Cheap Wills Cost A Lot

CHEAP WILLS COST A LOT 

Q.  Why do trusts cost more than wills, and why are wills so inexpensive?

A.  Thank you for asking!  I often joke with my colleagues that I am going to start advertising wills for $10.00 each and give away a free toaster if I’m assured the probate fee.

            At a recent bar meeting on probate fees, I heard an attorney make a comparison of the way probate attorneys practice to the way funeral homes used to charge $5.00 for ambulance runs to the hospital and sometimes provide the service free of charge.  By offering free or inexpensive services, the funeral homes hoped to get the lucrative funeral fees later on.

This attorney went on to explain that fees charged for wills are low in lieu of anticipated probate fees which an attorney hopes to receive in the future, and that because consumer advocates and others are suggesting to clients how they can avoid probate with living trusts, the probate attorneys are now losing large fees because they are getting fewer probate cases.  The attorney reasoned that since it was less likely that the firm was going to get the probate fee, the only logical thing to do was to raise the fees for drafting wills.

            The only logical thing, in my opinion, is always to give the client a choice in which way to plan his estate.  If a client chooses a will, he should be informed of the probate costs and time delays of administration.  A guardianship plan should be discussed since wills only deal with death.  If the client chooses a living trust, he should be given instructions on how to maximize the use of the trust by registering assets to the trust.

            Recently I had a debate with a probate attorney on the issue of probate vs. trust, which was televised all over the State of Florida.  The other attorney’s main defense against the trust was the higher initial cost, the misunderstanding people have about trusts, and the failure to place assets in the trust.

            I disagree with all of these points.  Trusts are more expensive than wills initially, but not nearly as expensive as probate.  Registration of assets is very important in the trust process, and problems will be prevented if the client follows the attorney’s instructions.  Trusts are simple to comprehend if the attorney will communicate to the client in an easy-to-understand format.

            In my opinion, the advantages of the living trust far outweigh planning your estate with a will.  According to recent statistics, the average probate fee is four percent of a person’s gross estate.

            Recommendation:  Review your estate plan, and discuss with your attorney what is best for you and your current situation.

Loving Features Trust

LOVING FEATURES TRUSTS

 

Q.  What is a “loving features trust”?

 

A.  A “loving features trust” is a new term used in estate planning which implements an old idea.  A loving features trust is simply a living trust with some possible added features for family members with special needs.

            First of all, a person creating a living trust has already displayed an extra dose of love for family members because living trusts avoid probate.  Probating a will is a costly procedure.  Avoiding probate also saves family members from court procedures that take up to a year from start to finish.  Probate is also a procedure that is a matter of public record.  The following are some important aspects of a loving features trust:

 

1. Trust is controlled by you during your lifetime.

2. Upon incapacity, the trust is used solely for your benefit by your choice of a successor trustee.

3. Trust has provisions to take loving care of any minor children or grandchildren and to take care of any special needs.

4. Taxes may be avoided through the use of trust, thus giving loved ones more money.

5. Special needs of loved ones can be planned for in loving features trust.  Special provisions can be placed in a trust for spendthrift children or children with drug abuse or other problems.

6. Trust provisions can be established for college or other educational purposes.

7. Life insurance and retirement accounts can be left to a trust to insure that money earned during a lifetime cannot be spent quickly.

8. Spouses with no financial or investment experience can be provided for in a loving features trust.

9. Upon the death of the grantor, a loving features trust can be divided into many subtrusts with each one providing for the special needs of family members.

 

I often refer to trusts as the ultimate in estate planning.  The disadvantages of just having a will are too great not to at least consider a trust in your estate plan.  Why not take steps to (1) avoid probate, (2) save time, (3) have a guardianship plan, and (4) insure privacy.  In addition, you can add those “loving features” to your estate plan.

Trust Power

 

TRUST POWER

 

 

Q.  Do I lose control of my assets if I place them in a “living trust”?

 

A.  No.  This is a common misunderstanding about the use of living trusts in estate planning.  The fear of “losing control” is without merit.

 

            A clause usually found in the trust agreement is called “Grantor’s Life Interest.”  This clause usually directs that the income and principal must be used for the benefit of the grantor (person creating the trust) as long as he/she lives.

 

            The income or principal of the trust can be spent exactly as though the assets were owned individually, even though they are now in the trust.

 

            For example, if husband and wife created a living trust and the husband died and the wife later became incompetent, the successor trustee(s) named by the grantors are directed by the trust to manage the assets for the wife’s (grantor’s) interest for as long as she may live.  It is entirely possible that if the husband and wife placed most of their assets in the trust, incompetency proceedings in court could be avoided.

 

            In order for the successor trustee(s) to take over bank accounts and stocks, etc., the trust usually grants that the successor trustee can provide the statements of two licensed doctors of medicine to establish the incapacity of the grantor to act in his/her own behalf.  The trust in this case has made it possible for successor trustee(s) to take over assets without a court hearing and approval from the court on expenditures.

 

            Successor trustee(s) can resign at any time in most trust agreements by giving 30-day notice to the beneficiaries, and other successor trustee(s) can take over.  Thus, if the grantors have named their children as first, second and third successor trustees, and after the husband and wife have died or have become incompetent, and the first successor is then unable to perform the duties of trustee, then he may resign and the second successor may take over.  If all three successors cannot perform the duties of successor trustee, then they and the beneficiaries may appoint a trustee.

 

            In summary, the person(s) creating a “living trust” do not lose power or control of the assets they place in the trust.  They have absolutely the same control over the assets in the trust as they do over assets owned individually.  By creating a trust, they have also controlled who would manage the assets if they were to become incapacitated in any way.

Estate Planning for Children

ESTATE PLANNING FOR CHILDREN

Q. What are some of the estate planning techniques that I need to be concerned with in planning for my minor children?

 

A. There are many different approaches to estate planning for children. One of the foremost concerns for any couple with minor children is that the children would be properly cared for in the event of a common disaster. Insurance is a common tool to provide enough money for the support of the children.

 

       However, money is not enough to raise children, and the selection of a guardian for the children should be carefully considered. The responsibility of distributing the money to the guardian either from the estate or from insurance can be controlled through a trust or through the probate and guardianship court. The decision-making process of how the guardian would receive the monies to care for the children should be decided when the will or trust is drawn by the attorney.

 

       The money for college education is another concern for estate planners and parents. Planning for college expenses is often accomplished with insurance, special savings accounts, annuities, or a variety of other financial planning tools. Usually an attorney and a financial advisor make an excellent team in planning for college expenditures.

 

       An estate planning tool that is sometimes used by parents is to spread out payment to children over a period of time in order for the children not to receive their entire inheritance at an early age. For example, some parents might plan for their children to receive 50% of their inheritance at age 21 and 50% at the age of 25 or 30. This would avoid the mismanagement of an entire estate at once.

 

       Planning for emergency medical costs is another very important aspect in planning for the care of children. Parents should properly plan their own disability insurance in order for the children’s support to be continued in a time of illness or other incapacity. Often medical misfortunes of the parents or children can cause financial disaster to a family without proper insurance planning.

 

       Another important element of estate planning for children is reducing or eliminating probate costs and arranging for the children to receive monies from the estate easily and quickly. This goal can be achieved often by the use of inter vivos or living trusts. A review of how this could be accomplished should be discussed with your attorney.

 

Can Two States Claim Me as a Resident?

DUAL RESIDENCES

  

Q.  Can two states claim me as a resident for tax purposes if I live in one state part of the year and another state the rest of the year?

 

A.  You should take all steps possible to avoid a claim of dual domicile upon death.  You should analyze the tax structure of both states and decide where you want to live.  You may wish to consider changing the situs of assets by changing their character.

            Real estate, tangible personal property, and mineral interests are generally governed and taxed upon death only in the state where the property is located.  Intangible property, e.g. securities and partnership interest, are usually subject to taxation, if any, in the state of the owner’s domicile.  Transferring real estate into a corporation, partnership, or certain types of trusts may change the nature of the property from real property to tangible property.

            Usually real property can only be taxed at its situs, whereas cash, bank accounts and securities (intangible property) are taxed where the decedent was domiciled at the time of death.

            The United States Supreme Court has ruled that the question of domicile is for the states to decide, and it is not unconstitutional for more than one state to claim a decedent of that state for the purpose of imposing an inheritance tax.  Because domicile is determined under each state’s law, two or more states can constitutionally tax a person’s intangible property.

            To constitute a domicile, or to effect a change of domicile, there must appear both an actual residence and an intention to remain there or make it one’s home.  The intention to establish a residence must be bona fide and unequivocal.  If one were to live in Florida for five to seven months and live in another state for the remainder of the year, the determination of where he or she was domiciled would depend on some or all of the following factors:

 

1. Whether residence was declared homestead;

2. Location of personal property;

3. Location of voter registration;

4. Location of banking accounts;

 

5. Membership in clubs, churches, etc.;

6. Location of charge accounts;

7. Location of securities;

8. Place where will or trust was signed;

9. Address on tax returns;

10. Address of automobile license;

11. Subscriptions;

12. Telephone listings;

13. Location of contributions.

 

Assets in multiple states may also have to go through multiple probate proceedings.  Your attorney may advise you how these assets can avoid probate.

 

Do I need a will if everything is owned jointly with right of survivorship with my wife?

FIVE EXCUSES TO DELAY ESTATE PLANNING

 

 

Q.  Why do I need a will if everything is owned jointly with right of survivorship with my wife?

 

A.  People develop excuses to delay estate planning.  The following is a list of common excuses.

 

1. “I don’t need a will because of joint ownership.”

FALSE — If you both die or one of you becomes incapacitated, you have waited too late to prepare your estate plan.

2. “My child’s name is on all of my bank accounts.”

HORRIBLE PLANNING — If the child is sued, goes through divorce proceedings, or is involved in an accident, you could lose the account.  A general rule is never to own assets jointly with a child.

3. “I have to discuss my will or trust with my children before I proceed.”

WHY?  It’s your money, and you should plan your estate according to your wishes.  Children could be your worst advisors.  A properly drawn trust is of great benefit to your children and yourself.

4. “I feel fine.  Why do I need a will?”

RIDICULOUS — I once had a lady ask me if I would visit her in the hospital to prepare a will.  I answered that I would, and she then informed me that she would call me back because she wasn’t sick enough yet!  Some people delay their estate planning until it’s too late.  She died four months later without a will.

5. “I will work on my estate plan as soon as . . .”

YOU NAME IT:         I paint my house;

                                    I return from my trip;

                                    I make my funeral arrangements;

                                    I decide what to do with my pets;

                                    I decide who gets what;

                                    I feel better;

                                    I finish my taxes, etc.

 

            I’ve heard every reason in the world to delay implementing an estate plan.  There is no time like the present to get your affairs in order.  Estate planning is a very important part of preserving your assets for loved ones and providing yourself guardianship planning.  Why not enjoy the peace of mind and satisfaction of having it completed and knowing that you have preserved as much of your estate as possible, plus saved yourself from ever having to go through a guardianship proceeding.  Why delay?

CONTROLLING THE ESTATE FROM THE GRAVE

CONTROLLING THE ESTATE FROM THE GRAVE

 

Q.  How effective are trusts that make bequests conditioned upon the children doing or refraining from doing certain acts?

A.  Parents often attempt to control the conduct of their children by leaving them their estate over a period of years if they do certain things.  Most courts uphold conditional bequests as long as they do not violate public policy.  Let’s look at some common areas.

RELIGION:  Some parents will try to force their child to have the same beliefs as they do or to belong to the same church, etc.  The courts have varied on this point from state to state, and it is often a matter of the degree of the request.  Conditions which tend to interfere with one’s freedom of religion may be struck down as volative of public policy.

MARRIAGE:  A gift conditioned upon the recipient remarrying is generally upheld; however, a conditional bequest which would force a beneficiary to remain in an unhappy marriage has been rejected by most courts as a violation of public policy.

DIVORCE:  A parent could not require a divorce before his child could receive his inheritance.  Most courts would construe that condition as a violation of public policy.  A gift which does not induce the divorce but provides for the support of a divorced person is generally acceptable.

PARENTAL CONTROL:  Conditions that would require a child to live away from his or her parent before receiving an inheritance are not enforceable as it is clearly against public policy.

BEHAVIOR:  The most common conditions are that a child refrain from drug, alcohol, and cigarette use, or maintain a certain grade average in school.  This type of behavior can be a condition of a person receiving a bequest from a will or trust.  Attorneys have to be extremely careful in drafting these types of clauses, as the most common problem of enforcing them is that they are often too vague.

 Conditional bequests can be a way to control behavior from the grave.  Each case must be analyzed separately to insure that it is not against public policy, and clauses must be carefully drafted so as not to be too vague.

Wills - Undue Influence

WILLS – UNDUE INFLUENCE

Q.  Can a will be overturned for undue influence?

 

A.  Yes.  The free use and exercise of being of sound mind is vitally important and absolutely essential in the validity of a will.  A will can be void, in whole or in part, if the execution is caused by fraud, duress, menace, undue influence or mistake.  Undue influence is a recognized ground for contesting the probate or setting aside a probated will.

 

            If one is to prove undue influence as required for the invalidation of a will, that person must prove overpersuasion, duress, force, coercion or artful or fraudulent contrivances to such a degree that the one preparing the will lost his freedom of thought in preparing and making the final provisions of his will.

 

            It must be shown that through the practice of persuasion, pressure, artful or fraudulent contrivances, the will was prepared subject to the desires and wishes of an overpowering person and not truly in the best wishes or desires of the person preparing the will.

 

            In addition, in order to defeat a will, undue influence relied on as a ground of contest must have operated on the testator at the time the will was executed.

 

KINSHIP AND PERSONAL RELATIONSHIPS

 

            Influence that arises from mere affection, attachment, desire to please or gratify is probably not enough to invalidate a will.  Even if affection based on an illogical infatuation is proven, it is probably not enough to prove undue influence.

 

KINDNESS

 

            Kindness, of itself, does not constitute undue influence nor is it evidence of it.  Kind offers and good deeds are not improper, and a will cannot be overturned because such influences produced requests in a will.

 

MARITAL RELATIONSHIPS

 

            There is no such thing as a confidential relationship between husband and wife governing contests of wills.  It is possible under special conditions for the wife or husband to exert undue influence in a will if the testator’s emotional, physical or mental condition is impaired.

 

BENEFICIARY’S HELP IN DRAFTING WILL

 

            Generally, the court views beneficiaries helping to draft wills with disfavor, and such circumstances are considered suspicious and invite close scrutiny.

 

TESTAMENTARY CAPACITY vs. UNDUE INFLUENCE

 

            If a will is attacked on the grounds of undue influence, then it has been accepted that the party was of sound mind.  If it can be proven that a will was executed while one was intoxicated, then the area of competency could be challenged.

 

UNNATURAL, UNREASONABLE OR UNFAIR CHARACTER OF WILL

 

            The circumstances surrounding a will that is unnatural, unreasonable, unfair or unjust are generally regarded as evidence that the issue of fraud or undue influence is present.

 

DEGREE OF PROOF

 

            Proof of undue influence is difficult, and, of course, has to overcome the presumption that the will expresses the voluntary intent of the testator.

 

            For questions in this area of the law, please seek the advice of a competent attorney specializing in estate planning.

Choosing an Attorney

CHOOSING AN ATTORNEY

  

Q.  How would a new Florida resident choose an attorney?

A.  There are many methods available for you to choose a new attorney.  Consider the following:

 

1. Ask friends, neighbors or co-workers about lawyers they have used and with whom they have had successful experiences.

2. Contact your state, city or county bar association and ask for the names and phone numbers of attorneys who handle cases within your needs.

3. Look for advertisements. Many attorneys advertise in the yellow pages and/or newspapers, and these ads often state their specialties, office hours and locations.

4. If you live near a law school, you may wish to contact the dean’s office or law professors for a recommendation.

 

Some questions you may wish to ask the attorney before or during the initial meeting are as follows:

 

1. Is there a charge for the initial consultation?  Many attorneys do not charge for the initial meeting.

2. What percentage of his or her practice is devoted to cases like yours?  Many attorneys can handle a variety of legal matters, while others devote most of their time to one area.

3. Does the attorney have references from past similar cases?  This information may or may not be available since most attorneys may be very hesitant to release client names for ethical reasons.

4. Will he/she personally work on your case or delegate it to others?

5. What are the billing arrangements, how will progress reports be made to you regarding your case, and how long does the attorney estimate your case will take to process?

6. What are the attorney’s fees?  Attorney fees are negotiable and should be a factor in making your decision.  Some attorneys charge flat fees, others charge hourly rates, and others take retainers or work on a contingency basis.  The hourly rate can vary a great deal from attorney to attorney.  Whatever fee arrangement you ultimately decide upon, it is best that it be in writing.  The writing can also provide a written estimate of the costs and how bills may be itemized.

 

Remember, when you choose an attorney, you could be choosing an advisor, confidant, and possibly a friend for life — GOOD LUCK!

 

LEGAL NEW YEAR RESOLUTIONS

 

 LEGAL NEW YEAR RESOLUTIONS

Q. What would be a good list of legal resolutions to make for the New Year?

A. Every person will have their own list of things that need to be accomplished in their own lives. A common list of items and goals for the New Year would be as follows:

 

1. Estate Planning: Everyone should have a will or a trust for proper planning of his or her estate. Wills and trusts should be reviewed every two or three years to keep the estate planned properly for distribution and taxes.

 

2. Insurance:  All types of insurance should be reviewed with your agent and/or attorney. A complete review will determine if you have enough insurance and if you have designated the proper beneficiaries. Shifting of the “owner” of some policies has estate planning advantages. Insurance planning for a “disability crisis” or planning to pay estate taxes with insurance dollars are worthwhile concepts to review and modify, if necessary.

 

3. Automobile insurance: More and more people are increasing their insurance and/or adding umbrella policies for extra protection. You have worked all your life to obtain what you have, and it could be catastrophic to lose it because of a lawsuit. Increasing your car insurance is one way to limit your exposure to liability.

 

4. Ownership of assets:  A review should be made of “how” you own things and the resultant impact that death or incapacity would bring upon the assets that you own. For example, automobiles should generally be owned in one name, as the owner(s) of automobiles usually are sued when there is an accident.  On the other hand, assets held in one name such as CD’s stocks and mutual funds to go through probate upon death.  You and your attorney should review how you own your assets and understand the consequences of death or incapacity and how you can change the ownership to minimize estate and administration costs.

 

5. Real estate transactions:  All real estate transactions, including contracts for additions to your home, should be reviewed by an attorney before signing. An attorney may help you avoid problems with (1) receiving or giving proper title; (2) termites; (3) mechanic liens; (4) dishonest contractors; and (5) properly licensed individuals.

 

6. List of instructions:  A well-planned list of funeral instructions and arrangements as well as what family members are to receive regarding personal effects within a household, makes it much easier on family members at the time of a loved one’s death.  Your attorney can draw provisions within your will to allow you to make a separate list of these items.

 

7. Financial inventory:  Everyone should have a goal to become financially organized. This would include a complete list of all assets and liabilities in a systematized format. Not only will this help you understand your net worth, but it would also make it easy for loved ones to handle financial matters at a time of need.

 

8. Preparing for the future:  It would be a great idea this year to purchase an organizer book that contains important and valuable information regarding your estate. This would also be a wonderful tool for your loved ones to have in the event that it is needed upon your incapacity or death. This organizer should include all personal, family, estate planning, and health care information, all financial information, personal property information, funeral instructions, pet instructions, email and online accounts information, and other important information to you. This organizer should also contain a section to record all of your legal, medical, financial, accounting, banking, stocks and bonds, IRA’s, 401K or pension plans, social security, military benefits, real estate, insurance agencies, religious advisors, and a section for any debts. You can rest assured knowing that you are not just preparing directions for your estate and financial information but also for your other important and sensitive information.