King & Wood, P.A.

What are the Top Estate Planning Mistakes?

“Estate planning is essential for families who want to secure financial stability and build generational wealth.”

A cornerstone of creating family success is proactive planning for the future. This includes working with experienced advisors, including estate planning attorneys, who can guide the family to making informed decisions. A recent article, “Top Estate Planning Mistakes Families Make—And How To Avoid Them,” from Forbes, advises readers to include thoughtful planning, organized financial records and estate planning to create a legacy to span generations.

The biggest mistake families make is not having an estate plan. The second biggest mistake is trying to create an estate plan without the help of an experienced estate planning attorney. Families often turn to an attorney who has helped with transactions, like buying a house or settling a homeowner’s insurance claim. However, this is a costly mistake. It’s like asking a podiatrist to perform brain surgery—they may be well-meaning. However, they don’t have the necessary experience and knowledge.

Disorganized financial and legal record-keeping leads to unnecessary estate planning and administration complications. Good record-keeping helps families make good decisions regarding spending and saving and makes estate planning more effective. For example, creating a budget for retirement without accurate information could lead a couple to overspend and run out of money or live so frugally that they don’t enjoy their retirement.

Financial records must be organized, so real estate, investment accounts, savings accounts, pensions, credit card debt, mortgages and personal property can be accurately valued. Creating a successful estate plan needs to include information on cash flow and spending to guide decisions on how assets will be distributed and what liquidity is needed.

Family wealth is not created by passing large assets to the next generation without restrictions. Long-term estate planning is needed to retain wealth. When large inheritances are passed on without planning or education, most of the money disappears by the second generation, and whatever’s left is usually gone by the third generation. The family’s wealth shouldn’t be viewed as a bank account to be depleted.

Trusts are often used in estate planning. However, a common mistake is to create a trust and then neglect to fund it. Funding a trust involves moving assets into the trust’s ownership. Deeds, titles and financial accounts must be changed to identify the trust as the owner rather than the person who used to own the asset. Some estate planning attorneys will have their office manage this process, while others require clients to do this themselves. Either way, funding the trust must be completed to perform as desired.

Maintaining an estate plan is just as important as creating one. Financial records and documents in the estate plan need to be kept up to date. If the estate executor dies, the will needs to be updated. If a guardian is named to raise minor children, which is done through a will, and the person moves away, a new guardian needs to be named in a revised will.

Estate plans also involve documents to protect the living. A Power of Attorney assigns another person the ability to manage financial and legal matters if a person is incapacitated by injury or illness. A Healthcare Power of Attorney is needed to have another person manage medical decisions. The name of this document varies by jurisdiction. However, without it, a family will need to go to court to be involved with a loved one’s medical care.

Estate planning can be viewed as organizing one’s life and planning for the future. It is a gift to loved ones and establishes a legacy of caring.

Reference: Forbes (Nov. 7, 2024) “Top Estate Planning Mistakes Families Make—And How To Avoid Them”

Top Tips for Estate Planning

“There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options, like transfer on death.”

Social media and in-person conferences are filled with “hacks” to improve lifestyles, finances and everything you can imagine. Taking a page from the world of “life hacks,” this article from Kiplinger, “14 Rapid-Fire Estate Planning Tips,” presents short and impactful info on estate planning.

Tip 1—Consider using a professional trustee in your estate plan for a more effective estate plan and more efficient administration.

Tip 2—For business owners, make sure that your estate planning attorney, CPA and financial advisors all understand your business. Invite them to your office or factory, so they can see how production or business practices are handled and the role of key employees, especially family members.

Tip 3—Discuss Transfer on Death (TOD) and Payable on Death (POD) options to see if they might be useful or detrimental to your estate plan. Many banks are pushing these arrangements, but they are not for everyone.

Tip 4—If you own a closely held company, have your estate planning attorney review any buy-sell provisions in the shareholder and operating agreements. Were these terms coordinated with the liquidity available to your trust or estate?

Tip 5—Do your trust documents include provisions regarding substance abuse powers and protections for beneficiaries? Give the trustee the power to deal with any substance abuse issues, including the power to pay costs directly to vendors and not directly to the beneficiary, require testing and treatment programs and pay for them with trust funds, and withhold mandatory distributions until the beneficiary meets certain testing and treatment standards.

Tip 6—Use an active voice in all forms, communications and agreements. Avoid ambiguity and provide clarity by using the active voice to identify the person who is or will exercise power or duty.

Tip 7—Be careful with personal information and documents. Your estate planning attorney and all other advisors should use encryption to protect emailed documents. Multifactor authentication should be used on any remote access. Don’t open attachments from anyone you don’t know or click on a link in an email from someone you think you know. Pick up the phone and call advisors before opening the email or link.

Tip 8—Ask your estate planning attorney to review the trust’s express standards of care, so you understand the duties and liabilities of the trustee. When a trust states a trust advisor is not a fiduciary and is not liable for actions taken in good faith, then any actions must be in good faith. This is a standard of care, and they are liable for actions taken in bad faith.

Tip 9—Ask your estate planning attorney about having your trust absolve successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for this language absolving them of the predecessor trustee’s prior acts of omission or commission. If there’s no such provision in the document, the successor trustee will want all qualified beneficiaries to sign a release and indemnification.

Tip 10—Don’t rely on your memory regarding gift and estate tax returns filed in the past or your past use of lifetime estate tax exemptions, annual exclusion gifts, withdrawal notices and Generation-Skipping Transfer Tax (GSTT) allocations. Locate copies of these documents in your records to ensure that they match. Document your file with any notes or communications about gifting. As a taxpayer, you and your estate are responsible for maintaining records and have the burden of proof in any tax matters.

Tip 11—Anytime you review or update your estate plan, take the time to review any beneficiary designations immediately. Existing deeds, titles, account details and beneficiary designations should all be up to date, as your new estate plan may be ineffective at best (and, at worst, worthless) if those forms are not completed and updated.

Tip 12—If you are a beneficiary, you are allowed to review trust administration and ask questions of the trust officer. You are entitled to know how often you will receive statements or annual accounting, the standards the trustee must follow for making distributions and whether or not you have any control over the use of trust benefits during your lifetime or upon your death.

Tip 13—When updating your estate, ask your estate planning attorney about drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments.

Tip 14—If you file personal tax returns and fiduciary tax returns for trusts, it may make sense to use the same accounting firm for both.

Reference: Kiplinger (Nov. 8, 2023) “14 Rapid-Fire Estate Planning Tips”

How to Get Your Estate Plan Started

“You’re not too young, you do have enough assets and don’t you want to make things easier for your loved ones after you pass away?”

Estate planning involves deciding what you want to occur when you die and which of your trusted contacts may be empowered to manage those assets when you aren’t here. However, there are many misconceptions about estate planning, reports a recent article from Kiplinger, “It’s Estate Planning Week: Here’s How to Get Started.” Let’s set the record straight.

An estate plan can be as complicated or simple as you wish. For some, an estate plan may require a last will and testament to describe how you want your assets distributed upon death. If you have a large estate with many assets and complex goals, you could use a trust or a combination of trusts to administer assets after death.

For example, if you want to leave money for grandchildren but don’t want them to be able to access the funds until they reach a certain age or milestone, you could have a specific trust created for each beneficiary with descriptive language to explain what has to happen before the assets are distributed.

For married spouses, an estate plan typically leaves the assets to the surviving spouse and then, at the second spouse’s passing, includes instructions on who receives the assets. If there are no children, or you don’t want family members to inherit assets, you can use your estate plan to designate a charity or charities to receive gifts of cash or other assets.

Creating an estate plan involves creating an up-to-date balance sheet listing assets. How much you leave to heirs depends on whether you’ve spent your assets before you die or have significant liabilities.

You’ll need to name trustees to manage the assets if you establish trusts. You’ll also want to name successor trustees who can take over if the original trustee cannot serve. Talk with your trustees and successor trustees to be sure they are willing to take on the responsibility, since they will be in charge of the assets and need to make important financial decisions.

If your estate plan relies on a last will, you’ll need to name an executor who manages the estate, distributes assets, pays taxes and more. This person should be someone you trust implicitly. If you fail to name an executor, the court may appoint a representative.

An estate planning attorney will be familiar with any state-specific estate tax issues as well as federal estate tax issues. You’ll want to include your financial advisor and CPA to ensure that the estate plan works with all aspects of your life.

The estate plan isn’t completed until all documents have been signed and notarized and all assets are titled correctly. If assets are to be placed in a trust, your estate planning attorney will help you title assets to be sure the trust owns them and not your estate. If assets aren’t re-titled correctly, you may lose the benefit of the estate planning process. Check-in with your estate planning attorney every three to five years to be sure your estate plan still works. Family relationships and tax laws change, so estate plans need to be reviewed regularly. For example, the current federal estate tax exemption is $12.92 million for an individual, but unless Congress acts, this will sunset in 2025, when the exemption will revert to $5 million per person.

Reference: Kiplinger (Oct. 16, 2023) “It’s Estate Planning Week: Here’s How to Get Started”

Think Strategically when Creating Estate Plan

“Crafting a carefully considered estate plan can ensure that asset distribution aligns with both your intended legacy and your beneficiaries’ needs.”

Mindful estate planning can create tax and investment efficiencies and help ensure that your wishes are fulfilled, says a recent article titled “Estate planning basics: Tips for strategic preparation” from Atlanta Business Chronicle. Before creating a plan, it may be helpful to understand the components of a comprehensive plan, how assets can be transferred and how to get started.

Thoughtful estate planning starts with key documents. Your last will and testament provides details on wishes about property distribution and assets after death. The will creator names an executor, who oversees and manages the estate until its final distribution, including payment of any outstanding debts or taxes.

The will has no impact on insurance proceeds, retirement assets, or transfer-on-death investment accounts. A will can be amended during the creator’s lifetime and should be reviewed every three years or so to ensure that it still aligns with the testator’s wishes.

Trusts are legal entities allowing a third party—the trustee—to manage assets on behalf of beneficiaries. There are many different kinds of trusts, depending on the family’s needs. The grantor, who is the person creating the trust, can define how and when assets pass to beneficiaries. They can be revocable, meaning the grantor can amend the trust as long as they are living, or irrevocable, meaning the grantor cannot amend the trust after its creation.

A letter of intent can accompany a will and is published to the executor, trustees and beneficiaries. This provides detail from the decedent on their wishes but is not legally enforceable.

Power of Attorney is used when the person creating it is physically or mentally disabled due to illness or injury. It allows an agent to manage financial and legal affairs, can be temporary or permanent and is revoked upon the death of the principal.

Advance directives for health care provide detailed guidance to caretakers and medical professionals regarding wishes for healthcare when the person is unable to communicate their own wishes.

Transferring assets to beneficiaries occurs in several different ways, including designations, jointly held accounts and property, probate, or trusts. Beneficiary designations are typically used with life insurance policies, annuity contracts, retirement accounts and investment accounts.

Some assets are owned through Joint Tenancy With Rights Of Survivorship (JTWROS). They pass by title or registration to a surviving co-owner. This type of ownership is usually used with bank and investment accounts, real estate property, vehicles, or boats. The asset automatically transfers to the surviving owner. Be sure to avoid conflicting instructions in wills or trusts when assets are owned with JTWROS.

Probate is the method through which the estate is approved by the court and assets are distributed using the will as guidance. The court also authorizes the executor to manage the estate.

Assets held in trust are maintained by trustees who hold the assets on behalf of beneficiaries. They are passed on based on the trust agreement and don’t go through probate.

Once you have created an inventory of all assets and properties, meet with an experienced estate planning attorney to draft the documents needed to carry out the plan. The attorney will help refine goals and clarify key issues. Assets may need to be retitled and trusts may need to be funded. Executors, trustees and beneficiaries should be notified, so they understand their role in your estate plan.

Reference: Atlanta Business Chronicle (March 1, 2023) “Estate planning basics: Tips for strategic preparation”

The Risks of Creating Your Own Estate Plan

“Even Consumer Reports suggests working with an experienced estate planning attorney to make sure documents are correctly prepared.”

We call it the brother-in-law syndrome: your brother-in-law knows everything, even though he doesn’t. He tells anyone who’ll listen how much money he’s saved by doing things himself. Sadly, it’s the family who has to make things right after the do-it-yourself estate plan fails. This is the message from a recent article titled “Dangers of Do-It-Yourself Estate Planning” from Coastal Breeze News.

Online estate planning documents are dangerous for what they leave out. An estate plan prepared by an experienced estate planning attorney takes care of the individual while they are living, as well as taking care of distributing assets after they die. Many online forms are available. However, they are often limited to wills, and an estate plan is far more than a last will and testament.

An estate planning attorney knows you need a will, power of attorney, health care power of attorney, a living will and possibly trusts. These are essential protections needed but often overlooked by the do-it-yourselfer.

A Power of Attorney allows you to name a person to manage your personal affairs, if you are incapacitated. It allows your agent to handle your banking, investments, pay bills and take care of your property. There is no one-size-fits-all Power of Attorney. You may wish to give a spouse the power to take over most of your accounts. However, you might also want someone else to be in charge of selling your shares in a business. A Power of Attorney drafted by an estate planning attorney will be created to suit your unique needs. POAs also vary by state, so one purchased online may not be valid in your jurisdiction.

You also need a Health Care Power of Attorney or a Health Care Surrogate. This is a person named to make medical decisions for you, if you are too sick or injured to do so. These documents also vary by state,. There’s no guarantee that a general form will be accepted by a healthcare provider. An estate planning attorney will create a valid document.

A Living Will is, and should be, a very personalized document to reflect your wishes for end-of-life care. Some people don’t want any measures taken to keep them alive if they are in a vegetative state, for instance, while others want to be kept alive as long as there is evidence of brain activity. Using a standard form negates your ability to make your wishes known.

If the Power of Attorney, Health Care Power of Attorney or Living Will documents are not prepared properly, declared invalid or are missing, the family will need to go to court to obtain a guardianship, which is the legal right to make decisions on your behalf. Guardianships are expensive and intrusive. If your incapacity is temporary, you’ll need to undo the guardianship when you are recovered. Otherwise, you have no legal rights to conduct your own life.

DIYers are also fond of setting up property and accounts so they are Payable on Death (POD) or Transfer on Death (TOD) accounts. This only works if the beneficiaries outlive the original owner. If the beneficiary dies first, then the asset goes to the beneficiary’s children. Many financial institutions won’t actually allow certain accounts to be set up this way.

The other DIY disaster zone: real estate. Putting children on the title as owners with rights of survivorship sounds like a reasonable solution. However, if the children predecease the original owner, their children will be rightful owners. If one grandchild doesn’t want to sell the property and another grandchild does, things can turn ugly and expensive. If heirs of any generation have creditors, liens may be placed on the property and no sale can happen until the liens are satisfied.

With all of these sleight of hand attempts at DIY estate planning comes the end all of all problems: taxes.

When children are added to a title, it is considered a gift and the children’s ownership interest is taxed as if they bought into the property for what the parent spent. When the parent dies and the estate is settled, the children have to pay income taxes on the difference between their basis and what the property sells for. It is better if the children inherit the property, as they’d get a step-up in basis and avoid the income tax problem.

Finally, there’s the business of putting all the assets into one child’s name, with the handshake agreement they’ll do the right thing when the time comes. There’s no legal recourse if the child decides not to share according to the parent’s verbal agreement.

A far easier, less complicated answer is to make an appointment with an estate planning attorney, have the correct documents created properly and walk away when your brother-in-law starts talking.

Reference: Coastal Breeze News (Aug. 4, 2022) “Dangers of Do-It-Yourself Estate Planning”

When are You Required to File a Gift Tax Return?

“Filing a gift tax return is something that might feel a little bit gratuitous—after all, you were gifting something, not accumulating income, so why would the IRS possibly need to be in the loop?”

The IRS wants to know how much you’re gifting over the course of your lifetime. This is because while gifts may be based on generosity, they are also a strategy for avoiding taxes, including estate taxes, reports The Street in a recent article “Do I Need to File a Gift Tax Return?”

Knowing whether you need to file a gift tax return is relatively straightforward. The IRS has guidelines about who needs to file a gift tax return and who does not. Your estate planning attorney will also be able to guide you, since gifting is part of your estate and tax planning.

If you give a gift worth more than $16,000, it is likely you need to file a gift tax return. Let’s say you gave your son your old car. The value of used cars today is higher than ever because of limited supply. Therefore, you probably need to file a gift tax return. If the car title is held by you and your spouse, then the car is considered a gift from both of you. The threshold for a gift from a married couple is $32,000. Make sure that you have the right information on how the car is titled.

What if you added a significant amount of cash to an adult child’s down payment on a new home? If you as a member of a married couple gave more than $32,000, then you will need to file a gift tax return. If you are single, anything over $16,000 requires a gift tax return.

529 contributions also fall into the gift tax return category. Gifts to 529 plans are treated like any other kind of gift and follow the same rules: $16,000 for individuals, $32,000 for married couples.

What about college costs? It depends. If you made payments directly to the educational institution, no gift tax return is required. The same goes for paying medical costs directly to a hospital or other healthcare provider. However, any kind of educational expense not paid directly to the provider is treated like any other gift.

Do trusts count as gifts? Good question. This depends upon the type of trust. A conversation with your estate planning attorney is definitely recommended in this situation. If the trust is a “Crummey" trust, which gives the beneficiary a right to immediately withdraw the gift put into the trust, then you may not need to file a gift tax return.

A Crummey trust is not intended to give the beneficiary the ability to make an immediate withdrawal. However, the withdrawal right makes the gift in the trust a “current gift” and it qualifies for the annual exclusion limit. Recategorizing the gift can potentially exempt the person giving the gift from certain tax obligations. Check with your estate planning attorney.

Even when filing a gift tax return, the amount of tax being paid is usually zero. This is because the gifts are offset by each person’s lifetime exemption. The IRS wants these returns filed to keep track of how much each individual has gifted over time. Unless you are very wealthy and making gift transfers from a family trust or to family members, it is not likely you will ever end up paying a tax. You are, however, required to keep the IRS informed.

Reference: The Street (March 31, 2022) “Do I Need to File a Gift Tax Return?”

 

Just What Is in an Estate Plan?

“Unfortunately, death doesn’t just happen to other people. We should all get our affairs in order, so that our loved ones can focus on grieving and moving on once we pass.’

Getting your affairs in order may not be on anyone’s top ten fun list for a weekend. However, once it is done, you can relax, knowing your loved ones will be cared for. Is estate planning more or less painful than doing taxes once a year? The answer depends on who you ask, but a recent article titled “Estate Planning Checklist: 12 Things to Get in Order” from South Florida Reporter breaks it down into easy-to-manage steps.

A last will and testament outlines how your assets will be distributed after your death. They include personal property, real estate, bank accounts, etc. You can name a guardian for minor children, and name an executor, the person who will be in charge of managing your estate.

Proof of identity. Your executor will need information including a valid birth certificate, Social Security card, marriage or divorce certificates, a prenuptial agreement, or military service discharge papers.

Digital asset information. With so much of our lives lived online, everyone needs a digital vault, an integrated password manager or some kind of system for managing your digital assets. Without this, your traditional and digital assets are vulnerable to identity theft and fraud.

Property deeds and titles. You have titles for cars, homes, or real estate property. They need to be gathered and kept in a safe place, then one or two highly trusted individuals need to be told where these documents are located.

Revocable living trust. Creating a trust with an experienced estate planning attorney can help loved ones avoid the time and cost of having your estate go through probate. The trust creates a legal entity allowing you to control property while you are alive but preparing for the future. If you are living and become incapacitated, the successor trustee controls the assets owned by the trust.

Debts. These do not disappear when you die. Your executor will need to know what debts exist because they will need to address them. Compile a list of your debts, which may include mortgages, auto loans, credit cards, personal loans and student loans. Add contact information for the lender, account number, login information and approximate amount of the debt. If you have credit cards you rarely use, include those also, so they can be closed out before identity theft occurs.

Non-Probate Assets and Beneficiaries. Assets with named beneficiary designations can be transferred directly to beneficiaries. However, this does not happen automatically. Your executor will need to provide beneficiaries with the information for the assets, including the name of the insurance company or financial institution, the location of policies, account numbers and the value of the asset. The beneficiary may need to provide a death certificate and identification information before the assets are released.

Financial information. Let your executor skip the scavenger hunt. Create a detailed list information including bank accounts, car insurance, credit cards, health, home and life insurance, pension plans, retirement plans and tax returns.

Advanced Health Care Directive. This document is an opportunity for you to tell health care providers how you want medical decisions to be made, if you cannot communicate your wishes. The AHCD typically has two parts: Health Care Power of Attorney (also known as a health care proxy) and a living will.

The Living Will outlines your wishes, if you are unable to communicate. It describes your preferences for end-of-life requests, medications, resuscitation, surgeries, or other invasive procedures.

Power of Attorney is a document to give someone else the power to act on your behalf regarding financial and legal affairs. The scope of power can be as broad as managing everything or limited to selling your classic car collection. Your estate planning attorney will help you clarify what responsibilities you wish to give in a POA.

Funeral Wishes. If you want to save your family a lot of stress during a very difficult time, outline what you would want to happen. Do you want a cremation or embalming and burial? Should it be a full-on faith-based memorial service, or a few poems read at graveside? Make sure that your wishes are communicated and shared with loved ones, so everyone knows what you want.

Meet with an Estate Planning Attorney. Make an appointment to meet with an estate planning attorney to put all of this information in the appropriate legal documents. They may have recommendations for options that you may not know about.

Reference: South Florida Reporter (April 2, 2022) “Estate Planning Checklist: 12 Things to Get in Order”

Common Estate Planning Mistakes

“Your last will and testament is one of the most important legal documents that you will ever make. It allows you to direct where you want your property, guardianship and debts to go after you die, and allows you to appoint an executor to act out your wishes.”

Despite the pandemic, two out of three American adults still do not have a will. Procrastination and thinking they don’t have enough assets to warrant a will are the top reasons given, says the article “The Biggest Mistakes People Make in Their Wills, According to Estate Lawyers” from Huff Post. Estate planning lawyers know this is a tragic mistake, since everyone over age 18 needs some estate planning documents. They can spare family members considerable financial and emotional stress during a terrible time.

Here are the biggest mistakes seen by estate planning attorneys:

Assigning co-executors. One executor and an alternate executor are all you need. If you make all of your children executors, the chances they will all agree are unlikely. Selling a house is the best example. What if one child wants to keep the house and two want to sell? What if they do not agree on the price?

If the parents insist on naming all of the children executors, then one solution is to have everyone sign waivers to agree in advance how disputes will be settled.

Thinking all you need is a will to avoid probate. A valid will has to go through probate and, depending on where you live, be administered by the court to some degree. However, if your estate includes assets titled solely in your name, without a beneficiary designation, they will go through probate before being distributed according to directions in the will. Talk with an estate planning attorney about how trusts work, how to title assets and other strategies to minimize probate.

Not being clear about personal possessions. Simple language of leaving “an equal share” to your heirs makes conflict inevitable. When loved ones die, emotional attachments to possessions become powerful. Siblings who always got along may find themselves battling over items they never seemed to care about in the past. The more discussions you can have with children before passing, and the more details in the will, the less likely the disputes will grow into litigation. If one of your children wants the family silver, write it in the will.

Failing to update wills and estate plans. Certain life events seem obvious times to update a will and estate plan, like the birth of a new child or grandchild, divorce, marriage or relocating. However, even without these “trigger” events, an estate plan needs to be reviewed and revised every three to five years. If you have children and grandchildren, for instance, and one of the children dies, the grandchildren will not inherit anything, unless provisions are made in the will.

Will an inheritance be helpful or harmful? Leaving a large amount of wealth to a young adult can be destructive, even if it is legal. An outright gift to a college student could disqualify them from financial aid. A large gift to a family member contemplating divorce could end up in the bank account of the ex-spouse. Think carefully about the short and long-term impact of the inheritance.

Keeping your will and estate planning documents a secret. Make sure people know where to find these documents and keep them in a safe place. If wills are not found, it is as if they do not exist.

Trying to do it yourself or with someone who is not an experienced estate planning attorney. If the will is found invalid by the court, it is as if you do not have a will and state law will determine what happens to your property. Even the best intentions from an attorney who practices in another area of the law puts your estate and your family at risk. Estate planning is complicated, and mistakes quickly become expensive for heirs.

Reference: Huff Post (March 8, 2022) “The Biggest Mistakes People Make in Their Wills, According to Estate Lawyers”

What Is Probate and How Does It Work?

“Probate survives as a procedure originally implemented by the King of England to protect his citizens from themselves and their greed.”

Probate is a legal process created long ago to protect the interests of a person after their death. It establishes a documented, validated, formal court procedure to establish title (ownership) and transfer ownership of a deceased person’s assets, as described in a recent article “Probate still gets lots of questions” from the Pauls Valley Democrat.

Probate accomplishes several goals. One is to fulfill the intentions of the decedent and follow the directions expressed in a written valid will. Another is to prevent the improper acquisition of assets by self-serving heirs or claimants. It provides a formal process to capture and control assets and document them. It also provides for the distribution of all assets in the estate, as directed by the decedent.

A petition is typically filed with the local district court in the county where the person resided at death. It confirms the jurisdiction of the court and defines the scope of the estate. This includes:

• Fact of death and name of the decedent, included in the original copy of the death certificate
• Residency of the decedent
• Whether there was a will (original will is filed with the court)
• Name of the executor or personal representative
• Names of all potential heirs
• The approximate size and scope of the estate

After documents are filed, a hearing takes place and formal notice is provided to all known heirs and to the public. This is where probate becomes problematic. Any known heirs who are notified may not always be named in the will and could bring claims against the estate. Any person who wishes to find out the size and scope of the estate may do so. This often brings creditors and predators into the process. Many scammers rely on probate notices to find fresh victims.

While the traditional goals of providing an open and fair opportunity to gain notice of the person’s death may have worked well in the past, today they often provide an opportunity for disgruntled relatives and thieves.

For this reason, many families prefer to take some or all assets from the estate and place them within the protection of a revocable living trust. Assets placed in a trust do not go through probate and will not be mentioned in a will. The trustee is charged with administering and distributing assets in a trust. There is no court involvement. Trusts may also be used during a person’s lifetime, as well as after they have died.

Other assets not governed by probate are those with beneficiary designations. Insurance policies, retirement accounts and investment accounts are among the types of assets distributed directly to the beneficiary without court involvement.

An estate planning attorney takes the best of these old English laws and blends them with our modern realities and current tax laws.

Reference: Pauls Valley Democrat (June 3, 2021) “Probate still gets lots of questions”

Do Unrecorded Deeds Help or Hurt Estate Planning?

“While discussing estate planning with my parents, they told me that an attorney prepared a deed for them but told them not to record it yet.”

Using an unrecorded deed to transfer property without probate sounds like an easy way to transfer ownership of the family home, but is it asking for trouble? That’s the topic of an article from NWI Times entitled, “Estate Planning: Are unrecorded deeds a good idea?” The fact that the idea came from a family’s attorney makes the question even more important. The attorney told the parents the children could record the deed after their deaths and transfer the property without probate.

Most estate planning attorneys haven’t seen this technique used in a long time, and some may never have heard of it. There’s probably a good reason for this—it’s an estate mess waiting to happen.

First of all, what if the deed itself goes missing? One of the most common questions estate planning attorneys hear is “What do I do because Mom lost the_____?” Fill in the blanks—the deed, the title to the car, the bank statement, etc. Important documents often get lost. If a deed is missing and can’t be recorded, title can’t be transferred. Hoping an important piece of paper doesn’t get lost is not an estate plan.

Until the deed is recorded, and title transferred, the holders of the title still own the property. They can mortgage the property or sell it. The plan for the children to receive and record the deed may not have legal authority.

Laws about how deeds must be created change. Indiana made a change to the law in 2020 that required signatures on deeds to be witnessed. Without the witness, the deeds can’t be recorded. If the adult child is holding a deed for the recording and it’s not witnessed because the parents have died, it can’t be recorded.

There are better ways to transfer ownership of the family home that adhere to the general principles of estate planning.

There are also different types of deeds that are more commonly used in estate planning to transfer home ownership without going through probate. One is a Transfer on Death Deed (TOD Deeds). A TOD deed allows a person to name beneficiaries on their real estate property without giving up any rights of ownership. The TOD deed is recorded, so there’s no worry about mom or pop losing the paperwork.  The TOD deed can also be changed by recording another deed or using an affidavit.

Trusts can also be used to transfer home ownership and keep the transaction out of probate. An estate planning attorney will be able to explain the different types of trusts used to transfer a home. State laws vary, and allowable trusts vary, so talking with a local estate planning attorney is the best option.

Reference: NWI Times (May23, 2021) “Estate Planning: Are unrecorded deeds a good idea?”