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Estate Planning with No Heirs

Old lady gardeningSome people have a somewhat unique estate planning challenge: they’re childless and not sure what should happen to the assets they leave behind or whom to appoint as their proxy decision-maker.

CNBC’s recent article, “Planning your estate when you've got no children or heirs,” says there may be no close family members, resulting in questions of who they should leave their estate to. These folks also often don't know who to name as executor of their will or who to trust to make decisions for them, in the event that they become incapacitated.

Studies show that most childless people don’t make out a will. The issue with having no will (or “dying intestate”) is that the state will decides who gets your assets. Therefore, it is recommended that for those with no family ties or close friends, to focus on your interests and tie them to charitable giving. You can immediately establish your legacy and enjoy it, while still living.

Another tough decision is choosing someone to have medical power of attorney, which allows that person to make important health-care decisions if you’re unable to do so. Usually married couples will name each other as their health-care proxy, but after the death of one spouse, the other with no children has the challenge of naming someone else. The same is true for childless singles who never married.

Likewise, a living will details your wishes if you’re on life support or suffer from a terminal illness.  It also instructs your proxy's decision making. You also should give someone durable power of attorney to act as your agent, if you’re unable to handle your finances. You can designate different people to handle healthcare and financial decisions.

You also need to designate someone to be the executor for your estate. This can be challenging for those without any family. The executor or “personal representative” has the legal authority to handle your estate. It should be someone you trust and someone who has the bandwidth to take on this responsibility.

If you can’t think of a person to name, your bank's trust division may be willing to serve as executor. You may also consider setting up a trust. Remember that some assets have beneficiaries, like 401(k) plans and life insurance policies. These accounts don’t pass through the will.

Doing something is better than doing nothing. Speak with an experienced estate planning attorney to get help with making these decisions and creating a plan.

Reference: CNBC (May 31. 2017) “Planning your estate when you've got no children or heirs”

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Administrator Must File for Portability for Surviving Spouse, Court Says

People reviewing documentsThe administrator of a decedent's estate in Oklahoma appealed an order from the trial court forcing the administrator to file a federal estate tax return for the estate and elect portability of the Deceased Spousal Unused Exclusion Amount (DSUE) under the federal gift and estate tax laws. The surviving spouse asked for the order and wanted the benefits from the portability election.

In “In the matter of Estate of Vose,” 390 P.3d 238 (Okla. 2017), reported in Justia, the administrator argued that the district court erred on several grounds. One of the decedent’s children by a prior marriage refused to make the required election for transfer, even though the surviving spouse agreed to pay the cost required to prepare the required federal estate tax return.

Since 2010, a spouse has been permitted to transfer, at death, his or her unused gift and estate tax exemption to the surviving spouse. Prior to that date, each spouse had his or her own gift and estate tax exemption, but any portion of that exemption that remained unused by the spouse at death couldn’t be transferred to the surviving spouse.

The Court saw no merit in the personal representative’s argument that the surviving spouse didn’t have standing. The Court said the right to portability of the DSUE was a beneficial interest in the estate for the surviving spouse, regardless of the surviving spouse’s rights as an heir. As a result, the right to portability was an interest that qualified the surviving spouse to bring the lawsuit.

The estate’s administrator also claimed that the couple’s premarital agreement was a waiver by the surviving spouse of any rights to the estate making a portability election. However, the State Supreme Court said the right to portability became law in 2010, which was years after the premarital agreement was signed in 2006. Although the Court found that the couple did agree to a broad waiver of marital rights under the existing law when the premarital agreement was signed, the agreement didn’t speak to the issue of portability, because it wasn’t in the tax code at that point in time.

The Supreme Court upheld the trial court’s decision that the personal representative’s fiduciary obligations to protect estate assets applied and required him to preserve and transfer the decedent’s unused federal estate tax exemption to the surviving spouse.

The Oklahoma Supreme Court rejected these arguments and said that “[a]n administrator of an estate occupies a fiduciary relationship toward all parties having an interest in the estate.”

Accordingly, 26 U.S.C.A. § 2010 requires the administrator to make the election to allow portability of the DSUE, and the only person with an interest in and ability to use the DSUE (if it exists) is the surviving spouse. If the election isn’t made through the timely filing of an estate tax return, it’s lost.

The Oklahoma Supreme Court found no reversible error by the trial judge and affirmed.

Reference: Justia (January 17, 2017) “In the matter of Estate of Vose”

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Planning for Incapacity is Wise Move

Old lady on computerMany of us are not very proactive in estate planning or aware of the issues of elder law, even though we know that eventually we will all face incapacity and/or death. The Arizona Jewish Post’s article, “Estate planning and elder law benefit all ages,” reminds us that life can change in mere seconds.

Estate planning and elder law attorneys say that everyone needs these three documents—a will, a health care power of attorney, and a financial power of attorney.

A will. If you die with no will, state law has a pecking order as to who will inherit your assets, starting with your spouse and children. A valid will must be signed by the person who wrote it, witnessed by two non-relatives who saw them sign and notarized as to the identity of the signer and witnesses.

Your will should name a personal representative, otherwise known as an executor. This should be done far ahead of time to be certain that they are willing and able to undertake the task. Let this person know the location of a copy of your will.

A living will details your end-of-life choices. Without authorized directions, your family may not be able to make the decisions you’d want. A living will can also include funeral wishes.

A medical power of attorney gives the individual you select, the authority to make health care decisions for you, if you’re incapacitated.

A financial power of attorney lets your appointed agent make financial decisions, pay your bills and take charge of your bank accounts, if you’re unable to do so.

A revocable living trust is a document that lets you assemble all of your assets in one place. The assets must be retitled to the trust, not to you as an individual. A trust can help with out-of-state real property or leaving money to a child with special needs who is receiving means-tested government benefits. When you die, the assets in the trust aren’t subject to probate, and are distributed as you instructed in the trust.

Speak with an experienced estate planning attorney for personalized advice that considers your assets, divorces, stepchildren and many other factors.

Reference: Arizona Jewish Post (December 2, 2016) “Estate planning and elder law benefit all ages”

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Things Executors Should Not Do

Do-this-not-thatIf the executor of an estate does not do certain things, then he or she can get in trouble. However, there are other things that can lead to trouble if an executor does do them.

It is relatively easy for the executor, also known as the personal representative of an estate, to learn about his or her responsibilities in that role. Most instructional guides are written in the positive and outline the steps that should be taken.

That can leave a lot of important information out, however, if the executor is not also given advice about what to avoid doing during the process.

Recently, the Wills, Trusts & Estates Prof Blog published a list of some of thing things that should not be done in an article titled, "Seven Things Personal Estate Representatives Should Avoid Doing."

The list includes:

  • Distribute Assets Early – Do not distribute any estate assets until all assets and potential debts are accounted for.
  • Use Estate Assets for Personal Issues – This will lead to having to pay the estate back at best and criminal charges at worst.
  • Ignore Taxes – Make sure all applicable taxes are paid.
  • Disobey Court Orders – If the judge in the case tells you to do something, you must do it.
  • Distribute Assets Before Paying Bills – Pay the estate's liabilities before distributing anything to heirs.
  • Ignore Claims Against the Estate – Creditors cannot be ignored unless a court says to do so.
  • Proceed Without an Attorney – Having the assistance of an estate attorney is the best way to make sure that everything is done properly and that mistakes are not made.

That last point is essential to steering clear of missteps.

For more information about estate planning, please visit my estate planning website.

Reference: Wills, Trusts & Estates Prof Blog (July 25, 2015) "Seven Things Personal Estate Representatives Should Avoid Doing."

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