Wills Need Probate

If you inherit something through a will, you cannot just take the will to the bank and demand they give you the contents of a bank account.

How wills actually work, is not understood by everyone.

Many people think that if something is written down in a will, then everything is settled. They think all that is required is for the beneficiary to show the will to whoever is holding the property the beneficiary is to inherit.

That is not the way it works at all.

Unfortunately, the misperception is common.

In fact, estate attorneys are used to hearing this from people named in wills, who think it all works that way and are upset when they discover that it does not.

The Times Herald recently discussed this in “Wills won’t work without probate.”

A will is only a bunch of words on paper that have no real legal authority, until the will is filed with a probate court.

The court must then agree to accept the will as representing the valid wishes of the deceased.

Once that is done, the probate court appoints a personal representative for the estate.

That personal representative is then charged with carrying out the directives in the will, under the supervision of the court.
This can result in a long and often expensive process.

It depends on the size of the estate, the ability of the personal representative and whether there are any challenges to the estate.

Of course, this can all usually be avoided by speaking to an estate planning attorney about getting a trust instead of a will.

Reference: The Times Herald (Sep. 22, 2017) “Wills won’t work without probate.”

Cutting a Child Out

It is not all that unusual for a child to not live up to the expectations of parents. Sometimes parents will be so disappointed when that happens, that they will attempt to cut the child out of their estate plans. They might want to reconsider.

Wealthy parents often have extremely high expectations for their children. They want their children to go to school, get a good job, raise a family and do all of the things that made the parents so successful.

However, sometimes a child just does not live up to those expectations.

Sometimes there is a black sheep who does everything the parents would not want him or her to do.

If the problems are severe enough, then the parents might even stop contact with the child and seek to cut him or her out of their estates.

The latter is often a bad idea, as the Globe and Mail discusses in “Think twice, wealthy family, before cutting the black sheep out of your will.”

One big thing to consider is that a child who receives nothing has no incentive to not cause problems.

A no-contest clause can prevent someone who does receive an inheritance from challenging an estate plan that they do not like, but it cannot prevent someone from doing so who is set to receive nothing or very little from an estate.

This can make cutting a child out of an estate plan a very expensive proposition. This is because the child has no reason to not launch legal fights.

A black sheep child can also be more easily controlled by using an estate plan to incentivize that child into desired behaviors.

An estate planning attorney can help you create a trust, for example, that only distributes money to the child when certain actions are taken by the child.

Reference: Globe and Mail (Sep. 19, 2017) “Think twice, wealthy family, before cutting the black sheep out of your will.”

The In-Law Problem

A big concern for many people when they are planning their estates, is that they do not trust the people their children married. They fear that a son or daughter-in-law will waste their children’s inheritances.

The situation where parents do not get along with their sons and daughters-in-law is a Hollywood cliché. TV sitcoms often feature running storylines featuring the cliché that play out over multiple seasons.

There is a reason for the cliché.

It is based in reality.

There is often tension between in-laws.

In estate planning, this plays out with the parents being wary that their son-in-law or daughter-in-law will meddle in the inheritance of the parents’ own children and waste the inheritance.

A recent example comes to us from the U.K., where someone wrote into a This Is Money advice column and asked how to protect a child’s inheritance from a bad son-in-law.

The article title asks this question: “I have a terminal illness and our son-in law is unreliable with money – how can we protect daughter’s inheritance?”

The answer in the U.S. is the same as it is in the U.K.

Instead of leaving a child an inheritance outright through a will, a trust can be used to protect the assets from a wayward in-law.
With a trust, you can make sure the money is only used for things you would want.

If your child gets divorced, the trust can also protect the inheritance in the divorce.

If you have an issue with your son-in-law or daughter-in-law and would like to make sure your child’s inheritance is not wasted, then contact an estate planning attorney to get a trust.

Reference: This Is Money (Sep. 8, 2017) “I have a terminal illness and our son-in law is unreliable with money – how can we protect daughter’s inheritance?”

No-Contest Clauses

One way to make people hesitate before challenging a will or trust, is to include a no-contest clause, which disinherits them, if they file a legal challenge.

People often get very upset when they think they have not received their fair share of a deceased family member’s estate. They can often be so upset that they decide to issue a legal challenge to the estate plan, especially if there is a substantial money involved.

These challenges can take a lot money out of the estate, since lawyers have to be hired to defend the estate from the challenge.

A way around this problem is to include a no-contest clause in wills and trusts, as Press Enterprise discusses in “The Pros and cons of the no-contest clause.”

A no-contest clause helps prevent these challenges. It simply states that anyone who challenges the will or trust will receive nothing from it.

As a result, the document will be effectively rewritten to disinherit the challenger.
This is an easy way to stop many people from challenging an estate plan.

They might not be happy with what they received, but they do not want to risk getting nothing.
Some criticize these clauses as deterring people from challenging an estate plan when they have good reason to, such as when there has been undue influence used by someone else to get more of the estate than he or she should.

However, most states will not enforce a no-contest clause, if the person challenging the will or trust has probable cause to do so.

If you want to make sure a no-contest clause is included in your will or trust, then visit an estate planning attorney and make sure the clause is included.

Reference: Press Enterprise (Aug. 5, 2017) “The Pros and cons of the no-contest clause.”

Even without an Estate Tax, Trusts are Beneficial

Many people get trusts as their primary estate planning instrument because of the estate tax, but trusts do have many other benefits.

With Congress taking up tax reform soon, one thing that many people are following is President Trump’s desire to eliminate the estate tax.

It is important for many people because the estate tax can take a sizeable portion out of an estate. Many people have designed their estate plans around not having to pay the tax.

If the estate tax is repealed, then people might have good reason to change their estate plans and they might decide to get rid of their trusts.

That is one of the main reasons people get trusts. They are a way to avoid the estate tax.

However, do not plan on scrapping your trust yet, since there are other reasons to get trusts than the estate tax, as Elder Law Answers discusses in “Are Trusts Still Useful If the Estate Tax Is Repealed?”

One of the best things about trusts is that they do not have to go through the probate process, which can be very expensive and time-consuming, depending on the state in which you live.

Trusts can also be kept private so your estate plan is not shared with the general public, as is often the case with wills.

Trusts can be used to pass your assets to beneficiaries in a controlled way and only after certain conditions are met. The truth is that trusts are an extremely versatile estate planning tool and beneficial with or without an estate tax.

It is too soon to know if the estate tax will be repealed.

If it does happen, do not let it fool you into thinking you no longer need a trust.

Reference: Elder Law Answers (June 30, 2017) “Are Trusts Still Useful If the Estate Tax Is Repealed?”

Why You Should Fund a Trust

If you have a trust, you might find by looking carefully at the estate planning documents that you do not really need to put assets into the trust while you are alive. Don’t let that fool you.

When you get a living trust, the estate planning attorney who drafted the trust will tell you that you need to fund the trust. That simply means that you need to transfer your assets to the trust.

This can be difficult at times, because you have to figure out what goes into the trust and what should stay out of it for various reasons.

The estate planning attorney can help you in making those determinations. Unfortunately, instead of asking for that help, many people end up not funding their trusts.

They see that they were also given a pour-over will at the same time as they got the trust.

That is a will that says any assets in an estate should be transferred to the trust, after the owner of the assets passes away.

Since the assets will be transferred later by the pour-over will, people think there is no reason to do it now.

That is a mistake, as the Times Herald-Record discusses in “Importance of funding a trust.”

The biggest problem is that one of the main reasons to get a living trust is to avoid having your estate go through probate court after you pass away.

However, if you rely on the pour-over will to fund your trust, then the place your trust gets funded is in probate court.

It is the probate court that will have to direct assets to a trust. By not funding the trust on your own, you defeat one of the primary reasons that you got the trust in the first place.

If you have difficulty funding your trust, then talk to your estate planning attorney about what you need to do.

Reference: Times Herald-Record (August 17, 2017) “Importance of funding a trust.”

Trusts Are Cheaper Than Wills

If you are looking to save money on your estate plan, then you might think that you should get a will since they are cheaper to get than a trust. However, trusts are actually cheaper overall.

Estate planning can be expensive for some people. Estate planning attorneys do not always come cheap and not everyone thinks they can afford to hire one.

In most cases, a will is less expensive to get than a trust. This is because trusts normally require more of the attorney’s time to draft. This leads many people to get wills to save time and money.

The problem with is that a will is more expensive overall than a trust, as the Times Herald-Record explained in “Trusts will cost you less at settlement time.”

When someone passes away, someone must then administer either the will or the trust to make sure that property is distributed as the deceased directed.

Using a will requires going to probate court and having an executor, who can charge for the service, go through the process of administering the estate.

On the other hand, using a trust means that a trustee, who can also charge for the service, is required to distribute everything.

The trustee normally does not have to go to court, which makes it a much faster process. The speed means that the trustee may charge much less overall.

In the end, the trustee may be a lot cheaper than any money that might have been saved by getting a will instead of a trust.

When getting an estate plan created, it is important to use the instruments that work best for your situation. Do not be afraid to get a trust because of the initial expense.
It just may be cheaper in the long run.

Reference: Times Herald-Record (August 2, 2017) “Trusts will cost you less at settlement time.”

A Feud Over the Rockefeller Legacy

John D. Rockefeller is a name that is almost synonymous with fossil fuels. The heirs to his fortune, however, are conflicted and fighting over them.

Recently, the last surviving grandson of John D. Rockefeller passed away at the age of 101. His passing has shined the light on an interesting feud between members of the Rockefeller family.

Standard Oil, the company Rockefeller founded, survives today as ExxonMobil. The Rockefellers are suing ExxonMobil because they believe the company lied for years about the effect of fossil fuels on climate change. Of course, fossil fuels are the reason that Standard Oil was founded. Without them, the Rockefellers would not have their great wealth.

Not every family member agrees on this issue, as Private Wealth reports in “Fighting Over A Dynasty’s Soul.”

A headline of “Rockefeller’s Sue Over Effects of Fossil Fuels” is interesting in and of itself. However, even more interesting is what this reveals about dynasties.

It shows how the beliefs and interests of heirs can be radically different than the interests of the founders. This has implications for how those with dynastic wealth set up the trusts to benefit their families.

Some founders will want to be flexible, so future generations will be able to change direction when information and beliefs change. Others might want to prevent that, since they will want to make sure their specific legacy is continued.

Reference: Private Wealth (June 22, 2017) “Fighting Over A Dynasty’s Soul.”

Do You Need a Trust?

One of the biggest questions in estate planning today, is whether a trust is the best option for your family.

If you were to conduct a representative poll of middle class Americans about the best way to plan for your estate, it is almost certain that the majority of respondents would suggest getting a living trust.

It is the first piece of advice you will find almost anywhere you look for estate planning information. The reason for that is complex.

One reason is that many internet companies who sell trust creation documents have been very active in pushing the benefits of trusts to get more customers. Trusts are also often the best estate planning option for people.

Nevertheless, the key is to determine what the best estate planning option is for you personally, not for society generally, as Madison.com points out in “Is a Living Trust Right for You and Your Family?.”

Trusts do have many benefits over wills.

Trusts do not have to go through probate and, therefore, are not subject to the commonly cited costs and delays associated with probate.

Trust provisions do not have to be made public, as most wills do. Trusts are also a great way to control what your heirs might do with their inheritances, but “testamentary trusts” under wills do so as well.

If you really want to know whether you should get a trust, the best thing to do is to ask an estate planning attorney. Tell the attorney what your needs are and let the attorney suggest the best ways to meet those needs.

Reference: Madison.com (June 27, 2017) “Is a Living Trust Right for You and Your Family?.”

New Zealand Trusts

Changes to New Zealand’s foreign trusts laws might show that using offshore trusts to hide assets is more prevalent than previously thought.

For many years, New Zealand has been thought of as a great place to hold foreign assets in trust. The nation had lax laws and allowed foreigners to have tax-free trusts with little oversight.

When the Panama Papers, the leaked emails of a law firm in Panama, were released, all that changed.

It was revealed that New Zealand was being used by some very wealthy people to hide assets from their own governments. This created some international pressure on New Zealand by other governments, as those other governments do not appreciate avoidance of their taxes.

In response to this pressure, the New Zealand government changed its trust laws. All foreign trusts were required to register, declare who controlled the trusts and declare who the beneficiaries of the trust were.

It was assumed this move would not be a burden for most foreign trusts, since there are many reasons someone might want to have a tax-free trust in New Zealand other than tax avoidance.

However, most foreign trusts have failed to register under the new law and many have fled the country, as the Wills, Trusts & Estates Prof Blog reports in “Trust the Kiwis.”

This suggests that using foreign trusts to hide assets is more common than previously thought.

Accordingly, government regulators will look for other ways to crackdown on trusts and make tax avoidance more difficult.

Reference: Wills, Trusts & Estates Prof Blog (June 20, 2017) “Trust the Kiwis.”