Month: January 2014

Estate Litigation : Can Your Personal Representative Handle It?

Everyone who creates an estate plan hopes that the settling of their estate will proceed smoothly and quickly. Unfortunately, though, litigation sometimes arises after you die. Whether it involves a challenge to your estate plan, or defending or prosecuting your rights in an unrelated matter, your estate may become a party to a civil suit. While you cannot prevent these complications from happening, you can take steps to strengthen your estate plan, beginning with the selection of your personal representative.

Personal representatives have a wide variety of duties. One such duty is the responsibility to protect the assets within the estate and to retrieve potential outstanding assets. This process may require the personal representative to defend the estate against challenges to the deceased’s will or trust or defend the estate in a civil lawsuit. The personal representative may also have to carry forward a civil lawsuit brought by the deceased, or initiate a new suit, if the deceased has a claim against another person or entity.

Typically, when one thinks about a litigation matter involving an estate, one thinks of cases like Beard v. Estate of Wenkman, where rival siblings battled over the validity of their late father’s will. Other times, though, estate litigation may involve pursuing a civil claim on behalf of the deceased. Robert Viola, for example, sued various entities for exposing him to asbestos dust, which led to his contraction of malignant mesothelioma, but he died only a few months after filing his suit. Due to his death, his personal representative took over the task of carrying the civil action forward on behalf of Viola’s estate.

No Good Deed Untaxed: Coordinate Gifting Strategy With Estate Plan

During the festive holiday season just past, many people were keenly focused on the process of giving gifts to their loved ones. If you’ve given a large gift of wealth to a loved one, or are contemplating giving one, it is wise to consider the ramifications of this gift, and ensure that your estate plan still accomplishes its stated goals, even after you’ve provided this gift.

Someone might choose to give a large gift of wealth for a variety of reasons. Perhaps you give a child a large sum of cash on the occasion of his or her wedding, or give your house to a child who lives nearby when you decide to “downsize” your living arrangements. Clearly, large gifts can have tax ramifications. In 2013, the annual federal gift tax exclusion was $14,000. With that in mind, if you are considering a large gift, you may want to discuss your options with a professional, to explore ways to minimize or avoid gift tax issues. Depending on your situation and the circumstances of the gift, you may be able to structure the gift over a period of years, or take other steps to help avoid tax over-exposure. Using smaller gifts may also reduce potential estate tax exposure.

Whether you give a large gift in one piece, or separate it into smaller gifts for tax planning purposes, you should use the occasion of providing this gift to revisit your estate plan. If one of your estate planning goals is to provide an equal distribution to your children, or a set percentage, the giving of this gift probably means that you will need to amend your will or living trust to reflect the gift.

No Time Like the Present: Estate Planning Isn’t Just for the Rich, Sick or Elderly

Many people make the unfortunate mistake of believing that, if they are young, in good health or not wealthy, they do not need to worry about estate planning. This outlook is both erroneous and potentially harmful to you and your loved ones. In reality, it is never too early to start working toward having a thorough estate plan in place. As a recent US News article reminds us, the “sooner you start planning, the more prepared you will be for life’s unexpected twists and turns.”

An estate plan provides essential value, regardless of your net worth. Even if you have far more debts than assets, an estate plan can significantly simplify, and de-stress, the lives of whomever you leave behind who will manage the settling of your estate. In many cases, those with the most modest of estates are those that can least afford to lose any wealth as a result of a non-existent or poorly crafted estate plan, especially if the deceased has left loved ones behind who depended on him/her. “The less you have, the more important every bit you’ve got is to you and the people you care about,” the article states, quoting an attorney.

Getting your estate planning “house” in order means communicating, openly and honestly, with your loved ones. You should take time to inform your loved ones about all of your estate planning goals and desires, so that your will or living trust will contain no surprises, which will lower the risk of a court challenge after your death. Frank communication is also imperative for determining what person (or people) will serve as your agents. Although it may feel awkward, as a younger person, to discuss your own death or incapacity, this conversation is vitally important. The names you designate as your successor trustees, financial attorneys-in-fact or healthcare proxies should reflect people of whom you approve and who are comfortable assuming those responsibilities.

‘No Contest’ Clause: Could Be a Good Idea

One concern many people have when they set about to plan their estates revolves around a challenge to their wills or trusts after death. One important reason for creating an estate plan is to assert control over the distribution of one’s assets, and a legal challenge undermines that, potentially shifting that control to the courts. A “no contest” clause in your will or trust may offer a degree of protection, but these provisions come with certain legal limitations of which you should be aware.

The law recognizes several grounds for legal challenges of a will or trust. Many common grounds may include claiming that: the document was not properly drafted, signed or witnessed, you lacked the proper testamentary capacity (in other words, were mentally incompetent) when you signed, or another person executed undue influence over you when you executed the document.

A “no contest” clause, which is sometimes referred to as a “penalty clause” or by the Latin name “in terrorem”, is a provision inserted within a will or trust that threatens to eliminate the distribution of any beneficiary who mounts a legal challenge to that legal document. These clauses offer a measure of protection against a will or trust challenge launched strictly out of spite and lacking any reasonable legal or factual basis. Perhaps you have a relative whom you believe may be dissatisfied with the size of his/her distribution. In this case, a penalty clause may protect your estate by discouraging your potentially unhappy beneficiary from launching a flimsy challenge.

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