Jul 27
Assets can be left to beneficiaries in any number of various ways, and the grantors are able to choose the “what, whom, how, and when.” In discussing the options, it is often best to start by describing the two ends of the spectrum:
1. Outright and Free of Trust – At one end of the spectrum is to leave the entire inheritance all at once, in one fell swoop. This is sometimes referred to as the “cash on the barrelhead” approach. The beneficiaries are free to do with the assets as they please – spend them, invest them, etc. The advantages of this approach are, of course, simplicity and accessibility.
2. Held Back in Trust – The other end of the spectrum is to not leave the beneficiaries the entire inheritance all at once, but rather continue the trust, with the assets retained, to be held, managed, and distributed to the beneficiaries, over an extended period of time. The advantage of this approach is reducing the risk of loss of the trust assets due to the following reasons:
a. Mismanagement. More than a few dollars are lost each day via fear, greed, ignorance, inattention, waste, mistrust, bad judgment, and lack of common sense. A continued trust with professional money management can greatly reduce these risks.
b. Taxes. The IRS takes different bites at different times – income taxes, estate taxes, sales taxes, etc. – but they all add up to a significant amount of a person’s assets. Income and estate taxes may be reduced, simply because the continued trust is another entity – separate and apart from the beneficiaries.
c. Divorce. Assets acquired during the course of a marriage – including inherited assets – are generally considered to be part of the “marital estate” and are therefore subject to division in a divorce proceeding. Assets in a continued trust are not reachable by a divorcing spouse.
d. Lawsuits. Lawsuits are increasingly common and can cause someone to lose a substantial part of their net worth. Ongoing trust assets are similarly not reachable by lawsuit claimants.
e. Bankruptcy. This is the ultimate depletion of wealth – a person losing all of his or her non-exempt assets due to the inability to pay off debts. Assets held back in a trust are generally not subject to a bankruptcy.
Assuming one opts for the continued trust approach, the next issue is to decide upon the terms and conditions for the continuation. The trust assets could be held for a period of time or for a beneficiary’s lifetime. Distributions of income and principal could be either discretionary or mandatory. Additional rights of a beneficiary to demand a withdrawal, remove a trustee, or re-write the trust can also be structured into a trust. There are almost limitless options in this arena that should be discussed with knowledgeable estate planning counsel.
Written by: Joshua C. Howard
Related Practice Area: Wills, Trusts and Estate Planning
Nov 09
When an out-of-state individual dies owning Kansas real estate, Kansas probate proceedings are necessary to transfer the real estate. Depending on the facts and circumstances involving the assets, beneficiaries, and planning, the necessary probate proceedings may take a number of different forms.
If less than six months have passed since the date of death, then a full administration in Kansas would be necessary. If, however, a probate administration has already been started in the decedent’s state of residence and more than six months have passed, an expedited ancillary administration in Kansas can be used to transfer the real estate. Accordingly, if the immediate sale or use of the Kansas property is not required, the most efficient method of transferring it often is waiting six months.
In order to begin this process, an “authenticated” (referred to as “exemplified” in some states) copy of the will and order admitting the will to probate is required. The next step is the preparation of the petition, order for hearing, and published and actual notice in Kansas. At the hearing, the Court would enter a journal entry transferring all the Kansas property to the beneficiaries. Once initiated, this process takes approximately a month and a half.
If the decedent owned additional real estate in other Kansas counties, authenticated pleadings from the first Kansas court would then need to be filed with the courts in the other counties to ensure clear title. Under the expedited probate process, the title in the properties would vest directly in the beneficiaries. Therefore, if the beneficiaries wished to sell the properties, they could do so in their own names following the completion of the probate matters.
While these procedures can be used for any Kansas property owned at death by a non-resident, they are most common for the transfer of family farmland and mineral interests. The attorneys at Clark, Mize & Linville, Chartered have assisted numerous families and out-of-state attorneys with these probate actions.
Written by: Joshua C. Howard
Related Practice Area: Probate and Estate Settlement
Apr 27
Estate planning is the process of planning for the eventual distribution of assets upon death. Although there are many different reasons to plan an estate, the following general goals are applicable to everyone:
- People want to give what they want. They want the flexibility to decide what to give.
- People want to give their property to whom they want. They do not like being told that they must include or exclude certain proposed beneficiaries.
- People want to distribute their property how they want. They want the freedom to choose the manner in which they make distributions of their property.
- People want to distribute their property when they want. They want the flexibility to make decisions for themselves based on the circumstances existing at the time.
- People want to accomplish these goals as conveniently as possible and at the lowest possible cost. People generally do not want the asset transfer process to be more difficult than necessary. Nor do they want to pay any more in taxes than is minimally necessary. Thus, the goal is to develop an estate plan that streamlines the transfer process and maximizes the value of property passing to the decedent’s family.
The role of an estate planning attorney is to help the client accomplish their goals. An experienced attorney has various tools at his or her disposal, and an estate can be transferred at death using the following methods:
- Last Will and Testament – The benefit of a will is that the testator can direct how he or she would like the assets to be distributed. Within a will, guardians for minor children can be named and language can be included to provide for children until they are old enough to manage assets. Wills, however, require a probate administration for transferring assets.
- Joint Tenancy – This type of ownership is one of the most common forms. The benefit of joint tenancy is that assets are transferred automatically to the joint owner upon the first death. However, the assets are then held in the survivor’s name alone and are subject to probate. Also, joint tenancy often does not work well outside of a marriage relationship.
- Transfer-on-Death and Beneficiary Designations – These types of designations can be used for various assets, including bank accounts, investment accounts, retirement accounts, life insurance, and real estate. Naming beneficiaries allows for assets to be distributed without the need for probate. Unfortunately, these designations sometimes lack the flexibility that is often necessary in estate plans.
- Revocable Living Trusts – Trusts are a time-honored method of avoiding probate. A properly established and funded trust provides all the benefits of avoiding probate and at the same time allows the necessary flexibility to leave assets in the desired manner. For example, trusts can be used to hold assets until children become older and protects assets from the beneficiaries’ creditors.
None of these tools are right in every circumstance. The estate planning attorneys at Clark, Mize & Linville, Chartered would welcome the opportunity to discuss your individual circumstances with you to tailor a plan to meet your needs.
Written by: Joshua C. Howard
Related Practice Area: Wills, Trusts and Estate Planning
