How Does Court Choose an Executor if a Will Isn’t Available?

An executor is the person who’ll manage your estate by protecting your assets, paying your debts and distributing the remaining property according to the terms in the will. But Programming Insider’s recent article, “Role of the Court When There is No Will For an Estate, asks “what would happen if someone dies without a will and, therefore, without appointing a personal representative?”

This is known as dying “intestate.” When it happens, the probate court must decide who will act as the estate’s administrator or personal representative. The judge’s decision will be based on state law, which will say how to prioritize potential fiduciaries in an administrator’s appointment. Every state has a prioritized list of preferred executors, and some states offer detailed guidance, like Oklahoma, which has a prioritized list. If more than one person is equally entitled to be appointed, a court has the option to appoint one or more executors.

The probate court has the final decision as to who will serve as the estate’s administrator or personal representative, even including a person who is named as executor in a will or is entitled to be chosen as a valid executor. The court will award authority to an administrator and will issue letters of administration or letters of testamentary. This authorizes the person to serve as an estate’s personal representative. Some people who might otherwise be entitled to serve as an executor may be disqualified based on state law. Here are some of the factors that a judge may consider when disqualifying a potential executor:

An executor must be an adult, who is at least 18 years old. However, some states require the minimum age of 21.
Criminal History. Some states don’t permit someone who’s been convicted of a serious crime to serve as the fiduciary representative of a decedent’s estate. Other states only require a potential executor to notify the court of any felony convictions.
Residency. This may be a factor in a person’s ability to serve as a personal representative. Some states let nonresidents serve in some circumstances. Some let nonresidents serve, if it’s a close relative. Finally, some other states require a nonresident executor to post a bond or use an agent within the state to process services and the court’s communication.
Business Relationship. There may be state laws as to who may be an executor if the decedent was an active member of a partnership; and
It also may be difficult for a noncitizen to serve as an estate’s personal representative.

Generally, probate judges have a lot of latitude and discretion on this selection.

Reference: Programming Insider (Nov. 9, 2020) “Role of the Court When There is No Will For an Estate

What Do I Do If Property I Just Inherited Has a Mortgage?

Bankrate’s recent article entitled “Does the home you inherited include a mortgage?’ explains that when a family member dies, there can be questions about wills, inheritances and how best to settle financial affairs. It can be a stressful time, and complicated, especially when real estate is a part of the equation. Let’s look at some specific situations and how to address them.

Inheriting a mortgage. In many instances, a person will inherit both a home and the mortgage that goes with it. If that’s the case, ask for help from an attorney who specializes in elder law or estate planning. Even though the borrower died, the mortgage still must be repaid. Therefore, if you’ve inherited it, you’ll have to decide how the loan and property will be handled. If you move into the home, you may be able to assume the mortgage and continue paying it. You might also think about a cash-out refinance and pay that way. You can also sell the home. Heirs have a good deal of leverage dealing with a mortgage in an estate situation thanks to federal law, which can help them assume an existing loan. You should ask your attorney about estate taxes and capital gains taxes from a sale.

Assuming a mortgage. Typically, if you’re assuming the loan, the lender will be willing to work with you. Mortgages frequently have a “due-on-sale” or “due-on-transfer” clause that requires full repayment of the loan, in the event of a change in ownership. In certain estate situations, federal law prevents the lender from calling the loan, even if it has such a clause. Surviving spouses also have special protections to ensure that they can keep an inherited home.

Inheriting a reverse mortgage. If the home involves a reverse mortgage or a Home Equity Conversion Mortgage (HECM), your options vary according to the circumstances of the borrower who died. If you inherited a reverse mortgage from a parent, your options include the following:

Paying off or refinancing the balance and keeping the home
Selling the home for at least 95% of the appraised value; or
Agreeing to a deed in lieu of foreclosure.

There is a six-month window for the balance to be repaid. This can be extended, if the heir is actively trying to pay off the debt. If the reverse mortgage isn’t paid off after a year, the lender is required by HUD to begin the foreclosure process. This has negative connotations. However, it is a normal part of settling a reverse mortgage, once the last borrower or non-borrowing spouse passes away. If you’re a surviving spouse, and you’re on the reverse mortgage, nothing will change.

If the mortgage is underwater. If the value of the inherited home is less than the outstanding mortgage debt, the home has negative equity or is “underwater.” If the mortgage is a non-recourse loan (the borrower doesn’t have to pay more than the value of the home), the lender may have few options outside of foreclosure. The same usually applies for a reverse mortgage: the most that will ever have to be repaid, is the value of the home. The heirs are fully protected, if the home isn’t worth enough to pay off the entire HECM balance.

When there’s no will. If a borrower dies without a will, there will be more complications and expense when handling a home with a mortgage (or any other assets). Talk to an experienced estate planning attorney regarding your specific situation.

Reference: Bankrate (Oct. 22, 2020) “Does the home you inherited include a mortgage?’

Despite Pandemic, Many Still Don’t Have an Estate Plan

It’s true—many people still believe that they don’t have enough assets so they don’t need a will, or that their money will automatically go to a next of kin. Both of these beliefs are wrong. While the title of this CNBC article is “More people are creating wills amid the pandemic,” the story’s focus is on the fact that most Americans don’t have a will. If you belong to this group, here’s what happens when you die.

The state you live in has laws about who will receive your assets if you die without a will, known as intestacy. Let’s say you live in New York. Your surviving spouse and children will receive your assets. However, in Texas, your assets will be entered into the state’s intestacy probate process, and your relatives will divide up your assets. Want to be in charge of who inherits your property? Have a will created with an experienced estate attorney.

Young adults think they don’t need a will, but Covid-19 has taken the lives of many healthy, young people. Every adult over age 18 needs a will. If you don’t have one, your loved ones—even if it’s your parents—will inherit a legal mess that will take time and money to fix.

If you have children and no will, there’s no way to be sure who will raise your children. The court will decide. Choose your guardians, name them in your will and be sure to name additional choices just in case the first guardian can’t or won’t serve. You should also appoint someone to be in charge of your children’s money.

What if you had a will created 10 or twenty years ago? That’s another big mistake. Your life changes, the law changes, and so do relationships. Life insurance policies, retirement plans, and transfer-on-death instruments are all legally binding contracts. The last will you made will be used, and if you haven’t updated your will or other documents, then the old decisions will stand. Remember that contracts supersede wills, so no matter how much you don’t want your ex to receive your life insurance proceeds, failing to change that designation won’t help your second spouse. You should review and update all documents.

Doing it yourself is risky. You won’t know if your will is valid and enforceable, if you do it from an online template. Your heirs will have to fix things, which can be expensive. The cost of an estate plan depends on the complexity of your situation. You may only need a will, power of attorney and advance directive. You may also need trusts to pass property along with minimal taxes. An estate planning attorney will be able to give you an idea of how much your estate plan will cost.

Talking about death and planning for it is a difficult topic for everyone, but a well-planned estate plan is one of the most thoughtful gifts you can give to your loved ones.

Reference: CNBC (Oct. 5, 2020) “More people are creating wills amid the pandemic”

Did Samsung’s Chairman Have an Estate Plan for his $20.7 Billion Fortune?

Samsung Electronics Co. Chairman Lee Kun-hee, South Korea’s richest man, had an estimated fortune of $20.7 billion. Most of this was his stakes in four Samsung units, according to the Bloomberg Billionaires Index. The country’s inheritance tax is as high as 60% on inherited shares for large shareholders and 50% on real estate and other assets. That could mean a tax bill of about $10 billion for Lee’s family.

Fortune’s recent article entitled “After Samsung chairman’s death, his heirs are facing a $10 billion tax bill” says that Lee’s heirs are unlikely to sell stock to finance the taxes.

Share sales can cause issues because they would reduce the family’s control over the company. Many choose to make the cash payment over five years. Cash can be prepared through means, such as dividends or salaries. That’s how Chairman Koo Kwang-mo, who took over the reins of LG Group in 2018 after his father’s death, is doing it. He and his family are paying their $817 million inheritance tax over five years.

Lee Kun-hee’s ownership included a 4% holding in the world’s largest producer of smartphones, televisions, and memory chips, as well as 21% of Samsung Life Insurance Co., which owns the second-biggest chunk of Samsung Electronics.

Lee’s only son, Jay, has been leading the company after a heart attack incapacitated his father in 2014. If he inherits all of his father’s shares in Samsung Electronics and Samsung Life Insurance, he may use dividends and financing from family members for the taxes. It’s also possible that the family will use personal financing.

The younger Lee has legal troubles from the controversial merger of two Samsung affiliates in 2015 that led to his control of the group. Although he holds less than 1% in Samsung Electronics, through the merger, he secured a 17% control in Samsung C&T Corp., which in turn directly owns 5% of the tech company.

He’s awaiting a final ruling on a bribery case that sent him to prison in 2017. He is facing a separate trial on financial-fraud charges, including stock-price manipulation to facilitate his succession.

Jay denied any wrongdoing. He has made a personal apology for the recurring corruption scandals at Samsung and pledged not to hand down leadership to his children.

Reference: Fortune (Oct. 26, 2020) “After Samsung chairman’s death, his heirs are facing a $10 billion tax bill”

Act Quickly to Protect an Estate

For most families, the process of estate administration or the probate of a will starts weeks after the death of a loved one. However, before that time, there are certain steps that need to be taken immediately after death, according to a recent article “Protecting an estate requires swift action” from The Record-Courier. It is not always easy to keep a clear head and stay on top of these tasks but pushing them aside could lead to serious losses and possible liability.

The first step is to secure the deceased’s home, cars and personal property. The residence needs to be locked to prevent unauthorized access. It may be wise to bring in a locksmith, so that anyone who had been given keys in the past will not be able to go into the house. Cars should be parked inside garages and any personal property needs to be securely stored in the home. Nothing should be moved until the trust administration or probate has been completed. Access to the deceased’s digital assets and devices also need to be secured.

Mail needs to be collected and retrieved to prevent the risk of unauthorized removal of mail and identity theft. If there is no easy access to the mailbox, the post office needs to be notified, so mail can be forwarded to an authorized person’s address.

Estate planning documents need to be located and kept in a safe place. The person who has been named as the executor in the will needs to have those documents. If there are no estate planning documents or if they cannot be located, the family will need to work with an estate planning attorney. The estate may be subjected to a probate proceeding.

One of the responsibilities that most executors don’t know about, is that when a person dies, their will needs to be admitted to the court, regardless whether they had trusts. If the deceased left a will, the executor or the person who has possession of the will must deliver it to the court clerk. Failing to do so could result in large civil liability.

At least five and as many as ten original death certificates should be obtained. The executor will need them when closing accounts. As soon as possible, banks, financial institutions, credit card companies, pension plans, insurance companies and others need to be notified of the person’s passing. The Social Security Administration needs to be notified, so direct deposits are not sent to the person’s bank account. Depending on the timing of the death, these deposits may need to be returned. The same is true if the deceased was a veteran—the Veteran’s Affairs (VA) need to be notified. There may be funeral benefits or survivor benefits available.

It is necessary, even in a time of grief, to protect a loved one’s estate in a timely and thorough manner. Your estate planning attorney will be able to help through this process.

Reference: The Record-Courier (Oct. 17, 2020) “Protecting an estate requires swift action”

Why Is an Art Dealer’s Family Contesting His Will?

Zarre didn’t have a wife or children. He is believed to have amassed a valuable art collection in the years since he opened the Andre Zarre Gallery on New York’s Upper East Side in 1974.

The gallery closed several years ago, because of Zarre’s health problems.

ArtNews’ recent article entitled “A New York Art Dealer Just Left His Multimillion-Dollar Estate to the Owner of a Deli in Queens—But His Family Is Crying Foul” explains that Yeje met Zarre in 2016. He reportedly cared for Zarre over the last eight months of his life, including when the dealer contracted the coronavirus.

Zarre recovered but fell in his Park Avenue apartment in July. Yeje drove him to the hospital, where he reportedly died of a heart attack.

“I washed him, I bought his groceries and fed him. He trusted me and I took care of him,” Yeje, who is 50, told the New York Post. “He was an awesome person.”

Friends of the dealer say they questioned his actions, when he reportedly began investing in the Palermo Delicatessen in Glendale, Queens last fall.

“[Zarre] was really going blind and could barely put one foot in front of the other,” Nick Wolfson, a friend of Zarre and one his gallery’s artists, told the New York Post, wondering if failing health had made the elderly dealer vulnerable to a swindle.

Zarre’s first cousin Arkadiusz Tomasik, who lives in the United Kingdom, claims that Zarre always told him that he’d inherit the estate. He questions the validity of the will leaving everything to Yeje, especially since Zarre was legally blind.

Yeje has offered Zarre’s family $45,000 and land that the art dealer owned in his native Poland, in exchange for not challenging the will. Tomasik is reportedly thinking about legal action.

If Tomasik disputes the will, he will file a lawsuit that seeks to invalidate the art dealer’s will. He will have to show that the will was signed under undue influence, by fraud, that Zarre didn’t have the capacity to sign the will or that the will wasn’t signed in accordance with New York law.

Reference: ArtNews (Oct. 19, 2020) “A New York Art Dealer Just Left His Multimillion-Dollar Estate to the Owner of a Deli in Queens—But His Family Is Crying Foul”

Can I Leave My Pet Some of My Estate?

The Minneapolis Star Tribune’s article entitled “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts” reports that Minnesotans are setting up trusts to care for their pets in the event they survive them.

This is a fairly new law in Minnesota. Since it was enacted in 2016, Minnesotans have been setting aside money to guarantee the care of their animals after they die or are incapacitated. With a pet trust, there’s a guarantee that the money earmarked to care for the animal will be there for the animal as intended. A trust can designate a separate caretaker, trustee and a trust enforcer to care for the animal, manage the money. and make certain the care is being provided as instructed in the trust.

A pet trust can contain instructions on the type of food, medical care, exercise and housing the pet will get, as well as the pet’s end of life and burial or cremation directions.

When the pet trust law was being debated in the Minnesota Legislature, there was the idea that pet trusts are frivolous, an option only for wealthy eccentrics like New York real estate and hotel tycoon Leona Helmsley. She died in 2007 leaving $12 million for the care of her dog, Trouble. The courts later reduced that amount to $2 million.

In the North Star State, the amount of money put into a trust to care for a pet can’t be excessive, or a judge might decrease the amount.

A pet trust can be used to care for an animal before the owner dies but is disabled or incapacitated. When the pet dies, depending on how the trust was created, the money left in the trust would be distributed to heirs or could go to another designated person or charity.

In states where pet trusts are not available, a person could write in their will that a relative will inherit a pet, and the pet owner could also leave the person money to pay for the animal’s care. However, because pets are legally considered personal property, they cannot own property or inherit assets themselves. As a result, there’s nothing that would prevent the relative designated to care for the animal to take it to the pound after you die and spend the cash on themselves.

A pet trust can provide a plan for animal lovers who want to own pets late in life but may be concerned the pet might outlive them. Talk to an experienced estate planning attorney about pet trusts in your state.

Reference: StarTribune (Sep. 23, 2020) “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts”

Cornelius Vanderbilt Created an Estate Plan, but Should I?

AJC’s recent article entitled “Why Vanderbilts should inspire you to create an estate plan” explains that when Cornelius Vanderbilt died, his son, William, inherited most of the fortune and nearly doubled it within a decade. However, after that came a drop in the cash, and after just a few decades, the fortune had been spent. Therefore, none of Vanderbilt’s descendants stayed among the wealthiest people in the country.

When 120 Vanderbilt family members recently gathered for a reunion at Vanderbilt University, not one was a millionaire. In a century, the largest estate America has ever known had dwindled to next to nothing.

Let’s look at why this happens and how you can prevent this from happening to your estate.

America is currently in the midst of the greatest transfer of wealth ever. An estimated $59 trillion will be transferred to heirs, charities and taxes between 2007 and 2061. However, roughly 70% of wealth transfers aren’t successful. This means that sometimes heirs get practically nothing. There are three reasons for this failure:

No trust and communication among heirs because they’re all concerned about their share.
Heirs are unprepared to inherit an estate, which may include managing investments or a business. In many cases, other family members don’t know how it works.
Heirs have no clue where the money should go and what purpose it should serve because no one is thinking long term about what is best for the family assets.

It’s common for business owners to believe that an estate plan is enough to keep everything in order, but they don’t consider their business. This is the reason why succession planning is vital. This planning determines what happens to the business itself and lays out the strategy, so it continues to operate smoothly after it’s passed to the heirs.

Let’s look at some tips for dealing with estate planning that should make for a smooth transition:

Create a plan. If you die without a will, state probate law will determine who gets your assets. This may not be what you want. Talk to an experienced estate planning attorney to be certain that everything is drawn up correctly.

Discuss the issues with your heirs. Talk to your family about the financial details. Make sure that your heirs know the details of your estate, so they can start to manage and oversee it once you die.

Get heirs involved in the process. Likewise, heirs can help plan based on their knowledge, future availability and expectations. By planning now, no one will be caught unaware about what to do with the estate.

Ready your heirs. Educate your heirs on how to manage and oversee your assets, especially if you have a succession plan for a business. Discuss the company’s mission and vision, and what you want the company to achieve.

Organize your financial documents. Get all financial documents in a single location and label everything clearly to help out your heirs. Keep this in a safe location, and let your heirs know where it’s located. Your attorney should also have a copy of your will, estate plan and succession plan (if applicable).

Get help from experts. Help forge a relationship between your heirs and your financial team, which may include a financial adviser, an estate planning attorney and an accountant. This will allow your heirs to know who to call, if things get complicated. It’ll also help to prepare them for what they’re supposed to be doing, once they get their inheritance.

Communication is the key. Talking with your experts and your heirs will make certain that everyone understands each other’s roles, regardless of whether it’s a small business or a multimillion-dollar empire.

Reference: AJC (Sep. 25, 2020) “Why Vanderbilts should inspire you to create an estate plan”

Does My Estate Plan Need an Audit?

You should have an estate plan because every state has statutes that describe how your assets are managed, and who benefits if you don’t have a will. Most people want to have more say about who and how their assets are managed, so they draft estate planning documents that match their objectives.

Forbes’ recent article entitled “Auditing Your Estate Plan” says the first question is what are your estate planning objectives? Almost everyone wants to have financial security and the satisfaction of knowing how their assets will be properly managed. Therefore, these are often the most common objectives. However, some people also want to also promote the financial and personal growth of their families, provide for social and cultural objectives by giving to charity and other goals. To help you with deciding on your objectives and priorities, here are some of the most common objectives:

Making sure a surviving spouse or family is financially OK
Providing for others
Providing now for your children and later
Saving now on income taxes
Saving on estate and gift taxes in the future
Donating to charity
Having a trusted agency manage my assets, if I am incapacitated
Having money for my children’s education
Having retirement income; and
Shielding my assets from creditors.

Speak with an experienced estate planning attorney about the way in which you should handle your assets. If your plan doesn’t meet your objectives, your estate plan should be revised. This will include a review of your will, trusts, powers of attorney, healthcare proxies, beneficiary designation forms and real property titles.

Note that joint accounts, pay on death (POD) accounts, retirement accounts, life insurance policies, annuities and other assets will transfer to your heirs by the way you designate your beneficiaries on those accounts. Any assets in a trust won’t go through probate. “Irrevocable” trusts may protect assets from the claims of creditors and possibly long-term care costs, if properly drafted and funded.

Another question is what happens in the event you become mentally or physically incapacitated and who will see to your financial and medical affairs. Use a power of attorney to name a person to act as your agent in these situations.

If, after your audit, you find that your plans need to be revised, follow these steps:

Work with an experienced estate planning attorney to create a plan based on your objectives
Draft and execute a will and other estate planning documents customized to your plan
Correctly title your assets and complete your beneficiary designations
Create and fund trusts
Draft and sign powers of attorney, in the event of your incapacity
Draft and sign documents for ownership interest in businesses, intellectual property, artwork and real estate
Discuss the consequences of implementing your plan with an experienced estate planning attorney; and
Review your plan regularly.

Reference: Forbes (Sep. 23, 2020) “Auditing Your Estate Plan”

Does Your Estate Plan Include Digital Property Protection?

One of the challenges facing estate plans today is a new class of assets, known as digital property or digital assets. When a person dies, what happens to their digital lives? According to the article “Digital assets important part of modern estate planning” from the Cleveland Jewish News, digital assets need to be included in an estate plan, just like any other property.

What is a digital asset? There are many, but the basics include things like social media—Facebook, Instagram, SnapChat—as well as financial accounts, bank and investment accounts, blogs, photo sharing accounts, cloud storage, text messages, emails and more. If it has a username and a password and you access it on a digital device, consider it a digital asset.

Business and household files stored on a local computer or in the cloud should also be considered as digital assets. The same goes for any cryptocurrency; Bitcoin is the most well-known type, and there are many others.

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has been adopted by almost all states to provide legal guidance on rights to access digital assets for four (4) different types of fiduciaries: executors, trustees, agents under a financial power of attorney and guardians. The law allows people the right to grant not only their digital assets, but the contents of their communications. It establishes a three-tier system for the user, the most important part being if the person expresses permission in an online platform for a specific asset, directly with the custodian of a digital platform, that is the controlling law. If they have not done so, they can provide for permission to be granted in their estate planning documents. They can also allow or forbid people to gain access to their digital assets.

If a person does not take either of these steps, the terms of service they agreed to with the platform custodian governs the rights to access or deny access to their digital assets.

It’s important to discuss this new asset class with your estate planning attorney to ensure that your estate plan addresses your digital assets. Having a list of digital assets is a first step, but it’s just the start. Leaving the family to fight with a tech giant to gain access to digital accounts is a stressful legacy to leave behind.

Reference: Cleveland Jewish News (Sep. 24, 2020) “Digital assets important part of modern estate planning”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

How Does Court Choose an Executor if a Will Isn’t Available?

What Do I Do If Property I Just Inherited Has a Mortgage?

Despite Pandemic, Many Still Don’t Have an Estate Plan

Did Samsung’s Chairman Have an Estate Plan for his $20.7 Billion Fortune?

Why Is an Art Dealer’s Family Contesting His Will?

Can I Leave My Pet Some of My Estate?

Cornelius Vanderbilt Created an Estate Plan, but Should I?

Does My Estate Plan Need an Audit?

Does Your Estate Plan Include Digital Property Protection?

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How Does Court Choose an Executor if a Will Isn’t Available?

What Do I Do If Property I Just Inherited Has a Mortgage?

Despite Pandemic, Many Still Don’t Have an Estate Plan

Did Samsung’s Chairman Have an Estate Plan for his $20.7 Billion Fortune?

Why Is an Art Dealer’s Family Contesting His Will?

Can I Leave My Pet Some of My Estate?

Cornelius Vanderbilt Created an Estate Plan, but Should I?

Does My Estate Plan Need an Audit?

Does Your Estate Plan Include Digital Property Protection?

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