Steps to Prevent a Contested Will

Emotions can run high at the death of a family member. If a family member is unhappy with the amount they received (or didn’t receive) under a Will, a Will contest may ensue. 

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Generally, only a person’s closest heirs, or “distributees” are able to contest a Will. Will contests can drag out for years, keeping all the beneficiaries from getting what they are entitled to. It may be impossible to prevent heirs from fighting over your Will entirely, but there are steps you can take to try to minimize squabbles and ensure your intentions are carried out.

Your Will can be contested if an heir believes you did not have the requisite mental capacity to execute the Will, someone exerted undue influence over you, someone committed fraud, or the Will was not executed properly.

The following are some steps that may make a will contest less likely to succeed:

  • Make sure your Will is properly executed. The best way to do this is to have an experienced elder law or estate planning attorney assist you in drafting and executing the will. Wills need to be signed and witnessed, usually by two independent witnesses.
  • Explain your decision. If family members understand the reasoning behind the decisions in your Will, they may be less likely to contest the Will. It is a good idea to talk to family members at the time you draft the will and explain why someone is getting left out of the Will or getting a reduced share. If you don’t discuss it in person, state the reason in the Will. You may also want to include a letter with the Will.
  • Use a no-contest clause. One of the most effective ways of preventing a challenge to your Will is to include a no-contest clause (also called an “in terrorem clause”) in the will. This will only work if you are willing to leave something of value to the potentially disgruntled family member. A no-contest clause provides that if an heir challenges the Will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
  • Prove competency. One common way of challenging a Will is to argue that the deceased family member was not mentally competent at the time he or she signed the Will. You can try to avoid this by making sure the attorney drafting the Will tests you for competency. This could involve seeing a doctor or answering a series of questions.
  • Remove the appearance of undue influence. Another common method of challenging a Will is to argue that someone exerted undue influence over the deceased family member. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your Will in drafting your will. Family members should not be present when you discuss the Will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive you to the attorney’s office.

Bear in mind that some of these strategies may not be advisable in certain states and certain situations. Feel free to talk to me about the best strategy for you.

(For more information on Wills click here.)

Regards,

Brian A. Raphan, Esq.

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Will Drafter’s Failures Don’t Help Undue Influencer’s Case

A New York trial court determines that an incapacitated woman was unduly influenced by her agent under a power of attorney, noting that the testimony of an attorney who drafted a will for the woman on behalf of the agent did not carry much weight because the attorney spent insufficient time with the woman and failed to determine her knowledge of her estate. Matter of Mitchell (N.Y. Sup. Ct., No. 100163/14, June 3, 2016).

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Mary Mitchell appointed Gary Shadoian as her attorney-in-fact under a power of attorney. During the time he was her agent, she wrote him checks valued at more than $120,000, which he used to buy things for himself. Mr. Shadoian contacted an attorney on Ms. Mitchell’s behalf to draft a will. The attorney had one conversation with Ms. Mitchell over the phone and met her once in person. The attorney allowed Mr. Shadoian to be present when Ms. Mitchell executed her will even though Mr. Shadoian was a beneficiary of the will.

After Ms. Mitchell was repeatedly hospitalized for neglect, the court appointed guardians for her. The guardians filed suit against Mr. Shadoian, arguing that he unduly influenced Ms. Mitchell. At the trial, the attorney who drafted the will for Ms. Mitchell testified on behalf of Ms. Shadoian that he didn’t know Ms. Mitchell was incapacitated, but admitted that he didn’t make inquiries about her knowledge of her estate.

The New York Supreme Court rules that Mr. Shadoian exercised undue influence over Ms. Mitchell. The court determines Mr. Shadoian’s testimony was not credible, and that the testimony of the attorney that prepared Ms. Mitchell’s will “was too threadbare to carry much weight.” The court notes that the attorney “failed to make even elementary inquiries as to the actual size of [Ms. Mitchell’s] estate, her medical condition, her social and familial history. Contrary to usual practice, he allowed an unrelated person, designated as beneficiary, to orchestrate the completion and execution of the will.”

5 REASONS TO REVIEW A WILL >

You were appointed Executor…Now what?

Being the executor of an estate is not a task to take lightly. An executor is the person responsible for managing the administration of a deceased individual’s estate. Although the time and effort involved will vary with the size of the estate, even if you are the executor of a small estate you will have important duties that must be performed correctly or you may be liable to the estate or the beneficiaries.

Last Will & Testament

The executor is either named in the will or if there is no will, appointed by the court. You do not have to accept the position of executor even if you are named in the will.

The average estate administration takes one year, though you won’t need to work full time on it. Following are some of the duties you may have to perform as executor:

  • Find documents. If there is a will, but you don’t already know where the will is or the will hasn’t already been brought to court, you may need to find it among the deceased’s belongings. If all you have is a copy of the will, you may need to get the original from the lawyer who drafted it. You will also need to get a copy of the death certificate.
  • Hire an attorney. You are not required to hire an attorney, but mistakes can cost you money. You may be personally liable if something goes wrong with the estate or the payment of taxes. An attorney can help you make sure all the proper steps are taken and deadlines met.
  • Apply for probate. If there is a will, the court will grant you letters testamentary. If there is no will, you will receive letters of administration. This will officially begin your work as the executor.
  • Notify interested parties. Notify the beneficiaries of the will, if there is a will, as well as any potential heirs (such as children, siblings, or parents who may or may not be named in a will). In addition, you will have to place an advertisement for potential creditors in a newspaper near where the deceased lived.
  • Manage the deceased’s property. You will need to prepare a list of the deceased’s assets and liabilities, and you may need to collect any property in the hands of other people. One of the executor’s jobs is to protect the property from loss, so you will need to assure the property is kept safe. You will also need to hire an appraiser to find out how much any property is worth. In addition, if the estate includes a business, you may have to make sure the business continues to run.
  • Pay valid claims by creditors. Once the creditors are determined, you will need to pay the deceased’s debts from the estate’s funds. The executor is not personally liable for deceased’s debts. The estate usually pays any reasonable funeral expenses first. Other debts include probate and administration fees and taxes as well as any valid claims filed by creditors.
  • File tax returns. You need to make sure the tax forms are filed within the time frame set under the law. Taxes will include estate taxes and income taxes.
  • Distribute the assets to the beneficiaries. Once the creditors’ claims are clear, the executor is responsible for making sure the beneficiaries get what they are entitled to under the will or under the law, if there is no will. You may be required to sell property in order to fulfill legacies in a will. In addition, you may have to set up any trusts required by the will.
  • Keep accurate records. It is very important to keep accurate records of everything you do. You will need to create a final accounting, which the beneficiaries must review before the distribution of the estate can be finalized. The accounting should include any distributions and expenses as well as any income earned by the estate since the deceased died.
  • File the final accounting with the court. Once the final accounting is approved by the beneficiaries and the court, the court will close the estate. File a final report with the court and close the estate.

All this can be a lot of work, but remember that the executor is entitled to compensation, subject to approval by the court. Keep in mind that the compensation is counted as income, so you will need to declare it on your income taxes.

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Did rockstar Prince die without a Will?

Who will get his millions?

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This article in USA Today states; Prince left no will, according to documents filed Tuesday by his sister, Tyka Nelson, in probate court for Carver County, Minn., where the beloved pop icon died suddenly last week at his Paisley Park compound.

“The Decedent died intestate,” Nelson said in her petition for the appointment of a special administrator to deal with Prince’s estate, which has been widely reported to be valued at $300 million.

Nelson said her brother left no surviving spouse, no children and no parents.  Besides Nelson, his full sister, he is survived by half-brothers and half-sisters, whom Nelson names in her petition as “interested parties” to the Prince estate to her knowledge thus far.

The adult half-siblings are: John Nelson, Norrine Nelson, Sharon Nelson, Alfred Jackson and Omar Baker. She also listed another half-sister, Lorna Nelson, who has died and did not have children. There was at least one other sibling identified as a stepbrother, Duane Nelson, who also has died, but Tyka Nelson did not list him as an interested party.

“I do not know of the existence of a Will and have no reason to believe that the Decedent executed testamentary documents in any form,” Tyka Nelson stated in the petition.

It’s possible there is a will and Nelson doesn’t know about it, but no one has come forward yet to say so. Calls to the office of Prince’s longtime attorney, L. Londell McMillan, were not answered.

When someone dies intestate, without a will, a probate court takes over the administration of the decedent’s estate and distribution of assets, which Nelson listed as “Homestead, other real estate, cash, securities and Other.”

Her petition said Prince had “substantial assets consisting of personal and real property that requires protection.” He “owned and controlled business interests that require ongoing management and supervision.” And he “has heirs whose identities and addresses need to be determined.”

She said “an emergency exists to the extent that the appointment should be made without notice because immediate action and decisions need to be made to continue the ongoing management and supervision of Decedent’s business interests; and because the names and addresses of all interested parties are currently unknown.”

She named Bremer Bank, National Association, as Prince’s longtime banker, which would be in “the best position of any corporate trust company to protect the Decedent’s assets pending the appointment” of an executor.

According to estate lawyers contacted by USA TODAY, when there is no will, state laws on inheritance prevail. In Minnesota, for instance, half-siblings are treated the same as full siblings for the purposes of inheritance. Nelson’s filings on Tuesday come as a surprise. Estate lawyers and Prince’s former manager, Owen Husney, said they would have expected Prince to have drawn up a will and an estate plan long ago.

Husney said he was too smart to have overlooked something that crucial and he had teams of lawyers, business managers and accountants over the years who would have advised him it was crucial.

So what’s the lesson learned here? Let’s start with you should have a Will.

If you die without a Will, the people who inherit may not be those you want to receive your money or personal property when you die!  This could include remote relatives you haven’t spoken to in years. If the Public Administrator is appointed to administer the estate, they will auction or dispose of your intimate personal property and your family may never have an opportunity to receive, or pass on, items which may have wanted them to have.

If you die without a Will in New York, your estate will pass under the laws of the State of New York. When an estate is handled by the Public Administrator, heirs may be required to partake in potentially lengthy and costly legal proceedings to prove their relationships before they can inherit. The Court may also appoint a “Guardian ad Litem” for “unknown” persons.  This Guardian ad Litem, along with the Public Administrator, will get a fee from your estate! If your heirs cannot prove their relationship to the Court, your estate may be paid to the State of New York.

Having a Will can ensure those you select inherit from you, reduce expenses, and expedite handling of your estate. It also allows you to nominate an Executor, who is the person who collects your assets and delivers them to your beneficiaries.  If you have the right Executor, your estate should move swiftly. Lastly, if you already have a Will and haven’t reviewed it in over two years, now is the time to do so to ensure your current wishes are carried out.

If you have any questions about drafting a Will or revising an existing Will feel free to reach out to me.

Regards,

Matthew S. Raphan, Esq.

mraphan@raphanlaw.com

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Choosing a trustee and an executor

The requirements for a trustee and how to choose one

How do you choose a trustee? What qualities should a trustee have? Alisa Shin and Sarah Price of Vanguard Advice Services discuss the requirements for a trustee and how to go about choosing one.

Video: https://personal.vanguard.com/us/insights/video/3437-Retail-Exc3

Transcript:

Liz Tammaro: And, Alisa, what are the pros and cons of creating a trust?

Alisa Shin: That’s a great question. People hear the word “trust,” and they automatically think of controlling people, and that’s not necessarily true. There are a lot of different types of trusts. I think most trusts that people are familiar with are trusts that are irrevocable, trusts that can’t be changed. And for a lot of people, that’s scary because they end up—They think they’re going to create this document that will date back to the dinosaur age, and, you know, they can’t ever change it again, and so they have to live with it. And that’s not necessarily true.

Trusts, irrevocable trusts, are really used for many reasons. One, obviously, if you have children or beneficiaries who are young and who can’t manage the money, a trust is a way to protect that money, to put a structure in place for the investment management and the management of how the assets are distributed to the beneficiary. And you can time it out so that a 15-year-old isn’t getting a large sum of money, and they can get it at a more appropriate time.

The more common reasons why people also use trusts is, one, to provide asset protection. A properly drawn irrevocable trust can protect those assets from future creditors in case the beneficiary gets sued, and a future creditor can also mean a divorcing spouse. So even if a beneficiary doesn’t have a prenuptial agreement, an irrevocable trust, if it’s drawn up correctly, could protect those assets so the divorcing spouse could not get those assets.

Liz Tammaro: And I’m hearing you say irrevocable doesn’t necessarily mean not changeable, right?

Alisa Shin: Correct. So there’ll be restrictions as to who could make the change, but a lot of times, when we talk with clients here at Vanguard, we really encourage clients because we just don’t know what the future is going to entail, to empower a beneficiary to have the ability to change the terms of the trust and determine who should get it at the beneficiary’s later passing, at their death.

And that’s typically called a testamentary limited power of appointment. It’s limited because you can decide who could receive the money. You could say that your child could give it to anybody they would like, or you could say that they can only give it to their descendants or charitable organizations. You can make it as broad or as restrictive as you would like.

Liz Tammaro: Okay, so you talked about some of the benefits of a trust. How about, are there any drawbacks to creating trusts?

Alisa Shin: You know, the drawbacks of creating a trust, it creates a little bit of a complexity in your life. When someone has a trust, that trust is a separate taxpayer, technically. It will have a second taxpayer identification number. So that means that that trust will have to file its own income tax returns, meaning the trustee will do that for them. It will have a separate account that won’t be combined into your own personal account because you want that to make sure that it stays protected from future creditors and so forth for the reasons we discussed.

Sometimes, depending on who your trustees are, there are additional costs associated with the trust. You need to, if you have a professional trustee serving, they might charge a commission. Clearly, if you have an accountant who’s preparing the tax return, there’s going to be one additional tax return that needs to be prepared for that trust.

Liz Tammaro: And one other thing, I’ll just open this up to both of you. I heard you say that it’s really important that it’s drawn up properly. Talk to me a little bit more about what you mean there?

Alisa Shin: In terms of, I assume, asset protection and so forth?

Liz Tammaro: Yes, the trust. You said it’s really important that it must be drawn up properly; the document must be— What do you mean by that?

Alisa Shin: There are certain provisions, something called a spendthrift provision that would need to be included in the document. I would say, in today’s day and age, a spendthrift provision is almost always in every trust document. But the other part of drawing it up properly is understanding what impact guaranteeing money from the trust would have for your beneficiary.

So if you create a trust that says, “Pay the income to my beneficiary every month,” because that’s a guaranteed income stream, that income stream loses its protection from a future creditor. Whereas, if the trust said, “The trustee has the discretion to use the income for my beneficiaries’ benefit,” that gives it a more solid layer of protection from a future creditor or a divorcing spouse.

So when you think about asset protection, divorce protection, it’s really a balancing game between giving your beneficiary access to the money and some comfort knowing that he or she might be able to get the money that they needed versus leaving it to a trusted advisor, a trusted family friend to make sure those assets are protected.

Important information

All investing is subject to risk, including the possible loss of money you invest. Diversification does not ensure a profit or protect against a loss.

This hangout is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

Read more on the subject: Download Free Probate Guide.

Legal DIY Web Sites Are No Match for a Pro, Consumer Reports Concludes

After road testing three leading Web sites that help you create your own will, power of attorney, and other important legal documents, Consumer Reports has concluded that none of the will-writing products is likely to entirely meet your needs unless those needs are extremely simple.

Consumer Reports

The independent non-profit testing agency evaluated three online services: LegalZoom, Nolo, and Rocket Lawyer. Using online worksheets or downloads, researchers created a will, a car bill of sale for a seller, a home lease for a small landlord, and a promissory note. They then asked three law professors — including Gerry W. Beyer of Texas Tech University School of Law, who specializes in estates and trusts — to review in a blind test the processes and resulting documents.

In his evaluation of the will-making programs, Prof. Beyer said that two of them could create good simple wills but he found deficiencies in all three, including features that could lead a user to add clauses that contradict other parts of the will.

Consumer Reports’ verdict?   “Using any of the three services is generally better than drafting the documents yourself without legal training or not having them at all. But unless your needs are simple—say, you want to leave your entire estate to your spouse—none of the will-writing products is likely to entirely meet your needs. And in some cases, the other documents aren’t specific enough or contain language that could lead to ‘an unintended result,’ in [a professor’s] words,”

An article on the study, titled “Legal DIY websites are no match for a pro,” appeared in Consumer Reports.  To read it, click here.

Consumer Reports’ findings accord with ElderLawAnswers’ own evaluation of online estate planning programs. For their White Paper on these programs, click here.

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Heir tight: The dos and don’ts of creating rock-solid trusts

Good article via Jennifer Woods at cnbc

Imagine working for decades so that one day you could pass your assets on to your children or grandchildren.

Wouldn’t you like to know that when the day comes, they won’t lose it all on bad investments or to a gold-digging spouse—or simply because they have no idea how to properly manage large sums of money?

Whether you’re bestowing assets during your lifetime or leaving them as an inheritance, creating trusts with well-thought-out terms can ensure your money lands in the right hands and isn’t squandered.

“When you write a will and leave money outright to your heirs … once it’s inherited, there are no controls on how that money is being handled, and you don’t know what will happen,” said certified financial planner Ian Weinberg, CEO of Family Wealth and Pension Management.

“Using trusts helps protect your heirs against future catastrophes—[such as] bankruptcies, money-hungry predators disguised as friends, family looking for loans or business bailouts and other financial challenges—and can also provide for certain special needs of your children or grandchildren,” he said.

Many trusts make multiple payouts over time, the hope being that spacing out distributions will prevent the beneficiary from blowing it all in one shot.

Read More Busting age-based investing myths

Russ Weiss, a certified financial planner with Marshall Financial Group, said that when it comes to setting the distribution terms with clients, “the conversations become tricky.”

In many cases, his clients use age-based payouts, in which a percentage of assets is distributed at various ages.

“The child doesn’t get it all at once,” he said. “If they are irresponsible with money, hopefully they can manage [with spread-out distributions].”

Distribution options

Payouts at 25, 30 and 35 years of age have historically been common, though experts warn that in this day and age, 25 is too young to properly manage large sums of money.

Weiss also has clients who schedule periodic payouts after the benefactor dies, so beneficiaries may get a distribution, for example, every five years following the death.

Who needs a trust?

  • Trusts are not just for the ultrarich. If your heirs stand to inherit even a few hundred thousand dollars, a trust is worth considering.
  • People with young children could benefit from a testamentary trust, established in a will and effective upon one’s death. It dictates how assets will be distributed at later dates. The drawbacks? These trusts go through probate, delaying disbursements, and the records are public.
  • Revocable trusts, or living trusts, are often a better option. You allocate, access and manage assets, and amend terms while you’re alive. When you die, the trust can convert to an irrevocable trust with unchangeable terms. Other pluses: They’re easy to set up, are flexible and protect privacy.—J.W.
  • For more info regarding the proper use of Trusts feel free to email me. Sincerely, Brian

Court Ruling: Transfers Made Years Before Needing Care Were Not Made in Order to Qualify for Medicaid

Doing Medicaid Planning for clients, I often get asked the question: “How does medicaid determine if my gifts were made to qualify for medicaid or not?” Saavy clients have a long history of gifting to show a pattern meant for gifting not medicaid spend down. This recent decision should be of interest.

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A New York appeals court holds that a Medicaid applicant who transferred funds several years before needing long-term care and kept enough resources to care for herself rebutted the presumption that the transfers were made in order to qualify for Medicaid. Safran v. Shah (N.Y. Sup. Ct., App. Div., 2nd. Dept., 2013-04373, 20166/12, July 2, 2014).

While she was living independently and didn’t require long-term care, Louise Kornhaber transferred funds to her family as gifts. Several years later, Ms. Kornhaber entered a nursing home. Due to the unexpected theft of her remaining resources, Ms. Kornhaber applied for Medicaid. The state assessed a penalty period based on the uncompensated transfers.

Ms. Kornhaber appealed, arguing that the transfers were made for a reason other than to qualify for Medicaid. The state affirmed the penalty period, and Ms. Kornhaber appealed to court.

The New York Supreme Court, Appellate Division, orders the state to provide Ms. Kornhaber with Medicaid benefits, holding that the penalty period was not appropriate. The court rules that because Ms. Kornhaber still had enough resources to maintain herself for years after she made the transfers, she rebutted the presumption that the transfer was made in order to qualify for Medicaid.

Medicaid Planning takes the experience and legal expertise of a qualified attorney. The detailed process of medicaid planning needs to avoid errors and mistakes that can make you ineligible of cost you possibly tens of thousands of dollars in delays or penalties. Click here to read: 8  Medicaid Mistakes to Avoid,

For the full text of this decision, go to: https://www.nycourts.gov/reporter/3dseries/2014/2014_04943.htm

Any questions? Send me an email: info@raphanlaw.com or call 212-268-8200 during the day for a free consultation.

Regards, Brian

Using a No-Contest Clause to Prevent Heirs from Challenging a Will or Trust

If you are worried that disappointed heirs could contest your will or trust after you die, one option is to include a “no-contest clause” in your estate planning documents. A no-contest clause provides that if an heir challenges the will or trust and loses, then he or she will get nothing.

Last Will & TestamentA no-contest clause may be a good idea if you have a beneficiary who may be upset by the property distributed to him or her. However, no-contest clauses (also called in terrorem clauses) only work if you are willing to leave something of value to the potentially disgruntled heir. You must leave the individual enough so that a challenge is not worth the risk of losing the inheritance.

Most states allow no-contest clauses, but there may be restrictions. In many states, if the contest is based on probable cause or good faith, then the no-contest clause is unenforceable. That means that if the court determines there is a good reason for the contest, the clause won’t prevent the challenging heir from inheriting. In addition, a no-contest clause may apply to some portions of your estate plan, but not others. For example, your heirs may be able to challenge your executors without violating a no-contest clause.

Two states –Florida and Indiana — will not enforce no-contest clauses no matter what. If you write your will in a state that enforces no-contest clauses and then move to Florida or Indiana, the no-contest clause will be void.

If you include a no-contest clause in your estate plan, you need to be sure there are no mistakes. If you leave out important property or aren’t clear about property in your possession, your heirs could be completely disinherited if they try to fix any mistakes.

While a no-contest clause can be a good tool, there are other ways to discourage a will contest. To contact me about Wills or this info email: info@raphanlaw.com

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Regards, Brian

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