Jarvis Law Office

Children Can Be Blocked from Your Estate

As a teenager a man had a relationship that resulted in a daughter but he did not find out until the daughter wrote to him with the news that her mother had identified him as the father while the mother was on her death bed.

This story appeared in an article entitled "Can my 40-year-old long-lost daughter get my estate?", recently featured in Market Watch with a question from a reader.

The man paid for DNA testing which confirmed that she was his only child.

Unfortunately, the father and daughter ultimately did not get along and ceased communication. The man lives with a partner who wishes to give him her house when she passes. However, this partner is reluctant to do so. It seems she does not want the daughter to inherit the house when the father passes away.

The man wonders how he can ensure that the daughter will not inherit the house.

The answer to the reader's question is very short and simple. He can have a will prepared to specifically exclude the daughter and any of her children.

Nevertheless, the article does not elaborate regarding why this needs to be done.

Accordingly, a more complete explanation would have noted what happens when a single person passes away without a will. In such circumstances, the laws of intestate succession apply. Consequently, the estate passes to any living children.

So, if you do not want a child to inherit your estate, you need a will. However, that is not all that must be done.

The law assumes that if a child is not mentioned in a will, it was an oversight. The judge can reconstruct the will to include the child. For that reason the child must be mentioned in the will and specifically disinherited.

A meeting with an estate planning attorney can help you accomplish your goals.

Reference: Market Watch (Feb. 5, 2016) "Can my 40-year-old long-lost daughter get my estate?"

It is Possible to Go out of State for an Executor

Your first choice as the executor of your estate may not live close by or even within your state of residence – but, if you are comfortable with them, they are someone you trust and someone with strong financial knowledge and experience it is still possible to designate that person as your executor. It is important, however, to realize there can be problems.

This subject was considered in a recent NWI Times article entitled "Pros and cons of an out-of-state executor."

The two biggest drawbacks are availability and time.

Executors are often required to make personal appearances at court hearings. It can be burdensome and expensive for an out-of-state executor to make the travel arrangements. Logistically, paper correspondence may also take longer.

According to the article, some states have additional requirements when the executor is a non-resident. For example, the state of Indiana requires out-of-state executors to post a bond and appoint someone who is a state resident as a registered agent for service of process. Other states have similar requirements.

On the plus side, appointing an out-of-state executor allows you to designate the best person for the job. Many of the negatives of doing so can be mitigated if the executor hires a local estate attorney to assist with the administration.

Consider contacting an estate planning attorney to guide you in the selection of filling the important position of executor.

Reference: NWI Times (Feb. 7, 2016) "Pros and cons of an out-of-state executor."

Use the Tax Season to Look at Your Estate Plans

The tax season is a time for gathering all of your key financial information and is an excellent time to take a look at your estate plan. While doing your taxes you will be gathering much of the same documentation needed to review an estate plan. In addition, the documentation will be fresh in your mind.

Accounting Web recently offered some tips about estate planning during the tax season in "Estate Planning Reminders for This Tax Season."

The advice includes:

• Review or Get a Will – Spend a little time to review your will and make sure everything is up to date. If you do not already have a will, visit with an estate planning attorney about getting one.
• Prepare a Letter of Instruction – Make a list of your assets, where they are located, and how they should be handled in your estate.
• Review Beneficiaries – Since you should have the asset documentation available as part of your tax preparation, make sure all beneficiary designations are up to date.
• Consider a Trust – Again since you already have the documentation handy, tax time is a good time to have a trust drawn up and to transfer assets into the trust.

The person who prepares your taxes and your estate planning attorney could work together. Consider it as tax time comes around.

Reference: Accounting Web (Feb. 8, 2016) "Estate Planning Reminders for This Tax Season."

Former Prosecutor Pleads Guilty in Estate Case

With a record of 20 years as District Attorney for Robertson County, Texas, John Paschall should have been someone who could be trusted but a client learned otherwise when Marium Oscar chose Paschall to oversee her estate.

Her estate was supposed to be divided between the local Volunteer Fire Department and a local charity. Instead, Paschall took approximately $200,000 from the estate for his own benefit.

His misdeeds came to light during a civil suit and he was subsequently charged in a criminal action.

Paschall plead guilty and will serve 30 days in jail and 10 years of probation. He was also ordered to pay more than $186,000 in restitution and surrender his license to practice law.

KBTX reported this story in an article entitled "Former Robertson County DA must pay $186,518.07, spend month in jail for stealing money."

Fortunately, Paschall was caught and convicted.

Even if you consider the sentence is on the light side, this case illustrates the need to be very, very careful when it comes to selecting the executor of your estate. Choosing an attorney may be a good idea. However, make sure it is an attorney you can trust, such as an experienced estate attorney who has a reputation for properly handling estates in your area.

Vetting the person you select to administer your estate can help ensure that he or she will not steal estate funds.

Reference: KBTX (Feb. 4, 2016) "Former Robertson County DA must pay $186,518.07, spend month in jail for stealing money."

The IRS Isn't Easily Misled on Art Value

Estate taxes are not an exception when it comes to the general goal of paying as little tax as possible but little flexibility is available when it comes to setting the value of an estate.

Liquid assets have a value that is easy to determine and an estate with $10 million in securities is not easily limited by way of estate taxes, but some assets have values that are more difficult to determine.

For instance, many wealthy families have art and other prized collectibles. The true value of these tangible assets cannot be easily ascertained until the items are put up for auction and sold. For estate tax purposes these items must be appraised.

Not surprisingly, some people attempt to choose appraisers who will give a low value to reduce the estate tax on the items. In the end, as the New York Times explains in an article entitled "Revaluing Family Treasures for the Taxman," that is not always the best idea.

The IRS has its own process for appraising art and other high-ticket items.

The Art Advisory Panel is a group of experts employed by the IRS. Every year the panel reviews hundreds of items to determine their value and make sure taxpayers are not undervaluing them for estate tax purposes. In other words, if something is undervalued by an appraiser, it is not a good idea to assume the IRS will not find out about it. Of course, the IRS's valuation can be challenged, but that does require a long and lengthy process.

An estate planning attorney could be helpful in avoiding a long, drawn-out struggle.

Reference: New York Times (Feb. 6, 2016) "Revaluing Family Treasures for the Taxman"

Executor Mistakes Can Result in Liability

An executor has many responsibilities including figuring out estate assets, paying any outstanding debts and distributing the remaining assets as dictated in the estate plan. While that sounds simple enough, the path to success is full of potential pitfalls.

This was the message of a recent Wall Street Journal article entitled "The Biggest Mistakes Executors Make."

The article lists the following common mistakes made by executors:

• Paying Bills Too Soon – Many executors pay bills as soon as they come in. This can be a mistake as some debts, such as to the government, should be paid before other debts to ensure that there is enough money to cover higher priority debts.
• Investing Estate Assets – Some executors think they can invest assets to increase the value of the estate. While that is good in theory if the investments increase in value, the executor can be held personally liable if they do not.
• Mishandling Real Estate – Real Estate must be handled carefully. Houses should not be sold too soon or too late and it makes a big difference whether or not there is someone still living on the property.
• Losing Personal Property – Executors should conduct an inventory of valuable tangible assets to make sure they are properly stored and not taken away by someone else.

An estate planning attorney can be helpful with guiding an executor through the process.

Reference: Wall Street Journal (Jan. 31, 2016) "The Biggest Mistakes Executors Make"

The Extraordinary Life and Ordinary Will of David Bowie

While there was speculation that musician David Bowie's estate plan would have been unusual with strange requests, it turns out the $100 million will is rather ordinary and does not include a breakdown of assets.

He directed that his wife should receive half of the estate, including his New York apartment. A total of 25 percent of the estate was left to his minor daughter through a trust. The remaining 25 percent is to go to his son from a previous marriage. Bowie also included small bequests to a couple of friends.

The New York Times reported on the will in "David Bowie's Will Splits Estate Said to Be Worth $100 Million."

The only unusual aspect of Bowie's will is how he would like his remains treated. In the 1980s, he vacationed with Iggy Pop in Bali. He fell in love with it and asked that, if possible, his remains be transported there to be cremated and disposed of according to Bali's Buddhist rites. If it is not possible to have his body cremated there, he at least wanted his ashes spread there.

It appears that the will of this unique individual is not only ordinary but unlikely to be challenged.

Reference: New York Times (Jan. 29, 2016) "David Bowie's Will Splits Estate Said to Be Worth $100 Million."

Taking Mom and Dad to Work

While companies have often focused on helping younger people with onsite daycare facilities for their children, a similar situation has developed for older employees who have found themselves responsible for providing care for their elderly parents.

More and more Americans are taking care of their elderly parents. Many are taking care of children and elderly parents.

Recently, Next Avenue reported on speculation that this might lead to companies offering onsite elder care facilities in "Will We Soon See Workplaces With On-Site Elder Care?"

The speculation comes from a speech at the annual Davos summit given by Welltower CEO Thomas DeRosa. He stated that taking care of a parent with Alzheimer's is a fulltime job for someone who cannot afford to hire a professional caregiver. Such a person would have to quit work, so it would be a good idea for companies who want to retain employees to have the facilities.

It is estimated that productivity losses due to taking care of family members cost $33.6 billion a year.

Of course, this is just speculation. No company has offered onsite elder care facilities yet.

Reference: Next Avenue (Jan. 29, 2016) "Will We Soon See Workplaces With On-Site Elder Care?"

There are Options to Traditional Funeral

Before the Civil War most people were buried at home after services held by their families but public mourning with morticians preparing the remains has become the tradition. 

The New York Times reports that many Americans are now looking to go the older route and have funeral services conducted in their own homes by family members in "Start-Ups Take Rites From the Funeral Home to the Family Home." One of the big benefits for many people is that home funerals are much less expensive than using a funeral home. Other people prefer the intimacy of services conducted in the home.

It is a good idea to think about how you would like your funeral to be conducted at the same time you are creating an estate plan.

Whether you would prefer a home funeral or a funeral home, you can make your preferences known in your will or in another document. As long as your preferences are reasonable and legal, then they can be followed.

Reference: New York Times (Jan. 30, 2016) "Start-Ups Take Rites From the Funeral Home to the Family Home."

Nursing Home Arbitration Clauses Can Be Difficult

According to the fine print, any dispute between the consumer and the company are handled under contract by arbitration if the company has its say. Nursing homes and other elder care facilities are increasingly inserting similar arbitration clauses into their contracts.

Companies are quick to note that arbitration is normally faster and cheaper than going to court. However, consumer advocates and elder law attorneys point out that these clauses do not necessarily benefit consumers. In reality, arbitration can make it more difficult for consumers to prevail and remedies that might be available in court are sometimes not available in arbitration.

The Wills, Trusts & Estates Prof Blog reports that a court in Arizona recently refused to enforce the arbitration clause in one nursing home's contract in "Arizona Court Overturns Home Arbitration Agreement."

In this case, the man who signed the contract on behalf of his mother did not have any legal authority to bind her to arbitration. He was not her power of attorney.

Going further, the court also signaled that such a ruling could apply more broadly. According to the court, the arbitration clause could be seen as an unenforceable contract of adhesion.

As the article notes, in many states consumers have a legal right to strike out the arbitration clauses before signing the contracts.

Before you sign any contract about nursing home care it would be beneficial to consult with an elder law attorney.

Reference: Wills, Trusts & Estates Prof Blog (Feb. 2, 2016) "Arizona Court Overturns Home Arbitration Agreement."