King & Wood, P.A.

What Sparks the Contesting of a Will?

“Some people draft wills or trusts to ensure that the loved ones they will eventually leave behind own a piece of the properties the former will be leaving behind in case of their death.”

A last will and testament is the document used to direct your executor to distribute assets and property according to your wishes. However, it’s not uncommon for disgruntled or distant family members or others to dispute the validity of the will. A recent article titled “5 Reasons A Law Will May Be Contested” from Vents Magazine explains the top five factors to keep in mind when preparing your will.

Undue influence is a commonly invoked reason for a challenge. If a potential beneficiary can prove the person making the will (the testator) was influenced by another person to make decisions they would not have otherwise made, a will challenge could be brought to court. Undue influence means the testator’s decision was significantly affected by a person who stood to gain something by the outcome of the will and made a concerted effort to change the testator’s mind.

Even if there was no evidence of fraud, any suspicion of the testator’s being influenced is enough for a court to accept a case. If you think someone unduly influenced a loved one, especially if they suffer from any mental frailties or dementia, you may have cause to bring a case.

Outright fraud or forgery is another reason for the will to be contested. If there have been many erasures or signature styles appear different from one document to another, there may have been fraud. An estate planning attorney should examine documents to evaluate whether there is enough cause for suspicion to challenge the will.

Improper witnesses. The testator is required to sign the will with witnesses present. In some states, only one witness is required. In most states, two witnesses must be present to sign the will in front of the testator. A beneficiary may not be a witness to the signing of the will. Some states have changed laws to allow for remote signings in response to COVID. If the rules have not been followed, the will may be invalid.

Mistaken identity seems farfetched. However, it is a common occurrence, especially when someone has a common name or more than one person in the family has the same name, and the document has not been properly signed or witnessed. This could create confusion and make the document vulnerable to a challenge. An experienced estate planning attorney will know how to prepare documents to withstand any challenges.

Capacity in the law means someone is able to understand the concept of a will and contents of the document they are signing, along with the identities of the people to whom they are leaving their assets. The person doesn’t need to have perfect mental health, so people with mild cognitive impairments, such as depression or anxiety, may make and sign a will. A medical opinion may be needed, if there might be any doubt as to whether a person had testamentary capacity when the will is signed.

A will contest can be time-consuming and expensive, so keep these issues in mind, especially if the family includes some litigious individuals.

Reference: Vents Magazine (May 6, 2022) “5 Reasons A Law Will May Be Contested”

What Is a Living Trust Estate Plan?

“While a Last Will can help ensure that one’s wishes regarding the distribution of their estate upon death are followed, it is the living trust that allows the estate to avoid probate.”

Living trusts are one of the most popular estate planning tools. However, a living trust accomplishes several goals, explains the article “Living trusts allow estates to avoid probate” from The Record Courier. A living trust allows for the management of a beneficiary’s inheritance and may also reduce estate taxes. A person with many heirs or who owns real estate should consider including a living trust in their estate plan.

A trust is a fiduciary relationship, where the person who creates the trust, known as the “grantor,” “settlor,” “trustor” or “trustmaker,” gives the “trustee” the right to hold title to assets to benefit another person. This third person is usually an heir, a beneficiary, or a charity.

With a living trust, the grantor, trustee and beneficiary may be one and the same person. A living trust may be created by one person for that person’s benefit. When the grantor dies, or becomes incapacitated, another person designated by the trust becomes the successor trustee and manages the trust for the benefit of the beneficiary or heir. All of these roles are defined in the trust documents.

The living trust, which is sometimes referred to as an “inter vivos” trust, is created to benefit the grantor while they are living. A grantor can make any and all changes they wish while they are living to their trust (within the law, of course). A testamentary trust is created through a person’s will, and assets are transferred to the trust only when the grantor dies. A testamentary trust is an “irrevocable” trust, and no changes can be made to an irrevocable trust.

There are numerous other trusts used to manage the distribution of wealth and protect assets from taxes. Any trust agreement must identify the name of the trust, the initial trustee and the beneficiaries, as well as the terms of the trust and the name of a successor trustee.

For the trust to achieve its desired outcome, assets must be transferred from the individual to the trust. This is called “funding the trust.” The trust creator typically holds title to assets, but to fund the trust, titled property, like bank and investment accounts, real property or vehicles, are transferred to the trust by changing the name on the title. Personal property that does not have a title is transferred by an assignment of all tangible property to the trustee. An estate planning attorney will be able to help with this process, which can be cumbersome but is completely necessary for the trust to work.

Some assets, like life insurance or retirement accounts, do not need to be transferred to the trust. They use a beneficiary designation, naming a person who will become the owner upon the death of the original owner. These assets do not belong in a trust, unless there are special circumstances.

Reference: The Record Courier (April 3, 2021) “Living trusts allow estates to avoid probate”

How Does a Trust Work for a Farm Family?

“The trust is a very useful and flexible tool for estate planning, yet it is probably the most underused estate management technique. A trust is an artificial entity, something like a corporation, created by a document or instrument.”

There are four elements to a trust, as described in this recent article “Trust as an Estate Planning Tool,” from Ag Decision Maker: trustee, trust property, trust document and beneficiaries. The trust is created by the trust document, also known as a trust agreement. The person who creates the trust is called the trustmaker, grantor, settlor, or trustor. The document contains instructions for management of the trust assets, including distribution of assets and what should happen to the trust, if the trustmaker dies or becomes incapacitated.

Beneficiaries of the trust are also named in the trust document, and may include the trustmaker, spouse, relatives, friends and charitable organizations.

The individual who creates the trust is responsible for funding the trust. This is done by changing the title of ownership for each asset that is placed in the trust from an individual’s name to that of the trust. Failing to fund the trust is an all too frequent mistake made by trustmakers.

The assets of the trust are managed by the trustee, named in the trust document. The trustee is a fiduciary, meaning they must place the interest of the trust above their own personal interest. Any management of trust assets, including collecting income, conducting accounting or tax reporting, investments, etc., must be done in accordance with the instructions in the trust.

The process of estate planning includes an evaluation of whether a trust is useful, given each family’s unique circumstances. For farm families, gifting an asset like farmland while retaining lifetime use can be done through a retained life estate, but a trust can be used as well. If the family is planning for future generations, wishing to transfer farm income to children and the farmland to grandchildren, for example, a granted life estate or a trust document will work.

Other situations where a trust is needed include families where there is a spendthrift heir, concerns about litigious in-laws or a second marriage with children from prior marriages.

Two main types of trust are living or inter-vivos trusts and testamentary trusts. The living trust is established and funded by a living person, while the testamentary trust is created in a will and is funded upon the death of the willmaker.

There are two main types of living trusts: revocable and irrevocable. The revocable trust transfers assets into a trust, but the grantor maintains control over the assets. Keeping control means giving up any tax benefits, as the assets are included as part of the estate at the time of death. When the trust is irrevocable, it cannot be altered, amended, or terminated by the trustmaker. The assets are not counted for estate tax purposes in most cases.

When farm families include multiple generations and significant assets, it’s important to work with an experienced estate planning attorney to ensure that the farm’s property and assets are protected and successfully passed from generation to generation.

Reference: Ag Decision Maker (Dec. 2020) “Trust as an Estate Planning Tool”

 

The Importance of a Will

“There’s much to plan for in life—college, your wedding, your first child, life insurance—and with more than enough to keep you busy, it’s easy to forget about your will.”

Even during a pandemic, few people want to spend time thinking about death. However, having an estate plan means having some of the most important documents you’ll ever create. Having a will is a gift that alleviates the burden placed on loved ones after we are gone, says this recent article “Why it’s important for every adult to get a will” from Bankrate. In a time of sorrow, the family and friends will be spared the stress that makes grieving more complicated when there is no will, no guidance and no path forward.

What is a will?

In its most simple form, a will is a legal document that serves to transfer property at your death to the people you choose. It is revocable, which means you have the legal ability to make changes to it, as long as you are alive and have the mental capacity to do so. However, wills do more than distribute property. The will is your chance to state your wishes for who will care for your children, what happens to your physical remains and who will take care of your pets.

Are Wills Pretty Much the Same?

There’s a good reason why the best wills are those created with an estate planning attorney: they are created to suit your specific needs. Just as every person is different, everyone’s will must reflect their life. Some people want to name a recipient for every single asset they have, while others prefer simply to give their entire estate to a spouse, their children, a trust, or a charity. However, there are also different kinds of wills.

A Testamentary Will is a will signed in the presence of witnesses. It is the best choice to protect your family.

A Holographic Will is a handwritten will, which is not acceptable in many states and could lead your family into all kinds of expensive and stressful battles, in and out of court.

An Oral Will is a verbal will that is declared in front of witnesses, but don’t count on anything you say being considered a legally valid will.

A Mutual Will is also known as a “I love you Will,” when partners create a joint will leaving everything to each other. There can be some tricky things about these wills, since when one person dies, the other is still legally bound to the terms of this will. If the surviving spouse remarries, it can become complicated.

A Pour Over Will is the ideal choice, when your plan is to pour assets into an established trust at your death.

What does a will do and not do?

Wills are used to determine guardianship for minor children and distribute assets and real property. Wills don’t control jointly owned assets, or contracts, like life insurance policies and retirement accounts. These are controlled by beneficiary designation forms. It won’t matter if your will says that your current spouse should inherit your retirement account and you never changed the beneficiary from your first spouse. This is why estate planning attorneys always tell clients to check on beneficiary designations when large life events, like divorce and remarriage, occur.

What happens if there is no will?

Without a will, the state’s laws will determine what happens and your wishes don’t count. That includes who inherits your property, and even who raises your minor children. The court will make all of these decisions. The stress that this creates cannot be underestimated. When there is no will, the chances of litigation between family members and trouble from distant relatives seeking a claim against your estate rises.

Reference: Bankrate (Nov. 6, 2020) “Why it’s important for every adult to get a will”

 

What You Need to Know about Trusts

 

“Generally, if you own property, have life insurance and/or have other assets which total over $150,000 (including life insurance and real property), you are a candidate for asset protection.”

Some people still think that trusts and estate planning are just for wealthy people. However, that’s simply not true. Many people are good candidates for trusts, used to protect their assets and their families. Trusts can also be used to avoid probate, says the article “Common misconceptions about trusts” from the Rome Sentinel.

Who controls my property? The grantor, or the person setting up the trust, has the option of being a trustee, if they are setting up a revocable trust or an irrevocable trust. There are tax differences, so you’ll want to do this with an estate planning attorney. The grantor names co-trustees, if you wish. They are usually a spouse, adult child, or trusted adult. Successor trustees, that is, people who will take over the trust if the primary trustee becomes incapacitated or dies.

Only rich people need trusts. Anyone who owns a home, has life insurance and other assets worth more than $150,000 can benefit from the protection that a trust provides. The type of trust depends the grantor’s age, health status, and the amount, variety, and location of assets. A healthy person who owns a lot of life insurance or other assets would probably want either a Revocable Living Trust or a Will that includes a Testamentary Trust. However, a person who is over 55 and is planning for nursing home care, is more likely to have an Irrevocable Medicaid Trust to protect assets, avoid probate and minimize tax liability.

Can I access assets in a trust? A properly prepared trust takes your lifestyle and spending into account. Certain types of trusts are more flexible than others, and an estate planning attorney will be able to make an appropriate recommendation.

For instance, if you have an Irrevocable Medicaid Trust, you will be restricted from taking the principal asset back directly. The assets in this type of trust can be used to fund costs and expenses of real property, including mortgage payments, taxes, furnace and roof repairs. An IMT needs to be set up with enough assets outside of it, so you can have an active retirement and enjoy your life. Assets outside of the trust are your spendable money.

Can my children or any others take assets from the trust? No, and that’s also the point of trusts. Unless you name someone as a Trustee with the power to take assets out of the trust, they cannot access the funds. The grantor retains control over what assets may be gifted during their lifetime. They can also impose restrictions on how assets are restricted after death. Some trusts are created to set specific ages or milestones, when beneficiaries receive all or some of the assets in the trust.

Trusts are not one size-fits all. Trusts need to be created to serve each family’s unique situation. An experienced estate planning attorney will work with the family to determine their overall goals, and then determine how trusts can be used as part of their estate plan to achieve goals.

Reference: Rome Sentinel (May 31, 2020) “Common misconceptions about trusts”

 

Alzheimer’s, Dementia and other Brain Diseases Require Special Estate Planning Steps

 

“Covid-19 or Coronavirus has created health worries and fear for everyone. For those with underlying health issues, which include multiple sclerosis, Parkinson’s disease, Alzheimer’s disease, or other brain diseases, those concerns are even more pronounced.”

There are certain steps that can be taken by individuals, loved ones and family members to make this challenging time safer and smarter, advises an article “Financial And Estate Planning Steps To Take Now: Special Considerations For Those With Brain Disease” from Forbes.

Anyone living with a neurologic condition needs to be sure their planning reflects not only their condition but their personal experience of the condition. The variability of each person’s experience of a brain disease, from symptoms and severity to the progression rate and future prognosis to the possibility of any recovery, affects how they need to plan.

For an Alzheimer’s patient, in early stages there may be no problems in signing legal documents and putting legal safeguards in place to protect finances. Most people are not aware that the degree of competency to sign legal documents varies, depending upon the complexity of the documents to be signed and the circumstances. A relatively low level of competency is required to sign a will. This is known as “testamentary capacity.” A higher level of competency is required to sign something like a revocable trust, investment policy statement, etc. Therefore, a person who may be legally able to sign a will may not have the legal capacity to sign other documents. Alzheimer’s patients need to get their entire estate plan in order, as soon as a diagnosis is received. Safeguards are extremely important, including having an independent person, like a CPA or trusted family member, receive copies of all monthly bank and brokerage statements, in case abilities decline faster than anticipated.

Patients living with peripheral neuropathy may experience issues with balance, burning sensations, dizziness, hypersensitive skin and pain that make wearing socks or shoes impossible. If the condition becomes so severe that the person becomes homebound, they need to make changes: set up accounts, so bills can be paid online, have income streams set to automatic deposit and simplify and consolidate accounts. It is important to have a Power of Attorney (POA) that is effective immediately or a revocable living trust with a co-trustee. In this way, you do not have to leave home to conduct your business.

Parkinson’s disease may not be well understood by professional advisors. You’ll need to explain that your facial expression—Parkinsonian masked face—does not mean that you are not responding to a conversation. They need to know that your handwriting may change, becoming small and cramped. This can result in a bank or other financial institution refusing to accept your signature on documents. Your attorney can prepare a document that confirms you are living with Parkinson’s disease and that micrographia is one of your symptoms. The document should include three or four different signatures to reflect the variations. Have each signature witnessed and notarized.

People living with MS (multiple sclerosis) face the possibility of an exacerbation that could leave them incapacitated at any time. A revocable trust to coordinate financial management, with trusted individuals as co-trustees should be in place.

For people with these and other brain illnesses, an emergency financial and legal road map needs to be prepared. It should include monthly recurring bills, non-recurring bills like life insurance, property taxes, etc. Contact information for key advisors, your estate planning attorney, CPA, financial advisor, banker, insurance agent, etc., needs to be shared. Your estate plan should be updated, if you haven’t reviewed it in three or four years. If you don’t have an estate plan in place, now is the time to have one created.

Reference: Forbes (May 17, 2020) “Financial And Estate Planning Steps To Take Now: Special Considerations For Those With Brain Disease”