Estate Planning Blog Articles

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

What Sparks the Contesting of a Will?

A last will and testament is the document used to direct your executor to distribute assets and property according to your wishes. However, it’s not uncommon for disgruntled or distant family members or others to dispute the validity of the will. A recent article titled “5 Reasons A Law Will May Be Contested” from Vents Magazine explains the top five factors to keep in mind when preparing your will.

Undue influence is a commonly invoked reason for a challenge. If a potential beneficiary can prove the person making the will (the testator) was influenced by another person to make decisions they would not have otherwise made, a will challenge could be brought to court. Undue influence means the testator’s decision was significantly affected by a person who stood to gain something by the outcome of the will and made a concerted effort to change the testator’s mind.

Even if there was no evidence of fraud, any suspicion of the testator’s being influenced is enough for a court to accept a case. If you think someone unduly influenced a loved one, especially if they suffer from any mental frailties or dementia, you may have cause to bring a case.

Outright fraud or forgery is another reason for the will to be contested. If there have been many erasures or signature styles appear different from one document to another, there may have been fraud. An estate planning attorney should examine documents to evaluate whether there is enough cause for suspicion to challenge the will.

Improper witnesses. The testator is required to sign the will with witnesses present. In some states, only one witness is required. In most states, two witnesses must be present to sign the will in front of the testator. A beneficiary may not be a witness to the signing of the will. Some states have changed laws to allow for remote signings in response to COVID. If the rules have not been followed, the will may be invalid.

Mistaken identity seems farfetched. However, it is a common occurrence, especially when someone has a common name or more than one person in the family has the same name, and the document has not been properly signed or witnessed. This could create confusion and make the document vulnerable to a challenge. An experienced estate planning attorney will know how to prepare documents to withstand any challenges.

Capacity in the law means someone is able to understand the concept of a will and contents of the document they are signing, along with the identities of the people to whom they are leaving their assets. The person doesn’t need to have perfect mental health, so people with mild cognitive impairments, such as depression or anxiety, may make and sign a will. A medical opinion may be needed, if there might be any doubt as to whether a person had testamentary capacity when the will is signed.

A will contest can be time-consuming and expensive, so keep these issues in mind, especially if the family includes some litigious individuals.

Reference: Vents Magazine (May 6, 2022) “5 Reasons A Law Will May Be Contested”

What are Benefits of Putting Money into a Trust?

For the average person, knowing how a revocable trust, irrevocable trust and testamentary trust work will help you start thinking of how a trust might help achieve your estate planning goals. A recent article from The Street, “3 Powerful Types of Trusts that Can Work for You,” provides a good foundation.

The Revocable Trust is one of the more flexible trusts. The person who creates the trust can change anything about the trust at any time. You may add or remove assets, beneficiaries or sell property owned by the trust. Most people who create these trusts, grantors, name themselves as the trustee, allowing themselves to use their property, even though it is owned in the trust.

A Revocable Trust needs to have a successor trustee to manage the assets in the trust for when the grantor dies or becomes incapacitated. The transfer of ownership of the trust and its assets from the grantor to the successor trustee is a way to protect assets in case of disability.

At death, a revocable trust becomes an Irrevocable Trust, which cannot be easily revoked or changed. The successor trustee follows the instructions in the trust document to manage assets and distribute assets.

The revocable trust provides flexibility. However, assets in a revocable trust are considered part of the taxable estate, which means they are subject to estate taxes (both federal and state) when the owner dies. A revocable trust does not offer any protection against creditors, nor will it shield assets from lawsuits.

If the revocable trust’s owner has any debts or legal settlements when they die, the court could award funds from the value of the trust and beneficiaries will only receive what’s left.

A Testamentary Trust is a trust created in connection with instructions contained in a last will and testament. A good example is a trust for a child outlining when assets will be distributed to them by the trustee and for what purposes the trustee is permitted to make the distribution. Funds in this kind of trust are usually used for health, education, maintenance and supports, often referred to as “HEMS.”

For families with relatively modest estates, a trust can be a valuable tool to protect children’s futures. Assets held in trust for the lifetime of a child are protected in the event of the child’s going through a divorce because the child’s inheritance is not subject to equitable distribution when not comingled.

Many people buy life insurance for their families, but they don’t always know that proceeds from the life insurance policy may be subject to estate taxes. An insurance trust, known as an ILIT (Irrevocable Life Insurance Trust) is a smart way to remove life insurance from your taxable estate.

Whether you can have an ILIT depends on policy ownership at the time of the insured’s death. In most cases, the insurance trust must be the owner and the insurance trust must be named as the beneficiary. If the trust is not drafted before the application for and purchase of the life insurance policy, it may be possible to transfer an existing policy to the trust. However, if this is done after the purchase, there may be some challenges and requirements. The owner must live more than three years after the transfer for the policy proceeds to be removed from the taxable estate.

Trusts may seem complex and overwhelming. However, an estate planning attorney will draft them properly and make sure that they are used appropriately to protect your assets and your family.

Reference: The Street (May 13, 2022) “3 Powerful Types of Trusts that Can Work for You”

What about House Contents when Someone Dies?

Probate law does not allow anyone to take items from a loved ones’ home after they die, until the will has been probated. Learning about probate, what it entails and how to prepare for it may make it a little easier when a family member dies, says a recent article titled “Can you empty a house before probate? from Augusta Free Press. Knowing what to expect can avoid common pitfalls and mistakes, some of which often lead to family fights and even litigation.

Probate is a court-supervised period when the estate of the decedent is on pause. Assets may not be distributed, including personal items in the home. The goal is to ensure that assets are distributed only after the will has been ruled valid by the court and following the instructions in the will.

Probate includes the legal appointment of the executor, who is named in the will with specific statutory responsibilities, to include ultimately distributing assets.

For many people, estate planning includes preparing assets to avoid the probate process. An estate plan includes a review of the entire estate to see which assets are best suited to be taken out of the estate. Living trusts, joint ownership, transfer-on-death (TOD) and many other estate planning strategies can be used, depending on the person’s finances.

Certain tasks can be accomplished during probate relating to the home and other property. This includes changing the locks on the home to protect it from criminals and unauthorized people who have keys. The decedent’s mail can be forwarded to the executor or another family member’s address. A review of the decedent’s bills, especially monthly payments, can take place. If there’s a mortgage on the home, the mortgage company needs to be contacted and the payments need to be made.

As the end of the probate period nears, it may be time to contact an appraiser to get an unbiased, professional appraisal of the home’s value. This will be needed if the home is to be sold, or if the estate plan needs a valuation of the home.

Probate is often a necessary process. It can create challenges for the family, especially if no estate planning has been done. In some jurisdictions, probate is quick and painless, while in others it is a long and expensive process. Prior planning by an experienced estate planning attorney prevents many of the issues presented by probate.

After probate has been completed, the executor distributes the assets, including the personal property in the home. Personal property with sentimental value often sparks more family fights than assets of greater value. Administering an estate when emotions are running high is a challenge for all concerned.

Another reason to have an estate plan in place is to delineate very specifically what you want to occur after your death. That way there is no room for family members to stake a claim and do something contrary to your wishes.

Reference: Augusta Free Press (May 13, 2022) “Can you empty a house before probate?

What Happens If You Become Incapacitated?

If you became incapacitated and advance planning had been done, your family will have the legal documents you need. Just as importantly, they will know what your wishes are for incapacity and end-of-life care. If there was no planning, your loved ones will have to start with a lengthy application to the court to have someone named a guardian. They are a person who has legal authority to make medical decisions on your behalf.

Having a plan in place beforehand is always better, explains the article “If I become incapacitated, who makes healthcare decisions?” from Waterdown Daily Times.

Another reason to plan ahead: the court does not require the guardian to be a family member. Anyone can request a guardian to be appointed for another incapacitated individual, whether incapacity is a result of illness or injury. If no planning has been done, a guardianship must be established.

This is not an easy or inexpensive process. A petition must be filed, and the person in question must be legally declared incapacitated. In some cases, these filings are done secretly, and a guardianship maybe established without the person or their family even knowing it has occurred.

There are also many cases where one family member believes they are better suited for the task, and the family becomes embroiled in controversy about who should serve as the guardian.

The entire problem can be resolved by working with an experienced estate planning attorney long before incapacity becomes an issue. A comprehensive estate plan will include a plan for distribution of assets (Last Will and Testament), Power of Attorney, Healthcare Power of Attorney and a Living Will.

These last two documents work together to describe your wishes for end-of-life care, medical treatment and any other medical issues you would want conveyed to healthcare providers.

Unfortunately, the pandemic revealed just how important it is to have these matters taken care of. If you did create these documents in the last few years, it would be wise to review them, since the people in key roles may have changed. While the idea of being on a respirator may have at one time been a clear and firm no, you may feel otherwise now.

A Healthcare Power of Attorney is an advance directive used to name a person, who becomes your “agent,” to make healthcare decisions. If there is no Healthcare Power of Attorney, physicians will ask a family member to make a decision. If no family can be reached in a timely manner, the court may be asked to appoint a legal guardian to be the decision-maker. In an urgent situation, the physician will have to make the decision, and it may not be the decision you wanted.

The Living Will explains your wishes for end-of-life care. For instance, if you become seriously ill and don’t want a feeding tube or artificial heart machine, you can say so in this document. You can even state who you do and do not wish to visit you when you are sick.

The best advice is to have a complete estate plan, including these vital documents, created by an experienced estate planning attorney. If you have an estate plan and have not reviewed it in the past three to five years, a review would be best for you and your loved ones.

Reference: Watertown Daily Times (April 14, 2022) “If I become incapacitated, who makes healthcare decisions?”

No Will? What Happens Now Can Be a Horror Show

Families who have lived through settling an estate without an estate plan will agree that the title of this article, “Preventing the Horrors of Dying Without a Will,” from Next Avenue, is no exaggeration. When the family is grieving is no time to be fighting, yet the absence of a will and an estate plan leads to this exact situation.

Why do people procrastinate having their wills and estate plans done?

Limited understanding about wealth transfers. People may think they do not have enough assets to require an estate plan. Their home, retirement funds or savings account may not be in the mega-millions, but this is actually more of a reason to have an estate plan.

Fear of mortality. We do not like to talk or think about death. However, talking about what will happen when you die or what may happen if you become incapacitated is very important. Planning so your children or other trusted family member or friends will be able to make decisions on your behalf or care for you alleviates what could otherwise turn into an expensive and emotionally disastrous time.

Perceived lack of benefits. Working with an experienced estate planning attorney who will put your interests first means you will have one less thing to worry about while you are living and towards the end of your life.

Estate planning documents contain the wishes and directives for your legacy and finances after you pass. They answer questions like:

  • Who should look after your minor children, if both primary caregivers die before the children reach adulthood?
  • If you become incapacitated, who should handle your financial affairs, who should be in charge of your healthcare and what kind of end-of-life care do you want?
  • What do you want to happen to your assets after you die? Your estate refers to your financial accounts, personal possessions, retirement funds, pensions and real estate.

Your estate plan includes a will, trusts (if appropriate), a durable financial power of attorney, a health care power of attorney or advanced directive and a living will. The will distributes your property and also names an executor, who is in charge of making sure the directions in the will are carried out.

If you become incapacitated by illness or injury, the POA gives agency to someone else to carry out your wishes while you are living. The living will provides an opportunity to express your wishes regarding end-of-life care.

There are many different reasons to put off having an estate plan, but they all end up in the same place: the potential to create family disruption, unnecessary expenses and stress. Show your family how much you love them, by overcoming your fears and preparing for the next generation. Meet with an estate planning attorney and prepare for the future.

Reference: Next Avenue (March 21, 2022) “Preventing the Horrors of Dying Without a Will”

Cryptocurrency and Estate Planning: What Executors Need to Know

Millennials are not the only ones investing in cryptocurrency. In a recent article titled “Help! My dad is investing in cryptocurrency” from Monterey Herald, a woman is worried about her elderly father investing in this new type of money. She is concerned for both his financial well-being and for what she may have to address when it is time to distribute his estate to her siblings.

Crypto, or cryptocurrency, is more than a passing fad. It has become an alternative purchasing and investment tool, with more than 8,000 different types of crypto available, representing billions in assets. You can use crypto to buy a Tesla automobile, an airplane or real estate. Regulations have recently been issued to permit banks to take custody of digital currency. One credit card company is even developing a card to allow consumers to spend digital cash using a credit or debit card.

Perhaps the ultimate recognition of this new currency comes from the IRS, which now requires owners to report income and capital gains earned on the sale of crypto and assess taxes on it, the same as other traditional types of investments.

As the executor of her father’s will, the woman mentioned above will be responsible for distributing her father’s entire estate, including the cryptocurrency. As a fiduciary, she will have to learn what it is and how to manage it.

When people buy crypto, they receive a digital key. This is usually a string of numbers, symbols and letters representing the asset on a secure ledger. The key cannot be replaced, and if it is lost, so are the crypto holdings. There are many different ways to store this key, so the daughter needs to know where the key is stored and how to access it.

The best way forward would be for the daughter to spend time with her father learning about cryptocurrency, what types he owns and how they are secured. Their conversation should also address his wishes for the investment. Does he want his grandchildren to receive it as crypto, or would he prefer to liquidate it before he dies and place it in a trust? Does he want her to liquidate it after he dies, and have it become part of his estate?

When it is time to settle the estate, if the crypto has not been liquidated into cash, she will need to value the assets at his date of death, like any other investment and may either sell the currency or distribute it to his beneficiaries. If the estate is valued at more than $12.06 million, federal estate taxes will need to be paid on all assets, including the cryptocurrency. There may also be state estate taxes due.

She should also speak with an estate planning attorney about cryptocurrency, and also read his will to learn if the cryptocurrency is included. If he does not have a will or an estate plan, now is the time to make an appointment with an estate planning attorney and get that in order.

Being an executor used to require learning about possessions like art or jewelry collections or fine rugs. Today, the executor needs to add a cryptocurrency education to their task list.

Reference: Monterey Herald (Feb. 19, 2022) “Help! My dad is investing in cryptocurrency”

Is It Important for Physicians to Have an Estate Plan?

When the newly minted physician completes their residency and begins practicing, the last thing on their minds is getting their estate plan in order. Instead, they should make it a priority, according to a recent article titled “Physicians, get your estate in order or the court will do it instead” from Medical Economics. Physicians accumulate wealth to a greater degree and faster than most people. They are also in a profession with a higher likelihood of being sued than most. They need an estate plan.

Estate planning does more than distribute assets after death. It is also asset protection. An estate planning attorney helps physicians, dentists and other medical professionals protect their assets and their legacies.

Basic estate planning documents include a last will and testament, financial power of attorney and a medical power of attorney. However, the physician’s estate is complex and requires an attorney with experience in asset protection and business succession.

During the process of creating an estate plan, the physician will need to determine who they would want to serve as a guardian, if there are minor children and what they would want to occur if all of their beneficiaries were to predecease them. A list should be drafted with all assets, debts, including medical school loans, life insurance documents and retirement or pension accounts, including the names of beneficiaries.

The will is the center of the estate plan. It will require naming a person, typically a spouse, to be the executor: the person in charge of administering the estate. If the physician is not married, a trusted relative or friend can be named. There should also be a second person named, in case the first is unable to serve.

If the physician owns their practice, the estate plan should be augmented with a business succession plan. The will’s executor may need to oversee decisions regarding the sale of the practice. A trusted friend with no business acumen or knowledge of how a medical practice works may not be the best executor. These are all important considerations. Special considerations apply when the “business” is a professional practice, so do not make any moves without expert estate planning assistance.

The will only controls assets in the individual’s name. Assets owned jointly, or those with a beneficiary designation, are not governed by the will.

Without a will, the entire estate may need to go through probate, which is a lengthy and expensive process. For one family, their father’s lack of a will and secrecy took 18 months and cost $30,000 in legal fees for the estate to be settled.

Trusts are an option for protecting assets. By placing assets in trust, they are protected from creditors and provide control in complex family situations. The goal is to create a trust and fund it before any legal actions occur. Transferring assets after a lawsuit has begun or after a creditor has attached an asset could lead to a physician being charged with fraudulent conveyance—where assets are transferred for the sole purpose of avoiding paying creditors.

Estate planning is never a one-and-done event. If a doctor starts a family limited partnership to transfer wealth to the next generation but neglects to properly maintain the partnership, some or all of the funds may be vulnerable.

An estate plan needs to be reviewed every few years and certainly every time a major life event occurs, including marriage, divorce, birth, death, relocation, or a significant change in wealth.

When consulting with an experienced estate planning attorney, a doctor should ask about the potential benefits of revocable living trust planning to avoid probate, maintain privacy and streamline the administration of the estate upon incapacity or at death.

Reference: Medical Economics (Feb. 22, 2022) “Physicians, get your estate in order or the court will do it instead”

Can Grandchildren Receive Inheritances?

Wanting to take care of the youngest and most vulnerable members of our families is a loving gesture from grandparents. However, minor children are not legally allowed to own property.  With the right strategies and tools, your estate plan can include grandchildren, says a recent article titled “Elder Care: How to provide for your youngest heirs” from the Longview News-Journal.

If a beneficiary designation on a will, insurance policy or other account lists the name of a minor child, your estate will take longer to settle. A person will need to be named as a guardian of the estate of the minor child, which takes time. The guardian may not be the child’s parent.

The parent of a minor child may not invest and grow any funds, which in some states are required to be deposited in a federally insured account. Periodic reports must be submitted to the court, and audits will need to be done annually. Guardianship requires extensive reporting and any monies spent must be accounted for.

When the child becomes of legal age, usually 18, the entire amount is then distributed to the child. Few children are mature enough at age 18, even though they think they are, to manage large sums of money. Neither the guardian nor the parent nor the court has any say in what happens to the funds after they are transferred to the child.

There are many other ways to transfer assets to a minor child to provide more control over how the money is managed and how and when it is distributed.

One option is to leave it to the child’s parent. This takes out the issue of court involvement but may has a few drawbacks: the parent has full control of the asset, with no obligation for it to be set aside for the child’s needs. If the parents divorce or have debt, the money is not protected.

Many states have Uniform Transfers to Minors Accounts. In Pennsylvania, it is PUTMA, in New York, UTMA and in California, CUTMA. Gifts placed in these accounts are held in custodianship until the child reaches 18 (or 21, depending on state law) and the custodian has a duty to manage the property prudently. Some states have limits on the amount in the accounts, and if the designated custodian passes away before the child reaches legal age, court proceedings may be necessary to name a new custodian. A creditor could file a petition with the court if there is a debt.

For most people, a trust is the best option for placing funds aside for a minor child. The trust can be established during the grandparent’s lifetime or through a testamentary trust after probate of their will is complete. The trust contains directions as to how the money is to be spent: higher education, summer camp, etc. A trustee is named to manage the trust, which may or may not be a parent. If a parent is named trustee, it is important to ensure that they follow the directions of the trust and do not use the property as if it were their own.

A trust allows the assets to be restricted until a child reaches an age of maturity, setting up distributions for a portion of the account at staggered ages, or maintaining the trust with limited distributions throughout their lives. A trust is better to protect the assets from creditors, more so than any other method.

A trust for a grandchild can be designed to anticipate the possibility of the child becoming disabled, in which case government benefits would be at risk in the event of a lump sum payment.

There are many options for leaving money to a minor, depending upon the family’s circumstances. In all cases, a conversation with an experienced estate planning attorney will help to ensure any type of gift is protected and works with the rest of the estate plan.

Reference: Longview News-Journal (Feb. 25, 2022) “Elder Care: How to provide for your youngest heirs”

Does the Executor Control Bank Accounts?

Executors administering probate assets usually have to deal with several different financial institutions. If good planning has been done by the decedent, the executor has a list of assets, account numbers, website addresses and phone numbers. Otherwise, the personal representative or successor trustee starts by gathering information and identifying the accounts, as described in a recent article “Dealing with the back offices of banks and brokerages” from Lake Country News.

The accounts must be identified, retitled to become part of the estate, or liquidated and moved into the estate account.

If the decedent had a financial advisor who handled all of their investments, the process may be easier, since there will only be one person to deal with.

If there is no financial advisor who can or will personally manage the assets, the executor starts by contacting the back office department of the institution, often referred to as the “estates department.” The contact info can usually be found on the institutions’ website or on the paper statements, if there are any.

Expect to spend a lot of time on hold, especially in the beginning of the week. It may be better to call on a Wednesday or Thursday.

The first call is to introduce the executor, advise of the death of the decedent and learn about the company’s procedures for transferring, retitling, or otherwise gaining control of the account. The bank usually assigns a case number, to be used on all future communications.

If possible, obtain their name, direct dial, and direct email of whoever you speak with. It may only be with one assigned representative, or a different person every time. It depends upon the organization. Take careful notes on every interaction. You may need them.

Some of the documents needed to complete these transactions include an original death certificate, a court certified letter of administration or trustee’s certification of trust and a letter of authorization signed by the client to allow the institution to communicate with the executor or successor trustee.

Financial institutions will often only accept their own forms, which then need to be prepared for completion and signature. Expect to be asked to notarize some documents. In many cases, the institution will require a new account be opened and the assets transferred to the new account.

Be organized—you may find yourself needing to submit the documents multiple times, depending on the financial institution. If hard copy documents are sent, use registered or express mail requiring a signature on delivery. If documents are sent by email, they should only be sent via an encrypted portal to protect both estate and executor.

This is not a quick process and requires diligent follow up, with multiple emails and phone calls. If the value of the estate is large and the assets are complex, it may be better to have the estate planning attorney handle the process.

Reference: Lake Country News (Jan. 15, 2022) “Dealing with the back offices of banks and brokerages”