patrick-j-gibbs

Do it Yourself Wills - Don’t

Sun, 08 Feb 2026 18:43:05 GMT

A colleague of mine who had more than 50 years experience in the field of wills, trusts and estates once recounted to me his exchange with a prospective client who asked how good his will would be if he wrote it himself using online software. My colleague’s answer was that it would be a good will for an attorney because the attorney would make a lot of money cleaning up the mess after the client’s death.

That may sound cynical, but there is a lot of truth in it. I have been asked to assist executors in probating about four or five wills that were written by (deceased) testators. I am still waiting to see one that did not create problems and/or a lot more work to probate in comparison to a professionally prepared will.

The best you can say for a do-it-yourself will is that it provides a starting point for an attorney because it probably answers some major questions in advance of a client conference. But that unsigned will should be treated only as a tool for the preparation of a well-drafted will.

Here are some of the reasons I don’t like “do-it-yourself wills”:

1. The online form was probably written for a national “audience.” Thus, all of the standard provisions that attorneys in Georgia (in my case) usually include are not going to be present.

2. It most likely does not include a specific grant of statutory powers to the executor. There is a prescribed method to allow the executor to independently administer the estate without requirements to obtain permission(s) or approval(s) from the probate court, but you must specifically refer to the section of the Probate Code providing that authority.

3. Contingent beneficiaries will not be adequately addressed. A lot of “simple wills” give everything to the spouse and, if there is no surviving spouse, then to children. But what if one child does not out-live both the testator and the spouse and some grandchildren/beneficiaries are minors? A well-drafted will most likely establishes a trust for those grandchildren, assuming disinheriting them is not an objective.

4. A lot of those off-the-shelf wills are not going to separately address tangible personal property. Who is it going to receive the “stuff” and how is it going to be divided if there is no surviving spouse?

5. The “blended family” situation with children from a previous marriage is a complicating factor and may easily be overlooked when referring to “my children.” Are the children of both spouses to be included in that phrase?

6. Non-probate assets such as life insurance and retirement accounts are controlled by beneficiary designations but if one is totally focused on the will, setting up primary and secondary beneficiaries for those assets (with appropriate provisions if there are minor children) can be overlooked. Sometimes they make up about half of the family wealth.

7. A will may not be the right estate planning tool for a person who does not have any close relatives. Imagine someone whose closest living relatives are cousins. The executor is required to notify those relatives in order to probate the will. That would be very difficult if their names and addresses are not known. In that situation using a well-drafted trust and appropriate beneficiary designations will be essential to an effective estate plan and the will should assume a secondary role.

8. The method of execution for the will-signing may be legally insufficient or create additional work to successfully probate the will. A will ends on the signature page with the signatures of the testator and the witnesses with the requisite language to show testamentary intent and a proper execution. However, any professionally drafted will is going to have a subsequent page with an affidavit signed by those three people before a notary that constitutes “proof” of the facts required when the will is offered for probate. No affidavit? Then, the executor must locate the witnesses and obtain a notarized document reciting all of those facts. That could be difficult if 20 years have passed since the will’s signing.

9. Other essential legal documents can be overlooked if one is fixated on doing a will and nothing else. A good estate plan should include an Advance Directive for Healthcare and a General Power of Attorney. Those documents designate an agent to manage medical and financial affairs if one is unable to do so because of legally incapacity or other reasons. Those documents should be based upon statutory forms and are therefore “state specific.” Is a website going to have separate forms for all fifty states?

As the sergeant told the police officers on the TV show Hill Street Blues before they went out on patrol, “Be careful out there.”

Understanding Estate Taxes and Inheritance Concerns in Georgia

Thu, 15 Jan 2026 17:37:22 GMT

Common Concerns About Estate Taxes

Estate taxes are often a major concern for individuals beginning the estate planning process. Many people worry that a significant portion of their estate will be lost to taxes, leaving less for loved ones.

These concerns are understandable, but they are often based on misunderstanding how estate taxes apply.

How Estate Taxes Apply Under Georgia Law

Georgia does not impose a separate state estate tax. However, federal estate tax rules may still apply in certain situations depending on the size of the estate.

Because federal thresholds and rules can change, understanding the general framework helps individuals assess whether estate taxes are likely to be a concern.

Inheritance and Beneficiary Considerations

In addition to tax concerns, many individuals want to understand how inheritances are handled. Beneficiary designations, asset ownership, and planning documents all play a role in how property is transferred.

Clear planning helps reduce uncertainty and ensures assets are distributed according to personal wishes.

Why Estate Tax Planning Is Often Overestimated

For many Georgia residents, estate taxes are not a significant issue due to federal exemption limits. However, planning still serves important purposes beyond taxes, such as clarity, efficiency, and protection for loved ones.

Understanding the full scope of estate planning helps place tax concerns in proper context.

Final Thoughts

Understanding estate taxes and inheritance concerns allows individuals to approach estate planning with realistic expectations. Addressing these topics under Georgia law helps reduce uncertainty and supports thoughtful planning decisions.

This content is for general informational purposes and does not constitute legal advice.

Estate Planning Myths Under Georgia Law

Wed, 10 Dec 2025 17:35:14 GMT

Why Estate Planning Myths Persist

Estate planning myths are common and often lead people to delay or avoid planning altogether. These misconceptions are usually based on outdated information, assumptions, or stories shared without understanding how Georgia law actually works.

Relying on myths instead of accurate information can result in unintended outcomes for families and loved ones.

“I’m Too Young to Need an Estate Plan”

One common belief is that estate planning is only necessary later in life. In reality, adults of any age can benefit from having basic planning documents in place, especially those who own property, have children, or want to control decision-making during incapacity.

Unexpected events can happen at any time, making early planning a practical step.

“I Don’t Have Enough Assets to Plan”

Another misconception is that estate planning only applies to people with significant wealth. Estate planning is about more than asset value. It also addresses guardianship, decision-making authority, and clarity for loved ones.

Even modest estates can benefit from thoughtful planning under Georgia law.

“A Will Avoids Probate”

Many people believe that having a will means probate will not be necessary. In Georgia, a will generally must be admitted to probate in order to be carried out. While certain planning tools may reduce probate involvement, a will alone does not avoid it.

Understanding this distinction helps set realistic expectations.

Final Thoughts

Estate planning myths can create confusion and unnecessary delay. Understanding how Georgia law actually applies allows individuals to make informed decisions and plan with greater confidence.

This content is for general informational purposes and does not constitute legal advice.

What to Bring to Your First Estate Planning Meeting

Wed, 03 Dec 2025 17:33:51 GMT

Why Preparation Matters

Preparing for an estate planning meeting helps make the conversation more productive and focused. While not every document must be finalized in advance, having key information available allows the discussion to move more efficiently.

Preparation also helps individuals feel more confident and informed during the planning process.

Personal and Family Information to Consider

Estate planning often involves discussing family relationships and responsibilities. Information about spouses, children, and other intended beneficiaries provides important context for planning decisions.

Understanding family dynamics can help ensure documents are structured appropriately.

Financial Information That May Be Helpful

While exact numbers are not always required, having a general understanding of assets and property ownership can be useful.

This includes real estate, financial accounts, and business interests located in Georgia or elsewhere.

Clear information helps ensure planning tools are matched to the nature of the assets involved.

Questions and Goals to Think About in Advance

Many people find it helpful to consider their goals before meeting with an attorney. This may include how assets should be distributed, who should serve in fiduciary roles, and what concerns they want addressed.

Thinking through these topics ahead of time helps guide the discussion.

Final Thoughts

Preparing for an estate planning meeting does not require perfection, but thoughtful preparation can make the process smoother. Gathering information and clarifying goals helps ensure the meeting is productive and aligned with individual needs.

This content is for general informational purposes and does not constitute legal advice.

Updating an Estate Plan After Major Life Changes in Georgia

Wed, 12 Nov 2025 17:32:31 GMT

Why Estate Plans Should Not Stay Static

An estate plan is not a one-time task. As life changes, estate planning documents should evolve to reflect new circumstances, relationships, and goals. Plans that are not updated may no longer function as intended under Georgia law.

Even well-drafted documents can become outdated if they do not account for significant life events.

Common Life Events That Trigger a Review

Major life changes often affect how assets should be distributed or who should serve in decision-making roles. Marriage, divorce, the birth of a child, or the death of a loved one can all impact an existing estate plan.

Changes in financial circumstances, such as acquiring property, starting a business, or retiring, may also require updates to planning documents.

Risks of Failing to Update an Estate Plan

Outdated estate plans can create confusion, unintended distributions, or increased court involvement. Beneficiary designations that no longer align with personal wishes may override planning intentions.

In some cases, old documents may even create conflict among family members if expectations are unclear.

How Often Plans Should Be Reviewed

While there is no fixed schedule, many Georgia residents benefit from reviewing their estate plan every few years or after major life events. Regular reviews help ensure documents remain aligned with current goals and applicable law.

Proactive updates are generally easier than addressing problems after they arise.

Final Thoughts

Updating an estate plan after major life changes helps ensure that personal wishes are accurately reflected and legally effective. Regular reviews support clarity, reduce uncertainty, and help families avoid unnecessary complications.

This content is for general informational purposes and does not constitute legal advice.

Planning for Incapacity Under Georgia Law

Tue, 14 Oct 2025 17:30:24 GMT

What Incapacity Planning Means

Planning for incapacity addresses what happens if a person becomes unable to make financial or medical decisions due to illness, injury, or other circumstances. While estate planning often focuses on what happens after death, incapacity planning focuses on protecting individuals during their lifetime.

In Georgia, incapacity can occur unexpectedly, making advance planning especially important.

Why Incapacity Planning Matters

Without clear legal authority in place, family members may need court involvement to act on behalf of an incapacitated loved one. This process can be stressful and time-consuming, particularly during medical emergencies.

Incapacity planning allows individuals to designate trusted decision-makers in advance, reducing uncertainty and providing guidance during difficult situations.

Common Documents Used in Incapacity Planning

Legal documents such as financial powers of attorney and advance healthcare directives help outline who can make decisions and what authority they have. These documents allow personal preferences to be respected when individuals cannot speak for themselves.

Having these documents in place helps provide continuity and clarity during periods of incapacity.

Addressing Misconceptions About Timing

Many people believe incapacity planning is only necessary later in life. In reality, adults of all ages can face unexpected medical situations that affect decision-making ability.

Planning early helps ensure protections are in place regardless of age or health status.

Final Thoughts

Planning for incapacity is a key component of a comprehensive estate plan. Addressing these issues under Georgia law helps protect personal wishes and reduces the burden on loved ones during challenging times.

This content is for general informational purposes and does not constitute legal advice.

Common Probate Mistakes Families Make in Georgia

Thu, 02 Oct 2025 17:29:00 GMT

Misunderstanding How Probate Works

One of the most common probate mistakes families make is assuming the process will be simple or automatic. In Georgia, probate is a legal proceeding with specific court requirements, timelines, and responsibilities. When families are unfamiliar with these steps, delays and frustration often follow.

Probate can move quickly in some cases, but it may also take months or longer depending on the estate. Understanding that probate is a structured legal process helps set realistic expectations from the beginning.

Relying on Incomplete or Outdated Documents

Another frequent issue arises when estate planning documents are outdated or unclear. Wills that no longer reflect current family relationships, asset ownership, or beneficiary intentions can create confusion during probate.

Even minor inconsistencies can require court clarification, which adds time and expense. Keeping documents current helps reduce complications when they are needed most.

Underestimating the Role of the Personal Representative

Serving as a personal representative involves more than carrying out wishes informally. Under Georgia law, executors and administrators have legal duties that include managing assets, meeting deadlines, and maintaining accurate records.

When personal representatives are unprepared for these responsibilities, mistakes can occur that slow the process or create additional legal issues. Understanding the scope of the role is essential.

Family Disputes and Communication Breakdowns

Probate can surface underlying family tensions, especially when expectations are unclear. Disagreements over asset distribution or decision-making authority can lead to objections that prolong probate proceedings.

Clear planning and communication during life can help reduce the likelihood of disputes after death.

Final Thoughts

Many probate mistakes stem from misunderstanding rather than neglect. By recognizing common problem areas, families can approach the probate process with greater awareness and preparation under Georgia law.

This content is for general informational purposes and does not constitute legal advice.

Understanding the Georgia Probate Process

Wed, 10 Sep 2025 17:25:04 GMT

What Probate Means Under Georgia Law

Probate is the court-supervised process of administering an estate after death.

The probate court oversees:

Appointment of a personal representative
Payment of debts and expenses
Distribution of assets according to a will or Georgia law

The process varies depending on estate size and complexity.

Key Steps in the Probate Process

While each case is unique, probate often includes:

Filing documents with the probate court
Notifying heirs and creditors
Inventorying estate assets
Resolving outstanding obligations
Distributing remaining property

Some estates move quickly, while others take longer.

Factors That Affect Probate Timelines

Probate timelines may be influenced by:

Whether a valid will exists
Estate size and asset types
Creditor claims
Disputes among beneficiaries

Delays are not uncommon, especially when documentation is incomplete.

Responsibilities of the Personal Representative

The personal representative (executor or administrator) has fiduciary duties, including:

Acting in the best interest of the estate
Keeping accurate records
Following court requirements

These responsibilities carry legal obligations under Georgia law.

How Probate Affects Families

Probate can be an emotional process for families.

Clear planning and understanding the process can help reduce stress and uncertainty during an already difficult time.

Final Thoughts

Understanding the Georgia probate process helps families prepare for what lies ahead. Knowing the basic steps and expectations can make navigating probate more manageable.

This content is for general informational purposes and does not constitute legal advice.

When Probate Is Required in Georgia — and When It’s Not

Wed, 13 Aug 2025 17:21:09 GMT

What Is Probate?

Probate is the legal process used to settle a person’s estate after death.

In Georgia, probate generally involves:

Validating a will
Appointing a personal representative
Paying debts and expenses
Distributing remaining assets to beneficiaries

Not every estate requires probate, but many do.

When Probate Is Typically Required in Georgia

Probate is often required when:

Assets are titled solely in the deceased person’s name
There is no beneficiary designation
Real estate is owned individually
A will must be formally administered

In these situations, court involvement may be necessary to transfer ownership legally.

Assets That May Pass Outside Probate

Certain assets may pass outside the probate process, including:

Assets held in a valid trust
Jointly owned property with rights of survivorship
Life insurance proceeds with named beneficiaries
Retirement accounts with beneficiary designations

Proper planning helps ensure these assets transfer efficiently.

Common Misunderstandings About Avoiding Probate

Many people believe probate can always be avoided.

In reality:

Some probate involvement may still be required
Poorly drafted plans can increase complications
Failing to update beneficiaries can create problems

Understanding how assets are titled is critical.

Why Knowing This Matters

Knowing when probate applies helps families:

Set realistic expectations
Reduce delays and confusion
Make informed estate planning decisions

Clarity helps loved ones navigate the process more smoothly.

Final Thoughts

Whether probate is required depends on how assets are owned and how planning documents are structured. Understanding these distinctions under Georgia law is an important step in effective estate planning.

This content is for general informational purposes and does not constitute legal advice.

Estate Planning for Families With Children in Georgia

Wed, 06 Aug 2025 17:18:24 GMT

Why Estate Planning Matters for Families With Children

For families with children, estate planning goes beyond asset distribution. It also addresses guardianship, financial support, and long-term planning.

Without a plan, Georgia law determines who may make decisions for minor children, which may not align with a parent’s wishes.

Naming a Guardian for Minor Children

One of the most important estate planning decisions for parents is naming a guardian.

A guardian may be responsible for:

Providing daily care
Making educational decisions
Overseeing health and well-being

Including guardianship provisions in a will helps provide clarity and guidance.

Managing Assets for Children

Children generally cannot manage inherited assets on their own.

Estate planning tools such as trusts may be used to:

Hold assets until a child reaches a certain age
Provide structured distributions over time
Designate a trustee to manage funds responsibly

These tools help ensure assets are used as intended.

Planning for Unexpected Situations

Estate plans can also address:

Temporary guardianship
Financial management during incapacity
Healthcare decision-making

Planning ahead helps families prepare for unexpected events.

When to Review a Family Estate Plan

Family estate plans should be reviewed when:

Children are born or adopted
Family circumstances change
Financial situations evolve

Regular updates help keep plans aligned with family needs.

Final Thoughts

Estate planning provides families with children an opportunity to plan thoughtfully for the future. Under Georgia law, having a clear plan helps protect children and provides peace of mind for parents.

This content is for general informational purposes and does not constitute legal advice.

Choosing an Executor or Trustee in Georgia

Wed, 09 Jul 2025 17:16:32 GMT

What Is an Executor or Trustee?

An executor or trustee is the person or institution responsible for carrying out the instructions in an estate plan.

Under Georgia law:

An executor administers a will through the probate process
A trustee manages assets held in a trust for beneficiaries

Both roles carry legal and fiduciary responsibilities and should be chosen carefully.

Key Responsibilities of an Executor

An executor’s duties may include:

Filing the will with the probate court
Notifying beneficiaries and creditors
Managing estate assets
Paying debts and expenses
Distributing assets according to the will

The role often requires organization, attention to detail, and ongoing communication.

Responsibilities of a Trustee

A trustee’s role may extend over many years and can include:

Managing trust assets
Making distributions to beneficiaries
Keeping accurate records
Acting in the best interest of the trust beneficiaries

Because trustees have ongoing obligations, reliability and financial judgment are especially important.

Who Can Serve in These Roles?

In Georgia, executors and trustees may be:

Family members
Trusted friends
Professional fiduciaries
Financial institutions

Each option has advantages and potential challenges depending on family dynamics and asset complexity.

Common Mistakes When Choosing a Fiduciary

Some common issues include:

Selecting someone unwilling or unable to serve
Naming a person without financial or organizational skills
Failing to name a backup fiduciary

Careful planning helps avoid unnecessary complications later.

Final Thoughts

Choosing an executor or trustee is an important part of estate planning. Taking time to understand these roles can help ensure your estate plan is carried out smoothly under Georgia law.

This content is for general informational purposes and does not constitute legal advice.

Wills vs. Trusts in Georgia: Understanding the Differences

Wed, 02 Jul 2025 17:13:55 GMT

Understanding Wills Under Georgia Law

A will is a legal document that outlines how assets are distributed after death. In Georgia, a will must meet specific requirements to be valid, including proper execution and witness signatures.

Wills are often used to:

Name beneficiaries
Appoint guardians for minor children
Designate an executor

However, wills generally require probate, which is a court-supervised process.

How Trusts Work in Estate Planning

A trust is a legal arrangement that allows assets to be managed by a trustee for the benefit of designated beneficiaries. Trusts can take effect during life or after death, depending on how they are structured.

Common reasons Georgia residents use trusts include:

Managing assets for minors
Reducing probate involvement
Providing ongoing asset management

Key Differences Between Wills and Trusts

While both tools serve important purposes, they differ in several ways:

Timing: Trusts can operate during life; wills take effect after death
Probate: Trusts may reduce probate; wills do not avoid it
Flexibility: Trusts can offer ongoing control over distributions

Choosing between a will and a trust depends on individual circumstances.

Do You Need Both?

In many cases, estate plans include both a will and a trust. A will can address matters not covered by a trust, while a trust manages specific assets.

There is no one-size-fits-all solution under Georgia law.

When to Review Estate Planning Tools

As assets, family situations, and laws change, estate planning tools should be reviewed periodically to ensure they remain appropriate.

Final Thoughts

Understanding the differences between wills and trusts helps Georgia residents make informed decisions about estate planning. The right approach depends on personal goals, family needs, and the nature of assets involved.

This content is for general informational purposes and does not constitute legal advice.

A Will for The Family Business

Wed, 04 Jun 2025 22:05:16 GMT

If you ever consult a financial planner, one of the issues on his or her checklist is going to be, "Do you have an up-to-date will?" It is a standard practice, and not because the planner is trying to sell legal services. The planning process has the objective of organizing a person's financial affairs so as to provide for the client and the client's family. That includes the unexpected death of the client which is sure to be emotionally devastating and can be economically disastrous.

The wisdom of such planning is even more obvious in the case of the owner of a family business. Such an enterprise often depends upon the management expertise of its founder. If he or she is gone, who will replace the founder is a business issue. Who is going to own the company is a legal issue.

If the sole owner of a business dies with a spouse and two children and no will, then the laws of inheritance require that the spouse receive one-third of the decedent's property (including the business) and then the children get the remaining two-thirds. That would be very bad news for a spouse, especially one who put sweat equity into building up the company from nothing.

Consider the hypothetical case of Coverall Roofs, Inc., a roofing contractor. The company is small. Joe, its only shareholder, does all the sales and marketing when he is not supervising the foremen of his six crews.

His wife, Mary, has been married to him for twenty-five years and the company's net income is her sole means of support. They have two sons and a daughter. Peter is a schoolteacher. Jane is the company's comptroller and John left the company after five years to become a general contractor.

Joe has spent his adult life growing Coverall Roofs from a small business into something worth a couple of million dollars (based on its ability to generate a net profit of $200,000 each year). He is encouraged that recent changes in the Federal Estate Tax has made him less of a target for the tax. As of January 1, 2011, a married couple can, with a good estate plan, pass $10 million of assets to their children without any estate tax. That "good news" is temporary because that change in the law only applies to estates in 2011 and 2012. Congress will have to pass another law to extend that protection to anyone who dies after December 31, 2012. Who wins the Presidential Election in 2012 should have a lot to do with the permanency of these changes in the estate tax.

Assume that Joe has prepared a will that leaves everything in trust for his wife and children. The trust provisions call for the payment of all its income to his wife during her lifetime and after her death the trust shuts down by distributing all of its property to the three children. Is that going to work?

Legally it is likely to be the correct approach because it avoids divided ownership of the company and it will probably avoid the Federal Estate Tax. Even if there is no Federal Estate Tax, it serves the purpose of providing an income to Joe's widow.

But it may not work over the long haul for practical business reasons. Who is going to replace Joe as the CEO of Coverall Roofs, Inc.? Shouldn't it be someone in the family? Mary was always a stay-at-home mother and doesn't know how to run the business. Jane is a "numbers" person and does not do well managing people. John could be tempted to come back to the company, but would probably hesitate because he would do better with his own company where he will receive 100% of any growth in the business, instead of the one-third he would receive at Coverall Roofs. He might resent seeing one-third of the company's increased value going to Peter who contributes nothing to the business. He doesn't even work there during his summer vacation from school.

There is no easy solution because this is a human problem as much as a legal problem. Joe needs to formulate a plan that treats his wife and children fairly and provides incentives to those people essential to the success of the family business. It would be best if that plan also increased the likelihood that Coverall Roofs survives into the next generation. Joe put a lot of himself into Coverall Roofs, and does not like the prospect of the company folding, or being sold off, as soon as he is gone.

Any successful small business needs a "will" that embodies a strategy to deal with the inevitable: death and taxes. We can repeal some taxes, but death will always be there.

Advanced Planning

Wed, 04 Jun 2025 22:05:16 GMT

Life Insurance Choices

It is such a simple question when you are completing a life insurance policy application. Who do you want to receive the death benefit in the event of your death? But there are many pitfalls on the way to a "correct" answer. For example, if you are a single person when the policy is purchased (or coverage is first extended in the case of an employer's group term policy), are you going to remember to change it when you get married? I once had a case where, five years after the wedding, a man was sure that he had changed the "beneficiary card" at his place of work to replace his mother with his wife. After his tragic death in an accident later that year his widow discovered that the change had never been officially made and the card still listed her mother-in-law. After a lawsuit, she was only able to obtain (through negotiations) a small fraction of the death benefit. She settled out-of-court because there was a high risk that she would receive nothing. That should be an easy mistake to avoid. The more subtle mistake involves the parents of minor children who designate those children as contingent beneficiaries of hundreds of thousands of dollars of life insurance (with the spouse as primary beneficiary). In the event of the simultaneous death of both parents, there is no surviving spouse to receive the death benefits. However, the life insurance company cannot legally pay the money directly to a minor. It must be turned over to a conservator of the property to hold until the child reaches 18 years of age. During that time it can only be invested in bank deposits and government securities unless prior court approval is obtained. There are two things wrong with this picture. First, most parents would like to delay the receipt of a large inheritance until at least after a child has completed college. Second, the investment of the insurance proceeds in more productive investments might be appropriate so that it will grow significantly faster than the rate of inflation. Both of those objectives can only be achieved through the use of a trust, where written authority is given by the parent (either through a Will or through a trust agreement) to an individual and/or a corporate trustee to hold the property, invest it and use it for the benefit of the child, until a designated age when it is to be distributed in total or in installments. Such a trust for the children does not have to be a free-standing trust. It can be a testamentary trust that receives the death benefit either directly from the life insurance company (with a carefully drawn beneficiary designation), or from the executor of the estate (when the estate is the secondary beneficiary but the will directs distribution of the estate's property to the trustee). Life insurance can also add to a person's wealth sufficiently that they must worry about the federal estate tax, which starts at 46% on every dollar above $2 million that does not pass to a surviving spouse or charity. An additional increase in the "exempt amount" to $3.5 million is scheduled for January 1, 2009. The "smart money" is betting that the scheduled January 1, 2010 repeal of the federal estate tax will never take effect and the exempt amount will be fixed at $3.5 million. The estate tax avoidance for large life insurance policies is fairly straight forward, when married couples utilize tax-oriented trusts in their estate plan. Each spouse protects some property from such death taxes by leaving it in trust instead of outright to the surviving spouse. With the right contingent beneficiary designation and a series of disclaimers, all or some of the life insurance can go to the trust, of which the spouse is a trustee. At the death of the surviving spouse, that trust money is not subject to the estate tax and passes to the children at the appropriate ages chosen by their parents. Finally, when a person has what we might call "mega-wealth" and wants to maintain life insurance, the most "estate tax-efficient" method can be to establish an irrevocable trust which purchases and pays for that life insurance. The founder of that trust donates sufficient money to it each year for payment of the premiums. This is a fairly complex solution and should only be done with the assistance of an experienced attorney and life insurance agent.

Perils of Joint Ownership

In Shakespeares great play, KING LEAR, the title character discovered the danger of judging the love of his daughters by a willingness to make protestations of love in exchange for the advancement of their inheritance. Two daughters said all the right things, took the money he gave them and left him to die mad, homeless and penniless. He disinherited the third daughter who had remained silent, relying upon her acts of dutiful love to answer his question of how much she loved him. A case a few years ago in the Georgia Court of Appeals demonstrated similar, albeit less dramatic, perils that are possible from the careless creation of joint ownership of a financial asset. An elderly woman, Virginia Gray, named two of her daughters as joint owners with her on several certificates of deposit that totaled about $230,000. All of the money for the CD's came from Mrs. Gray. In 1996 she suffered a disabling stroke and later that year the daughters cashed in the CD's and used the funds as their own. Just as in KING LEAR there was a third daughter. She took nothing from her mothers accounts. A court-appointed guardian for Mrs. Gray successfully sued the daughters to recover the assets and was even awarded the attorneys fees and expenses incurred in bringing the suit. Georgia law draws the distinction between access to such jointly titled CD's and the actual ownership of them. "A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent." Notice that the law speaks of "during the lifetime of all parties." Another problem from careless use of joint ownership arrangements occurs at the death of the true owner of the account. The decedent could have a last will and testament that benefits all of his or her children equally. Any joint asset, by the terms of the account agreement, will pass by way of survivorship to the other persons named on the account. It will not be part of the estate transferred in accordance with the will unless there is "clear and convincing evidence of a different intention at the time the account is created." By statute, Georgia prohibits a person from using his or her will to change the right of survivorship or "pay on death" provisions governing such an account. As I have written before, "probate" may be something to be avoided in other states such as Florida, California or New York, but it is not so in Georgia. With a well-drafted will, the administration of a decedents estate in Georgia can be as easy as settling that person's affairs through the much-touted "living trust." Joint ownership as a means of "avoiding probate" is the wrong tool being used for an unnecessary task. The same convenience of a joint account can be obtained through the use of a power of attorney for an account given by the elderly parent to the adult offspring. The financial institution will usually require a signature card signed by the account holder and the "attorney-in-fact." A word to the wise: even when there is a formal document establishing a power of attorney relationship, banks, and other financial institutions such as stock brokerage houses and mutual funds, have been known to require such signature cards or the execution of their forms before honoring any power of attorney designation. Another problem I have seen is the vulnerability of the joint account to the claims of the creditor of the adult offspring. A garnishment served on the bank by a judgment creditor will tie up the joint account for months if the "real owner" of the account wants to argue that his child does not have a legal interest in the account subject to a claim by the creditor. Most of the time it will be easier to pay off the money owed instead of fighting a court battle. The sloppy use of joint ownership can create a contentious situation where people may honestly differ over what was intended, or a golden opportunity for someone to steal a fortune and get away with it. If they spend it all before they are caught, a court judgment will be of little comfort. At a continuing legal education seminar I attended a few years ago, I heard a veteran estate planning attorney swear that he hated joint ownership arrangements. Now you can see some of the reasons why.

Saving for College

When I first wrote my newspaper column about "saving for college" it was August, the time for many students to leave for a new year in college. It was too late for those students to start a college fund to pay tuition costs for that year. However, there is always plenty of time for parents and grandparents of younger students to save money. One of the best methods for such savings is a tax-free saving plan commonly referred to as a 529 plan. Section 529 of the Internal Revenue Code was amended in 2001 to grant tax-free status to distributions from a Qualified State Tuition Program (QSTP). Any investment income earned on a QSTP account, if it is distributed for a qualified educational expense, is tax exempt. One feature that is easy to overlook is that there is no maximum age on who can start a 529 Account or who can be a beneficiary of an account. An adult can start an account for "later-in-life" education. There are basically two types of QSTP: a pre-paid tuition program and a savings program. All 50 states have passed laws to establish programs to administer their respective QSTPs. Pre-paid tuition programs are becoming less fashionable because of the lack of flexibility in comparison to the Section 529 savings plans. I am going to restrict my discussion to the savings plans. Georgia started its QSTP program in 2002. Its Web address is www.path2college529.com. The site allows for online enrollment and features such tools as a financial calculator to show how much can be gained by starting a savings plan account early in the child's life. There is a state income tax deduction of up to $2,000 of contributions and a taxpayer does not have to file an itemized return to be able to claim the deduction, which makes it appealing to all taxpayers. Aside from gift tax considerations, there is no annual contribution limit — only a cumulative contribution limit. When the total account balance of all accounts for the same beneficiary equals $235,000 no further contributions can be made. However, the account(s) reaching that "cap" can continue to grow due to investment performance. The beneficiary of a 529 account can use the funds for a qualified educational expense at a public or private institution anywhere in the U.S. The definition of "educational expense" is surprisingly broad and includes remedial, technical and post-graduate education. Withdrawals that are not used for a qualified educational expense are treated as taxable income and incur a 10% penalty. There are exceptions related to the death, disability of the beneficiary, or lack of need because of a scholarship. The best feature of 529 plans is that a contribution to a plan qualifies as a "present gift" for purposes of estate and gift taxes and is therefore eligible for the $12,000 annual gift tax exclusion (as of January 1, 2008). Under current federal law, five years worth of contributions can be made in one year and, if the donor survives the subsequent four years, all of the money will be protected from estate and gift taxes. It is thus possible for someone to fund all of a child's college education with a gift made when that child is an infant. The child does not have to be the owner of the plan at anytime (unlike custodial accounts that are turned over at age 21) and the account's owner (grandparent or parent) can change the account's beneficiary to someone else in the family for any reason (i.e. the original beneficiary does not pursue any education after high school). The investment performance on 529 savings plans varies from state-to-state. Each state chooses a plan administrator, which is usually a major national investment firm. Georgia selected a subsidiary of TIAA-CREF that manages many plans throughout the country. One indicator of the company's investment management skills: the performance since inception (May 1, 2002) of the "balanced fund option" was 7.95% (annual return) as of November 30, 2007. Another factor to consider is that the total investment management fees for the age-based investment options is capped at 0.78%, which compares favorably to the management costs in some other states. All of these figures are likely to change over time. Each person considering any investment should research the performance, competitiveness and management costs of Georgia's plan and any other plan under consideration. A would-be donor should research the investment performance and the flexibility of a program (such as ability to change investment portfolios). There are many investment options within each plan with some being more conservative than others. Only in hindsight will an investment choice look brilliant or stupid. The federal rules allow a once-a-year shift from one state's plan to another, or a once-a-year change in the account's investment strategy. This is not a vehicle for trying to time the market or make a killing. A good place for research of plans around the country is www.savingforcollege.com, which was founded by accountant Joseph F. Hurley. It has informative articles and ratings on all the 529 plans in the U.S. Some plans are better because of lower administrative costs or better investment performance, so research can really pay off. There is a rating system on the Web site that evaluates each state's program from the perspective of resident and non-resident taxpayers.

Before You Get Sick

Before you are admitted as a patient to a hospital the administrative personnel are required to ask you whether you have a healthcare power of attorney and/or a living will. They are not necessarily asking because, if you answer in the negative, they are going to pull out a form for you to complete. The purpose usually is to get a copy of such document(s) into the hospital files. Even if they did give you some blank forms, waiting to deal with the issue at the hospital is waiting too long. In this article I want to explore the medico-legal issues of healthcare directives so you can work out your personal solution long before you are sick or injured. I know of one case involving a woman in her 70's who had congestive heart failure. Her health had steadily declined for about a year. She concluded for very good reasons that the condition was eventually going to kill her and so, in the event of a heart attack, she did not want to be revived. Nevertheless, when she had a heart attack while at home and the emergency medical technicians arrived, no one had any sort of written health care directive in hand. If a document existed, it was not easily found during the emergency. The EMTs revived her and she was admitted to the hospital where she had several more heart attacks before finally succumbing to a fatal attack. Under Georgia law there are two different documents with statutory language addressing life, death and coma situations: the Healthcare Power of Attorney and the Living Will. They have two different purposes, but they should be prepared at the same time so as to be as consistent with each other in the areas where they overlap. The Healthcare POA authorizes a person (and one or more optional "back-ups") to stand in the shoes of the patient when he or she is unable to understand and communicate with the treating physician. The Living Will is nothing more than a letter of instructions from the patient to his or her doctors containing choices as to life support equipment, including feeding tubes, in life/death and coma situations. Before it has any effect there must be a certificate from two different physicians that the statutorily defined irreversible terminal condition or persistent vegetative state (coma) exist that warrant discontinuing artificial means of delaying the patient's death. There are many medical situations that are not life or death, but the patient is not able to make and communicate a decision as to treatment. That is where a Healthcare Power of Attorney can be absolutely essential and a Living Will is irrelevant. Consider the case of someone diagnosed with advanced Alzheimer's disease. The condition is neither terminal nor does it involve a coma. Without a Healthcare POA the legal alternative for dealing with the everyday decisions of both personal care and medical care is to obtain a court-appointed guardian of the person. As a practical matter a spouse of the patient might be able to get through many of those decisions without a formal legal document. But sooner or later a dispute with other family members or a reluctant health care provider will probably occur. Experience has shown that a Healthcare POA can be a springboard for serious reflection and discussion of the medical and ethical issues surrounding treatment of severely disabled or very elderly patients. Dr. Kevorkian exploited vulnerable people, some of whom did not have terminal conditions, in promoting his brand of euthanasia that bordered on murder. These are very difficult issues that involve a person's philosophical and religious beliefs. Family members of the patient can impose their beliefs upon the patient unless he or she executes a Healthcare POA and clearly expresses their own philosophy about life and death. It does not take a long search on the Internet to find fill-in-the-blank forms that address these issues. There are "healthcare directives" drafted by different medical institutions or foundations that go into excruciating detail about specific medical conditions and preferred treatment as to each. You can also find the Georgia statutory forms for a Healthcare POA and a Living Will. The American Bar Association's Commission on Legal Problems of the Elderly has published a tool kit for health care advance planning. I have a copy available for my clients. As of this writing it is also available at www.abanet.org/aging/toolkit/home.html. Using these forms in a do-it-yourself fashion is better than nothing. However, I suggest that going to an attorney who has experience in this field is preferable for several reasons. First, you are doing this for the first time, the attorney is not. He or she has had the opportunity to smooth over some of the rough spots in the statutory forms and add some refinements. Second, there are many questions that need clarifying, such as after death decisions, and directions that you may not be familiar with. Also, this can be part of preparing or revising your will. (You do have an up-to-date will reflecting the changes in the law or in your own life?)

How to Title Real Estate

Before You Get Sick

Wed, 04 Jun 2025 22:05:16 GMT

It seems like everyone has heard of the "Living Will." For about 15 years it was one of two statutes in Georgia that addressed the situation of an incapacitated patient who had an irreversible condition that was expected to cause death in a relatively short time, or was in a coma or persistent vegetative state that was reasonably believed to be permanent. That's a lot of legalese, but it's not easy to describe a medical situation where it might be morally and legally justifiable to withhold life-sustaining medical treatment from a patient.

The second Georgia statute was the Durable Power of Attorney for Healthcare which, like the living will statute, established a method for a person to state in advance preferences for medical care and treatment under "hopeless" circumstances. It also enabled any adult to designate an "Agent" to carry out those wishes and take charge of medical care in the event of the patient's incapacity, even when the situation was not so life-threatening.

This dual track approach ended on July 1, 2007, when the "Georgia Advance Medical Directive for Health Care Act" took effect. The statute prospectively abolished both the living will and the durable power of attorney for health care. However, all such documents executed before July 1, 2007 were "grandfathered" and are still completely effective and legally valid.

I was never much of a fan of Living Wills and I am glad to see them go. The document was not a will and it had nothing to do with living. It functioned as a letter to the doctors who might be treating the letter-writer sometime in the future. It stated that, if and when two doctors certified in writing that the patient was in an (irreversible) coma, persistent vegetative state or had a "terminal condition" (the last being defined by statute), life sustaining and death delaying treatment could be discontinued. Instructions could also be included on whether to continue nutrition or hydration supplied by artificial means.

There are at least two problems with this approach. First, it placed too much responsibility upon the doctors. Any outcome would depend upon the decision of the doctors as to whether there was any hope of recovery. A few years ago a Wall Street Journal column related the story of an elderly patient whose family had to stiff-arm a doctor who urged them "to pull the plug" on dear old dad. They finally invoked his religious preferences (Jewish) as a reason to continue treatment. The two-fold irony was that he had not been an observant Jew in years and that he recovered from his illness, despite the doctor's pessimism.

The second problem is that the Living Will did not address the medical decisions that must be made in the days or weeks prior to the "end-stages" of any illness or hospitalization. Who will take charge of the patient's treatment when he or she has reduced capacities because of the illness and/or medications?

In 1991 this issue of designating (in advance) a "proxy" to speak for the incapacitated patient was addressed with the Georgia statute authorizing a Durable Power of Attorney for Health Care. It enabled anyone to designate an agent and include the same "life and death" preferences but without requiring any doctor's certificate. It also granted authority to someone to make medical choices in non-life-threatening situations. Lastly, a person could address in advance post-mortem matters of autopsy, organ donation and disposition of remains, such as cremation.

The new Georgia Advance Medical Directive for Health Care explicitly replaced both the Living Will and the Durable Power of Attorney for Health Care with the stated goal of using "understandable and everyday language." The language may be better but the document is so loaded up with details that one could spend 45 minutes just getting through the selection of different options.

The larger problem is that it getting into that level of detail, and doing it successfully, requires practically prophetic powers. It calls for highly detailed plans in very hypothetical situations that might occur years from now. It provides the illusion of being organized. I call it an illusion because without a context of the age and general health of the patient combined with the state of medical technology, all the choices that seem definitive are usually just guesswork. That's the case because most people are executing the document years in advance of any need for its utilization.

My suggestion on how to deal with the new statute is to exercise considerable independence in choosing the options set out in the statutory form and do not hesitate to use only parts of the statutory form. The statute specifically provides that the use of its form is not required and that some parts of it are optional.

I also would point to the analysis contained in a law journal article I read a few years ago on medical powers of attorney. Going for the shock factor, the author opined that a medical power of attorney is "not worth the paper it is written on." The true value of the document is the discussion among the family members that preparing the medical power will prompt. This is an ongoing process that only starts in the attorney's office and can continue for years. The reason I mention an attorney is that most people deal with these issues in conjunction with preparing and executing their wills. Planning for how to handle a disabling medical condition is just as much a part of the estate planning process as a last will and testament.

One major improvement in the new form is the emphasis given on the cover page to the subject of what to do with the document after it is signed. We're dealing with a document that could be crucial in a medical emergency or an unexpected hospitalization. It should not be buried in a file drawer or a safety deposit box at the bank.

A few years ago I had to dig out from storage my file copy of a medical power of attorney for a client who was in a medical crisis in the hospital after heart surgery. The original could not be found. There was a lot of anxiety until I found my file copy. Therefore, copies of the Advance Directive should be given to the person and the persons designated as "backup agents." Even the family physician might want a copy. It should available from multiple sources when needed. I recently scanned a copy into the computer for a client so it could be stored electronically and available (with password protection) through an Internet connection.

When you really need one of these documents it is likely to be too late to prepare and execute it. That's why it's called "Advance," as in "do it in advance." This is one of those cases where an ounce of prevention is worth a pound of cure.

How Do You Own Your Home?

Wed, 04 Jun 2025 22:05:16 GMT

Owning your home seems to be a very passive activity, until some repair work has to be done. This "how to" article is not about fixing things around the house. I am going to write about how you own your residence and other real estate. The equity that a family builds up over the years in residential real estate makes up a large part of the family's wealth. So how that property is titled can be a major issue in planning for how to preserve that wealth for a surviving spouse and pass it eventually to the next generation. This can be very important for people in rural areas because of acreage that may accompany that residence.

Some years ago I assisted some people in handling their father's estate. The family homestead started out in the mid-20th century as a forty-acre tract. By the time of the father's death in 1995 it was down to 26 acres. When he died the land was worth over $35,000 an acre. Because it was in his name on the date of his death, all of the land received a "step-up" in basis to the fair market value as of the date of death. That means any profit on the sale of the property (and therefore any capital gains tax) would be determined using the date of death valuation and not the original cost from more than forty years ago. The land was sold and there was no income tax on the proceeds because there was no capital gain when the sales price matched the date of death value.

If the patriarch had titled the land jointly with his wife, then only one-half of it would have received a step-up in basis. He also utilized a very old legal technique of leaving a life estate in the property to his wife with full ownership passing to the two children after her death. I do not know if he intended it, but the result was that the property was fully protected against her creditors during her last illness because she only owned the legal right to live in the old family homestead for the remainder of her life.

That case illustrates how the titling real estate, especially when it is highly valuable, can have legal, economic and tax consequences. There are plenty of families in North Georgia with land that has been "in the family" for decades. With economic growth spreading from Atlanta to Chattanooga, some of those tracts of land are going to be worth millions of dollars.

Controlling the development of that land could be a source of contentiousness in the family. Establishing a legal entity to own the land, such as a trust, partnership or limited liability company, may be necessary to establish a policy on what to do with the land upon the death of one generation and grant authority to someone in the next generation to carry out that policy.

In some families setting that policy may be straight-forward, but there is no one available who is sufficiently sophisticated and/or trustworthy to implement the policy. In that case naming a non-family member, even a corporate fiduciary, as a trustee of a trust established to own and eventually sell the land may be necessary.

Most married couples I encounter, almost out of reflex it seems, have titled their home as joint tenants with right of survivorship. When there is not a lot of wealth tied up in the house, this is a convenient method. But what if there are hundreds of thousands in equity and there is a blended family? It might be desirable to protect the residence for the surviving spouse and still preserve the wealth for the children from a previous marriage. Again, setting up a trust to hold the property might be a good idea.

Even with a less valuable residence, joint ownership can be tricky. In Georgia the deed passing title to two people must explicitly create a right of survivorship. Otherwise a tenancy in common is created. When one owner dies that person's interest will pass through his or her estate. If there is no will and the decedent had children surviving, the children will inherit a part-interest in the residence. That could be messy for a surviving spouse.

There are many ways to title real estate. The next time you update your wills, (you do have current wills, don't you?) review the situation and make sure you are doing the right thing for the right reasons. It's one way of avoiding unpleasant surprises.

I Just Need a Simple Will

Wed, 04 Jun 2025 22:05:16 GMT

How many times have I heard it? A person calls me and wants to schedule an appointment. All they need is a simple will for a husband and wife. Only on rare occasions do I find that they are correct in their assessment. Since underestimating legal needs is a common problem, I thought that it was worth writing about.

First, what are the alternatives? With the last will and testament, it is either a simple will or a trust will. The "simple" approach calls for the executor of the decedent's to distribute all of the decedent's property that remains after payment of debts, taxes, and administration expenses and then close the estate. A trust will requires the executor to make a distribution of some or most of such property to a trustee, who then manages, invests and distributes the property given him or her to designated beneficiaries in accordance with instructions contained in the will.

Another alternative is a hybrid of the first two where the executor is instructed to hand over the net assets of the decedent's estate to a trustee of a trust established by the decedent while living. Such a trust is called an "inter vivos trust," which is Latin for "between the living," referring to a living person starting the trust by making a written agreement with another living person. Usually such a trust is revocable (i.e. subject to being amended or revoked by the person establishing it). The last will and testament in this situation is called a "pour-over will" because it pours over the assets from the decedent's estate to the trust, which then controls their ultimate disposition.

Combining pour-over wills with inter vivos trusts, is less popular in Georgia than in other states, such as Florida, California and New York, because the probate administration of wills is much less cumbersome and expensive in Georgia. Our probate system is user-friendly and minimizes court involvement in the administration unless there is a controversy.

So why would someone need the complexity of a trust will instead of a simple will? The most common reason is to provide for minor children in the event of the death of one or both parents. Many young parents are driven by the desire to designate a guardian to care for their children if both parents have died. They underestimate the need for someone to watch over the family's assets, including life insurance death benefits, until the children are old enough (and wise enough) to manage it for themselves. Without a trust, all of assets must be held by a conservator for each child and turned over to him or her upon reaching 18 years of age. With a trust it can be invested and managed with greater flexibility. While the child is younger the trustee can use it for his or her benefit and then distribute it outright at much later ages (e.g. one-fourth at 28 and the balance at 32).

The threat of death taxes was once a major reason for a trust will. Due to changes in the tax law in 2011 and in 2017, the Federal Estate tax is threatening fewer estates. For 2020 the tax kicks in for estates that are over $11.5 million. However, a married couple with the proper documents can protect a total of over $20 million. That "exempt amount" is scheduled to change in 2026 to about $6 million person.

A trust is used to minimize exposure to the death tax because it can hold assets at the "first death" so that some portion of the family wealth bypasses the estate of the surviving spouse estate. After the death of the surviving spouse, the trusts from each estate hold all of the family wealth for distribution to the children at designated ages. Historically the tax rate has been as high as 55%. So when the death tax hits it can take quite a bite out of the family wealth.

The last reason the "I just need a simple will" approach can be questionable is that a will only deals with death. A disabling illness or injury creates plenty of legal issues that a will cannot resolve. I find that over 90% of the people I see for wills have not prepared and signed powers of attorney. These documents enable a spouse, or any other trusted person, to stand in for a totally disabled person and make necessary health and financial decisions. So even if a trust will is not needed, powers of attorney should be a part of every estate plan.

Making a will is better than doing nothing. But it is not wise to go into the effort with preconceptions of how much needs to be done.

Does Your Will Need Revising?

Wed, 04 Jun 2025 22:05:16 GMT

Changes in a person's life over a ten year period can undercut the effectiveness of the best estate plan. Children can turn into terribly irresponsible young adults. Juveniles can become surprisingly responsible citizens. Elderly parents can become financially dependent upon their adult offspring. Baby boomers can inherit a few million dollars. All these things will happen in the next decade to somebody.

I recommend to my clients that they pull out their estate planning documents every three to five years, read over them and just think about it again. With everything else in life there is no way a normal person can remember all of the details after a few years.

On a larger scale the laws that affect estate planning do not stay the same. Congress is always doing something. In December, 2010 estate planners were surprised to receive a "Christmas present" in the form of new estate tax law that could enable a family to protect $10, 000,000 from the Federal Estate Tax. In 2017, the Congress increased that “exempt amount.” Until it “sunsets” in 2026, the estate tax protection will be over $11 million per person ($22 million for a married couple). In January 2026, the current law will mandate a decrease to about $6 million per person. So it could be literally rewarding to keep up with the latest changes in articles in publications like Money Magazine or The Wall Street Journal .

Those dramatic changes in the tax law have rendered wills done over 20-25 years ago woefully out of date. Back then exemption from the Federal Estate Tax (known to its critics as "the death tax") was only $600,000. Anyone who has a will that was designed to maximize avoidance of the death tax with formulaic provisions tied into the old tax law has a Big Problem. Since the current tax law protects 99% of all estates, those formulas would probably impose a rigid legal structure that unnecessarily diverts a lot of the decedent's wealth to a trust instead of outright to the surviving spouse. Result: one unhappy surviving spouse, who was expecting more flexibility than having a lot of the family assets tied up in a trust.

A few years ago I had a flurry of probate files which were based on wills done out-of-state and/or back in the '80's. The wills presented issues that made the probate or estate administration more time-consuming. For example, attaching an affidavit to the will, signed by the testator and the witnesses is standard procedure in Georgia. When it is missing, or in a form not accepted in Georgia because it uses another state's format, we have to find at least one of the witnesses and obtain sworn "Answers to Interrogatories" from the witness before the will can be probated.

I have seen plenty of wills from Florida and I don't think a single one of them has waived the requirement for an inventory, appraisal and final return. That causes extra work for the executor, which usually does not add anything to the quality of the estate administration and increases the legal costs. So anyone with a perfectly nice set of documents for Florida, after moving to Georgia probably needs to update their documents.

What are your alternatives? Do you write a new will every January, after you see what Congress passed in the previous year? I do not think such drastic measures are necessary. However, I tell clients that they should not count on getting more than ten years of use out of their wills before they need revising.

Of course if you don't have a will, then revision is not an issue. Just do it.

Special Trusts

Wed, 04 Jun 2025 22:05:16 GMT

Sometimes it just doesn't work for someone to own any property. The classic example of this is a person who is legally incapacitated because of a mental or physical disability. Such can happen in predictable or unpredictable ways. It's not surprising when a person who is 85 years old suffers from senile dementia or Alzheimer's Disease and thus is not able to manager their financial affairs. A 55-year old man falling off of a roof and suffering a disabling head injury is not predictable.

I am going to write this month about the rather predictable situation of someone who is permanently disabled because of a medical condition from childhood, or because of a medical condition at an advanced age. There are a variety of trusts that are useful in protecting people who need special attention. First, we will address the case of children who need such protection.

In the law the concept of a "permanent child" does not refer to a Peter Pan type character, but rather describes the legal situation of a person who has a permanent mental or physical disability so severe that he or she will never have the complete capacity to live independently, making everyday economic and legal decisions.

When meeting with their parents I usually refer to them as "special needs children." Life is not necessarily all that complicated as long as one of the parents is still alive and taking care of the special needs child. However planning for the time when there is no parent around to care for the child demands a more complex estate plan than the usual.

Before I address the orphaned child scenario, I should mention one other estate planning issue peculiar to the special needs child. The extended family of grandparents, aunts and uncles have to be educated to the legal techniques appropriate to the child's circumstances. The proverbial "rich uncle" should not leave property outright to that child in his will. If that is a possibility, I usually recommend that the parents of the child establish a "living trust" that is in stand-by mode while they are living, but is also available to receive any bequests from Uncle Albert or Grandpa.

Two benefits flow from that approach: (1) the child will not directly "own" inherited wealth that will necessitate probate court proceedings to appoint a conservator; and (2) the existence of that wealth will not disqualify the child from certain government benefits, particularly Medicaid, that are conditioned on the recipient not owning anything.

So the word has to go out to everyone to be careful in what they do if they want to benefit the special needs child. That includes beneficiary designations on life insurance and retirement accounts. A bachelor uncle who puts that child down as his beneficiary for a life insurance policy or a 401(k) plan has created one big headache.

It is far better for him to consult with the child's parents to identify the supplemental needs trust that the parents established (the "living trust" referred to above) and name the trust as his beneficiary. The trust will then use any such money to pay for those therapies, services and things that are not covered by any government special education or Medicaid program. Similarly the parents must not neglect that aspect of their estate planning.

The parents should create such a trust document and then update their beneficiary designations on life insurance and retirement accounts to point to the trust for some or all of those assets in the event that no parent is surviving. If the parent's death were to trigger the pay-out under a "wrong" beneficiary designation, the trustee of the supplemental needs trust would have to sit on the sidelines and watch as the probate court conservatorship proceedings chew up resources in legal costs and disqualify the child from any needs-based government benefits.

Sometimes a pay-out to the permanently disabled child is unavoidable. The most common example is a personal injury award because of a lawsuit brought on behalf of the disabled child. When that happens the usual solution is to obtain court approval of establishment of a "special needs trust" that can pay for the child's needs which exceed the government benefits. The trust does not disqualify the child because after the child's death the trust is required to reimburse the government for any medical assistance payments made during his or her life. Such proceedings can also be used to "fix" the mess created by (the late) Uncle Albert's well-intentioned, but sloppy, beneficiary designations.

This sort of problem can also arise in the "elder law" field because of a the possible need for an extended stay in a nursing home. Such costs are not covered by Medicare. So the purchase of a long-term care insurance policy, years before the need arises, may be wise. Not everyone has such foresight or the money to pay the premiums. The difficult situation is where the person cannot afford to pay for the nursing home from their own income or assets, but is too "rich" to qualify for the Medicaid program covering the cost.

"Medicaid planning" is too complex a subject to include in this column. For one thing, that term can refer to the deliberate impoverishment of an elderly person by transfers to their offspring so as to qualify for Medicaid-paid nursing home care. It is a morally and legally difficult area.

There is one legal method for a disabled elderly person to pass the income test for Medicaid assistance. A "Miller Trust" can be established on his behalf to receive all of his income (assuming he does not meet the low-income requirements). The trustee receives all of the income and uses it for the nursing home care, less a small monthly allowance for the patient's personal needs.

The other trust that might be appropriate is the Special Needs Trust, discussed above. However this time the trust would be established in the will or living trust of a spouse who predeceased the disabled spouse. Obviously this is not universally applicable, but it should not be overlooked by those people so situated.

The special needs of a child or an elderly person will often be best served by a special trust that is dedicated to their best interests while passing the cost of medical treatment off to the Medicaid program. However, it won't happen without foresight and careful planning.

Is a Will Enough

Wed, 04 Jun 2025 22:05:16 GMT

Only a small percentage of people have wills. The most commonly cited statistic states that one-third of the adult population have prepared wills. But is a will enough? No, there are other essential documents that I believe all people need in addition to a last will and testament.

A will only controls the property that a person owns in his or her own name at the time of death. Any assets that are owned with a right of survivorship or with a beneficiary designation are going to pass "outside of the will." That can result in unintended results. I once had a case where a man told his insurance agent that he had changed the beneficiary designation on his employer-provided life insurance from his mother to his wife of five years. A year or so later I was representing his widow because she had learned that he had not made the change of beneficiary. It went to court and, because she had a weak legal position, she had to settle for a fraction of the death benefit.

The complexity of beneficiary designation issues is a recurrent problem. I frequently encounter young parents who have named minor children as their secondary beneficiaries on their life insurance and their IRA accounts. Such moves are counter-productive when the estate plan calls for a trust to protect all this wealth in the event that there is no surviving parent. In this era of multiple marriages, if the surviving parent is an ex-spouse the problem of protecting the children can be even more dramatic. (A natural parent succeeds to custody of a child upon the death of a custodial parent/ex-spouse).

IRA's often contain a considerable portion of the family wealth. Because they are "beneficiary designation" property and hold tax-deferred money, IRA's should not usually pass through the account holder's will in the event of death. If an estate is the IRA beneficiary, the tax deferral is usually lost because of the five-year rule requiring the account to be liquidated within five years after the year of the account holder's death. If a trust is a beneficiary of an IRA, certain tax regulations must be observed in order to obtain the best income tax treatment for the death benefit. Again, focusing exclusively on the will can result in an incomplete estate plan with unintended (and undesirable) consequences.

Not all estate planning issues are connected with death. In the event of a disabling illness or injury a person may not be able to act on his or her own behalf. If the legal capacity is serious or permanent, then probate court proceedings to obtain the appointment of a guardian is the traditional solution.

A conservatorship petition is notorious for being time consuming, expensive and overly protective of the property of the disabled person. Having an alternative requires planning in advance. A person with substantial financial or real estate investments might use a "living trust." At a minimum a standby general power of attorney is a necessary precaution for every adult. A catastrophic illness or injury can result in an even more dramatic need for a Advance Directive for Health Care, which appoints an agent to manage the disabled patient's health care, (i.e. tell the doctors what you want done.)

It seems as if everyone has heard of a "living will" which memorializes a person's preferences on life support procedures in the event of a coma, persistent vegetative state or a terminal condition. In 2007 Georgia passed a statute to consolidate the old living will statute with the durable power of attorney for health care. The new document is called the Advance Directive for Health Care. Every adult should have one, regardless of age or the state of health.

So it should be obvious by now that "all I need is a simple will" may be the wrong approach for a lot of people. Even if someone has the other documents mentioned above, the need to coordinate those documents and the person's economic affairs won't go away. I recommend to my clients that they review their estate plans every three to five years, or after any major life event (e.g., a death in the family, the birth of a child, retirement, major illness, etc.). That involves more than just reading through the documents. Checking beneficiary designations, running a worksheet tabulation of all assets (including life insurance), and thinking about the continued suitability of candidates for executor, trustee and guardian all go into a successful effort to avoid obsolescence.

"Estate planning" does not require fancy folders and color charts with twenty-year projections of future wealth. It involves creating a set of documents that implement those decisions necessitated by that individual's circumstances. A simple life will probably result in simple documents, but only after a thorough analysis of all the facts.

Coping with Death

Wed, 04 Jun 2025 22:05:16 GMT

In many respects it is very difficult to prepare for death. However the planning needed to avoid creating chaos for one's survivors is not difficult. It is only necessary to anticipate the steps necessary to settle the affairs of a decedent. Whether you are thinking of your own "estate," or that of a loved one for whom you are responsible, some planning will make the estate settlement process (which most people refer to as "probate") easier. In this article I will review the basic steps for "settling" a decedent's estate.

The first challenge for the survivors is to locate and read the deceased's will, if there is one. The last will and testament nominates someone to serve as executor of the estate. For purposes of this article I will assume that a will was written and found. I will also assume that everyone is acting in good faith and, unlike some television drama, nobody destroys the will in order to increase their share of the estate.

The first task facing the executor is to identify the assets and how ownership of them will pass. In Georgia there are basically four "classes" of ownership: joint tenancy with right of survivorship ("JTROS"), beneficiary designated assets (e.g. life insurance, IRA's, etc.), personally owned assets and those owned in a revocable trust.

A common misconception among people who establish "living trusts" is that, upon their death, all their property will be covered by that trust. That is only true to the extent that they formally changed the title of any asset to make the trust the owner.

Similarly, JTROS property is not covered by a person's will after death. It passes by right of survivorship to the other joint owner(s). This can easily lead to a case of unintended consequences when an older parent puts the name of an adult offspring on their bank account or other financial asset for the purpose of giving them signature authority. Unless specifically instructed not to do so, people at the bank will pull out an account agreement form that contains a "pay on death provision" or creates a right of survivorship. This sort of sloppiness can lead to bitter fights between siblings after the death of the parent because a major asset may be taken out of the probate estate if someone asserts his or her right of survivorship and a sibling disputes the correctness or propriety of that assertion.

In Georgia jointly titled property must specifically refer to the "survivorship" rights, otherwise a tenancy in common is created. Property owned by a decedent in a tenancy in common is in that person's probate estate and is controlled by his or her will (or the laws of inheritance when there is no will). In other states, especially when a husband and wife jointly own property, the rules can be very different. The extreme example of such different rules are the community property laws out West in places like California.

Only those assets which are personally owned, which includes money owed to the decedent or his estate, pass under the supervision of the probate court. Those are usually referred to as being in the probate estate. However, all four classes are considered to be "owned" by the decedent for purposes of calculating what Federal Estate Tax, if any, must be paid by the executor of the estate. Thus, collectively they make up the "taxable estate."

The executor has a duty to locate and gather the assets that are in the probate estate. In the case of those assets in the taxable estate, but not in the probate estate, the executor needs to tabulate the total to ascertain whether a Federal Estate Tax Return (Form 706) must be filed with the Internal Revenue Service. The threshold amount for that tax, as of January 1, 2011, is $5 million. That amount is often referred to as the exempt amount and it will remain at that level until January 1, 2013. If recent history is any indicator, Congress will pass a law at the last minute to keep the exempt amount at $5 million for 2013 and later years.

Even when no estate tax is due, because of deductions and credits, the return must be filed within nine months of the date of death when the decedent's "gross estate" exceeds the threshold amount. The executor is personally liable if he or she distributes the estate's assets to the heirs without satisfying any tax liability.

It should not need saying, but experience has proven otherwise: the authority of a person acting under a durable power of attorney ends with the death of the person giving that power. Once appointed by the court, the executor must close any bank accounts in the decedent's name and open a bank account in the name of the estate. If the executor finds that someone used a power of attorney after his authority ended, he must hold that person accountable.

Finding the records of the decedent is an essential part of the executor's job. A checklist is helpful in this regard. The following items should be on any checklist: bank records, including check registers and canceled checks; mortgages and deeds; stock brokerage statements; stock certificates; life insurance policies; pension benefit statements; loan documents; income tax returns for the past three years; any prior gift tax returns; recent credit card statements; inventories and appraisals of valuable assets (e.g. art, jewelry, coins); burial plot contracts; motor vehicle titles; and insurance policies covering the home and personal property.

Insurance is also an issue for the executor because insurance on the decedent's automobile(s) and other property will not continue indefinitely. The executor should contact an insurance agent, preferably the decedent's, to continue coverage, even if a new policy must be issued to the estate.

One consolation to the survivors is that they do not have to do all of this work on their own. The decedent's attorney and accountant can be of immense help in organizing the effort and providing expertise. However the first inheritance from the decedent will be the organization, or chaos, they have brought to their own affairs.

Estate Planning Basics

Wed, 04 Jun 2025 22:05:16 GMT

I had a client a few years ago who died of a heart attack when he was 73 years old. He died while still "at the top of his game" (to borrow a phrase from baseball) as a distinguished college professor at Georgia Tech and an elder statesman in local politics in Fulton County, Georgia.

It says something about our times that his death seemed much too soon. A generation or two ago he would have been considered "elderly." The suddenness of it reminds us of how precarious life can be. Since I worry about such things as part of my work, it reminds me of how important it is that a person not only have a well-drafted will, but also an up-to-date estate plan. A will that is ten years old can still work very well from a legal perspective, but in those ten years a person's estate plan can become obsolete.

An estate plan matches a person's economic reality to the legal arrangements to dispose of their wealth in the event of death. It's designed to implement their wishes and minimize exposure to taxes. Whether a person uses a Last Will and Testament or a combination of a Will and a "living trust," organizing the title to property and the beneficiary designations is essential to a successful estate plan.

A while back I had a client, who is not married and has no children, tell me that he wanted a clause in his will setting aside a percentage of his assets to pay for some of the college costs of his niece and nephew. He controlled about $300,000 of assets, but most of it was in retirement accounts, which are not affected by his will. So his estate plan would need to coordinate his beneficiary designations and the bequests in his will so as to get the "correct" portion of that $300,000 into a college fund.

A person can title his or her property in several ways, all of which have implications for how ownership of it will pass in the event of death. It is common for a husband and wife to have their home and other real property titled jointly with right of survivorship. This approach emphasizes flexibility over predictability. It postpones the issue of the ultimate passage of title to a non-spouse beneficiary (such as the children of that marriage, or of multiple marriages) to the "second death," the death of the surviving spouse, whoever that might be.

Let's consider the hypothetical case of Mr. & Mrs. Hitech who both work in North Fulton County for telecommunications companies. They each have grown children from previous marriages who are all in their 20's, with some still in college. Each has life insurance policies totaling $600,000 and retirement accounts of about $500,000. With their other assets each would leave an estate worth over $2 million. However over half of that wealth is in retirement accounts or death benefits from life insurance.

After the tax reform bills passed in 2010 and 2017, the Federal Estate Tax has become a non-issue for over 99% of the population. The Hitech family should be safe from the IRS because (as of 2020) over $11 million can be passed to the children without any estate tax. That "exempt amount" may revert back in 2026 to a lower amount established in 2011. However, adjusted for inflation that is likely to be no less than $6 million. Thus, tax planning has become less important. For most people the selection of the primary and secondary beneficiaries on the retirement accounts and life insurance is equal in importance to what is done in the wills and/or trusts. Those designations could be pivotal in the transmittal of wealth to the surviving spouse and children in a fashion satisfactory to the client.

If the spouse is the sole beneficiary in our fictional Hitech family, there is a real possibility that the entire $4.0 million of family wealth will be controlled by the wishes of whoever happens to be surviving spouse. If there is a trust in the will of the first spouse to die it may get few, if any, assets because practically all of the decedent's assets never "passed under" the will (and thereafter to the trust). Why would that happen? The answer would be those beneficiary designations and the residential property owned “joint with right of survivorship.” Even in a case where there is no blended family, there is no guarantee that the surviving spouse will not re-marry and leave the entire family wealth from the first marriage to that second spouse.

It should be obvious by now that drafting a good set of documents is only part of the solution. A person needs to coordinate the economic reality with those legal documents and keep them coordinated in the years after their execution. Failure to do so may cause a lot of disappointment and heartache when the documents "work" but the estate plan doesn't.

This site is established for general information only. The discussion of legal issues should not be construed to constitute formal legal advice nor the formation of a lawyer/client relationship. Persons accessing this site are encouraged to seek independent counsel for advice regarding their individual legal issues. Persons not residing in the State of Georgia should be aware that the law in other states may differ materially from some of the legal principles discussed here.

Perils of Ownership

Wed, 04 Jun 2025 22:05:16 GMT

In Shakespeare's great play, KING LEAR, the title character discovered the danger of judging the love of his daughters by a willingness to make protestations of love in exchange for the advancement of their inheritance. Two daughters said all the right things, took the money he gave them and left him to die mad, homeless and penniless. He disinherited the third daughter who had remained silent, relying upon her acts of dutiful love to answer his question of how much she loved him.

A case a few years ago in the Georgia Court of Appeals demonstrated similar, albeit less dramatic, perils that are possible from the careless creation of joint ownership of a financial asset. An elderly woman, Virginia Gray, named two of her daughters as joint owners with her on several certificates of deposit that totaled about $230,000. All of the money for the CD's came from Mrs. Gray. In 1996 she suffered a disabling stroke and later that year the daughters cashed in the CD's and used the funds as their own. Just as in KING LEAR there was a third daughter. She took nothing from her mothers accounts.

A court-appointed guardian for Mrs. Gray successfully sued the daughters to recover the assets and was even awarded the attorneys fees and expenses incurred in bringing the suit.

Georgia law draws the distinction between access to such jointly titled CD's and the actual ownership of them. "A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit, unless there is clear and convincing evidence of a different intent."

Notice that the law speaks of "during the lifetime of all parties." Another problem from careless use of joint ownership arrangements occurs at the death of the true owner of the account. The decedent could have a last will and testament that benefits all of his or her children equally. Any joint asset, by the terms of the account agreement, will pass by way of survivorship to the other persons named on the account. It will not be part of the estate transferred in accordance with the will unless there is "clear and convincing evidence of a different intention at the time the account is created." By statute, Georgia prohibits a person from using his or her will to change the right of survivorship or "pay on death" provisions governing such an account.

As I have written before, "probate" may be something to be avoided in other states such as Florida, California or New York, but it is not so in Georgia. With a well-drafted will, the administration of a decedents estate in Georgia can be as easy as settling that person's affairs through the much-touted "living trust." Joint ownership as a means of "avoiding probate" is the wrong tool being used for an unnecessary task.

The same convenience of a joint account can be obtained through the use of a power of attorney for an account given by the elderly parent to the adult offspring. The financial institution will usually require a signature card signed by the account holder and the "attorney-in-fact." A word to the wise: even when there is a formal document establishing a power of attorney relationship, banks, and other financial institutions such as stock brokerage houses and mutual funds, have been known to require such signature cards or the execution of their forms before honoring any power of attorney designation.

Another problem I have seen is the vulnerability of the joint account to the claims of the creditor of the adult offspring. A garnishment served on the bank by a judgment creditor will tie up the joint account for months if the "real owner" of the account wants to argue that his child does not have a legal interest in the account subject to a claim by the creditor. Most of the time it will be easier to pay off the money owed instead of fighting a court battle.

The sloppy use of joint ownership can create a contentious situation where people may honestly differ over what was intended, or a golden opportunity for someone to steal a fortune and get away with it. If they spend it all before they are caught, a court judgment will be of little comfort.

At a continuing legal education seminar I attended a few years ago, I heard a veteran estate planning attorney swear that he hated joint ownership arrangements. Now you can see some of the reasons why.

Do you need a trust?

Wed, 04 Jun 2025 22:05:16 GMT

There is a hardly a financial planner on the radio, or in the print media, who does not push the idea that every person's estate plan needs a trust. They usually refer to them as "living trusts." For people living in Georgia that "ain't necessarily so." In this article I am going to address the situations where having a living trust is worthwhile.

First, what is a living trust? Simply put, it is a written agreement under which one living person, the "settlor," gives legal ownership of certain property to another living person, the "trustee," who holds it in accordance with the terms of the agreement. Although the settlor and trustee are two separate roles, they can be performed by the same person if the settlor so desires.

The term "living trust" is a poor translation of the Latin in the phrase " inter vivos trust," which really means a trust between the living. This distinguishes it from a "testamentary trust" which is created by a person's last will and testament and does not take effect until after that person's death, when the executor of the will transfers specified property to the person appointed in the will to serve as trustee. That trustee then administers the trust portion of the will in the same fashion as he would with a living trust that had the same provisions.

A trust agreement is either revocable or irrevocable. Unless a power to revoke or modify is reserved by the settlor (which is usually done), a trust is deemed irrevocable. A revocable trust can be the best vehicle for handling a complex set of assets. For example, a Georgia resident owning real estate in North Carolina would face a separate probate there at his or her death. Ownership of the land in a trust would avoid that second probate proceeding.

Another use might be to manage financial investments that are outside of a retirement account. This could be a hedge against a disabling illness (including senility) or injury where the settlor wants to designate a specific person to be a successor trustee who can provide continuity of management in the event of disability or death. In this time of "blended families" and prenuptial agreements, a revocable trust also might be a method of allocating some or all of the trust's assets to one set of beneficiaries, while all other assets pass to the remaining beneficiaries through a will, beneficiary designation or a right of survivorship on jointly titled property.

A living trust can be a good "will substitute" for situations where a person's legal heirs consist of distant relatives who have not been heard from in decades. With a will the Probate Code requires that the executor attempt to notify all those legal heirs (e.g. grand-nieces, second cousins, et al.) of the petition to probate the will. If practically all of that person's wealth is in a living trust, the probate proceedings will be less important and the trustee can spend more time taking care of the designated beneficiaries versus locating the distant relatives to fulfill the procedural requirements of probating the will.

Families with a permanently disabled child might benefit from a living trust because they can allocate certain assets for the benefit of the disabled child and put "supplemental needs" provisions into the trust document to preserve the child's eligibility for government benefits such as SSI and Medicare. Using an "off the shelf" living trust for an estate plan that benefitted such a disabled child could be a catastrophic mistake.

A supplemental needs trust does not have to be funded when it is established, but can be in a stand-by mode until the death of one or both of the parents. Then the will of the second parent to die and/or a life insurance policy (where the trust was the beneficiary), can pour money into the trust. Such a supplemental needs ("living") trust can have the additional advantage of being available to receive gifts or bequests from grandparents or other relatives of the disabled child.

How to choose a trustee and/or a successor trustee would require a separate article. Briefly put, it is essential to pick someone who is completely honest and has good judgment and organizational skills. Don't forget that corporate trustees are available with all those skills in one organization. A trust with a million dollars or more of assets can support the cost of a bank or trust company serving as trustee. In some family situations the corporate fiduciary could be the best solution because no family member has the skill set, or the time, to properly administer the trust.

There is one school of thought that, if a corporate trustee is used, the investment management powers for the trust should be given to another trustee and not to the corporate fiduciary, even if that other trustee must retain a separate investment advisor. Any trust agreement can be "tailor made" to address those concerns.

This has been a brief overview of living trusts. Beware of anyone who argues that everyone needs a living trust. It is one tool that may belong in an estate plan you devise with your attorney's advice, but only after considering all of the alternatives. Plan carefully and you will rest easy.

Estate Planning for Blended Families

Wed, 04 Jun 2025 22:05:16 GMT

In today's America the "traditional family" of a husband, wife and their children is becoming a statistical minority of all households. The term "blended family" has been coined to describe the family unit where the husband and wife have children who might be from as many as three marriages: his previous marriage, her previous marriage and their marriage.

The variations can include previous marriages that ended because of death and those ending in a divorce. The children can range in age from infancy to just ten years younger than their stepmother. The blended family has special needs in estate planning because of the conflicting interests of the different survivors.

Mary Smith has a two-year old boy to raise alone after the death of her husband, John, in an auto crash while traveling on business. John's ex-wife, Diane, has two teenagers who are gifted students and looking forward to college. The last thing Mary needs is a lawsuit by Diane against her husband's estate because he did not maintain the life insurance policy required by the divorce settlement, or he improperly changed the beneficiary in breach of that agreement.

Harry Jones is a senior executive with a high tech company in Alpharetta. His wife, Martha, has a ten-year old child from her previous marriage (which ended with the death of her first husband) and a four-year old from this marriage. Harry has two kids who have almost finished college, of whom he is very proud. However he also loves both of the children he and Martha are raising. In the event of his death only three of those four children are entitled to benefit from his estate, in the absence of an express provision in his last will and testament.

Robert Green, age 67, never thought that he would find another woman with whom he could enjoy the retirement he and his late wife, Paula, had planned on for the forty years before her tragic death. Fortunately, he met and married Joan, age 65, who alone had raised two wonderful children after being divorced when she was 32 years old. Robert is a multi-millionaire and has two children of his own who are successful professionals. Joan's two daughters are both dedicated school teachers and her wealth mainly consists of a paid-for house and $150,000 in retirement accounts. Robert would like to provide for Joan's financial security if she outlives him, which according to the mortality tables she is likely to do. But he would also like to provide some inheritance for the children from his first marriage.

In these hypothetical cases I have assumed that every person involved has the best of intentions. Despite these good intentions they all need to face the reality that the legal system will not satisfactorily provide for their blended families without an effective estate plan. By effective I mean something done with binding legal documents, such as a will or a trust, that contains provisions to achieve their goals. The trust could be in a free-standing document, or created in the last will and testament. Here are some ideas of possible solutions for each of these hypothetical families:

Ideally, Mary and John Smith consulted with an attorney after the birth of their baby boy and drafted wills (two years before his tragic death). John's (hypothetical) will thus avoided the imposition of the statutory rules of inheritance which would leave Mary with only one-third of his estate with two-thirds to his children. At the same time (again ideally) they assessed their life insurance needs so that the coverage was organized to meet John's legal obligations because of his previous divorce agreement and still address Mary's economic needs in case of his death.

Harry Jones might want to adopt his stepchild, but even without doing so he can include that child in his will to share on some basis with the child he has with Martha. He might want to consider a life insurance trust to immediately benefit his older children in the event of his death. Martha could survive him by many years and the need to provide for her support might call for all of his financial assets. Using a life insurance trust could avoid any reduction in the death benefit by the Federal Estate Tax and would provide detailed instructions to control the distribution of the policy proceeds.

Robert and Joan Green need a plan that addresses the desire to provide for their separate children but protects Joan's financial security during retirement. If Robert has a large IRA account he might designate Joan as beneficiary of the account (either outright or through a trust). If he left a couple of million dollars to his children from his previous marriage, then he could minimize the estate taxes (remember he is a multi-millionaire!) while still addressing a real-world concern. A "marital trust" for Joan might be ideal. It would give her of the trust income and after her death the trust property (after payment of estate taxes, if any) would go to Robert's children. Joan's will might protect certain property she wants Robert to get with the balance of her estate going outright to her children or grandchildren.

The worst estate plan for a blended family is the one given to them by state law when they do not prepare and execute well-drafted wills. It is likely to result in resentment, if not civil war between offspring and surviving spouse. In this area an ounce of prevention is worth a ton of cure.

Want to Avoid Probate? Why?

Wed, 04 Jun 2025 22:05:16 GMT

Over 35 years ago, when I first studied estate planning in law school, the professor graded us on the basis of a very long memorandum we each wrote answering specific questions drawn from his experience in private practice. One task was to respond to the hypothetical client who came in after reading the book, "How to Avoid Probate."

Today people are still selling books, and even seminars, which avowedly solve the problem presented by using a last will and testament to wind up the affairs of a deceased person. They all share the defect of overgeneralizing with a one-size-fits-all approach.

Strictly defined, "probate" is the process of proving that a written document is the properly executed last will and testament of the decedent. When there is no dispute as to the genuineness of the document, or the "testamentary capacity" of the person making it, the people who are the "legal heirs" will usually agree in writing to its admission into probate.

The legal heirs in this context are those persons who are most closely related by marriage or blood to the deceased according to state law. They are to be distinguished from the beneficiaries of the will, who are the persons who actually receive property from the estate because of the dispositive provisions of the will.

In those cases where there is no controversy, the person named to serve as executor of the will files a probate petition and the written consent from the heirs at the Probate Court. He is then sworn in without any delay or even a hearing. The probate of the will is done.

What most people connect to the term "probate" is actually the settlement of the decedent's affairs. That includes safeguarding assets, paying debts, collecting money owed to the estate, filing tax returns and distributing the property in accordance with priorities set by law and the instructions of the decedent (expressed in his will or a trust agreement).

For many years we have been told, often by people who have something to sell, that a written trust agreement made while living will avoid all this trouble and expense. But regardless of whether there is a will or a trust controlling a person's property at death, the same work must be done by the executor and/or the trustee.

Payment of debts and taxes, the assembly and distribution of assets -- all this must be done. Even worse, if the decedent established a trust and did not put his assets in the name of the trust, the trust document is not enough. There has to be an up-to-date will to cover the assets that are not owned by the trust, or payable to the trust, at the time of the death. Otherwise, the decedent's intentions are likely to be frustrated.

I have seen reports of people paying $2,000 to $3,000 to multi-state "trust mills." The Federal Trade Commission has been investigating these scams for many years because the worst of them involved no personal consultation with an attorney and no effort to move assets into the trust. The irony is that a local attorney can prepare a complete set of estate planning documents, tailored to the individual client, for less than half that cost. As far as the do-it-yourself kits, one question suffices: If it was that easy, why would law students need two semesters (usually after two years of legal studies) on wills, trusts and estate planning?

Some people have sufficiently complex family relationships or property arrangements that a revocable trust agreement could be useful for them. Owning real estate in two different states is a classic fact pattern that often necessitates such a trust, as long as the land is deeded into it. When there is no one in the family qualified to serve as executor or trustee over a very large estate, a trust agreement with a corporate trustee might be appropriate.

If you want a more expansive discussion of estate planning than the space available here permits, you can contact a mutual fund company, such as The Vanguard Group (800 662-7447), and ask for brochures on that subject and the investment services often needed while implementing an estate plan.

Obviously I do not recommend reading "How to Avoid Probate." If you go to the bookstore, or online to Amazon.com, look for such books as Beyond the Grave by Gerald M. Condon and Jeffrey L. Condon. That book gives you the pros and cons of different estate planning tools from the perspective of two attorneys who use the "war stories" from many years of a trust and estate practice to educate the reader. Be thankful that you live in Georgia, a state where the legal system is so user-friendly that you need a particular reason, individual to you, to worry about avoiding probate.

Divorce & Estate Planning

Wed, 04 Jun 2025 22:05:16 GMT

A divorce is almost always an emotionally traumatic experience and often the concluding event to troubled times. Worrying about estate planning after struggling through the legal system to obtain the divorce may seem like adding insult to injury. But like bitter medicine, as painful as it may be, people are not organized for the future without creating an estate plan that puts the past behind them.

I am not just talking about getting a new will. Under Georgia law any divorce automatically "re-writes" an existing will to treat the former spouse as if he or she had predeceased the person whose will is being probated. This was a dramatic change from the previous law which treated the divorced person's will as automatically revoked by the divorce.

Having a valid, up-to-date will, however, is only a part of the estate planning process. What about the life insurance and the retirement accounts? They are normally covered by beneficiary designations and are non-probate assets. The children of David Egelhoff (from his first marriage) found this out the hard way after his second divorce in April, 1994 and his death two months later in an automobile accident. Those children were the only heirs of his estate, but their former step-mother (his ex-wife Donna) - despite the divorce - was still listed as the beneficiary of the life insurance and pension accounts at his employment at the Boeing Company.

After seven years of litigation that ended up in the U.S. Supreme Court, Donna, the ex-wife, got both the $46,000 of life insurance and the pension account for which she was still designated beneficiary. The Supreme Court ruled that the Employee Retirement Income Security Act ("ERISA") pre-empted any attempt under state law to revoke the beneficiary designations because of the divorce.

Determining who will be the recipients of a transfer of wealth in event of death is only part of the estate planning process. Who will control those assets is another essential feature. All those people who were picked to be executors, trustees and guardians before the divorce may be totally inappropriate choices after everybody in the extended family picked sides during the divorce. A deliberate review all of the "players" designated in the will and the powers of attorney should be conducted when the divorce decree is obtained. One practical lesson from the facts of the Egelhoff case is that there is no guarantee of many months, or years, to arrange one's affairs before death.

One important legal rule that troubles many divorced parents of minor children is that any designation of a testamentary guardian for those children will not become effective if the ex-spouse and non-custodial parent outlives the custodial parent. It takes a termination of the parental rights of the non-custodial parent before the testamentary appointment of a guardian by the (deceased) custodial parent can control. If there are special circumstances, such as a history of abuse, one might insert a strongly worded provision into the will on the unsuitable nature of the surviving parent with instructions to a trustee to pay for any necessary lawsuit to protect the children.

That brings us to the role of the trustee. A well-drafted last will and testament can appoint a person to manage and distribute the inherited property to the children for their education and support in the years leading up to a complete distribution of the property. A trustee should be an honest, organized and financially savvy person who will look after the best interests of the children. If there is sufficient money in the trust to justify the expense, it is feasible to name a corporate fiduciary to serve as sole trustee or as a co-trustee. The accounting systems and investment expertise of a corporate fiduciary are advantages that could combine well with an individual trustee who has personal familiarity with the needs any children. Choosing the right trustee(s) can be crucial to a successful trust will.

Coordination of assets such a life insurance and retirement accounts with the trust is essential to any successful estate plan. For example, putting minor children down as beneficiaries of life insurance is counterproductive. That life insurance death benefit also could make the difference in funding the trust enough to make it feasible to pay for a professional trustee's annual fee (usually around 1.25%).

It is possible that relationship between a trustee and the ex-spouse who is raising the children could become strained. In that case the client might decide to include special provisions in the trust on how to make any expenditures for educating and raising the children. Make sure the legal documents reflect your current wishes. If you die, you are not going to get a second chance to re-visit the subject.

Probating an Estate

Wed, 04 Jun 2025 22:05:16 GMT

Part One: Opening the Estate

I have often written that probate in Georgia is not the terrible ordeal that people fear in other states. However settling the affairs of a deceased person is real work. That process (commonly referred to as "probate") constitutes the administration of an estate. The probate of a will is complete once a probate judge has entered an order officially recognizing a document as the Last Will and Testament of the deceased and appointing an executor. Then the estate administration begins.

If there was no will then one of the legal heirs to the estate (those persons who are entitled to the decedent's property under the laws of inheritance) will normally ask the probate court to appoint him or her as administrator of the estate. The Georgia Probate Code refers to both executors and administrators together as personal representatives for purposes of the provisions that apply to them both equally. I will use that term for the remainder of this article.

The first task facing the personal representative, is to identify the assets and how ownership of them will pass. In Georgia there are basically four "classes" of ownership: joint tenancy with right of survivorship ("JTROS"), beneficiary designated assets (e.g. life insurance, IRA's, etc.), personally owned assets and those owned in a revocable trust.

The personal representative must safeguard the assets that were personally owned by the decedent or payable to his estate. Those assets are considered to be in the probate estate. That will usually involve taking custody of physical assets, closing the accounts for financial assets (and transferring them to an account opened for the estate) and obtaining appropriate insurance policies on structures (e.g., a home) and physical assets.

Only the assets in the probate estate change ownership under the supervision of the probate court. However for purposes of calculating any Federal Estate Tax all four classes of assets are considered to be "owned" by the decedent. Collectively they make up the "taxable estate." The personal representative can be personally responsible if he or she transfers all the assets of the estate before settling up with the IRS on the estate tax liability.

As of January 1, 2011, the taxable estate must exceed $5 million to generate a possible estate tax liability. This "exempt amount" will be applicable to estates of persons dying in 2011 and 2012. No estate tax is applicable to the estates of persons who died in 2010, unless the personal representative elects to be covered by the new law (passed just before Christmas, 2011). Before we get too far into 2013, tax lawyers are hoping that Congress will enact a law to extend the current estate tax system. A lot will depend on who wins control of the Senate and the White House in the 2012 election.

Even when no estate tax is due because of deductions and credits, a Federal Estate Tax return should be filed within nine months of the date of death when the "gross estate" exceeds the threshold amount.

Similarly, jointly titled property is not covered by a person's will or trust after death if a right of survivorship was created so that the joint owner(s) received the deceased owner's interest. Without a right of survivorship, joint property is a "tenancy in common" and the decedent's interest will pass through the probate estate.

Finding the records of the decedent is an essential part of the personal representative's job. A checklist is helpful in this regard. The following items should be on any checklist: bank records, including check registers and canceled checks; mortgages and deeds; stock brokerage statements; stock certificates; life insurance policies; pension benefit statements; loan documents; income tax returns for the past three years; any prior gift tax returns; recent credit card statements; inventories and appraisals of valuable assets (e.g. art, jewelry, coins); burial plot contracts; motor vehicle titles; and insurance policies covering the home and personal property.

Part Two: Closing the Estate

The probate process culminates in the distribution of the estate's assets. If the personal representative of the estate is to completely perform his or her responsibilities, there must be a formal process of terminating the estate administration. Assuming the personal representative has completed the estate administration, a "petition for discharge" can be filed in the probate court to formally close the estate. When the personal representative is also the only beneficiary of the estate, this last court filing may not be necessary. I am going to discuss those situations where the personal representative must formally close the estate.

How long does it take to close an estate? The personal representative can start to close an estate as soon as six months after being appointed, if there is no federal estate tax return required and there is minimal income tax accounting to be done for the decedent or the estate. Since the tax collector has a priority claim, the personal representative has to resolve the tax situation first. After that the claims of other creditors of the estate must be addressed so the personal representative can give a good title to the assets transferred to the beneficiaries.

The estate administration starts with a "notice to creditors and debtors" being published in the newspaper by the personal representative for four consecutive weeks. By statute the estate must remain open for a four month period after the last publication of that notice so that creditors can present their claims to the personal representative for payment.

Under Georgia law the only way the estate's assets can be distributed so as to defeat the claims of creditors is after a petition in probate court by a surviving spouse and/or minor children for a "year's support." Georgia has a policy of protecting widows and minor children with the equivalent of a bankruptcy for a spouse/parent who dies with only enough assets to support his family for one year. For purposes of this discussion we will assume that the decedent's assets were sufficient to pay the claims of the creditors and the year's support petition was not necessary.

If the estate is open long enough to generate significant income on its assets, then the personal representative has the additional duty of filing a "fiduciary income tax return" for both federal and state taxes. Unless there is a waiver of the inventory and formal returns in the will or by all of the beneficiaries of an intestate estate (a decedent without a will), the personal representative must file reports with the probate court with details of the estate's assets, income and expenditures.

By this time you are probably thinking that the personal representative has a lot of work to do. Even when such court filings are waived by the terms of the will, the beneficiaries are entitled to an annual report from the personal representative completely accounting for the estate's activities.

The personal representative will have to make a decision whether to charge for all the work done in administering the estate. Roughly speaking, a "commission" of almost five percent of the probate estate's cash assets can be paid from the estate's assets to the personal representative without obtaining an order from the probate court . Often a surviving spouse or a family member will serve as personal representative without seeking any commission because of a sense of duty.

After using the estate's assets to satisfy the priority claims for medical bills (from the last illness), burial expenses, taxes, administrative expenses and debts, the personal representative should formally distribute the estate's remaining property. Legal title of any real property should be formally transferred by an executor's deed, whether to a purchaser for value or to a beneficiary of the estate. Delivery of other property should be acknowledged with a written receipt. Heirs/beneficiaries who receive any valuable assets should be given sufficient data to be able to determine their tax basis in those assets in case of future sale and resulting capital gains taxes.

Only by dealing with all of these details in a process that might take a couple of years to finish can the personal representative honestly file a petition for discharge and be released from their duties by the probate court. Both the personal representative and the beneficiaries need this closure, which is formally given only by the probate court's order granting that petition. This is another one of those instances where the job is not done until the paperwork is completed.

How to Title Real Estate

Wed, 04 Jun 2025 22:05:16 GMT

I know of one case involving a woman in her 70's who had congestive heart failure. Her health had steadily declined for about a year. She concluded for very good reasons that the condition was eventually going to kill her and so, in the event of a heart attack, she did not want to be revived. Nevertheless, when she had a heart attack while at home and the emergency medical technicians arrived, no one had any sort of written health care directive in hand. If a document existed, it was not easily found during the emergency. The EMTs revived her and she was admitted to the hospital where she had several more heart attacks before finally succumbing to a fatal attack.

Under Georgia law there are two different documents with statutory language addressing life, death and coma situations: the Healthcare Power of Attorney and the Living Will. They have two different purposes, but they should be prepared at the same time so as to be as consistent with each other in the areas where they overlap. The Healthcare POA authorizes a person (and one or more optional "back-ups") to stand in the shoes of the patient when he or she is unable to understand and communicate with the treating physician.

The Living Will is nothing more than a letter of instructions from the patient to his or her doctors containing choices as to life support equipment, including feeding tubes, in life/death and coma situations. Before it has any effect there must be a certificate from two different physicians that the statutorily defined irreversible terminal condition or persistent vegetative state (coma) exist that warrant discontinuing artificial means of delaying the patient's death.

There are many medical situations that are not life or death, but the patient is not able to make and communicate a decision as to treatment. That is where a Healthcare Power of Attorney can be absolutely essential and a Living Will is irrelevant.

Consider the case of someone diagnosed with advanced Alzheimer's disease. The condition is neither terminal nor does it involve a coma. Without a Healthcare POA the legal alternative for dealing with the everyday decisions of both personal care and medical care is to obtain a court-appointed guardian of the person. As a practical matter a spouse of the patient might be able to get through many of those decisions without a formal legal document. But sooner or later a dispute with other family members or a reluctant health care provider will probably occur.

Experience has shown that a Healthcare POA can be a springboard for serious reflection and discussion of the medical and ethical issues surrounding treatment of severely disabled or very elderly patients. Dr. Kevorkian exploited vulnerable people, some of whom did not have terminal conditions, in promoting his brand of euthanasia that bordered on murder. These are very difficult issues that involve a person's philosophical and religious beliefs. Family members of the patient can impose their beliefs upon the patient unless he or she executes a Healthcare POA and clearly expresses their own philosophy about life and death.

It does not take a long search on the Internet to find fill-in-the-blank forms that address these issues. There are "healthcare directives" drafted by different medical institutions or foundations that go into excruciating detail about specific medical conditions and preferred treatment as to each. You can also find the Georgia statutory forms for a Healthcare POA and a Living Will. The American Bar Association's Commission on Legal Problems of the Elderly has published a tool kit for health care advance planning. I have a copy available for my clients. As of this writing it is also available at www.abanet.org/aging/toolkit/home.html .

Using these forms in a do-it-yourself fashion is better than nothing. However, I suggest that going to an attorney who has experience in this field is preferable for several reasons. First, you are doing this for the first time, the attorney is not. He or she has had the opportunity to smooth over some of the rough spots in the statutory forms and add some refinements. Second, there are many questions that need clarifying, such as after death decisions, and directions that you may not be familiar with. Also, this can be part of preparing or revising your will. (You do have an up-to-date will reflecting the changes in the law or in your own life?)

Saving for College

Wed, 04 Jun 2025 22:05:16 GMT

Section 529 of the Internal Revenue Code was amended in 2001 to grant tax-free status to distributions from a Qualified State Tuition Program (QSTP). Any investment income earned on a QSTP account, if it is distributed for a qualified educational expense, is tax exempt. One feature that is easy to overlook is that there is no maximum age on who can start a 529 Account or who can be a beneficiary of an account. An adult can start an account for "later-in-life" education.

There are basically two types of QSTP: a pre-paid tuition program and a savings program. All 50 states have passed laws to establish programs to administer their respective QSTPs. Pre-paid tuition programs are becoming less fashionable because of the lack of flexibility in comparison to the Section 529 savings plans. I am going to restrict my discussion to the savings plans.

Georgia started its QSTP program in 2002. Its Web address is www.path2college529.com . The site allows for online enrollment and features such tools as a financial calculator to show how much can be gained by starting a savings plan account early in the child's life. There is a state income tax deduction of up to $2,000 of contributions and a taxpayer does not have to file an itemized return to be able to claim the deduction, which makes it appealing to all taxpayers.

Aside from gift tax considerations, there is no annual contribution limit - only a cumulative contribution limit. When the total account balance of all accounts for the same beneficiary equals $235,000 no further contributions can be made. However, the account(s) reaching that "cap" can continue to grow due to investment performance.

The beneficiary of a 529 account can use the funds for a qualified educational expense at a public or private institution anywhere in the U.S. The definition of "educational expense" is surprisingly broad and includes remedial, technical and post-graduate education.

Withdrawals that are not used for a qualified educational expense are treated as taxable income and incur a 10% penalty. There are exceptions related to the death, disability of the beneficiary, or lack of need because of a scholarship.

The best feature of 529 plans is that a contribution to a plan qualifies as a "present gift" for purposes of estate and gift taxes and is therefore eligible for the $12,000 annual gift tax exclusion (as of January 1, 2008). Under current federal law, five years worth of contributions can be made in one year and, if the donor survives the subsequent four years, all of the money will be protected from estate and gift taxes. It is thus possible for someone to fund all of a child's college education with a gift made when that child is an infant.

The child does not have to be the owner of the plan at anytime (unlike custodial accounts that are turned over at age 21) and the account's owner (grandparent or parent) can change the account's beneficiary to someone else in the family for any reason (i.e. the original beneficiary does not pursue any education after high school).

The investment performance on 529 savings plans varies from state-to-state. Each state chooses a plan administrator, which is usually a major national investment firm. Georgia selected a subsidiary of TIAA-CREF that manages many plans throughout the country. One indicator of the company's investment management skills: the performance since inception (May 1, 2002) of the "balanced fund option" was 7.95% (annual return) as of November 30, 2007.

Another factor to consider is that the total investment management fees for the age-based investment options is capped at 0.78%, which compares favorably to the management costs in some other states. All of these figures are likely to change over time. Each person considering any investment should research the performance, competitiveness and management costs of Georgia's plan and any other plan under consideration.

A would-be donor should research the investment performance and the flexibility of a program (such as ability to change investment portfolios). There are many investment options within each plan with some being more conservative than others. Only in hindsight will an investment choice look brilliant or stupid. The federal rules allow a once-a-year shift from one state's plan to another, or a once-a-year change in the account's investment strategy. This is not a vehicle for trying to time the market or make a killing.

A good place for research of plans around the country is www.savingforcollege.com , which was founded by accountant Joseph F. Hurley. It has informative articles and ratings on all the 529 plans in the U.S. Some plans are better because of lower administrative costs or better investment performance, so research can really pay off. There is a rating system on the Web site that evaluates each state's program from the perspective of resident and non-resident taxpayers.

Whichever QSTP plan or other approach a person chooses, rising college tuition costs will not be a problem for those who plan ahead.

Elder Care - Planning to Grow Old

Wed, 04 Jun 2025 22:05:16 GMT

It is a good news/bad news joke. The good news is that people are living longer. The bad news is that people are living longer - and when they get "too" old they are not able to live independently. In North Georgia the current cost of assisted-living facilities or a semi-private room in a nursing home can cost, at a minimum, $3,000 to $5,000 per month. A few years ago I came across a study that found that 24% of the care-givers for an elderly or disabled relative lived with the person to whom they were providing care.

In the case of a physically infirm relative isn't it better for family members to assist that person in living as normal life as possible? Once upon a time it was not all that unusual for grandparents, parents and children to live in the same household. As more people live into their 80's and 90's we may see many families with four generations alive at the same time with two of those generations in retirement. I am an optimist and believe that they will combine resources and help each other out.

For families who are not able to do it all by themselves, an entire industry called "non-medical home-care" is available. A "home health aide" can assist on daily activities such as dressing, eating and personal hygiene at a cost of $15 to $25 per hour.

There are also adult day-care programs to provide what the name suggests. You can consult to the National Adult Day Services Association at www.nadsa.org to learn more about these community-based group programs which can meet the needs of functionally and/or cognitively impaired adults. They provide a variety of health, social, and other related support services in a protective setting during business hours five days a week.

If people have a complicated situation with no obvious solution, consulting an expert could make life a lot easier. A "geriatric care manager" may be just the person to talk to. "GCM" services can be provided by a social worker, counselor, nurse, or gerontologist who specializes in assisting older people and their families. Besides the obvious role of counseling and support to the family that person can identify problems and provide solutions based on community resources.

An expert is more likely to know local resources and can assist in referrals to geriatric specialists in different disciplines. If living with the family is not feasible, a GCM can assist with moving an older person to or from a retirement complex, assisted care home, or nursing home. As one might expect these experts have started an association and a web site, www.caremanager.org. You also can visit www.eldercare.gov to identify senior services in your community. The "locator service" is also available by phone at (800) 677-1116 on Monday to Friday from 9:00 AM to 8:00 PM.

By now you may be wondering when will I bring up the subject of "Medicaid planning" to cover the cost of nursing home care. A while back some elderly people thought it was smart to give away many or most of their financial assets to their children with the idea that they would increase their chances of qualifying for medicaid payment of nursing home costs. It is not that simple and probably never was.

First, Medicaid is a welfare program for the poor. There are very low limits on how much a single person can have in assets so as to qualify for Medicaid. How low? Try less than $2,000. It is different for a married couple because a "community spouse" is not required to be totally impoverished so that the infirm spouse can qualify for assistance.

The numbers can change from year to year, so a discussion of the maximum assets for a married couple is sure to become obsolete. A good approximation is less than $100,000 of assets which are not exempt from the eligibility calculation. Exempt assets include: a home, rental real estate, vehicles, small life insurance policies, personal effects, burial contracts and plots and loans. There are also income limits for Medicaid eligibility which are too complicated to discuss here.

I could write an entire article about Medicaid eligibility, and still take the risk that it would be out-of-date as soon as I posted it to the web site. The best approach is to consult with an estate planning attorney who is familiar with the law before making significant gifts that are designed to reduce one's assets to qualify for Medicaid. There are attorneys who spend most of their time navigating through all of the Medicaid rules. Estate planning attorneys who do not practice in that area know those who do and should be able to give you a referral.

Long term care insurance, a subject I couldn't get to in this article may be a better alternative. My opinion is that any plan that involves depending upon the government is not a desirable solution.

We all want to grow old gracefully. For some of that we have to plan for the worst and hope for the best.

Living Trusts: What Are They?

Wed, 04 Jun 2025 22:05:16 GMT

One estate planning tool that gets an inordinate amount of attention in the popular press is the "living trust." From some articles one would think that this one legal instrument can cure every estate planning problem. Some argue that a living trust is indispensable for avoiding, or at least minimizing, the impact of the Federal Estate Tax. However, because of recent changes in the law that tax is diminishing in importance for most people.

On January 1, 2011 the threshold for the tax went up to $5 million per person with a provision that enables a married couple to make full use of $10 million in estate (and gift) tax exemption during their joint lifetimes. In 2017 another tax reform act increased that “exempt amount” evern further. Because of automatic inflation adjustments, as of January 2020 it increased to about $11.5 million per person. Does a better estate tax environment mean that such trusts are going to become obsolete? I don't think so.

First, let's define some terms. What is a trust? In this context, it is a written agreement where one person, the "settlor" gives legal ownership of property to a "trustee" who manages that property in accordance with the terms of the agreement. Although the settlor and trustee are two separate roles, they can be performed by the same person, if the settlor so desires. The trust document can be either a written agreement, or a portion of the last will and testament of the "settlor."

When a trust is established by a person's will it is a "testamentary trust" and takes effect after the executor of the will transfers property to the trustee who agrees to perform the duties set out in the trust portion of the will.

When a trust is established by a written agreement between two living people it is an "inter vivos" trust. The Latin phrase means "between the living." The term "living trust" comes from shortening the translation of "inter vivos trust". Such trusts are either revocable or irrevocable. Unless a power to revoke or modify is reserved by the settlor (usually the case), a trust is automatically irrevocable.

Living trusts have been useful in minimizing death taxes because they have enabled a married couple to shelter selected assets at the first death to occur, utilizing the maximum amount of protection (which was once only $1 million) from estate (and gift) taxes. It does this by excluding the trust assets from the taxable estate of the surviving spouse when the "second death" occurs. In that fashion the exempt amount can be used twice by a married couple so that theoretically over $20 million can go to their descendants without any Federal Estate Tax.

Aside from tax issues, a living trust can be the best vehicle for handling a complex set of assets. For example, a Georgia resident owning real estate in North Carolina would face a separate probate there at his or her death. Ownership of the land in a trust would avoid that second probate proceeding.

Other uses include management of financial investments outside of a retirement account as a hedge against a disabling illness or injury. A designated successor trustee will provide continuity of management. In this time of patchwork families and prenuptial agreements, a revocable trust also might be a method of allocating some or all of those assets to children from a previous marriage, with non-trust assets passing to a surviving spouse through a will.

Another popular use for living trusts is ownership of large insurance policies (i.e. $500,000 or more) on the life of the settlor of the trust. If the trust is irrevocable it can shield the death benefits from the Federal Estate Tax. For a high net worth person avoiding a 40% estate tax on any property above $11.5 million might be very attractive.

Living trusts could be important for families with a permanently disabled child. Because of government benefit programs such as SSI and Medicare, a trust for a disabled child with "supplemental needs" provisions will avoid wealth transfers to the child that make the child too "rich" and therefore disqualified for the programs. The use of ordinary estate plan documents can thus disrupt the arrangements made for the child's care after the parent's death because a "spend-down" requirement can be imposed on the trustee of trust that does not contain these special provisions.

Choosing a trustee and/or a successor trustee is not easy. You need someone with good judgment and complete honesty. The trustee can and should select professional advisors (e.g., investment advisor, accountant and attorney), so a good trustee need not possess the expertise of all those professionals. Corporate trustees (with those skills all in one organization) are an alternative when a settlor has no "natural" person available to serve as trustee.

Beware of anyone who suggests that a living trust is a cure-all for your legal needs. It is one tool that may belong in the estate plan you should be designing with your attorney's advice. Plan carefully and you will rest easy.

Getting Old: Planning for Disability

Wed, 04 Jun 2025 22:05:16 GMT

Let's face it. We are all getting older. Life gives all those under the age of 30 a psychological "immunity" to any worry about that fact of life. Everyone else should eventually deal with the possibility of not being able and healthy as they were in their halcyon days of youth.

In 2001, when I first wrote about the legal issues from a disability, I cited the case of Christopher Reeve, the actor who played Superman. He was in his 40's when he was thrown from a horse and suffered a spinal cord injury that left him a quadriplegic. It could have been worse since he was left with his mental faculties. Because of his powerful will to live, he overcame the many limitations of life in a wheelchair and became a spokesman and hero for disabled persons everywhere until his death in 2006.

In 2005 it was Terri Schiavo. She was a woman in her 20's living in Florida when, due to an injury or illness (that remains fairly vague for me), she allegedly lapsed into a "persistent vegetative state." There was a medical malpractice lawsuit that produced a recovery of at least a million dollars with which to provide for her care.

Not too long after the malpractice case was concluded. A dispute arose between her husband and her parents over whether she wished to be kept alive in this condition and who would decide her fate. Her husband won the lawsuit and she was starved to death when the artificial nutrition and all sources of hydration were terminated.

The Terri Schiavo case is at one end of the spectrum. At the other end of the spectrum are the people I see in my practice who are on the other side of 70 years of age and who face the possibility of an illness, or just old age, destroying their ability to manage their personal affairs.

The first concern for anyone should be providing for the control of their medical care in the event of an incapacitating illness or injury. If Terri Schiavo had executed a Living Will, there would have been less room for argument because that instrument would clearly state her wishes.

In 2007 the Georgia General Assembly combined the statutes for the Living Wills and the Durable Power of Attorney for Health Care into one statute that authorizes the creation of an Advance Directive for Health Care. It contains a person's stated preferences and empowers another person, such as a spouse, adult offspring or close relative to carry out those preferences.

The Advance Directive is important in the case of a person in a coma or at the end-stages of a terminal illness for two reasons: first, he or she considered (in advance) different scenarios and decided upon his or her preferences; second, it kept the power to implement those preferences "in the family."

Another big issue that is present in many geriatric cases, is how that person's financial affairs are to be managed in the event of a disability. When no estate planning documents have been executed, a conservator of the property who is appointed by a probate court judge may be the only solution. The disadvantages of that procedure include increased costs, more paperwork, and less flexibility. The advantages are court supervision and regular reports from the conservator that can be scrutinized by others concerned in the well-being of the "ward."

Part of any "basic" set of estate planning documents is usually a financial power of attorney. That document designates a spouse, close friend, adult son or daughter to serve as attorney-in-fact to act on behalf of the person executing it. Even with a power of attorney, most people should contact their bank, mutual fund, stockbroker and retirement plan administrators to verify that the authority of that attorney-in-fact will be recognized. They may have to sign and submit additional forms required by the entity.

An older person with a large investment portfolio (e.g. $100,000 or more) or significant real estate holdings might consider establishing a revocable trust to hold those investments. The advantage here is the ability to designate a successor trustee so that the original owner is hand-picking the person (including a corporate trustee if necessary) to succeed the owner as trustee and thus the "investment manager" of those assets.

Another advantage is the immediate availability of the assets after death for the trust's beneficiaries. In contrast, if those investments pass through a probate estate the executor may need to delay full distribution for six to nine months pending resolution of any taxes or debts payable by the estate. Early partial distributions from an estate are normally permissible.

Planning for Medicaid eligibility is a hot topic in some circles. First, it is worth remembering that Medicaid (in this context) is a welfare program for the poor to defray the cost of extended care in a nursing home. Second, there are laws and regulations designed to delay eligibility to those who intentionally impoverish themselves so as to receive Medicaid benefits. Trust me those rules are complicated.

A person who is concerned about these issues might consider buying an extended care insurance policy. If it is too late for that, consulting an attorney with a practice devoted to Medicaid planning might be appropriate. The ironic thing is that some people who are concerned about Medicaid eligibility have sufficient assets and income to cover the cost of extended care.

In all cases, it is only with hindsight that we learn exactly when such legal planning was necessary. The only sure thing is that more peace of mind is obtained when adequate precautions are taken against the legal problems arising from a disabling illness or injury.

Life Insurance Choices

Wed, 04 Jun 2025 22:05:16 GMT

I once had a case where, five years after the wedding, a man was sure that he had changed the "beneficiary card" at his place of work to replace his mother with his wife. After his tragic death in an accident later that year his widow discovered that the change had never been officially made and the card still listed her mother-in-law. After a lawsuit, she was only able to obtain (through negotiations) a small fraction of the death benefit. She settled out of court because there was a high risk that she would receive nothing.

That should be an easy mistake to avoid. The more subtle mistake involves the parents of minor children who designate those children as contingent beneficiaries of hundreds of thousands of dollars of life insurance (with the spouse as primary beneficiary). In the event of the simultaneous death of both parents, there is no surviving spouse to receive the death benefits.

However, the life insurance company cannot legally pay the money directly to a minor. It must be turned over to a conservator of the property to hold until the child reaches 18 years of age. During that time it can only be invested in bank deposits and government securities unless prior court approval is obtained.

There are two things wrong with this picture. First, most parents would like to delay the receipt of a large inheritance until at least after a child has completed college or is older than 18 years of age. Second, the investment of the insurance proceeds in more productive investments might be appropriate so that it will grow significantly faster than the rate of inflation.

Both of those objectives can only be achieved through the use of a trust, where written authority is given by the parent (either through a Will or through a trust agreement) to an individual and/or a corporate trustee to hold the property, invest it and use it for the benefit of the child until a designated age when it is to be distributed in total or in installments.

Such a trust for the children does not have to be a free-standing trust. It can be a testamentary trust which receives the death benefit either directly from the life insurance company (with a carefully drawn beneficiary designation) or from the executor of the estate (when the estate is the secondary beneficiary but the will directs the distribution of the estate's property to the trustee).

Life insurance can also add to a person's wealth sufficiently that they must worry about the Federal Estate Tax, which starts at 35% on every dollar above $5 million that does not pass to a surviving spouse or charity. That "exempt amount" is fixed for 2011 and 2012. The "smart money" is betting that somewhere around January 1, 2013, Congress will pass a law to freeze the exempt amount at that level.

Estate tax avoidance for large life insurance policies is fairly straight forward when a married couple utilizes tax-oriented trusts in their estate plan. Each spouse protects some property from such death taxes by leaving it in trust instead of outright to the surviving spouse. With the right contingent beneficiary designation and a series of disclaimers, all or some of the life insurance can go to the trust, of which the spouse is a trustee. At the death of the surviving spouse, that trust money is not subject to the estate tax and passes to the children at the appropriate ages chosen by their parents.

Finally, when a person has what we might call "mega-wealth" and wants to maintain life insurance, the most tax-efficient method can be to establish an irrevocable trust which purchases and pays for that life insurance. The founder of that trust donates sufficient money to it each year for payment of the premiums. This is a fairly complex solution and should only be done with the assistance of an experienced attorney and a good life insurance agent.

Life insurance is too important (when it is needed) for mistakes to be made. Be careful out there.

Estate Planning and IRA’s

Wed, 04 Jun 2025 22:05:16 GMT

A retirement account can be the key to long-term financial security. It also can be a person's largest financial asset, if not in the present at least in the future. After recovering from the dramatic downturn in the stock market in 2008, some investors are regaining their optimism as stock prices climb. Over the long term IRA's (and 401(k)’s)are probably one of the best ways a person can provide for a more secure future and possibly avoid inflation eating into the real value of his or her wealth.

Estate planning as to a retirement account starts from two basic facts: (1) at death the account passes to a designated beneficiary and (2) income tax has been deferred for a retirement account (except for Roth IRA's). It must be paid when money is distributed from the account, whether that happens before or during retirement, or after the death of the account holder.

A note as to terminology: In this discussion I am going to use IRA's to refer collectively to all tax deferred retirement accounts because (1) the law is generally the same for IRA's and these other accounts; and (2) an employee upon retirement or leaving a job can usually convert a 401(k) and other pension accounts to an individual IRA. Most experts suggest rolling over a 401(k) or other employer-provided account to an IRA upon retirement or changing employers.

The Federal Estate Tax is less of a threat to large IRA's as it was in previous years. As of January 1, 2020 each person can pass about $11.5 million of assets to the next generation free of the Federal Estate Tax. That exempt amount will revert after December 31, 2025, to the figure under the previous tax law, which should be no less than $6 million. Of course, Congress can write another “tax reform act” before January 1, 2026 and preserve the higher figure.

The Federal Estate Tax (sometimes referred to as the "death tax") is imposed on a person's wealth, their retirement accounts and any life insurance death benefits from policies owned or controlled by the decedent. Any assets going to a surviving spouse are usually protected by an unlimited marital deduction, which simply means that imposition of the death tax is postponed until the death of that surviving spouse, the "second death."

A surviving spouse has the option of rolling over an IRA into his or her own IRA account, thus postponing the income taxes until money is withdrawn from the new account, which ideally is when that person has retired. No other beneficiary can do a rollover.

Thus it is usually a no-brainer for a person to name their spouse as primary beneficiary of their IRA. But what about the "backup" beneficiary? If the account holder has minor children, there can be problems. Minors cannot own such property in their own name. This legal disability is why people create trusts to hold assets for their children until they are older and (hopefully) wiser.

If you go to the trouble of setting up a trust for the children (even if it is only through your will -- a "testamentary trust"), should you name that trust as beneficiary of the IRA? The answer is probably yes. However, any trust that is named as the beneficiary of an IRA must be drafted very carefully because of the income taxes on the account. Until January 1, 2020, the trustee of such a trust for the children could “stretch out” the distribution of the retirement assets based on the life expectancy of the beneficiary. Because of a law enacted in December 2019, with few exceptions that is no longer possible for a non-spouse beneficiary. In most cases the account must be distributed in full and the income taxes paid within 10 years of the death of the account holder. (Roth IRA’s must be distributed but no income taxes will be imposed on the distributions.)

Some people are not in the clear even after their children are grown up because they have "blended families," with children from previous marriage(s). Naming a surviving spouse as the beneficiary creates a risk that the children of the original account owner will never see any of the IRA money because the surviving spouse can rollover the account and name new beneficiaries. If the IRA is large enough it might be worthwhile to name a trust specifically drafted to pay all IRA distributions to the surviving spouse and upon his or her death then to the children.

One pitfall to avoid is failing to name a beneficiary, in which case the estate of the account holder will most likely become the IRA beneficiary. That will be a real mess if that deceased account holder died without a will.

Now that I have covered the problems, what is the solution? It would take a fairly thick book to discuss plans for the most common scenarios. I know because I have such a book on my shelf. A list of possible beneficiaries is the following: surviving spouse, custodian for minor children, children outright, a specially drafted trust and/or a charity. In may be necessary to name such beneficiaries in order of priority instead of all together. Thus the beneficiary designation language may be as complicated as the language in the will. As the sergeant used to say on the TV series Hill Street Blues, "Be careful out there."

It Starts With a Will

Wed, 04 Jun 2025 22:05:16 GMT

A good estate plan only starts with well-drafted documents. Whether a person uses a Last Will and Testament or a combination of a Will and a "living trust," paying attention to the details of how property is titled and what beneficiary designations are made for "non-probate" assets is essential. It's coordinating a person's economic reality to the documents.

I frequently see situations where more than half a family's wealth consists of an IRA, 401(k) account and life insurance. In those cases part of my responsibility as an estate planner is to alert the client to the need for intelligent choices of the beneficiaries for those assets and to help the client to implement those choices.

Consider the hypothetical case of Mr. & Mrs. Hitech. They both work for telecommunications companies. They have three children: two from their marriage and one from Mrs. Hitech's previous marriage, with the oldest (hers) attending college at the University of Georgia. Each has life insurance policies totaling $600,000 and retirement accounts of about $500,000. With their other assets each would leave an estate worth over $2 million. However over half of that wealth is in retirement accounts or death benefits from life insurance.

There are a couple of challenges facing Mr. & Mrs. Hitech: (1) Do they want to treat the children from the different marriages equally in the division of assets? (2) How do they make sure that all of those non- probate assets go into a trust for the children in the event that there is no surviving spouse?

For a married couple who have children from two different marriages, there are two common approaches: one is to treat all of the children as one class of beneficiaries who will receive equal shares from the combined wealth of the husband and wife after both of them have died; a second approach is to identify particular property as going to a child or children (often in a trust) with the balance going outright to the spouse.

The first approach requires that the surviving spouse hold to the plan after the "first death," even if there is a second marriage. The alternative would be to use a trust to hold the property of the first spouse to die for the benefit of the surviving spouse with a final distribution to the children after the "second death." But there is a pitfall even with a conservative approach. Assume a trust that will ultimately benefit the children is built into the plan. The beneficiary designations for the life insurance and retirement accounts must be updated to designate the trust, or if the client wishes, the spouse individually, or a mix of the two.

Even a "conventional" family can run into trouble. If it is a younger family, then minor children could be mistakenly named as direct "secondary" beneficiaries of life insurance or retirement accounts. Instead (most of the time) the secondary beneficiary for the life insurance and the retirement accounts should be a trust for the minor children.

An older couple often faces the dilemma that the surviving spouse could be disabled. Usually the spouse should not be named as the direct beneficiary of a size-able retirement account. Instead a specially designed trust should be receiving the account with that surviving spouse as the sole beneficiary of the trust during that person's remaining life.

It should be obvious by now that drafting a good set of documents is only part of the solution. A person must formulate a plan to coordinate the economic reality with the legal documents. Otherwise those documents could be like someone who is "all dressed up with no place to go."

When You Should Update your Will

Wed, 04 Jun 2025 22:05:16 GMT

My law practice has been concentrated on estate planning since about 1992. I have had plenty of time to see clients five to ten years after the completion of their wills and other estate plan documents (e.g. powers of attorney, advance medical directives and trusts). I have detected a pattern during that time as to developments and events that necessitate an update of some or all those documents.

The most common developments are children getting older and wiser so that the cautious approach to delay outright distributions to them when there is no surviving spouse is no longer necessary. The flip side of that involves adult offspring who have become financially irresponsible or, even worse, addicted to drugs or alcohol. In such circumstances, the parents may dispense with a trust for their children or may tighten the rules for outright distribution to particular children.

The most dramatic development has been a series of tax reform bills in the past ten years that have permanently changed the threshold for the estate tax from $1 million per person in 2001 to $11.5 million per person in 2020. That means that 99% of the population no longer have to worry about the Federal Estate Tax.

Unfortunately, in the years just prior to 2001 that estate tax threshold was as low as $600,000. Many people back then used an estate tax oriented formula in their estate plan documents (i.e. wills and/or trusts). Those formulas required the surviving spouse to create a trust in the event of the death of a spouse to minimize estate taxes.

Even after a scheduled drop in the exemption in 2026 to about $6 million per person, the overwhelming majority of people with “old” wills that required creation of a trust for estate tax reasons have a problem that requires a revision. Under case law from many years ago, the formula used in those wills is not interpreted in accordance with the current tax law but in accordance with the then-existing tax law. The will’s provisions will require that the surviving spouse create a trust that does not obtain any tax savings.

Estate planning involves more than just wills and trusts. I have seen a pattern in recent years that many of my clients over 50 years of age have about 50% of the family wealth in life insurance and retirement accounts. Those assets are controlled by beneficiary designations. As noted in my previous blog post, the law on distributions from retirement accounts after the death of the account holder changed dramatically in December 2019. The new law will compel outright distribution to a non-spouse, adult beneficiary within ten years after the year of the death of the account holder. The entire account must be emptied and, except for Roth IRA’s and 401(k)’s, income taxes paid on it.

The immediate access by adult offspring to these assets may indicate a change in the timing of outright distributions from any trust created for their benefit.

In all cases a thorough review of all beneficiary designations, both primary and secondary, should be made every few years to make sure that they are still appropriate.

Finally, for senior citizens in their 80's and 90's updating the will could be less important than updating documents such as powers of attorney and revocable trusts that address the contingency of an incapacitating mental condition from illness or injury. Financial assets must be managed by the client or a designee and a current power of attorney or a trust document may be the best way to provide for a smooth transition from one to the other.

Estate Planning and Your Digital Life

Wed, 04 Jun 2025 22:05:16 GMT

A recent article in The Wall Street Journal about including your digital assets in your estate planning got me thinking about how electronic files and communications are becoming integral to our everyday lives.

Just the other day I was preparing an updated will for a client who alerted me to his Delta Sky Miles account and his points in the Marriott Hotels Rewards program. Due to his work before retirement he had a lot of “points” in both programs. In order to control them in the event of his death I included specific bequests to a son and a daughter. Each was to receive one of the accounts. Without the specific bequests it likely that both Delta Airlines and Marriott Hotels would have refused to a post-mortem transfer.

Digital assets in our daily lives our often linked to email accounts. In 2017 Georgia adopted the Uniform General Power of Attorney Act. One of the innovations in the statute is to allow the principal to empower the attorney-in-fact to “exercise authority over electronic communications sent over received by the principal.” Any general power of attorney done before July 1, 2017 in Georgia probably does not address that issue.

As a practical matter the agent is not going to be able to access email or many online accounts without a password. Therefore, it is imperative that people adopt and use a password manager program. The two most highly rated programs are LastPass and Dashlane. Both programs are cross-platform solutions with versions to run on your PC, your cell phone and your tablet computer. The estate planning angle is that the manager requires one “master password” and that password can be written down and appropriately hidden somewhere at home for the agent in the event of incapacity, or the executor in the case of death, to locate and use.

All those photographs stored electronically in the “cloud” are going to be easier to retrieve if the necessary information as to their existence and the web sites involved is put into that password manager.

Did you know that the eBooks that you have purchased from Amazon for reading on a Kindle, iPad or phone don’t really belong to you the same way as a hardback copy does? In the event of the death of the account holder, Amazon’s current Digital Rights Management agreement does not authorize the transfer of the license for the eBooks as part of your estate. So it might be wise to have at least one device that has copies of the library you want to keep for the indefinite future, even beyond your death. The same might apply to any music library that is cloud-based. Over the years a person could put a lot of money into a collection of books or music that could vanish into the ether in the event of death.

I am not a big user of Facebook but I do know some people who seem to devote a great part of their lives to an online existence there with a network of friends and family. Anyone who does should look at what is the deal on archiving any of the information on Facebook and how long a Facebook account can be kept “alive” after the death of the owner.

One last thing about your digital existence could enable you to create history. Some people have art collections or family heirlooms on the walls, or on the mantlepiece in the living room. The story behind such items could be preserved by the simple technique of a walk-through with a running commentary – all recorded because of the video capability of your cell phone. An old rocking chair may be more of a keepsake if the family knows that great-grandma used it to rock her firstborn to sleep. The picture of the good-looking young man from the 1930's should have some “caption” to indicate that it was a great-great-uncle photographed before he went to a war from which he never returned.

One’s electronic life should be integrated into the real world. Living in the present is a pretty shallow existence when there is no perspective from the past and no plans for the future.

Beneficiary Designations: Do's and Don'ts

Wed, 04 Jun 2025 22:05:16 GMT

How you handle the beneficiary designations on your life insurance and retirement accounts can be just as important as naming the beneficiaries of your probate estate in your last will and testament. I call them non-probate assets. In the hundreds of estate planning worksheets I have received from clients in the past few years I have identified a common pattern. About half the family wealth passing to the next generation in the event of a death with no surviving spouse are the non-probate assets.

For discussion purposes let’s address the hypothetical couple with one or more children under 25 years of age. Often that couple will have no less than $500,000 of life insurance coverage through a combination of the group term policies from their employers and the individual policies they own. If they have been prudent, or fortunate enough to have a generous 401(k) plan at work, there might be another $200,000 in retirement accounts. With equity in their home, some stock investments and cash, this couple could be “worth” about a million dollars in the event of both of them dying, either simultaneously or sequentially. Let’s also assume that they have been prudent enough to get wills drawn up when the children were younger.

Unfortunately, they have been too busy with everyday life to revisit the subject of their wills and estate plan. The wills are now more than ten years old. In the intervening years those non-probate assets built up without much thought as to how they relate to the provisions in their wills. Ideally they have a contingent trust in those wills that will be established in the event that there is no surviving spouse and there are children living. But how will all those non-probate assets get into that contingent trust?

The answer is the secondary beneficiary designation. Usually that designation will specify the trust established by the insured’s last will and testament. That is called a testamentary trust. Sometimes it will be a trust established by a separate document (often called a “living trust”).The person named as trustee obtains the payment of the life insurance and retirement account, but only if the trust is designated as the secondary beneficiary.

In Georgia a testamentary trust is fairly common because Georgia’s probate system is very user friendly. However, sometimes it can be appropriate to write a revocable trust (a “living trust”) instead of a testamentary trust. Then the secondary beneficiary for John A. Client could be the Trustee of the John A. Client Family Trust, under agreement dated 12/1/2020.

Someone who does not have a trust for young children might be tempted to put them down as the secondary beneficiaries of the life insurance. That is not a good idea. If the death benefit from life insurance is payable to someone who is under 18 years of age, the company will insist on paying it to a court-appointed conservator of the property. The legal costs and the premiums for the surety bond required for any court appointed conservator can be considerable. Once the child attains 18 years of age, the entire death benefit must be turned over to the child. In the meantime, without permission from the probate court, the conservator can only invest the trust’s assets in bank accounts, certificates of deposit and state/federal government bonds.

It’s far better if the death benefit is held in a trust. The terms of the trust can require the trustee to use the money for the child’s care, education and support. Investments by a trustee are governed by the reasonable prudent investor rules. The trust assets can be invested in stocks, bonds and financial instruments. Individuals serving as trustee can engage an investment advisor to design and manage an investment portfolio.

The trust provisions can delay the ultimate distribution of all the assets to the child until a time when the parent believes the child is going to be responsible. In the worst case scenario the trust will continue to operate during the entire lifetime of the child.

Finally, there can be complicated income tax issues when the trust is named as the secondary beneficiary of a retirement account (with the spouse as primary). Special trust provisions should instruct the trustee to comply with the tax code’s requirements for distributions from the trust to the beneficiary after the death of an account holder. It’s a complicated subject deserving a separate blog post. Suffice it to say that boilerplate trust provisions are unlikely to even mention the tax angles.

The job is not done until the legal documents have suitable beneficiary designations so that both probate and non-probate assets will end up controlled by the plan embodied in those documents.

How Do You Close a Probate Estate?

Wed, 04 Jun 2025 22:05:16 GMT

The answers to that question in this post assume that the estate is in Georgia. In any other state similar or dramatically different procedures will be used depended on how much that state’s probate code differs from Georgia’s.

A well-drafted will in Georgia, which excludes practically all do-it-yourself projects, contains a waiver of three requirements:

Obtaining a fiduciary bond.
Filing an inventory at the probate court of the estate’s assets.
Filing an annual report at the probate court of the estate’s accounts and activities.

When those requirements are not waived in the will, or there is no will, it is sometimes possible to obtain a court order to waive them. However, that usually requires that all the heirs and/or beneficiaries of the estate do not object to a motion for the court to grant that waiver.

When the filing of an annual report has been waived, the beneficiaries of the estate are still entitled to receive a report each year as to the money coming into and going out of the estate. The big difference is that report can be less formal than a court-filed annual report and therefore less expensive to prepare.

An often over-looked task for the executor, or administrator of the estate when there is no will, is to provide a receipt for the beneficiary to sign and return acknowledging delivery of the bequest to him or her. If the distribution is being made before all taxes and debts have been paid, the cautious personal representative (a term covering both executors and administrators) will include an acknowledgment by the recipient that it is logically possible that the distribution might be “clawed back” into the estate because of an unexpected gap between the assets still in the estate and previously unknown liabilities.

The really cautious personal representative (“PR”) will calculate the future cash flow requirements for the estate and then hold back a reserve of money that is three times the anticipated cash requirements. If not enough information is available to the PR to make that calculation, then no distribution should be made until there is. An example would be pending litigation against the estate with difficult to calculate damages allegedly to be paid from the estate’s assets.

Taxes are probably the biggest reason that any PR should not be in a hurry to make distributions. For example, does the PR know whether the decedent filed returns and paid all income taxes for the years prior to the death? What possible tax liability might exist for the estate’s income if the estate is open for multiple years?

With a very few estates there can be a federal “death tax” liability. Currently the exemption from that tax is $11.6 million. It is inflation adjusted each year and part of that exemption can be used to avoid gift taxes on lifetime gifts. Therefore the figure is an approximation.

These days I rarely see an estate that must file a tax return for the death tax because there are so few estates that large. In my opinion, estates under $6 million are unlikely to be taxed even if the exemption decreases during the foreseeable future.

Finally, there is the fairly common situation where the PR is also the only beneficiary of the estate. Most surviving spouses are in that situation when there is a will that provides “all to my spouse if she survives me and if not then equally to my children who survive me” and the spouse is serving as the PR.

Then the PR needs to look at whether formally closing the estate (with a court filing) is a good idea because there are known or potential creditor claims which are not easily resolvable. If those claims are disputed but no suit has been filed, then the PR may need to force the issue by filing a Petition for Discharge that, if granted, will close the estate. When the unpaid creditor is listed on the Petition for Discharge and served with a copy, it must file an objection to the petition. Failure to do so will result in the estate being formally closed and the creditor barred from subsequently filing a suit for the claim. It’s sort of a “put up or shut up” moment.

The most important point for any PR to remember is that consulting with an attorney, preferably one retained at the beginning of the estate administration, is a good idea. That way the PR can avoid future problems created by a failure to administer the estate in accordance with the terms of the will and/or the probate code.

Charitable Giving in Your Will

Wed, 04 Jun 2025 22:05:16 GMT

For some people making a charitable bequest in a will is a big mistake and it’s not because the charity is not deserving. It’s because the will may not be the best source of that charitable gift if there are retirement accounts that are going to the children of the testator (the person making the will).

It is a matter of tax efficiency. Assume that the testator has plenty of assets owned in his or her name in addition to the (tax-deferred) retirement accounts. In this scenario the testator wants to give $100,000 to one or more charities and then the remaining $900,000 to children. (In this scenario there is no surviving spouse.)

Of that $1 million in assets, $100,000 is in traditional retirement (not Roth) accounts. If a charity is the beneficiary of the IRA account(s), then no income tax is paid after the death of the testator (who as account holder is naming the charity as the beneficiary of the accounts). There is an additional advantage to using the IRA account because it is easier to change the beneficiary of the account versus changing the recipient of the charitable bequest in the will.

If the charity is a named beneficiary of $100,000 in the will, there is still no income tax paid by the charity and the estate may receive an income tax deduction for the charitable bequest, which might not be that beneficial if it does not have much taxable income. However, if instead the $100,000 of IRA money is left to the children as part of the $900,000 going to them, then about 25-30% of income taxes (federal and state) will most likely be due on that $100,000. It might be even more if some or all of the children are in higher income tax brackets, or the tax rates are dramatically increased in future years to pay for the profligate spending currently in fashion in Washington.

Once upon a time the inherited IRA could be “stretched” over the life of a child who is a beneficiary with minimum required distributions each year based on the life expectancy of that child, re-calculated each year. In 2019 that rule was changed by the “Secure Act” and now, with exceptions for minors and disabled children, the inherited IRA must be completely distributed with the taxes paid by the end of the tenth year after the year of the death of the original account holder (in this scenario the parent).

There are details that should be worked out with one’s tax advisor before implementing a charitable giving plan with this approach. It might be feasible to name the charity of some of the IRA money with the balance going to the children. Until January 1, 2020 (the effective date of the Secure Act) it was a big mistake to mix charities with individuals in an IRA beneficiary designation because the after-death distribution rules depended on the life expectancy of the beneficiaries and a charity has no life expectancy. Now that there is a 10-year rule applicable to such distributions, it is possible that this is no longer a problem in “mixing” the beneficiaries.

This post does not constitute tax advice and under IRS rules cannot be relied upon in the completion of income tax returns. However, it is useful in raising the question of what is the best asset for charitable giving. One of my favorite aphorisms is that you can’t get the right answer unless you ask the right question.

Who Has the Authority to Direct the Method of Burial or Cremation?

Wed, 04 Jun 2025 22:05:16 GMT

The ability to control the disposition of bodily remains after a person’s death (including cremation and burial) is something that should not be a bone of contention between family members. Once upon a time, Georgia law provided that the “next of kin” had the power to decide what would be done. That might become controversial only if family members had a difference of opinion. In this day and age of blended families, after divorces and remarriages, a family dispute is a real possibility.

The case in Oklahoma of Estate of Foresee , 2020 OK 88 (October 13, 2020) illustrates what can happen. Fortunately, as you will see, that does not have to happen to people living in Georgia.

Tom Foresee was married for 39 years and at the end of his life suffered from ALS (Lou Gehrig's Disease). It is possible that the effects of that disease was one of the reasons that his wife filed for divorce in 2019. As one might expect after a divorce was commenced, when Tom Foresee prepared his last will and testament he named two of his children as executors of his will and not his wife. He died on January 11, 2020, presumably before the divorce was finalized.

The two children and his wife got into a dispute over how to dispose of his body. The children, as executors of his will, filed a petition in probate court, which was granted. A few days later the wife filed an objection, which was denied.

The wife appealed to the Supreme Court of Oklahoma citing a conflict between the provisions of the will directing the executors to pay for the expenses of burial and a state statute that provided that a person could assign the right to direct the manner in which his body shall be disposed of after death (in this case to her).

The state supreme court sided with the executors and gave them priority because the court did not want to separate the authority to make the decision from the responsibility for paying the cost of that decision.

That sort of fight should not happen in Georgia because a statute, O.C.G.A. § 31-21-7, establishes the priority for disposing of remains. The health care agent under an Advance Directive for Healthcare has first priority. Someone named in a “pre-need affidavit” (as set out in the statute) has the second priority. The surviving spouse has third priority. The executor of the decedent’s estate is in ninth place.

I believe that a well-drafted Advance Directive for Healthcare should explicitly refer to the authority for the Agent to direct the disposition of bodily remains after the death of the person making that directive. That way any family member who wanted to object would be confronted with the explicit provision in the Advance Directive authorizing the Agent to control the arrangements. There would be no need for people to be pulling out a state statute.

The provision could state, “My Agent may direct the disposition of my remains, and the authority granted by this Advance Directive for Health Care shall specifically extend beyond my death to enable my Agent to perform this duty.” The Advance Directive provides a space for special instructions and I often have clients specify whether or not organ donations are to be made and whether a burial or a cremation shall take place.

Most Advance Directives for Health Care are prepared when a person is making his or her Last Will and Testament. That Advance Directive and a General Power of Attorney are usually “piggy-backed” on to the project of preparing the will. Surveys show that only one-third of people who need wills go to the effort of having them prepared by a competent attorney. (Don’t get me started on the mess created by most “home-made” wills.)

The fight seen in the Estate of Foresee is possible in Georgia, but unlikely when people take advantage of the Advance Directive, especially when they include in the directive some specific instructions on the disposition of bodily remains.

Where to Store a Last Will and Testament

Wed, 04 Jun 2025 22:05:16 GMT

Only one-third of the people in this country who need a last will and testament have one. This article is written for those people. Once you have a will, the next task is to store it properly. The start of that process is to make sure that it’s the original that is being stored. In recent years I have had several probate estates where the executor could find a photocopy but could not find the original. I use water-marked paper and blue ink for signatures on the wills I prepare to make it easier to distinguish an original from a photocopy. Not all attorneys are so cautious, therefore every will should be examined carefully before it is stored to ensure that it is the original.

When an original has been lost and the testator has died, the executor who is probating a photocopy must overcome the statutory presumption that the original was destroyed as a method of revocation. When all of the legal heirs are signing a written consent to the probate petition and thus there is no opposition to it, that task is doable but it can be time-consuming. Additionally, the Georgia Probate Code requires that the petitioner obtain written testimony from the two witnesses to the will or explain why those witnesses are not available (e.g. they are dead or cannot be found). All of that work is going to delay the granting of the petition and will most likely add to the legal expenses.

The first thought of many people who are looking to store a will is to put it in a bank safe deposit box. That is likely to work if sufficient precautions are taken. The first problem is that a bank can deny access to a safe deposit box upon the death of an owner if no living person is listed in its records as an authorized owner or user. Next, there is the question of whether the location of the safe deposit box and the key to it are known to the family members.

There is an alternative that is possibly “the best of both of worlds.” If the original of the will is stored in a good place at home (as discussed below), anyone who owns a safe deposit box can put a copy of the will in the box with a note attached that provides the location of the original at home.

One lesser-known option is to go to the probate clerk of the county in which one is residing and deposit the will for safekeeping at the courthouse. A fee is charged for that service, usually around $15.00, and it should be done in person just to avoid the risk of the will being lost in the mail. The probate clerk normally provides a receipt that should be attached to the photocopy of the will that is safely stored in one’s records at home.

A safe or file cabinet at home is a common solution for storage of the will. In the case of a safe, the first question should be who in the family knows the combination or has access to the key to the safe. In the case of a file cabinet, a properly labeled folder for the will is a good idea.

Finally, a solution that is less frequently used is the will depository maintained by many, if not most, trust companies for wills (and trusts) in which they are named to serve as executor or backup executor, or as trustee. This is done at no expense to the testator and could be a wise precaution if there are controversial provisions in the will that might motivate a family member to destroy it after the death of the testator.

When someone takes adequate precautions it is more likely that the first “inheritance” to the surviving family members will be an orderly and less expensive probate process.

Put Your Affairs in Order

Wed, 04 Jun 2025 22:05:16 GMT

The phrase is from movies produced more than 50 years ago. The doctor gives the bad news to his patient, “There is nothing we can do for you. It’s time for you to put your affairs in order.” I was reminded of it when I started working recently on two different probate files. In both instances the male decedent knew he had a terminal diagnosis but failed to put his “affairs in order.”

These case histories will be semi-fictional because some legal issues are not yet resolve. Also to preserve the anonymity of the parties, I will refer to the first decedent as Aaron and the second as Benjamin.

Aaron had no children and had not been married before. He had been contending with a serious medical condition in recent years and only late last year learned that it was terminal. So he decided to marry the girlfriend with whom he had lived for the last few years. They married but despite that being a major life event, he did not revise the will that he had signed about five years earlier and in another state.

Not having an up-to-date will was only the most obvious of his mistakes. He owned a nice home with a mortgage. Through his employer he had some life insurance coverage. That life insurance would make those mortgage payments a lot easier. Therefore, changing the beneficiary to put his new wife down as a beneficiary was a no-brainer. He didn’t. After his death we discovered that he never processed the paperwork to change the beneficiary from his mother.

Assets such as life insurance and retirement accounts with beneficiary designations are not usually controlled by a will. For that reason I call them non-probate assets. Aaron was two for two in messing up his non-probate assets because he had an old girlfriend listed as the beneficiary on his retirement plan. His employer was a state government agency. Therefore the requirement under federal law that the spouse must consent to a non-spouse beneficiary designation could not apply to this retirement plan.

There still might be a happy ending for Aaron’s widow. If she is lucky, the old girlfriend will be generous and sign a disclaimer to renounce her rights as the primary beneficiary of the retirement account. Then, assuming the retirement account did not have a secondary beneficiary, his estate can receive that account and distribute it (after payment of income taxes) to his widow. Since Aaron had no children his only legal heir was his widow. Under Georgia law their marriage operated so as to “rewrite” his old will because her rights as the sole heir under the law of inheritance prevailed for everything except specific bequests (e.g. $5,000 to his older sister).

Benjamin’s situation was even more of a mess. He married late in life and had a fine young son who was nine-years old at the time of Benjamin’s death. He had a $100,000 life insurance policy. Unfortunately he never updated that policy and it had his mother as primary beneficiary. She did not have any fondness towards her daughter-in-law and took the death benefit. The principal assets of Benjamin’s estate were his residence with $200,000 of equity and a rental home that did not have a mortgage but is worth $150,000.

Benjamin never got around to consulting an attorney and preparing a will. Like many people he thought that making a will somehow made it more likely that he would die soon. Maybe he also thought that his wife would receive everything. Unfortunately, the law makes it complicated. His son is entitled to one-half of all assets titled in Benjamin’s name and his widow (and the mother of his son) gets the other half. The law of inheritance dictates that result when there is no will.

If the probate court decides to make it easier for the family, it will allow the widow to create an irrevocable trust for the benefit of their son which will receive about $175,000 from the net proceeds of the sale of the real estate. She will be the trustee of the trust and will be empowered by the court-approved terms of the trust to pay for her son’s private school tuition. The balance remaining when he attains 18 years of age must be distributed to him. We can only hope that by then he will have learned some good sense about money, or at least listen to his mother and not spend it all in one place.

Both Aaron and Benjamin left as their first legacy after death an absolute mess for their widows. Systematic estate planning would have avoided that. A well-drafted will and possibly a trust would have been a great start. Then updating beneficiary designations on non-probate accounts would have been a finishing touch. All that can be emotionally hard for someone with a terminal diagnosis. However to quote John Wayne from one of his movie roles, “Sometimes a man’s gotta do what a man’s gotta do."

Estate Planning Fundamentals for Georgia Residents

Wed, 04 Jun 2025 17:09:34 GMT

What Is Estate Planning?

Estate planning is the process of organizing legal documents that determine how your assets are managed during your lifetime and distributed after death. Under Georgia law, a well-structured estate plan helps ensure your wishes are followed while reducing confusion and stress for loved ones.

Estate planning is not only for the wealthy. Anyone who owns property, has children, or wants a say in future decision-making can benefit from having a plan in place.

Core Documents in a Georgia Estate Plan

A typical estate plan may include:

Last Will and Testament outlining asset distribution and guardianship
Trusts , when appropriate, to manage or protect assets
Financial Power of Attorney for decision-making during incapacity
Advance Directive for Health Care addressing medical wishes

Each document serves a different purpose, and not every plan looks the same.

Why Estate Planning Matters in Georgia

Without an estate plan, Georgia’s intestacy laws determine who receives your assets. These default rules may not reflect your intentions and can lead to delays, court involvement, and family disputes.

An estate plan provides clarity, direction, and peace of mind for both you and your family.

Common Misunderstandings About Estate Planning

Many people delay estate planning because they believe:

They are too young
They do not own enough assets
A simple will is always sufficient

In reality, estate planning evolves as life circumstances change and often requires periodic review.

When to Review Your Estate Plan

Estate plans should be reviewed after major life events such as:

Marriage or divorce
Birth or adoption of children
Significant asset changes
Relocation within or outside Georgia

Regular reviews help ensure documents remain aligned with your wishes.

Final Thoughts

Estate planning is a thoughtful process that provides protection and clarity for the future. Understanding the fundamentals is the first step toward creating a plan that reflects your goals under Georgia law.

This content is for general informational purposes and does not constitute legal advice.