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Wills and POAs

13

Replies to: Wills and POAs

  • bluebayoubluebayou 28057 replies208 threads Senior Member
    In my friends case, according to the will, she got nothing from the $5M estate so she will fight for it no matter what.

    of course, in this country one can sue for practically anything. And every state law is different. But generally, a PoD/ToD account is not considered part of the estate; they are not part of the will, which is why they bypass probate. After eliminating PoD/ToD accounts, there is little left in the estate to sue for. Of course, that does put the estate & Executor in a quandry since the remaining estate has little assets but might have to defend a law suit.

    As an example, a Florida appellate case which clearly determined that Florida law separates PoD accounts from the estate:
    Accordingly, the magistrate’s finding, by clear and convincing evidence, that Elizabeth intended for her accounts to be divided among her six children was critically important for purposes of determining whether the joint accounts were assets of the estate. However, that finding was simply irrelevant for purposes of determining whether the POD accounts were assets of the estate. The appellate court, therefore, remanded the case for entry of a revised order, this time determining that the joint accounts, but not the POD accounts, were assets of the estate.

    But, yes, the estate was first sued, lost, and then appealed to win. So, it did cost the estate legal fees.

    https://www.wealthmanagement.com/estate-planning/pay-death-accounts-not-part-estate
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  • wis75wis75 14393 replies65 threads Senior Member
    Also do a health care directive. In this you specify your care level wishes. Leave a copy with each son and your physician, perhaps the hospital if you have been there. In this you make known your wishes. Ask your estate lawyer about forms, ours had an extensive wish list for us with all sorts of scenarios.
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  • greenwitchgreenwitch 9286 replies42 threads Senior Member
    I found "Beyond the Grave" helpful too. It goes over so many different scenarios and so many potential pitfalls that are useful to know. I took notes when I read it and brought them to our lawyer for the first meeting.

    Too many people I know have seen estate lawyers that just don't have enough imagination, or don't warn clients of potential trouble down the line.
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  • ivycoverivycover 135 replies1 threads Junior Member
    ivycover wrote: »
    . . . . Even if you disown them account for them in a bequeath. . . . . .
    ucbalumnus wrote: »
    . . . . . How often are people who are specifically excluded from receiving anything successful at contesting or suing for more? . . . . .

    Give even the most loathsome a token. This addresses a couple of bases for challenge and is the most minimal inoculation for your estate. Payment or vesting over time or on performance is another strategy. Forfeiture or diminishment for challenge is another.

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  • artloversplusartloversplus 8618 replies251 threads Senior Member
    edited July 2019
    "Accordingly, the magistrate’s finding, by clear and convincing evidence, that Elizabeth intended for her accounts to be divided among her six children was critically important for purposes of determining whether the joint accounts were assets of the estate"

    Each case is different, in your case, there was no intent to disinherit some of her children, thus the ruling. It might be different in another case if she is trying to devide her assets unevenly to the extent of disinheritance.

    There are no stats about disinheritance success rate, but I am sure it happens every day in the US court system.
    edited July 2019
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  • poblob14poblob14 369 replies69 threads Member
    edited July 2019
    Speaking not as a lawyer (I am one, but not an estate lawyer, so I'm a total layman in this area) but as the administrator of my mom's estate and as the husband of a co-administrator of another:
    Do NOT make a trust the beneficiary of any retirement accounts (401K, IRA, etc.) unless you have a specific reason to do so. It creates several major pains in the buttocks of the survivors, unless it is very carefully written (my in-laws' trust was not).
    @rickle1 has it exactly right above: decide exactly what you want to happen, and meet with experts in the field for advice on how to make that happen.
    edited July 2019
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  • bookwormbookworm 9283 replies74 threads Senior Member
    poblob14

    Could you explain more?
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  • dragonmomdragonmom 6144 replies155 threads Senior Member
    Yes, please. Ours are in the trusts that will be created when we pass on.
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  • IgloooIglooo 9233 replies226 threads Senior Member
    If poblob doesn't, come back soon to clarify, you could google. I vaguely remember that if you put IRAs in a trust, you lose some privileges of IRA. I don't remember exactly what it was. I think it has something to do with passing it on. Like passing it on to your spouse is treated not as passing it on to your spouse. That makes sense since it's your trust, not you, passing it on.
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  • TdoesCollegeTdoesCollege 174 replies0 threads Junior Member
    edited July 2019
    I can talk a little about how it works when the retirement plans are not in a trust (specifically IRAs): [Please note that there are some new laws in progress that aim to change this handling]. When my mom passed, with an IRA, it was not part of her trust or will. My siblings and I were named beneficiaries on the account. So, it was us and the financial institution. No lawyers or the trustee were involved. We each had the option to take a lump sum, or roll it into an inherited IRA and spread distributions out over multiple years or our life expectancy, known as a stretch IRA (this is the bit that Congress is potentially changing). This allows us some control over when taxes due. (I.e. we can spread the taxes out over years instead of being bumped up to a higher (highest?) tax bracket the year of total distribution. )
    edited July 2019
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  • scmom12scmom12 3236 replies21 threads Senior Member
    Talking about this to H, he was under impression that putting assets in trust means your heirs don’t get a stepped up basis which could make a big impact of how heirs use inheritance. Is he correct or does it vary?
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  • notrichenoughnotrichenough 9385 replies33 threads Senior Member
    Here's a good article on trusts and retirement accounts (although written before the elimination of stretch IRAs was contemplated):

    https://www.lordabbett.com/en/perspectives/retirementperspectives/designating-trust-as-ira-beneficiary.html
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  • Singersmom07Singersmom07 4397 replies82 threads Senior Member
    @notrichenough Thanks for the article. S1 has estranged himself and his family from us so we are now in the process of rewriting all of our documents. He had been executor and in the POAs. We do not want to disinherit our grandson however so are having to do some of these distributions into trust. Our attorney is being very thorough in this but the article is very helpful for me to understand more of what he is doing.
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  • bluebayoubluebayou 28057 replies208 threads Senior Member
    Talking about this to H, he was under impression that putting assets in trust means your heirs don’t get a stepped up basis which could make a big impact of how heirs use inheritance. Is he correct or does it vary?

    Not a big issue, if the trust is worded correctly. Also true of IRA's put into the trust after death. The IRS has some buzz words that are required if one is gonna use the Stretch IRA (lifetime of beneficiary today, or 10 years under new legislation).

    A competent estate attorney should do it correctly.

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  • artloversplusartloversplus 8618 replies251 threads Senior Member
    "Talking about this to H, he was under impression that putting assets in trust means your heirs don’t get a stepped up basis which could make a big impact of how heirs use inheritance. Is he correct or does it vary? "
    That is true if it is a "Residual Trust" or an "Irrevokable Trust", Living Trust has no problem on step up. I was the victim in this:
    At the time of my Dad's passing, the Estate Tax exclusion was only $1M. The lawyers, at that time, in their infimite wisdom, decided to splite his estate into two parts, to protect the decendents (That is us, the kids) from inheritance tax. So they created a "living Trust" for mom and a "Residual Trust" for the kids. His total estate was stepped up on his death. But the Residual Trust portion has been ear marked for the kids, although my mom will continuely receive income from it. The residual trust is excluded from the mom's estate, OTOH, when mom die, 10 years later, the residual trust value cannot be stepped up, because it was considered being "distributed to the kids".
    Well, you can guess what happend. In the 10 years span, the exclusion of estate tax has risen from $1M to $5M(now is $11M) when mom died. And we would've avoid estate tax had the "residual trust" was not created. In the mean time, we are holding the tax basis of the property in the "residual trust" and must pay capital gain tax if we sell the property in it.
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  • artloversplusartloversplus 8618 replies251 threads Senior Member
    edited July 2019
    BTW, based on our estate lawyer, the "Residual Trust" or "Irrevokable Trust" could be voided by court petition BEFORE mom's death, on the grounds of necessities, such as my mom needed to liquidated the assets from the trust for living expenditures. We did not discover this until after her death, so it is not possible to get out of it for the reason just to get a stepped up basis.
    edited July 2019
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  • rickle1rickle1 2668 replies22 threads Senior Member
    Yes the living trust has essentially no bearing on taxes (income or estate) because assets remain in the estate. It's primary function is to avoid probate. Irrevocable trusts, on the other hand, are a whole different ball game.
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  • bluebayoubluebayou 28057 replies208 threads Senior Member
    Yes the living trust has essentially no bearing on taxes (income or estate) because assets remain in the estate.

    Be careful with IRA's..... See the article posted earlier in #53:
    Assuming that naming a trust fits a client’s overall objective, advisors should verify (with an attorney) that the trust qualifies as a “look-through” or “see-through” trust. In other words, the IRS will “look through” the trust and treat the trust’s beneficiary as the IRA’s direct beneficiary, although the trust remains the direct owner of the IRA (actually an inherited IRA). This allows heirs to take advantage of favorable minimum-distribution rules that apply to individual designated beneficiaries (e.g., those beneficiaries that have a life expectancy).

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  • IgloooIglooo 9233 replies226 threads Senior Member
    @artloversplus It looks to me you wouldn't have gotten step up If your mother voided irrevocable trust before her death. Does voiding do anything tax-wise?
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