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WILLS PROBATE
JOINT TENANCY LIVING WILLS
POWERS OF ATTORNEY
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MICHAEL LYNN GABRIEL
ATTORNEY AT LAW
B.S, J.D., M.S.M., LL.M., DIP. (Tax)
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. COMMON PROBATE QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. COMMON ESTATE PLANNING QUESTIONS . . . . . . . . . . . . . . . . 49
3. DURABLE POWERS OF ATTORNEY AND . . . . . . . . . . . . . . . . . 89
LIVING WILL DECLARATIONS
4. PROBATE AVOIDANCE VEHICLES . . . . . . . . . . . . . . . . . . . . . . . 152
5. JOINT TENANCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
6. WILLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
7. ESTATE PLANNING QUESTIONNAIRE . . . . . . . . . . . . . . . . . . . . 308
8. ESTATE AND INHERITANCE TAXES . . . . . . . . . . . . . . . . . . . . . . 323
9. CONSIDERATIONS IN DECIDING WHETHER TO USE. . . . . . . 362
A WILL OR REVOCABLE TRUST FOR ESTATE PLANNING
10. ASSET PRESERVATION THROUGH THE USE OF . . . . . . . . . . 381
SELF-SETTLED SPENDTHRIFT TRUSTS
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .406
ESTATE PLANNING
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. COMMON ESTATE PLANNING QUESTIONS . . . . . . . . . . . . . . . . . . . . . . .4
2. ESTATE PLANNING QUESTIONNAIRE . . . . . . . . . . . . . . . . . . . . . . . . . . .44
3. ESTATE AND INHERITANCE TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4. CONSIDERATIONS IN DECIDING WHETHER . . . . . . . . . . . . . . . . . . . . .90
TO USE A WILL OR REVOCABLE TRUST FOR ESTATE PLANNING
5. TRUST PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6. REVOCABLE TRUST TERMINATING ON TRUSTOR'S DEATH . . . . . .115
7. REVOCABLE TRUST CONTINUING AFTER TRUSTOR'S DEATH . . . .267
8. A-B BYPASS TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .307
9. QTIP TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .361
10. JOINT TRUST UP TO THE UNIFIED CREDIT . . . . . . . . . . . . . . . . . . . . .419
11. POUROVER WILLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470
12. SUPPORTING TRUST DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . 520
13. ASSET PRESERVATION THROUGH THE USE OF . . . . . . . . . . . . . . . . 544
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .565
INTRODUCTION
The ultimate in estate planning is cryogenics. Cryogenics is freezing the body of a dead person so it can be brought back to life sometime in the future when the technology to do so is developed. In fact, it is possible to do a lay-away plan where a person has his head cut off and frozen. This is done with the hope that in the future an entire new body can be cloned and the head attached to it. The person first has to be declared dead. The question becomes: What will happen to the body? Whether we believe we come back in another form or pass to a higher plane of existence, we will nevertheless travel to a realm where no one ever returns. We cannot take it with us. That is not to say that people have not tried to do so. The Pharaohs of Ancient Egypt, the Mayans in Central America and the Celtic tribes in Europe all attempted and failed to take their worldly goods with them.
So what then is left for us to do? Lacking a philosophical bent, we can only offer practical and pragmatic answers for the living. The only answer that makes sense is that if a person cannot take the estate with him, it should be given to those for whom the person cared. For most people that means simply giving the estate to family members and loved ones. If the estate is going to be given away, it makes sense to give it to loved ones rather than to the government in the form of avoidable taxes.
The purpose of estate planning is to help a person build a large estate during life and to pass as much of it as possible to the loved ones upon death. This book attempts to present the various types of available estate planning for the average estate.
An estate plan is the procedure by which a person attempts to preserve the assets of his estate during life and distribute them after death. The main considerations in estate planning are avoiding probate, reducing estate and inheritance taxes and quickly distributing the estate to the designated heirs.
A complete estate plan will consider methods for preservation of the estate during life by maximizing income while reducing income taxes that must be paid. The costs of probating a will are large. An old joke: If the person was not already dead, the cost to probate his estate would kill him.
Probate costs include court fees, appraisal fees, attorney fees and executor fees. Court costs and appraisal fees are modest: a couple of hundred dollars for an average estate. The real costs are the attorney and executor fees. The maximum amounts of attorney and executor fees are set by statute and approved by the court. They are based upon the size of the estate (value of the property to be probated) and increase as the estate increases. In California, for example, attorney and executor fees are as follows:
1. 4% of the first $15,000; maximum $600.
2. 3% of the next $85,000; maximum $2,550.
3. 2% of the next $900,000; maximum $18,000.
4. 1% of the next $15,000,000 and .5% thereafter.
For example, a $100,000 estate probated in California the maximum attorney and executor fees would be $6,300: ($3,150 each). The attorney and executor can agree to take less or no fee at all.
Avoidance of probate fees is a major inducement for implementing an estate plan. When a revocable trust is used, there are no probate fees. The estate passes immediately to the designated beneficiaries of the trust. No court proceeding is needed to transfer the property of a trust, so no attorney is needed. There are several means to avoid having to probate property. The most common probate avoidance vehicles are:
1. Summary probate proceedings in the decedent's state. A summary probate is an abbreviated procedure for small
estates or for transferring the entire estate to a surviving spouse. Many states have adopted special procedures to by-pass the expense and long delay in probating such estates.
2. Giving the estate away while alive.
3. Placing the property into joint tenancy with the proposed heirs. Upon death, title for the property passes
immediately without probate to the surviving joint tenants. Real property held in joint tenancy passes to the survivors without a probate by recording a notice of the death of a joint tenant.
4. Placing the estate into a revocable trust that passes the estate to the designated beneficiaries immediately upon the decedent's death. This is the most popular form of
estate planning. It is fast and bestows the maximum amount of control and property over the estate.
To determine the best type of estate plan, one needs to know the
size of his estate, how he wishes to distribute it and the amount of control he is willing to
relinquish to create the estate plan.
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CHAPTER 1
COMMON PROBATE QUESTIONS
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This chapter is devoted to the questions most frequently asked concerning probate. Nearly everyone has a basic understanding as to what a probate is all about. Few people, however, really understand the mechanics of a probate unless they have been compelled to go through one.
A probate is overall name given to the judicial proceeding whereby a court distributes an estate of a deceased person who had not made arrangements for the passing of the estate without court supervision prior to death. In short, if a person dies with property in excess of $60,000 in value for which he had not made arrangements for its passage outside of probate after death (such as through a revocable trust or joint tenancy), then the property must be probated in order to have it distributed to the deceased person's heirs. All property that passes to heirs by virtue of a Will or by intestacy must be probated.
Probate law is the only field of law that is gradually fading out of existence. Summary Probates, Joint Tenancies and Revocable Trusts have been steadily reducing the number of probate filings each year. The reason for this reduction is that such probate avoidance alternatives avoid the need to need for a probate as they pass title to the heirs or beneficiaries in the subject property immediately upon death. Since the only real function of a probate court is to decide who gets a deceased person's estate, following death, if the decedent has already done that then there is nothing left for the court to do.
Probate law is one of the most technically precise and regulated areas of law. Nearly everything that is done in a probate is subject to judicial review. The acts of the personal representative are, themselves, strictly regulated and reviewed by the courts.
This chapter is designed to familiarize the reader with the problems and procedures faced in probating an estate. The questions contained herein cover most of the problems faced in an average sized probate.
Generally, everyone having an estate over $60,000 should consider some type of probate
avoidance vehicle. The reason or this is that when an estate exceeds $60,000 it is almost
always more expensive to probate the estate, given attorneys fees and the fees of the
personal representative, than it would to create a revocable trust for estate planning
purposes. However, in the event that a person elects to have his or her estate probated, for
whatever reason, the questions in this chapter and their answers will help the user better
understand the problems and procedures that await. This chapter will be very useful in
helping the reader identify and focus on the areas of most concern in their decision to have
their estate probated.
1. WHAT IS PROBATE? "Probate" is the name for the entire legal proceeding in a probate court to determine how to distribute the estate of a deceased. Probate is the legal mechanism whereby a court states who gets the estate. Probate of a deceased's estate is necessary when the decedent did not plan his final affairs beyond preparing a Will. Appropriate estate planning avoids probate altogether while providing for the immediate transfer of the estate to the designated heirs.
Probate proceedings are long, cumbersome and expensive. They are avoidable with proper
estate planning. In recognition of the difficulties and expense of probate many states have
enacted laws waiving probate or streamlining procedures for small estates (usually under
$60,000). These summary probates usually involve nothing more than filing petitions with
the court stating that the estate is too small to be managed effectively and that it should be
distributed without administration to the heirs. Summary probate procedure is available
only for small estates. Above a certain value, usually $60,000, a regular probate is
required. A person whose estate exceeds $60,000 should develop a simple estate plan and
avoid probate.
2. WHAT ARE THE FUNCTIONS OF A PROBATE COURT?
The probate of a deceased person's estate is handled through a probate court. It is a special department or court under a court of general jurisdiction. The probate court oversees the administration of the probate estate. The probate court is responsible for performing the following functions:
1. Appointing the legal representative of the estate.
2. Supervising the representative.
3. Receiving and evaluating the inventories, accountings and other reports of the representatives.
4. Assuring that all bills, taxes and claims against the estate are paid by the representative.
5. Overseeing the distribution to the heirs.
6. Closing the estate and releasing the representatives from further responsibility.
The estate remains under the control of the personal representative until the probate court issues the final order of distribution. It can take years for an estate to be closed and the assets distributed to the heirs.
3. WHAT IS A LAST WILL AND TESTAMENT?
A Will is the final testament a person makes to ensure his earthly possessions go to whom he wants them to go. A Will is totally revocable during one's life. A Will usually must be in writing and witnessed by two or more adult persons. The witnesses usually cannot be heirs mentioned in the Will.
In some states an oral Will made in immediate contemplation of death may be valid to distribution of the estate. The creator of the Will (testator) must be legally competent to make the Will and not be insane or otherwise mentally impaired.
Unless a clause of the testator's last Will specifically revokes all prior Wills, all of the Wills of the testator must be read together. The probate court then will determine how the estate will be distributed. Therefore, all Wills should have a simple clause revoking all of the testator's prior Wills.
A Will must be signed, dated and, unless typed, be written entirely in the handwriting of
the testator or be an approved Statutory Will (a pre-printed Will authorized by statute in
the testator's state of residence).
4. WHAT IS A HOLOGRAPHIC WILL?
A Holographic Will is a Will that is written entirely in the handwriting of the testator. Some states, such as Colorado and California, do not require a Holographic Will to be witnessed. Most states require a Holographic Will to be witnessed. Many states will not accept a Holographic Will as valid if there are any pre-printed or typed portions of the Will. Some states will permit pre-printed language in the Will if the material provisions are entirely in the testator's own handwriting. To be safe a Holographic Will should have two or more witnesses. That means, however, that it is no longer a Holographic Will, but an ordinary Will. Generally, Holographic Wills should not be used because they raise the potential issue of forgery. A case in point was the alleged Holographic Will of HOWARD HUGHES. The distribution of his estate of several billion dollars hinged on a purported unwitnessed Holographic Will. After years of legal wrangling, the court ruled that the Will was a forgery, but there are still some experts who believe it wasn't. If it was real, however, the issue of competency then exists because most sane people would not give away millions to strangers.
5. WHAT IS A STATUTORY WILL?
Many states have created Statutory Wills. These Statutory Wills comply with all of the terms for a valid Will in the state. They are pre-printed blank Wills on which the testators simply fill the blanks, sign and have notarized. Nearly all states have approved Statutory Wills for their citizens which will be sold in stationery and office supply stores. A Statutory Will still has to be probated the same as any other Will.
It is important that whenever a pre-printed do-it-yourself Will is used that the person pay
particular attention to detail. A telling example of this is an actual case where a woman
used a pre-printed Will. She was unmarried and had lived for 30 years with a man. She
had a child whom she had not seen for over 30 years. She left everything to her male
companion in the Will. Unfortunately, the Will she had bought and used was titled "Single
Without Children." Her son filed a claim as a pretermitted heir and was awarded her
entire estate. The man who had been with the decedent for 30 years received nothing
because the woman chose the wrong pre-printed Will.
6. WHAT HAPPENS IN A PROBATE IF A WILL IS LOST?
If a deceased person's Will cannot be found, the general presumption in law is that the person destroyed it. The estate will be distributed in accordance with the state's laws of intestacy. It is next to impossible to prove the existence of a missing Will and what it contained to the satisfaction of a court. If an heir can do so and also convince the court that the Will was inadvertently destroyed, the court might possibly distribute the estate as intended. Example: George made a Will and gave a copy to a friend and placed the original Will in his son's house, which was destroyed by fire. The court might distribute the estate according to the copy. The evidence needed to prove to the court that the deceased did not destroy a missing Will is overwhelming.
The better tactic is for the person to sign two duplicate Wills with a general provision stating, "I have executed this last Will and testament in duplicate with one copy being held by my attorney. On my death if the Will in my possession cannot be found, it is not to be presumed that I revoked it. The Will in the possession of my attorney can be admitted in probate and treated as though it was the Will in my possession."
Because a lost Will is presumed to have been revoked, a probate court will not accept a
copy of a Will into probate unless it can be shown to its satisfaction that the original Will
was not destroyed by the deceased. The general presumption is that the decedent revoked
the Will if it is missing. Producing a copy of the Will proves the contents of what was in it
but does not prove that the deceased did not revoke it. Example: A fire kills the testator
and destroys the Will at the same time. It then falls upon the heirs to prove that the
testator did not destroy the Will prior to the fire. Therefore, execute the Will in duplicate
with a clause that if the Will is not found in the deceased person's possessions, it is not to be
presumed to have been destroyed.
7. WHAT IS LEGAL COMPETENCY TO MAKE A WILL?
In order to create a Will that is valid, the testator must be legally competent to do so. The issue of competency is critical when determining the validity of a Will. Will contests based upon competency are the most difficult cases in the law to win. The creator of the Will is dead, and the intent of a deceased testator has to be proven by extraneous and parol evidence that:
1. The testator was an adult or emancipated minor.
2. The testator knew the nature and quality of his estate.
3. The testator knew those who were the natural objects of his bounty (must have known his or her family).
4. The testator was mentally competent and not suffering from any insane delusions as pertained to the members of his family.
5. The testator was not on mind-altering drugs or alcohol when the Will was executed.
6. The testator knew that he was making a Will.
If these elements are not met, the Will is invalid no matter how many witnesses were present when it was executed. Competency is interesting because it does not have to be permanent. A person can be insane, have a temporary return to sanity, sign the Will and relapse into insanity with the effect that the Last Will and Testament will be valid.
The issue of competency most commonly arises when an elderly person creates a Will close
to the time of death or while under some type of medical treatment that might cloud
judgment. Most Will contests arise by someone claiming the decedent was tricked into
signing a Will.
8. WHAT IS INTESTACY?
A person is said to have died intestate if that person died without having executed a valid Will. The estate of a decedent whose Will is declared invalid will be treated as if he died without a Will. An unemancipated deceased minor's estate will be treated as though the minor died intestate. Minors cannot write a valid Will. If a Will is declared invalid for any reason (failure to be witnessed, having improper witnesses, being under age, lacking mental capacity, etc.), the decedent's estate will be distributed as though he died without creating a Will.
9. HOW IS AN INTESTATE ESTATE DISTRIBUTED?
When a person dies intestate, the estate usually is divided among the immediate family as follows:
1. If there is a spouse and a child, the estate is divided evenly between the two.
2. If there is a spouse and more than one child, one third of the estate goes to the spouse, and the rest is divided among the children.
3. If there is a spouse and parents and no children, the estate is split between the spouse and parents.
4. If there are parents and no spouse or children, it goes to the parents.
5. If there are no parents, spouse or children, the estate goes to any brothers and sisters.
The probate court will keep searching for heirs until it finds someone to receive the estate. To find an heir to Howard Hughes' estate the court ultimately found a distant cousin by adoption several times removed.
10. WHEN IS A WILL DECLARED INVALID?
A probate court will declare a person's Last Will and Testament invalid when:
1. The testator was an unemancipated minor, usually under eighteen years of age.
2. The testator did not sign it or have enough witnesses, or the witnesses were heirs and thus disqualified, or the witnesses were minors. In most states people named in a Will as receiving property cannot be witnesses. Their signatures are invalid. If there are not two, and in some cases three, good witnesses, the Will is declared invalid.
3. The testator was mentally incompetent at the time the Will was executed.
4. The testator was forced to make the Will as a result of fraud, duress or undue influence of another.
5. The oral Will was found invalid because it exceeded the statutory amount that can be passed by an oral Will.
6. A Holographic Will was not entirely in the handwriting of the testator or not signed or not dated.
When a Will is declared invalid, the last valid Will of the decedent will be admitted into probate. If there is no valid previous Will, the decedent's estate will be distributed in accordance with the decedent's state laws.
11. WHAT ARE THE CONSIDERATIONS IN MAKING A WILL?
A Will is a final statement of a person about how his estate is to be distributed. A probate court will not employ a Ouija board or seance to determine the testator's intent on issues not covered in the Will. The court will apply the state's law and general equitable principles. One should consider the following factors before making a Will:
1. What specific bequests (gifts) are to be made?
2. How should the remainder of the estate be distributed?
3. Who should be the executor of the estate?
4. Should a bond be required on the executor?
5. What powers should be given the executor? How much should the court supervise the executor?
6. Should adopted or step-children inherit from the estate?
7. Should a testamentary trust be established?
8. Who should be nominated as guardian for minor children?
9. Should any debts be canceled that are owed by heirs, or will they be deducted from the inheritances?
10. If assets are to be sold to pay debts, is there a priority as to how they will be sold?
It simply makes no sense to leave such important matters to be decided by a judge who has no understanding of the decedent or his wishes.
13. WHAT IS COMMUNITY PROPERTY?
A small minority of states (California, Arizona, Idaho, Louisiana, New Mexico, Texas, Nevada, Washington, Wisconsin and to an extent Oklahoma) have laws that state all property acquired by either spouse during a marriage (except by gift, devise or bequest) is jointly and equally owned by both spouses. Earnings by both spouses for their work during the marriage along with retirement benefits earned during the marriage also belong equally to both spouses. Upon death only one half of the community property is placed in the deceased spouse's estate. The other half of the community property remains the sole property of the surviving spouse and is not included in the decedent's probate.
When a spouse dies intestate in some community property states, such as California, the surviving spouse automatically acquires title in the community property without probate. Since community property is considered by law to be owned equally by both spouses, a spouse's estate consists of only one-half of the property. Either spouse can direct through a Will how his half of the community property will be distributed. A surviving spouse is not automatically entitled to the deceased spouse's share of the community property. Example: George and Ellen are married in a community property state. George gives his half of the community property and all of his separate property by Will to his children, not to his wife, Eileen.
If the deceased spouse does not have a Will, his half of the community property will be
distributed by state laws. California has a special provision that requires all community
property to pass automatically to the surviving spouse if a spouse dies intestate. In the
example above, if George died without a Will, then Eileen would inherit automatically, with
no probate, all of George's interest in the community property. A probate would still be
needed for all of George's separate non-community property.
14. WHAT IS STEPPED-UP BASIS FOR PROPERTY RECEIVED FROM DECEDENT?"
The basis (value for tax purposes) of property received from a decedent through a trust or through probate is its fair market value on the date of the decedent's death. Example: A person bought a home for $10,000. On his death it was worth $40,000. The basis of the property when heirs receive it will be $40,000. If the heirs sell it for $40,000, there will be no capital gains taxes due. If the heirs sell the house for $60,000, they will have to pay capital gains taxes on $20,000 (selling price $60,000 minus stepped-up basis $40,000).
Community property is considered owned by both spouses and is given special tax treatment. Under federal law when one spouse dies, the basis of both halves of the community property will be increased to fair market value. This is a great tax advantage. Example: A couple bought a home for $20,000 that had increased to $500,000 upon the husband's death. The basis for the husband's share in the community property is increased to fair market value $250,000. Under the special treatment for community property, the wife's share is also increased to fair market value $250,000. The surviving wife can sell the house for $500,000 without having to pay any capital gains taxes. If, however, the spouses held the house as joint tenants, only the husband's half would have been increased to fair market value. The wife's basis for her half would have remained at $10,000. If the wife later sold the house for $500,000, she would have to pay capital gains tax on $240,000 ($500,000 - $260,000 total basis).
The stepped-up basis for community property is a great tax advantage over mere jointly-held property between spouses.
15. WHO ARE HEIRS?
An heir is someone who succeeds by operation of law to the estate of a person who died intestate. Each state identifies those persons that can be heirs under its laws. A living person has no heirs, only "heirs apparent." Heirs must survive a decedent.
Generally, heirs are the spouse, parents, children, brothers and sisters (immediate family) of the decedent. If none survive the decedent, the laws will extend heirship to the next-of-kin closest in relationship to the decedent.
Generally step-children have no greater rights in a step-parent's estate than those of a total stranger. Unless the step-children were adopted, which legally makes them the same as biological children, step-children are viewed as strangers for inheritance purposes.
If an heir is to receive property from an estate but can't be found, the probate court will order the property of the heir to be delivered to the county treasurer, county administrator or other designated agent. The agent will hold the property for the missing heir until the heir or a person acting for the heir or his estate applies for release of the property. Payment to the designated agent relieves the personal representative of further responsibility to the heir.
When the property consists of real or personal property other than cash, the court may
order the property to be sold, converted to cash and kept in an interest-bearing account. If
the money in the bank account is not claimed within a fixed statutory period, it is
transferred to the state as "escheated property."
16. WHO IS A PERSONAL REPRESENTATIVE?
The person appointed by the court to act for the estate of a deceased person is the personal representative. There are two types of personal representatives: (1) the executor or executrix and (2) the administrator. The executor (a man) or the executrix (a woman) is appointed by the court to represent the estate when the trustor (creator) of the will dies. A person nominates an executor or executrix in the Will, but it is the court that does the actual appointment. If the court is not satisfied with the decedent's chosen representative, it will appoint another. An administrator is a man (administratrix, if a woman) appointed by a court to administer the estate of a decedent who died intestate.
The personal representative is given statutory powers to handle the affairs of the estate in most transactions without court approval. Through his Will the decedent can give the executor more powers and authority to act than are normally contained in the statutory powers conferred by the court. Usually court approval must be sought before real estate can be sold. A testator, however, may require in his Will that the real property be sold. If he does, court approval is not necessary.
The personal representative, whether the executor or the administrator, is responsible for performing the following duties in the probate:
1. Marshals (assembles and inventories) the assets of the estate.
2. Establishes a checking account in the name of the estate.
3. Arranges for appraisal of the assets of the estate, both real and personal property.
4. Seeks payment on any insurance policies owed on the life of the deceased person.
5. Substitutes as the representative of the deceased person in any litigation pending at the time of death.
6. Files any litigation needed to collect debts owed to the estate or to maintain and preserve the estate.
7. Pays all bills, including funeral bills and medical bills for the last illness.
8. Prepares tax returns and pays all federal and state taxes for the estate and the decedent.
9. Submits accounting to the court for review.
10. Petitions the court for authority to distribute to heirs.
11. Distributes to heirs.
12. Applies to the court for final discharge, terminating his authority to act and releasing him from liability.
It usually takes a minimum of six months for a personal representative to do all this. It can take significantly longer. Some estates have been open for years. This is the prime factor in favor of a revocable trust, which can transfer property immediately subject only to the payment of appropriate estate and income taxes.
The personal representative appointed by the court is responsible for the payment of all taxes owed by the estate from the assets in the estate. If the personal representative distributes the estate before payment of all taxes due and owing, the representative may become personally liable for the taxes to the extent of the property transferred. Example: The representative distributes $50,000 to the heirs, and the IRS then determines that an additional $60,000 is owed in taxes. The personal representative may be responsible for any portion of the $50,000 not recovered from the heirs.
17. WHAT IS AN ACCOUNTING?
The personal representative is required to file an inventory with the court when the estate is opened. An inventory is a complete listing of every asset in the estate and its value. While the estate is open, the representative is required to keep track of every penny received or spent by the estate.
Before the estate can be closed, the representative is required to account for every penny that entered and left the estate. There must be a complete accounting for the estate. All of the heirs can agree to waive an accounting. That might be done when the accounting is unnecessary because the heirs trust the executor, or when it will be too costly given the difficulty or expense in performing it. Unless the accounting is waived, the estate cannot be closed.
18.WHAT ARE LETTERS OF PROBATE?
In a probate the court appoints a personal representative. The appointment of a representative is manifested by a court document. The court order appointing an executor in an estate where there is a Will is called "letters testamentary." The court order appointing an administrator in an estate where there is no will is called "letters of administration."
The letters are the official appointment of the personal representative to act for the estate. Once these letters have been issued, the personal representative is legally entitled and indeed obligated to undertake the management of the affairs of the probate estate. No one should ever deal with a person claiming to be the personal representative of an estate without first seeing the letters of appointment.
19. WHAT IS A WIFE'S DOWER'S RIGHT?
Some states still have the ancient common law right of "dower." Under the concept of dower the law gives an interest to the wife in the real property of the husband owned by him at any time during the marriage. The wife's right (dower) was contingent upon her surviving him, and it became an absolute right after she did so. The dower interest was a life estate in one-third of the real property that the husband owned during the marriage.
The wife's dower could not be defeated by the husband during his life or by his Will, and
her interest was not subject to the claims of her husband's creditors. The dower terminates
upon divorce. Many states have abolished dower and replaced it with statutory shares in
the deceased husband's estate.
20. WHAT IS A HUSBAND'S CURTESY RIGHT?
Some states still have the ancient common law doctrine of "curtesy" governing the husband's statutory share of his wife's estate. Curtesy grants the husband an interest in the real property of the wife owned by her during the time of the marriage. The husband's curtesy was contingent upon him surviving her, and it became an absolute right when he did so, provided a child was born during the marriage.
Curtesy entitles the husband to a life estate in all of the wife's real property owned by her
during the marriage. The husband's curtesy could not be defeated by the wife during her
life or by her Will and was not subject to the claims of her creditors. Curtesy terminates
upon a divorce. Most states have replaced the doctrine of curtesy with statutory shares for
the surviving husband in the deceased wife's estate (between a third and a half).
21. WHAT ARE COMMON LAW STATES?
The following are the states that follow the common law marital property rules. In these states a person owns separately and apart from the spouse everything titled solely in his name and everything purchased by his own property, income, or salary. The titles to property actually control who owns. This is different from the law in community property states, which hold that all property acquired by gift, devise, or bequest belongs to both husband and wife. The common law states are:
ALABAMA ALASKA ARKANSAS COLORADO
CONNECTICUT DELAWARE FLORIDA GEORGIA
HAWAII ILLINOIS INDIANA IOWA
KANSAS KENTUCKY MAINE MARYLAND
MASSACHUSETTS MICHIGAN MINNESOTA MISSISSIPPI
MISSOURI MONTANA NEBRASKA NEW JERSEY
NEW HAMPSHIRE NEW YORK N. CAROLINA N. DAKOTA
OHIO OKLAHOMA OREGON S. CAROLINA
PENNSYLVANIA RHODE ISLAND S. DAKOTA UTAH
TENNESSEE VERMONT VIRGINIA W. VIRGINIA
WYOMING
Every common law state has its own laws determining the statutory share that a surviving spouse receives from a deceased spouse's estate. In the following states the surviving spouse receives a one-third life estate. This is the right to use the property to obtain income but not the right to sell it: Connecticut Kentucky Rhode Island Vermont
In the following states, the surviving spouse's percentage varies, depending on whether the deceased spouse had children. The surviving spouse usually gets at least one-half of the estate, one-third if there are children.
Alabama one-third of the augmented estate.
Alaska one-third of the augmented estate.
Colorado one-half of the augmented estate.
Delaware one-third of the estate.
Dist. of Columbia one-half of the estate.
Florida 30% of the estate.
Hawaii one-third of estate.
Iowa one-third of estate.
Maine one-third of the augmented estate.
Minnesota one-third of estate.
Montana one-third of augmented estate.
Nebraska one-third of augmented estate.
New Jersey one-third of augmented estate.
New York one-third of augmented estate.
North Dakota one-third of augmented estate.
Oregon one-fourth of the estate.
Pennsylvania one-third of the estate.
South Dakota one-third of the augmented estate.
Tennessee one-third of the estate.
Utah one-third of the estate.
W. Virginia up to one-half of the augmented estate. In the following states, the surviving spouse's percentage varies depending on whether the deceased had children. If there are no children the surviving spouse usually gets one-half of the estate but only one-third if there are children.
Arkansas Illinois Indiana Kansas Maryland Massachusetts Michigan Missouri New Hampshire N. Carolina Ohio Oklahoma
S. Carolina Virginia Wyoming
Georgia is unique. Instead of a fixed share, Georgia requires the deceased spouse's estate to support the surviving spouse for one year. This might or might not exceed the one-third of the estate usually given in other states.
Most states base the statutory share on the augmented estate of the deceased spouse. The augmented estate consists of everything owned by the decedent: joint-tenancy property, trust property, etc. The amount of the statutory share is calculated from the augmented estate. The probate court has the power to cancel joint tenancies and trusts created by the deceased spouse in order to give the surviving spouse a statutory share. The purpose of using the augmented estate is to ensure the deceased spouse passes a statutory share of the estate to the surviving spouse. Not all states, however, use the augmented estate. Instead, other states simply rely on the property actually undergoing probate.
22. WHAT IS THE ROLE OF AN ATTORNEY IN A PROBATE?
An attorney is not required to probate an estate. In a simple probate a representative with normal intelligence and no legal training can handle the probate procedures quite well. There are a number of do-it-yourself probate manuals on the market that can assist a non-lawyer in the probate. An attorney will be needed if there is any type of lawsuit against the estate by third parties, such as a creditor's claim or a will contest. Most states have laws stating that only attorneys can bring or defend a lawsuit in court for another. Therefore, the personal representative cannot act as an attorney in a court unless he is a licensed attorney.
23. WHAT ARE ESTATE AND INHERITANCE TAXES?
A common misconception is that probate exists as a means for the state or federal government to collect taxes. That is not the case. Estate and inheritance tax rates are based on the size of the estate and the relationship of the heirs to the deceased. It is irrelevant to the taxing entities whether or not a probate is conducted when determining the tax liability.
For example, assume that a person gives $800,000 at his death to his children. It makes no difference if the $800,000 comes to the children from probate or through a revocable trust. There is greater cost if the estate is probated rather than passing it through a trust, but the tax rates are the same. The tax is on the money and property distributed after death, not whether or not it comes from probate.
Some states will freeze jointly-held property (such as bank accounts, real estate and brokerage accounts) until the taxing entities have time to assess the value of the decedent's interest in the property. In particular, New Jersey and South Carolina require 10 day's written notice to taxing agencies before securities, deposits or assets of a decedent may be transferred outside of probate. In the states that freeze the assets pending a tax determination, a limited amount may none-the-less be transferred to a spouse or children without having to give the required notice. New Jersey permits $5,000 to be transferred to the surviving spouse without having to wait the required 10 days.
The purpose of permitting limited transfer for use by the family is to keep the spouse and family from destitution while the taxing authorities determine what amount of tax is owed. It is markedly unfair to seize the joint property of one person merely because the other joint tenant died. Consequently, the notice period is usually small.
There is a lifetime federal unified credit for gift and estate taxes of $1,000,000 through 2004. Then for estates it rises to an unlimited amount in 2010 and then reduces to $1,000,000. For gifts, the exemption remains at $1,000,000. This means that no federal estate taxes will be owed unless an estate exceeds the unused portion of the unified credit (the unified credit amount minus the value of lifetime gifts). Under the Internal Revenue Code, a personal representative can file a request with the IRS (and sometimes the state taxing agency) for a final assessment of the taxes owed by the estate. The IRS has three years in which to assess additional taxes. If the personal representative makes a request for a prompt assessment, the IRS has to complete the assessment within 18 months. After the assessment is done, the personal representative can pay the tax, distribute the remaining estate to the heirs and be discharged without any liability for future taxes.
24. SHOULD JOINT WILLS BE USED IN ESTATE PLANNING?
Joint Wills are trouble and should usually be avoided. The problems are obvious. A married couple makes a Joint Will; one spouse dies; the survivor wished to change the Will; the ultimate beneficiaries, usually the children, object. Whether the surviving spouse can alter a Joint Will depends both on the language of the Will and the state law where the Will is probated. If the Will states that after the death of one spouse the survivor cannot amend or revoke, most states would enforce that provision on contractual grounds. These states take the position that the deceased spouse would not have executed the Joint Will had he known that it could be changed after death.
If the Joint Will does not have the language making it irrevocable and unamendable, the
court Will try to decide the intent of the parties when they drafted it and base its decision
on that determination. There simply is not any real justification for running this type of
risk. Individual Wills are relatively cheap, especially statutory Wills, so cost should not be
the determinative factor in deciding upon use of a Joint Will.
25. HOW IS A WILL CHANGED?
A "codicil" is an amendment to a Will. It does not revoke the entire Will, but it does change certain provisions. The probate court will read the Will and all codicils together to determine the final intent of the deceased. A codicil is, in essence, a mini-Will. It is prepared, signed and witnessed in the same manner as an ordinary Will. Particular care must be taken in writing a codicil to define just what changes are to be made in a Will. If an heir is to be removed or added, it must be clearly stated. A codicil should be kept together with the Will to assure that it will not be overlooked when the estate is probated. A codicil is governed by the same rules as a Will. Therefore, if a codicil is missing, it will be presumed to have been previously revoked unless conclusively proven otherwise.
All changes to the Will must comply to the same formalities used in making a codicil or new Will. A person who simply deletes old provisions or inserts new clauses brings the validity of the Will into question. A person can revoke his Will at any time by another Will or simply by destroying the old Will. Some states would consider the writing of the new clauses an effective revocation of the old Will yet ineffectual in creating a new Will.
A person should never write a change on the face of a Will. All changes to a Will should be by a valid codicil or a new Will in accordance with the requirements of the state of domicile. Given the ease with which new Wills can be created, especially Statutory Wills, there is no reason to risk invalidation of an existing Will by writing on it. Just prepare a new Will or a codicil.
26. WHEN SHOULD A WILL BE CHANGED?
Unless changed, once a will is drafted, it is valid forever. As time passes, a person's needs and circumstances change. A will drafted years earlier may no longer fulfill the current needs and desires of the person. A will should be changed to reflect the true intent of the person.
The following changes in a person's life should immediately cause a review of the person's will:
1. A change in marital status. Marriage makes the new spouse a pretermitted heir. A divorce might not cut the ex-spouse out of the will.
2. Children are born or adopted. State laws allow unmentioned children to claim a portion of an estate as pretermitted heirs. These children, however, might not receive under state law what the decedent would have given them.
3. Step-children. In most states, step-children of a deceased have no rights to inherit under a step-parent's estate. Therefore, if a step-parent wishes to make dispositions to a step-child, that intent must be specifically stated in a Will.
4. The value of the estate changes and the earlier gifts were too much, too little or there is now enough to give to others as well.
5. The intended heirs, executors, guardians or trustees have died.
6. Changes in estate or inheritance tax laws that make changing the will advisable to save on taxes.
7. The necessity for testamentary trusts for surviving spouse and children no longer exists.
A Will should be reviewed every few years for possible changes. Tax laws change frequently, and wills should be reviewed to ascertain their effect on the estate.
27. CAN A CHILD BE DISINHERITED?
Most states permit a parent to disinherit a child: prevent the child from receiving anything from the parent's estate. While possible, the intent to specifically disinherit a child must be detailed in writing. The laws of all states presume that a parent does not intend to disinherit a child unless specifically stated in the will. If a child is simply not mentioned in the will, the court will presume it was an error and award the child his intestate share of the estate.
Louisiana has several probate laws different from the rest of the nation. While the rest of the nation derived its basic law from English Common Law, Louisiana derived its law from French Napoleonic Code. Louisiana permits the disinheriting of a child only on one of 12 different grounds. Therefore, in Louisiana a parent cannot disinherit a child, no matter how specifically the intent to do so is stated in the will, unless one of the 12 grounds are met. These grounds run from a minor marrying without consent to planning to murder a parent.
28. WHAT ARE PRETERMITTED HEIRS?
A probate court will presume that a parent did not intend to disinherit a child unless the intent is specifically stated in the will. This comes into play in the pretermitted heir situation. A pretermitted heir is an heir, usually a child, who is not mentioned in the will, but who would have inherited under a state law if there had been no will. When the court finds the existence of a pretermitted heir, the court will award that heir his intestate share of the estate. For example, assume that Mary wrote a will leaving her estate to her three children. Mary later had a child out of wedlock and died shortly thereafter. Mary's will did not mention the new baby. The court, however, will find the baby a pretermitted heir and award the baby her intestate share of the estate which is one-fourth.
A step-child is not a pretermitted heir and has no right of inheritance under the law. California has created a novel statutory provision that permits a person to claim a defacto adoption if certain elements are met. California requires there be a parent-child relationship between the people and that an adoption was not possible because of some legal impediment. If these elements are met, the court will treat the person the same as an adopted child and award him an intestate share of the estate.
As with a pretermitted heir, a court will presume that a deceased spouse did not intend to disinherit a surviving spouse unless it is specifically stated in the will. A pretermitted spouse is a surviving spouse who is not mentioned in the deceased spouse's will. In all states a surviving spouse will inherit from a deceased spouse's estate, under each state's laws. It matters not that the surviving spouse is pretermitted or disinherited by a clause in the will, the state law will provide for inheritance. When the court finds a pretermitted spouse, it will award that spouse the intestate share of the estate. Example: Mary wrote a will leaving her estate to her three children. Mary then remarried and died 20 years later. Mary's will did not mention the husband. The court will find the new husband a pretermitted spouse and award him his intestate share of the estate, usually a third.
29. WHAT IS THE EFFECT OF A DIVORCE ON A TESTATOR'S WILL?
A few states, like California, have enacted laws that specifically prevent an ex-spouse from inheriting under a deceased ex-spouse's will that had been drafted at the time of their marriage. In most states, however, an ex-spouse will be entitled to share in the estate where the decedent failed to rewrite the will after the divorce. Most states take the view that the decedent must have wanted to make gifts to the ex-spouse because the will was not changed. Those courts will honor that perceived intention.
No one should ever assume that a divorce removes the rights of the ex-spouse to inherit
under a will. In cases of divorce, a new will or a codicil should be drafted to state that the
ex-spouse is not inheriting under the will. A new will should be written as soon as the
divorce papers are contemplated and should certainly be in place when the divorce is filed.
Some die during a divorce (in fact its been the basis of many mystery movies). The
marriage is still legal. Thus the surviving spouse receives property under the deceased
spouse's old will even though granting the divorce would have invalidated the will.
Example: An attorney defended a woman charged with the murder of her wealthy
husband. The woman had shot her husband six times. He defended her successfully.
Because it was not murder, she inherited his estate of $26 million.
30. WHAT IS AN ANCILLARY PROBATE?
An ancillary probate is a proceeding conducted in a state other than the state that was the decedent's permanent residence. Every state is responsible for probating the real and personal property located within it. If a deceased owned property in more than one state, a probate may be required in each such state in addition to the state of the decedent's domicile. Example: Robert died with a home in Georgia and another in Alabama. Probates must be opened in both Georgia and Alabama for the house in each state. If a decedent owns oil and gas leases in six states, there will be ancillary probates in five of the states plus a probate of the majority of the decedent's estate in the state of domicile.
Additional problems arise if the states have differing requirements for a valid will. Example: The domicile state requires two witnesses, but the state with the ancillary probate requires three witnesses. The will may be invalid in the ancillary probate state, and the property located therein will be distributed by its law of intestacy.
31. WHAT IS A WILL CONTEST?
A Will contest is a legal proceeding whereby someone, usually an heir or beneficiary, attacks or contests the validity of a will or a distribution made under it. A will contest results in a trial before the court to determine if the will was validly executed and should be enforced. The main contentions for contesting a will are:
1. Improper execution.
2. Lack of competency.
3. Lack of intent to make a will.
4. Pretermitted spouse.
5. Pretermitted heir.
6. Fraud, duress or undue influence.
Generally, only two witnesses are needed for a will, but a few states have rather eccentric requirements. Vermont requires three witnesses; Louisiana follows the Napoleonic Code requiring three witnesses, one of whom must be a notary public. These factors are important if there is a possibility of an ancillary probate. If the will might be probated in another state, it must comply with that state's and the decedent's home state's requirements for a valid will. In the case of an ancillary probate, if the will does not comply with the ancillary state's requirements for a valid will, it will be declared invalid and the estate distributed by the laws of intestacy.
All states require that proof be submitted that the decedent actually signed the will. Some states actually require some or all of the witnesses to come before the court and testify about the signing of the will. Other states, such as California, permit the witnesses to sign a declaration called a proof of subscribing witnesses in which the witness swears under penalty of perjury that he actually saw the testator sign the will.
A few states, like Louisiana, permit witnesses to sign the will before a notary public. When this is done, the will is said to be self-authenticating, and the witnesses need not appear in court to validate their signatures. When the witnesses are dead or unavailable and their signatures were not notarized, some states, California for instance, permit handwriting experts to testify that the decedent signed the will. This is a last resort and is difficult if the decedent had a long illness that affected his signature. It is a good idea to use witnesses who are younger and in better health than the testator.
If the will is successfully contested, the probate court may invalidate the entire will or only the challenged portion of it. If the entire will is invalidated, the last valid will is reinstated. If there is no such valid prior will, the estate will be distributed pursuant to the laws of intestacy.
32. WHAT ARE CREDITOR CLAIMS?
After a probate is opened a notice of the probate proceeding is published in a newspaper of general circulation in the area where the decedent lived. This publication informs creditors of the decedent that a death has occurred. The publication also informs the creditors that they have a fixed period of time ranging from four to six months to file claims with the probate court for the amounts they are owed.
If any creditor that was given valid notice, directly or by publication, fails to file a claim within the statutory period of time, he is barred from recovery. The reason for having a cut-off period is to close the estate on a certain date. Otherwise, the probate would be open forever while old unpaid claims were being submitted. Once filed, the executor must approve or reject the claim. If the claim is approved, it will be paid from the estate at the closing. If the claim is rejected, the creditor has a fixed time to file a lawsuit to collect the claim. After that time, collection is permanently barred.
This creditor period is the main reason for the delay in closing a probate and distributing the estate. The advantage of a revocable trust is that the property is transferred immediately. The disadvantage is that the creditor claims follow the estate. The claims will be paid. Still it makes better sense to pay them immediately through a trust rather than wait months for the action to work its way through the courts.
Funeral expenses are paid out of the estate. They are granted a priority over other bills. They are among the first bills paid once the estate has been marshaled (assembled). Many people today make their own funeral arrangements by paying for the service ahead of time. Many states, such as Ohio, Nevada, South Dakota and Washington require money paid under a pre-need plan to be placed in a trust fund. In the event the funeral home goes out of business, the money is returned to the client. Sometimes a person purchases a funeral policy to pay the funeral expenses, and the insurance company can pay insurance proceeds directly to the funeral home. Some states, such as Maryland and Tennessee, require all payments on funeral policies to be made to the estate and forbid funeral homes being named beneficiaries on such policies.
If the estate is not large enough to pay all of the creditors, the personal representative will sell the secured property. The representative will apply the proceeds from the sale of the secured property to the secured creditors: those holding loans secured by designated property. If the proceeds are not enough to cover the claims, the secured creditors will have an unsecured claim for the unpaid balance. Any amount received in the sale that exceeds the amount of the claims is paid to the estate.
After claims of the secured creditors are satisfied, all the unsecured creditors divide the
remaining estate according to their percentage of claims against the estate. Example: Ed
dies owing George $50,000 secured by a printing press. The executor of the estate sells the
press for $30,000 and pays it to George. The remaining $20,000 becomes an unsecured
debt of George against the estate. Ed's estate totals $100,000 with $200,000 in unsecured
claims. George's $20,000 unsecured claim is 10% of the total unsecured claims. Therefore,
George receives 10% of the unsecured estate, which is $10,000.
33. WHAT IS A FAMILY ALLOWANCE?
Many states, like California, permit a surviving spouse or minor children to claim a fixed amount from decedent spouse or decedent parent's estate free from all creditor claims. This family allowance can be in addition to anything bequeathed in the will. In some states if an heir elects to take a family allowance, the heir cannot take under the will.
The family allowance can also be taken despite the terms of the will. The will may specifically give the wife nothing, but the wife may still be entitled to the family allowance under state law. A family allowance was one of the means used by the states to replace dower and curtesy. In a small estate the family allowance is the only way that the family may receive anything from the decedent's estate.
34. WHAT HAPPENS WHEN BOTH SPOUSES DIE SIMULTANEOUSLY?
A simultaneous death occurs when both the husband and wife die together so close in time that it cannot be ascertained with certainty who died first. When there is simultaneous death, each spouse's estate is distributed as though the other spouse has died first. The husband's estate passes to his heirs in the manner it would have passed had the husband actually died first. Jointly held property is divided equally among the two estates. Every state except Alaska and Louisiana have adopted the Uniform Simultaneous Death Act, which covers this situation.
Many Wills avoid this problem altogether by simply containing clauses that require the spouse or other heir to survive the testator by a fixed period of time in order to inherit, usually 60 days.
35. HOW LONG DOES IT TAKE TO PROBATE AN ESTATE?
The time required to settle an estate varies from state to state. It depends on whether there is litigation or creditor claims. In California it takes a minimum of six months to close an estate. Four months is the statutory creditor claims period, and the other two are the general period of public notice for opening and closing an estate.
Some states require that an executor actually close the estate within a fixed period of time.
In Kansas the mandatory time to close an estate is nine months. In Wyoming, one year is
the time period. Where litigation is involved years may pass before an estate can be closed.
If a revocable trust is used, there is no estate to close because the trust estate passes
immediately upon death to those next entitled to receive it under the terms of the trust.
36. WHAT IF THE FINAL JUDGMENT OF DISTRIBUTION?
After the accounting has been performed and either accepted by the court or waived by the heirs, the court will order which creditor claims are to be paid and how the final distribution to the heirs is to be made. The final judgment acts as a deed for real property. Recording the final judgment is the same as having received a deed from the personal representative for the real property distributed under the final judgment.
37. HOW IS AFTER-DISCOVERED PROPERTY TREATED?
An estate can always be reopened if property not covered by the terms of the final judgments have what is called an omnibus clause that states how such after-discovered property is to be distributed, thereby avoiding reopening the estate. Generally such an omnibus clause states, "The remainder of the estate along with any undiscovered property shall be distributed as follows:..."
When an omnibus clause is used in the final judgment of the probate court, there is usually
no reason to reopen the probate because of after-discovered property. Finding
after-discovered property may result in additional estate or inheritance taxes. The taxes go
with the property. If additional taxes are owed because of the existence of this newly
discovered property, the heirs receiving the property will be responsible for the taxes to the
extent of the value of the assets received from the estate.
TABLE OF CONSANGUINITY
FIGURES INDICATE THE DEGREE OF RELATIONSHIP TO THE DECEASED
PERSON.
The estate normally goes to children, grandchildren or great-children
under a state's law of intestacy before the Table of Consanguinity
is utilized.
DECEASED ---->PARENTS ---->GRANDPARENTS ----->GREAT GRANDPARENTS ----->GREAT GREAT
PERSON GRANDPARENTS
1 2 3 4
.
.
CHILDREN BROTHERS UNCLES GREAT AUNTS GREAT GRAND
SISTERS AUNTS UNCLES UNCLES AND AUNTS
2 3 4 5
.
.
GRAND NIECES FIRST FIRST COUSIN FIRST COUSIN
CHILDREN NEPHEWS COUSINS ONCE REMOVED TWICE REMOVED
3 4 5 6
.
.
GREAT GRAND GRAND NIECES FIRST COUSIN SECOND COUSINS SECOND COUSIN
CHILDREN NEPHEWS ONCE REMOVED ONCE REMOVED
4 5 6 7
GREAT GRAND FIRST COUSIN SECOND COUSINS THIRD COUSINS
NIECES AND TWICE REMOVED ONCE REMOVED
NEPHEWS
5 6 7 8
FIRST COUSIN SECOND COUSINS THIRD COUSINS
THRICE REMOVED TWICE REMOVED TWICE REMOVED
7 8 9
SECOND COUSINS THIRD COUSINS
THRICE REMOVED TWICE REMOVED
9 10
THIRD COUSINS
THRICE REMOVED
11
CHAPTER 2
Death is the great equalizer. The only other thing that cannot be avoided is taxes. Even the Ancient Egyptians were unable to conquer the "hereafter." Since we cannot avoid taxation, we must live with it and hopefully die in a manner that will minimize the taxation following our deaths.
There are few people who believe that the government should take all of a decedent's property upon death. Unfortunately, the government does not always feel that way. Not so many years ago, a Democrat representative stated on the floor of the House of Representatives that the people were only entitled to keep that money and property that the government says that they can keep. In that vein, the Democrats have proposed in 1992 House Resolution 4848 which called for taxing all estates over $200,000 in value. If HR 4848 had passed, a $600,000 estate would have had to pay nearly $60,000 in additional taxes. Fortunately, HR 4848 never became law and in the 2001 Tax Act, the unified credit was actually increased to $1,000,000 through 2004 and increases to unlimited in 2010 before dropping back to $1,000,000 in 2011.
Estate planning is a legal term of art. It covers anything that a person deliberately does to manage his estate while living and which oversees its distribution after death. Wills, trusts, joint tenancies, gifts and summary probates are the main instruments used in estate planning. The questions in this chapter serve to educate and guide the reader to the form of estate planning that is most useful to his given circumstance.
In order to present as full a discussion as possible, questions regarding revocable trusts as estate planning tools are discussed even though this volume does not address revocable trusts. The second volume on estate planning specifically deals with the use of revocable trusts for estate planning. In the second volume are the following full, complete and easy-to-use revocable trusts along with all of their necessary supporting documents:
(a) Individual trusts.
(b) Joint trusts for married couples.
(c) A-B By-pass trusts.
(d) QTIP trusts.
The ESTATE PLANNING II is designed to be the most complete and user-friendly self-help revocable trust book on the market. Any person with an estate of $60,000 or more should consider the use of a revocable trust for estate planning purposes.
This chapter deals with the most common questions asked by people when contemplating whether they need to implement an estate plan. The questions, herein, cover the general field of estate planning and help inform the reader of the various options available.
1. WHAT IS AN ESTATE PLAN?
An estate plan is a general term for the procedure by which a person intends to preserve the assets of his estate during life and distribute them after death.
The main considerations in estate planning are the avoidance of probate, reduction of estate and inheritance taxes and the quick distribution of the estate to the designated heirs.
A complete estate plan considers the various methods for the preservation of the estate
during life by maximizing income while reducing to the extent possible, given the
circumstances of the individual, the amount of income taxes that must be paid.
2. WHAT ARE THE COSTS OF PROBATING A WILL?
The costs incurred in probating a will are large. A probate is usually one of the most expensive expenditures made by a person. An old joke which is wryly true is that if the person weren't already dead, the cost to probate his estate would kill him. Probate costs include court fees, appraisal fees, attorney fees and executor fees. Court costs and appraisal fees are modest: usually a couple of hundred dollars for an average estate. The real cost is for the attorney and executor fees.
The maximum amount of attorney and executor fees are set by statute and approved by the court. They are based upon the size of the estate (value of the property to be probated) and increase as the estate increases.
In California, for example, attorney and executor fees are calculated as follows:
(1) Four per cent (4%) of the first $15,000; maximum $600.00,
(2) Three per cent (3%) of the next $85,000; maximum $2,550.00,
(3) Two per cent (2%) of the next $900,000; maximum $18,000.00, and
(4) One per cent (1%) of the next $15,000,000, and one-half per cent (.5%) thereafter.
An estate of $100,000 probated in California would pay maximum attorney and executor fees of $6,300.00: $3,150 each to the executor and attorney. This is a maximum fee. The attorney and executor can agree to take less or no fee at all.
The avoidance of probate fees is a major inducement for implementing an estate plan. With a revocable trust there are no probate fees because the estate passes immediately to the designated beneficiaries in the trust. No court proceeding is needed to transfer the property of a trust so as such no attorney s needed.
3. HOW CAN PROBATE BE AVOIDED?
There are several means available for a person to utilize in order to avoid having to probate an estate. These probate avoidance vehicles are:
(1) Summary probate proceedings, if available in the decedent's state. A summary probate is an abbreviated procedure for clearing and transferring small estates or entire estates to a surviving spouse. Many states have adopted special procedures to by-pass the expense and long delay in probating such estates.
(2) Giving the estate away while alive.
(3) Placing the property in joint tenancy with the proposed heirs. Upon death, title for the property passes immediately without probate to the surviving joint tenants. Real property held in joint tenancy passes to the survivors without a probate by the recordation of a notice of the death of a joint tenant.
(4) Placing the estate into a revocable trust that passes the estate to the designated beneficiaries immediately upon the decedent's death. This is the most popular form of estate planning because it is fast and bestows the maximum amount of control over the estate in the hands of the present owner.
In order to determine the best type of estate plan best suited to an individual's
circumstances, the person must understand the size of the estate, how he wishes to
distribute it and the amount of control he wishes to relinquish in order to create the estate
plan.
4. WHAT ARE THE DISADVANTAGES OF USING JOINT TENANCIES FOR AVOIDING PROBATE?
There are three main disadvantages in forming a joint tenancy:
(1) Putting the property into joint tenancy is an immediate gift of half or more of the property. This means that property placed into joint tenancy becomes attachable to satisfy the debts of the other joint tenants upon the creation of the joint tenancy. For example, assume a house was placed in joint tenancy with a child. A creditor of the child gets a judgment. The creditor can seize and sell the child's half interest in the house.
(2) There may be gift taxes due on the gift if the value of the gift exceeds $10,000 and the unified credit has been used by previous gifts. By the way, there is no federal gift tax on gifts to a spouse if the spouse is an American citizen.
(3) There is no stepped-up basis for property placed in joint tenancy. The basis of the property for the donee is the same as for the person who made the gift. On the other hand, property obtained through a probate or a revocable trust has its basis raised to fair market value and can be immediately sold with no income gain and thus no capital gain tax.
The main disadvantage in creating a joint tenancy is that half or more of the property is
relinquished immediately. Example: A parent puts a house in joint tenancy with a married
son. The son gets a divorce. The wife might, in some states, be awarded the son's interest in
the house which was something the parent never intended to do.
5. WHAT IS A DURABLE POWER OF ATTORNEY?
A general power of attorney is a written document that gives a person (called the attorney in fact) the authority to act on the principal's behalf. A general power of attorney lapses (becomes invalid) when the principal becomes incompetent or dies. At the time it is needed most, when the principal is no longer able to act for himself, a general power of attorney lapses, and the right of the attorney in fact to act for the principal ceases.
To address this situation, most states have adopted the Uniform Durable Power of Attorney Act. Under the Act, a durable power of attorney will continue in full force and effect even though the principal subsequently becomes incompetent. A durable power of attorney must contain specific language stating the intent of the principal for the power of attorney to continue during the period of incompetency and incapacity.
A durable power of attorney has the effect of eliminating and replacing the necessity of a voluntary conservatorship. A durable power of attorney can also give the attorney in fact the power to make all decisions or just specific health care decisions for the principal in the event the principal becomes unable to do so.
Because of their importance to estate planning, durable powers of attorney have been given
their own chapter in this book.
6. WHAT IS A LIVING WILL?
A living will is not a Will for probate purposes. Rather, it is a document that serves as a directive to a treating physician and the world at large that the person executing it does or does not want to be kept alive using extraordinary means. A living will is used to ascertain the intent of the person when he is unable to make the health care decisions at the time it is necessary to do so. Living Wills, including samples, are discussed in the durable power of attorney chapter.
Without the existence of a living will stating a contrary intent, a court will presume a person wanted extraordinary means used to be kept alive. The court will order extraordinary means to be used to keep the person alive, even over family objections.
Living Wills should be used in addition to durable powers of attorney for health care in
order to assure that a person's wishes are most likely fulfilled in this most dire of situations.
7. WHAT IS A POUR-OVER WILL?
A pour-over will is a special will used in conjunction with a revocable trust. After the trustor dies, the pour-over will places all property into the trust that the decedent forgot or failed to place while alive. Unfortunately, property not placed into the trust prior to the trustor's death may require a probate if the size of the assets is large enough that summary procedures cannot be used.
In a real case, the trustor forgot to place a piece of property which he owned in Hawaii into a California trust which the trustor had created. The executor of the Pour-Over Will was required to open a Hawaiian probate in order to get permission to put the property into the trust. Having to probate the non-trust property needlessly cost the estate $11,000. The trustor could have done it during his life for the cost of recording a deed into the trust usually about $10.
A simple example of the need of a Pour-Over Will would be if a person hits a lottery for
$50,000,000 and drops dead in the excitement. The Pour-Over Will operates to place the
money into the trust after it has been probated. Once placed in the trust, the money will be
managed in accordance with the trust terms.
8. WHAT IS A MARITAL DEDUCTION?
Under federal law, there is no federal gift or estate taxes on property transferred between spouses. This is an unlimited credit that has only two exceptions:
(1) It must be an actual gift. If the gift is in trust, then all of the income must go to the spouse.
(2) The spouse receiving the gift must be an American citizen.
Gifts to a non-citizen spouse are not eligible for the unlimited deduction but are eligible for a $110,000 annual exclusion under Section 2523 of the Internal Revenue Code. Property passing from an American spouse to an alien spouse, after death, does not qualify for an unlimited marital deduction either. Special tax rules apply for such transfers, and a tax consultant should be consulted if the estate of the American spouse exceeds $675,000.
Therefore, a person can generally pass his entire estate to a surviving spouse without
incurring any federal estate taxes. This may not ultimately be the best estate planning. If
the property given to the surviving spouse boosts the surviving spouse's estate over the
unified credit amount, the surviving spouse's estate will have to pay estate taxes. No gift to
a surviving spouse that boosts his estate over the available unified credit should be made
until the decedent's unified credit is depleted as discussed below.
9. WHAT IS THE UNIFIED CREDIT?
Every person is permitted to transfer assets totaling $1,000,000, which gradually rises to an unlimited amount in 2010 and back to $1,000,000 in 2011 under the Tax Relief and Reconciliation Act of 2001 by death without incurring an estate tax under federal law. There is imposed a gift tax through 2010 equal to the estate tax for gifts made during that period.
Under the Tax Act of 2001, Congress imposes a gift tax to restrict the transfer of income producing property from high income to low income taxpayers after the estate tax is eliminated. The gift tax exemption beginning in 2010 is $1,000,000. So even though transfers of property after death can be made tax free in 2010 for at least one year, unless made the estate tax elimination is made permanent by Congress, a gift tax on the transfer of property while alive will remain. The gift tax rate imposed in 2010 under the 2001 Tax Act is equal to the top individual tax rate at the time of the gift.
About half of the states impose their own estate and inheritance taxes. These taxes should also be considered in estate planning. The Internal Revenue Code permits a small credit for state death taxes to be applied against the federal estate.
The significance of the unified credit is that it permits a husband and wife to give to their
children a total combined estate of $2,000,000 trhough 2003 before incurring any estate
taxes. A person giving his entire estate to a surviving spouse is not taking advantage of the
unified credit. Not using the unified credit is ill-advised when making the gift to the
surviving spouse pushes the value of that estate over the unified credit amount and subjects
it to the payment of federal estate taxes on the surviving spouse's death.
10. WHAT IS THE ANNUAL EXCLUSION?
Under federal tax law, every individual may make an annual gift of $11,000 per year per person without incurring a gift tax or having the gift applied towards the available unified credit. A parent having four children could give each of them $11,000 for a total of $44,000 free of gift taxes. The advantage of making these gifts is that they provide a means to reduce the size of the estate to below the unified credit thereby reducing or eliminating federal estate taxes.
An alien spouse does not qualify for the unlimited marital deduction. In place of the unlimited marital deduction, an alien spouse is permitted to receive, as a gift from the other spouse, $110,000 per year tax free.
END OF CHAPTER PREVIEW
CHAPTER 3
I. DURABLE POWERS OF ATTORNEY
A general power of attorney is a written document wherein a person, called the principal, gives to another person, called the attorney in fact, the authority to act on the principal's behalf. A general power of attorney lapses and becomes invalid at the moment that the principal becomes incompetent or dies. At the time it is needed most, a general power of attorney becomes invalid, and the right of the attorney in fact to act for the principal ceases, lapses and terminates at the moment that it is most needed.
To address this situation, the Uniform Durable Power of Attorney Act was drafted and adopted in some form by most states. In addition, Section Five of the Uniform Probate Code reads as follows:
POWERS OF ATTORNEYSection 5-501. When Power of Attorney Not Affected by Disability.
Whenever a principal designates another his attorney in fact or agent by a power of
attorney in writing and the writing contains the words "This power of attorney shall not be
affected by disability of the principal," or "This power of attorney shall become effective
upon the disability of the principal," or similar words showing the intent of the principal
that the authority conferred shall be exercisable by him as provided in the power on behalf
of the principal notwithstanding later disability or incapacity of the principal at law or
later uncertainty as to whether the principal is dead or alive. All acts done by the attorney
in fact or agent pursuant to the power during any period of disability or incompetence or
uncertainty as to whether the principal is dead or alive have the same effect and inure to
the benefit of and bind the principal or his heirs, devisees and personal representative as if
the principal were alive, competent and not disabled. If a conservator thereafter is
appointed for the principal, the attorney in fact or agent, during the continuance of the
appointment, shall account to the conservator rather than the principal. The conservator
has the same power the principal would have had if he were not disabled or incompetent to
revoke, suspend, or terminate all or any part of the powers of attorney or agency.
Section 5-502. Other Powers of Attorney Not Revoked Until Notice of Death or Disability.
(a) The death, disability, or incompetence of any principal who has executed a power of attorney in writing other than power described in Section 5-501, does not revoke or terminate the agency as to the attorney in fact, agent or other person who, without actual knowledge of the death, disability, or incompetence of the principal, acts in good faith under the power of attorney or agency. Any action so taken, unless otherwise invalid or unenforceable, binds the principal and his heirs, devisees and personal representatives.
(b) An affidavit, executed by the attorney in fact or agent stating that he did not have, at the time of doing an act pursuant to the power of attorney, actual knowledge of the revocation or termination of the power of attorney by death, disability or incompetence, is, in the absence of fraud, conclusive proof of the nonrevocation or nontermination of the power at that time. If the exercise of the power requires execution and delivery of any instrument which is recordable, the affidavit when authenticated for record is likewise recordable.
(c) This section shall not be construed to alter or affect any provision for revocation or
termination contained in the power of attorney.
The Uniform Durable Power of Attorney Act is set forth in this chapter in its entirety. A durable power of attorney is a special power of attorney which contains specific language stating the intent of the principal that the power of attorney is deliberately intended to continue in full force and effect during the period of incompetency and incapacity.
A durable power of attorney has the effect of eliminating and replacing the necessity of a voluntary conservatorship. A durable power of attorney can also give the attorney in fact the power to make all or just specific health care decisions if the principal becomes unable to do so.
Many states have approved a statutory form for durable powers of attorney. Following this chapter is the statutory form in California for a durable power of attorney for health care and the statutory form in California for business affairs. Also following this chapter is a combined durable power of attorney for both health and business affairs for use in most of the states that have adopted the Uniform Durable Power of Attorney Act. This form should only be used after verifying that it complies with the user's particular state law. Forms of those states that have approved statutory durable power of attorney forms will usually be sold in stationery and office supply stores for about $2.00 each.
II. LIVING WILLS
A living will is not a will for probate purposes. Instead, a living will is a declaration by a person that serves as a directive to a treating physician, hospital and the world at large that the person executing it wants or does not want to be kept alive through the use of extraordinary means. A living will declaration is the only way to ascertain the intent of the person in the event that the person is or becomes unable to make a decision at the time it is necessary to do so.
Most states presume a person wants extraordinary means used to be kept alive and will order it employed unless the person has made a living will stating the opposite intent.
A few states will not recognize a living will unless it is executed close in time to the incompetency and with informed consent. In such states, the living will would have to be executed in a hospital or with a doctor shortly before the surgery or treatment that subsequently rendered the person incompetent. The fact that some states will not recognize a living will executed some time before the incompetency does not mean that it should not be executed. If it is later ruled invalid under state law, there is no harm. In such an instance, the Living Will Declaration will be treated as though it had never been executed. It is the recommendation of most estate planners that everyone create a living will specifying their wishes and directives to their physicians and that the living will should be restated and redone, if possible, before any surgery or major treatment is undertaken. A living will declaration follows this chapter.
Most states require a living will declaration to have at least two witnesses over the age of 21 years. A few states accept witnesses of 18 years of age. Some states require the living will declaration to be notarized. The living will declaration included in this book calls for two witnesses and a notary acknowledgment. Having a living will declaration notarized is a good idea even if it might not be required in most states. The notary is an impartial licensed official of a state. Testimony as to capacity and intent from such a person carries more weight with a court in the event of a dispute over a person's intent or capacity when creating a living will declaration. It is suggested that both witnesses be over the age of 21 years of age but not so elderly or in poor health that they might predecease the person utilizing the living will declaration.
Furthermore, most states require that the witnesses not be blood relatives or anyone who would share in the estate of the person utilizing a living will declaration. In other words, anyone who would benefit from a person's death should not be a witness. Using such a person as a witness will usually invalidate the declaration. The reason behind this exclusion: the states do not want to give a witness an incentive, however improbable, to have the person creating the living will declaration put to death.
Some states do not permit doctors, medical personnel or nursing home personnel to be witnesses because of the concern that they may exert an undue influence on the person using the living will declaration. To avoid raising this issue, none of the above persons should be used as a witness, even if permitted under state law.
After a living will declaration is executed, a copy should be given to the person's physician. In fact, several states have laws that require the declaration to be delivered to such physicians before the patient becomes incompetent if the order is to be effective. The rationale for this is so that physician can consult with the patient and verify that the declaration truly expresses the person's intent. It really does not do any good to have the declaration tucked away in a safety deposit box when it is most needed. The existence of the living will declaration should be widely publicized so that if something happens, such as an auto accident, someone will know to tell the treating physicians and hospital that a living will declaration is in existence. In fact, copies of the living will declaration should be given to those persons named as agents in it. If the need arises, they will be able to produce the living will declaration to assure that the creator's intent is fulfilled.
A very sad example for the need of such a living will declaration recently received national attention. An unmarried woman who was pregnant suffered brain death. Her partner, who was the father of the child, wanted the child and would raise it. The woman's parents, however, did not want the child, their grandchild, born. Since the woman did not have a living will declaration in effect, the decision on whether or not to stop the life support machine rested with the parents. The father of the child and partner of the woman filed a lawsuit seeking to prevent the parents from stopping the life support machine and killing his child, which his former partner was carrying. Various women's rights groups sided with the parents arguing that no man should force a woman to have a child, even if she was brain dead. The matter was settled out of court with the parents relenting and agreeing for the child to be born provided the father would raise it.
In the living will declaration used in this book, a woman is called upon to state whether she wants or does not want life support to be withdrawn if doing so would cause an abortion. Even with a woman's stated intention on this matter, there is no guarantee that a court would follow it if an abortion would result. In such a situation a court will look at her intention and apply it against appropriate state and federal law. If such intention is not violative of either, then it will be given effect.
A woman might also attempt to define the circumstances under which she would permit a child to be born. For example, if the child was seriously deformed or handicapped, she might state in the section for other instructions, that, under those circumstances, she would want the life support removed with the knowledge that an abortion would occur. In this situation, there is no guarantee that a court would approve the removal of life support, but, at least, the intention was made clear for the court and all concerned to consider.
UNIFORM DURABLE POWER OF ATTORNEY ACT OF CALIFORNIA
(The form of the California Act is very similar to the uniform acts adopted in other states.
All references are to the Civil Code of California.)
SECTION 2400. DURABLE POWER OF ATTORNEY DEFINED.
A durable power of attorney is a power of attorney by which a principal designates
another attorney in fact in writing, and the writing contains the words "This power of
attorney shall not be affected by subsequent incapacity of the principal," or "This power
of attorney shall become effective upon the incapacity of the principal," or similar words
showing the intent of the principal that the authority conferred shall be exercisable
notwithstanding the principal's subsequent incapacity.
SECTION 2400.5 PROXY BY ATTORNEY IN FACT IS NOT A DURABLE POWER
OF ATTORNEY.
Where a durable power of attorney gives an attorney in fact the power to exercise voting
rights, a proxy given by the attorney in fact to another to exercise the voting rights is
subject to all the provisions of law applicable to such proxy and is not a durable power of
attorney subject to this Article.
SECTION 2401. ACTS OF ATTORNEY IN FACT BINDING ON PRINCIPAL AND
SUCCESSORS IN INTEREST.
All acts done by the attorney in fact pursuant to a durable power of attorney during any
period of incapacity of the principal have the same effect and inure to the benefit of and
bind the principal and his or her successors in interest as if the principal were competent.
SECTION 2402. PRIOR NOMINATION OR SUBSEQUENT APPOINTMENT OF GUARDIAN, CONSERVATOR, OR OTHER FIDUCIARIES.
(a) If, following execution of a durable power of attorney, a court of the principal's domicile appoints a conservator of the estate, or other fiduciary charged with the management of all of the principal's property or all of his or her property except specified exclusions, the attorney in fact is
accountable to the fiduciary as well as the principal. The fiduciary has the same power to revoke or amend the power of attorney that the principal would have had if he or she were not incapacitated; but if a conservator is appointed by a court of this state, the conservator can revoke or amend the power of attorney only if the court in which the
conservatorship is pending has first made an order authorizing or requiring the fiduciary to revoke or amend the durable power of attorney and the revocation or amendment is in accord with the other. This subdivision does not apply to a durable power of attorney to the extent that the durable power of attorney authorizes the attorney in fact to make health care decisions, as defined in Section 2430 for the principal.
(b) A principal may nominate, by a durable power of attorney, a conservator of the person
or the estate or both, or a guardian of the person or estate or both, for consideration by the
court if protective proceedings for the principal's person or estate are thereafter
commenced. If the protective proceedings are conservatorship proceedings in this state,
the nomination shall have the effect provided in Section 1810 of the Probate Code, and the
court shall give effect to the most recent writing executed in accordance with Section 1810
of the Probate Code, whether or not such writing is a durable power of attorney.
SECTION 2403. EFFECT OF DEATH OR INCAPACITY OF PRINCIPAL -- ALL
POWERS OF ATTORNEY, DURABLE OR OTHERWISE.
(a) The death of a principal who has executed a written power of attorney, durable or
otherwise, does not revoke or terminate the agency as to the attorney in fact or other
person who, without actual knowledge of the death of the principal, acts in good faith
under the power. Any action so taken, unless otherwise invalid or unenforceable, binds
successors in interest of the principal.
(b) The incapacity of a principal who has previously executed a written power of attorney
that is not a durable power of attorney does not revoke or terminate the agency as to the
attorney in fact or other person who, without actual knowledge of the incapacity of the
principal, acts in good faith under the power. Any action so taken, unless otherwise
invalid or unenforceable, binds the principal and his or her successors in interest.
SECTION 2404. ACTS OF ATTORNEY IN FACT IN GOOD FAITH RELIANCE OF POWER-AFFIDAVIT SHOWING LACK OF ACTUAL KNOWLEDGE AS CONCLUSIVE PROOF OF NONREVOCATION OR NONTERMINATION.
As to acts undertaken in good faith reliance thereon, an affidavit executed by the attorney
in fact under a power of attorney, durable or otherwise, stating that he or she did not have
at the time of the exercise of the power actual knowledge of the termination of the power by
revocation or by the principal's death or incapacity is conclusive proof of the
nonrevocation or nontermination of the power at that time. If the exercise of the power of
attorney requires execution and delivery of any instrument that is recordable, the affidavit
when authenticated for record is likewise recordable. This section does not affect any
provision in a power of attorney for its termination by expiration of time or occurrence of
an event other than express revocation or a change in the principal's capacity.
SECTION 2405. APPLICATION AND CONSTRUCTION OF ACT TO
EFFECTUATE UNIFORMITY.
This Article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this Article among states enacting it.
SECTION 2406. TITLE.
This Article may be cited as the UNIFORM DURABLE POWER OF ATTORNEY ACT.
SECTION 2407. PROVISIONS SEVERABLE ON INVALIDITY.
If any provision of this Article or its application to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the Article which can be given effect without the invalid provisions or application, and to this end the provisions of this Article are severable.
The following Durable Power of Attorney is a combined form for both Health Care and Financial Affairs which can be used in the following states and territory which have not adopted a statutory Durable Power of Attorney form for Health Care or do not require use of their form (New Mexico, New York and Virginia have adopted a statute but do not require use of their form):
Alabama Arkansas Arizona Colorado
Delaware Florida Hawaii Iowa
Indiana Louisiana Maryland Maine
Michigan Missouri Mississippi Montana
Nebraska New Jersey New Mexico New York
Oklahoma Pennsylvania South Dakota Virginia
Washington Wyoming Virgin Islands
The states not mentioned and the District of Columbia have adopted a statutory durable power of attorney form for health care. The forms for these states are sold in most office and stationery stores. The forms are also available in the book Powers of Attorney for Everyone by Michael Lynn Gabriel.
To illustrate the use of Durable Power of Attorney and Living Will Declarations, completed samples for the following forms succeeded by the blank pull-out forms are set forth:
1. Durable Power of Attorney for Health Care and Financial Affairs.
2. California Statutory Durable Power of Attorney for Health Care.
3. California Uniform Statutory Power of Attorney.
4. Living Will Declaration.
DURABLE POWER OF ATTORNEY
FOR BOTH HEALTH CARE AND FINANCIAL AFFAIRS
KNOW ALL PEOPLE BY THESE PRESENTS, that I, MICHAEL LYNN GABRIEL residing at 504 C LOW GAP ROAD, UKIAH, MENDOCINO COUNTY, STATE OF CALIFORNIA, phone number (707) 468-0268 do declare this to be a Durable Power of Attorney.
This Durable Power of Attorney shall not be affected by subsequent incapacity of the principal.
This Durable Power of Attorney shall become effective:
( X) Immediately upon the execution of this Durable Power of Attorney.
( ) Only after certification by two licensed physicians that I have been determined to lack the capacity to make health care and financial decisions for myself.
I hereby revoke all prior powers of attorney regardless of the type or to whom they may have been given.
I hereby nominate, constitute and appoint LYDIA ANN STINEMEYER GABRIEL , whose address and telephone number are: 504 C LOW GAP ROAD, UKIAH, CALIFORNIA (707) 468-0268 , as my true and lawful Attorney in Fact, for me and in my name, place and stead, and for my use and benefit, to exercise the following powers:
(1) To make health care decisions on my behalf. Health care decisions means decisions on my care, treatment, or procedures to be utilized in order to maintain, diagnose or treat my physical condition. This Durable Power of Attorney, as it relates to health care decisions, does not carry with it the power to authorize any of the following acts:
(A) Any commitment or placement in a mental health facility,
(B) Any convulsive treatment, or
© Any psychosurgery.
Furthermore, I hereby expressly authorize any physician, hospital, and any other person or organization, to release and disclose to my agent any information any of them may have concerning my physical condition and any health care, counsel, treatment, or assistance provided to me either before or after the execution of this power of attorney, any privilege hereby being expressly waived to such disclosures. This waiver shall extend to communications to my agent only and shall not be deemed a general waiver of the privilege. My agent may, however, authorize release of such information to such third persons as my agent deems to be reasonable or necessary in the exercise of the powers granted in this instrument.
(2) Subject to any limitations in this document, my agent has the power and authority to do all of the following:
(A) Authorize an autopsy,
(B) Make a disposition of a part or parts of my body under the Uniform Anatomical Gift Act, and
(C) Direct disposition of my remains in accordance with state law.
(3) Subject to any limitations in this document, I hereby grant to my agent full power and authority to act for me in my name, in any way which I myself could act, with respect to the following matters as each of them to the extent that I am permitted to act through an agent:
(A) Real estate transactions,
(B) Tangible personal property transactions,
(C) Bond, share and commodity transactions,
(D) Financial institution transactions,
(E) Business operating transactions,
(F) Insurance transactions,
(G) Retirement plan transactions,
(H) Estate transactions,
(I) Claims and litigation,
(J) Tax matters,
(K) Personal relationships and affairs,
(L) Benefits from military service,
(M) Records, reports and statements,
(N) Full and unqualified authority to my agent to delegate any and all of the foregoing
powers to any person or persons whom my agent shall delegate.
(4) To ask, demand, sue for, recover, collect, and receive such sums of money, debts, dues accounts, legacies, bequests, interest, dividends, annuities, and demands whatsoever as are now or shall hereafter become due, owing payable or belonging to me and have, use and take all lawful ways and means in my name or otherwise, and to compromise and agree for the acquittance or other sufficient discharge of the same.
(5) For me in my name, to make, seal, and deliver, to bargain, contract, agree for, purchase, receive, and take lands, tenements, hereditaments and accept the possession of all lands, and deeds of assurances, in the law therefor, and to lease, let, demise, bargain, sell, remise, release, convey, mortgage, and hypothecate lands, tenements and hereditaments upon such covenants as they shall think fit.
(6) To sign, endorse, execute, acknowledge, deliver, receive, and possess such applications, contracts, agreements, options, covenants, deeds, conveyances, trust deeds, security agreements, bills of sale, leases, mortgages, assignments, insurance policies, bills of lading, warehouse receipts, documents of title, bills, bonds, debentures, checks, drafts, bills of exchange, notes, stock certificates, proxies, warrants, commercial paper, receipts, withdrawal receipts and deposit instruments relating to accounts or deposits in or certificates of deposits of banks, savings and loans or other such institutions or associations, proof of loss, evidences of debts, releases and satisfaction of mortgages, judgments, liens, security agreements, and other debts and obligations, and such other instruments in writing of whatever kind and nature as may be necessary or proper in the exercise of the rights and powers herein granted.
(7) Also to bargain and agree for, buy, sell, mortgage, hypothecate, and in any and every way and manner deal in and with goods, wares and merchandise, choices in action, and to make, do and transact all business of whatever nature and kind.
(8) Also for me and in my name, and as my act and deed, to sign, seal, execute, deliver, and acknowledge such deeds, leases, mortgages, hypothecations, bottomries, charter parties, bills of lading, bills, notes, receipts, evidences of debt, releases and satisfaction of mortgages, judgments and other debts, and other such instruments in writing of whatever kind and nature as may be necessary and proper.
(9) To have access at any time or times to any safe deposit box rented by me, wheresoever located and to remove all or any part of the contents thereof, and to surrender or relinquish said safe deposit box, and any institution in which such safe deposit box is located shall not incur any liability to me or to my estate as a result of permitting my agent to exercise this power.
(10) I hereby expressly authorize any attorney of mine, past or present, to release and disclose to my agent any information any of them may have concerning my legal affairs or other facts, which they may have concerning my personal affairs and any legal service, counsel or assistance provided to me either before or after the execution of this power of attorney, any privilege hereby being expressly waived as to such disclosures. This waiver shall extend to communications to my agent only and shall not be deemed to authorize a release of information to third parties and shall not be deemed a general waiver of the privilege. My agent may, however, authorize release of such information to such third persons as my agent deems to be reasonable or necessary in the exercise of the powers granted in this instrument.
(11) Giving and granting unto said attorney in fact full power and authority to do and perform every act necessary, requisite or proper to be done in and about my property as fully as I might or could do if personally present, with full power of substitution and revocation, hereby ratifying and confirming that my said attorney shall lawfully do or cause to be done by virtue hereof.
The attorney in fact under this durable power of attorney is specifically not given and does not have the authority or power to revoke, amend or alter any revocable or irrevocable trust that I have created or may create in the future.
The Attorney in Fact ( x ) is ( ) is not granted reasonable compensation for services rendered under this Power of Attorney.
The Attorney in Fact ( ) is ( ) is not permitted to engage in self-dealing with my estate.
Special instructions or authority:
If LYDIA ANN STINEMEYER GABRIEL is not available or becomes ineligible or unable for any reason to act as my agent and to make decisions for me, or if I revoke appointment or authority to act as my agent, then I designate and appoint PAUL THOMAS GABRIEL , address: 3336 LOVELAND ROAD, YOUNGSTOWN, OHIO 44502 , phone: (213) 445-7846 as my alternative, true and lawful attorney in fact with all of the powers enumerated above, including the power to make health care decisions on my behalf.
IN WITNESS WHEREOF, I have hereunto signed my name on this day of , 2000, at . MICHAEL LYNN GABRIEL
I am aware that I have the following rights regarding this Durable Power of Attorney.
1. This document gives to the person whom I designate as my attorney in fact the power to make health care decisions for me subject to the limitations and statement of my desires that I have included in this Document. The power to make health care decisions for me may exclude consent, refusal of consent, or withdrawal of consent to any treatment, service or procedure to maintain, diagnose or treat physical or mental condition. I may state in this document any type of treatment or placements that I do not desire.
2. The person whom I designated in this document has a duty to act consistent with my desires as stated in this document or otherwise made known or, if my desires are unknown, to act in my best interests.
3. Except as I have otherwise specified in this document, the power of the person whom I have designated to make health care decisions for me may include the power to consent to my doctor not to give treatment or to stop treatment which could keep me alive.
4. Unless I specify a shorter period in this document, this power will exist for seven (7) years from the date I execute this document, and if I am unable to make health care decisions for myself at the time the seven (7) year period ends, this power will continue to exist until the time I become able to make health care decisions for myself.
5. Notwithstanding this document, I have the right to make medical and other health care decisions for myself so long as I give informed medical consent with respect to the particular decision. In addition, no treatment may be given to me over my objection, and health care to keep me alive may not be stopped if I object.
6. I have the right to revoke the appointment of the person designated in this document by notifying that person of the revocation in writing.
7. I have the right to revoke the authority granted to the person designated in this document to make health care decisions for me by notifying the treating physician, hospital, or other health care provider orally or in writing.
8. The person designated in this document to make health care decisions for me has the right to examine my medical records and to consent to their disclosures unless I limit this right in this document.
Dated: MICHAEL LYNN GABRIEL
ATTESTATIONI declare under penalty of perjury under the laws of the State of CALIFORNIA that MICHAEL LYNN GABRIEL, the person who signed this document is personally known to me or proven to me on the basis of convincing evidence to be the Principal, that the Principal signed or acknowledged to this Durable Power of Attorney in my presence, that the Principal appears to be of sound mind and under no duress, fraud, or undue influence; that I am not the person appointed as attorney in fact by this document, and that I am not a health care provider, the operator of a community care facility, nor an employee of an operator of a community care facility, nor the operator of a residential care facility for the elderly, nor an employee of an operator of a residential care facility for the elderly.
I further declare under penalty of perjury under the laws of the State of CALIFORNIA that I am not related to the Principal by blood, marriage, or adoption, and to the best of my knowledge I am not entitled to any part of the estate of the Principal upon the death of the Principal under a will now existing or by operation of law.
DATED:________________________
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CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLICSTATE OF ________
COUNTY OF _______
On _________________ before me, ________________
personally appeared ________________________personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
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DURABLE POWER OF ATTORNEY
FOR BOTH HEALTH CARE AND FINANCIAL AFFAIRS
KNOW ALL PEOPLE BY THESE PRESENTS, that I, residing at , phone number do declare this to be a Durable Power of Attorney.
This Durable Power of Attorney shall not be affected by subsequent incapacity of the principal.
This Durable Power of Attorney shall become effective:
( ) Immediately upon the execution of this Durable Power of Attorney.
( ) Only after certification by two licensed physicians that I have been determined to lack the capacity to make health care and financial decisions for myself.
I hereby revoke all prior powers of attorney regardless of the type or to whom they may have been given.
I hereby nominate, constitute and appoint , whose address and telephone number are: , a