Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Friday, August 1, 2014

Estate Planning Lessons From Sterling Lawsuit

SterlingAs I have previously discussed, Donald Sterling lost his attempt in probate court to stop the Clippers sale. The story of Donald Sterling serves as a reminder that estate planning is not just about what happens to assets after death, but should include careful planning of what happens in case of incapacity. The Sterling case came down to whether Donald Sterling’s diagnosis of mental incapacity and Shelly Sterling’s actions of taking over the trust were proper under the family trust provisions. When a clause is written for incapacity, it is important that the grantor pick their successor carefully and remember that the person closest to them, such as a spouse, may not always be the best person to take over their business. It is also important that various possibilities are considered and specifically planned for, such as intermittent or resumed capacity.

See Darla Mercado, Donald Sterling’s Battle Holds a Harsh Lesson for Advisors, Investment News, July 30, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 1, 2014 in Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 22, 2014

The Shortcomings of Joint Accounts

Joint accountWhile many people may view joint accounts as an effective way to avoid probate since joint property passes automatically to the joint owner at death, there are several drawbacks to joint ownership of investment:

  1. Risk. Joint owners of accounts have total access and the ability to use the funds for their own purposes.  Additionally, the funds are available are available to the creditors of all joint owners and could be considered as belonging to all joint owners should they apply for public benefits or financial aid. 
  2. Inequity. If a senior has one or more children on certain accounts, at death some children may end up inheriting more than others.  There is no guarantee that all of the children will share equally.
  3. Unexpected. If a child passes away before the parent, a system based on joint accounts can fail.  It may be necessary to seek conservatorship to manage funds or they may pass to surviving children with nothing or a small portion going to the deceased child’s family. 

Joint accounts are not entirely cumbersome and can work well in several situations.  When a senior has just one child and wants everything to go to him, joint accounts can be a great way to provide for succession and asset management.  Also, joint accounts can be useful to put one or more children on one’s checking account to pay customary bills and have access to funds in the event of incapacity or death. 

See Three Reasons Why Joint Accounts May Be A Poor Estate Plan, Elder Law Answers, July 18, 2014. 

July 22, 2014 in Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 15, 2014

Estate Planning for Alzheimers

Old people holding hands

Alzheimer’s is a devastating disease that affects many Americans every year.  If diagnosed early enough, a person with Alzheimer’s disease will likely retain the mental capacity to sign an estate plan.  These documents should include a Power of Attorney for healthcare, Power of Attorney for property, and a will.  It is vital that these documents are signed in a timely manner, as any delay could prevent the patient’s meaningful input as the cognitive impairments worsen. Provided below are a few steps to guide an Alzheimer’s patient when creating a plan:

  1. Power of Attorney Documents.  These designate to a loved one to make healthcare and asset management decisions when the person affected with Alzheimer’s is no longer capable of making decisions for themselves.  When naming someone to hold Power of Attorney, select an individual you trust to carry out your wishes and act in your best interests.
  2. Last Will and Testament. A will allows the Alzheimer’s patient to finalize their legacy and distribute their estate.  The will should include burial and funeral wishes as well.
  3. Time is of the Essence. Since Alzheimer’s is a progressively declining illness, prompt action is required.  The longer the passage of time from diagnosis to document signing, the more likely the Alzheimer’s affected person will be deemed incompetent.
  4. Finalizing the Plan. Sit down and have a conversation with family and loved ones to discuss healthcare plans and wishes, including discussion of nursing home placement or in-home care.

See Maria Shriver, Life Ed: Protecting Wishes And Assets of Alzheimer’s Patients, NBC News, July 14, 2014.

July 15, 2014 in Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Trusts | Permalink | Comments (0) | TrackBack (0)

Minnesota Addresses Thefts by Court-Appointed Guardians

MinnesotaAfter the discovery of abuse by court-appointed guardians in Minnesota, the state audited 24 random accounts handled by Alternate Decision Makers, Inc. The findings uncovered problems with ten accounts ranging from missing documents to possible indications of theft. Allegations of theft by the guardians include unreasonably high fees accessed, missing property, and personal items sold off after the protected person died. The suspicious accounts discovered by auditors are being sent to judges for review and to be remedied.

See James Eli Shiffer, Conservator’s Thefts Prompted 24 State Audits, Star Tribune, July 14, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

July 15, 2014 in Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Guardianship, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Thursday, July 10, 2014

Some Gifts to Those Holding Power of Attorney Are OK, Says Vermont Court

Gift BoxFiduciaries that receive gifts from those that they hold that special relationship with are under heightened suspicion. This includes those that have power of attorney. This is complicated by the fact that many that hold power of attorney are family members, and the gift may just be a gift.

In Shaffer v. Kaplan, the United States District Court for theDistrict of Vermont held that some gifts from the principal to the person holding power of attorney are allowed. The court found that only gifts that involve undue influence will be considered self dealing and thus be presumed invalid.

See Luke Lantta, Holding Power of Attorney Doesn’t Prohibit All Gifts From Principal to Agent, Bryan Cave Fiduciary Litigation, July 8, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

July 10, 2014 in Disability Planning - Property Management, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Donald Sterling’s Emotional Trial Testimony

SterlingAs I have previously discussed, Donald and Shelly Sterling are currently in court battling over the sale of the Clippers and the decision by doctors on Donald’s mental fitness. When Donald took the stand on Tuesday, he was anything but a cooperate witness for opposing counsel. He berated the 85-year-old attorney, asking him about is legal experience and criticizing his questions. He also went after the doctors involved in him being declared mentally unfit and the NBA. His angry outbursts were interrupted at least once with crying, but after regaining his composer he continued his angry rant, which lasted nearly an hour.

See Nathan Fenno, Donald Sterling Verbally Attacks NBA, Lawyer in Trial Testimony, Los Angeles Times, July 8, 2014.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

July 10, 2014 in Current Affairs, Current Events, Disability Planning - Property Management, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2014

Planning for a Special Needs Child

Special needsThe number of students with disabilities has increased at a faster rate than both the general population and school enrollment.  In 2010, approximately 2.8 million school-age children were reported to have a disability. 

Many parents assume that they will be forced to disinherit their child with a disability because if they leave them money, they will lose the government benefits.  While it is true that your child could be disqualified from benefits if you are not cautious, creating an effective estate plan that includes a Special Needs Trust can help preserve a child’s eligibility for government benefits and other programs.

A Special Needs Trust is an effective way to leave assets intended for that child in the trust to supplement benefits received from government programs.  Instead of paying for medical care, the trustee can use the funds in the Trust for the “best use and comfort” of the beneficiary and pay for items and services Medicaid will not.  A properly designed Special Needs Trust can ensure your child will receive your assets, your retirement funds, and any other items of value without generating negative consequences. 

See Mark Eghrari, No, You Don’t Have to Disinherit a Child With Special Needs, Forbes, July 2, 2014. 

July 7, 2014 in Disability Planning - Property Management, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, July 4, 2014

Sterling Case May Be Headed to Federal Court

SterlingAs I have previously discussed, Donald Sterling and Shelly Sterling are currently in a legal dispute over Donald being deemed mentally unfit as trustee of the family trust, which may affect Shelly’s deal to sell the Clippers. Now, Donald has filed to have the case removed from probate court to a Federal district court. Shelly’s side views this as a move to delay the proceedings, but Donald is claiming jurisdiction issues in his argument to have the case removed.  The case was scheduled to proceed in probate court on Monday.

See Steve Almasy, Donald Sterling Wants L.A. Clippers Trial Moved to Federal Court, CNN, July 4, 2014.

Special thanks to Professor Adam Hirsch (University of San Diego) for bringing this article to my attention. 

July 4, 2014 in Current Affairs, Disability Planning - Property Management, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 1, 2014

3 Steps to Creating a Successful Estate Plan

Passing down

Real estate can be passed down from generation to generation and often carries with it a sentiment value beyond money.  Yet handing down a major asset is far from simple.  This is why it is so important for property owners to plan in advance and communicate closely with their family members to develop a comprehensive estate plan.  Here are three steps to help guide your planning:

  1. Keep Open Communication.  By communicating with family members and maintaining close contact with financial advisors, families can remain in control and diffuse potential tension.  An attorney can also help families manage real estate inheritance. 
  2. Assess Your Tax Situation.  Taxation can be tricky when passing down your home, especially for high net worth individuals.  “There are different planning and tax considerations for these groups . . . High and ultra high net worth individuals may need to set up trusts called Qualified Personal Residence Trusts (QPRTs) to discount the value of their estates.”  You want to compare the effect of passing the house to children through your estate, versus the costs and benefits of gifting the house to a QPRT.
  3. Plan a Maintenance Fund.  To ensure that family homes are well-maintained, parents must also develop a plan to help their children and future generations finance repairs and other unforeseen maintenance expenses.  “When it comes to real estate, you need liquid dollars to finance the upkeep.”

See Ritika Puri, Passing Down Your Home? 3 Steps to Creating a Successful Estate Plan, Forbes, June 30, 2014. 

July 1, 2014 in Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Thursday, June 12, 2014

Shelly Sterling Seeks Emergency Court Order in Probate Court

SterlingAs I have previously discussed, the diagnosis by doctors that Donald Sterling was mentally unfit aided the sale of the Clippers by Shelly Sterling to Steve Ballmer, because the terms of the family trust did not require his signature if he was mentally unfit. Further, the trust did not require that the determination of mental fitness be through a court order. Now, Shelly is petitioning a probate court for an emergency order on this issue.

Donald Sterling has declared that he will put up a fight. It is believed that Sterling would have consented to the deal if asked, but that his change of heart is a combination of Shelly having him diagnosed as mentally unfit and the NBA’s decision to not remove Sterling’s lifetime ban and the fine. Sterling has stated that he is defending his freedom of speech and will continue to fight for his rights.

See Ramona Shelburne, S. Sterling’s Attorney Heads to Court, ESPN, June 11, 2014.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

June 12, 2014 in Current Affairs, Disability Planning - Property Management, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)