King & Wood, P.A.

Who Should Be Your Executor?

“The person you have placed in charge of your estate under a Will is called a ‘Personal Representative’ or ‘Executor/Executrix.’”

Most people mistakenly believe they must name their eldest child as their executor, the person in charge of administering their estate. According to the article “Eldest child, best friend, C.P.A.—Who should you put in charge of your estate?” from Coeur d’Alene/Post Falls Press, even people who understand they are not legally required to name their eldest child still think their oldest child is supposed to be their executor.

This may have been a social norm way back when. However, those days are gone. Here is what you should consider when determining who you want to be in charge of your estate.

First, what estate planning documents does the executor need to deal with? An executor is primarily concerned with your Last Will and Testament. This document states what you want to happen to your possessions and assets when you die. It also includes your choice of executor.

Not everyone has a trust. However, you’ll likely rely on a trust if you have assets you don’t want to go through probate. The instructions in the trust have nothing to do with the will. The trustee is in charge of the following the directions in the trust, which spells out exactly what you want to happen with any assets owned by the trust.

Your executor and trustee can be the same person. However, they don’t have to be. They need to be someone you have a high degree of confidence in, capable, self-starting, organized and able to navigate the relationships of the other family members and beneficiaries of your estate.

While your will and trust will have specific language, there are also many things an executor and trustee will need to make discretionary decisions on. For instance, if your executor sells your home to distribute proceeds to named beneficiaries, they’ll decide which realtor to use, what the listing price should be, what offers to consider, which offer to accept, what terms of acceptance should include, etc.

You’ll also need to be confident that the person you name will honor your wishes and do their best to achieve the desired outcomes for the benefit of your heirs. If the executor/trustee is also a beneficiary, they must understand their fiduciary responsibilities. They are responsible for putting the estate and not their own interests first.

They’ll also need to be highly organized and able to handle duties without procrastinating. If they are not, they may decide to retain an estate planning attorney to be organized and manage the details. There’s nothing wrong with doing this. It may be impossible for a layperson to know precisely how to manage an estate and probate in highly complex estates.

Consider all of the people who have an interest in your estate or legal rights to be made aware of its administration. They may include children, stepchildren, non-family member beneficiaries, charities, etc. Your executor may need to deal with all of them.

Finally, be realistic about who you select as an executor and trustee. If they need to work together, do they get along? If you know they haven’t seen eye-to-eye on anything since fifth grade; it’s not likely to change because you’ve given them this responsibility. An estate planning attorney may be a better alternative to avoid family feuds or long-standing battles erupting over your estate.

Reference: Coeur d’Alene/Post Falls Press (Aug. 6, 2023) “Eldest child, best friend, C.P.A.—Who should you put in charge of your estate?”

How to Pass on Family Heirlooms with Fewer Estate Battles

“There are better—and often more creative—ways to plan and divide that can avoid family squabbles over cars, jewelry, furniture and household items.”

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama.”

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

Can You Prevent Will from Being Contested?

“From contentious relatives to scam artists, wills are not immune to the threat of a contest. If you have an inkling such a fight could be in your estate’s future, here are some ways to limit the risk.”

The best planning doesn’t preclude disappointed family members and hangers-on from trying to get what they consider their “fair share” of an estate.

There are some steps you can take to avoid this happening to your estate, says a recent article, “Counterattack: Tips for Thwarting a Will Contest,” from Kiplinger.

Traditionally, an in terrorem provision is added, known as a “no-contest” clause to a will or a revocable trust to discourage attacks. If triggered, it can cause an heir to lose their entire inheritance if the person is excluded from a will or trust, or if the person challenges the appointment of the personal representative or trustee or claims to be a creditor when the probate court has denied this status.

However, the no-contest provision isn’t always permitted. They are unenforceable in Florida and Indiana. In some courts, states may refuse to enforce them under certain fact scenarios. There are other ways to achieve the goal of excluding an heir or maintaining a firm grip on the estate.

Authorize personal representative or trustee to pay the cost of a potential contest. In some states, personal representatives and trustees are authorized to litigate on behalf of an estate or trust or retain attorneys to do so. Even when a potential heir is omitted from a will or trust, knowing the assets of the estate will be used for litigation expenses and will shrink the size of the estate is enough to deter some litigious people.

Require mediation for any disputes. Some states allow the use of mediation, arbitration, or alternative dispute resolutions to resolve issues. A will could require a potential challenger to use an alternative to litigation and provide guidelines for dispute mediation, from determining how mediators will be selected, whether the process should be adjudicatory or collaborative and the scope, timing and nature of mediation.

Establish a “litigation holdback fund.” Instead of forfeiting the entire interest in the estate by filing a lawsuit, the beneficiary’s interest in the estate could be escrowed, with access restricted during a will contest. When eventually paid to the beneficiary, the interest would be reduced by the cost of litigation.

Create a separate trust for a contentious beneficiary. The law requires beneficiaries the right to request a complete copy of the trust agreement created for their benefit. By creating revocable trusts for each beneficiary, the beneficiary named in one trust will not see the contents of the trust for other beneficiaries. This could prevent a disgruntled person from comparing their trust to another, but there is a risk of a beneficiary alleging a fraudulent transfer in creating separate trusts.

What else can you do to prevent a will contest?

• Have the testator/settlor undergo an examination by two physicians to eliminate any charges of incapacity and provide the physician’s signed statements as scheduled to the will or trust.
• Include a statement of intent from the testator/settlor about the estate plan to demonstrate their intentions.
• Video the execution of the will or trust. Explain the dispositive scheme and inclusion of beneficiaries and obtain a signed statement from each witness and notary. Have a third party certify the video’s authenticity.

If you are concerned about protecting your estate plan, it’s best to meet with an experienced estate planning attorney to review your estate plan for any potential vulnerabilities. A plan in advance could save all concerned from the headache and expense of an estate battle.

Reference: Kiplinger (Nov. 10, 2022) “Counterattack: Tips for Thwarting a Will Contest”

IRS Extends Portability Election Option Deadline from Two to Five Years

“Portability allows spouses to combine their exemption from estate and gift tax. This allows a surviving spouse to use the unused estate tax emption of the deceased spouse.”

The Internal Revenue Service recently issued a change to the rules regarding portability of a deceased spouse’s unused exclusion (DSUE), expanding the time period from two years to five years. As explained in the recent article “IRS Extends Portability Election” from The National Law Review, portability allows spouses to combine their exemption from estate and gift tax. Here’s how it works.

A surviving spouse may use the unused estate tax exemption of the deceased spouse to lower their tax liability. Let’s say Spouse A dies in 2022, when the estate tax exemption is $12.06 million. If, during Spouse A’s lifetime, they had only used $1 million of their exemption amount, Surviving Spouse B may elect portability to claim $11.06 million DSUE, as long as they file for the exemption within five years of the decedent’s date of death.

Prior to the rule change, the surviving spouse only had two years to claim the DSUE. The due date of an estate tax return is still required to be filed nine months after the decedent’s death or on the last day of the period covered by an extension, if one had been secured.

The IRS had previously extended the deadline to file for portability to two years. However, over time, the taxing agency found itself managing a large number of requests for private letter rulings from estates failing to meet the two year deadline. It was noted many of these requests for portability relief occurred on or before the fifth anniversary of a decedent’s date of death, which led to the current change.

How do I Elect Portability?

To elect portability, the executor (or personal representative) of the estate must file an estate tax return on or before the fifth anniversary of the decedent’s date of death. This estate tax return is a Form 706. The executor must note at the top of Form 706 that it is filed pursuant to Rev. Proc. 2022-32 to elect portability under Sec. 2010(C)(5)(A).

Eligibility to elect portability is not overly burdensome for most people. The decedent must have been a U.S. citizen or resident on the date of their death and the executor must not have been otherwise required to file an estate tax return. This means the decedent was under the estate tax exemption at the time of their death. With the current estate tax exemption now at $12.06 million for an individual, most people will find themselves well under the limit.

This new regulation expands the number of people who will be able to take advantage of the exemption and will help families pass wealth on to the next generation without incurring the federal estate tax. Speak with your estate planning attorney to be sure to elect portability when the first spouse passes, in order not to lose this exemption.

Reference: The National Law Review (Aug. 1, 2022) “IRS Extends Portability Election”

Does Estate Administration Need to Be Supervised?

“What is an unsupervised administration and why is it better than other types?”

Probate is the legal process where the court approves the will and the executor so the estate may be distributed after a person dies. Probate is a familiar term to many, but supervised or unsupervised administration is less well known. The article “Estate Planning: Supervised and unsupervised probate administrations” from nwi.com explains how estate administration works.

Generally speaking, there are two different types of probate administration, as inferred by the article’s title: supervised and unsupervised. Depending on who you ask, there may also be a third, known as “informal probate.”

Not all assets are passed through probate. Bank accounts owned jointly pass directly to the other owner. A home owned with a Transfer on Death (TOD) deed is also considered a non-probate asset. This is not to say that non-probate assets cannot be brought into probate. There are instances where they can. However, it takes a bit of an effort and is pretty unlikely to occur.

Probate assets are assets with no surviving joint owner and no beneficiary designation. These types of assets require a proceeding to ensure that the correct person or entity receives it after the original owner dies.

A supervised probate administration requires extensive court involvement. Every action taken by the executor has to be approved. If the home is to be sold or a distribution made to beneficiaries, the executor has to obtain a court order authorizing it.

An unsupervised probate administration, just as it sounds, involves far less court involvement. The personal representative or executor is recognized as valid, creates an inventory of the assets and files the inventory with the court. Once the inventory is reviewed, the executor is told to administer the distribution of assets according to the terms of the will.

Beneficiaries have 90 days to object to the executor’s actions. although this may vary by state. Check with your estate planning attorney. If no one objects, the final account is approved and the executor is done.

With less court involvement, asset distribution proceeds at a faster rate, which is why many wills provide for it.

The “informal probate” mentioned earlier is an outlier. Its use varies by state and by jurisdiction. There’s no court involvement at all. This is mostly used for very, very small estates. Some argue it’s still probate, even if it’s informal, while others maintain it exists solely to avoid probate.

The nature of probate depends on many factors, including where the decedent lives, the size and complexity of the estate and whether or not there are many family members or others who might challenge the estate’s distribution. In some communities, probate is a quick and painless process. In others, it is long, expensive and stressful. Your estate planning attorney will know what your situation will be and help you and your family plan accordingly.

Reference: nwi.com (April 10, 2022) “Estate Planning: Supervised and unsupervised probate administrations”

James Brown Estate Battle Resolved … Almost, but Not Quite

James Brown Estate Battle Resolved … Almost, but Not Quite

“For more than a decade, Brown’s heirs and estate administrators, including Mr. Bauknight and Adele Pope, a former executor, have battled in court over the value of his estate.”

A company specializing in buying and marketing estates and song catalogs has bought the assets of James Brown’s estate, including music rights, real estate and control over Brown’s name and likeness. It is hoped that the sale, worth an estimated $90 million, will finally achieve Brown’s wishes to finance scholarships for needy children, according to a recent article from The New York Times titled “After 15 Years of Infighting, James Brown’s Estate is Sold.”

The money will be used to endow the Brown scholarship trust in perpetuity, said the accountant who has served as the Brown estate’s executor since 2009. The deal includes a provision for the buyer, Primary Wave, to also contribute a percentage of future earnings to the scholarships, intended for children in South Carolina, where Brown was born, and Georgia, where he grew up.

This is a step forward in one of the longest and most contentious estate conflicts in the high-profile world of celebrity estates. Multiple lawsuits in state and federal courts have cost millions in legal fees and left behind what one official described as “As big a tangle as you’ve ever seen.”

Part of the mess centered around Ms. Tommie Rae Hynie, a singer who married James Brown in 2001. It was later learned she was already married to another man. With her spousal status unclear, Ms. Hynie and five of Brown’s children battled over the estate. Their goal was to set aside his will and negotiate a settlement of their own to receive big chunks of the estate.

They found a willing listener in a state attorney general and a state judge who approved their agreement in 2009. However, four years later, the South Carolina Supreme Court struck down their settlement, calling it “a dismemberment of Brown’s carefully crafted estate plan.” It also ruled unanimously that Ms. Hynie was not Mr. Brown’s legal spouse.

Brown’s heirs and several executors have also fought over the estate’s value. One estimated it as $5 million, while another put it at $84 million. The discrepancy was claimed to be a result of savvy management of the estate after Brown’s death.

Negotiations for the sale were handled by John Branca, who was Michael Jackson’s longtime attorney and one of the executors of Jackson’s estate.

However, it’s not over yet. For one thing, the longstanding battle between two executors, Mr. Bauknight and Ms. Pope, removed as executor in 2009, isn’t over. She is suing the estate; he and others have filed suit against her. These cases are under appeal and until they are settled, or a court decision is made, no distributions can be made and no scholarships can be paid.

Reference: The New York Times (Dec. 13, 2021) “After 15 Years of Infighting, James Brown’s Estate is Sold.”

Does Estate Planning Vary by State?

“Whether you've recently moved to Florida or are a ‘snowbird’ with Florida residency, there are important reasons to consider updating your estate plan.”

Estate planning laws vary greatly from state to state and understanding the difference could have a significant impact on whether your estate plan is valid. It is best to get this straight shortly after moving, says The National Law Review in the recent article “Updating Your Estate Plan: What Michigan Residents Need to Know When Moving to Florida.”

It's not just people from Michigan who move to Florida who need to have their estate plans reviewed, if they are snowbirds or making a full-time move—it’s anyone who moves to another state, from any state. However, Florida’s popularity makes it a good example to use.

Florida restricts who is permitted to serve as a Personal Representatives under a will. The personal representative, also known as an executor, must be a descendent or ancestor of the decedent, a spouse, brother, sister, aunt, uncle, nephew, niece or descendant or ancestor of any such person or a Florida resident.

Florida doesn’t recognize “no contest” clauses in trusts or wills. It also does not recognize unwitnessed testamentary documents, which are handwritten documents even if they are in your own handwriting. Michigan may accept them, but Florida courts do not.

Florida also has a special set of laws, known as the Homestead laws, designed to protect a decedent’s surviving spouse and children. You may have had other plans for your Florida home, but they may not be passed to the people you have designated in your non-Florida will, if they don’t follow the Sunshine State’s guidelines.

Power of Attorney laws differ from state to state, and this can create huge headaches for families. In Michigan, the Durable Power of Attorney can be “springing,” that is, it is effective only upon incapacity. In Florida, once a Durable Power of Attorney is signed, it is effective. Florida may accept a DPA from another state, but Florida law will be applied to the agent’s actions, and restrictions will be based on Florida law, not that of another state.

As for estate planning documents concerning medical and financial decisions while you are living, these are also different. A living will names a person, known as a “Patient Advocate” in Michigan or a “Health Care Surrogate” in Florida, who is authorized to make decisions regarding end of life care, including providing, withholding, or withdrawing life-sustaining treatment. In Michigan, you need two doctors to certify a patient’s incapacity for non-life-or-death decisions. In Florida, only one doctor is needed.

Whether you are traveling north for a cooler summer or planning to leave a northern home before the winter arrives, meet with your estate planning attorney to understand how any and all of your estate planning documents will work—or not—when you are in another state.

Reference: The National Law Review (June 30, 2021) “Updating Your Estate Plan: What Michigan Residents Need to Know When Moving to Florida”

Can I Set Up a Trust for an Adult Child?

“Creating a will is important for all adults, but particularly those who have dependents—including adult dependents. Adding a trust to your estate plan can provide even more guidance.”

If you are the parent or guardian of an adult who depends upon you financially, estate planning is critical. When you can’t care for your child, an estate plan which includes funding and guidance protects your dependent and ensures that they will receive the care they need, reports Parents in the article “Wills and Trusts for Adult Dependents.”

First, you need a will. This fundamental estate planning document lets you be very specific about what you want to happen after your death. It also nominates guardians for minor and adult children and pets. Wills can be used to manage decisions that apply to everyone. If there is no will, the laws of your state and a court make all of the decisions, not you.

If you have dependents, the will lets you choose who you want to serve as a guardian for your children. If you are already the legal guardian of a dependent adult, the will can be used to name the person to take over for you. Choose guardians who are up to the responsibilities that come with caring for a dependent adult.

The will is used to manage assets after your death. However, in the case of a dependent adult, you may also need a Special Needs Trust. If you pass assets directly to a dependent adult and they are receiving certain government benefits, the inheritance may make them ineligible for benefits and services.

A Special Needs Trust allows you to earmark a certain amount of money for their care. An estate planning elder lawyer will be familiar with this type of trust and help you create it.

If your dependent adult does not receive any means-tested benefits but is not able to manage an inheritance, then a trust can be used to hold assets to be controlled by a trustee, who might also be a guardian or caretaker.

A will and trusts are central to a well-prepared estate plan. Working with an estate planning attorney will give you the opportunity to consider how you want to distribute assets while you are living and after you have died. It also gives you the opportunity to name a personal representative, or executor, who will manage your estate after your death and be in charge of making sure that your wishes, as expressed in your will, are followed.

Trusts are more complex than wills and allow for a greater degree of control over assets. The trust is a legal entity to benefit others, and a trustee is the person named to be in charge of the trust.

Bear in mind that anything passed through a will has to go through a court process known as probate. The will has to be validated and the executor has to be approved by the court. Any assets in the trust are already outside of your estate and do not go through probate.

Reference: Parents (July 7, 2021) “Wills and Trusts for Adult Dependents.”

What Is a Fiduciary and Why Is It Important?

“One of the most important decisions you will ever make is choosing a fiduciary.”

If you do not choose a fiduciary, a guardian appointed by a court may end up making financial and medical decisions for you and the intestate statutes of your state will determine who will administer your estate when you have passed. If you’d rather have some control over your life, doing some estate planning now will prevent these scenarios later, according to the article “Fiduciary Agents have power to make decisions you’d prefer to make yourself” from the Pocono Record.

A financial fiduciary is the person you designate under your general durable power of attorney, last will and testament, or trust.

The fiduciary under a power of attorney has the power to make decisions, while you are living, for your financial and legal affairs. The person is named in a legal document called an agent or attorney in fact. This document can be broad, allowing the person to determine how to spend or invest your money, to buy and/or sell your home, etc., or it can permit someone to act on your behalf solely for a specific transaction. You and your estate planning attorney determine what is best.

An agent under a healthcare proxy can make healthcare decisions on your behalf, when you are unable to communicate for yourself because of a severe illness or an injury, or a cognitive condition. It is very important to understand that if you are already incapacitated, you cannot sign documents giving anyone else these powers. They must be prepared before they are needed!

Some people prefer to have one person serve as both their agent for finances and for healthcare. This allows one person who understands your physical and mental needs to make decisions about home care, assisted living or a skilled nursing facility and have access to the resources to pay for these services. This also means that one person is applying for any government benefits to help pay for this care.

There are times when designating two different agents creates conflict, if the two people don’t agree on the appropriate type of care. One may be more concerned with spending down resources, while another may wish you to receive 24/7 care.

If you appointed someone to serve as your fiduciary many years ago, it is so important that your documents be reviewed and updated. Do you still want that same person to make critical decisions on your behalf? Are they still able or willing to serve? If the person you have chosen lives in another state and wants you to be moved to where they live, will that work for you and your family?

If you have not reviewed your estate plan and your power of attorney documents in recent years, it is strongly recommended you do so now. Many families are now grappling with the results of outdated planning, or no planning at all. Having an updated estate plan and all of the related documents provides peace of mind for you and your loved ones.

Reference: Pocono Record (June 1, 2021) “Fiduciary Agents have power to make decisions you’d prefer to make yourself”

Can Family Members Contest a Will?

“The death of a loved one results in an emotional grief that, when combined with large sums of money on the line, can cause the beneficiaries of the will or trust or the heirs of the deceased to challenge the validity, interpretation, or administration of the will or trust.”

Estate planning documents, like wills and trusts, are enforceable legal documents, but when the grantor who created them passes, they can’t speak for themselves. When a loved one dies is often when the family first learns what the estate plans contain. That is a terrible time for everyone. It can lead to people contesting a will. However, not everyone can contest a will, explains the article “Challenges to wills and trusts” from The Record Courier.

A person must have what is called “standing,” or the legal right to challenge an estate planning document. A person who receives property from the decedent, and was designated in their will as a beneficiary, may file a written opposition to the probate of the will at any time before the hearing of the petition for probate. An “interested person” may also challenge the will, including an heir, child, spouse, creditor, settlor, beneficiary, or any person who has a legal property right in or a claim against the estate of the decedent.

Wills and trusts can be challenged by making a claim that the person lacked mental capacity to make the document. If they were sick or so impaired that they did not know what they were signing, or they did not fully understand the contents of the documents, they may be considered incapacitated, and the will or trust may be successfully challenged.

Fraud is also used as a reason to challenge a will or trust. Fraud occurs when the person signs a document that didn’t express their wishes, or if they were fooled into signing a document and were deceived as to what the document was. Fraud is also when the document is destroyed by someone other than the decedent once it has been created, or if someone other than the creator adds pages to the document or forges the person’s signature.

Alleging undue influence is another reason to challenge a will. This is considered to have occurred if one person overpowers the free will of the document creator, so the document creator does what the other person wants, instead of what the document creator wants. Putting a gun to the head of a person to demand that they sign a will is a dramatic example. Coercion, threats to other family members and threats of physical harm to the person are more common occurrences.

It is also possible for the personal representative or trustee’s administration of a will or trust to be challenged. If the personal representative or trustee fails to follow the instructions in the will or the trust, or does not report their actions as required, the court may invalidate some of the actions. In extreme cases, a personal representative or a trustee can be removed from their position by the court.

An estate plan created by an experienced estate planning lawyer should be prepared with an eye to the family situation. If there are individuals who are likely to challenge the will, a “no-contest” clause may be necessary. Open and candid conversations with family members about the estate plan may head off any surprises that could lead to the estate plan being challenged.

One last note: just because a family member is dissatisfied with their inheritance does not give them the right to bring a frivolous claim, and the court may not look kindly on such a case.

Reference: The Record-Courier (May 16, 2021) “Challenges to wills and trusts”