Stone Law Offices, Ltd.

No Will? Don’t Count on a Happy Ending for Your Family

“At the time, he had gone so far as to have his will drawn up, but he hadn’t finalized it. In addition, he hadn’t authorized anyone to have power of attorney, in case of illness.”

The gentleman at the heart of this article isn’t the first, and sadly he won’t be the last, to start and not finish the process of preparing a will and all of the other documents that go into having an estate plan. People say they don’t need to do this just yet, or they are having trouble deciding who should be their executor, etc. Regardless of the reason, the end result of an unfinished estate plan is almost always a disaster for the family. It certainly is in the article “Thy will be done (and you really should get it drawn up right now)” from the San Antonio Express-News.

One week after a woman spoke to her dad about his estate plan, he became ill and was hospitalized. The man’s girlfriend became verbally abusive to family members. The sisters of the man had previously sued him, accusing him, as trustee of the father’s trust, of taking more than his fair share of the family money. The daughter was trying to pay for his care during a two-month stay in the hospital. However, without a power of attorney and in the middle of a costly lawsuit from the man’s sisters, the only way forward was declaring a “conservatorship” of her father’s assets. The father died, with no will, and with his estate under attack from his sisters.

It took two years to settle the probate case and the lawsuit between the sisters and the estate of their brother. That’s a long time to mix mourning, family strife and court actions.

The value of the father’s estate was drained by the long litigation and probate process. The daughter estimates that her father’s estate paid 13 times more than necessary, because there was no power of attorney and three times more than necessary because of the lack of a will. And making matters worse, more than 30 percent of the estate vanished because of the unfinished estate plan and poor communication between family members.

More than $500,000 remained in probate, and then was drained by a third over the course of the two years.

However, the worst part can’t be measured in money. It is the emotional cost of siblings who grew to hate other. The sisters didn’t say goodbye to their brother, or even attend his funeral.

A Gallup poll in 2016 found that only 44% of Americans have a will. Thirty-two percent of Americans over age 65 still don’t have a will. What are they waiting for? Some think they are saving their families money by not having a will, but the above example is clear proof of how wrong that thinking is.  Doing an online will isn’t much better. One attorney said it best: when wills are not prepared by estate planning attorneys and they go wrong, they go very wrong.

Speak with an estate planning attorney and make sure that your family is protected from the fights, the costs and the lost time that can’t be regained.

The Coronavirus and Estate Planning

“The rapidly evolving coronavirus (COVID-19) crisis is creating a plethora of unique estate planning and legal challenges across the globe, particularly given the volatility of the financial markets.”

As Americans adjust to a changing public health landscape and historical changes to the economy, certain opportunities in wealth planning are becoming more valuable, according to the article “Impact of COVID-19 on Estate Planning” from The National Law Review. Here is a look at some strategies for estate plans:

Basic estate planning. Now is the time to review current estate planning documents to be sure they are all up to date. That includes wills, trusts, revocable trusts, powers of attorney, beneficiary designations and health care directives. Also be sure that you and family members know where they are located.

Wealth Transfer Strategies. The extreme volatility of financial markets, depressed asset values,and historically low interest rates present opportunities to transfer wealth to intended beneficiaries. Here are a few to consider:

Intra-Family Transactions. In a low interest rate environment, planning techniques involve intra-family transactions where the senior members of the family lend or sell assets to younger family members. The loaned or sold assets only need to appreciate at a rate greater than the interest rate charged. In these cases, the value of the assets remaining in senior family member’s estate will be frozen at the loan/purchase price. The value of the loaned or sold assets will be based on a fair market value valuation, which may include discounts for certain factors. The fair market value of many assets will be extremely depressed and discounted. When asset values rebound, all that appreciation will be outside of the taxable estate and will be held by or for the benefit of your intended beneficiaries, tax free.

Grantor Retained Annuity Trusts (GRATS). The use of a GRAT allows the Grantor to contribute assets into a trust while retaining a right to receive, over a term of years, an annuity steam from the Trust. When the term of years expires, the balance of the Trust’s assets passes to the beneficiaries. The IRS values the ultimate transfer of assets to your intended beneficiaries, based on the value of the annuity stream you retain and an assumed rate of return. The assumed rate of return, known as the 7520 rate comes from the IRS and is currently 1.8%. So, if you retain the right to receive an annuity stream from the trust equal to the value of the assets plus a 1.8% rate of return, assets left in the trust at the end of the term pass to your beneficiaries transfer-tax free.

Charitable Lead Annuity Trusts. Known as “CLATs,” they are similar to a GRAT, where the Grantor transfers assets to a trust and a named charity gets an annuity stream for a set term of years. At the end of that term, the assets in the trust pass to the beneficiaries. You can structure this so the balance of the assets passes to heirs transfer-tax free.

Speak with your estate planning attorney about these and other wealth transfer strategies to learn if they are right for you and your family. And stay well!

Stone Law Offices’ COVID-19 Response – We are open and here to help!!!

As many of you are aware, Nevada Governor Sisolak has implemented his “Stay Home for Nevada” initiative, which includes the closing of all “non-essential” businesses for the next 30 days in order to slow the spread of the COVID-19 virus.  During this period, Stone Law Offices will remain open as an “essential service” business to assure that our clients’ and the community’s legal needs continue to be met.

In keeping with CDC guidelines and other medically advised social-distancing guidance to minimize the community spread of COVID-19, we have implemented the following “best practices” protocols for the health and safety of both you and our staff, including but not limited to the following:

• Except for signing mission critical legal documents or when otherwise absolutely necessary, we are minimizing in-person meetings in our office and are utilizing virtual client meetings and prospective client consultations via telephone and video conference, and email.
• Hand sanitizer and disinfectant wipes are available in our lobby, every conference room, and the common areas, and additional high-touch cleaning and disinfecting is being done multiple times throughout the day.
• Hand-washing is mandated by all staff members before and after each in-person client meeting, and all staff have been instructed to stay home if they are feeling ill or suspect that they have come in contact with the virus.
• On your part, if you are experiencing any flu-like symptoms (fever, cough, shortness of breath, etc.), we ask that you stay at home and contact us for how best to address your legal needs.
• We are leveraging our technology for the receipt and delivery of your documents via our secure cloud service, and utilizing e-signature and e-notary services for remote signing. In addition, our technology allows each of our attorneys and staff to work remotely from home.     

If you have any questions, or if you need assistance with the review or update of estate planning, probate, trust administration, asset protection, and business planning legal needs, please do not hesitate to contact us at 702-998-0444, or schedule a complimentary consultation. 

Should I Use a Trust to Protect My Children’s Inheritance?

“We have approximately $1.5 million in cash and investments, mostly in Certificates of Deposit (CDs). Our mortgage is paid and we have no debt. We have three adult children. Should we put out assets into a trust to better protect them for the future?”

Parents with savings have several options for their children’s future inheritances.

nj.com’s recent article answers this question: “We have $1.5 million. Should we get a trust for our children’s inheritance?” According to the article, parents could create lifetime trusts or trusts in their wills for the benefit of the surviving spouse during the spouse’s lifetime.

After that, they can have the remainder of the assets pass in trusts for each of the children, until they reach a certain age or ages.

A lifetime trust is a type of trust that’s created during an individual's lifetime. This is different from a testamentary trust, which is a trust created after a person's lifetime through the operation of that person's will.

Usually the individual who settles the trust (the "Grantor") will retain control over the assets in the trust, including the right to revoke the assets during his or her lifetime. These forms of lifetime trusts are known as grantor trusts.

Another option is to have these types of trusts continue for the benefit of the grandchildren.

The children’s trusts can have instructions that the assets and income are to be used for the health, maintenance, education and support of the child.

The parents would need to name a trustee or co-trustee. This is the person who’s responsible for investing the assets, filing tax returns and paying taxes (if necessary). He or she will also distribute the assets, according to the terms of the trust.

Trusts are complicated business, so meet with an experienced estate planning attorney to determine the best strategies based on your circumstances and goals.

What Estate Planning Do I Need with a New Baby?

“Becoming a parent means taking on a whole new level of responsibility. After all, you've now got a new life in your hands and your child is dependent on you for everything.”

Congratulations, you’re a new mom or dad. There’s a lot to think about, but there is a vital task that should be a priority. That is making an estate plan. People usually don't worry about estate planning, when they're young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set him or her up for a secure future.

Motley Fool’s recent article, “If You're a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they've protected their child, no matter what the future holds.

1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will, is to name a guardian for your children. If you designate a guardian, you will select the person you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you'll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death.
4. Look at a Trust. If you die prior to your children turning 18, they can't directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children, after they've passed away.

When you have a new baby, working on your estate planning probably isn't a big priority. However, it's worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

Don’t Forget to Update Your Estate Plan

“Are you the type of person who signs their will, sticks it in a drawer and never looks at it again? Or are you constantly updating and making small changes to your will, based on which one of your grandchildren has fallen out of favor?”

There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life, or after they were diagnosed with a serious disease. However, even if your family life and finances are pretty basic, there are still changes in the law that you may need to incorporate into your estate plan.  Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago, may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your will in a while, do it now.

What Can You Tell Me About a Special Needs Trust?

“If you have a loved one who deals with chronic illness or a disability of some kind, you want to be able to keep supporting them after you’re gone. However, you don’t want to disrupt their ability to collect funds from programs like Medicaid or disability payments. In these situations, you can use a special needs trust.”

A special needs trust is a specific type of trust fund that’s created to help a beneficiary with special needs but not jeopardize their eligibility for programs, like Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and Medicaid. KAKE’s recent article, “How a Special Needs Trust Works,” says that programs like SSDI and Medicaid can be vital supports for those dealing with disabilities or chronic illnesses.

These programs have income limits to ensure they’re serving those who need them the most. If you were to just give money to your beneficiary when you pass away, it could come in above this income limit.

A special needs trust works around this. That’s because the owner of the funds is technically the trust, not the beneficiary. You also name a trustee to be in charge of disbursing the funds in the trust. Therefore, while the beneficiary benefits from the trust, she doesn’t have control of its assets.

If you are creating a special needs trust for a beneficiary, you must do this before the beneficiary turns 65. And funds from the trust typically can’t be used to pay for food or shelter.

If a person could benefit from a special needs trust, but they themselves own the funds, you can create a first-party special needs trust in which you serve as both the beneficiary and the grantor. These can be complicated to draw up, and states have varying rules determining their validity. A first-party special needs trust has the money that belongs to its beneficiary.

With a third-party special needs trust, the trust holds funds that a beneficiary doesn’t directly own. These are generally used by grantors to allow the beneficiary to start getting money from the trust, even before their death. The funds never technically belong to the beneficiary, so they can’t be used for Medicaid payments. The trust can be used to save money for the beneficiary and future beneficiaries.

The third type of these trusts is the pooled special needs trust. Nonprofit organizations manage assets for a fee, and these organizations pool the funds of multiple trusts together and invest them. When it comes to payments, beneficiaries get an amount equal to their percentage of the pooled trust’s balance.

A special needs trust lets you write down what you wish your funds’ purpose to be, making it legally binding. Special needs trusts are irrevocable, so you can also protect your funds from creditors and lawsuits against the trust’s beneficiary. It lets you help your beneficiary deal with the expenses that come with illness or disability, without hampering their ability to get other assistance.

How Do I Title Our Property as Tenants in Common?

“This method is actually the default ownership method in Oklahoma, i.e. if you simply title ownership as “joint ownership” the form of ownership assumed will be as a tenant in common.”

There are several ways to hold property. They include ownership as an individual and property held as joint tenants with right of survivorship. A third major form of ownership is “Tenancy in Common.”

The Pauls Valley Democrat says in its article “How to title your property as tenants in common” that ownership as a tenant in common provides an undivided interest in the whole property (i.e., an undivided one-half, one-third, etc.). This interest in property stands on its own and can be bought and sold. This form of title is the best option for two or more people who want to keep their title separate during life and after death.

In practice, this ownership is a bit theoretical because an undivided interest provides a partial ownership of the entire property—but not a total ownership of any part of the property. Therefore, an undivided one-half owner has the right to use the entire property, including the right to benefit from one-half of the rent, lease, or crop share.

When several individuals own an undivided interest, the control, usage, and management can become complex and troublesome, especially when one of the co-tenants spends their own money to improve the property, which benefits the other co-tenants.

Tenancy in common offers a benefit because the interest is transferable and can be sold or otherwise transferred, without affecting the other owners. However, the value of a partial ownership is decreased in value, because of the potential limitations on sharing with the other owners.

The following is an issue that can occur, if a husband and wife own their property as tenants in common. If one spouse dies, his or her undivided interest remains as a part of the estate. As a result, his or her estate has to be probated for a clear transfer of title to the surviving spouse or to other heirs. It’s an expense for the survivor that could have been avoided, if another form of ownership were implemented.

Another thought with co-tenancy is a debt of one of the co-owners. The death of one of the co-tenants does not terminate the ability of his or her creditors to file a claim against the property as a part of a probate.

Each owner has the right to sue to split the property in a suit for partition, and the other owners may at any time face such action. Typically, real property can’t be fairly split into equal pieces. Thus, there’s a sale of the property by the court and then a split of the money after the sale. This isn’t a good option in many cases. Plan in advance, rather than react after the fact.

How Do I Get an Executor to Sell My Mom’s Home?

“If the will does not specifically provide a bequest of the home and the will says everything goes 50/50 to you and your sister, then the executor has the right and responsibility to sell the home to carry out the bequest.”

It’s not uncommon for a parent to leave his or her home to their children in equal shares.

Let’s assume that two sisters are both equal beneficiaries of their mother’s estate in New Jersey. Each adult child has retained an attorney. The executor, who’s a family friend, is moving slowly with the probate process, and it’s been more than a year of waiting. The executor of estate is the individual who is specifically designated in the deceased’s will to manage the estate.

In this case, the glacier-like progress of the executor is causing a strain on the sisters’ relationship. This results in the sisters fighting over the estate. One sister is in no hurry to sell the house, and the other feels frustrated and may have to just give her everything and walk away to save her sanity.

nj.com’s recent article on this topic asks “My mom’s executor won’t sell the house. What can I do about it?” The article says that these sisters probably tried to negotiate a resolution. However, there’s no reason to think the only way to resolve this is for you to “give her everything and walk away.”

The executor should sell the home and distribute the proceeds to the sisters.

If one of the children, her attorney, or the executor object to the sale of the home, a judge may need to intervene.

If there’s no issue, and the executor won’t act, a beneficiary can apply to the court to remove the executor. The judge may then name the two sisters as co-executors, so they can sell the home.

Although there would be legal fees and costs to go to court to get some action, if the executor won’t move, there may not be any other choice.

In addition, the sisters could ask the judge to decrease any executor commission that would be owed to the original slow-moving executor to cover the legal fees, if the judge agrees that the executor was acting improperly.

What’s a Blind Trust?

“A blind trust is a type of living trust, in which the grantor and beneficiary have no control over or knowledge of the assets in the trust or how they’re being managed.”

This is a kind of living trust where the grantor and beneficiary don’t control or know about the assets in the trust or how they’re being managed. Instead, a third-party trustee has full control of the trust assets and doesn’t communicate with the grantor or beneficiary about the dealings of the trust. This trust can be revocable (the grantor can change it) or irrevocable (the trust can’t be modified or terminated).

Investopedia’s recent article, “How to Establish a Blind Trust,” explains that this arrangement makes perfect sense. A blind trust is designed to eliminate any real or perceived conflicts of interest.

Blind trusts are common in politics but also can be useful in other situations, such as to avoid any conflicts of interest. Retiring or retired business owners and executives who retain large amounts of company stock may be interested in politics, charitable work, or board membership that requires them to act objectively.

Creating a blind trust entails having an established estate planning attorney drawing up a document that the grantor signs to give full power of attorney over the trust assets to an independent, third-party trustee.

While drafting the trust, you can provide input like what the investment objective of the trust will be. You stop all communication with the trustee and have no further knowledge of how the trust’s assets are being handled.

Selecting the right trustee is important. You want a person who’s honest and investment savvy. If you’re trying to separate yourself from your investments, you also need someone with whom you don’t have a close relationship.

Blind trusts create a level of separation between the grantor’s assets and professional or political activities that helps to decrease or eliminate real or perceived conflicts of interest and accusations of wrongdoing.

Some people who receive a windfall (such as winning the lottery) can also use them to maintain their financial privacy.

If you’re considering a blind trust, carefully think about whether the benefits of independence and the removal of oversight outweigh the drawbacks of loss of control and information, especially if the blind trust will be irrevocable. Speak with a knowledgeable estate planning attorney.