Category Archives: Legal Senior Tips

8 Ways to Avoid Probate

Is it worth your while to avoid Probate?

If you are interested in avoiding probate, you might want to check out Mary Randolph’s, J.D. book “8 Ways to Avoid Probate.” If you own property at your death, probate offers an orderly process to transfer that property to others. However, there are ways called nonprobate transfers to pass property to others without going through probate. Here is the list from Mary Randolph’s book:

1. Set up a Pay-On-Death (POD) account. This is done by signing a form provided by your financial institution or bank, designating to whom you want your checking and savings accounts to go to at your death.

2. Name a beneficiary for your retirement account and for your stocks and bonds. Again, you do this by designating your beneficiaries on a form provided by your financial institution.

3. Transfer of Vehicles at your death. In Idaho, there is no law allowing you to set up a transfer on death of your vehicle to another person. Some people create a joint ownership with the right of survivorship by putting their adult child’s name on the title to the vehicle. This can be risky because a creditor could sue the child and take the child’s interest in the vehicle. If your estate is small enough, your heirs can transfer the title to the vehicle by filing a small estate affidavit with the county assessor.

4. Transfer of Real Estate. Real property, such as a house, can be transferred to a spouse without going through probate if the couple holds the title to the property as Community Property with a Right of Survivorship. In addition, real property can be transferred by deeding the property to a person, but retaining a life estate in the property. This allows the person to continue living in the house until their death, and then title is transferred by recording a death certificate.

5. Hold property in as Joint Tenancy. This usually refers to setting up checking or savings accounts as joint tenants with a right of survivorship. When one of the account holders dies, the money in the account passes to the survivor. This works well with a spouse; however, if you put an adult child your account to help you pay bills, it may not be your intention for the child to have the money in the account at your death. This issue has led to many court cases to determine what the person’s intent was, when they put their child’s name on their account.

6. Create a Living Trust. When you create a trust, you transfer all of your property into the Trust. When you die, there is no probate because you own no property. The terms of the trust determine how the property passes at your death. This avoids Probate, but be aware that Trusts must be managed, and over time as things are acquired, they must continually be put into the trust–it does not happen automatically.

7. Small estate procedures. If the total value of all your assets in your estate is less than $100,000, your heirs can claim the property by filing an affidavit with the person or institution that has the property belonging to your estate. This refers to anything but real estate.

8. Make a gift. Property you give away before you pass away does not go through Probate. However, you should never give away property that you might need. There are also Medicaid rules about giving property away, that could prevent you from being eligible for Medicaid if you have given away property in the previous five years.

Avoiding probate is only one of the factors you should consider in planning how to transfer your property at your death. A Will does require Probate, but in Idaho it is a fairly simple process. It’s a good idea to seek legal advice so that your unique situation is handled the best way for you!

Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a Senior’s legal, financial or healthcare needs, please call us, 208-785-5600.

May 2017

Probates: Transferring Your Property

How to ensure your property goes to those you desire, smoothly.

A lifetime often results in the accumulation of a significant amount of property. What happens to our property at the end of our lives? While a will is the determination of where you would like your property to go, probate refers to the actual process by which ownership of the property is transferred. In other words, the probate is the enactment or actualization of the will. In the event that a will does not exist, probate follows a process of distribution established by the law.

Probate can generally be broken down into four steps. The first is the courts’ official recognition of the personal representative, or executor. A personal representative is needed to oversee the distribution of the estate. Most often nominated within the will, this individual is empowered to perform a wide range of activities, including the signing of property deeds, filing tax returns, closing financial accounts, and selling assets. This person ought to be someone who is both trustworthy and responsible.

The second step involves the personal representative making an inventory and appraisal of all the decedent’s property. This is then filed with the probate court.

Third, any debts of the decedent are paid by the personal representative from money obtained from the estate. The order in which debts are to be paid is important, and must precede the distribution of the inheritance. Keep in mind that neither the personal representative nor other family members are held liable for debt not covered by the assets of the estate.

Finally, the remaining assets are distributed among heirs in accordance with the will (or in accordance with the Uniform Probate Code if a will does not exist). Distribution may occur through liquidation of the remaining assets or allocation of the property as is.

There are a few points important to note when it comes to Idaho probate:

An informal probate is common and does not require court hearings or judicial supervision. Formal probate, involving a judge, is needed in situations where disputes arise or ambiguity exists regarding the decedent’s wishes.
In certain circumstances, Trusts or Joint-Tenancies are better suited and can avoid probate altogether. But note that in Idaho, probate is a fairly easy process.
Sometimes cases arise in which property is owned outside of the decedent’s state. In these instances, it is important to consult with your legal advisor to determine jurisdiction and whether an ancillary probate is needed.

It’s always a good idea to maintain careful records of your debts and assets, including deeds and documentation of bank accounts, certificates, insurance policies, stocks, and bonds. Keep your papers together in an accessible, safe place. By doing this, you ensure that your property will pass to those whom you designate, and that the transfer process will go as smoothly as possible for your loved ones.

Health Care and Property Powers of Attorney

Having a Power of Attorney in place before you need it, is best!

Many times, important decisions must be made at a time when you are least able to make them. For instance, a sudden illness could temporarily or permanently take away the ability to make decisions. Since you don’t know what unforeseen events lie ahead, it is best to have powers of attorney in place, so a trusted person can step in and help if needed.

A “Power of Attorney,” or POA, is a legal document that authorizes a person of your choosing to act on your behalf in certain situations. The two most common types of POA’s are property and healthcare. The primary use of a POA is having someone legally empowered to make decisions for you if you become ill, incapacitated or even absent. Having such legal documents in place prior to the need arising, allows you greater control over what happens.

As you grow older, sometimes you need help when routine financial tasks become confusing or difficult. A Power of Attorney for property allows someone to step in and help you pay bills, sell property or apply for Medicaid. In contrast, a Durable Power of Attorney for Healthcare only comes into effect if you are unable to communicate. In that case, your agent has the authority to carry out your desires for medical treatment that you expressed in your Living Will.

It is important to recognize that your family cannot get a POA after you have become incapacitated. If you become incapacitated without a valid POA, a court may have to appoint a Guardian and Conservator to make important decisions for you. When this happens, sometimes family members fight over who will be appointed, and the costs to obtain and maintain a Guardianship and Conservatorship are high.

Many people feel some apprehension about creating a POA. They wonder, will my assets and money be kept safe? How do I know the authorized person will act in my best interest? These are valid concerns that can be addressed at the time of drafting a POA.

Here are a few tips you may want to consider when deciding to move forward on your power of attorney:

Select someone who you trust and is competent to make difficult decisions in complex situations and who is looking out for what is best for you. While steps may be taken to prevent against abuse and fraud, there is no substitute for a trustworthy, qualified agent. A child or sibling can make for a good potential candidate.
Creating a POA in no way limits your current access or control over financial and healthcare decisions.
You have the option to revoke a POA should circumstances change that make it in your best interest to do so.
A POA does not replace a person’s Will. POA’s are designed to terminate automatically upon death.
Having a Power of Attorney for property is safer than putting someone on your checking account.

If you have the foresight and prudence to plan for incapacity before the need arises, you will be in the driver’s seat when important decisions in your life have to be made by others.

Thomas W. Packer
186 East Judicial Street
Blackfoot, Idaho 83221
208-785-5600

Community Property

Idaho is a community property state.

In the United States, there are only 10 states that are community property states—Idaho is one of them. It’s a good idea to know how community property laws work. Let’s talk about how some of these laws affect us in our daily lives.

First, there are two types of property: community and separate. Community property is all the property and income obtained by either spouse during the marriage. Either spouse has the right to control or obligate the community property. However, to sell or encumber real property requires the signature of both spouses.

Debts that are incurred by either spouse during the marriage are owed by both spouses—even if a debt is incurred in only one of the spouses’ names. A creditor can garnish money from a joint account, or even an account titled in the name of the spouse that did not incur the debt. It’s wise to pay attention to debts being incurred by your spouse.

Separate property is all property owned by either spouse before marriage, or acquired by either a gift or an inheritance. The husband or wife cannot obligate the separate property of the other spouse.

The nature of property, whether community or separate, affects how property passes when you die. If you die without a Will and have a surviving spouse, but no children, all your community and separate property passes to your spouse. However, if you have surviving children, they would get half of the separate property, but none of the community property.

If you have a Will, you can give half of the community property and all of your separate property to whomever you designate in the Will. Be aware, however, a surviving spouse can claim a homestead allowance of $50,000 that has priority over other gifts in the Will unless you state in the Will that that is not your intention. This can create problems when there has been a second marriage, if you intend for the property to go to your children.

In addition, Idaho law allows spouses to prepare a Community Spouse Deed, which transfers the title of real property (such as a house) to the surviving spouse, without going through probate. This is done by simply recording a death certificate, saving both time and money.

There are many more Idaho laws that govern what happens to our community and separate property when you pass away. To have things happen the way you want, it’s a good idea to have a Will that clearly states your intentions.

Transfers of Property

There are many ways to transfer property after death.

Estate planning consists of preparing for incapacity during lifetime and transferring property after death to loved ones. Most people think of a Will or a Trust when transferring property. However, there are many ways that property can be transferred:

Will – a document that names a Personal Representative and directs the disposition of property at death. Wills are probated, but in Idaho, this is usually a simple process.
Trust – an arrangement to hold property and assets in trust. A Trust avoids probate, but is more complicated and more expensive than a Will, and it requires maintenance as property is sold or bought during one’s lifetime.
Community Spouse Deed – Most couples in Idaho hold title to their homes as community property. When one spouse passes away his or her name does not automatically come off the title. By changing the title to Community Property with a Right of Survivorship, all that the surviving spouse has to do is record a death certificate to take the deceased spouse’s name off the title.
Joint Tenancy – Most bank accounts with two people are examples of Joint Tenancy. If there are two people on the account and one dies, the survivor gets the account. However, when parents put their adult children on their bank accounts to help pay bills, they make them a joint-tenant, with the right to the money in the account when the parent dies. This often was not the parent’s intention.
Pay-On-Death Accounts (POD) – Most financial institutions will set up a Pay-On-Death account, at no extra cost so that at death, the balance in the account is paid to the persons, in the percentage indicated.
Affidavit of Heirship – Three years after a person’s death, if their estate has not been probated, the person’s heirs may record an Affidavit of Heirship, with the County Recorder, which transfers the title of property to them.
Give it away! – If one doesn’t foresee needing Medicaid within 5 years, he or she may give away property without affecting his or her eligibility for Medicaid; however, by giving property away during one’s lifetime the individuals receiving the property will lose a step-up in basis and may have to pay capital gains tax.
Deed retaining a Life-Estate – One may deed property and retain a life estate. This means that one keeps the property for the rest of their life, and at their death the property passes to the grantee named in the deed.

The decision of which method to use depends on the size of the estate, the type of property held, family dynamics and the goals of the person making the Estate Plan. Care should be taken when implementing any strategy, to make sure it is plainly understood and that it achieves the desired results.

Final Disposition after Death

Who decides what happens to your remains after you have died?

After a loved one has passed away, the last thing families want is a dispute over what should be done with his or her remains. Occasionally this happens, when there are differing opinions and there are no documents in place that express the loved one’s wishes.

In Idaho Code Section 54-1142, it states: If the decedent did not make a prearranged funeral plan, the right to control the disposition of his or her remains vests in the following persons in the order listed:

the person designated in a written document executed by the decedent and acknowledged. (“Authorization for Final Disposition”);
the person designated under a durable power of attorney for healthcare executed by the decedent;
the person designated in a durable power of attorney (for property) executed by the decedent, if it contains express and clear language granting such right to the agent named in such power of attorney;
the competent surviving spouse;
a majority of the competent surviving adult children of the decedent;
the competent surviving parent.

Any question about an individual’s intent is easily resolved if they have executed an Authorization for Final Disposition. This names a Representative and gives him or her the authority to carry out the decedent’s wishes.

As with other decisions, by making your desires clear, it is much more likely that they will be carried out.

Beneficiary Designations (Part 2)

In some situations, naming an individual as a Beneficiary does make sense.

Last month, we discussed the reason for naming your Estate as the beneficiary on IRA’s, life insurance policies, mutual funds, bank accounts, and annuities. Naming your estate as the beneficiary of these accounts provides funds to pay your debts and final expenses. Your Personal Representative will then transfer the remaining property in your estate to those persons or charities you have named in your Will.

However, in some situations designating an individual instead of your Estate, as your Beneficiary, does make sense. If you have a small estate consisting only of insurance and a bank account, naming an individual as the beneficiary of the insurance and setting up a Pay-on-Death on the bank account, avoids the need to probate. Payments from the insurance company and the bank are made directly to the individuals that you have designated.

In another example, if you receive Medicaid to pay for your care in an assisted-living facility, when you pass away, Estate Recovery will file a claim against your estate for the cost of your care that was paid for by Medicaid. Insurance proceeds are not subject to Estate Recovery, so you would want to designate an individual, not your Estate, as the beneficiary of your insurance policy.

Finally, if your spouse’s care is being paid for by Medicaid, you don’t want to name your spouse as the beneficiary of your insurance policy. If your spouse receives insurance proceeds while on Medicaid, it may jeopardize his or her eligibility for Medicaid—if your spouse’s assets at the end of any given month exceed $2,000, he or she will become ineligible for Medicaid.

In conclusion, each individual circumstance is unique, making it difficult for a one-size-fits all answer as to whom you should name as a beneficiary. If you have questions, it may be worthwhile to review your specific situation with an attorney.

Beneficiary Designations (Part 1)

It is a good idea to review your beneficiaries and POD designations regularly.

Ringing in the New Year for many people includes setting goals and getting organized. As a result of this, my law practice has been busy the last couple of months helping our clients with estate planning.

One often overlooked area of estate planning is that of reviewing the beneficiaries of your life insurance policies and annuities, and the Pay-on-Death (POD) designations on IRAs, mutual funds and bank accounts. If your designations are out-of-date, when you pass away your assets could go to an unintended person, such as a former spouse, for example, no matter what your Will says. As your life changes, it is wise to periodically review all your designations and bring them up-to-date.

Knowing who to name as a beneficiary or POD designee depends on your circumstances and objectives. If your objective is to fund your Estate and make sure there are sufficient assets to pay creditors and carry out your estate plan, naming your Estate as your beneficiary insures that the proceeds are used to pay funeral expenses and debts, with the balance passing to your heirs as directed in your Will.

When naming individuals as beneficiaries or POD designees, some parents make the mistake of naming their oldest child as the sole recipient, with the idea that the oldest child will settle their affairs and share the wealth with their siblings. These same parents often direct in their Will that their estate is to be divided equally among all of their children. If the life insurance proceeds and financial accounts represent the bulk of the estate, and the oldest child does not share the proceeds with their other siblings, the parents may have unwittingly disinherited their other children.

Having said this, there are situations where designating individuals to receive the proceeds of a financial account or life insurance policy does make sense. This will be the subject of our next Senior Tip.

In conclusion, a good time to review your beneficiary designations is in March, as you receive your 1099 Tax Forms from the financial institutions holding your assets. Give your financial institutions and insurance policy holders a call and make sure your beneficiary designations are current and in keeping with your wishes.

Tangible Personal Property List

Use a tangible personal property list to clearly specify who you want to receive your personal property.

Idaho Code Section 15-2-513 expressly permits the use of a statement separate from your Will to dispose of non-business, tangible personal property upon your death. If you want to use such a separate written statement rather than itemize the disposition of tangible personal property in your Will, you should know and follow the requirements set forth below:

No duplication. The separate written statement should not include items already specifically disposed of by you in your Will.
Assets that may be disposed of by written statement. Common examples of property that may be disposed of include personal effects, jewelry, family heirlooms, furniture, antiques, art work, books, household items, sporting equipment, automobiles, etc.
Assets that may not be disposed of by written statement. A separate written statement cannot be used to dispose of money, evidence of indebtedness, documents of title, interests in real property, securities or property used in a trade or business.
Date and sign written statement. Each page of the statement should be dated and must be signed by you.
Clearly describe each item. Clearly describe each item so that it is easily identified and not confused with another similar item.
Designation of beneficiary (devisee). Each beneficiary (also referred to as a “devisee”) should be identified by his or her proper name and relationship to you. The address of the beneficiary should be added if the beneficiary is not closely related to you so that proper identification is assured.
Alternate Beneficiary. You may wish to consider providing for an alternative beneficiary if the first-named beneficiary does not survive you, although this is not necessary.
Change in designation of beneficiary or property. You may change the devisees or property designated in the separate written statement from time to time or revise or revoke the entire statement. Changes should be made only by preparing a new statement patterned after the original form. The old statement should be destroyed. Changes should never be made by alternation on the face of an executed statement; your intent will inevitably be unclear.
Retain written statement in safe place. The separate written statement should be kept in a safe place where it can be easily found, preferable with your original Will.
Notice to Personal Representative. We recommend that you notify the personal representative named in your Will regarding the location of the written statement.
Periodic review. The written statement should be reviewed periodically and kept current.

Families often fight more over mom’s wedding ring or dad’s hunting rifle than they do over the distribution of a 401K. A tangible personal property list is often overlooked, but is an important document to prevent disputes between family members when settling an estate.

Provide for your pet in your will or trust

“I like pigs. Dogs look up to us. Cats look down on us. Pigs treat us as equals”. Winston Churchill

If you have ever loved a pet, you understand the question that many of my clients ask: when I pass away, who will care for my pet? Pets offer companionship and bring joy into our lives, and in return we want to make sure they go to a good home.

There are several options for the placing of pets, including family members, friends and adoption programs with organizations like the Idaho Humane Society. If you plan to leave your pet with an individual, you should discuss with the prospective caretaker if they are willing to care for your pet. If they accept, you can leave your pet in your Will to that person. You may also want to leave some money or other pet care items to that person, asking the person to use the money and items to care for your pet. Your request gives guidance to the caretaker, but is nonbinding. You cannot leave money or other property directly to an animal.

A more complex and expensive method to provide for your pet is to set up a Pet Trust. Idaho Code § 15-7-601 allows for a Trust to be set up for a pet. Funds can be put into the Trust with instructions that are binding, as to how the money is to be used and how your pet is to be cared for.

If providing for your pet’s future when you are gone is important to you, consider leaving specific instructions in your Will concerning with whom you want your pet placed. This brings peace of mind, knowing your pet will be in a good home.