Beware of Nonlawyers Acting Like Lawyers

When people think about creating an estate plan, they may think it just involves getting a set of forms that convey their wishes regarding their finances, health, and what will happen to their stuff when they die. Although the documents that comprise an estate plan may seem like simple forms, these important estate planning tools are the legally binding way for clients to manage their affairs during their incapacity (when they cannot manage their own affairs) or their death. Relying on nonlawyers to help with estate planning forms or provide legal advice can pose significant risks. Many professions should not provide legal advice, but it is not uncommon for some to cross into legal territory when they have related fields of expertise. Individuals in these professions must recognize the boundaries of their expertise and refer clients to qualified legal professionals when estate planning advice is needed. Additionally, consumers should be aware of these limitations and seek legal help.

Reasons to Be Cautious and Contact an Estate Planning Attorney

Many different types of professionals play important roles in the estate planning process. Some aspects of the process, however, should be handled only by lawyers. Nonlawyer professionals do not have the same legal training and expertise that a licensed and experienced estate planning attorney has. Estate planning requires an understanding of complex legal issues, including tax implications, property rights, and family law considerations. Relying on individuals who do not have the right qualifications may result in oversights or incorrect applications of law.

Other types of professionals can provide crucial information about your finances, insurance policies, property, and other relevant issues that contribute to a comprehensive estate plan. They can also offer expert advice regarding investment strategies, financial products that can enhance your estate plan, and important tax consequences.

Nonlawyers often provide generic estate planning solutions that are merely templates and do not address your specific needs and circumstances. Estate planning is highly individualized, and a one-size-fits-all approach may not adequately protect your money and property or meet your goals. Attorneys know which questions to ask to prevent or navigate specific legal problems and provide alternative strategies.

Estate planning laws and probate procedures also vary significantly from one jurisdiction to another. Nonlawyers may not be well-versed in the specific laws of your state, leading to incomplete or inappropriate legal documents that may not be legally valid or effective. Between improperly drafted documents and outdated documents that must be updated as your circumstances change, there is sure to be disappointment when you need your estate plan to work.

In addition, communication with attorneys is protected by attorney-client privilege, which ensures confidentiality. Most nonlawyers cannot offer the same level of privacy, potentially jeopardizing sensitive information and creating legal risks.

How to Find a Reputable Estate Planning Attorney

Finding a reliable and experienced estate planning attorney is crucial for ensuring that your wishes are properly documented, legally protected, and enforceable. Here are some general strategies to help you find a reputable estate planning attorney, regardless of your location:

  • Referrals from friends, family, colleagues, or other professionals you trust for recommendations. After you have compiled a list of potential attorneys, search online for reviews and testimonials from previous clients to gain insight and find the right fit
  • Online legal directories, such as the American Bar Association’s Lawyer Referral Directory, Avvo, Martindale-Hubbell, or WealthCounsel’s EstatePlanning.com. Find attorneys based on their practice area, location, and client reviews
  • Professional organizations that focus on estate planning attorney memberships, such as the American Academy of Estate Planning Attorneys or the National Academy of Elder Law Attorneys
  • Local legal aid organizations or pro bono services: some attorneys offer reduced fees or pro bono services for individuals with limited financial resources

Crafting the right plan for your unique situation requires working with a professional. If you have questions about the estate planning process or are ready to get started, give us a call.

Who Should Be the Trustee of a Third-Party SNT

Family members with special needs may require assistance throughout their lives. If you want to ensure that a loved one with a disability is taken care of after you are gone, you can help manage resources for them by using a third-party special needs trust (SNT).

Also known as a supplemental needs trust, a third-party SNT is funded with assets (money and property) that do not belong to the special needs beneficiary but are meant to be used for their benefit. Third-party SNTs allow the beneficiary to receive some benefit from the trust while preserving the beneficiary’s eligibility for means-tested public assistance programs such as Medicaid and Supplemental Security Income (SSI). When the beneficiary passes away, whatever funds remain in the third-party SNT can pass to other family members.

Choosing the right trustee to manage a third-party SNT is a crucial decision. The person selected for this role must understand their responsibilities and fulfill them in a way that does not jeopardize the beneficiary’s government benefits.

SNTs and Third-Party SNTs Explained

There are two main types of SNTs: first-party SNTs and third-party SNTs. Both are intended to ensure that a person with a disability or functional needs can receive financial support from the trust while preserving their government benefits. What differentiates these two types of trusts is the source of trust funding and the government’s entitlement to a portion of the trust’s funds.

  • First-party SNTs are funded with first-party money (i.e., the beneficiary’s own assets). Typically, this type of SNT is set up by a person with special needs if they receive a windfall (e.g., a personal injury or medical malpractice settlement) or if they become disabled at a time when they have significant assets but need to qualify for means-based benefits.
  • Third-party SNTs are established by a parent, grandparent, sibling, or other person and funded with their assets rather than the assets of the beneficiary—including money, life insurance policies, real estate, and investments—to benefit a family member with special needs. A third-party SNT can be created in two ways:
    • A standalone third-party SNT is created during the lifetime of the trustmaker, is effective immediately upon creation, and remains effective after the death of the trustmaker. It is eligible to receive assets from multiple sources during and after the trustmaker’s lifetime.
    • A testamentary third-party SNT is created as part of a person’s last will and testament and does not come into existence until the person who created the will passes away. At the time of death, designated estate assets are transferred to the trust and the individual with special needs becomes the beneficiary of the trust.

SNTs and Government Benefit Reimbursement

Whichever type of SNT is created, whether first-party or third-party, standalone or testamentary, the assets in the trust are legally owned by the trust—not the beneficiary. As a result, the special needs beneficiary is not disqualified from SSI or Medicaid, which have income and resource limits for enrollees.

There is an important difference, however, between first-party and third-party SNTs in terms of government benefit reimbursement:

  • In a first-party SNT, when the beneficiary dies, the state Medicaid agency is entitled to reimbursement for the full amount paid on behalf of the beneficiary during their lifetime. This could mean fully exhausting the remaining trust funds to repay state Medicaid programs. Only after Medicaid reimbursement has been satisfied can the trust balance be distributed to other beneficiaries named in the trust by the trustmaker.
  • This Medicaid repayment obligation does not apply to a third-party SNT because the assets it contains never belonged to the beneficiary. When the beneficiary of a third-party SNT dies, all remaining assets can pass to other named beneficiaries. Ultimately, the government will not get any portion of the trust funds.

Responsibilities of a Third-Party SNT Trustee

Once the decision is made to create a third-party SNT, the next, and equally important, decision is to select someone to serve as trustee.

The trustee is the person responsible for managing the SNT on behalf of the disabled beneficiary. They administer the trust and manage its assets according to the trust’s terms. More than one individual can serve as trustee. A trustee can also hire an attorney or other professional to help them meet their legal duties.

A trustee has a fiduciary duty to act in the best interests of the trust beneficiary. Broadly, in the SNT context, they are required to ensure the beneficiary remains eligible for government benefits by providing additional financial support from the trust for specific and limited purposes. For example, the trustee may use the trust funds to supplement the beneficiary’s government benefits—but not replace or duplicate them—by distributing funds to pay for things like education, recreation, and vacations.

 A trustee’s duties can include the following:

  • Handling trust distributions to the beneficiary
  • Overseeing investments of trust assets
  • Maintaining trust records
  • Filing the trust’s taxes
  • Communicating with the beneficiary and other involved family members

Third-party SNT trustees have a big responsibility. Among other things, they must understand the rules and regulations surrounding government benefits and allowable distributions. Using an SNT to provide cash or cash equivalents to the beneficiary, or to pay for the beneficiary’s food or shelter, could disqualify a beneficiary from public benefits.

In all trust-related matters, the trustee must act to ensure the beneficiary maintains the highest quality of life possible. Failure to uphold their fiduciary duty could not only harm the beneficiary, but also lead to legal action against the trustee. A new trustee may have to be named. If estate planning documents do not name a successor trustee, the court may need to appoint somebody to serve as trustee.

Choosing a SNT Trustee

Special needs trusts have highly technical terms and administrative requirements, and the rules governing them are very complicated. A simple mistake on the part of the trustee could unintentionally hurt the beneficiary.

A layperson named as the trustee of an SNT can hire an attorney to provide guidance and assistance; they may need to do so to satisfy their fiduciary duty and make sure the disabled beneficiary receives appropriate support. Attorney fees can be paid out of the trust.

Alternatively, an SNT can designate a professional trustee to oversee the trust. Hiring a professional trustee can increase trust costs, but a trustee who has experience with SNTs may be better suited than a family member to fulfill the trustee’s many important responsibilities.

A special needs attorney from our office can assist family members with setting up an SNT. We also work with SNT trustees to meet their legal duties and maximize trust benefits. To discuss your goals and needs with a special needs planner, please contact us.

What Is a Residuary Clause and Why Is It Important?

When developing your estate plan, it is nearly impossible to address every account or property you own. There are sure to be some things you unintentionally overlook. However, by including a residuary clause, you can intentionally disburse any remaining items inadvertently left over during the estate or trust administration process to a named beneficiary or group of beneficiaries. 

Ensuring That Everything You Own Goes to the Right People 

During the estate planning process, you may decide that you want to leave certain items to specific individuals. But what happens in the following situations?

  • You forgot to include everything you own in your will or trust.
  • You do not address personal property of little value, like clothing or your extra set of emergency batteries and hand tools in the basement.
  • You acquired new accounts or property after your estate plan was completed but you did not update it accordingly.
  • You have retirement accounts, bank accounts, or insurance policies but do not have completed beneficiary designations.
  • You have not named backup beneficiaries if something happens to your first choice (e.g., they predecease you, are unable to receive their inheritance for some reason, or decide they do not want it). 

A residuary clause outlines what should happen to any property that has not been addressed in your documents or assigned to a beneficiary. 

Without a residuary clause, your loved ones may be subjected to complications in the probate or trust administration process. Any money or property that has not been specifically left to someone will be distributed according to state laws, potentially going to individuals you did not intend. 

The Challenge of Remembering Everything in Your Will or Trust

It can be difficult to meticulously catalog and address every single possession in your will or trust. That is why the residuary clause exists. Provisions can be made in your will or trust for each beneficiary and what they should receive. Then, to ensure that everything you own or that is part of your will or trust is accounted for, a clause similar to one of the following can be added to your will or trust:

“I wish to leave the remainder of my estate to _____.” 

“The deceased settlor’s remaining property will be administered as follows:”

When crafting the residuary clause, you can name a person or charity that you would like to have inherit what is left over after you provide instructions for specific items or property. You could also decide to have the remaining amount divided among multiple people, charities, or a combination of both. For more than one person or charity, it can be helpful to specify the percentage that each person or charity will get to eliminate any problems or confusion.

The residuary clause guarantees that everything you own ultimately finds its way to the individuals or charities you want.

Working with an Experienced Attorney

The last thing anyone wants is to leave their grieving family to deal with confusion and disappointment after they pass. When designed properly, wills and trusts can offer clear instructions for an executor, personal representative, or trustee to navigate a smooth administration process. Estate planning attorneys understand how to create comprehensive legal documents that leave no room for ambiguity and avoid complications during probate and trust administration. By working closely with an experienced attorney, you can be confident that every aspect of your estate is thoughtfully considered and that your legacy will be passed on according to your wishes. Call us to schedule an appointment to ensure that all of your hard-earned money and property are properly planned for.

Saying Goodbye Is Hard: How a Comprehensive Estate Plan Can Help

When people think about estate planning, they usually focus on who will receive their money and property when they pass away and how it will be received. However, estate planning can also address your end-of-life wishes—the considerations and expenses involved when it is time to say goodbye to your loved ones. The following are important questions to ask yourself, as the answers are a critical part of creating a comprehensive estate plan.

How Do You Want Your Remains Handled at Death?

Addressing your final wishes for your body may be uncomfortable, but planning ahead can save your loved ones time and give them peace of mind, knowing that they are carrying out your wishes. There are many common options available, such as

  • being buried in a casket, 
  • being cremated, or 
  • donating your body or organs. 

Alternatively, some people choose more unique ways to dispose of their remains, such as by having them turned into a diamond.

Depending on your state’s laws, these wishes may be included in your last will and testament, healthcare power of attorney, advance directive, or a separate document.

Do You Want a Service or Celebration?

When it comes to commemorating your passing, a variety of options are available to achieve your specific wishes.

Funeral

Some people prefer to plan a more traditional funeral at their place of worship, complete with music, scripture readings, and a meal afterward. A funeral can also include a gathering before the church service or a graveside service. The focus of the funeral is to allow your loved ones the opportunity to mourn your passing. 

Memorial Service

A memorial service can be like a funeral in terms of formality, but typically the deceased’s remains are not present at a memorial service; usually photos of the deceased are displayed instead. However, a memorial service can also be informal, similar to a celebration of life.

Celebration of Life

“Celebration of life” events are an increasingly popular way to celebrate your life experiences and accomplishments. Pictures and videos can be displayed during the event as your loved ones tell stories of you. The celebration can be tailored to reflect your personality and highlight what matters most to you.

Nothing

You may decide that you do not want a funeral, memorial service, or celebration. This could be for any number of reasons: you may not have many friends or family who could attend a local service, you prefer to avoid funeral expenses and would rather have your money pass directly to your loved ones, or you are a private person who does not want the details of your passing shared with the public.

It is important to note that documents with instructions for funerals, celebrations, or the disposition of your remains may not be legally binding in your state. Every state has different rules. However, by letting your loved ones know your wishes, they can use that information when making decisions for your final arrangements.

Do You Have a Final Message?

While you may focus on the official documents that address your money and property such as a last will and testament and a trust when creating your estate plan, you can also include documents with personal messages to help you say goodbye to your loved ones. 

Letter

If you love to write or find it easier to communicate through writing, leaving a letter to your loved ones can allow you to thoughtfully convey your wishes and last sentiments. You could write one letter addressed to all of your loved ones if the information you want to communicate is the same for each person. Alternatively, you could write a separate letter to each loved one if you have specific things to say to each person.

In these letters, you can talk about your relationship and valuable lessons that you have learned and provide advice and guidance to pass along to future generations. Not only will the information in the letter be meaningful to the recipient but it will also provide them with a tangible gift to help them through the mourning process that can be saved for years to come.

Video

Another way to speak from your heart is through video, which can allow you one last opportunity to speak to your loved ones. Just like writing a letter, you can address friends and family as a group in one video or address each person with individual videos. Videos can convey the same information as a letter and give the recipient the added joy of hearing you speak and seeing your face.

How Will You Pay for Your Final Expenses?

Depending on the extent of your end-of-life wishes and the anticipated cost, there are many ways to allocate money to cover these expenses.

Funeral Trust 

Although a funeral trust is uncommon in some jurisdictions, it may be an option. A funeral trust holds money for funeral costs until you pass away. Then, at your death, the trustee pays the beneficiary (typically the funeral home providing services) with the funds held in the trust. A funeral trust allows you to set aside money to cover the following expenses:

  • casket or urn
  • burial vault 
  • cemetery plot 
  • embalming or cremation 
  • funeral service and accompanying gathering
  • obituary
  • death certificate

Final Expense or Burial Insurance 

Final expense or burial insurance is a special type of life insurance policy that is purchased to pay for funeral costs, medical bills, and other end-of-life expenses. It usually pays a small death benefit, such as $5,000 to $25,000, meant to cover funeral expenses rather than provide financial support for loved ones.

Separate Savings Account 

Finally, if you have enough financial resources, you could set aside money in a savings account to pay for your end-of-life expenses. The savings account would be in your own name and would have a trusted individual as the payable-on-death beneficiary, who would then use the funds to pay for your final expenses.

We understand that planning for death is not easy. Our attorneys can help ensure that your wishes are carried out and your legacy lives on. Give us a call to begin a thoughtful discussion about your end-of-life wishes and expenses.

What Is the Difference Between a Probate and Trust Administration Attorney and an Estate Planning Attorney?

Estate planning attorneys and probate and trust administration attorneys play crucial but distinct roles in the legal processes involving legacy planning, asset distribution, and wealth preservation. 

Estate planning attorneys focus on creating a plan to manage a person’s money, property, and affairs upon their death or if they are unable to manage it themselves. Probate and trust administration attorneys, on the other hand, deal with settling an estate or trust after the person has passed away. While there can be some overlap between these roles, not every attorney handles both. 

As part of the estate planning process, you should discuss with your attorney the role they will play during your lifetime and whether they can also assist your loved ones with estate and trust administration when you pass away. 

What Does an Estate Planning Attorney Do? 

An estate planning attorney can help you create an estate plan when you are alive and offer ongoing plan reviews and guidance throughout your lifetime. 

An estate plan provides answers to the most important questions about how your affairs should be settled, not only when you die but also if you become unable to manage your own affairs. These questions include the following: 

  • Who gets my money or property when I am gone? 
  • Who will take care of my minor children if I am unable to? 
  • How can I pay less in taxes and keep more money for my loved ones? 
  • Will people know where to find my important records (e.g., estate planning documents, account information, or life insurance policy information)? 
  • Are the right beneficiaries listed on my accounts? 
  • Does it make sense to put some of my accounts and property into a trust? 
  • Is there somebody to act on my behalf if I am alive but unable to make or communicate decisions about my health or finances? 
  • How do I document my end-of-life care preferences? 
  • What are some ways to provide additional financial security for my loved ones?

Generally, estate planning attorneys recommend that every adult establish an estate plan, especially if they have loved ones they want to provide for. This means at least having a last will and testament (also known as a will) that specifies how your money and property should be distributed and to whom, including items with financial value and those with strictly sentimental value. A will also does the following:

  • Names a trusted decision-maker (also known as an executor or personal representative) to settle your affairs and manage the court-supervised probate process, which validates the will and oversees distribution of your money and property 
  • Appoints a guardian (and backup guardians) for your minor children
  • Directs the executor or personal representative on how to pay the costs of the estate, such as your outstanding debts, taxes, and probate fees
  • Names your beneficiaries and states how your money and property should be distributed to them 

In addition to preparing a will and helping you decide whether you might need one or more trusts, an estate planning attorney can assist with the following tasks: 

  • Selecting an executor and trustee
  • Minimizing estate taxes
  • Transferring accounts and property to a trust or naming a trust as a beneficiary 
  • Helping you choose the right beneficiaries and structure their inheritances to meet their needs
  • Choosing agents under financial and medical powers of attorney
  • Creating medical directives

Effective estate planning can minimize the time and complexity of the probate process and give your loved ones faster access to your money and property. An estate plan may not be able to eliminate probate entirely; however, without an estate plan, your money and property will be distributed according to state law—which may not align with your wishes. 

The state may also have to get involved with choosing guardians for your children, authorizing others to act on your behalf, and deciding other important matters. The state’s decisions may be very different than what you would have chosen. In addition, a lengthy probate process can cause delays, increased expenses, and a loss of privacy. Having an up-to-date estate plan makes your wishes known and makes things easier for your loved ones. 

What Does a Probate and Trust Administration Attorney Do? 

A probate and trust administration attorney assists your loved ones with the estate or trust administration process after you pass away. They help your loved ones through the legal processes that your death sets in motion. 

Probate Attorney

A probate attorney can work on behalf of the representative (i.e., the executor or personal representative) who you name in your will, or the person appointed by the court if you die without a will, to settle your financial affairs and carry out your final wishes. A probate attorney can also represent your beneficiaries in the probate process. 

Some common duties that a probate attorney performs for clients include the following: 

  • Collecting life insurance proceeds 
  • Giving legal advice regarding the client’s responsibilities and rights
  • Identifying and creating an inventory of what you owned at the time of your death 
  • Locating your will 
  • Managing the probate estate’s finances  
  • Overseeing appraisals for your property
  • Making sure the executor pays any estate and income taxes owed and any of your outstanding debts that must be paid
  • Preparing and filling necessary court documents 
  • Retitling accounts and property as necessary
  • Transferring accounts and property to appropriate beneficiaries   

Trust Administration Attorney

A trust administration attorney guides a trustee through the administration of a trust. Trusts are not subject to the probate court process, allowing the trust’s accounts and property to be distributed quickly and privately. However, the trustee may need assistance fulfilling their legal obligations. Trust administration attorneys may provide services to beneficiaries as well. 

A trust attorney may be needed in the following situations: 

  • Reviewing the trust document and state law to guide the trustee through the steps that must be taken to ensure they are performing all required legal duties, such as keeping records, filing taxes, making distributions, and fulfilling their fiduciary responsibilities to act in the best interests of the trust’s beneficiaries 
  • Preparing legal documents necessary for the transfer of ownership of the trust’s accounts and property
  • Identifying and resolving potential issues (e.g., conflicts of interest or improper beneficiary influence on the trustee)
  • Helping a trust beneficiary assert their rights, including the right to be informed about the trust and its administration, the right to a trust accounting, the right to receive timely trust distributions, and the right to challenge how the trustee is administering the trust 

What Type of Attorney Do You Need? 

Some attorneys are qualified to perform estate planning as well as probate and trust administration services. 

At the Like Law Group, we handle both the estate planning work, as well as the probate and trust administration work but not all lawyers or firms do the same. If you or a loved one needs assistance with creating or updating an estate plan, handling the estate of a deceased loved one, or administering a trust, please give us a call.

What Happens to Real Estate With a Mortgage When I Die?

Your mortgage, like the rest of your debt, does not simply disappear when you die. If you leave your home that has an outstanding loan to a beneficiary in your will or trust, your beneficiary will inherit not only the property but also the outstanding debt. They may have the right to take over the mortgage and keep the home, or they may choose to sell it and keep the proceeds. A few different scenarios can unfold, however, depending on the mortgage terms and the estate plan instructions. 

Ultimately, planning for the transfer of real estate upon your death can make the process much easier for your loved ones. 

American Housing Debt Exceeds $12 Trillion

The US homeownership rate stood at around 66 percent in 2022, according to the US Census Bureau.1 The Federal Reserve Bank of New York reported at the end of September 2023 that Americans were carrying $12.14 trillion in mortgage balances.2

Housing debt makes up over 72 percent of all US consumer debt.3 A home is the largest purchase that most people will ever make, and many borrowers pass away before receiving the deed to their house free and clear. A survey from CreditCards.com found that 37 percent of Americans died with unpaid mortgages.4 

The number of Americans who have received or expect to receive an inheritance has increased in recent years.5 At the same time, 73 percent of Americans are likely to die with debt, including unpaid mortgages.6 

Unpaid Mortgages on Inherited Homes

A 2023 Charles Schwab survey revealed that more than 3/4 of parents intend to leave a home to their children in their estate plan. However, nearly 70 percent of those who expect to inherit a home from their parents say they will sell it due to increasing real estate costs.7 

Deciding what to do with a family property that is passed down to the next generation can be an emotional as well as a financial decision. While the sentimental value of a home is typically a strong motivator for holding on to it, beneficiaries may move on from an inherited home because of financial considerations. 

If a couple co-signed a home loan together and one spouse predeceases the other, the surviving spouse must continue making mortgage payments. A surviving spouse may also be responsible for paying back a mortgage taken out by the deceased spouse alone if the couple lives in a community property state such as Arizona, California, Texas, or Washington.8 

Outside of co-signers and community property spouses, the loved ones of a decedent are not typically personally responsible for making mortgage payments on the decedent’s home unless they receive ownership of the property, as in one of the following scenarios.

One beneficiary inherits the property through a will, trust, or deed.

A person can leave a house to a loved one after their death under the terms of a will or trust, or with the use of a transfer-on-death deed or Lady Bird deed (in those states that permit these forms of deeds to enable real property to avoid probate and pass automatically to a beneficiary). When the home transfers, a mortgage or loan secured by the home also transfers. The person who inherits the home must pay off the mortgage with other funds or sell the property and apply the proceeds to pay off the mortgage. In certain cases, they may be able to take over (or assume) the existing mortgage and have it transferred to them, with the beneficiary continuing to make the monthly mortgage payments. Additionally, some lenders might work with the new borrower to refinance the loan and change the terms. 

Multiple beneficiaries inherit the property through a will, trust, or deed.

Multiple beneficiaries who inherit a property through a will, trust, or the appropriate deed have the same options for an inherited mortgage as a single beneficiary: they may be able to assume the mortgage (as co-borrowers), use other funds to pay off the mortgage, or sell the property and use the sales proceeds to pay off the mortgage. Any option requires all beneficiaries to be on the same page. One or more beneficiaries can buy out the shares of the other beneficiaries, although higher home prices and mortgage rates could make it impractical for one or more beneficiaries to buy out the other beneficiaries. If a consensus cannot be reached, the court may order the sale of the property and a division of the proceeds. 

Heirs inherit the property through the probate process.

Gifting a home to a beneficiary or beneficiaries assumes that the original homeowner had a will or trust as part of an estate plan. This is an unreliable assumption, though, since roughly 2/3 of Americans do not have an estate plan.9 

Dying without a will or trust means that the court will appoint an executor or personal representative to distribute the decedent’s money and property and settle their debts. Because the home is part of the unsettled probate estate, the mortgage on the home becomes part of the probate estate as well. The executor may use other money and property from the probate estate to make mortgage payments until the home is sold or transferred to the rightful heir. If the mortgage is not paid off during the probate process, the heir will take ownership of the home subject to the mortgage, and the options discussed in the two scenarios above will apply.

Make a Plan to Pass on Your Home

A parents’ home is often a place of cherished family memories. Leaving a home to children is a common way to keep a family legacy alive and transfer wealth. However, rising costs and evolving preferences are contributing to declining interest among children in keeping their parents’ homes. 

A home with a mortgage presents additional challenges that should be accounted for in an estate plan. For example, your plan can contain provisions that dedicate funds to help loved ones pay for an inherited home or provide additional instructions about how to distribute home sale proceeds among beneficiaries. As part of your estate plan, you can even refinance your mortgage now to secure more favorable terms for your beneficiaries after your passing. 

An estate planning attorney can offer advice that aligns with your legacy goals and family situation. To make the transfer of a home as seamless and efficient as possible, contact our attorneys to schedule an appointment. 


Footnotes

  1. Robert R. Callis, Rate of Homeownership Higher Than Before Pandemic in All Regions, US Census Bureau: America Counts: Stories (July 25, 2023), https://www.census.gov/library/stories/2023/07/younger-householders-drove-rebound-in-homeownership.html.
  2. Fed. Res. Bank of N.Y., Ctr. for Microeconomic Data, Q3 2023, https://www.newyorkfed.org/microeconomics/hhdc.html (last visited Jan. 29, 2024).
  3. Id.
  4. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
  5. Mary Ellen Cagnassola, More Americans Are Leaving Inheritances — and It’s Not Just Wealthy People, Money (Apr. 12, 2023), https://money.com/more-americans-leaving-inheritances/.
  6. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
  7. Veronica Dagher, The New Math on Inheriting Your Parents’ House, Mansion Global (June 1, 2023), https://www.mansionglobal.com/articles/the-new-math-on-inheriting-your-parents-house-6fd575cf.
  8. Rebecca Lake, What Are the Community Property States?, SmartAsset (Aug. 25, 2023), https://smartasset.com/financial-advisor/community-property-states.
  9. D.A. Davidson Survey Finds That Two-Thirds of Americans Do Not Have an Estate Plan, D.A. Davidson: Perspectives, https://dadavidson.com/News/Perspectives/ArticleID/3646/D-A-Davidson-Survey-Finds-That-Two-Thirds-of-Americans-Do-Not-Have-an-Estate-Plan#:~:text=Return-,D.A.%20Davidson%20%26%20Co.,compared%20to%2059%25%20of%20men (last visited Jan. 29, 2024).

Inspiring Action: The Guide to Creating or Updating Your Estate Plan

Creating or revising an estate plan can feel overwhelming, causing many people to procrastinate. But the longer you put it off, the more potential there is to be caught unprepared in an emergency. So how can you motivate yourself and your loved ones to begin the process? Here are some strategies to help you overcome some of the negative feelings associated with this process and meet the challenge head on.

Reward Yourself for Your Accomplishments

While the benefits associated with updating or creating a new estate plan are a reward in and of themselves, we can all use an extra push. Sometimes the promise of a small indulgence as a reward can change your frame of mind when initiating the process. However, your idea of a reward may be more substantial and might involve a more significant gift for the entire family to enjoy. What other projects have required extra motivation in the past? How much easier might they have been to complete if you rewarded yourself or your family for their completion? Get inspired with a few meaningful ideas that could serve as a reward:

  • Plan a well-deserved vacation
  • Make a reservation at your favorite restaurant
  • Book a family photo session
  • Buy the new phone, laptop, or computer you have been eyeing

The key to an effective reward is personalization. Choose something that resonates with you and can serve as a reminder of the importance and the effort you put into completing the estate planning process, which is essential to protecting your family’s future.

Break Your Estate Planning Project Down into Smaller Steps

Estate planning can be a complex process and facing it as a whole may seem impossible. To make it more manageable, break the process down into smaller, more achievable steps.

Identify the first three steps you need to take using these suggestions: 

  1. Learn more about estate planning tools and how they work. Find out what is typically included in a comprehensive estate plan, such as wills, trusts, powers of attorney, and advance directives. 
  2. Collect financial information. Gather and organize your financial information, including a detailed inventory of your money, property, debts, and sources of income. List bank accounts, investments, real estate, insurance policies, personal belongings, and more. 
  3. Set specific goals for your estate plan. Establish clear goals based on the following factors: 
  • Family structure
  • Business and personal financial objectives
  • Intentions for protecting and supporting your loved ones after your passing
  • Desired lifestyle in retirement
  • Wishes for how you would like to be cared for as you age
  • End-of-life wishes
  1. Choose your beneficiaries, personal representatives, trustees, and agents. Determine the beneficiaries you want to inherit your money and property and the individuals you want to be responsible for managing and distributing these accounts and property after your death. Think about the people you would trust as guardians for your minor children and whom you feel comfortable choosing to make financial and medical decisions for you if you become unable to make those decisions for yourself. 
  2. Ask for the help you need. Throughout this first phase of preparing your estate plan, identify estate planning attorneys as well as tax and financial professionals in your area. Schedule consultations to discuss your needs and assemble a reliable team.
  3. Review and update an existing plan. If you already have estate planning documents in place, review them for accuracy and relevance. Life circumstances such as marriages, divorces, or births, as well as changes in financial status, usually require updates. Ensure that beneficiary designations on accounts and insurance policies are current. 

By following these initial steps, you will lay a solid foundation for participating in the estate planning process. Each step keeps you on track and moves you toward the larger goal of completing your estate plan.

Tell Someone about Your Plan 

Accountability can be a powerful motivator. Share your intention to create or update your estate plan with a trusted friend or family member. This person can offer support and encouragement. They can also check in on your progress so you will be more likely to follow through on your commitment. For some people, simply saying the words out loud or putting them on a calendar also makes the project a priority. Choose the best way to hold yourself accountable.

Use Positive Affirmations 

Still feeling reluctant to engage in estate planning? This may stem from deeper concerns or anxieties about the future and your mortality. Counteract negative thoughts and shift your mindset by using positive affirmations to focus on why you may not want to proceed with preparing an estate plan. The following affirmations may help you take the worry or fear out of estate planning by focusing on the positive benefits. You may even want to write out one or two and post them in a place where you commonly look.

  • I am taking proactive steps to protect the future of my loved ones if something happens to me.
  • Planning my estate is an expression of love and support for my family.
  • I value the peace of mind that comes with having a detailed and thoughtful estate plan.
  • My estate plan provides critical information and instructions that my spouse and children may need in emergencies.
  • I recognize the importance of making decisions now to ease the burden on my loved ones later.
  • My estate plan reflects my commitment to responsible financial planning and is a tangible expression of love and protection.
  • Taking control of my financial and healthcare decisions throughout life is empowering.
  • I approach estate planning with confidence, knowing it is a positive and necessary step for a happy and healthy family.

Repeating these affirmations regularly can help cultivate a positive mental attitude to get you through the estate planning process. And by combining these strategies, you can develop the motivation for establishing or revising your estate plan. 

Making an appointment with an estate planner is often the first step. Contact us to get started.

I’m a Survivor . . . and Now I Have My Own Trust?

Many married couples share almost everything, including finances. This may be reflected in their estate plan by using one joint living trust instead of two separate trusts. Separate trusts can provide greater flexibility, but a joint trust can be structured so that when one spouse passes away, the trust is split into two subtrusts: a survivor’s trust and a decedent’s trust. 

This arrangement provides the surviving spouse with the same versatility that separate trusts offer. The surviving spouse has full control over their survivor’s trust, but may have limited control over the deceased spouse’s accounts and property that make up the decedent’s trust. 

Decedent’s Trust and a Survivor’s Trust

A survivor’s trust is a middle ground between a joint trust and separate trusts. 

If a couple chooses to combine their assets (accounts and property) into a joint revocable living trust, both spouses will usually be named as trustees and beneficiaries. The joint trust can further stipulate that when one spouse passes away, the trust divides into subtrusts. 

One of those subtrusts can be a survivor’s trust. A second subtrust, the decedent’s trust, will also be created to hold and manage assets owned by the decedent. 

How a Survivor’s Trust Works

A typical joint trust arrangement lists four types of property, depending on the state in which you live: 

  • Joint assets
  • Community property
  • First spouse’s separate property
  • Second spouse’s separate property

When the first spouse dies, the survivor’s trust receives one-half of the community property, one-half of the joint property, and all property identified as the separate property of the surviving spouse. The deceased spouse’s half of the community property and joint property, along with their separate property, may be funded into the decedent’s trust with its own set of instructions. The trust agreement could also state that all of the deceased spouse’s property will go into the survivor’s trust instead of going into a separate subtrust. 

Reasons to Have a Survivor’s Trust

Regardless of exactly how the joint trust assets are allocated, a crucial distinction is that a survivor’s trust is revocable, while the decedent’s subtrust is irrevocable

This means that the surviving spouse retains full control over the survivor’s trust. They can alter the terms of the trust however they want. For example, they can add and remove assets, change beneficiaries, appoint new trustees, or terminate the trust. The surviving spouse can also completely change the terms of the survivor’s trust in its entirety. 

While the surviving spouse may be the beneficiary of the decedent’s trust, the surviving spouse will likely have less control over the management of assets in the decedent’s trust. This allows the deceased spouse to put protective measures in place while they are alive to make sure that their assets are managed the way they want and that someone cannot change the rules after they pass away. This can be helpful for clients who are worried about their spouse remarrying after their death and to ensure that assets that remain at the surviving spouse’s death go to a predetermined person.

The purpose of any trust is to take care of loved ones and protect assets from costly probate and taxes. To discuss an estate plan that meets your goals, schedule an appointment with our estate planning attorneys.

What Is the Last Surviving Spouse Rule?

Estate planning can be a significant part of successful financial management, especially for married couples. One key consideration is minimizing estate taxes, which can substantially affect the distribution of money and property to a married couple’s loved ones. 

What Are Gift and Estate Taxes?

In 2024, a $13.61 million federal exemption per person for gifts and estate taxes means many individuals with a high net worth will not owe federal estate tax if they die in 2024. An individual can give away up to $13.61 million in 2024 to children or other nonspouse beneficiaries during their lifetime or after their death. They will pay 40 percent in estate taxes only on gifts that exceed that amount.

You may believe you or your spouse will never have more than $27.22 million combined; but the current exclusion will revert to the pre-2017 amount—$5 million adjusted for inflation—on January 1, 2026, if Congress does not act. 

That means the 40 percent estate tax rate could apply to gifts over approximately $6.4 million come 2026, requiring many families with high net worth to reevaluate their estate plan and adjust legal strategies to preserve and protect more of their property and investments. Changes may include taking advantage of the deceased spousal unused exclusion amount (DSUEA) if they pass away prior to January 1, 2026.

What Is the Deceased Spousal Unused Exclusion Amount? 

The Tax Relief Act of 2010 introduced the concept of portability—the ability of a surviving spouse to use their deceased spouse’s unused exclusion amount—and made it permanent in 2013. Before then, if a person died with wealth below the federal estate tax exemption amount and did not use their exemption, it was lost forever. 

Today, the DSUEA can be used to increase the estate tax exemption for the surviving spouse. When the first spouse dies, the other can elect to port their spouse’s unused exemption within five years of the spouse’s death and add the unused exemption to their own. To have the DSUEA available for the surviving spouse to use, a representative of the decedent’s estate, possibly the spouse, must file a federal estate tax return (Form 706) to report the DSUEA. 

Widows and Widowers Cannot Collect Estate Tax Exclusions

If you are a widow or widower who has been married before, the portability rule lets you use the DSUEA of your last deceased spouse to offset the tax on any transfer during your life or at death. If you have more than one predeceased spouse, you can use the DSUEA of multiple spouses, but the decedent whose DSUEA is being used must be the survivor’s last predeceased spouse when their DSUEA is being used. A surviving spouse may not use the sum of DSUEA from multiple predeceased spouses at one time or apply the DSUEA after the death of a subsequent spouse.

How It Works

Portability can make a significant difference when it comes to the taxation of an estate.

Remarriage with Second Spouse Dying

Example. Bob and Sue were married with jointly titled property and a net worth of $16 million. Bob died first in 2020 with a federal estate tax exemption of $11.58 million. Sue inherited all of Bob’s property, and because of the unlimited marital deduction, none of Bob’s exemption was used. Sue elected portability by filing an estate tax return on time, and was able to add Bob’s $11.58 million to her own exemption of $12.92 million. Sue gets remarried to Dan in 2021. Dan dies in 2022, and after an estate tax return is filed, he has a DSUEA of $6 million. Sue then dies in 2023 with an estate worth $16 million. At her death, she has her estate tax exclusion amount of $12.92 million and Dan’s $6 million since he was her last predeceased spouse.

If Sue had a larger estate or wanted to make gifts during her lifetime, she may be able to make large lifetime gifts over the annual exclusion amount ($17,000 in 2024) during her lifetime while Bob was her last predeceased spouse (before Dan dies) and use Bob’s DSUEA to prevent having to pay gift tax on the large lifetime gifts. As soon as Dan dies, however, he becomes her last predeceased spouse and she will no longer be able to use Bob’s DSUEA.

Tax Planning Can Get Tricky

We understand that trying to navigate the tax rules can be a daunting task. We are here to assist you in better understanding the options available to you and crafting the best estate and financial plan to meet your unique situation. To learn more about strategies to protect yourself, your loved ones, and your life savings, give us a call.

Watch Out for Stolen Items in Your Loved One’s Estate

Your family member went through a meticulous estate planning process to organize and distribute money and property for the benefit of their loved ones, including you. But you may suspect that some of the high-value items in their estate originated as stolen property. The possibility of discovering stolen items within an estate is often overlooked, but it can have legal, financial, and emotional complications. How does it happen?

Example: Stolen Artwork

A New York Times article published in 2023 reported that the New York Metropolitan Museum is carefully combing through its art collections after the government seized dozens of art pieces that were suspected of having been stolen or looted in the past. It is widely known that art collections have mysteriously disappeared over the centuries, especially during wartime, and that ownership should be researched to avoid purchasing an item that belongs to someone else. The Art Loss Register alone lists 700,000 stolen items. Many items find their way into legitimate markets through underground dealers where criminals can exploit innocent buyers. 

When putting together your estate plan, any significant collections you own should be taken into consideration. If your loved one receives stolen items from you at your death, they may not receive legal title to the item, exposing the estate to financial and tax implications. If artwork or other high-value property is removed from the estate, it can affect the liquidity necessary to meet potential estate tax and administrative costs as well as the inheritance of beneficiaries. An estate planning attorney can prepare for different scenarios to protect you and your family.

Private Letter Rulings and Seized Assets 

According to a private letter ruling, if your family discovers stolen items after a loved one’s death, the Internal Revenue Service could include the fair market value of the property in the deceased’s estate for estate tax purposes, even after it has been seized and returned to the owner. This could leave the family owing an estate tax but unable to sell the item in order to pay the estate tax.

The government can seize property it believes has been involved in illicit or criminal activity. Even if your family member purchased an item from a reputable dealer or inherited the item decades ago, it can still be taken. 

How People Come into Possession of Stolen Items

Understanding how individuals unknowingly acquire stolen items is crucial for recognizing potential risks. Innocent parties often purchase items through estate sales or auctions or receive gifts from friends or family members. A lack of transparent ownership or a historical record can make it challenging for the unsuspecting owner to identify stolen items.

Every year, over one million homes are burglarized and almost one hundred billion in store merchandise is stolen. Billions in stolen property is circulating, leaving innocent buyers liable. Those possessing stolen items can serve time in jail or be forced to pay a fine.

Common places to come across stolen goods are online marketplaces such as Craigslist, eBay, or Facebook Marketplace that have lax regulations for selling items. Pawn shops can often be unsure of the origins of their inventory, but they are required to research ownership or face prosecution.

Can You Be Held Accountable?

Not everyone is held accountable for being in possession of stolen goods. There is no statute of limitations for prior owners to claim their stolen property, but there are legal defenses used for possessing it. The defense of laches asserts that prior owners who unreasonably delayed asserting their rights may not be entitled to bring a claim against the person or estate in possession of their property. After all, the property may have already been sold and the proceeds divided among heirs, making it very difficult to recover. 

Whether you can be prosecuted or convicted of possessing stolen property depends on several factors:

  • Knowledge that the item was stolen. Suspected stolen items should be reported to law enforcement, or you could be held accountable. However, if it was nearly impossible to know it was stolen, you will likely not be held accountable.
  • Knowledge that the item was in your possession. You can unknowingly be in possession of a stolen item. If you are honest, open, and prompt, you should not be held accountable.

What Should You Do If You Suspect Ownership of Stolen Property?

You can take steps during your family member’s lifetime to address your suspicions. Be proactive. If there is a hint of uncertainty about the legitimacy of an item, your estate planning attorney can take the following steps:

  • Research the item’s history and provenance to trace its ownership back to its origin to see whether it has ever been reported as stolen.
  • Seek guidance from professionals such as art historians, appraisers, or legal experts who specialize in stolen art and property. They can validate legitimate ownership.
  • Report the situation to law enforcement in a timely manner to contribute to the recovery of stolen property and prevent legal complications down the line.

There is a risk of discovering stolen items within a loved one’s estate, especially with high-value collections. Do not overlook this when doing your estate planning. By being vigilant, understanding the legal implications, and taking proactive steps, you can mitigate the risks of inheriting or owning stolen property and ensure a smoother estate settlement process for you or your loved ones. Contact our estate planning attorney today.

A Proper Estate Plan Can Protect You and Your Family

Proper estate planning can protect you from the risks of owning stolen property through due diligence and research, ensuring that the prior owner’s rights are extinguished. Unfortunately, research into the origins of property can be expensive, often costing more than the item’s value. However, where there is one suspicious item, there may be more. 

If you are the beneficiary of gifts with suspicious origins, you can disclaim them. If you have questions about something in your collection or your recent inheritance, you can contact our office.