Legal advice on Inheritance rights

Attorney Thomas B. Burton answers a reader question involving estate planning and long term nursing home care where the mother's home was sold to pay for the mother's nursing home care.

Attorney Thomas B. Burton answers a reader question from a reader who sold the mother's home to pay for her care, and then wonders whether she will receive a share of her mother's other assets.

1. Not having an estate plan at all. The most common estate planning mistake is not having an estate plan. Unfortunately, no one can escape death, but thoughtful planning for what may occur after your death is one of the most important things you can do to ensure your personal and financial affairs will be handled properly when the inevitable occurs. 2. Not updating your Will. There are many changes that can take place within a family or business structure, such as births, deaths, divorces, and new property acquisitions. Therefore, to ensure the assets you leave behind are given to those you intend, it is wise to perform a periodic update of your will when these changes take place. 3. Not planning for disability. An unexpected or long term disability can often have greater consequences on your personal and financial affairs. Decisions such as who will handle your finances, raise your children, or make healthcare decisions on your behalf are extremely important. Therefore it may be necessary to appoint a power of attorney and/or create a living trust to work on your behalf if you’re unable to do for yourself. 4. Not making gifts to reduce your estate taxes. A common estate planning mistake is failing to make gifts under your estate plan to reduce your estate taxes. According to the Internal Revenue Code, gifts up to $15,000 a year per spouse may be excluded from estate tax. So gifts made to individuals, groups, or business, are subject to a $30,,000 estate tax savings. Not only will this leave more money in your estate for distribution, you can positively impact a specific person or individual cause of your choosing. 5. Putting your child's name on your deed. When you put your child’s name on the deed to your home, you are essentially giving your child a hefty sized taxable gift. (See number 4 above). While gifts up to $15,000 are excluded from estate tax, gifts more than $15,000 per spouse are taxable. Instead, create an estate plan that passes on the home or value via an inheritance. 6. Choosing the wrong person to handle your estate. Sometimes the person you think is the best choice for executor of your estate is not always the case. For example, while you may think your spouse or child may be best suited to handle the affairs of the estate when you are gone, there may be someone else who is not as personally invested to objectively handle the extensive duties and demands required of an executor, trustee, or guardian. 7. Not transferring your life insurance policies to a life insurance trust. A life insurance policy is subject to a hefty estate tax when you die, resulting in most of the proceeds going to the IRS instead of your intended beneficiaries. One way to avoid this is to set up a life insurance trust to act as the owner of your life insurance policies. This way you avoid hefty estate taxes being placed on the insurance proceeds, and spare your spouse or beneficiary any undue hardship in waiting up to several months for a pay-out of the insurance proceeds. 8. Not taking advantage of the federal exemption (per spouse). For married couples, one of the easiest ways to save on estate taxes is to fully use the federal exemption for each spouse (set at $11.4 million per spouse in 2019). Before 2011, married couples typically created exemption trusts (also called credit shelter trusts or AB trusts) so that when a spouse died, instead of exhausting that spouse’s individual exemption amount, a portion of the estate could be protected in the trust. However, since 2011, surviving spouses are allowed to make a “portability election” which passes any of the deceased spouse’s unused exemption to the surviving spouse, in effect potentially doubling the exemption amount for the surviving spouse. 9. Procrastinating. Even for those who realize an estate plan can benefit them, this realization sometimes comes too late in time. To avoid the stress of not having a proper estate plan in place, it would be wise to meet with an estate planning lawyer to help you at least draw up a basic estate. 10. Not meeting with an experienced legal, financial or tax professional. Not meeting with an estate planning lawyer or other professional is probably the most common mistake a person might do, especially if you have complicated assets or if you have doubts about your own ability to draft an estate plan. An experienced attorney can provide you with tax-planning strategies based on the particular needs and demands of your estate.

Purpose of Survivorship Requirements The survivorship requirement, as mentioned before, is a period of days in which your beneficiary must survive in order to inherit your property. Let’s say you want to pass your assets to your spouse, and you set a survivorship period of 30 days. When you pass away, your spouse does not immediately get your assets. They can only receive your assets if they are alive for at least 30 days after your death. Common survivorship requirements range from 5 days all the way to 60, which means that at the end of the range, beneficiaries may be required to wait up to 2 months to access their inheritance. Is It Necessary? For better or worse, most states require a survivorship period. If there is no survivorship requirement listed in your will, then the court will have to enforce their own time period depending on the state. In most cases, your beneficiary will have to wait 5 days before receiving the property. Whether you are creating a will or a trust, you are most likely going to have to set a survivorship requirement. Currently, 20 states have set this as an automatic requirement. Before you set a survivorship period, make sure to check whether or not your state requires it as well as what kind of survivorship range will suit your family. Why A Survivorship Requirement? Imagine this – you pass some of your assets to your cousin without a survivorship period. Your cousin suddenly passes away two days after receiving your property. Where does your property go? These assets would now be distributed through your cousin’s estate plan, assuming they have one, and you would have no control over who receives what was once your property. Perhaps your property would be passed to your nephew, who you would have never chosen as a beneficiary, and you have no way of stopping it. You can also include a provision in your estate planning documents that if a beneficiary passes away, you would like to pass your property to an alternate beneficiary, such as a charitable organization or another family member. Ultimately, however, this type of confusion and legal hassle can be avoided with the installment of a survivorship requirement in your estate plan, which wouldn’t allow the assets to be transferred to said cousin in the first place.

Why Does A Trust Need A Name? One question that may first arise is why does a trust even need a name? It seems trivial and honestly, unnecessary, however, for a trust to hold title to certain assets, it must have an identifiable and formal name. What Are My Options? Attorneys usually recommend including the family name in the title and keeping it as short and simple as possible. This may not be a particularly creative approach, but at least you’ll be able to easily discern exactly what the trust entails, which arguably is the most important part of naming your trust. While it is common to use the “family” in a trust, it is not a requirement. As long as it can be identified, you can name it anything you want. If you do not want to include your name for privacy reasons and just want to transfer property to the trust, one option is to name the trust after the street on which the property is located. It’s also common to add the date that the trust was signed into effect as another way to identify the document (remember, short and simple, just the year will do). If you have more than one trust with relatively similar names, this approach is recommended so that you can quickly and easily identify the trust and distinguish it from the others. Other Possible Names Trusts can also be named for their purpose. You could have a dividend trust where the money left for your children must be put into dividend stocks and can only be distributed in full on a specified birthday. An appropriate name for this trust can be “The John Smith II Dividend Trust”. Let’s say you want to have a trust specifically used for someone’s college tuition. The trust can be named “The John Smith Educational Trust”. If you want to create a trust for a charity, the ASPCA for example, the trust can be named “The ASPCA Charitable Trust”. In the interest of privacy, you may want to avoid using your name altogether and use a generic name instead. This could be helpful in the case that a creditor is seeking out your assets, since it will be harder for them to find something that cannot be traced back to your name.

Avoid Probate By definition, a will has to go through probate (the process of validating a will in court, which can take up to a year and a half). If you’re looking to avoid probate, you’re better off inquiring with your attorney about setting up a living trust, naming your beneficiaries on your financial accounts, and/or set up joint tenancy with a right of survivorship. Funeral Plans Since a will is often read several days or even weeks after your death, any funeral plans outlined in your estate plan may not be adhered to. This will likely leave it up to your loved ones to decide how they will organize your funeral, which includes choosing the method of body disposal. Rather than including funeral plans in a will, consider drafting a set of instructions that everyone in your family is aware of and will have access to. Your Pets The fact of the matter is that by law, pets are considered property, and while obvious, you cannot leave money to your furry friends. That being the case, you can certainly designate someone to inherit your pets in your will, though if you choose to take this route, you should definitely set up a pet protection agreement or a “pet trust” to leave money to someone who you are confident will take proper care of your pet. Writing a will will only be of service naming the to-be caretaker. Reduce or Avoid Estate Tax While it’s certainly a useful document, a will is quite useless in avoiding or even reducing estate taxes. More effective ways of minimizing the tax liability on your estate include placing your assets into trusts, giving gifts to family, acquiring life insurance and directing assets to named beneficiaries, and more. Distributing Your Property Right Away As mentioned prior, before any assets can be distributed to the beneficiaries, the will must be “validated” in court through probate. Moreover, larger estates can take even longer and can incur significant legal fees, thus draining the value of the estate. Transferring Certain Types of Assets Not all property can be transferred. If the property has other owners, through a joint tenancy with a right of survivorship for example, one person’s share cannot be passed through a will. If you’re looking for an effective way of transferring property, setting up a trust is your best bet. Further, financial accounts with designated beneficiaries cannot pass through wills. You can leave instructions, but the only thing that will have any effect on how those assets will be transferred is the beneficiary that you designate in the respective account (IRA, 401(k), pension plans, life insurance, etc.). Allowing Beneficiaries Immediate Access to Funds Which Require Probate Once the will is probated, the executor must collect the funds from the estate and, under court supervision, distribute them as specified in the will. The executor is the only individual allowed to access any bank accounts in the estate. Care For An Individual with Special Needs By now it should be clear that a will serves a simple yet key purpose: to provide instructions for the distribution of probatable assets after death (of the testator). If you wish to provide funds and care to someone with special needs, you’ll need to set up a Special Needs Trust (SNT), which will support them with extra income without running the risk of losing essential government benefits.

Introduction Often clients do not want to go through the expense and inconvenience of transferring their vehicle titles to their trusts. For those of you who feel this way, you will be happy to know that in 2016, the Oklahoma legislature passed a revision to the Oklahoma Statutes authorizing the transfer of title for a motor vehicle on a transfer-on-death form 771. Statutory citations This law can be found at 2018 Oklahoma Statutes, Title 47. Motor Vehicles, Section 47-1107.5 (47 OK Stat § 47-1107.5 (2018)). The form can be located at https://www.ok.gov/tax/documents/771.pdf. Statutory requirements to transfer title If the title of the motor vehicle is not subject to a lien or other encumbrance, it may be transferred on a transfer-on-death form by filing with the Tax Commission the written notice of transfer signed by the transferor (the “owner”) and designating the transferee (the beneficiary to whom the vehicle is to be transferred). Such notice shall transfer ownership of the vehicle to the transferee upon the death of the transferor. The notice form shall include the following: 1. The vehicle identification number of the vehicle; 2. The number of the license plate issued to the vehicle, if any; 3. The full name and address of the transferor; 4. The full name and address of the transferee; and 5. The signature of the transferor. The signature or consent of or notice to the transferee is not required. B. This transfer may be revoked or changed at any time prior to the death of the transferor by filing an amended notice with the Tax Commission. How to claim title When the transferor dies, the transferee must “accept” the certificate of title for the motor vehicle by signing the form on the reverse side. The designated transferee must verify the death of the transferor owner and submit it to the Tax Commission with a copy of the transferor’s death certificate, preferably a certified original. Once the transfer is completed, the Commission will issue a new title reflecting the transfer of ownership. Conclusion If you have any questions about when and how to use a TOD Notice, or want to know more about the process, please feel free to contact our office at 405-408-7792 or contact me at [email protected] for further assistance.

Q: What is an inheritance trust? A: Designating a trust as beneficiary can be useful if the intended beneficiary has financial issues and is not a good money manager. That could mean distributing assets according to a certain schedule or simply withholding access until the beneficiary is a certain age. The trust can also provide protection from creditors, if your heir is likely to owe money in a divorce or file bankruptcy. Q: What are some benefits of having an inheritance trust? A: A trust can also be used to provide for children from a previous marriage, as long as it meets certain requirements. It could, for example, allow someone to leave enough money to care for their spouse, with remaining funds going to their children after their spouse passes. Q: What is the difference between a person versus a trust being listed as the beneficiary of an IRA? A: Designating a trust as the beneficiary of an IRA can be tricky. You’ll need specialized guidance to avoid costly tax mistakes and other unintended consequences. Generally, when someone inherits an IRA, they must withdraw a minimum amount each year. Q: What are the pros and cons of having a trust compared to a person serving as the beneficiary? A: Heirs have the option of stretching payments out over their expected lifespan, which means funds can continue to grow with tax-free benefits. When the beneficiary is a trust, the IRS will “look through” the trust and treat the heir(s) as if they were the named beneficiary. That way the trust can take advantage of the same tax-free minimum-distribution strategies. Q: How does a “look through” effect the beneficiary of an IRA? A: Several factors can disqualify the trust from this look-through treatment. Trusts in which the oldest beneficiary cannot be clearly identified, or which name a nonperson beneficiary (such as a charity or estate) won’t qualify for look-through treatment. If that happens, payments may be calculated according to the original owner’s life expectancy, as if they were still alive. That could mean a far more rapid payout than desirable. Q: What happens if your IRA is designated solely to your spouse? A: With the rollover option, couples can extend the tax benefits of an IRA account for decades, even generations. If you leave your IRA outright to your spouse, he or she has the option to roll those funds into his or her own IRA and defer distributions until age 70 1/2. Then, when your surviving spouse dies, the IRA can be left to younger heirs, using their life expectancy to set distributions.

Estate Planning Creating an estate plan is the first step in preparing for your future. It is also important to ensure that all your assets are properly titled or have the correct beneficiary designation language in order to carry out your wishes regarding the distribution of your assets at your death. Last Will and Testament Your last will and testament is a document that memorializes your wishes with respect to how you want your assets to be distributed after you die. Any assets held in your sole name will be passed on to the beneficiaries listed in your will through a process called probate. If your assets already have a joint owner or beneficiary listed, these assets will pass to that person or persons listed and will not go through the probate process. Will A will may have specific provisions that control not only who will receive part of your assets but also how they will receive it. This is a way you can provide protection for your beneficiaries. As an example, Linda creates a will, which states that upon Linda’s death, all assets be paid out to her husband, if living, otherwise equally to her children. Her husband however is receiving government benefits, so her will directs that her husband’s share be paid out to him in a Supplemental Needs Trust (SNT). The purpose of this trust is to ensure that the assets paid out to him are protected, while also ensuring he does not lose his government benefits. Additionally, Linda’s will directs any sums payable to her children to be paid out to them in descendants’ trusts. The purpose of these trusts is to give her children creditor protection while also ensuring that assets paid out to them are not included in their taxable estate. Furthermore, Linda’s daughter is 19 years old, so her trust specifically directs that a third-party act as Trustee until Linda’s daughter attains the age of 25, at which point she will manage her own trust. Beware! On paper, Linda’s plan may follow her wishes. However, one of Linda’s primary assets is a large brokerage account and this account is listed as transfer on death (TOD) to her husband. The contingent TOD beneficiaries listed are all of her children. Should Linda die before her husband, this account will automatically go to him and will not pass pursuant to the provisions listed in her will. Therefore, the account will not be payable to her husband’s SNT and he will likely lose his government benefits. If Linda dies after her husband, the account will be paid out to her children, outright and free of trust, thus defeating the purpose of creating descendants’ trusts for her children. The same issue could arise if her husband or children were listed as joint owners of an account, they would become sole owner upon her death and ignore the trust provisions in her will. The Solution To avoid this problem, Linda should remove her husband and children as beneficiaries of the account, and instead list as the beneficiaries either her estate or the trusts created within her will. This will guarantee that the brokerage account will be paid into the trusts in her will which will provide the intended protections to her family members. It is extremely important to make sure your attorney has all information as it relates to your finances and family dynamic. Not only should your attorney be provided with a complete list of assets (including how they are titled and the names of the beneficiaries listed), your attorney should also have full knowledge of any family concerns that may need to be addressed within your plan. It was important that Linda’s attorney understood that her husband relied on government benefits and that her young children may need a little extra protection. Conclusion It is best to consult with an Estate Planning and Elder Law Attorney to review your current estate planning documents and all accounts to ensure your wishes will be carried out both through the probate process, as well as outside probate.

Attorney Thomas B. Burton answers a reader question about what paperwork she may need to file with the State of Wisconsin for her mother who passed away in Dane County while receiving Care Wisconsin services.