Articles Posted in Estate Administration

The crisis brought by COVID has served as a stress test for many of the laws and regulations effecting our nation’s seniors.  The power of attorney, a document that gives one person, the agent, the legal power to act for another, the principal, fills a dire need to put control over their health and resources in trusted hands in the event of incapacity, especially in times of crisis.  Patients in nursing home facilities, for example, need quick and durable responses to the crisis.  And guarantees that the courts, and third parties such as banks, will respect their decisions.  

In 1948, the “Short Form” POA was created to simplify the process for New York citizens.  Since then, it’s become anything but.  A new law rectifies this.  

New Power of Attorney Bill Comes into Effect June 13, 2021 

A Court of Appeals in California recently affirmed a trial court’s award of attorney fees to a trust. This decision came after the trust tried to enforce a conservation easement. The defendants in the case owned land and were accused of intentionally violating an easement. This case raises an important lesson about the role that conservation easements can play concerning trusts.

How the Case Arose

A conservation agreement refers to a voluntary arrangement between a landowner and either a land trust or government agency that limits land use to protect a property’s condition. When an entity violates a conservation agreement, courts are permitted to award injunctive relief as well as financial compensation. 

In the recent Texas appellate case of Maxey v. Maxey, a dispute occurred involving the probate of an estate in which two sisters mediated and reached a settlement agreement addressing the division of real property. The two sisters disagreed on how to divide property among several trusts and as a result initiated legal action against one another. Following mediation, the sisters entered into a settlement agreement to divide real estate. The parties then disagreed on what the settlement agreement meant and again initiated legal action against each other. The trial court ultimately found that the settlement agreement’s terms were ambiguous and submitted the meaning of an agreement to a jury. Following a jury trial, the losing sister appealed.

The court of appeals later reversed this decision and held that the settlement agreement was not ambiguous. The court instead found that language used was not reasonably susceptible to multiple meanings. Because the language in the settlement agreement was found not to be ambiguous, the court found that the jury should have determined the parties intent as a matter of law and did not need to rely on extrinsic evidence. Consequently, the court remanded the case back to trial court to construe the settlement agreement and properly divide the real estate.

When trusts and estate cases arise involving real estate, parties often must mediate and settle disputes. One of the valuable takeaways from the Maxey case is that it emphasizes that parties can enter into enforceable and unambiguous settlement agreements that divide real property provided that they create adequately detailed descriptions. Fortunately, besides stating property descriptions, there are also some other helpful steps that parties can follow to avoid trusts and estate planning contests or disputes.

Assisted living facilities provide elderly individuals with a stepping stone between independent living and the more intensive care provided at nursing homes. Elderly individuals can receive assistance with things like cooking, cleaning, and hygiene at assisted living facilities while still maintaining personal independence. 

Deciding whether your loved one would benefit from an assisted living facility, however, is a complex process. As a result, this article reviews just some of the most critical factors that should be reviewed when deciding whether your loved one should be placed in an assisted living facility.

# 1 – Size

In the November 2020 case of Ochse v. Ochse, a Texas court heard a case that could potentially have a ripple effect on how trusts are interpreted. In this case, a mother established a trust that provided the trustee was authorized to make distributions to both the trustee’s son as well as the son’s spouse. At the time the trust was executed, the son was married to his first wife, but later divorced and married a second wife. The son’s children then initiated legal action against the son for breaching fiduciary duties as trustee and joined with the first wife who is also the mother as necessary parties. The first wife and son then filed competing summary judgment motions addressing whether the first or second wife was the son’s “spouse” as referenced in the trust. The trial court then held that the second wife was the correct beneficiary at the time of the suit. The first wife subsequently appealed.

What the Case Involved

The second wife and son argued that the use of the word, “spouse”, in trust documents did not mean the first spouse’s actual name. Instead, these parties argued that the term referred to the class of whoever was currently married to the son. The court of appeals, however, disagreed. The first wife argued that in the absence of contrary intent, a gift to a “spouse” of a married individual must be construed to mean the spouse at the time of the document’s execution instead of a future spouse. The first wife further argued that the terms “primary beneficiary’s spouse” as well as “son’s spouse” referred to the first wife because she was the son’s spouse at the time that the trust was executed. Both interpretations requested the court to view spouses as either statuses or class gifts. 

Executors as well as the personal representatives of estates can be held personally liable for either applying or distributing estate assets when there are unpaid estate taxes owed in case the Internal Revenue Service is not paid. When estate tax returns are not filed, the final amount of estate taxes due is not determined until either the statute of limitations expires or an audit occurs. Consequently, estate fiduciaries are left uncertain about whether or when an adjustment to estate taxes will occur if the Internal Revenue Service has accepted an estate tax return as filled. 

This type of response is unfair to both fiduciaries and beneficiaries because the most fiscally responsible fiduciaries can hold back on distributions until the amount taxed is more certain. To assist fiduciaries in assessing whether tax is due, an estate tax return is filed with the IRS. These returns are often issued following review by the Internal Revenue Service and a decision about not to audit or following the completion of post-audit procedures or litigation. 

The Role of Estate Tax Closing Letters

Many people think that retirement involves doing nothing. In reality, if you want to make sure that you avoid legal and financial complications, substantial consideration must be made during the retirement period. This involves handling Medicare issues, filing for Social Security, and navigating tax and distribution-related nuances. This article reviews some important issues to consider when reviewing retirement issues.

# 1 – Aim for a 5% Return

Even people with a large amount of savings discover that they end up having much less after paying withdrawal taxes. The best way to plan around taxation issues is to aim for a return of about 5% from your investments. While it can be tempting in retirement to focus on a conservative portfolio of assets, it is in most people’s best interest to diversify their portfolio. 

In the United States, married individuals almost always receive assets from their spouses without paying estate tax. One exception is the often-overlooked law involving marriage between a citizen of the United States and a foreign national. If you find yourself in this situation, it can create a unique challenge during estate planning.

The Foreign National Exception

Under federal law, if an American citizen is married to a foreign national and the first to die in the couple, the surviving foreign national is prohibited from using the standard marital deduction to inherit property. If the couple lives in the United States, the entire asset is subject to this regulation. If the couple lives overseas, however, only US-based assets are impacted by this law. 

Many conversations mention estate and inheritance taxes together, but there are some substantial differences between these two things. Both these taxes, however, have one thing in common: not everybody pays them. 

As a result, it is a wise idea to begin by deciding whether you will be required to pay either of the taxes.

Is Inheritance Taxable?

The Supreme Court of Montana recently affirmed a judgment by the district court distributing assets from a trust established by a husband and wife to the couple’s three children. 

The district court had interpreted the trust creator’s handwritten codicil as a wish and not a specific bequest of the woman’s stock in a company that the couple had created and grown. Before the husband’s death in 1993, the couple executed identical wills under which the assets of the first spouse to die  passed into a trust with the assets in the trust intended to be distributed equally between the three children of the surviving spouse. 

As a result of the Supreme Court’s decision that the codicil was lacking in testamentary intent to specifically devise shares, this specific bequest was not passed on. 

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