Estate planning has always been important. Today, the blended family is as prevalent as a traditional family. The blended family and estate planning is very important in today’s world. A :blended family” is a family where at least one of the parents has remarried and there step parents and step children. Estate planning becomes very important in this family arrangement to ensure peace after the parent dies and that the wishes of the decedent are carried out and no one is left out.
As an example, Dad is single, owns a house and wants to leave it to his daughter. He also wants to leave her some family heirlooms. Dad remarries and does not prepare a will, trust or engage in any other estate planning. His new wife, step mom, is never added to the title of the house. He dies without a will. Depending on the value of the house, it could all go to the new wife, Step Mom, and leave the daughter out in the cold. This is because of the law of intestacy and succession. Also the family heirlooms and all other personal property will go to the new wife.
However, if Dad had done some estate planning, a trust or will, he could specify what he wants done with his estate and take care of his blended family. By creating a will or a trust he could provide for his new wife, step mother, as he deems fit, leave his family heirlooms to his daughter and take care of his family obligations. As an example, he could use a will to leave his family heirlooms to the daughter and use a trust to allow his new wife to live in the family home and after she dies the house goes to the daughter. He can also set aside monies in a trust for the daughter to go to school.
Today more families consist of a single parent and one or more children. An important issue to be addressed by the single parent is estate planning. If a person dies intestate, without a will, their estate passes to their children. If the children are minors, then the estate is controlled by the parent or guardian of the child. Estate planning allows the single parent to specify what is done with his or her estate. Estate planning can include a trust, a will, both or neither.
Lets say a single father dies leaving two children and a $50,000 life insurance policy, owns some stocks, a house and a car. The father named the children as the beneficiaries of the policy and has no will. Since the children are under the age of 18 they cannot control the monies from the life insurance policy. The house has to be probated and depending on the amount of equity in it, probate can be simple and short or extended. The children’s mother or guardian controls the monies from the insurance policy and the estate. In theory she can do whatever she wants with the money so long as she says it is for the best interest of the children. If the father wanted the money used for college and the mother uses it to buy the child a car at 16 there is nothing that can be done.
The father’s best option is to put the proceeds of the life insurance policy, the house and any other assets such as stocks into a trust with the trustee being a person he trusts. The father can specify that the monies can only be spent on a college education or whatever other purposes the father deems proper. The trustee will have the option of deciding what to do with the house, it can be sold or kept and rented out until such time as the children need the money. The same can be done with the stocks and other assets.
Estate planning, properly prepared and executed can give peace of mind to the person making the estate plan and make life easier on his heirs. If you have any questions, please do not hesitate to contact us.
Using Trusts for Estate Planning purposes is a popular thing to do. Trusts can be as simple or as complex as a person wants. The most common use for a trust is to avoid probate to transfer cars, houses, and other assets that are titled to their heirs after their death. A related reason for trusts is to give bequests after heirs reach a certain age. Another reason we suggest trusts to our clients if if our clients have children who will never be able to care for themselves, such as disabled children. Many governmental benefits are tied to the assets available to or under the control of the person receiving the benefits. Putting the assets in a spend thrift trust puts the assets out of the control and ownership of the person yet available for their benefit without threatening governmental benefits. If you have questions about trusts, please contact us.
Inheriting a Mortgage
There was a recent article in Fox News about inheriting a mortgage. This is a common issue which we have previously dealt with. Each situation is unique. There are several questions to be answered: what do the survivors want, is there a will, is there more than one person on the mortgage, do the survivors want to keep the house and payoff the mortgage, are the mortgage payments behind, is there more equity than debt in the house, is there a reverse mortgage in place?
The most important question to be asked is what does the survivor(s) want? If they want to sell the house and pull out the equity then depending on how the house is titled, trust vs. personally, the house is sold either regularly or through the probate court. If the survivor(s) want to keep the house then the trust deed needs to be examined, the status or the mortgage needs to be determined and based on the answers to the questions listed above, a course of action can be laid out to keep the house.
When homeowners takes out a mortgage they sign a trust deed. In Nevada if the payments are not made the lender can foreclose on the mortgage pursuant to NRS 107 et seq. In Nevada we have what are called “non-judicial” foreclosures. This means court intervention is not needed to foreclose on a property so long as the legal requirements are met.
If you have any questions, please do not hesitate to contact us.
There was an interesting article in Fox News recently about adult guardianship. According to the article Peter Falk had dementia, his second wife had control and the kids from the first wife were shut out.
It is very stressful when a parent can no longer take care of their affairs and a guardian is needed. Many times the children cannot agree on 1) if a guardianship is needed and 2) who will be guardian. That is when one person files a Petition for Guardianship pursuant to NRS 159. Once a petition is filed all family members have to be notified of the hearing to establish guardianship. At that hearing the court will determine if a guardianship is needed and who the guardian will be. With the proper planning the guardianship process can be made easier. There are two things people can do to make this stage of life easier on loved ones.
1. Everyone should have a Durable Power of Attorney for Health Care Decisions, sometime called a living will. This form allows a person to specify what medical decisions they do and do not want made in the event that they can not make those decisions themselves. A person can also specify who they want to be as their guardian.
2. Estate planning is important as once a guardianship is established all disbursements are supposed to be approved by the court. However, assets in a trust are owned by the trust not the beneficiary and thus may be outside the jurisdiction of the court.
3. Consider creating a trust. A trust serves two purposes 1) estate planning and 2) asset protection. Depending on a person’s situation some times a trust is recommended and sometimes it is not. There is a big difference between an asset protection trust and an estate planning trust.
If you have any questions, please contact us. We will be happy to discuss your situation and options.