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Probate House for Sale

How Does Probate affect Real Estate Transactions?

How Does Probate affect Real Estate Transactions?

For a family whose 91-year-old mother lives in her home, has a will and has appointed two sisters as Power of Attorney and executors of her estate, the question of handling the transfer of the home is explored in a recent article from the Herald Tribune, “Transfer title now or go through probate in the future?”

The family wasn’t sure if it made more sense to transfer the title to her two daughters and son while she was still living, or let the children handle the transfer as part of the estate. The brother may wish to purchase the home after the mother passes, as he lives with his mother.

If nothing is done, the house will be part of the probated estate. A case will have to be opened, a representative will be appointed by the court (usually the executor of the will) and then the executor can sell assets in the estate, close accounts and deal with the IRS and the Social Security Administration. The probate process can be time-consuming and expensive, depending on where the mother lives.

There are a number of steps that could be taken to simplify things. The mom’s assets can be held jointly, so they pass to the surviving owner, or a trust can be created, and her assets be titled to the trust, so they pass automatically to beneficiaries.

The issue of the house becomes a little more complicated because there are so many options. If the house has appreciated significantly over the years, keeping it in the estate will minimize taxes that have to be paid if and when it is sold.

For example, let’s say the house has increased in value by $250,000. Under current tax law, the mother can exclude up to $250,000 in profits from the sale of the home. This is the exclusion before the sale of a primary residence where the owner has lived in the home for two out of the last five years.

If she signs a quitclaim deed now to give the home to her three children, the IRS will consider this a gift to the three children. Her cost basis in the property (what she paid for the home, plus the cost of any material or structural improvements) will be transferred to the children. However, when the children go to sell the property, they won’t have that same $250,000 exclusion. The three siblings will have to pay federal income or capital gains tax on the same of the home.

However, if the home remains in the mother’s estate when she passes, the siblings inherit the home at the stepped-up basis. In other words, the value of the house (for estate tax purposes) will rise to the current market value at the time of her death, and not the value when she paid for the house. If the children decide to sell the house immediately, there won’t be any profit and there won’t be any taxes.

Depending on the state’s laws, the children might be able to use a transfer on death deed that would let the property transfer automatically to heirs upon the mother’s death. The siblings then inherit the property at the stepped-up value.

Here’s another question to consider: how does the cost of setting up trusts and transfer on death deeds compare to the estimated cost of probating the estate?

This family, and others in the same situation, should speak with an estate planning attorney to evaluate their options. The siblings in this case need to clarify whether their brother wants to buy the house and if he is able to do so. The mom then needs to make a decision, while she is still able to do so, because after all, it’s still her home.

Reference: Herald-Tribune (Nov. 7, 2020) “Transfer title now or go through probate in the future?”

Read more related articles at:

HOW PROBATE AFFECTS TITLE RIGHTS AND REAL ESTATE CLOSINGS

What Happens to a House in Probate? 3 Common Paths for Estate Property

Also, read one of our previous Blogs at:

The Estate Planning Goal of What To Do with Mom’s House

Click here to check out our Master Class!

 

Assisted Living Facility

How Should I Go about Researching Assisted Living Facilities?

How Should I Go about Researching Assisted Living Facilities?

This can be a daunting task because there are so many different types of facilities to care for aging seniors. Each type has different services and accepts different payment sources. US News & World Report’s recent article entitled “What Is the Best Way to Research Assisted Living Facilities?” says that there are plenty of resources to help you in your search.

Begin Early. The sooner you begin the process, the better. Doing research before you need it is crucial. The decision is frequently made in a crisis situation, which can be dangerous. That is why preparing for these situations sooner is vital.

Create a List. The first step is to make a list of assisted living facilities in your area that you might want to tour. AARP recommends the following sources:

  • Your local or state agency on aging. To locate one near you, use the federal government’s Eldercare Locator website or call 1-800-677-1116.
  • LeadingAge, an association of aging-related organizations. They have an online Aging Services Directory to search for facilities in your area.
  • Argentum is a trade association for senior living communities that also has an online directory to search by ZIP code.
  • Ask relatives, friends, neighbors, and your loved one’s doctors about recommendations.
  • S. News also has details of services and patient and family reviews to help you find the best assisted living choice.

Employ a geriatric care manager. This professional can assist help with your aging loved one’s needs. They will take you to facilities they know and suggest specialty facilities, such as a memory care facility for a senior with dementia.

Review the facility’s licensure and accreditation. Make certain the place is licensed and, if needed, has enhanced special needs certification to provide specialized health care for complex conditions and dementia. You should also ask about staff tenure because a high turnover rate is a red flag that the facility is poorly run. It also means your loved one will be meeting new people constantly, which can be stressful. See if residents are able to actively participate in the things that affect their lives, such as what they eat and what activities are available.

Talk to an elder law attorney. An elder care attorney might be able to help, though this should be as an add-on to other legal services you might need, like estate planning.

Reference: US News & World Report (Nov. 10, 2020) “What Is the Best Way to Research Assisted Living Facilities?”

Read more related articles at:

How to Evaluate an Assisted Living Facility

Assisted Living Facilities: Weighing the Options

Also, read one of our previous Blogs at :

Use This Checklist When Visiting Assisted Living Facilities

Click here to check out our Master Class!

 

fighting over money

How Do You Stop Family Fights Over an Inheritance?

How Do You Stop Family Fights Over an Inheritance?

More than two-thirds of all advisors surveyed by Key Private Bank said the hardest part of estate planning is navigating family dynamics, according to a 2019 survey. The sensitivities of simply talking about estate planning often present emotional challenges to putting a plan in place, especially when the family includes multiple marriages and blended families.

Advice is offered in a recent news article from CNBC, “Executor of a Family Estate? Here’s How to Avoid Infighting Over Inherited Wealth.”

Much of the problem, experts say, stems from poor communication. A dialogue needs to be open between generations that is a two-way conversation. In most instances, the older generation needs to invite the younger generation to get the ball rolling.

A lack of clarity and transparency can lead to problems. One example is a father leaving the family farm to his children, with a plan that also included money to help run the farm and legal documents to help the transition go smoothly. However, the children didn’t want the farm. They wanted to sell. Disagreements broke out between siblings, and the family was bogged down in a big fight.

Clearly Dad needed to talk with the children, while his estate plan was being created. The children needed to be upfront and honest about their plans for the future, and the issue could have been solved before the father’s death. The lesson: talk about your wishes and your children’s wishes while you are living.

After someone dies, they may leave behind an entire estate, with a lifetime of personal items that they want to gift to family members. However, if these items are not listed in the will, the heirs have to decide amongst themselves who gets what. This is asking for trouble, whether the items have sentimental or financial value. In fact, sentimental items often generate the most controversy.

When conflicts arise, the presence of a third party who doesn’t have emotional attachments and is not embroiled in the family dynamics can be helpful.

If the issue is not addressed before death, there are a few ways to move forward. An estate planning attorney who has seen many families go through this process can offer suggestions while the will is being prepared. There are facilitators or mediators who can help, if things get really rocky.

Heirs may wish to create a list of items that they would like to be reviewed by the executor. This option works best, if the executor is not a sibling, otherwise charges of favoritism and “Mom always liked you best” can spiral into family spats.

Some families group items into buckets of equal value, others set up a lottery to determine who picks first, second, etc., and some families literally roll the dice to make decisions.

Reference: CNBC (Nov. 12, 2020) “Executor of a Family Estate? Here’s How to Avoid Infighting Over Inherited Wealth”

Read more related articles here:

The Shocking Reason Why Siblings Squabble Over Inheritance And How To Prevent It

How to stop a family fight over inheritance

Also, Read one of our previous Blogs at:

How Can I Avoid Family Fighting in My Estate Planning?

Click here to check out our Master Class!

Britney Spears and Dad

Britney Spears’ Conservatorship Battle with Father Continues

Britney Spears’ Conservatorship Battle with Father Continues

A Los Angeles court has declined an application from Britney Spears asking to remove her father James Spears from the conservatorship of her estate, reports NBC News in the recent article “Britney Spears loses bid to remove father from conservatorship, refuses to perform.” The singer’s father has been her sole conservator in 2019, after attorney Andrew Wallet resigned from his role as co-conservator.

Superior court judge Brenda Penny declined to suspend James Spears from his conservatorship in a hearing in a Los Angeles court. She did not rule out the possibility of considering any future petitions for his removal or suspension.

Britney Spears’ attorney, Samuel D. Ingham III, informed the judge that the singer is afraid of her father and has said that she will not perform again as long as her father is in charge of her career.

The financial company Bessemer Trust has been appointed as co-conservator.

James Spears’ lawyer has argued that in the time he has been in charge of her estate, Britney Spears’ net worth has changed from being in debt to a net worth reaching $60 million.

In addition to the conservatorship battle being waged in court, there is also an online campaign named #FreeBritney. The campaign maintains that the singer is being controlled by her father, despite her wishes to be an emancipated adult.

James Spears became his daughter’s conservator following a mental breakdown in 2007, which was widely covered in the media. An acting conservator, Jodi Montgomery, has stepped in to help Spears.

James has been critical of the #FreeBritney movement, comparing supporters to conspiracy theorists.

Britney has requested that her father be removed from his role as conservator earlier this year, but his conservatorship has been extended until February 2021.

This past September, James also withdrew his legal battle to rehire estate manager Andrew Wallet, who Britney Spears said was “uniquely unsuited” during his first period of service.

He worked from 2008-2019 as a co-conservator, but Britney said that she could not afford his services.

Wallet subsequently claimed that the pop star will likely need to be under conservatorship for the rest of her life.

Reference: NBC News (Nov. 11, 2020) “Britney Spears loses bid to remove father from conservatorship, refuses to perform”

Read more related articles at:

‘The whole world is watching’: Britney Spears battles father to open up conservatorship case

Also, read one of our previous Blogs at:

What’s the Latest on Britney Spears’ Conservatorship?

Click here to check out our Master Class!

Debt after Death

What Debts Must Be Paid after I Die?

What Debts Must Be Paid after I Die?

When you pass away, your assets become your estate, and the process of dividing up debt after your death is part of probate. Creditors only have a certain amount of time to make a claim against the estate (usually three months to nine months).

Kiplinger’s recent article entitled “Debt After Death: What You Should Know” explains that beyond those basics, here are some situations where debts are forgiven after death, and some others where they still are required to be paid in some fashion:

  1. The beneficiaries’ money is partially protected if properly named. If you designated a beneficiary on an account — such as your life insurance policy and 401(k) — unsecured creditors typically can’t collect any money from those sources of funds. However, if beneficiaries weren’t determined before death, the funds would then go to the estate, which creditors tap.
  2. Credit card debt depends on what you signed. Most of the time, credit card debt doesn’t disappear when you die. The deceased’s estate will typically pay the credit card debt from the estate’s assets. Children won’t inherit the credit card debt, unless they’re a joint holder on the account. Likewise, a surviving spouse is responsible for their deceased spouse’s debt, if he or she is a joint borrower. Moreover, if you live in a community property state, you could be responsible for the credit card debt of a deceased spouse. This is not to be confused with being an authorized user on a credit card, which has different rules. Talk to an experienced estate planning attorney, if a creditor asks you to pay off a credit card. Don’t just assume you’re liable, just because someone says you are.
  3. Federal student loan forgiveness. This applies both to federal loans taken out by parents on behalf of their children and loans taken out by the students themselves. If the borrower dies, federal student loans are forgiven. If the student passes away, the loan is discharged. However, for private student loans, there’s no law requiring lenders to cancel a loan, so ask the loan servicer.
  4. Passing a mortgage to heirs. If you leave a mortgage behind for your children, under federal law, lenders must let family members assume a mortgage when they inherit residential property. This law prevents heirs from having to qualify for the mortgage. The heirs aren’t required to keep the mortgage, so they can refinance or pay off the debt entirely. For married couples who are joint borrowers on a mortgage, the surviving spouse can take over the loan, refinance, or pay it off.
  5. Marriage issues. If your spouse passes, you’re legally required to pay any joint tax owed to the state and federal government. In community property states, the surviving spouse must pay off any debt your partner acquired while you were married. However, in other states, you may only be responsible for a select amount of debt, like medical bills.

You may want to purchase more life insurance to pay for your debts at death or pay off the debts while you’re alive.

Reference: Kiplinger (Nov. 2, 2020) “Debt After Death: What You Should Know”

Read more related articles at:

Here’s how unpaid debt is handled when a person dies

What Happens to Your Debt When You Die

Also, read one of our previous Blogs at:

Does My Mom Have to Pay My Dad’s Credit Card Debt after He Dies?

Click here to check out our Master Class!

Transfer House to Child

Is Transferring House to Children a Good Idea?

Is Transferring House to Children a Good Idea?

Transferring your house to your children while you’re alive may avoid probate. However, gifting a home also can mean a rather large and unnecessary tax bill. It also may place your house at risk, if your children get sued or file for bankruptcy.

You also could be making a mistake, if you hope it will help keep the house from being consumed by nursing home bills.

There are better ways to transfer a house to your children, as well as a little-known potential fix that may help even if the giver has since died, says Considerable’s recent article entitled “Should you transfer your house to your adult kids?”

If a parent signs a quitclaim to give her son the house and then dies, it can potentially mean a tax bill of thousands of dollars for the son.

Families who see this error in time can undo the damage, by gifting the house back to the parent.

People will also transfer a home to try to qualify for Medicaid, but any gifts or transfers made within five years of applying for Medicaid can result in a penalty period when seniors are disqualified from receiving benefits.

In addition, transferring your home to another person can expose you to their financial problems because their creditors could file liens on your home and, depending on state law, take some or most of its value. If the child divorces, the house could become an asset that must be divided as part of the marital estate.

Section 2036 of the Internal Revenue Code says that if the parent were to retain a “life interest” in the property, which includes the right to continue living there, the home would remain in her estate rather than be considered a completed gift. However, there are rules for what constitutes a life interest, including the power to determine what happens to the property and liability for its bills.

There are other ways to avoid probate. Many states and DC permit “transfer on death” deeds that let homeowners transfer their homes at death without probate.

Another option is a living trust, which can ensure that all assets avoid probate.

Many states also have simplified probate procedures for smaller estates.

Reference: Considerable (Sep. 18) “Should you transfer your house to your adult kids?”

Read more related articles at:

Should Your Client Transfer the House to Her Kids?

Should You Give Your House Away?

Also read one of our previous Blogs at:

Don’t Give Your Adult Kids Your House

Click here to check out our Master Class!

Nursing homes vs Assisted Living

What’s the Difference Between Nursing Homes and Assisted Living?

What’s the Difference Between Nursing Homes and Assisted Living?

US News & World Report’s recent article entitled “Nursing Homes vs. Assisted Living” explains that a big question is determining what type of facility is the best fit. According to the National Institute on Aging (NIA), long-term care residences include:

  • Assisted Living Facilities
  • Nursing Homes
  • Board and Care Homes; and
  • Continuing Care Retirement Communities.

We will look at the major differences among these options.

Assisted Living. Assisted living and nursing home facilities are different in many ways. One big difference is in how to pay for them. Some assisted living facilities do not accept Medicaid and are private pay only. Medicaid does cover nursing home care because states must do so under federal law. That’s the only way some can cover the cost in many instances.

Otherwise, the primary difference is in the level of care each can provide. Assisted living is for those who need some help with daily care, but not as much as what a nursing home has to offer. These facilities are for those who can still take care of themselves, but could use a bit of help with daily activities such as:

  • Housecleaning and laundry
  • Household chores and cooking
  • Bathing
  • Medication management; and/or
  • Transportation to medical appointments or stores.

The residents use any or all of the services offered and pay for the level of care they are receive. However, the more care, the higher the cost. Assisted living residents typically have their own private apartments and share common areas, like the dining room and community rooms. Most offer three meals a day for those who don’t want to cook, 24-hour supervision and security and socializing and recreational events with other residents. Many assisted living communities even permit pets.

Nursing Homes. Nursing homes are also called “skilled nursing facilities” and provide a higher level of daily care—especially medical care that assisted living facilities aren’t equipped to handle. Along with the same help for daily living that assisted living communities provide, a nursing home can offer:

  • Nursing care
  • Rehabilitation services, such as physical, occupational and speech therapy
  • Help getting dressed or in and out of bed
  • Frequent or daily medical management for chronic conditions; and
  • Some facilities specialize in memory care for patients suffering from Alzheimer’s disease or other forms of dementia.

Board and Care Homes. Also called “residential care facilities” or “group homes,” these are small homes of 20 or fewer residents living in private or shared rooms. Similar to assisted living facilities, these places can provide personal care and meals but no nursing or medical care.

Continuing Care Retirement Communities. Also called “life care communities,” they offer different levels of service in one location, like independent housing, assisted living, and a skilled nursing facility all in one place. Residents can begin at one level of care and transition into higher care, as needed.

How to pay for care is another common misunderstanding, because unless you have long-term care insurance, assisted living is paid out of pocket. For a skilled nursing facility, if you are hospitalized and discharged to a care facility, Medicare will pay a set amount for a certain time. The responsibility for payment then goes back to the resident.

Only when a senior is legally destitute, can you use Medicaid. Talk to an elder law attorney about the details.

Reference: US News & World Report (November 52, 2020) “Nursing Homes vs. Assisted Living”

Read more related articles at:

Assisted Living vs. Nursing Homes: What’s the difference?

Residential Facilities, Assisted Living, and Nursing Homes

Also, read one of our previous Blogs at:

Use This Checklist When Visiting Assisted Living Facilities

Visiting Grandma at the Nursing Home

Click here to check out our Master Class!

Elderly couple Tricare Bills

What are the New Fees for Tricare for Vets?

What are the New Fees for Tricare for Vets?

If you were to take action now to set up your payment process prior to November 20, you can avoid having to pay enrollment fees in advance.

The Military Times’ recent article entitled “Here’s what military retirees who are affected by new Tricare Select fees should do now” explains that beginning on January 1, these individuals, generally working-age retirees under age 65, will pay $12.50 a month for individual coverage, or $150 annually. Enrollment fees for those with families will be $25 a month, or $300 annually. These fees were put into effect in the Fiscal 2017 National Defense Authorization Act, but delayed until January 2021.

There were 407,431 military retirees and 764,936 retiree family members in Tricare Select at the end of last year, according to a Department of Defense report. It also applies to retirees in the Tricare Overseas Program Select.

These new fees don’t apply to retirees in the Tricare for Life program, and it doesn’t impact Chapter 61 retirees (those getting disability retirement) and their family members, and survivors of deceased active duty service members. Active duty family members don’t pay Tricare Select enrollment fees.

It’s important for affected retirees to set their payment up as soon as possible, says Mark Ellis, chief of policy and programs for the Tricare Health Plan, to avoid having to pay one or two months of premiums in advance. The call takes no more than three minutes, he said.

Retirees should contact their regional Tricare contractor by phone or through their website to set up their fee payment. Officials ask retirees to pay for their Tricare Select coverage by military allotment, if possible, for security. If the premium isn’t paid by January 1, coverage could be forfeited. Under federal law, “we don’t have legal authority to provide care or process claims,” if the fees aren’t paid, Ellis said.

“We realize things happen,” he said, noting that there is a process in place for the Tricare Select retirees to be notified, if, for example, an electronic funds transfer or credit card payment fails to go through. There is a reinstatement period of 90 days, and if the back fees are paid, the coverage can be reinstated back to the day after the retiree stopped paying fees, and coverage is brought up to date. “As long as back fees are paid, we can process denied claims,” Ellis said. “We can’t do it forever, but we do have processes in place.”

The new fees impact retirees and their family members in the so-called “Group A,” which is where the sponsor’s initial enlistment or appointment was before January 1, 2018. The retirees in that group are generally working-age retirees under age 65. They don’t currently pay enrollment fees, but under the National Defense Authorization Act of 2017, Congress required defense officials to start charging these working-age retirees enrollment fees in 2021. The 2020 Tricare open season concludes on December 14.

Reference: Military Times (Oct. 26, 2020) “Here’s what military retirees who are affected by new Tricare Select fees should do now”

Read more related articles at:

Tricare costs for 2021: Some good news for military families

Tricare enrollment fees are set to increase for many in 2021

Also, read one of our previous Blogs at:

Will Vets Get COLA Increase in 2021?

Click here to check out our Master Class!

 

Coronavirus Estate Planning

No Time Like the Present Pandemic to Get the Estate Plan Going

No Time Like the Present Pandemic to Get the Estate Plan Going

The pandemic has made many people focus on depressing things, like death. Many of us are worth more dead than alive.

Federal News Network’s recent article entitled “It’s your estate, but who gets it?” says that lack of control is one of the frustrating things about this already terrifying pandemic. We can wear masks, keep our distance and avoid crowds, but then what?

There are some very important and valuable things that are still under your control. One of these is estate planning.

Any number of things could have occurred in 2020 that are off your radar because you’re still adjusting to the many changes the pandemic has brought to our everyday lives.

Many people see their estate plan as one of life’s necessary chores. Once it’s signed, they simply file it away and forget about it. However, an estate plan should be reviewed regularly to be certain that it continues to meet your needs. Here are just a few of the life events that make it essential for you to review and possibly revise your estate plan with an experienced estate planning attorney:

  • The birth or adoption of a child
  • You are contemplating divorce
  • You have recently divorced
  • Your child gets married
  • Your child develops substance abuse problems or has issues with managing finances
  • Those you’ve named as executor, trustee, or agents under a power of attorney have died, moved away, or are no longer able to fulfil these obligations
  • Your child faces financial challenges
  • Your minor children reach the age of majority
  • There has been a change in the law that impacts your estate plan
  • You get a sizeable inheritance or other windfall.
  • You have an estate plan but can’t locate it
  • You acquire property; or
  • You move to another state.

If any of these events occur, talk to your estate planning attorney to see if it is necessary to revise your estate plan to address these issues.

Reference: Federal News Network (Nov. 4, 2020) “It’s your estate, but who gets it?”

Read more related articles at:

Estate Planning During the Pandemic