Posts

Will Writing for Blended Families

Many American families have stepchildren today, and it is not uncommon for them to receive the same treatment as full biological children when it comes to inheritance. This is particularly true where stepchildren are part of a blended family from an early age. Biological siblings may have different feelings about a stepchild inheriting what they perceive as theirs as a natural heir. A surviving spouse may have the same feelings about their children’s inheritance.

Transferring an Inheritance

Estate planning for blended families is key to a smooth inheritance process, especially since probate rules and intestate succession law do not treat step and biological children the same when it comes to inheriting. Open communication about your estate plan is also helpful in managing heirs’ expectations.

Trying to be equitable among your heirs can be tricky, and relying on your spouse and children to work things out after you are gone is not a good plan. To create a solid plan, carve out some quiet time and identify your most important estate planning goals, including distributions of all assets.

These assets include your house, car, jewelry, other personal items, investments, retirement plans, brokerage accounts, and insurance. If you opt to gift items before your death, be certain you no longer include the asset or property in your estate plan. Even items of little financial value may be an expected inheritance from a child. The goal is to reduce tensions among family members.

Creating a Trust

Share your ideas with your spouse and agree on a basic approach, including scenarios for who might pass away first. Leaving property outright to a surviving spouse may not be the best approach as it does not ensure the children, step or otherwise, ultimately benefit. Many blended family systems use a trust to provide for a spouse while leaving their property to their children.

Will Contests

Stepchildren can contest a will to be treated as a full biological child if they are named in a prior will. A will that was written before a remarriage creates an opportunity to contest. Note that your stepchildren have very little chance of inheritance without a will. Dying without a will or intestate prevents your stepchildren from inheriting in all but a very few states. In states where they are eligible, stepchildren will be considered last in line to inherit because of the laws of intestate succession.

A stepchild named in a previous will can challenge on the grounds of undue influence, lack of capacity, mistake, fraud, or coercion. If the will being contested is thrown out of probate, estate inheritance reverts to the next most recent will. A stepchild must be named in at least one prior will to have “standing” to challenge the will. If all wills are invalidated, the state will treat stepchildren as intestate heirs.

Separate Wills

Even if a biological parent, in concert with a stepparent, makes their wills simultaneously and identically to leave the estate to one another, a surviving spouse can change their will upon the death of the other. It’s possible they may then exclude the stepchildren. But, if the original will left equal shares to biological and stepchildren, a stepchild could contest to have the most recent will invalidated.

Reciprocal or Mutual Wills

Most states do not recognize reciprocal or mutual wills as a binding contract. A mutual will can only be enforced if it specifically constitutes a binding contract that can’t be changed. It’s far more reliable to create a trust to care for a surviving spouse and your children’s inheritance than depend on mutual wills and goodwill after you’re gone.

While contesting a will is permissible under certain circumstances, there is no guarantee it will be successful. To ensure your legacy wishes are met, consult with a qualified estate planning attorney who understands the intricacies and nuances of estate planning for blended families.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Getting to know probate

Getting to Know Probate

Getting to Know Probate

You can minimize or avoid probate entirely by getting to know probate and working with an estate planning attorney. Probate proceedings are part of the public record and can be very time-consuming and expensive. However, in nearly every case, some probate is necessary, so it is important to understand how to navigate the process.

Probate proceedings seek to validate the decedent’s last will and retitle the estate’s assets into the name of heirs according to the deceased’s wishes. These court-supervised proceedings ensure estate debts are paid and oversee the distribution of assets to heirs.

After losing a loved one, the family will generally come together and hopefully encounter a properly written will and other crucial estate planning documents. Without a well-organized plan, the probate process can take much longer. Family members will be tasked with gathering information necessary for court.

Probate Court Proceedings

The petitioner, usually the estate executor or succession representative, will begin the process by filing a death certificate and a last will to the probate court. It is also useful to produce a list of know creditors and names and contact data of the decedent’s heirs. Smaller estate probate processes and those estates not contested by heirs can usually work through probate fairly quickly and efficiently.

Laws regarding probate are state-specific, and most states set valuation thresholds. In Louisiana an estate value is less than $125,000 may allow your lawyer to reduce court filing fees or even avoid probate court altogether.

For larger value estates, there is a substantial amount of necessary paperwork to validate the will, determine asset distribution, settle disputes, pay off remaining debts, and ultimately close the estate by paying the decedent’s final taxes. A checklist of documents to gather getting to know probate include :

  • Death certificates
  • Final will
  • Revocable trust documents
  • Heir and beneficiary contact data
  • Beneficiary designations
  • Pre or post-nuptial agreements
  • Previous three years of federal and state income and gift tax returns
  • Life insurance policies
  • Real estate deeds
  • Vehicle titles
  • Statements of financial accounts
  • Contracts and business agreement documents
  • Appraisals for high-value art, collectibles, or jewelry
  • Other known assets
  • Known debts
  • Ongoing bills
  • Medical and funeral expenses

Probate Proceedings Without a Will

The decedent’s residence states intestacy laws will apply if your loved one dies without a last will (intestate). All personal property without a beneficiary designation will be subject to the probate process at the court’s direction.

But some assets will avoid the probate process under state property title, state contract, or state trust law. These assets may include:

  • Beneficiary designate life insurance policies
  • Beneficiary designate retirement funds
  • Beneficiary designate annuities
  • Pay-on-death or transfer-on-death accounts
  • All trust property (in most circumstances).

Cost of Probate

Complex probate processes can be costly and take years to finalize, which is why many individuals retain an estate planning attorney to minimize probate proceedings. Lengthy proceedings can be frustrating for heirs getting to know probate who are rightful beneficiaries but must comply with the probate process. The average cost of probate varies by state; however, five to ten percent of an estate’s value in administrative costs and legal fees is not atypical. Some estates may lose as much as twenty percent of their value.

Other fees may include executor compensation, court fees for filings and paperwork, and a probate bond. After the probate proceedings are complete, a probate bond may be refunded. The most common reason for high probate costs occurs when beneficiaries contest the will, as ongoing litigation can be expensive. Issues relating to preparing and filing the decedent’s last federal estate tax return and any ensuing audit may also increase the cost of the probate process.

Most individuals will create an estate plan with their lawyer that allows assets to pass outside the probate process, typically through creating a revocable living trust. Depending on your situation, your estate planning attorney may recommend other types of trusts as well as ensure that named beneficiaries on accounts that pass outside of probate are up to date. Regularly reviewing your estate plan with your attorney can help minimize probate court interactions and streamline your heir’s inheritance process. For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

When is Probate Not Necessary?

While probate may sound intimidating, it is a typical legal procedure formalizing how assets pass to heirs or beneficiaries. Whether or not you require probate depends on the type of property and how you own it, and the state laws in which you live. While probate can be a complex process for vast estates, it is a simple formality for most Americans. Essentially, probate allows a judge to give legal permission for assets to pass whether or not there is a last will.

Can You Skip Probate Altogether? 

Revocable Living Trusts (RLT) avoids probate proceedings and allows assets to transmit to beneficiaries faster. The assets in the trust bypass the probate court and usually take precedence over any property you designate in your will. A clear determining indicator of the need for probate is the value of the decedent’s property. If the valuation is less than $100,000, the assets qualify for a simplified procedure in most states. As one example, to act without court intervention for settlement in a simplified procedure:

  • The estate will have adequate assets to pay taxes and debts
  • If there is a will, the executor petitions the court
  • Without a will, the surviving spouse petitions the courts if the estate has community property and the decedent has no children or grandchildren from a prior relationship
  • The court determines bypassing probate would be in the best interests of creditors and beneficiaries, and the executor is not a creditor

This small estate affidavit procedure is helpful if the probate asset valuations, excluding any property interest to surviving spouses or domestic partner’s community, minus liens, and encumbrances, is no more than $100,000. In the absence of a will, the probate process must ensue, and the distribution of whatever assets may exist do so under the state intestacy law. There are ways to avoid probate even with a sizeable estate through careful planning. Probate avoidance not only will reduce legal fees in the long run, but it can mean avoiding estate tax, which can be significant in a very wealthy estate.

Can Assets Be Passed Outside of Probate?

Aside from an RLT, life insurance policies pass outside of probate. POD accounts (payable on death) can pass to your beneficiary without probate for your checking and savings accounts, money markets, CDs, and US Savings bonds; however, each account will require a complete beneficiary registration. Retirement accounts such as a 401(k) or IRA also pass to an adequately designated beneficiary outside the probate court. 

Most pensions that are inheritable are under a form of trust and, as such, will also maintain their valuation outside of the probate process. In military benefits, a death gratuity, a lump sum payment to survivors made by the US Department of Defense, is $100,000 and is tax-exempt. If there is real estate as joint tenant ownership, the property will pass outside of probate as well.

What Happens If a Revocable Living Trusts is Not Established?

In the absence of an RLT, using named beneficiaries in POD accounts and retirement accounts, or the probate process, there is almost no way to own inheritable property legally. A quasi exception exists in Florida, where a family may own property in a decedent’s name if they do not sell it and continue paying taxes. Each state has differentiation in inheritance laws, so it is essential to retain an elder law attorney for the state where you live.

Most families will contact the probate court whether or not the bulk of the estate will pass through the probate process. The will executor must file a request for probate in the county where the decedent was living and provide a death certificate. At this time, the probate court likely approves the executor named or designates one and provides letters of testamentary which legally permits the findings and processing of the decedent’s financial and other property accounts. To get specific answers to your estate questions regarding passing your probate and non-probate assets to your heirs, please contact us at (318) 255-1760 or schedule an appointment. We welcome the opportunity to speak to you about your estate planning needs.

The Mechanics of a Will

A complete estate plan should include a will, which is a legal document that disperses your property upon death. If you die without one (intestate), the state will distribute your assets and property via state law and quite possibly at odds with your wishes.  Having a will allows you to appoint a legal representative or executor to carry out your bequests and name a guardian for your children. There is no doubting the importance of having a will; however, there are some limitations you should be aware of.

Although a will can be the primary mechanism to transfer property on death, it does not cover all property situations. Some classes of property you are unable to distribute through a will are:

  • Property held in trust – A trust will have named beneficiaries who will receive the trust’s property according to the trust terms and not based on what is in your will (unless specifically stated in the trust).
  • Pay on death accounts – Informally known as PODs, the original account owner names a beneficiary(s) to whom the assets in the account pass automatically upon the owner’s death.
  • Life Insurance – Life insurance benefits pass to your named beneficiary(s) in the life insurance policy and are not affected by your will.
  • Retirement plans – In a similar manner to life insurance, money in an IRA or 401(k) passes to the named beneficiary(s). According to federal law, a surviving spouse is generally the automatic beneficiary of a 401(k); however, there are some exceptions. An IRA permits you to name a beneficiary(s).
  • Investments in transfer on death accounts – Some accounts holding stocks and bonds will transfer on death to the named beneficiary(s). Like POD accounts, transfer on death accounts bypass probate and go directly to the beneficiary(s).

A will does not allow you to avoid probate. Under most circumstances, a will must go through the probate process in order to allow beneficiaries to inherit property. It can take months to get through probate, and it involves expenses like an attorney, executor, and court fees. Also, under most circumstances, your will and everything associated with it (property you own, who your beneficiaries are, etc.) become part of the public record that anyone can access.

Keep funeral instructions outside of your will. The reality is your funeral may have already taken place before someone finds and reads your will, which can take days, even weeks. If your funeral or memorial service is important to you, the best way to help your family is to pre-plan, making arrangements with a funeral home. You can leave written instructions with the family as to your plans.

Your pets cannot inherit through your will. An animal is legally unable to inherit money or property from you. If you want your pets to be cared for after you die, leave money to a person willing to take care of your animals. The person you select can inherit your pets since a pet is considered property. You can also set up a pet trust or a pet protection agreement, either of which provides for your pet’s care.

Provisions for a child on government benefits are best in a trust. It is best to create a special needs trust to provide for a child with special needs or a child who is receiving government benefits. The trust can hold money for your child’s care without affecting those benefits.

There are ways to circumvent the limitations of a will by creating trusts, setting up pay-on-death accounts, and ensuring a beneficiary is named on all accounts that permit them. Your will is an important component of a comprehensive estate plan, but it can’t do everything.

We would be happy to discuss the pros and cons of having a will and other options available to you as part of your overall estate plan. Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help with your long-term care needs.

Understanding the Succession (Probate) Process

In Louisiana a succession (sometimes called “probate”) is the legal process for authenticating a deceased person’s will, reviewing their assets, paying their outstanding debts and taxes, and distributing what remains to their inheritors. After an asset-holder dies, the court will appoint a valid will’s executor to administer the probate process. In the absence of a will, the court may appoint an estate administrator to handle probate. Probate or succession law varies by state, but there are steps in the process that are common.

First, an executor is appointed and is normally the person named in the will. It is the executor’s responsibility to initiate the probate process. An executor can be a family member, a financial advisor, or any person the testator deemed capable of administering their estate. The executor files the will with the probate court, which initiates the probate process. A court officially appoints the executor as named in the will, giving the executor legal authority to act on the testator’s behalf.

The executor’s function is to locate and oversee all of the estate’s assets and to determine each asset’s value. The majority of the deceased’s assets are subject to the probate court, where the deceased lived at the time of their death. Real estate is an exception, and probate may extend to any county where the real estate is located.

The executor will pay any taxes and debts owed by the deceased from the estate. Creditors are given a limited time to make claims against the estate for any money owed to them. If the executor rejects the claim, the creditor may take them to court, where a probate judge will determine the debt’s validity. The executor is responsible for filing the deceased’s final, personal income tax returns. The executor’s last task, via court authorization, is to distribute what remains of the estate to the beneficiaries.

Some form of a succession is generally required to transfer title any asset or account. However, if there is no will, depending on the size of the estate, a court proceeding may be unnecessary and allow the heirs to transfer the title using a specially worded affidavit.

If a person dies without a will, they are said to have died intestate. An estate can also be deemed intestate if the will presented to the court is found to be invalid. The decedent’s assets of an intestate estate follow a similar probate process, beginning with the appointment of an administrator  if necessary. An administrator functions like an executor, receiving all legal claims against the estate, paying outstanding debts, and the decedent’s taxes.

Administrators must also seek out legal heirs, including surviving spouses, parents, and children. The probate court will determine the distribution of the estate among its legal heirs. In the absence of any family or other heirs, remaining assets go to the state.

The more complex or contested an estate is, the longer the succession can take to finalize. The longer the process, the higher the cost.  Although there are exceptions that can be made, the list of the estate’s assets is generally a matter of public record, so if you want to keep your estate private, it is best to pursue other estate planning options such as a trust.

As estate planning attorneys, we can help you determine what planning tools are best for you. Contact us to schedule time for a private conversation to further determine how we can help. Please contact our Ruston, LA office by calling us at (318) 255-1760 or schedule an appointment to discuss how we can help.