Thursday, March 29, 2018

If You Have Special or Unique Estate Planning Goals, You Need a Special Plan


Summary: For pretty much everyone, it is exceptionally important, not just to get an estate plan, but to get a complete and carefully created estate plan. That need can be especially high if you have certain special circumstances that apply to your situation. If, for example, you are disinheriting all of your children and leaving everything to a non-relative or a more distant relative, then you need to be extra certain that you have the documents, and the wording within those documents, that you need to achieve your goals.


A court case from early 2018 provides an example of how important it is, when your goals include atypical objectives like disinheriting close relatives in favor of distant relatives or non-relatives, to have a plan that dots all the I’s and crosses all the T’s. When a plan doesn’t bad things can ensue. An unfortunate example of this was the estate of a man from Texas named Larry. Larry’s case highlights how, in estate planning, sometimes small details make big differences.

Larry made the wise decision to avoid having no plan and executed a will in 2009. The will stated that Larry’s niece, Valorie, was to receive “all my personal effects and all my tangible personal property, including automobiles, hangars, aircraft, fly-drive vehicles, patents, companies, and all other things owned by me at the time of my death, including cash on hand in bank accounts in my own name, or companies[’] names, or securities, or other intangibles.”

Sounds pretty thorough, right? To many readers, it probably sounds like the will directed that Valorie got pretty much everything. Sometimes, though, it’s not what is on paper but what isn’t there that can make all the difference. That was true in Larry’s case and led to his estate going through the Texas court system for an extended period of time.

Larry’s daughter, Lori, went to court seeking an order from a judge entitling her to a portion of Larry’s assets. Lori’s argument was that her father’s will only gave Valorie all of his “personal property.” The will said nothing about Larry’s “real property.” So all of Larry’s real estate, Lori argued to the judge, should be distributed as if there was no will at all. That would mean following the rules of intestate succession and distributing all of Larry’s real estate holdings in equal portion to Lori and her two brothers.

Larry’s brother, Gary, whom Larry had appointed as his executor, argued to the judge that the will was clear that Valorie got everything. The key, he argued, was the will’s “all other things owned by me” language in the document.

The trial court judge agreed with the brother, but the state Court of Appeals ultimately ruled for the daughter. The appeals court concluded that the “all other things owned” phrase meant all other types of personal property in addition to the things he explicitly listed. This meant that, when read in full context, that the will said nothing about what was to happen to Larry’s real estate holdings. As a result, Lori and her brothers were entitled to split their father’s real estate assets.

Was the final outcome what Larry really wanted? Based upon the reported facts, it seems somewhat unlikely. Whether it was or was not, Larry’s estate distribution was not ideal. The final outcome either was one that did not match Larry’s goals, or it was one that did match Larry’s goals but took years of litigation in the Texas courts to achieve. Either way, it could have been avoided with a provision in the will stating what was to happen to Larry’s real property. 

Everyone deserves to have the peace of mind of knowing that they have a complete and carefully thought-out estate plan to dictate their goals for their legacy. If you are someone who has some special and/or unique goals, it is imperative to work with an experienced estate planning team to ensure your desires are achieved, and completed without stressful and expensive extra litigation.

Reference:
Justia US Law. (2018) In the Estate of Larry Ronald Neal, Deceased Appeal from County Court at Law No. 2 of Wise County (memorandum opinion). Retrieved from URL: https://law.justia.com/cases/texas/second-court-of-appeals/2018/02-16-00381-cv.html


This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com. 

This article written and published by:
8039 Cooper Creek Blvd
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Friday, March 16, 2018

Estate Planning for the Continued Success of Your Farm


Summary Whether you own a small retail or service business, or you are a family farmer, your business is an important part of your life and wealth. Chances are, you have taken steps during your lifetime to protect your business and ensure its longevity. You have probably also taken steps to protect your family during your lifetime. A proper estate plan can include provisions that will ensure that your business or farm’s continuity will be appropriately provided for, and that your loved ones will receive what you intend in accordance with your wishes.

A court case from “across the pond” serves as an example and a useful reminder of just how important proper and complete planning is, especially when you own a business or a farm. In the case from England, the husband was part of a family farming operation. The family had created a business entity (in this case, a partnership) for the business. The farmer’s wife believed that the partnership owned the farming business but that the farmland itself was owned by the husband individually.

The husband died in 2005. He had created a will before he died. His will said that the farmland was to be distributed into a trust that was to benefit the wife. Eventually, though, the wife discovered sometime after her husband’s death that the farmland was 100% owned by the partnership. This meant that the husband individually owned none of the farmland, which meant that his provision in the will funding his farmland into the trust was meaningless and the trust received nothing in terms of land.

The case even ended up in the British courts. While the law of the United Kingdom has its differences from the laws of the U.S. states, the facts that led to this unfortunate farmer’s wife’s problems and subsequent trip to the courthouse could just as easily have been something that happened here in the States.

Business entities can be very useful tools within an overall business plan for your family farm. Establishing a partnership, corporation, LLC or other entity can offer substantial advantages to you and your family (and your farming business) when it comes tax planning, asset protection and reduction of liability exposure, or other objectives.

When you decide to create such legal structures, though, it is important to make sure that they are properly incorporated into your estate plan. If you own your interest in your farm as a member of an LLC, for example, it is essential to make sure that your estate plan includes instructions for distributing your ownership stake in the LLC to whomever you want to receive your interest in the farm. It is also important to make sure that you understand clearly “who owns what,” so that you can make certain that your estate plan functions properly. An estate plan that distributes land will not work if it turns out that your LLC, and not you, own that farmland.

If your estate planning goals have led to establishing a living trust, it is important to make sure that your trust is properly funded. This could include funding your ownership interest in your farm’s business entity into your trust. In other words, for example, you may need to create documentation that transfers legal ownership of your stake of your farming LLC from you as an individual to you as the trustee of your living trust.

While this may all sound very technical, what you should take away is just how important it is, when you plan your estate, to make sure that everything is coordinated to work together. It is just as important to make sure that you review and update your plan – your whole plan – to make sure that it is still constructed to give you and your family the maximum benefit and the maximum realization of your goals. Your experienced estate planning attorney can help you with making the best choices for you and your family. 

 This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com. 

This article written and published by:
8039 Cooper Creek Blvd
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Monday, March 12, 2018

How the Procedural Rules of Probate Can Get in the Way of Your Goals


Summary: When you decide to create an estate plan, you obviously want a plan that will allow you to express your wishes and have those wishes carried out after you die. In some situations, though, the law may stop you from doing so. The legal rules regarding probate administration may bar you from naming the person you want to serve as the administrator of your estate. Using a living trust is one way you may be able to avoid this problem, as the legal rules create fewer prohibitions against serving as the successor trustee of a living trust as compared the administrator of probate estate. This type of plan may more fully allow you to achieve the goals you have for your estate.

Imagine, if you will, this situation: You are preparing to create your estate plan. You are widowed and have one child, a son. Your son, a responsible member of his community with a family and a good job, is the person you desire, not only to be the beneficiary of your wealth, but also the administrator of your estate. You have no one else who is as close to you whom you’d want to handle the job.

However, as you prepare to put your plans onto paper, you discover a stunning problem. You see, back when he was in college 25 years ago, your son, on a dare, shoplifted some alcohol from a liquor store. Because the bottles he grabbed happened to be worth a grand total of $205, he was convicted of a felony theft crime. Your estate planning attorney, much to your surprise and dismay, tells you that, in your state of residence, the law forbids people who have felonies on their records from serving as administrators of probate estates. As you sit in the lawyer’s office flabbergasted, you can only think… “Now what am I going to do?”

Sound far-fetched? It’s not. Some states have a flat prohibition that forbids anyone with any type of felony conviction on their record (no matter what type or how long ago) from serving as an administrator of any probate estate in that state. (And yes, some states allow for felony convictions for stealing as little as $200.)

This story highlights the fact that there are many procedural hurdles and potential pitfalls involved in going through the probate process. Probate administration is a creation of statutory law and court case decisions, so when an estate goes through probate, everything must be done in such a way that it passes through all the hoops that have been erected by the statutes and previous court ruling about probate.

There are ways to avoid these potential procedural pitfalls. One way, for example, is to create a plan that distributes most or all of your wealth through a revocable living trust. Because a living trust is not something that was created by probate laws, dividing and distributing your wealth using a living trust is a process that does not have to satisfy all the procedural hoops and hurdles of probate law. There are certain requirements, such as the way that you go about executing (signing) a trust, that the law says you have to meet, but there are many others that do apply to wills and probate that don’t apply to trusts.

Let’s return the example above. While you cannot name your son due to the law’s barrier against convicted felons serving as estate administrators, you probably can set up an estate plan centered around a revocable living trust and then name your son as the successor trustee of that trust, regardless of that shoplifting conviction from a quarter-century ago. The law generally establishes far fewer barriers preventing people serving as successor trustees. As compared to the laws governing estate administrators, you can generally name almost anyone you want to be your successor trustee.


This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com. 


This article written and published by:
8039 Cooper Creek Blvd
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Friday, March 9, 2018

Coordinating Business Planning and Estate Planning for the Continued Success of Your Farm


Summary: Assets with death beneficiary designations can be quite helpful, including as part of an overall estate plan that will avoid probate. In some circumstances, though, they may come with certain pitfalls that can create problems. In those situations, there may be a better way, or a different planning tool that will better meet your needs. With complete estate planning, possibly including the use of trust planning, you may be able to protect your family more effectively from those pitfalls.

Chuck and Terri’s story was, in many ways, a tragic one. The couple married and had a son, Conner, who was born in 1997. Chuck was 43 and Terri 29 at the time. In 2009, doctors diagnosed Terri with terminal cancer. A few years later, Chuck was also diagnosed with cancer, and his was terminal as well. Chuck’s cancer was believed to be either more aggressive or more advanced, because the doctors expected him to die before Terri did. However, in the fall of 2013, Terri died suddenly and somewhat unexpectedly at age 45. Chuck lived another 10 months before passing away at age 60.  

This unexpected series of events, and the order in which they occurred, mattered a great deal. Terri had a $600,000 life insurance policy. Chuck was the beneficiary under the policy. However, shortly before she died, Terri changed the beneficiary designation to name her sister, Amanda, and Chuck as co-beneficiaries. According to Amanda, she and Terri both promised each other that, if anything happened to either of them, the survivor would take care of the deceased sister’s kids. At the time, though, Amanda had no idea that Terri would name her as a co-beneficiary of the life insurance policy.

After Terri’s death, Chuck became concerned that Amanda was not going to use the life insurance money to take care of Conner, even though she had promised to. He went to court, asking the judge to place $270,000 of the life insurance proceeds in trust. (Chuck asserted that Terri wanted Amanda to keep $30,000 for herself and dedicate the remaining $270,000 of her half to Conner.) In court, while on the witness stand, Amanda actually asked, “If it’s my money, what does it matter what I spend it on?”

The trial judge sided with Chuck, but the state court of appeals eventually ruled for Amanda. The problem was that a life insurance policy is legally a contract and the law is very specific that, if a contract is clear and not ambiguous, then it should be carried out as written. In this case, the insurance contract was clear that, when Terri died, the insurance company was to pay $300,000 outright to Chuck and $300,000 outright to Amanda. Whatever promises Amanda and Terri had made to each other, whatever documents Terri had handwritten stating her wishes… they were all irrelevant. The insurance policy beneficiary designation form clearly said that Chuck and Amanda were co-beneficiaries. That was all that mattered.

There was ample evidence that this outcome may not have been what Terri truly wanted. There was evidence that Terri’s main focus was to provide for Conner. Almost certainly, Terri did not want Chuck, in his final months, to have to fight a court battle with Amanda over the life insurance money. The actual outcome of this situation certainly did not achieve those goals.

In many cases, there is a better way. One option would be the use of trusts as part of an estate plan. If, for example, someone like Terri wanted to dedicate her wealth to providing for her minor child, and was also dealing with the uncertainty of a terminally ill spouse, a trust might have done a better job achieving those goals. A person in a situation like Terri could, for example, choose to create a trust and name that trust as the beneficiary of the life insurance policy. This would then allow for greater flexibility. You could name your terminally ill spouse as the trustee of the trust but also name someone like a trusted sibling as the first successor trustee in the event that your spouse dies or becomes incapacitated. You could also, if you have a child in their mid teens (as Terri did,) create provisions in your trust to delay some or all of the distribution of the money, so that your child doesn’t receive a six-figure lump-sum of money on his or her 18th birthday. The trust could clearly state whom the funds were to benefit, such as stating that the trust was for the benefit of your spouse during the spouse’s lifetime and for your child thereafter.

Assets with death beneficiary designations can be useful tools in estate planning and avoiding probate. Sometimes, though, there is a better way. That’s why it helps to plan carefully with the help of an experienced estate planning attorney.



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Monday, March 5, 2018

Understanding the Do’s and Don’ts of Trust Funding


Summary: A living trust can be an extremely beneficial part of an overall estate plan. A living trust can help accomplish many goals, such as avoiding probate. To get the most from your plan, though, you’ll need to make sure that you’ve properly funded the assets that should go into your trust and avoided doing so with those that should not go into a trust. Regardless of the makeup of your assets, it is important to understand that a living trust can offer many advantages beyond just probate avoidance, including planning for mental incapacity and reducing the risk of a successful estate plan legal challenge.

If you looked into, and learned much about, revocable living trusts, then you probably know a few key basic facts about them. One of the things with which you’re probably familiar, then, is the necessity of trust “funding.” Funding a trust refers to the process of transferring legal ownership of your assets from you as an individual to you as the trustee of your living trust. Your living trust can only control those things that are properly funded into it. A living trust with no assets in it is like a car with no fuel in the gas tank. No matter how well designed it is, it won’t be capable of doing anything if it’s empty.

So, with that in mind, you’ve probably heard of the importance of “fully funding” your trust. Does full funding mean that you should transfer everything into your living trust? Actually, no. There are certain types of assets that you should take great care to avoid funding into your living trust. Funding these assets could cause you to suffer many types of negative consequences, especially when it comes to taxes.

For example, you definitely should not fund any type of qualified retirement account into your plan. This group includes things like 401(k) accounts, 403(b) accounts, IRAs and qualified annuities. Why not? It’s because the taxing authorities look at this transaction and consider it to be a “complete withdrawal” of all of the funds in the account. So 100% of whatever amount you had in the account at that time will be legally declared to be income to you in that year and you’ll have to pay income tax on it, which could be huge hit to your income taxes that year.

You may have heard that you cannot fund your health savings account (HSA) into your trust. While that is true, there is a “work-around” for this. Instead of transferring ownership of the account to the trust, you can simply name your living trust as a beneficiary of your HSA.

While you can fund life insurance into your living trust, you may not want to and you may not need to. You may not want to because, in some states, transferring ownership of an asset like life insurance can reduce the level of creditor protection provided by the law. You may not need to because, much like HSAs, you can include your life insurance proceeds in the distribution instructions of your living trust simply by naming your trust as the beneficiary of the policy.     

With all these things that don’t go into a trust, you may be wondering, “If I have these assets, does that mean I don’t need a trust?” No, it does not mean that! For many people, probate avoidance is a primary goal for their estate. While assets with beneficiary designations accomplish that, chances are that you have many more assets, some of which may be high-value assets, that do not have beneficiary designations attached to them and which would need to go through probate to be distributed without a trust.

Additionally, a living trust does much more than just avoid probate. Most observers believe that it is harder to challenge a living trust successfully in court than it is a will. A living trust can also help you avoid the need for a conservatorship if you should become mentally incapacitated. So, whether you’re planning for mental disability or planning to avoid a legal contest to your plan, a living trust can help with all of these goals that go beyond just avoiding probate. 



This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com. 


This article written and published by:
8039 Cooper Creek Blvd
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844.306.5272 (Phone)
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Friday, March 2, 2018

You’re Never Too Young, or Too Poor for an Estate Plan


Summary: Life is unpredictable. While your circumstances today might make you think you have little need for estate planning, those things can change quickly. The best way to make sure that you and your loved ones are protected for whatever may come is to get an estate plan in place. With a plan in place, your loved ones will know your desires regardless of whether your estate is worth a few thousand dollars or a few million.

In the biblical Book of Proverbs, the writer wisely warns, “Do not boast about tomorrow, for you do not know what a day may bring.” The reality is that none of us are promised tomorrow and, in light of that, it is never too early to begin thinking about estate planning and to make a plan to leave a legacy remembering those who mattered to you most. You might say, but I am only in my 20s, have no children and have amassed very little wealth. That still doesn’t mean that that you cannot reap substantial benefits from an estate plan because, as the ancient author so correctly put it, “you do not know what a day may bring.” 

A tragic story from Indiana provides a real-life example of this truth. Keri was a young woman in her 20s. She wasn’t married and had no children. She had no job and was planning to go back to school. Chances are high that estate planning was one the furthest things from her “to do” list. At around 11:00 p.m. one September night, a driver hit Keri while she was was walking along a road in Anderson, Ind. The first driver injured but didn’t kill Keri. However, that driver didn’t stop. Another driver came along later and ran over Keri again, killing her. Keri had no estate plan at the time of her death.

Keri’s aunt opened an intestate estate and, as the administrator of the estate, sued the drivers’ insurance companies for wrongful death. Both companies settled with the estate and paid out monetary settlements. What followed was an extensive litigation that went all the way to the state Court of Appeals. The focus of the legal battle was who should get the money from those two insurance settlements. Keri’s aunt, as the estate administrator, argued that the money should be distributed according to the state’s Adult Wrongful Death Act. Keri’s three half-siblings argued that the court should distribute the money according to the state’s intestacy laws. Under the Wrongful Death Act, Keri’s mother potentially would receive all of the insurance money. If the intestacy laws were used, then the mother and the three-half siblings would each get 25% of the settlement payments.

The Court of Appeals decided that the Wrongful Death Act’s rules for distribution were the ones to use. In this specific case, that meant that the money was outside of Keri’s probate estate and was to be distributed according to the statute, regardless of whether or not Keri had an estate plan. Nevertheless, Keri’s case highlights the unpredictability of life. Sometimes, the receipt of large amounts of money can happen unexpectedly. So can premature death. It is better to plan and not need your plan for a long time (because everyone will need a plan eventually) than not to plan and have nothing written down when the time comes. 


This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com. 


This article written and published by:
8039 Cooper Creek Blvd
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844.306.5272 (Phone)
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