Ronald Morton's Elder Law Blog

Saying so long to the Stretch IRA?

The most recent proposed transportation legislation before congress has a provision that removes the ability of inheriting beneficiaries of traditional IRA's to take out the inherited funds over their lifetimes (because that has a lot to do with transportation infrastructure).  The so-called Stretch IRA provisions that have been contained in tax code for close to a decade now, permitted people that were named as beneficiaries of an IRA to withdraws their inheritance over their actuarial lifetimes, thereby keeping the majority of their funds in the IRA growing tax deferred.  Under the current proposal, that "gift" contained in the tax code would be removed, and beneficiaries would be required to withdraw the funds within 5 years of the owner's date of death, thereby accelerating the income tax owed on those previously tax deferred funds.  We all know that congress is looking for ways to increase revenue without looking like they are raising taxes.  Accelerating "income" by taking away the stretch may be an easy way for them to do it.  More info here.  Allowing the sunset of the current exemption for estate tax can't be far down the list.  After all, they won't be passing an increase, but simply allowing the law that was previously passed expire the way it was intended to when it was passed. 

Frequently Overlooked Estate Planning Tool: Prenuptial Agreements

In addition to more traditional estate planning documents like wills and trusts, a prenuptial agreement can be another estate planning tool. These agreements are not only for the rich and famous.  Anyone getting getting married who has already accumulated a separate estate should consider executing a prenuptial agreement prior to marriage. This document can help protect your family during death or divorce by providing certainty and predictability should one of those events occur. Fro a good article on the subject, see here.  While not the most romantic pre-marriage conversation, for couples on their second marriage, it is a conversation worth having, especially if one spouse has children from a prior marriage.  Without a prenuptial agreement, the death of one spouse may result in many if not all of the deceased spouses assets being paid to the survivor, to the complete exclusion of the dead spouses children.  Conversely, the death could result in the lion's share of the estate being paid to the children, even though the plan was for those assets to support the surviving spouse during his or her remaining lifetime. 

Transfers to Spouse Not Presumed to be under Undue Influence

The Mississippi Supreme Court has ruled that a lifetime transfer of property to a spouse is not presumed to be because of undue influence.  Typically, the law provides that transfers of assets to a person with a confidential relationship to the giver are presumed to be due to undue influence by the reciever.  So, for example, when a parent gives the majority of their wealth to their caregiver child, to the exclusion of their other children, the excluded children can claim that the caregiver child influenced the transfer.  Because the caregiver child is in a confidential relationship with the giver, the presumption is that the transfer is the result of undue influence.  That presumption then, must be overcome by evidence from the gift reciever that the gift was made of the giver's free will, and not the result of undue influence. In the case of  Langston v. Williams however, the giver was not a parent, but a spouse.  The parent later died and the children sued their decedent's spouse.  The Court held that, in the case of transfers between husbands and wives, there is not an automatic presumption of a undue influence, despite the existance of a confidential relationship.  This brings the state's rule in line with the rule for testamentary gifts as well.  So, where a challenge is made against the spouse of a giver, whether the gift is by will or lifetime transfer, the burden falls on the person challenging the transfer.  No presumption arises against a spouse.  But, that does not mean that a gift made under undue influence cannot be reversed, merely that the burden of proving it is on the challenger, not the spouse gift recipient. 

Times Change - Your Estate Plan Should Too

We recommend that our clients review their plans at least every 3 years to ensure that their planning is up-to-date with their faimly situation and the law.   A family will go through many changes over the course of years, and that often should also mean changes to their estate plan. Unfortunately many people simply create their plans and think they are done.  By not revisiting your estate plan from time to time, they run the risk of their plan not working. Sometimes this means changes to executors, beneficiaries, or even guardians of children that may have passed away or are no longer in your life. You will want to take the necessary steps to replace or remove those individuals as soon as possible. Not only do family changes take place, but also laws and even your assets. The following article demonstrates an example of why you should keep your estate plan up-to-date. See here.  We provide our clients with a no-charge review of their plans ever 3 years.  Other cliens want even more frequent reviews, and for those clients we offer our Client Annual Maitenance Plan (CAMP), which provides annual reviews and updates on a subscription basis. 

Pet Trusts Growing in Popularity

A recent article points out the beneifts of Pet Trusts.   As the article points out, unfortunatley, Mississippi is on one of the few jurisdictions around the country that does not recognize pet trusts by statute.  Nonetheless, it is possible to provide for funds for support of your pet in Mississippi through your estate plan.  If i can help wtih planning for your pet's care after you have passed, please do not hesitate to set up an appointment. 

Summary of Intestate Probate

The following is a summary of many of the rules for probating an estate, reprinted from Chancery Judges Ed Patten's newsletter and Larry Primeaux's blog. 

Statutory order of preference for appointment of Administrator. § 91-7-63, MCA.

* Surviving spouse.

* Next of kin, if not otherwise disqualified.

* Other third party, bank or trust company.

* If no application is made within 30 days of the decedent’s death, administration may be granted to a creditor or other suitable person.

* If no application is made and the decedent left property in Mississippi, county administrator or sheriff may be appointed. § 91-7-79 and -83, MCA.

Oath and Bond.

* At the time that Letters of Administration are granted, the Administrator must take and subscribe the oath set out in § 91-7-41, MCA.

* At the same time the Administrator must also post a bond in the full value of the personal estate unless all heirs are competent and consent to waive or reduce bond, or unless the Administrator is the sole heir. § 91-7-67, MCA.

Notice to Creditors.

Administrator has the responsibility to provide notice to creditors in the order and form prescribed in § 91-7-145, MCA:

* Adminisrator must make a reasonably diligent effort to identify creditors having a claim against the estate, and to mail them actual notice of the 90-day time period within which to file a claim.

* Administrator must file affidavit of known creditors and attest to having served actual notice on them.

* After the affidavit of known creditors has been filed, Administrator publishes notice to creditors in a local newspaper notifying them that they have 90 days within which to file a claim against the estate.

The notice must run three times, once per week for three consecutive weeks, and must include the name of the estate and the court file number.

* Administrator must file proof of the newspaper publication with the court.

* Publication may be waived by the court in small estates with a value not more than $500.

 Inventory and Appraisal.

* Unless excused by the court, the Administrator must complete and file inventory and appraisal within 90 days from the grant of Letters of Administration. § 91-7-145, MCA.

Determination of Heirs.

* An action to determine heirs must be brought before the estate may be closed.

* Publication process to the unknown heirs of the decedent must be made.

* Determination of heirship requires 30 days’ process and should be to a day certain so that the unknown heirs may be called.

Interim Hearings.

* Held as necessary to meet needs of the estate or to resolve interlocutory conflicts among the parties.

* A hearing to determine heirs may be necessary if any previously-unknown heir appears and claims heirship and the claim is disputed by the other heirs.

* A hearing to adjudicate whether to pay probated claims may be necessary if there is any dispute as to the validity or timeliness of the claims.

Petition to Close Estate and Discharge Administrator.

* The attorney must file a certificate that there are no probated claims, or that the probated claims have been satisfied.

* Final account is filed with petition, unless excused by the court.

* All parties in interest are summoned to a hearing on the final account and petition to close. § 91-7-295, MCA.

* If approved, the court enters judgment for final distribution of any property in the Administrator’s care. § 91-7-297, MCA.

* Upon court’s approval, the Administrator is allowed a reasonable fee for services and reimbursement of attorney’s fees. § 91-7-299, MCA.

First Anniversary of McNair Estate

It has been a little more than a year since NFL quarterback and Mississippi native Steve McNair was murdered.  After an initial flurry of activity in the estate, the Estate has since been relatively quiet. 

Although his estate was valued at approximately $19 Million, McNair died without even a basic will.  Initially it looked as though the estate would be tied up in litigation, with the wife/executrix naming children of her marriage, but not his other children, as estate heirs.  However, not much controversy has arisen from this in the court file so far.  

McNair’s Nashville restaurant was closed shortly after his death, and his Nashville home has been taken off the market.  Basically, in the last year, not much has happened, and this estate remains open.  Such delays are not uncommon in probate estates, even in those worth far less than $19 million.  That is why an estate plan is so important.  Even a basic Will will remove much controversy and uncertainty surrounding an estate distribution.  In more complex estates, such as McNair's, tax and legacy planning should also be included in the planning documents.  Most of our clients choose to go further and handle their estates through a revocable living trust.  Such a trust removes the probate court from the estate settlement process and almost certainly results in a much faster and less expensive resolution of estate affairs.  Additionally, a trust provides privacy for the decedent and their family, so nosy neighbors, or family members, or even bloggers like me, cannot observe and write about disputes in their estate. 

It's a Buyer's Market for Burial Spots

An article in today's USA Today points out how difficult it can be to re-sell a burial spot.  Many interviewed in the article purchased lots, only to change their plans years later, and have had no interest from the public in purchasing the spaces.  For seniors and their children, this suggests an opportunity.  Either purchase space from a private individual reselling their purchase, at a discount, or wait until the need arises and purchase a discounted lot on an at-need basis.  The down-side risk to waiting, of course, is that a space will not be available in your preferred location at your time of need.  But given the heavy inventory of spaces currently for sale, it is likely that grave spaces can be acquired at significant discounts below the retail prices offered by cemeteries for pre-planning, and certainly for "at-need" planning, which is generally significantly higher than the usual price for lots.  Places to check for cemetery lots are the newspaper classified ads, and online sources like Craigs List. 

Many people who want to plan their funerals for their own piece of mind and to remove that burden from their children mistakenly believe that they must purchase  such planning from a funeral home.  A better option is to do that planning inside of a funeral trust.  The funeral trust can be funded with funds not associated with the funeral home, so that family will be free to conduct services and bury their loved ones at the place that makes the most sense at the time of death, rather than what made sense at the time planning was first done.  Funeral trusts are completely portable and are unavailable as Medicaid resources.  Funeral lots for self and immediate family are likewise exempt from Medicaid. 

My Will's Not Valid? What'chu talkin' 'bout!

Just days after the death of actor Gary Coleman multiple Wills have surfaced. The childhood star famous for his role as Arnold in the television series Diff’rent Strokes left an estate that appears poised to be disputed by his ex-wife, his former manager, and a mystery woman.  You can read more details here.

The will asserted by his ex-wife, or now common law wife as she asserts, was not witnessed and will therefore not likely be accepted by a court as valid.  Will challenges are not limited to the rich an famous.  They just are the ones that make the headlines. The overwhelming majority of will disputes you are not likely to ever hear about, like this one recently decided by the Mississippi Court of Appeals.  One thing is certain.  You do not get a second chance to fix your estate, and challenges are not likely to arise until it is too late to do anything about it.  That is why it is so important to make sure your estate is planned and executed properly.  While there are lots of free and low-cost solutions available, the only way you can have certainty that your estate is properly planned and executed is by engaging the services of a qualified estate planning attorney.  If you are uncertain whether your affairs are in order, please feel free to call my office for a complementary review at (601)925-9797.  Your meeting will be free, and your peace of mind will be priceless. 

Billionare's Estate Tax May be $0 Thanks To Estate Tax Holiday

A Texas pipeline tycoon who died two months ago may become the first American billionaire allowed to pass his fortune to his children and grandchildren tax-free. When John D. Rockefeller, America’s first billionaire, died in 1937, his estate paid 70 percent.  But Dan L. Duncan, a Texas natural gas billionaire who owns natural gas processing plants and pipelines, died in March, 2010, at age 77, making him the first known billionaire to die during the year without an estate tax.  If congress does not act to make the estate tax retroactive into 2010, the federal treasury may miss out on as much as $4 Billion in estate taxes.  The Treasury collected more than $25 billion in estate taxes in 2008, the most recent year for which data is available. More.