Estate Planning and Probate: Part Four

Estate Planning and Probate:  Part Four

Although I am dismayed as to why my parent's attorney has not recommended a living trust to them, I have determined that dealing with their will, probate and the estate will be manageable.  However, almost any estate will benefit from using a trust in the distribution of assets following death reducing the burden on the executor.  To put it simply, the trust is used to incorporate a person's wealth for use during their life and to provide for adequate management (usually distribution) upon death.  Since the trust is considered as a person, for legal purposes such as making payments, owning assets, and buying or selling property, it goes on after death of the original owner by naming a trustee executor, the equivalent of a CEO, to continue with its management.  We will now discuss how that is done.

What is a Living Trust?

A Revocable Living Trust aka Living Trust aka Family Trust is a way to turning over assets to legal independent entity that is considered separate from you as an individual.  In other words it is a legal document that holds title or ownership to the property and assets you give it.  You are transferring your assets from yourself or family and titling them in the name of the trust.  This is much like how setting up a corporation creates a separate legal entity from the people who run or manage it.  People can sue the corporation and perhaps put them out of business but the employees or managers of the corporation personal assets are protected.

By definition a corporation is, "A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members."  A living trust is similar to a corporation in that it is a separate entity that requires management, typically you, who retains unlimited access to and full control of the assets during your lifetime even though the trust holds title.  Of course, depending on size, you can manage the trust with any size of a management team you feel is justified, and people often employ lawyers and financial advisers in that capacity.

A revocable living trust looks very much like a will as its purpose is detailing and instructing how your estate is to be handled at your death.  The difference between a will and living trust is how they are handled legally at the time of death.  Note that a living trust can also be non-revokable.  In which case it would go on with continued management and other purpose, like charitable or political foundations, or cease if all assets are lost, as in a bankruptcy.  Suffice to say that trusts come in various sizes and shapes to suit a wide variety of causes.

Why do we want at Living Trust?

Just as with a corporation a trust has to own title to any property or asset.  This means that you have to have legally transferred the title of your assets into the trust name which is called "Funding the Trust".  For example, you would change the owners name on your trust assets such as your home, IRA, 401K, life insurance policies, bank accounts from, say, John and Jane Doe to the trust name of "John and Jane Doe, Trustees of the Doe Family Trust".

The trust avoids probate because you have designated trustees and laid out in detail who will manage the assets.  If a spouse dies the surviving spouse as the surviving trustee receives full control to buy, sell, borrow or transfer assets titled in the trusts name.

Who should you have a Living Trust?

A living trust should be created by persons with two minimum desires.  First are those with significant assets for distribution who wish to avoid distribution arguments or challenges.  Although a mere will can be detailed to a great extent, wills are not as legally binding as are trusts, since they are not regarded as legal entities in and of themselves.  Hence they can be contested.

Second, as has been stated many times, it is for those with a reason to minimize probate and related costs to probate.  The trust, as a legal entity, takes the place of probate as legal method to oversee the distribution of the estate as defined in the document.  There are other reasons people might wish to fund a living trust, but these are the primary ones.

Referring back to the story about when my brother died in an auto accident you'll understand the need for a living trust.  When a loved one passes there is often a knee jerk reaction to get the pain over with as soon as possible from the people who loved the decedent.  Unless our dying wishes and estate distribution are spelled out as succinctly and in an uncontroversial manner, we may hurt the ones we love and have governments and lawyers, not loved ones, benefit from our passing.

The U.S. legal system views a living trust as a very sound legal document that manages passing assets on to whomever you designate without contention.  This is possible because your name has been taken off of the assets thus upon your death there is no need for the courts to remove your name from the assets for legal transfer.  A will on the other hand can be contested as it is considered just an expression of your wishes and will need to be vetted by the courts before assets can be passed on to your heirs.  Take, for example, a house.  When a trust owns a house, the trust executor can use trust assets to continue paying mortgages and taxes.  As the deceased, you can no longer do this from a personal (non-joint with no survivor) account.  In a trust the house can be sold and the proceeds go into the trust for disposition.

Another example might be of a family car that you want to give to one of your children.  If you keep the car in your name you have legal and liability obligations that tie you to that asset.  If you are gone you cannot sign and date any transfer.  Thus, it costs money and paperwork for the court to retitle the car in your child's name before terminating other legal ties to that property.

A living trust is very important because it:

 

• Unlike a will assets titled in the name of trust do not have go through probate.  This can eliminate the need for surety bonds or co-executor representation required in some states for out-of-state executors.
• It will prevent the courts from controlling your assets due to incapacity, where you may still be living but otherwise unable to manage your assets.
• It gives you very specific control over how you leave the assets such as to your children, grandchildren, family, friends, church and charities.

When there are five or fewer beneficiaries the Federal Deposit Insurance Corp. insures each beneficiary up to $250,000.  A trust naming four beneficiaries for example would be insured for $1,00,000.

The living trust is a written legal document that allows you, as the trustee(s), unlimited access to and full control of your assets during your lifetime.  It also enables you to name a successor trustee/executor to pass property on after your death to family, friends and/or loved ones.  In allowing you to appoint someone you make certain your property goes to the ones you choose after your death.

Summary

Just as governments and corporations have a defined line of succession set out when they are created, in the trust you set out a defined set out of successor trustees to act for the trust.  The successor trustee is tasked with managing the trust assets in manner detailed in your trust document.  This is much as the executor of a will would operate, but more specific, legally binding and thus easier for the trustee to assume control.  Note too, that one may assign major assets to a living trust and have a will for minor assets.  When heirs are listed in co-joined documents like this, it lends great credence to the legality of the will, ensuring the court will not alter or allow a successful challenge of the will.

This is very important and really simplifies the handling of the estate for the trustee.  For example, in Virginia this executor/will process is supervised through Commissioners of Accounts, and usually takes about a year.  In many cases, it is desirable to avoid some of the procedures and costs of probate which a living trust helps avoid.

How does a Living Trust work?

ust as with a corporation a trust has to own title to the property or asset.  This means that you have to have legally transferred the title of your assets into the trust name which is called "Funding the Trust".  For example, you would change the owners name on your trust assets such as you home, IRA, 401K, life insurance policies, bank accounts from the name of John and Jane Doe to the trust name of "John and Jane Doe, Trustees of the Doe Family Trust".

The trust avoids probate because you have designated who the trustees of the trust are and laid out in detail who will manage the assets.  If a spouse dies the surviving spouse as the surviving trustee receives full control to buy, sell, borrow or transfer assets titled in the trusts name.  Just as governments and corporations have a defined line of succession set out when they are created, in the trust you set out a defined set out a clearly defined set of successors trustees to act for the trust.  The successor trustee is tasked with managing the trust assets in manner detailed or made know in your trust document.  This is much like the executor of a will but much more specific, legally binding and easy for the trustee.  This is very important and really simplifies the handling of the estate for the trustee.  For example, in Virginia this executor/will process is supervised through Commissioners of Accounts, and usually takes about a year.  In many cases, it is desirable to avoid some of the procedures and costs of probate which a living trust will avoid.

Estate Planning and Probate: Part Three

Estate Planning and Probate: Part Three

The General Responsibilities, Duties, and Roles of a Nonresident State Will Executor in Virginia.

We have been discussing how to prepare an estate for probate and have centered on one aspect!  Being an out of state executor.  I would like to go into some detail here, as it is likely in today's mobile society that many people may have similar issues and this detail should help them understand pitfalls they need to look into for their own non state residency and other concerns.

If you have been named executor of an estate and accept the duties you are morally and legally obligated to make sure the wishes of the decedent are met.  However, what most executors overlook is that you are also obligated to participate in the estate planning and determine if you can accept being executor.  You may not agree with how the estate is set up, the other participants named in the Power of Attorney or other estate documentation.  Perhaps your health and life events prevent you from performing your executor role, etc.  You have to keep the owners of the estate naming you informed should a life event temporarily or permanently prevent you from representing their wishes in the future.

As an estate holder, you must ask the person you intend to appoint if he or she is willing to serve as executor before drafting your will.  You should outline the responsibility and make sure they are willing to perform the task properly.  As attorneys are very well paid they will usually volunteer to serve as your executor.  You must also properly vet your chosen executor to see if they can qualify because if they have credit problems or have committed a crime which the state may not accept if probate is required.  Co-executors are also a possibility to consider but this may create controversy in dealing with your estate if they do not agree on actions and which tasks to perform.

For example, you may cause a sibling or relative rivalry over your estate, unless you don't like them and want this (smile). You should also consider appointing an alternate executor in case the primary or secondary executor(s) cannot serve or are disqualified.  The state will appoint a paid one if necessary.  One who can charge large fees, which you may not want?

The executor or personal representative (also called administrator) you choose may also charge the estate a fee for his or her services.  Often if this individual is a relative and heir, he or she may choose not to charge a fee.  If a fee is charged, in some states the amount is regulated by statute, and in others it is what is “reasonable” for the work performed.  Therefore, executors who inherit under the will often simplify the accounting and distribution of the estate because they may not want to track their expenses and time required to bill the estate.

An executor will likely have to work with the estate's attorney and other professionals such as accountants, financial advisors, or appraisers.  This work is made simpler if the will or trust is well defined in the legal documents left by the decedent.  All these management fees associated with the estate are costs that heirs need to closely monitor as they can be used to overly expense the estate.  Never depend on the courts to make sure fraud does not take place.

Depending on the state, nonresident executors may be required to post a bond with the court in order to serve. This bond acts as a guarantee the executor will manage the estate properly, in order to protect the heirs.

In my own case, according to http://www.virginiaestatelaw.com/main/chapters/qualification/procedure.shtml 
"a personal representative may be a nonresident of Virginia, but surety is required on the bond of a non-resident personal representative, unless a resident co-fiduciary is appointed.  The Clerk must also be satisfied that the person seeking qualification is suitable and competent to perform the duties of his or her office."

Checking with two Virginia attorneys on this I determined this is an either/or proposition.  Either I purchase a surety bond to insure the estate or I bring a Virginia resident co-executor to the court.  I asked a Virginia friend of mine if he would do this and he asked what I forgot to ask the first attorney, "What would be required of me in such a role?"  Hmmm… good question so I asked the second attorney that very question and I got the simple answer:

• He has to show up in probate clerk's office for co-qualification as executor or registration as a designated agent of the estate.
• He has to make sure you do what the estate documents tell you to do.

This is not a responsibility to be taken lightly for if an out-of-state executor ripped off the estate or mismanaged the estate the Virginia resident co-executor could be held responsible.

Since my parents estate was only under a will it would be subject to probate for assets totaling over $15,000 in value.  If the estate went into probate, I now knew this would require me as an out-of-state executor to possibly have to hire a probate attorney or appoint someone local as co-executor thus complicating things and increasing expenses.

I also read that while administering and distributing the estate the executor must publish a notice to creditors in a local newspaper. I asked a Virginia attorney if this was really necessary and he explained that once a person dies the creditors have one year to pursue the estate for debts.  By posting notice in the newspaper you are legally shutting off creditors from pursuing debts after a year.  He also explained this is probably only necessary for very wealthy estates worth a million or more.  But it would also be useful in relieving any subsequent fraudulent activity in the future.  Keep in mind that identity theft is rampant and can be practiced on the deceased as well as the living.

Summary

As executor of any estate you have an obligation to administer the estate with the highest degree of fidelity and good faith for if you do not you can and probably will be held legally responsible.  Being an executor of an estate can be a daunting task as you take controls of the assets, take measures to protect and prudently invest them during administration, identify and pay debts and obligations of the decedent that are enforceable, determine and pay taxes owed by the decedent or their estate, protect and sell off probate property, distribute what remains of the estate to heirs and beneficiaries named in the decedents will or according to state law if there was no will, all the while accounting to the probate court as to how you are handling and distributing the estate assets.

If the estate is in probate, there are also deadlines and detailed responsibilities that must be met.  For example, in Virginia, the executor must contact beneficiaries within 30 days after executor qualification by the court.  Then within four months of appointment, the executor must file with the Commissioner of Accounts a detailed list, known as an "inventory," of the probate property, including the value of each item.  Within sixteen months from appointment, the executor must file another accounting with the Commissioner, showing the income and expenditures of the estate administration.   The final accounting to the court must show the distributions made to the beneficiaries named in the will.  If any inventory or accounting is rejected by the Commissioner of Accounts the executor may have to hire an attorney to help them meet state requirements.

Many of these details will be similar in states across the nation. Investigate them so when you act as executor or you name one, you can speak knowledgeably and confidently to heirs and your own nominees.

The General Responsibilities, Duties, and Roles of a Nonresident State Will Executor

If you discover that you have been named executor of an estate you are morally and legally obligated to make sure the wishes of the decedent are met.  However, what most executors overlook is that you are also obligated to participate in the estate planning and determine if you can accept being executor.  You may not agree with how the estate is set up, the other participants named in the Power of Attorney or other estate documentation.  Perhaps your health and life events are preventing you from performing your executor role and so on.  You have to keep the owners of the estate naming you as executor informed if a life event will temporarily and most certainly permanently prevent you from representing their wishes in the future.

The executor, or personal representative, is the person(s) you appoint in your will to handle the administration of your estate throughout the probate or estate allocation process after your death.  An estate without the proper beneficiary designations or properly prepared legal documents could cost the executor a great deal of unnecessary responsibility, time and effort.  Not to mention this lack of planning could rob their heirs of inheritance as assets are gobbled up in taxes, legal fees and probate.

As the estate holder ask the person (attorney, child, relative or friend) you intend to appoint if he or she is willing to serve as executor before drafting your will.  You should outline what the responsibility entails and make sure they are willing to perform the task properly.  As attorneys are very well paid they will usually volunteer to serve as your executor.  You must also properly vet your chosen executor to see if they can qualify because if they have credit problems or have committed a crime the state may not accept them if probate is required.  Co-executors are also a possibility to consider but this may create controversy in dealing with your estate as they may not agree on things.  For example, you may cause a sibling or relative rivalry over your estate, unless you don't like them and want this (smile).  You should also consider appointing an alternate executor(s) in case the primary or secondary executor(s) cannot serve or is/are disqualified.

The executor or personal representative (also called administrator) may charge the estate a fee for his or her services.  Often if this individual is a relative, he or she may choose not to charge a fee.  If a fee is charged, in some states the amount is regulated by statute, and in others it is what is “reasonable” for the work performed.  Therefore, executors who inherit under the will often simplify the accounting and distribution of the estate because they may not need to track their expenses and their time to bill to the estate.  An executor may have to work with the estate's attorney, along with other professionals such as accountants or appraisers if the will or trust is not well defined in the legal documents left by the decedent as we discussed.  The executors/attorney/accountant/appraiser management fees associated with the estate are venues that heirs need to closely monitor as they can be used to overly expense (rip off) the estate.  Never depend on the courts to make sure this type of fraud does not take place.

Depending on the state, nonresident executors may be required to post a bond with the court in order to serve.  This bond acts as a guarantee the executor will manage the estate properly, in order to protect the heirs.  According to http://www.virginiaestatelaw.com/main/chapters/qualification/procedure.shtml  "a personal representative may be a nonresident of Virginia, but surety is required on the bond of a non-resident personal representative, unless a resident co-fiduciary is appointed.   The Clerk must also be satisfied that the person seeking qualification is suitable and competent to perform the duties of his or her office."


Checking with two Virginia attorneys on this I determined this is an either/or proposition.  Either I purchase a surety bond to insure the estate or I bring a Virginia resident co-executor to the court.  I asked a Virginia friend of mine if he would do this and he asked I forgot to ask the first attorney, "What would be required of me in such a role?"  Hmmm… good question so I asked the second attorney that very question and I got the simple answer:

• He has to show up in probate clerk's office for co-qualification as executor or registration as a designated agent of the estate.
• He has to make sure you do what the estate documents tell you to do.

This is not a responsibility to be taken lightly for if an out-of-state executor ripped off the estate or mismanaged the estate the Virginia resident co-executor could be held responsible.

Since my parents estate was only under a will it would be subject to probate for assets totaling over $15,000 in value.  If the estate went into probate, I now knew this would require me as an out-of-state executor to possibly have to hire a probate attorney or appoint someone local as co- or alternate executor thus complicating things and expenses.  I also read that while administering and distributing the estate the executor must publish a notice to creditors in a local newspaper.  I asked a Virginia attorney if this was really necessary and he explained that once a person dies the creditors have one year to pursue the estate for debts.  By posting notice in the newspaper you are legally shutting off creditors from pursuing debts after a year.  He also explained this is probably only necessary for very wealthy estates worth a million or more.

Before an executor of a will purchases a surety bond from an agency, he or she must submit themselves to a credit check, have their executor application approved, and go through other screening processes.  This is all the more reason an executor does not want the estate to go into probate, which Virginia attorneys assure me is not big deal.  As we will soon discuss, the surety bond protects the estate and the family of the deceased from any fraudulent or illegal actions on the part of the executor and assures that the will is executed as expected.

As executor of any estate you have an obligation to administer the estate with the highest degree of fidelity and good faith for if you do not you can and probably will be held personally responsible.  Being an executor of an estate can be a daunting task as you take controls of the assets, take measures to protect and prudently invest them during administration, identify and pay debts and obligations of the decedent that are enforceable, determine and pay taxes owed by the decedent or their estate, protect and sell off probate property, distribute what remains of the estate to heirs and beneficiaries named in the decedents will or according to state law if there was no will, all the while accounting to the probate court as to how you are handling and distributing the estate assets.

If the estate is in probate, there are also deadlines and detailed responsibilities that must be met.  For example, in Virginia, the executor must contact beneficiaries within 30 days after executor qualification by the court.  Then within four months of appointment, the executor must file with the Commissioner of Accounts a detailed list, known as an "inventory," of the probate property, including the value of each item.  Within sixteen months from appointment, the executor must file another accounting with the Commissioner, showing the income and expenditures of the estate administration.   The final accounting to the court must show the distributions made to the beneficiaries named in the will.  If any inventory or accounting is rejected by the Commissioner of Accounts the executor may have to hire an attorney to help them meet state requirements.

Estate Planning and Probate: Part Two

Estate Planning and Probate: Part Two

In this series we are discussing personal experience with estate planning and probate; what it means to the planners and survivors.  This is neither financial nor legal advice.  It is simply a discussion to help the reader understand and consider action options on the topic.  We started out explaining why planning for probate is desirable.  Expressing ones wishes upon passing can vastly simplify work for survivors who may have issues with their emotions or be removed from the locality of the decedent.  This edition adds choosing an executor for the process of probate.

Following my knee surgery I went home to help my Mom as my Dad had entered a rehabilitation center with his own health issues.  I figured while home to examine their estate and thus make the process easier in time of need.  My parents had previously informed me I was being named executor, so I asked to see the paperwork.  Mom was proud of the will their lawyer put together.  They had been paying the firm for years to handle all their legal matters such as keeping their "will" updated, producing the Powers of Attorney, Advance Directives for Medical Decisions, and so on.  She then informed me that her understanding was that in Virginia an out of state executor would need to work with a local co-executor.  Their attorney offered his services.  To me it sounded crazy as I was unfamiliar with the rules.  Thus, as I searched the Internet for answers, I found a basis for this fact.

For example, at http://www.courts.state.va.us/courts/circuit/Bedford/probate.html  I found the following:

"A named executor residing outside of Virginia who wishes to be appointed as executor must bring a Virginia resident to the appointment with the Probate Clerk to either co-qualify or be designated as a registered agent."

Seeing this I knew I better spend time studying Virginia estate law to make my pending executorship easier and identify someone I trust as a Virginia co-executor.  If you are in a similar out-of-state position you should investigate executor rules to ensure a named executor can function in that capacity.

Trust But Verify!

Years ago, I had access to limited paid legal services through working for a Fortune 500 corporation.  Taking advantage of this, my wife and I contacted an attorney to check our will and other legal documents.  After reviewing them, he strongly suggested we set up a "Revocable Living Trust".  He made a convincing argument for why it was important. We went along.  For my wife and I it is a painless process.  We simply create the Trust and transfer our assets to it, called funding the Trust.  At the time I did not credit our attorney with the honesty, integrity, and intelligence I learned he deserved after doing research into a living trust for my aging parents, who do not understand the need for such documents. Which was contrary to what I had believed, so I want to help them make good decisions, but also verify they make the RIGHT decisions.

Since I have a revocable living trust, a question rose in my mind.  I wondered why my parent's attorney had not recommended as a trust to them.  After talking to theirs and another Virginia attorney I was, indeed, convinced it was not necessary.  In this case, it proved excessive as the value of the estate would not be there when they were gone.  Their wealth was in pensions and social security, which would terminate as needed.

If I had determined a change in my parent's estate was needed I would have been in store for one hell of a battle.  Dealing with them on financial matters in the past had proven impossible.  In all of my existence, they never accepted any financial advice about anything.  Given this, I was determined to do my research and employ the proper outside resources to convince them if that proved to be a good idea.  Facing this, my wife gave me the best advice I have ever received in dealing with aging parents, "if after your research with the attorneys your parents refuse to go along with your recommendations then tell them to find another executor."   Remember, the work performed as an executor carries legal as well as personal responsibilities, so it must be done with full commitment.  There is no room for doubt.

Note that if you are named an executor to someone's estate, the process will require you to accept that position.  It cannot be forced upon you.  You have multiple options:

• Accept it
• Reject it 
• Accept but hire out the work, having the estate pay for documented expenses 
• Accept and do all the work, even taking a reasonable fee 
• Several variants of the above

Many people do most or some of the work, hiring out the more complex items to an attorney, as needed. Many do it without compensation, which can be made easier if the proper documents exist to make things work, like the existence of the revocable living trust.

Faced with this daunting task I broke down the problem into manageable parts.  I decided the first thing to find out was if my mom was right about being executor of the will in Virginia.  I also would determine if there was some reason my parents only had a "Will" and not the "Revocable Living Trust".  In doing so, I would find out if a living trust was a good idea for my parents.  If I discovered flaws in their estate planning I would have to ask myself whether I should or could be executor of their will/estate.

As I have already stated, the answers showed I could be executor, but would need local representation.  A lawyer would be best for that position so hiring out the complex tasks would be efficiently handled. A trust is not needed, as the value of the estate lies in their house and pensions. There are no cash deposits or other significant properties to handle.

On whichever side you stand, working with the planner and a prospective executor is an important step to ensure each understands responsibilities involved.  The conclusion here is that a potential executor needs to determine their suitability for the work and what they may need in resources to complete it, the plan where those resources will come from.

My take:

After a knee replacement I came home to help my mother as best I could.  I figured while I was home to start getting involved as best I could in their estate.  They had informed me months earlier that I was now the executor of their estate.  When I asked to see the paperwork, my mom was very proud of the will that a high paid lawyer helped them put together.  My parents had been paying a high paid attorney/law firm for years to handle all their legal matters such as keeping their legal "will" updated, produce Powers of Attorney, Advance Directives for Medical Decisions and so on.  She then informed me that her understanding was that as an out of state "will" executor I would need to work with a Virginia co-will executor and their high paid attorney who had offered his services to help.  This sounded crazy but as I searched the Internet for answers I found some basis for my mom's statement.  For example, at multiple websites such as http://www.courts.state.va.us/courts/circuit/Bedford/probate.html  I found, "A named executor residing outside of Virginia who wishes to be appointed as executor must bring a Virginia resident to the appointment with the Probate Clerk to either co-qualify or be designated as a registered agent."   Seeing this I concluded that I had better spend some quality time studying Virginia estate law and see if I could make my possible executorship of their estate easier and perhaps find a Virginia co-executor.

Years ago, I had access to limited paid legal services as a benefit of working for a large corporation.  Taking advantage of this benefit, my wife and I contacted an attorney to check our will and other legal documents.  After reviewing all our legal documents he strongly recommended we set up what is called a "Revocable Living Trust".  He made a very convincing argument at that time for why that was important so we went along.  For my wife and I this process was painless as all we had to do was transfer our assets to the living trust (called funding the trust) as our attorney recommended.  At the time I did not credit our attorney with the honesty, integrity and intelligence that I do now after researching setting up a living trust for my aging parents who did not understand the need for this.  For example, I was wondering why my parent's high paid attorney had not recommended that they set up their estate as a revocable living trust.  After talking to him and another Virginia attorney they convinced me that trust was not necessary.

If I had determined that a change in the way my parent's estate was set up I would have been in store for one hell of a battle.  Dealing with them or financial matters, in the past, had always proven impossible.  In all the years of my existence, my parents had never accepted any financial advice about anything I have recommended, ever.  Given our past, I was determined that this time I would do my research and employ the proper outside resources to convince them of what they needed to do with their estate and legal documents if that proved to be a good idea.  Facing this frustration my wife gave me the best advice I have ever received in dealing with aging parents which was, "if after your exhaustive research an expense with the attorneys if your parents refuse to go along with your recommendations then I suggest you tell them to find another executor to their will."  This advice along with the fact that I was putting together something to benefit my blog readers inspired me to give this project every ounce of effort I could.  Even if my efforts proved to be unsuccessful I knew this project might benefit you.

Faced with this daunting task I had to break down the problem into manageable parts and determine where to start.  I decided that the first thing I had to find out was if what my mom said about being executor of the will in Virginia was true.  I also had to determine if there was some logical reason that my parents only had a "Will" and not the "Revocable Living Trust" that I thought they may need.  Then I had to find out if a living trust was a good idea in Virginia for my parents.  If I discovered any major flaws in their estate planning I knew I would have to ask myself the question of whether I should or could be the executor of their will/estate.  My first step in this process was to determine what was required of an out-of-state will executor in Virginia.

Estate Planning and Probate: Part One

This series of blog entries came about for a multitude of reasons.  In going over my parent's estate paperwork while visiting a Virginia attorney's website he quoted a staggering statistic.  He stated that a high percentage of Americans don't have a will.  I scoured the Internet to see if this was true and the website http://wills-probate.lawyers.com/wills-probate/lawyerscom-wills-and-estate-planning-survey-findings.html reports only about 35% of American adults currently have wills and only 18 % had a trust in 2009.  Since I have had personal experience with what a lack of estate planning can cause love ones in the aftermath of ones passing I decided to write about it.  First, understand I am in no way an estate planner, lawyer or attorney.  My hope is that this discussion will move you to begin planning of your estate.

The planning of estate disposal is, at best, a morbid experience.  In doing so you are admitting that you will die someday.  I know that until I was married this was not something I gave a lot of thought to.  Then I contracted cancer and it became an even greater priority.  It is human nature, I suppose, to ignore planning estate distribution, until it can no longer be avoided.  Yet, in today's world of inexpensive solutions such as http://www.legalzoom.com there is no excuse to not have at least a will and probably to add a trust.  You can no longer use expense as justification since planning can unburden your heirs from distributing your estate using the simplest means available.   Keep in mind, your heirs may not be in a position when you pass to take time to handle the estate with the diligence you might want or expect.  There can be travel or grief interfering in the assessment of your desires when you go.  Detailing wishes in advance and keeping them up to date reduces the anxiety of such times and provides you peace of mind.  Simplicity is the key, since following your passing the bereft will be BERIEVED, making the job difficult enough on its own merit.

On the health side you need to create a medical power of attorney to authorize someone to make decisions if you are not able to.  You also need a living will to detail your wishes with respect to life-sustaining activities such as feeding tubes.  Along with these decision making documents, you should prepare for the distribution of your property.  Along with a will or trust you need to look at all your IRAs, life insurance, retirement plans, bank accounts and other assets that have beneficiary designations.  Beneficiary designations supersede what is in your will, so it is critical step in your estate planning to make sure the beneficiaries are up-to-date with your wishes.  So, let's start with a personal story…

A personal example of an estate without a will or trust

Years ago my bother perished in an auto accident at the young age of 36.  At the time, I had knee surgery in Michigan so I could only fly to my parent's home in Virginia while in a wheelchair.  When I reached their house, after they picked me up at the airport, I had to witness the chaos surrounding this event and comfort my hysterical parents.  There is no greater loss to a parent than that of losing a child and since I could not walk I was smack dab in the middle of everything.  I could only dream of moving my wheelchair out of the living room since I had to answer the door.

During my brief stay I was only able to pay a short-lived visit to my brother's house during the  days  my company  allowed me off of work.  I managed in all the chaos of that visit to snatch up a very few things to remember him by which I packed into my suit cases for my flight back to Michigan.  The accident occurred at the beginning of the month and rent was paid through the end of the month, so we had plenty of time to deal with his belongings.  Thus, I made arrangements with friends in Virginia that in a couple weeks I could drive down again to move his stuff into storage.  I could then go through it when I had time to reflect on the loss, look at his belongings, and absorb what he meant to me in our life together.  Most of all I wanted to keep and distribute a few more things beyond the few items I had to remember him by.  Weeks later I drove 10.5 hours to empty his house only to find out how irrational grieving parents can become.

My parent's knee-jerk reaction was to put this tragic event behind them as quickly as possible.   All my brother's belongings had been given to charity.  There were a few possessions left, such as a damaged TV, stereo equipment with the wires ripped out of because they did not know how to unhook them, and a bunch of old VCR tapes.  There were people he loved: a very caring girlfriend, me, and a few close friends that I know he would have wanted to get some things to.

There was no will.  He had not named an executor.  Also he had no life insurance or cash to speak of so he was cremated and buried above my grandparents which he may or may not have wanted.  I hope this story shows the advantage of lifting up those you love by making your wishes known and using proper estate planning tools before you no longer have the chance.  Remember, people you care about may not have time, convenient proximity, presence of mind, or accurate assessments of your desires when you go.  Detailing wishes in advance and keeping them up to date reduces the anxiety of such times and provides peace of mind.

I cannot take full credit for this blog entry and Henri Q. Feep as he chooses to be known helped me with this writing, ThatCyberSecurityGuy.

How selling your house and taking back a LifeTime Lease can benefit your family.

When I started this blog, I only planned on writing about technical solutions that we all need in order to protect our Internet devices.  Then as I read Kiplinger's, PC World, USAA, SemperFi, American Legion and various other magazines it hit me that they talk about various subjects such as cyber security, identity theft and so on.  If these other publications can cover a broad range of topics I felt that blogging about subjects such as finance and life's bumps were perfectly appropriate.  That way my blog could benefit you technically, financially and mentally.

For example, knowing that you are not alone in your quest to help your loved ones who may, as in my case, reject everything you advise them on and may help you cope.  As we all move through life we encounter and try to deal with many situations and finding the necessary steps in which to deal with these life crises is very important.  They are very frustrating as we look back and understand that the love ones that we tried to help did not give credence to the information we had provided to them.  On the off chance that you or those that you love will work together to better your futures together I decided to include some worldly blog entries to benefit you and your families.  There is no reason for all of us to commit the same mistakes repeatedly, and as a follower of my blog you need these life stories.

About 16 years ago, I desperately wanted to change careers and signed up to take all of the necessary classes to sell real estate.  As I went through these real estate classes some of the instructors talked about what the books called "A Lifetime Lease", which seemed weird to me.  Under what circumstances would you ever want to purchase a property and then give the owner a Lifetime Irrevocable Lease?  Every single real estate agent I met during that time owned their parents' house granting them back a lifetime lease.

As I learned about this legal arrangement it became apparent that this was a no brainer that every family needs to do.  Therefore, I put together a package for my parents that described how this works, why it is important and how my parents were protected.  I then sought out the financing and determined that I could purchase their house.  At that time I was living pretty well on a very good IT salary and could easily afford to qualify for a mortgage and purchase their house.  My parents completely ignored the packages, emails and phone calls about the need to do this and now 17 years later; we are trying to deal with the consequences.  I put this blog entry up on the off chance that your family can learn from my family's folly and benefit from these types of mistakes.

What is a Lifetime Lease?

Search the Internet on "lifetime lease" or "life lease" and you will find an abundance of information.  My only reason to blog about this now is that it currently relates to how my family has backed itself into a financial corner that is destined to end badly.  A life lease is very simply, a legal document that grants the resident occupation rights until their death or a crippling life event.  It can also be based against another person's life.  It is a deed that reserves a life estate for a farmer, your parents or some other tenant in which the owner of the lease cannot revoke as long as the terms of the lease are being met.   Upon death, the property reverts to the owner so you would not want to enter into a "life lease" arrangement with someone who may wish you harmed.  Also as the leaseholder, you would not want to enter into this arrangement with someone who may prove unreasonable, not maintain the property, and/or not pay their taxes or their rent.

Why do you want a Life Lease?

We often hear about Reverse Mortgages these days, but these are not in the best interests of your parents, friends or relatives.  The best way to get the equity out of your parent or relatives' house is a life lease.  A "Life Lease" is important for many reasons, if you have a reasonable family, and God knows I see a lot of drama and unreasonableness these days, such as in the case of my parents.  This agreement between responsible parties can be viewed as simply as a matter of estate planning in which to establish your parents to live on a lease thus conveying their assets to someone trusted.  This means that the parents have spent down their assets, which are a necessary precursor to obtaining government benefits.  A family that works together benefits together!

• This is very necessary for Medicaid planning purposes and a host of other government help that cannot otherwise be obtained.  For example, to get Medicaid you do not want the house in your parents' names, as their equity has to be used up before they qualify for any government help. 
• When the estate is probated the state taxes can be massive.  For example, in Virginia the executor is expected to provide an inventory of all assets, along with their estimated value at the time of the testator’s death.  In cases where the estate is valued at more than $15,000, a probate tax must be paid at the rate of 10 cents for every $100 of the value of the estate.  Therefore, it is very important to pass the estate on to your loved ones prior to your death or loss of health.

Code of Virginia probate tax and what assets are subject to this?

In whichever state you may live or have been named an executor in you will need to study the probate laws.  Some of the following was taken from http://www.tax.virginia.gov/site.cfm?alias=Probate as to which assets are not subject this tax.

•  Property passing by the exercise of a power of appointment.
• Jointly held property with right of survivorship. 
•  Insurance proceeds payable to a named beneficiary, other than the estate.
• Bonds payable upon death to a named beneficiary.
• Property that passes by inter vivos trust.  (See:  https://en.wikipedia.org/wiki/Inter_vivos_trust)  We will talk about trusts and the need for them in a later blog entry.

The tax does apply to property owned as tenants in common, to the extent of the decedent's interest in the property.  The probate tax also applies to property that is passed to a beneficiary through a will.  In Virginia, the probate estate includes the assets (real property and personal property) that were held in the decedent's name at death, and those that pass under the will.

Property passing under a will can become complicated.  There can be ambiguity in the laws surrounding it which may require legal help to navigate.  There can also be complications in the interpretation of the will which will have to be decided by the states courts.

What are the other considerations before entering into a life lease?

In the scenario above, if the parents want to sell the house, the kids would have to agree.  After all, it legally belongs to the kids anyway.  This is not a big deal because the parents can always walk away thus leaving the kids holding the bag on the mortgage payments, which may then force them to sell the house anyway.

The legal agreement between the tenant and the life leaseholder also has to be very specific as to whom is responsible for what.  For example:

• The tenant usually handles the real estate taxes and pays the rent.  However, if these are not specified in the lease documentation the life estate holder may be held responsible for these expenses.
• The tenant is also usually responsible for ordinary repairs, upkeep and maintenance as they become necessary for the preservation of the property.  The remainderman (the person who gets the property at the end of the life estate) expects the tenant to repair and keep the property maintained.  If the life tenant is not properly maintaining the property the life leaseholder can conduct inspections and make necessary repairs, but this may require a court order. 
• A tenant may want to make permanent improvements or changes to the property.  These types of improvements usually require the consent of the remainderman. 
• Homeowner's insurance can be split between the estate lease holder and the tenant.  Just as a renter is responsible for insuring their belongings, a life lease tenant can only be responsible for insuring his or her interest leaving the remainderman with the obligation to insure the remaining interest. 
• A life tenant can move out and sublet the property, which the life estate holder may not want.  Any rent that the life tenant receives would have to be reported as taxable income. 
• A life tenant can sell their life lease but all that the buyer would get is the same interests in the property as the tenant.  This interest would expire upon the death of life tenant.

Glossary:

Decedent - An individual who has died.  The term literally means "one who is dying," but it is commonly used in the law to denote one who has died, particularly someone who has recently passed away.  A decedent's estate is the real and Personal Property that an individual owns upon his or her death.

Remainder - A future interest held by one person in the real property of another that will take effect upon the expiration of the other property interests created at the same time as the future interest.

Remainderman - remainderman n. the person who will receive a remainder in real property.