to get a will off the internet, transfer my land when I die, and put my children on my bank account?” It’s just not a good idea. For the plan to work as you would want it to, it should account for plenty of complications. A good plan should protect your spouse and your children from the loss of valuable government benefits if anybody is or becomes disabled. The plan should avoid the delay and expense of probate court. The plan should protect money from children’s creditors or divorce or remarriage. It should be crafted to serve family harmony and to avoid disputes between children as joint owners.

Even a relatively simple situation is made up of many moving parts. Internet documents and joint-ownership devices just won’t do the job.

Also, assembling the moving parts so they work smoothly is just the first step. Your estate plan needs maintenance too, just like your car has a “check engine” light. Major family events like serious illness or death, marriage, birth, or financial reversals are alerts that you should tune up your plan to reflect those changes. Your plan shouldn’t be “one and done.”

It takes expertise to coordinate the various strategies available. Don’t risk a result that will cause your family problems and unnecessary expense. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

The Trustee’s Role: A Brief Overview

Your estate planning process, whether it is in the middle or just getting underway, likely contains questions regarding how and to whom your assets should be distributed. A trust can be a great tool in your estate planning tool kit. A properly created trust can give you and your family more options and privacy than a will.

Unlike a will, a trust will help keep your estate from going through an expensive, time-consuming, and public probate process. If you set up a trust, you still create a will, but it becomes a pour-over will, which moves (pours) your assets into your trust. You can choose from different types of trusts, depending on how and when you want your assets dispersed.

Types of Trusts

There are many types of trusts, but they all establish a financial arrangement between three parties: the trustor(s), the trustee(s), and the beneficiary(ies). The person creating the trust is known as the trustor, grantor, or trustmaker. Trusts can be created by more than one person. The trustor chooses one or more persons or entities to serve as the trustee. The trust is for the benefit of one or more beneficiaries, which can be people or entities, such as charities. For some trusts, the trustor, trustee, and beneficiary are the same person.

The Role of a Trustee

The role of a trustee can vary widely, depending on the nature of the trust, wishes of the trustor, and needs of the beneficiaries. Generally speaking, a trustee manages the trust and the assets it holds and disperses income or principal from the trust in accordance with the terms of the trust. A trustor may grant the trustee broad latitude in distributing assets to the beneficiaries or may impose strict guidelines. For example, a trustee may be allowed to make funds available for the general wellbeing and happiness of the beneficiaries or may only be able to disperse funds for educational purposes.

If the trustor has a beneficiary who has special needs and is receiving benefits from Medicaid, Medicare, or another government program, then the trustee needs to make sure they are dispersing assets without disqualifying the beneficiary from the government program. Some trusts have a special or supplemental needs provision in them, and some are wholly for the person with special needs.

In addition to dispersing the funds of a trust, the trustee also pays any taxes that are owed, records expenses and income, and oversees the physical assets owned by the trust, such as real estate. The trustee may be required to report taxes, expenses, and income to the beneficiaries on a scheduled basis. All these duties will be dictated by the language in the trust.

Choosing a Trustee

In most cases, the trustee of a trust can also be a beneficiary of the trust. One notable example of when a beneficiary cannot be the trustee of their trust is with a special needs trust. For the beneficiary of a special needs trust to qualify for government assistance, they cannot have any control over the assets of their trust or how they are managed and dispersed.

When considering who will be the trustee of your trust, choose a person you can rely on to follow the instructions you lay out in the trust. This person can be a reliable family member or friend, or an entity, such as a bank or trust company. For some trusts, such as a living trust, you can be the initial trustee and select someone else to be the trustee if you become incapacitated or when you die.

More than One Trustee

More than one person can serve as trustee at a time. This can be a good option for when beneficiaries are young. For example, a trustor can allow a young beneficiary to serve as a co-trustee of their trust along with an older trustee until a certain age when the beneficiary can serve as sole trustee.

Choosing the trustee of a trust is an important decision. When you are making this decision, consider the purpose of the trust now and in the future. Consider who will be able to best manage the trust’s assets and the beneficiaries’ needs. An experienced estate planning attorney can help you create the trust, or trusts, that will best suit your needs and select the right trustees.

This article offers a summary of aspects of estate planning law. It is not legal advice, and it does not create an attorney-client relationship. For legal advice, you should contact an attorney. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

To Avoid These Common Estate Planning Mistakes, Review Your Plan Regularly

Estate planning is viewed by many Americans as something they can do once and then file away until they die. However, without being aware of the potential impact, people will make gifts during their lifetime or change listed beneficiaries on accounts which can have enormous unintended consequences on their will or trust. Review your estate plan regularly to help to prevent these common mistakes.

Gifting money during your lifetime without changing your will

It is a common practice for people to include cash gifts in their will. Whether money for a favorite nephew or niece, childhood friend, or household worker, there can be significant sums of cash for distribution to inheritors listed in your will. Often, family members learn these gifts were already satisfied during your lifetime because they hear the story about the joy it brings to the recipient.

Without modifying your will after gifting cash during your lifetime, the named individual will still get the gift when the will enters probate. Smaller gift amounts may not create issues in an estate but don’t match your intentions. More considerable sums of money can create situations that financially break an estate plan. A court will not know that a gift was satisfied during your lifetime either, and there is no one left to speak to the intention of the will, resulting in a second gifting of cash.

The cash gift is paid again if the inheritor chooses not to be forthcoming. While many in the family will view a lifetime gift as an advance on an inheritance, if the recipient does not agree, you may have to litigate, which can be costly. If you give lifetime gifts of cash and do not intend to give a secondary gift upon your death, change your will after the gift.

Too few assets to fund a trust

If your trust is years old and its overall assets have decreased in value, reviewing the gift provisions outlined in your trust is crucial. You may not have enough assets to pay for all of the gifts. It is not unusual that in flush financial times, people create grand estate plans leaving cash to family and friends and creating trusts for others’ benefit. These good intentions can fall far short of reality in leaner times, leaving some people to receive less than hoped or nothing at all.

In a trust, cash gifts pay out first. For example, if you leave $1,000,000 to your sibling and the rest in trust for your children, but at the time of death, your trust is only worth $1,150,000, the trust will then only contain $150,000 for your children after the payout. This is probably not your intention. Another possibility is your trust provisions don’t get funded because there is no cash to cover them. 

Sadly, it will be the lawyer or trustee’s responsibility to advise these recipients of what they were supposed to receive from the trust, but unfortunately, they will not. Regular review of your trust and its goals can avoid this situation. Crafting a trust with realistic goals or making amendments to those goals during less abundant times will keep the trust’s intentions valid and achievable.

Thinking all assets pass through your will

Some people leave a lot of money that they believe satisfies all the gifts listed in their will. They total all their assets, which seems large enough to address all beneficiaries. However, all assets will not pass under the will, which is the difference between probate and non-probate assets.

Probate assets will pass through the decedent’s name into their estate and be distributed according to the will. In contrast, non-probate assets pass outside the will, usually by joint ownership or beneficiary designation. Knowing the difference between the asset classes provides the true value in the estate and receives distribution according to your will. Also, be clear your estate will need to deduct any outstanding debts, expenses, and taxes, which will reduce the probate asset number again.

Joint ownership additions

It is very easy to add an individual as a joint owner with rights of survivorship of an asset such as a bank account or piece of real estate. Yet if your will relies on that asset being part of your estate to pay others (or debts, expenses, and taxes), there may be a problem. Joint ownership can often lead to will contests and lengthy court battles. Before succumbing to the temptation of joint ownership, speak with your estate planning attorney and proceed cautiously so as not to upset the existing estate plan.

Changes to beneficiary designations

Beneficiary designation changes can have unintended consequences on your estate plan. The most common problems occur with changes to beneficiaries in life insurance policies. The policy may be payable to your trust to cover the cost of bequests, pay estate taxes, or shelter monies from estate taxes. Similarly, a retirement account due to an individual but changed to another may result in adverse income tax consequences. You may upend the intention of your estate plan by casually changing a beneficiary designation.

These are some of the more common mistakes people make that can negatively affect your estate planning goals. Regularly review your intentions and legal documents with your estate planning attorney to clarify changes in assets and asset types, lifetime gifts, beneficiary designations, and joint ownership additions. Doing so will keep your legacy as you intend it to be. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

Sibling Estate Disputes: How to Avoid Them or Resolve Them

In most families, there can be no getting around sibling rivalry. Depending on your particular family members and the dynamic between them, old rivalries from the past can become more significant when a parent passes. Adult children who are emotionally upset and in the unfamiliar territory of an inheritance process can invent new problems or magnify existing ones.

Protecting Family Relationships

Rivalry issues often present in heartbreaking ways, damaging family relationships and altering the parent’s original intent for estate distribution. It can potentially cost family members significant time and money in litigation. The death of a parent is a difficult test for siblings, particularly in cases where assets are shared unequally.

It is possible to avoid many inheritance disputes with some forethought if a parent implements a few key steps before and after death with sound estate planning. Comprehensive estate planning includes a will and trust with a non-sibling trustee or executor and the chance for equitable gift-giving during the parent’s lifetime, providing the opportunity to elaborate on or defend their decisions. Non-family fiduciaries who can act in the estate distribution include an attorney, CPA, or other financial institution that provides this service. Professional services may be well worth implementing as a strategy to diffuse issues between contentious family members.

Gifting to Children Before Death

One technique for a parent to quell potential issues is to legally gift up to $16,000 annually to each child without owing taxes on those gifts and spending down the estate’s cash assets, so there is less to argue over. You can’t argue about assets that have already been gifted. Every parent has the right to do whatever they choose with their money during their lifetime.

Using Neutral Parties to Distribute Assets after Death

After a parent dies, a mediator is particularly useful if one of the family’s adult children is the executor or trustee of the estate. The mediator remains neutral and can counsel all siblings about the estate’s distribution process while helping to keep emotions on an even keel. A mediator can also help executors or trustees formulate a plan to liquidate estate assets and split the proceeds among heirs, sometimes using the services of an independent fiduciary for assistance.

Income Disparity Among Siblings

Sometimes sibling economic disparity creates different perspectives about what is fair. Suppose a financially stable adult child prefers to hold onto an inheritable asset for a long-term payout while another heir in greater need requires an immediate return. A mediator may aid in negotiating the sale of that interest to the more financially stable heir while cashing out the other sibling, keeping the deal within the family.

Situations that Can Lead to Contesting the Will

New spouses and step-children, disabled and dependent siblings who require care, and estranged children are very likely to mount challenges to the status quo of inheritance if they feel they are being unfairly compensated. Legal actions citing undue influence for personal gain are not uncommon but can be difficult and expensive to prove. It is legally permissible for a parent to leave a child out of their will. To avoid legal challenges by the disinherited (and likely disgruntled) child, the parent should discuss their reasons with the child upfront or explain the decisions they made in their will.

Letters of Intent

A handwritten letter of instruction for gifting family keepsakes can outline who gets what and, although it is not legally binding, can be helpful in most circumstances. Without written guidance, how siblings choose to distribute heirlooms among themselves is left to chance. Try to establish an agreeable framework among siblings in advance. Once someone digs their heels in about a certain keepsake, they can quickly lose objectivity. While it doesn’t make sense, there are instances where sibling litigants spend more money trying to win a family heirloom in court than the object itself is worth. A systematic approach agreed to upfront can circumvent these emotional responses to family keepsakes.

There are as many potential problems to resolve in estate distribution as there are personalities. However, parents usually know which children are likely to fight over their inheritance. Action that prevents conflicts among heirs while a parent is alive is the most direct way to solve the problem. A parent can also make changes to their plans as financial circumstances and feelings among siblings change.

Reviewing and revising your estate plan to account for marriages, deaths, divorces, and births shows that heirs receive due consideration, decreasing the potential for conflict. An estate planning attorney can advise you about gift-giving while you are alive and create an estate plan that reduces the chances of sibling rivalry and infighting after your death. Proactive planning and honest discussions with your lawyer can help craft a plan that provides the best opportunity for peaceful outcomes among siblings. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Estate Planning

An Overview of Probate

ABA explains that probate is a legal process that gives legal recognition to a will, and appoints the executor, also known as the personal representative, to administer the estate and distribute property. Therefore, it is good to contact a probate lawyer to determine if the estate is small enough to bypass formal probate, whether the fiduciary must be bonded (this requirement is often waived in the will), and what reports are necessary to prepare.

The Uniform Probate Code

In more recent years, states have tried to simplify their probate procedures. The Uniform Probate Code (UPC) consists of laws written by a group of national experts to help standardize and streamline probate, and most states have adopted these standards. Across state lines, the probate process is finally beginning to work more effectively.

Probate Attorneys Help Navigate or Avoid Probate

However, this does not mean you shouldn’t meet with a probate attorney. Individual states still have different monetary thresholds for what constitutes a lower value estate that can bypass part or all of the probate process. Administering complex estates with an attorney’s guidance will be beneficial even if most estate assets already take advantage of estate planning tools designed to bypass probate. The attorney can support the executor or personal representative when providing the local courts with basic information like death certificates, form submissions, and communication with beneficiaries while administering the estate. The goal is to keep the probate process as simple as possible.

The essence of probate involves the following:

  • Determining and proving the decedent’s will
  • Submitting an estate inventory and appraisal of the decedent’s property
  • Ensuring the estate’s taxes and debts are paid in full
  • Making sure every estate asset is distributed in accordance with the decedent’s will or the state’s intestacy laws.

Probate Attorneys Help Executors Through Estate Administration

The estate’s personal representative is responsible for initiating court procedures and distributing the assets to named beneficiaries. If the personal representative fails to initiate probate proceedings, any party interested in the estate may initiate probate. Typically, these parties include those who will gain assets from the will, like a beneficiary or a creditor. In the absence of a named personal representative or if they are unwilling or unavailable to administer the estate, the court will appoint one to oversee the probate process. You may hire a probate attorney instead.

The time frames to begin the probate process are state-dependent. They begin at the decedent’s date of death and range from three to twenty or more years. Some states have no time limits for filing a will for probate, like California.

Removing Conflict and Debt Negotiation

Once the gathering and filing of the necessary paperwork for the probate process are complete, you may find a disgruntled heir or someone bypassed from the will altogether make a legal challenge to the probate court, perhaps contesting the validity of the will. These legal challenges slow administering the estate, as can handling an estate with excessive debt where property needs to be sold to make good on debt claims. A probate attorney can mediate conflicts that arise by removing emotions from the decisions and negotiating debts.

If the probate process is going to be lengthy, immediate family members can ask the court to release short-term support funds in most states. The reputation of probate is at times well deserved for being time-consuming and expensive.

The probate process can be simple only when heirs agree with the will and the dissemination of property and assets. In that case, the executor provides the local courthouse with the decedent’s last will, a certified copy of the death certificate, a list of names and addresses of heirs, and a list of known creditors.

Maintaining Privacy

If there is disagreement among heirs, it is worth sorting out issues before beginning the probate process to avoid a legal challenge to the will. Once filed, probate proceedings are part of the public record, and most people prefer privacy regarding the death of a loved one and inheritance. However, excessive delay in the probate process will likely create more complex and expensive situations to resolve. If you need to work things out with heirs before beginning probate, it is best to resolve issues, if possible, sooner than later.

Avoiding Probate with Estate Planning Tools

While some probate processes can be extensive, taking multiple years to complete, most probate does not. Many estate planning attorneys help their clients avoid extensive probate through mechanisms such as a revocable living trust. This trust type allows the property in the trust to pass outside of probate. Other ways to avoid probate are titling property with survivorship features or adding beneficiaries on accounts, such as an IRA. Knowledgeable estate planning attorneys use these mechanisms and entities to keep the probate process to a minimum. These entities may include:

  • Annuities, life insurance policies, and retirement funds with named beneficiaries
  • Pay-on-death or transfer-on death-accounts
  • Property in joint tenancy with rights of survivorship
  • Property held as tenancy by the entirety
  • All property held in a legal trust

Most individuals seek to minimize the probate process when creating their estate plan. This best practice is suitable for larger and more complex estates as probate can become expensive and significantly decrease your estate’s inheritable value. Even smaller value estates using the entities and techniques for direct transfer or property outside of probate can benefit. Talk over your wishes with your estate planning attorney to create a plan that can minimize probate. If you are already a named personal representative and the existing estate plan is murky or without the presence of a will, a probate lawyer can help you assess the best path forward to accomplish the probate process with minimal loss to the estate’s value. We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.