The Estate Planning Goal of What To Do with Mom’s House
What To Do With Mom's House After She Dies

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

It’s a not uncommon estate planning objective for the surviving parent to leave the family home to her children. At the parent’s death, estate planning questions often arise concerning how long the children have before they must sell it or change the deed. What if one sibling wants to live in the home for a while, before it is sold?

nj.com’s article on this subject asks, “Mom died and left us her home. What do we have to do next?” According to the article, the executor is tasked with gathering the assets, paying the debts and taxes (if any) and then distributing the assets, in accordance with the parent’s will.

If the home was in the parent’s name alone, it makes the property a probate asset that’s passed according to the will. In addition, if the will provides that under the residuary clause everything that’s left is to be distributed equally among the children, it will give the executor discretion to liquidate and then make the distributions.

There also may be a specific provision in the will covering the home.

There’s no specific timeline as to when the property has to be transferred. However, the executor is required to act prudently and in a reasonably timely manner.

In this situation, the home will most likely be sold. It is also the executor’s responsibility to pay the bills associated with the home, until a buyer is found.

If one child wants to live there, and it’s agreeable to everyone, make sure that she doesn’t refuse to leave, when it comes time to sell.

Note that landlord-tenant laws protect a tenant and may create an issue. The executor may want to talk with an attorney to determine what steps are necessary to protect against the tenant refusing to leave.

Learn how good estate planning lessens the chances of children fighting.

Reference: nj.com (April 1, 2019) “Mom died and left us her home. What do we have to do next?”

Use a Trust to Protect an Inheritance
Use a Trust to Protect a Loved One's Inheritance

Use a Trust to Protect an Inheritance

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” Should you use a trust to protect a loved one’s inheritance? Absolutely. A trust is a common tool used to protect an inheritance for a beneficiary who is not ready to handle it. Not everyone will be mentally or emotionally prepared for the money you wish to leave them. Here are some things to consider:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts, protective orders or conservatorships. If this happens, there’s little control over how the money will be used. The conservatorship will usually end and the funds be paid to the child, when they become an adult. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with an estate planning attorney to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

  • A beneficiary with a substance abuse or gambling problem;
  • A beneficiary and her inheritance winds up in an abusive relationship;
  • A beneficiary is sued;
  • A beneficiary is going through a divorce;
  • A beneficiary has a disability; and
  • A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of an estate planning attorney. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to a qualified estate planning attorney to make the process easier and to be certain that your money goes to the right people at the right time.

Learn how to use a trust to protect a child’s inheritance.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”

Resources: Fidelity Investments – What Is A Trust?

Lessen the Chances of My Children Fighting Over Their Inheritances.

There are several actions that a parent can take to decrease the chance of a fight by the children over their inheritances after their death, says nj.com in its recent article, “My brothers might start a fight over mom’s will. What can she do about it?” Inheritance squabbles are not inevitable. Family inheritance harmony can be achieved with good planning.

 

Trying to decide how to divide property is a common estate planning challenge. Some people decide inheritances should be split among heirs equally, with the same amount left to each heir. Others decided to divide their estate “equitably,” in some other way that is considered fair.

It may not be clear if the parent is looking to leave her only daughter the house and other assets to her sons, or if she plans to distribute her assets unevenly. If the home is valued similarly to whatever other assets the parent is leaving her sons, there may not be a fight.

However, if the house represents most of the parent’s net worth and the sons’ inheritances will be much smaller, it could create hard feelings.

The brothers can’t contest the will simply because they think the inheritance is unfair. In New Jersey, the primary reasons to contest a valid will are either because the decedent lacked testamentary capacity or was subject to undue influence.

An attorney can help draft a will that will prepare in advance for either of these grounds for a will contest. As far as testamentary capacity is concerned, an attorney should test the parent before allowing her to sign the will.

Another option would be for the parent to tape a video that shows her signing the will. This would make it more difficult for her sons to claim she didn’t have mental capacity.

The parent can also include language in the will explaining why the inheritance isn’t equal. If they see the reasoning behind her decision—and it’s rational—they may be less likely to allege undue influence.

She may want to prepare a letter of intent to explain her reasoning. This is not a legal document but may be helpful, if the will is contested.

Another option is a no-contest clause. However, these are frowned upon in New Jersey. A no-contest clause states that if an heir challenges the will and loses, then he or she will get nothing.

Another option would be for the parent to change the deed to her house to a life estate deed.

An estate planning attorney needs to be consulted to prepare the estate plan with the mother, so that she can be sure that her wishes are followed. The attorney will also be able to provide some helpful insight on the family dynamic.

Learn how a revocable living trust can lessen the chances of child infighting over their inheritances.

Reference: nj.com (May 3, 2019) “My brothers might start a fight over mom’s will. What can she do about it?”