What’s in a Trust?

By: Marianna I. Chaet, Esq.

            A common misconception people have about their estate planning is that having a trust means that there will never be a need for a probate at their death. The grain of truth in the myth comes from the fact that any assets placed into a trust are considered “non-probate assets.” The beneficiaries named in the trust will not have to go through probate to get to the trust assets. The named Trustee will simply step in and manage the assets in accordance with the terms of the trust

            When people come in with existing trust documents, the first question to sort out is what assets are in their trust. The trust agreement does not have the answer because it just states who created the trust, who gets to carry out the client’s instructions, and what happens with the assets that are placed into the trust. Some trusts include exhibits that state what assets are in the trust. However, those exhibits do not actually place the assets into the trust.  

If the intention is to avoid probate using a trust, then the trust owner must take the extra steps of going to each bank or brokerage at which he or she has an account and either retitle that account in the name of the trust or name the trust as a beneficiary of the account. With real estate, the trust owner must record a deed with the Superior Court from the owner into the trust.

If the trust is not named as a beneficiary of an account, if accounts are not retitled in the name of the trust, or if a deed is not recorded from an individual to the trust, then the trust does not hold any of those assets.

However, even if a person takes all of the steps during their lifetime to put all of their assets into a trust, there may still be probate assets at their death. For example, if someone passes away and there is a wrongful death suit filed at their death, then the proceeds from that suit will be probate assets that pass through a person’s estate. The same is true for any tax refunds or other checks that are made out to the decedent in his or her individual name.

            It is true that any assets that placed into a trust are non-probate; however, that is not a guarantee that a probate will not be needed for other assets.

Marianna is a partner at the Law Offices of Miller & Chaet, PC. 678-746-2900 NorthFultonWills.com

Estate Priority of Claims

By: Marianna I. Chaet, Esq.

            To probate a decedent’s Will in solemn form, all of the decedent’s closest living relatives, or “heirs-at-law,” must be notified of the probate and provided with a copy of the Will even though they may not be beneficiaries under the Will.

            Typically, we notify spouses and children. But if someone passes away unmarried and with no children, we look for parents and siblings and nieces and nephews. In the case of an only child, we look instead for the grandparents, aunts and uncles, and cousins. Sometimes we may locate an “heir-at-law” who has never even met the decedent. When we contact the heirs, they usually ask first if they stand to receive anything; and second if they owe anything.

            The second question is easier to answer than the first. A beneficiary under the Will or an heir-at-law will never be personally responsible for the decedent’s debts, so long as they were not a personal guarantor for the debts. Any debts of a decedent are claims against his or her estate and would be satisfied out of the estate.

            An heir may or may not receive anything from an estate. If they were not named as a beneficiary under the Will, then they would not receive anything from the probate estate. If they were named as beneficiary, then it would depend on whether or not there are enough assets in the estate to satisfy all of the claims of the estate. O.C.G.A. 53-7-40 dictates the priority in which estate claims are satisfied in the state of Georgia: 1) Year’s support for spouse and minor children; 2) funeral expenses; 3) administration expenses; 4) expenses of last illness; 5) unpaid taxes; 6) judgments, secured interests, and liens; and 7) all other claims. Only after all of the various claims have been satisfied in priority order would a beneficiary get property from an estate. If all of the estate assets were used to satisfy higher priority claims, then a beneficiary would not receive anything from the estate.

Marianna is an associate at the Law Offices of J. Christopher Miller, PC. 678-746-2900 NorthFultonWills.com

When do I Update my Will?

By Chris Miller, Esq.

    Two popular questions among clients who sign new Wills are:  How long is this Will valid? When should it be updated?   There is no strict timeline.  A Will signed forty or fifty years ago can still be submitted to the probate court if the Executor can prove its validity.  On the other hand, families change.  Children grow into adults and named Executors get sick, pass away, or just become more distant.  A good rule of thumb is to look at the documents every four years, and contact an attorney to ask if changes in the law justify an update of the documents.

  A change in marital status should almost always be accompanied by a new Will. A new wedding or a divorce not mentioned in a person’s Will means that the Georgia Probate Code automatically changes the Will’s distributions in ways that might not be intended.  For example, a single mom who remarries should consider whether her new spouse should share equally in her probate estate with her child or children, or if a more thoughtful approach is necessary.  New beneficiary designations on life insurance policies or retirement accounts can meet those goals. Likewise, a divorce does not automatically revoke a Will in Georgia.  The divorced spouse is barred from receiving assets or a role in an unchanged Will, but the divorced spouse’s relatives are not.   If an ex-husband’s brother is listed as a Successor Executor or a beneficiary, then that language would still be respected and compensation could be awarded to him.  For that reason, among the many tasks for a divorcing spouse should be changing beneficiaries of retirement plans or life insurance policies, and updating his or her Will.

   Second, the addition of a new baby to a family should prompt the review of beneficiary designations and estate planning documents.   If the contingent beneficiary on a policy lists only a Trust for an older sibling and is not updated after a younger sibling comes along, then the older sibling’s Trust gets the insurance proceeds and the younger sibling might be left out in the cold.  When in doubt, it’s always worth while to review a plan with fresh eyes.   Your memory of what the plan says might not match up to what the plan actually provides.

What Does a Will Do?

By Abby Fitts

            Most people know that they need a Will, but what exactly does it do? A Will can give directions on how you would like your assets to be transferred after you pass away, but it also appoints some very important actors that will hold specific jobs in settling your final affairs.

            First, you should name an Executor in your Will. The Executor’s job is a short term one. This is the person who files your Will with the probate court, cleans up and sells your home, pays any of your final bills, and takes care of either giving away or selling your personal items like furniture and clothing. You will want to choose an Executor that is organized and comfortable with dealing with paperwork. Your Executor may need to enlist the help of an attorney in dealing with your estate, so this person should be professional and able to meet deadlines.

            Anyone with children under 18 should also name a Guardian in their Will. The Guardian is who your child will live with if you pass away before they can live on their own. This person will choose which schools your child will attend, take them to doctor’s appointments, and take care of your child on a daily basis. The Guardian stands in your shoes as a parent, so you should choose someone who you feel would raise your child in a way you would approve.

            If you leave behind any assets to a minor child, you will want to name a Trustee to hold onto those assets until the child is older and more responsible. Think of a trust as a picnic basket that holds the dollars you leave behind for your children. The Trustee holds the handle of the picnic basket and makes distributions to the child throughout his or her life to pay for their health, education, and support. You can choose when the Trustee should give money to your child to manage on his or her own. The Trustee’s job is a long term one, and their duties could last well into your child’s adulthood.

            It is important to revisit your Estate Plan every few years to confirm that it fits your needs. This gives you an opportunity to review which jobs you have assigned to your close friends and family and reevaluate if necessary.

Estate Planning in a Pandemic

By: Marianna Chaet, Esq.

            This pandemic has been difficult on everyone. Times like these make people question their mortality and wonder how prepared they are if they get sick. This year, we have had an increase of phone calls from previous clients and new referrals wondering what kinds of things they need to have in place just in case something happens to them.

            The number one thing we recommend is that everyone over age 18 has an updated Georgia Advance Directive for Health Care. The Health Care Directive allows you to pick an agent to speak to the doctors on your behalf when you are unable to speak for yourself. It also allows you to pick the treatments you want to receive or refuse at the end of life. We suggest that you bring a copy of your health care directive to the hospital with you if you are going in for any procedure in which you will be given anesthesia. Free directive forms are available from many sources on the internet. In Georgia, the form needs to be signed by the declarant in front of two witnesses.   

            The second important thing is making sure that the beneficiary designations on all of your accounts, such as IRAs, 401ks, and life insurance are up to date. A beneficiary designation will always trump a Last Will and Testament or a state law of inheritance, so making sure that the designations are up to date is key to making sure that your assets flow to the intended individuals.

            Lastly, we suggest making  it easy for family members to identify all of your assets and where they should be distributed. If you have a Will, make sure your relatives know where the original is stored and how to get to it. It is also important to list the institutions where your assets are being held and the important contacts that would be helpful in dealing with your assets, such as your accountant, estate planning attorney, and insurance agent.

Marianna is an associate at the Law Offices of J. Christopher Miller, PC. 678-746-2900 NorthFultonWills.com

Taking to Heart Some Lessons from Last Year

By Chris Miller, Esq.

The challenges of 2020 have reinforced three key lessons in estate planning basics. As survivors of the pandemic, we need to learn to avoid extra costs and delays for the family members we will leave behind some day:

#1) Tell Your Family Where To Find Key Documents

Few phone conversations with grieving family members are more trying than those asking if a deceased loved one had hired a law firm to create a Will.  A signed original Will in the hands of the named Executor is worth its weight in gold because Georgia’s probate law puts an extra burden on proving the validity of a Will when only a photocopy is available for the Court’s inspection. That extra burden means gathering Affidavits from people who searched for the original or who had possession of it after it was signed, as well as Affidavits from people who can testify that the decedent did not intend to revoke the Will after it was signed and that his or her wishes had not changed. If you have a Will, make sure your loved ones know where to find it.

            #2)  Update Powers Of Attorney and Health Care Directives

            In 2017, Georgia’s legislature adopted a new standard form for powers of attorney that are easier to enforce than powers of attorney written by lawyers before then.  Banks in Georgia are now required to honor the new statutory form instead of insisting that a new power of attorney on a bank form is signed by an ailing customer.  Older powers of attorney just can’t be used as easily as recently signed documents using the latest forms. Please make sure that your Powers of Attorney are in the statutory format.

            #3)  Prepare your Executor with a Letter of Instructions

            Many tasks that an Executor takes on after someone dies are easier if the Executor has a list of financial assets, credit card accounts. and a directory of people to call.  That list should also include directions about how to distribute personal effects like jewelry, furniture, and other heirlooms. Executors want to follow the wishes of the decedent whose estate they are managing.  Giving them a letter describing those wishes and making it easy for them to contact the people who are important to you is a meaningful way to let them know you care.     

Preparing for Trouble with a Power of Attorney

By Chris Miller, Esq.

                This year’s coronavirus pandemic has upended each industry in a different way, from bringing universal remote learning to classrooms, to one-way arrows at doctors’ offices and supermarkets.  In the steady world of estate planning and probate, the changes have impacted how we practice, but not the basics of what we do.

                Estate planning at its core addresses two questions: Who makes decisions? and How do assets change hands?   The first question is one of power or authority.  When each of us become adults, we gain the right to open bank accounts, acquire cars and houses, and invest our savings. Knowing how those assets are handled when we get sick and pass away is the key to creating a smooth path to our care and inheritance. One common way to share power on a bank account is to make it joint, so that two or more people have the right to withdraw money.  This has the advantage of letting someone else use your funds to care for you, but it has two disadvantages. First, joint bank accounts are subject to the creditors of both accountholders, and a sudden accident or illness or loss of a job can send almost anybody into a scramble for cash. Second, joint bank accounts also become the property of the surviving accountholder at the death of one party, and those assets do not flow through the decedent’s Will.   If a parent has more than one child and plans to divide assets equally among them at death, then having a jointly-held account with one child for convenience during your lifetime alters the path of how that account changes hands at your death.  A good middle ground is a Power of Attorney, which gives someone the right to act for you, but does not give them ownership rights in your property or the right to take that property for themselves.

                Georgia adopted a new form of Power of Attorney in 2017. Powers of attorney signed before that are less effective and likely to be rejected by banks and other financial institutions.  Keeping these documents current is the best way to make life easier for the loved ones you name as your agents, Executors, and beneficiaries.

Pulling a Family Through Probate

By Chris Miller, Esq.

Losing a loved one is a tough event to endure, and each member of a family experiences it different. A good estate attorney will not just answer questions about the law, but will also take time to hear the pain a client is feeling and be a source of comfort and unity.

The law books are filled with cases where families have torn themselves apart in a quest to right some perceived wrong or to achieve a greater inheritance. The path through these challenges is not always through the court of law. Instead, bring to the table a sense of perspective and gratitude for the past. Recognize that future relationships between people are precious sources of support. Money does not fill the hole created by the loss of a family member. The paths of probate and estate administration have been with us for centuries. Tax consequences might change from year to year, but two key actions can hold a family together through the grief and loss with which they are coping.

First, be transparent. Too many executors try to minimize suffering by holding onto secrets, or keeping the assets or wishes of the decedent under wraps. A good executor, though, takes positive steps to show that he or she is doing things fairly and following the instructions in a Will or Trust. This means delivering regular updates on what the executor has been doing and updating beneficiaries about what the next steps are.

Second, set reasonable expectations. Many people are eager to get closure and reap the financial rewards of an inheritance. However, a calm and methodical approach to estate administration will often be more efficient and yield greater benefits. The axiom of “measure twice, and cut once” applies to dividing an estate just as well as it does to carpentry. Executors have obligations to a decedent’s creditors, but not all creditors get treated equally. Georgia law sets claims against an estate into priority order, and if notice is published correctly, it sets a deadline for creditors to notify an executor of their claims. Sharing information and getting good advice along the way is a good trail to follow. Those tools hold a family together as they find their way toward accepting the loss that each feels individually.

Building Consistency in your Estate Plan

By Chris Miller, Esq.

After the initial shock and loss of losing a loved one, families ask questions about the mechanics of asset transfer.  What happens to the house?  What happens to the life insurance and retirement accounts?  The answers to those questions are sometimes found in a Will that the decedent has signed and stored in a safe place, but they are more often determined by planning steps outside the Will. Beneficiary designations and asset titles play a big role in how property is dealt with at death.  That is because a Will only controls “probate” assets.  Probate assets are resources owned by an individual without a beneficiary designation at the time they die.

A house, for example, might transfer to a joint owner without claim of any other family member if the Deed was written as “joint tenants with rights of survivorship.”   Likewise, a retirement account or an insurance policy gets paid to the beneficiary designated on that account, even if a Will signed later tries to steer those assets to someone else.  These unintended consequences can cause hurt feelings and resentment among family members that lasts for decades.

  Avoiding those hurt feelings means expressing an intent in consistent and multiple ways. In addition to having an updated Will, it helps to double check your beneficiary designations and review the language of the deeds to your properties.  A Will can provide big picture instructions to an Executor you know will be fair and professional. Beyond the Will, though, you should also guide your Executor about how to distribute your personal effects and who to call after you pass away.  That guidance is best done in a separate letter that does not become part of the public record when the Will gets filed for probate. 

Quick Notes on The SECURE Act By: Marianna Chaet, Esq.

A new federal law known as the SECURE Act took effect on January 1, 2020. The new law makes changes to the rules governing retirement accounts like IRAs and 401(k) plans. Three changes that affect the most people are:

• Individuals can contribute to traditional IRAs at any age, even after they retire.
• The age when required minimum distributions begin has been raised from 70.5 to 72.
• Qualified retirement plans and IRA benefits generally have to be distributed within 10 years of the employee or IRA owner’s death.

The first and second changes are self-explanatory. However, the third change needs further explanation. Under the old rules, if a retirement account had a designated beneficiary, then the beneficiary’s life expectancy could be used to “stretch-out” the distributions of an IRA (and the tax consequences of those distributions) over the beneficiary’s remaining lifetime. The SECURE Act ends the beneficiary’s ability to “stretch-out” the distribution of the IRA, and instead mandates distribution within 10 years after the death of the owner, with a few particular exceptions, such as in the cases of a surviving spouse, a minor child, or a disabled beneficiary.

The new rules do not require annual distributions over the 10-year period, but just that everything in the IRA or retirement plan be distributed within 10 years. Some people may have created trusts that took advantage of the “stretch-out” rules by requiring annual distributions of income to the beneficiary. It might be worth reviewing your estate planning documents with the drafting attorney to make sure that the documents still achieve your goals.

Marianna is an associate at the Law Offices of J. Christopher Miller, PC. 678-746-2900 NorthFultonWills.com