How to Avoid a Will Challenge

The Northwest Indiana Times says in its recent article, “Choosing an executor,” that will challenges are pretty rare. A successful contest can stem from an issue with the will making process.

That’s all the more reason to use an experienced estate planning attorney to help you create your estate plan. It’s the common mistakes that cause the most trouble, especially when a person tries to save money and do it themselves. If you work with an attorney who focuses on wills and estates in your state, he or she will know when a law changes—and how it can impact your plans and objectives for your legacy.

The time to think about a possible will contest or challenge is in the initial planning process. If you and your attorney discuss your concerns from the start, he or she can plan around them and design tactics that can avoid or reduce the chances of a will contest.

Hand-229777_640It’s much simpler to tackle a problem now, than to try to solve it later after you’re not around. When working with your lawyer, the more information you offer, the more likely the problem can be addressed and avoided.

For example, if you are considering favoring a daughter who has taken care of you for many years but worry that the other children will be upset, discuss this with your estate planning attorney.

Your attorney may ask you to get a letter from your physician. That letter should confirm that, that in his or her medical opinion, you’re of sound mind and have the capacity to make your own decisions. Capacity is a common challenge to a will. A begrudged heir may claim you were not mentally capable of signing a will.

Your attorney may also record the will signing, so there’s evidence that you weren't under another person’s influence or pressured into signing the will. Don’t be surprised if your attorney asks that the care-giving child isn’t at the signing, to lessen the concern of undue influence.

Some folks will leave a person they intend to disinherit a dollar. That won't do anything, except cost your estate a dollar. Just because you left them a dollar, doesn't mean they can't challenge the will.

Some people also want to have a term in the will stating that anyone who challenges the will is disinherited. However, that is not a 100% lock. This provision, known as an in terrorem clause, is unenforceable in many states.

Speak with an experienced estate planning attorney and plan for the challenge. Odds are it will never arise. However, if it does, by taking these steps, your family will be ready and your wishes will be honored.

We can help with the most difficult of estate planning matters.  If you have any questions at all just fill out this simple form and we'll be in touch.

Jeffrey Bellomo, Esq.



Reference: The Northwest Indiana Times (September 3, 2017) “Choosing an executor”

Suggested Key Terms: Trusts and Estates, Probate Court, Inheritance, Estate Planning Lawyer, Will Changes, Will Contest, Probate Attorney


It’s Okay, an Intentionally Defective Grantor Trust is Legal

Definition of trustDon’t worry; this is a totally legal and valid trust. The “defective” part only describes the fact that it’s not valid for income tax shifting purposes.

Because it’s a Grantor Trust, all of the income, deductions, and credits are reported on the individual income tax return of the person creating the IDGT, who is called the Grantor or Settlor. This is all explained well in a recent article appearing in The Nevada Appeal: “What is an ‘IDGT?’”

An IDGT is valid for gift or estate tax purposes. The Grantor is also called the “deemed owner” and is separate from the trust. A big benefit of the IDGT is that significant wealth can be transferred by the Grantor without transfer taxes. This is due to the lack of coordination between the regulations for income tax and those concerning gift and estate (transfer) taxes that apply to grantor trusts.

A grantor trust—which is also known as a “living trust”—is revocable. The owner or grantor is allowed to modify the terms, add assets and remove assets from the trust. Income is reported on the individual income tax return, and the grantor trust isn’t required to file Form 1041, an income tax return for estates and trusts.

A typical transaction involves the grantor selling an asset that is expected to grow in value to the IDGT in exchange for a promissory note for the fair market value of the item, with interest at the applicable federal rate (AFR). Since the transaction is a sale for gift tax purposes, the gift tax doesn’t apply. It’s also a sale for estate tax purposes.

The grantor owns only the promissory note, and when he or she dies, only the value of the note is included in the grantor’s estate. The appreciation passes to the beneficiaries of the trust without any gift or estate tax liability.

The transaction doesn’t mean that the trust pays income taxes. In fact, the “defective” part of the IDGT means the grantor still reports and pays taxes on trust income—like dividends or rents. The grantor pays those income taxes out of other assets, so it further reduces his or her estate. But the payment of those income taxes is not a gift.

Reference: Nevada Appeal (January 23, 2017) “What is an ‘IDGT?’”


Blended Family Estate Planning

Biracial familyThe best time to start estate planning is now—before the plan needs to be implemented, says The Fairfield Bay News in “Estate Planning Tips for Blended Families.” Estate planning can be very complex with a blended family, so ask for help from a qualified estate planning lawyer.
Here are a few general ideas to help you think about your blended family:
Update Beneficiary Designations. Get all of your beneficiaries set and updated, like those on your retirement accounts and insurance policies. This will ensure that they reflect your blended family. It is important to remember that these designations take priority over the instructions in your will—it’s a totally separate deal.
Living Trust. While you’re at it, consider a professional trustee for a living trust. Trusts can help you to avoid probate and allow you the freedom to decide how and when you want your assets distributed. After you pass away, a properly created trust can provide a surviving spouse with income for life. After he or she dies, it will then give the children from an earlier marriage the remainder of the trust assets. To be fair to all, you may want to hire a professional third-party trustee who isn’t a beneficiary of the trust and isn’t entitled any of the trust assets. This person or company wouldn’t have a vested interest in how proceeds of the trust are distributed.
Prenuptial Agreement. When settling an estate, a prenuptial agreement can help eliminate disputes among members in a blended family. With a pre-nup, you can detail a separation of property for your will, your living trust, and any other relevant estate-planning arrangements in the event that you and your new spouse agree to keep your assets separate so you can each pass an inheritance to your own children.
Finally, be sure to share your estate-planning intentions with the members of your blended family. This can help prevent bad feelings and unpleasant surprises.
Reference: Fairfield Bay (AR) News (November 9, 2016) “Estate Planning Tips for Blended Families”


Is a Living Trust Right for You?

Definition of trustA living trust is a legal document that holds title to your assets for your benefit (and likely with you as the trustee) while you're alive. It then manages those assets for you if you become disabled and administers them for your beneficiaries according to your instructions at your passing.

This was the subject of a recent Fox News article, “Why Should I Put My Home in a Living Trust?”

Living trust versus a will. A living trust is similar to a will in that it’s a legal document that instructs how to distribute your possessions after your death. If you have a will when you pass away, your estate goes into probate where the court monitors the distribution of your estate. But if you set up a living trust while you're alive, you’ll work with an attorney to do the paperwork ahead of time and avoid court supervision of the most valuable items you own after you're gone

Whatever you place in the trust can be distributed in just weeks after you pass. Also, a living trust is private, not like a will, which is a public document.

A living trust is typically funded with your assets, such as your home. You also should put any vacation homes in different states in the trust to avoid separate probate proceedings in those states. To place property in a living trust, your estate planning attorney will draw up a new deed in the name of the trust and maintain a list of what's in the trust to make it easier for your successor trustee.

Revocable or an irrevocable trust. The creator of the trust also needs to opt for either a revocable or an irrevocable trust. A revocable trust is one that lets you change what property is in the trust—or even the very existence of the trust itself. This is good for someone who wants to stay in control over his or her assets, right up until the moment he or she can no longer mentally do so, at which point a designated trustee is ready to assume control.

An irrevocable trust is one where once you create it—that’s it. You can't take things in or out, or dissolve it. This type of trust isn’t included in your estate's value for taxes, so an irrevocable trust can save you some potential tax money there. But because of this lack of flexibility, the irrevocable trust usually makes more long-term financial sense.

Talk with a qualified estate planning attorney about your situation.

Reference: Fox News (October 5, 2016) “Why Should I Put My Home in a Living Trust?”


Create a ‘Bulletproof’ Will

Grandfather and granddaughterWith people living longer, things can be messier. There’s more time for a second marriage, more time for assets to accumulate, and more time for more kids and grandkids—creating more confusion over who gets what after you’re gone.

USA Today discusses five measures to offset potential challenges to your will in “5 ways to make a bulletproof will.”

  1. The no-contest clause. This provision will discourage people from disputing a will. It means that if you challenge the will, you get nothing. This clause can make beneficiaries think long and hard about trying to get more than you bequeath them.
  2. Emphasize your wishes verbally. Creating your will may seem to be a personal and private task. However, you should really try to communicate with your heirs to avoid unintended turmoil after your death. If you tell your loved ones while you’re alive, you can explain your rationale. It also makes it more decided that your choices are yours alone—making it more difficult to successfully contest the will. It also allows heirs to understand your wishes, which might help defuse hard feelings.
  3. Ask your doctor to verify your mental health. A valid will must be made by someone of sound mind. Disgruntled heirs may question whether you were in your right mind when you made the will and could argue to a judge to disregard your wishes. To avoid this, older individuals should include a doctor’s note that confirms their mental capacity with the will.
  4. Get a lawyer. The do-it-yourself, fill-in-the-blanks will-preparation software is inexpensive and convenient. However, it's risky to go with the cheapest option when you have so much to lose. It’s similar to what astronaut Alan Shepard said before blast-off: “It's a very sobering feeling to be up in space and realize that one's safety factor was determined by the lowest bidder on a government contract.” A cheap online will may not be up-to-date with current laws, which could open the door for challenges.
  5. Consider a living trust. A living trust legally transfers your assets to designated beneficiaries. However, a trust is private, where a will is a public record. Also, the legal time frame to challenge a trust is usually shorter than for wills, plus a living trust will include directions for your finances in the event you are incapacitated. A will doesn’t have this. Speak with an experienced estate planning attorney to learn more about whether a living trust is right for you.

Reference: USA Today (Sept. 27, 2016) “5 ways to make a bulletproof will”

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