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Probate

5 Ways to Protect Your Loved Ones by Having a Will

We feel that having a will, and related powers of attorney and advanced directives, is one of the most important tasks one should complete.

After working hard your entire life to provide for your family, you should not allow the Texas Probate Code and the courts to decide how your assets are distributed.

Protect Your Loved Ones with a Will

This article points out the various problems of dying without a will and how these consequences are eliminated with a properly drafted will that disposes of your assets in accordance with your wishes.

1. Name Your Own Beneficiaries in your Will

Problem: When you die without a will, you are considered to die intestate and your property will pass in accordance with the descent and distribution provisions of the Texas Probate Code. Sometimes these individuals are the same you would provide for under your will, but not always.

Benefit: When you die with a will, the beneficiaries named under your will inherit your property exactly as you specify.

2. Reduce the Cost and Time of Probate

Problem: If you die without a will, the cost to probate your estate is substantially higher because of additional requirements, such as filing a determination of heirship with the court to decide the rightful heirs of your estate.

Benefit: This procedure is not necessary when the beneficiaries of your estate are named in your will.

Problem: The probate process is substantially more time consuming if a dependent administration is required in which the court has to approve every action taken by the administrator.

Benefit: An independent executor named in your will administers your estate with minimal court supervision. This allows the probate process to be completed in a timely and cost effective manner.

3. Name Your Own Executors in your Will

Problem: If you die without a will, the court will appoint an administrator of your estate based on the order specified in the Texas Probate Code.

Benefit: If you die with a will, the court will appoint the executor(s) named in your will before considering any other individuals.

4. Extend the Time in Which Beneficiaries Receive the Bulk of Your Estate

Problem: If you have minor children and you die without a will, your children will receive their share of your estate when they reach 18 years of age.

Benefit: With a properly drafted will, a contingent trust can hold your children’s share until they turn an age that is more appropriate for them to receive the bulk of your estate.

The trustee named in your will manages the children’s inheritance until they turn an appropriate age. The trustee may make distributions to your children during the life of the trust for their health, education, maintenance and support.

While the use of a contingent trust is most common when minor children are involved, they work just as well for any individual under a certain age or otherwise incapacitated.

Any beneficiary designations for your life insurance policies or retirement plans should also be coordinated with your will to make sure they are distributed to the children’s trust if they are under a certain age.

5. Eliminate or Reduce Any Estate Tax

Problem: Under current law, if your gross estate, including life insurance and retirement, is under $5.45 million, your estate will typically pass tax-free to your beneficiaries (and a married couple typically can pass up to $10.9 million of their wealth estate tax free).

Benefit: If your gross estate exceeds that number, you should contact an estate planning attorney to learn about estate planning options that can eliminate or substantially reduce any estate tax which would otherwise be payable to the Internal Revenue Service. With a federal estate tax rate as high as 40%, this issue should not be ignored.

Don’t wait…. Do it now….  Make it a priority to protect your loved ones this year!

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While most people realize they should have a will, they still tend to procrastinate over having it done. Most attorneys can have a will prepared within days of the initial meeting, which will alleviate the many problems your loved ones will face if the time is not taken to get your affairs in order.

Avoid Family Feuds When Distributing Assets Part Two

 

 

Avoid Family Feuds

Our last blog post offered some tips for avoiding family feuds when distributing assets of a family member. It’s important to choose your executor carefully.The executor generally exercises discretion in distributing personal and household items. So it’s important to name a trustworthy person with a fair, impartial, reasonable personality — especially if there are sibling rivalry issues. You want someone who will fulfill your intentions. The right executor can reduce the chance of litigation.

No matter who you name as an executor, the individual will appreciate clear, written instructions.

Here is a “Textbook Example of Headaches, Heartaches and Expense”
Without specific estate instructions concerning asset distribution, family members can be left guessing what a deceased person would want — or decide what to do themselves.

In one case, a Michigan probate court had to step in and resolve bitter disputes by distributing numerous items. The court called it “a textbook example of the headaches, heartaches, and expense that can result from inadequate estate planning.”

Facts of the case: According to court documents, Barbara Waters was divorced and living with Kevin Goethe when she died. She had three children from a previous marriage and he had one son.

Goethe built and furnished the house. When the couple moved in together, they combined household furnishings and purchased items together and individually.

Goethe proposed and purchased an engagement ring but the couple never married. “Ms. Waters was diagnosed with cancer and told Mr. Goethe it would be unfair of her to marry him because of her illness,” according to court documents.

Waters made out a handwritten (holographic) will and signed it “Mom.” Upon review, the court stated the document did not meet the state’s legal requirements and was therefore invalid.

Weeks after Waters’ death, her children moved out of Goethe’s home. He packed some belongings and left them on the front porch for the children to pick up. He was not home when they arrived. The children gained entry to the house through another relative. They removed “almost everything they thought was their mother’s.”

Goethe testified the house was “ransacked.” Family photographs were removed. One photo was ripped in two, with Goethe’s image returned to the frame and Waters’ image taken.

The Probate Court called the children’s actions “offensive.” It then made decisions to divide the items, including:

  • A jewelry chest and small kitchenware had to be returned to the estate by Goethe. However, some jewelry items were determined to be gifts from Waters so Goethe got to keep them.
  • Photos were ordered returned or duplicated at estate expense.
  • A family pet was claimed by both sides. Goethe was awarded the Maltese Terrier “in lieu of compensation for items which either disappeared from his house or items to which he might have had a reasonable claim.”

The judge stated the court could not adopt either “extreme position” — that everything in the house belonged to Goethe or that the children were entitled to anything connected with their mother.

He added: “there is a difference between saying or writing down what you hope will happen and taking the proper legal steps to assure that a court will enforce your intentions.” (Waters, Probate Court for the County of Marquette, No. 10-31879-DE)

This article only provides basic answers to some of the questions involved in the distribution of assets. Consult with your estate planning adviser about your situation. By planning ahead, you can avoid battle lines being drawn after your death over possessions accumulated during your life.

Avoid Family Feuds When Distributing Assets

Avoid Family Feuds

In the days after a person dies, some family members may decide to take matters into their own hands. These individuals may have a key to the home and decide they are going to take items they want. Before the will is even read, furniture, jewelry, artwork and other items may disappear. Cash around the home may be grabbed. In some cases, trash bags of stuff are hauled away.
Family feuds may erupt when other beneficiaries find out items are missing.

In some families, nothing brings out greed and long-time resentments like divvying up sentimental items that remind adult children of their childhoods. The situation can become even worse if it involves divorce, a blended family, or an unmarried couple.

Splitting up material possessions among family members can be more acrimonious than dividing up financial assets. If there are four heirs and a bank account worth $10,000, it’s easy to divide it with each person receiving $2,500. But how do you divide a diamond ring or antique teapot four ways?

Unfortunately, some families wind up incurring large legal expenses over non-titled items that have more sentimental importance than monetary value.

To help avoid this in your family, here are some Q&As about how the executor collects and distributes the assets in an estate.

Q. Exactly how are assets distributed?

A. Here is a brief rundown of the process. After the will is read, the executor must inventory and gather the assets of the estate. Appraisals may be needed for items of value, such as jewelry.

An estate bank account is opened up by the executor, who also obtains a tax ID number. The various accounts of the deceased person are then transferred to the account.

The executor must pay creditors, file tax returns and pay any taxes due. Then, he must collect any money or benefits owed to the decedent. Finally, he or she distributes the remainder in accordance with the will. The executor generally exercises discretion in distributing personal and household items. (Unwanted items must be disposed of or donated to charity.)

Q. How long does it take before assets in a will are given to beneficiaries?

A. Generally, beneficiaries have to wait a certain amount of time, say at least six months. That time is used to allow creditors to come forward and to pay them off with the estate assets. (In some cases, an executor may make partial distributions to the heirs after he or she estimates the debts. However, if the estimates are wrong, the distributions can be called back.)

Q. What happens in the time between when a person dies and the assets are finally distributed?

A. The executor must handle the everyday tasks of the estate to preserve the assets. For example, if there is a home that needs to be sold, the executor must be sure to make mortgage payments, as well as pay insurance premiums and utility bills. (Foreclosure can be started if a few mortgage payments are missed.)

Q. What if a relative has a key to the home and goes in to take items he or she wants?

A. The executor should inventory the assets as soon as possible — before family members get a chance to remove items. If a valuable or important item is taken, and the person responsible refuses to return it, a court can step in to order the item back into the estate.

If the executor knows there are outstanding keys to the decedent’s house, or is concerned about someone coming in without authorization, the locks should be changed.

Q. What happens if the beneficiaries are not satisfied with the way the executor distributes personal items? Or what if the heirs suspect the executor has taken or hidden certain valuable items for himself or herself?

A. The beneficiaries can request an informal accounting of the assets from the executor. If the executor refuses, or the beneficiaries are still not satisfied, they can petition the court for a mandatory accounting. Consult with your attorney about how to proceed.

Q. What can I do to prevent these types of disputes from occurring after I die?

A. There are a number of steps you can take:

  • Give away gifts while you are still alive. If there are specific items you want to loved ones, present them now. In other words, get them out of your estate. It can be rewarding to see your prized possessions go to individuals who appreciate them. Depending on the size of your house, you may have thousands of items. Throw away or donate things you no longer need. (A donation to a qualified charity may result in a tax deduction.)
  • Make specific bequests in your will or in a letter of intent. If you want your car to go to your daughter or your golf clubs to go to your grandson, put it in writing. Without detailed instructions and guidance, the executor may have to devise an equitable system for distributing your possessions. That can place a large burden on the executor and lead to disputes among your heirs.
  • Choose your executor carefully. The executor generally exercises discretion in distributing personal and household items. So it’s important to name a trustworthy person with a fair, impartial, reasonable personality — especially if there are sibling rivalry issues. You want someone who will fulfill your intentions. The right executor can reduce the chance of litigation.

No matter who you name as an executor, the individual will appreciate clear, written instructions.

This article only provides basic answers to some of the questions involved in the distribution of assets. Consult with your estate planning adviser about your situation. By planning ahead, you can avoid battle lines being drawn after your death over possessions accumulated during your life.

“You’ve been served!” on Social Media

Recently, I saw a story that ran on a KEYE-TV (ch. 42, in Austin) newscast about a bill that has been proposed in the Texas legislature by Representative Jeff Leach (R) from Plano. That bill, HB 1989, is proposing to allow people to be served subpoenas through social media.  When I first saw KEYE’s story, I must admit I thought this proposal was one of the worst ideas to be proposed in our Texas Legislature in recent memory.

Opponents of the concept argue that most people (myself included) miss posts and messages sent through social media all the time, there’s no way to confirm receipt by the actual person, and it is hard to confirm that a particular account is actually created, monitored and maintained by the particular individual sought to be served. They also say that serving someone in this manner is inappropriate because it would make the fact that the individual was being sued more public than it should be. While it is true that most court cases are public record, they are passively so–one has to go to the courthouse or to an online site to specifically look for the case. It is not like when someone files a lawsuit, it makes the front page of the paper, except in rare high-profile cases of public interest, and most lawsuits don’t fit that category.

But after reading the article on KEYE’s website (http://www.keyetv.com/news/features/top-stories/stories/texas-bill-would-allow-serving-subpoenas-through-social-media-7193.shtml?wap=0) and reviewing the actual text of the bill (http://www.capitol.state.tx.us/tlodocs/83R/billtext/html/HB01989I.htm), I realized it was not emphasized in the story that the same base criteria that have been in place for “substituted service” or alternative service plus additional safeguards/restrictions applicable only to social media under this bill, would be applied to these situations. Currently, under Rule 106 of the Texas Rules of Civil Procedure, which has been in place over 70 years,

(a) Unless the citation or an order of the court otherwise directs, the citation shall be served by any person authorized by Rule 103 by

(1) delivering to the defendant, in person, a true copy of the citation with the date of delivery endorsed thereon with a copy of the petition attached thereto, or

(2) mailing to the defendant by registered or certified mail, return receipt requested, a true copy of the citation with a copy of the petition attached thereto.

(b) Upon motion supported by affidavit stating the location of the defendant’s usual place of business or usual place of abode or other place where the defendant can probably be found and stating specifically the facts showing that service has been attempted under either (a)(1) or (a)(2) at the location named in such affidavit but has not been successful, the court may authorize service

(1) by leaving a true copy of the citation, with a copy of the petition attached, with anyone over sixteen years of age at the location specified in such affidavit, or

(2) in any other manner that the affidavit or other evidence before the court shows will be reasonably effective to give the defendant notice of the suit

Citation by publication, or serving someone through a newspaper or other published media, has also been provided for in our court procedural rules for over 70 years, and it provides,

When a party to a suit, his agent or attorney, shall make oath that the residence of any party defendant is unknown to affiant, and to such party when the affidavit is made by his agent or attorney, or that such defendant is a transient person, and that after due diligence such party and the affiant have been unable to locate the whereabouts of such defendant, or that such defendant is absent from or is a nonresident of the State, and that the party applying for the citation has attempted to obtain personal service of nonresident notice as provided for in Rule 108, but has been unable to do so, the clerk shall issue citation for such defendant for service by publication.

It is not being proposed that social media be allowed as the primary or first option for serving someone, only when under the rules that already exist here in Texas (and similarly in most states and under Federal court rules also) it would be okay to serve someone by a substitute or alternate method to personal service by a constable or authorized private process server. If a litigant can show a court that service in person or by certified mail as authorized has been unsuccessful and can show that the criteria for obtaining substitute service or citation by publication have been met, under under the procedural rules the court may allow service by such alternate means.

In addition, as described in HB1989, additional procedures and safeguards must be followed.

If substituted service of citation is authorized under the Texas Rules of Civil Procedure, the court may prescribe as a method of service under those rules an electronic communication sent to the defendant through a social media website if the court finds that:

(1)  the defendant maintains a social media page on that website;

(2)  the profile on the social media page is the profile of the defendant;

(3)  the defendant regularly accesses the social media page account; and

(4)  the defendant could reasonably be expected to receive actual notice if the electronic communication were sent to the defendant’s account.

Bradley Shear, a Washington DC area social media lawyer, stated in an ABC News story last year, “Authentication [of the social media user who is sought to be served through such social media] is a major issue since you must be sure that the person with whom you are trying to serve online is the same person offline. You don’t want to have someone’s due process rights infringed upon due to not being properly notified.” This principle is addressed by the first two criteria, as long as the courts hold the attorneys and litigants hoping to use this method to strict and high burden of proof to show that the online person is actually the same person in “real life” who is sought to be served..

So, given the advancement of technology, and the reality that it is possible that it could even be MORE likely in some situations that someone might see the subpoena or other legal process if served through the social media source than by some other means currently becoming less used (i.e., newspaper), if implemented right, I believe that service of process through social media could actually be a better and more appropriate method than certain currently allowed alternative methods.

Service by social media has been allowed  in New York, Minnessota, Nevada (Federal appeals court – 9th Circuit), Australia, New Zealand, Canada, and the United Kingdom, and other jurisdictions are being added all the time.

We will have to wait and see if the Texas Legislature passes HB 1989 to know whether service through social media officially becomes a permissible means to serve someone in a case.

Estate Administration: The Will After Death

Wills are the most common way for people to state their preferences about how their estates should be handled after their deaths. A person who makes a will is known as a testator (male) or testatrix (female). A will is similar to an instruction booklet for the probate court. It provides the court with guidance as to how to distribute the person’s assets in accordance with the person’s wishes. Generally, a gift after death cannot be made to anyone other than a surviving spouse, children, or other relatives specified in state law in the laws pertaining to intestacy (dying without a will), unless there is a will that meets all the legal formalities required by state law. Thus, a will is the cornerstone of any estate plan.

A will is a very important legal document. The law favors the testamentary disposition of property, which is a main purpose and function of a will – to dispose of property which the testator owns. However, the disposition of property is not an essential characteristic of a will and a valid will may be made for the sole purpose of naming an executor. In general, people make wills in satisfaction of moral obligations. With such an obligation in mind, the testator almost always drafts a will that includes provisions for the distribution of his or her property after death. As circumstances, including applicable law, change, it is wise to consider updating your will.

Wills only control probate assets, that is, those assets that can be transferred by the probate court. Some assets do not have to be probated and generally are not controlled by a will. These assets include life insurance proceeds, which are paid to the beneficiaries designated in the policy. Other non-probate assets include property held in joint tenancy, which provides that, upon the death of a joint tenant, the deceased person’s interest automatically passes to the surviving joint tenant(s). Because these assets are transferred by means other than the probate process, a will generally does not control how they are distributed. A skilled estate or elder law attorney is the best source of advice regarding which assets are best distributed through a will, and which should be distributed through other estate planning instruments.

Example: A person names her spouse in a beneficiary designation (within the policy documents) to receive her life insurance proceeds on her death. In her will, she names her sister to receive those same proceeds. Because the proceeds are paid directly to the spouse, they never become part of the deceased person’s estate. Therefore, her will, which only controls her estate, cannot override the beneficiary designation.

A will must meet certain formal requirements in order to be valid. These requirements vary from state to state. Generally, the testator must be an adult of sound mind, meaning that the testator must be able to understand the full meaning of the document. Wills must be written. Some states, including Texas, allow a will to be in the testator’s own handwriting, which is known as a holographic will.  But it is generally considered a better and more enforceable option to have a typed or pre-printed document. For non-holographic wills, a testator must sign his or her own will, unless he or she is unable to do so, in which case the testator must direct another person to sign the will in the presence of witnesses, and  the signature must be witnessed and/or notarized. A valid will remains in force until revoked or superseded by a subsequent valid will. Some changes may be made by amendment (a “codicil”) without requiring a complete re-write.

Some legal restrictions prevent a testator from giving full effect to his or her wishes. Some laws prohibit disinheritance of spouses or dependent children. A married person cannot completely disinherit a spouse without the spouse’s consent, usually in a prenuptial agreement. In most jurisdictions, including Texas, a surviving spouse has a right of election, which allows the spouse to take a legally determined percentage (up to one-half in some places and circumstances) of the estate when he or she is dissatisfied with the will. Nondependent children may be disinherited, but this preference should be clearly stated in the will in order to avoid confusion and possible legal challenges.

A will usually appoints an executor or personal representative to perform the specific wishes of the testator after he or she dies. The personal representative consolidates and manages the testator’s assets, collects any debts owed to the testator at death, sells property necessary to pay estate taxes or expenses, and files all necessary court and tax documents for the estate. In many states, if the language of the will provides for it, the personal representative may act independently of court oversight and approval; in Texas, this is called being appointed as an independent executor or independent administrator.  If language allowing a personal representative to be independent is not included in the will, by default generally the administration of the estate must be “dependent” and must have court oversight and approval of most actions. Under certain conditions, it is possible to avoid a dependent administration even when the will does not provide for an independent executor.

While wills may be “tickets” to go through the probate process, not having a will forces the probate court to distribute the property without guidance from the testator. Dying without a will leaves an estate intestate, and a probate court must step in to divide up the estate using legal defaults to give property to surviving relatives. A personal representative must still be appointed, but the court must choose someone rather than following the deceased person’s wishes.

The court requires that any unpaid debts and death expenses be paid first, and then any distributions follow the legal guidelines found in the probate statutes. The rules vary depending on whether the deceased was married and had children, and whether the spouse and children are alive. If the intestate individual has no surviving spouse, children or grandchildren the estate is divided between various other relatives. Therefore, intestacy means that people who would never have been chosen to receive property may do so. Additionally, state intestacy laws only recognize relatives, so close friends or charities that the deceased favored do not receive anything. If no relatives are found, the estate goes to the government in its entirety. When made aware of the consequences of intestacy, most people prefer to leave instructions rather than subject their survivors and property to mandated division.