Trusts are simply agreements that are characterized by trust and confidence between the trustee and the grantor (or the person creating the trust). The trust agreement gives authority to the trustee to administer the trust assets and distribute them to the named beneficiaries according to the provisions of the trust. A spendthrift trust is just a particular type of trust that you can consider including in your overall estate plan.
Similar to your last will and testament, a trust provides a way for you to decide now how and when your property should be distributed after your death. On the other hand, unlike your last will and testament, a trust can also provide a way to protect those assets in cases where a particular beneficiary may need special assistance in managing that property. That is where a spendthrift trust can be very useful.
A spendthrift trust is one that provides control over the trust assets by limiting the beneficiary’s access to those assets. These restrictions are primarily included for the benefit of heirs who have the potential of squandering that property. A spendthrift trust can also protect the assets from the beneficiary’s creditors, if that is a concern.
Essentially spendthrift trusts place restrictions on the access given to a beneficiary with respect to the trust principal. In most cases, the beneficiary is not allowed to access the principal, nor can they promise the assets to a third party. Put another way, if a beneficiary is unable to access the funds in the trust those funds cannot become subject to their creditors' claims either.
Since the beneficiary of a spendthrift trust is not allowed to have direct access to the trust assets, their benefits can only be received through the appointed trustee. This can be accomplished through a regular payment from the trust, or through goods or services bought by the trustee for the beneficiary.
Spendthrift trusts are generally considered when the grantor needs to leave cash or other property to a beneficiary about whom they are concerned may not be efficient at managing that money or property. Some reasons certain people need to ensure more control might include situations where the beneficiary is not particularly good with money or is prone to becoming indebted to multiple creditors. The beneficiary could also be an addict, making them more susceptible to squandering the money or property in order to satisfy that addiction. Beneficiaries who are easily defrauded or deceived are often more in need of the protection a spendthrift trust can provide.
The first thing you should think about when considering whether to create a spendthrift trust is whether you need to consult an attorney. Estate planning attorneys are very useful in helping to create specific types of trusts because they understand the terms that must be included to make those trusts work the way you need them to. After interviewing you to determine what you are looking to accomplish, your attorney can help you determine whether a spendthrift trust is what you actually need.
It is also a good idea to consider when and how you want the trust to terminate. You should also decide what should happen to the trust principal in case the beneficiary’s circumstances change. For example, if the beneficiary dies or becomes capable of managing the trust funds, then there may no longer be a need for the trust. Another consideration is whether you want to include provisions that allow for special payouts in the event the beneficiaries incur substantial expenses.
After you create the trust agreement, the next step that must be taken is to actually fund the trust. The concept of funding a trust is basically a matter of transferring ownership of the trust property into the name of the trust. What that means is, you can move cash in a bank account to a new account in the name of the trust. It also means naming the trust as a beneficiary of life insurance policies and annuities. If you have real estate, you can create a deed transferring that real property to the trust.
If you have questions regarding spendthrift trusts, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
If one of your goals in estate planning is to avoid probate through a revocable living trust, you should also have a "pour over" will. Pour over wills allow certain property that passes through your will at your death to be poured into (or transferred) to a trust. At that point, the property is distributed to your trust beneficiaries.
A revocable living trust only governs the assets that have been transferred under the Trust Agreement. Any assets that are not funded into the trust during someone's life will have to go to probate and administered by the person's will. Most estate planning attorneys believe that handling all of your assets with one document, a trust agreement, is easier than trying to handling the estate through two processes (through both a probate administration and a private trust administration). There are, in fact, several advantages to creating a pour over will. When all of your assets are controlled by one document, there is less room for confusion. Also, a pour over will takes care of those assets that you may have neglected to transfer to the trust, before your death.
Another advantage is the privacy that you can maintain with the trust that a simply will does not provide. Wills become public record with the probate court, which means they are available to everyone who is interested in looking at them. Using a pour over will to transfer your assets to a trust keeps the details of your assets and your beneficiaries private.
The biggest disadvantage to using a pour over will is that the property must still pass through probate. Therefore, the distribution of any property headed toward the trust could be delayed in probate before it can be distributed to the trust. This could take months. On the other hand, if the property is passed on through a living trust directly, without first going through a pour over will, the property are likely to receive their inheritances within a few weeks. A pour over will should be a "backup" method of funding a trust; it is much more efficient to have the trustor(s) transfer assets into the trust while they are still living in order to avoid probate entirely.
Generally, most of your assets will not pass through the pour over will. Instead, if you have a proper estate plan, your most valuable assets will already be transferred to a living trust. Only the property that remains, minor assets and anything unintentionally omitted from the trust, will pass under the terms of the will. As such, the probate procedure will likely be simpler and less time consuming, based on the size of the probate estate.
Just like any other type of will, a pour over will must nominate an executor to wrap up the estate after your death. The duties of the executor often include collecting the assets, satisfying debts and paying taxes, then ultimately distributing the assets to the beneficiaries. These tasks are much simpler for the executor of a pour over will. The only duty is to take all of the assets identified in the pour over will and transfer them to the trust. Generally, the executor of a pour over will is the same person or entity that is the trustee of the trust to which the assets are transferred - that makes it extremely easy for the same person to administer the entire estate.
A trustee is a vital part of every trust. The trustee is the person who must ensure that the terms of your trust are followed. A common choice for trustee is an adult relative or a trusted friend. Selecting someone you know personally has its benefits, of course. You are likely to receive personal attention from someone you know, and they may not be inclined to charge a fee. However, acting as a Trustee is not necessarily a privilege! There is a lot of work in the administration of a trust, and a personal relative or friend might not have the time, energy, or know-how to effectively administer the trust.
Another option is a financial institution. Certainly, financial institutions and trust companies are qualified and capable of serving as trustees. Indeed, these institutions have the knowledge and expertise in managing funds which would provide a sense of comfort. However, financial institutions and trust companies are typically more expensive and charge their fees based upon a percentage of the trust estate. A licensed professional is another option, and their fees are typically lower.
Once the assets have been transferred to the trust, they become the responsibility of the successor trustee (the person you named in your living trust to take over at your death or incapacity). The duties of a successor trustee are similar to that of an executor, except that the trustee has control over the trust assets only and may administer those assets privately outside of court. The successor trustee has no control over property that is part of your probate estate.
If you have questions regarding a pour over will, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
If you have any knowledge about estate planning, you have no doubt heard the terms "last will and testament" and "trust." However, do you know how these two estate planning tools different? While it is true both wills and trusts are helpful estate planning devices, they satisfy very different goals. Nonetheless, they can be used together to establish a comprehensive and effective estate plan. Here is what you should know.
Planning ahead should be a life goal for many different reasons. First, having a plan in place gives you the opportunity to determine now who you want to inherit your property when you die. Another reason to plan ahead is so that you can take advantage of the tax benefits and potential for probate avoidance that wills, trusts, and other estate planning tools can provide. Also, an estate plan gives you a way to prepare your family for the possibility that you may become incapacitated in some way. If that happens, usually unexpectedly, your family will need to be able to continue management of your financial and personal affairs for you.
A last will and testament is essentially a written legal document that designates exactly how you want your estate to be distributed after your death. Wills are useful estate planning tools because they can be revised or revoked at any time before your death or incapacity.
A trust is really a fiduciary agreement, which means it is based on confidence and trust between the trustee and the grantor (or person making the trust). The agreement is actually between three parties: the trustee, the grantor and the beneficiaries. A trust agreement authorizes the trustee to hold and manage the trust assets for the benefit of your chosen beneficiaries. The trust agreement also provides explicit instructions concerning how to manage and distribute the trust property. Two of the primary goals of a trust are to reduce estate taxes and avoid probate, if at all possible.
One of the key differences between a last will and testament and a trust is that a will becomes effective only after your death. A trust, however, takes effect as soon as you create it, unless otherwise specified in the trust agreement. On the one hand, a will directs who receives your property upon your death, while a trust can begin distributing property before death, at death or afterwards, depending on how you set it up.
A last will and testament is very flexible when it comes to beneficiaries. With a will, you can name as many beneficiaries as you want, or you can have just one. The choice is yours. On the other hand, there are generally two types of trust beneficiaries: those who receive the income from the trust during their lifetime and those that receive the remaining assets after the first beneficiary passes away.
A will can control any property that is in your name alone at the time of your death. It does not control property that is held in joint tenancy or in a trust. A trust, on the other hand, covers only the specific property that has been transferred to the trust. In order for particular assets to be included in a trust, it must be retitled in the name of the trust. So, if you neglect to include any property in your trust, such as property you acquire after the trust has been created, then it will not be controlled by the terms of the trust.
Another major difference between trusts and wills is that a will must go through probate while a trust actually avoids probate, at least for the property it controls. Through the probate process, the court confirms that the will is valid and then oversees the administration of the will. The court will also ensure that the property is distributed according to the terms of the will. Trust property, however is transferred entirely outside of probate, so the court is not required to be involved. For this reason, trusts can save time and money.
Attend a FREE Webinar! If you have questions regarding a last will and testament, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
If you have any children under the age of 18, it is important that you at least have a Last Will and Testament ("Will"), including provisions regarding guardianship of your children, should anything happen to you. Legal guardianship provisions for minor children are an extremely important part of estate planning for young families. There are certain provisions for guardianship Nevada parents need to be aware of when making their estate plan.
A Last Will and Testament is basically used to make dispositions of property, which do not take place until your death. Another purpose of a Will is to appoint someone to manage your estate and to appoint someone as guardian of your minor children. Without a Will, your property will be distributed to your family, following the laws of intestate succession in your state. Note that intestacy laws have basically remained unchanged for a very long time, and those laws may not take into consideration today's issues with the modern family (most importantly blended families). Your closest family members usually receive equal shares depending on the law's pre-determined priority system.
When one spouse or parent dies, the surviving spouse or parent will automatically be the child's legal guardian unless that person's parental rights have already been terminated. Should both parents die at the same time, or nearly the same time, any guardians named in a Will would become responsible for the child's care. A Will must be submitted to probate court, and the probate judge will oversee the entire process, including the approval (or disapproval) of the guardians named in the Will.
When you are considering who should be named as legal guardian for your children, take into consideration the age, health, location, and general personalities/parenting styles of the potential individuals. You must also recognize that these factors will probably change in the future. For this reason, it is a good idea to select both primary and secondary guardians, should there be anything preventing your primary guardians from serving in that role.
Permanent guardianship in a Will is approved by a court, which may take weeks or even months. Nevada allows parents to appoint short-term guardians to care for minor children for a maximum of six months. This ensures that the children do not have to spend any time in custody (child protective services, foster care, or other) while the permanent guardianship is being approved. In order to protect the children, there must be a separate legal document appointing short-term guardians.
One of the common reasons parents put off planning for guardianship of their children is that they are "looking for the right person." Of course, you want someone who will raise your children with the same values you hold, but finding the perfect fit may not be possible. In fact, it is not very likely. Instead, you need to find someone who has a similar belief system and who is also willing to instill in your children the values you hold. It takes some discussion and some compromise. But you cannot put off guardianship planning simply because you haven't found the perfect guardian yet. If you wait too late, a judge will make that decision for you. You can always re-execute a new Will, or change the Will, if you decide to change the appointment of guardians.
In order to properly care for your children, your guardians will need to have access to financial assets, as well. This can be established a number of ways, but is most effective through a Trust. A Trust may be created during your life (a Living Trust) or upon your death (a Testamentary Trust). Within the Trust, there are a few key things to consider. Who do you want to manage the money (i.e. is the guardian in charge of raising the children also responsible for the money, or do you separate those responsibilities)? Do you want the children to have equal shares regardless of circumstances, or would you like a Common Pot to be available for all of your children until they reach a certain age? Do you create a Living Trust and keep the Trust administration private, or do you create a Testamentary Trust and require judicial oversight of the Trust? Many of these questions are hard to answer on your own, and it is best to discuss these matters with an attorney in doing your estate planning.
Unfortunately, you cannot rely on something as informal as a letter or email to establish your choice for guardian of your minor children. No matter how clear your choice may be spelled out in a letter or email, it is not legally binding on the court. A judge could take that informal statement into consideration, but there could be so many issues of credibility for the judge to wade through, especially if someone challenges the appointment. Basically, if you take the time to choose someone and write it down, why not take the next step of making it official?
If you do not include guardianship provisions in your Will, the appointment of a legal guardian will be made by the probate court without any input or guidance from the parents. Although it is the judge's responsibility to ensure the best interests of the child are met, the decision may not coincide with your own wishes. That is why creating an estate plan is the best solution for you and your family.
Attend a FREE Webinar! If you have questions regarding guardianship, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
There are many types of estate planning tools, including various types of trusts. Irrevocable trusts are different from revocable ones. To be “irrevocable” means to be immune to change. So, by design, an irrevocable trust is one that cannot be amended, modified, changed or revoked. Once it has been properly created, you can consider the written terms of the trust agreement to be written in stone. With few exceptions, the terms cannot be changed in the future.
There are two types of irrevocable trusts: irrevocable living trusts and testamentary trusts. They both serve different purposes. An irrevocable living trust, also referred to as an “inter vivos irrevocable trust,” is created and funded by someone who is still living. A few examples of irrevocable living trusts include:
However, a testamentary trust is created and funded after someone’s death. This means that no one who is still living has any legal authority to change the terms of the trust. Therefore, virtually all testamentary trusts are irrevocable.
Since an irrevocable trust is specifically designed so that it cannot be changed or revoked, the basic rule is no changes can be made once created. However, there are a few options to consider if there is an issue with the terms.
Some irrevocable trusts include instructions to the trustees or beneficiaries specifically allowing for the terms to be modified under very specific and limited circumstances. On example is typically seen in Charitable Trusts, which usually contain provisions to allow modification of the trust agreement to comply with changes in federal law.
Judicial modification can also be an option when, for instance, circumstances have changed so that the administration of the trust has become too expensive. The trustee and/or trust beneficiaries can request that the terms of the trust be modified or that the trust be completely terminated through a court proceeding.
Recently, many states have adopted legislation to allow for "decanting." Wine lovers know that the term “decant” means to pour wine from one container into another in order to open up the aromas and flavors of the wine. In the world of irrevocable trusts “decant” means the legal process through which the trustee appoints or distributes trust property in further trust for the benefit of one or more of the beneficiaries. In other words, the trustee transfers some or all of the property held in an existing trust into a brand new trust with different and more favorable terms.
Protection from creditors can be accomplished only with an irrevocable trust. “Irrevocable” means the trust cannot be changed once it is created. Since you no longer control the property, and it cannot be revoked, the money is no longer considered to be yours. As such, that property is no longer subject to your creditors.
As with anything else you want to accomplish, the provisions in a trust are essential to ensure asset protection. First of all, the interest you leave to your beneficiary must either be contingent on some future event, or be subject to the sole discretion of the trustee.
The general purpose of a revocable living trust is to avoid the expense and delay of guardianship and the probate process. Typically, a revocable living trust is used along with a will in estate planning. Property in a trust can be distributed upon your death without court approval.
A revocable living trust cannot provide protection for your assets because the property in the trust is still considered to belong to you. You are named as the trustee so you will still have control over the trust assets during your lifetime. Since the property is essentially yours, it remains subject to the claims of your creditors.
Another reason that a revocable living trust does not protect your assets is because you have the power to revoke the trust at any time. If you do, the trust property immediately becomes yours once again. Also, all of the income your trust assets may generate belongs to you and must be reported on your personal income tax return. All of those characteristics of a revocable trust make it poor for protecting assets.
Download our FREE estate planning worksheet! If you have questions regarding an irrevocable trust, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
It is relatively easy to understand how important asset protection planning for Nevada residents can be. Most people want to make sure their assets are protected, including real estate, investments, business interests, and even personal property. Just consider the costs of malpractice, business (E&O), and other forms of liability insurance, which are rapidly increasing. It is certainly important to be preemptive in protecting your assets from potential creditors, whether that is through an insurance policy, homestead, or other asset protection plan. What may be even more important is understanding the most common mistakes in asset protection that Nevada residents should avoid.
One common mistake that many people make is assuming that there is something wrong with creating a plan to protect your assets. Many people feel like they are "hiding assets" or irresponsibly "sheltering" their estate from the reach of creditors. That simply is not true. We are all free to structure our assets in the most advantageous way available, as long as we do so properly and in accordance with the law. The only time that the issue of fraud is raised is when the purpose of an asset protection plan is solely to hinder, delay, or defraud creditors from collecting valid debts. The key is to create your asset protection plan before the creditors' claims arise.
Plan in advance! Another mistake that some individuals make is not taking action to protect their assets until after a problem has arisen. If you've already been sued (or if you know you're about to be sued), it's likely too late to effectively create a plan. The best and most effective asset protection planning is accomplished long before any creditor claims arise. The best time to start an asset protection plan is when you are solvent and not currently facing any threats from existing creditors. The purpose of asset protection planning is to protect from potential future creditors. The sooner you start planning, the more options will be available to you.
One aspect of asset protection planning that is difficult for most people is making a proper determination of who is likely to be a potential creditor. Those who are able to make this determination are better able to make an effective asset protection plan. It is easier to plan when you know exactly what you are planning for. In other words, if you can implement a strategy to protect against certain claims you can more easily limit your exposure to that liability. Some common ways to avoid liability, especially for business owners, include:
You cannot rely on an asset protection plan someone else used. Friends may be well-intentioned, but one size definitely does not fit all when it comes to asset protection planning. Not every protection strategy will work in every case. Any estate planning attorney will tell you – an asset protection plan needs to be developed on a case by case basis. Some people can effectively create an asset protection plan by taking advantage of legal protections under homestead, ERISA, business, and other federal and local laws; still others may need a more complex asset protection trust to deal with potential creditors. Individual needs must be carefully considered when choosing your planning options, so don't use a boilerplate plan and hope that you will be protected. Most likely, you will not.
Many clients have the same misconception, that any type of trust can provide asset protection. That is not the case. First, revocable living trusts do not provide protection for individuals who created the trust simply for that purpose. It is important to remember that, in most states, when the person who has funded the trust is a potential beneficiary, then the assets may not be protected from creditors. However, a properly drafted revocable living trust may be able to add asset protection for surviving spouses and/or other beneficiaries. An irrevocable trust can only protect property that is transferred to the trust as long as there is no evidence of a fraudulent conveyance, and a statutory period of time has passed before a creditor claim arises. Foreign offshore trust accounts have come under scrutiny in United States Courts, recently. Very special care must be given when implementing an asset protection plan that includes an offshore account.
A part of asset protection planning necessarily includes consideration of possible inheritances from relatives, a factor that is often overlooked. Those inheritances must be structured, as well, in order to provide maximum flexibility, as well as, protection against creditors and divorce. An estate plan is a way for you to prepare yourself and your family for what happens after you pass away. An appropriate estate plan can also give you an opportunity to plan for unexpected incapacity. Regardless of how few assets you may have, planning for your family's future is a necessity for everyone.
If you have questions regarding mistakes in asset protection, or any other asset protection planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
Receiving an inheritance from a loved one can be thrilling, but for some it may also cause some concern. In fact, there are a host of questions you may have when you receive the news that an inheritance is coming your way - including, "Does this mean that I'm going to have to pay tax on this inheritance?" Inheritance tax is different from estate taxes, which is also different from (although related to) the gift tax. Whether or not you will be required to pay an inheritance tax depends on which state you, the beneficiary, live in. Here are the answers to five common inheritance tax questions as it applies to beneficiaries that are residents of Nevada.
In general, an inheritance tax is a tax levied on money or property received from the estate of someone else. In those states that still impose an inheritance tax, the rate will depend usually on the type of beneficiary you are. In other words, spouses and children of the deceased are generally taxed at a much lower rate than others. In some states, certain categories of heirs are exempt from the tax completely.
No, you don't need to worry about a Nevada inheritance tax! Nevada is among the majority of states that does not impose an inheritance tax. The federal government no longer levies an inheritance tax either. Beneficiaries of an estate will inherit the estate tax-free, and they receive a "step-up" in basis that can allow them to sell those assets immediately without paying capital gains tax.
Basically, the difference between inheritance taxes and estate taxes is who is responsible for paying. Inheritance taxes are paid by the person receiving the money or property from someone else. Whereas, estate taxes are due from the estate of the person who has died, when the property is transferred to heirs and beneficiaries. The estate tax laws vary from state to state, and Nevada is one that does not impose an estate tax for those individuals that die as residents of Nevada or owning property in Nevada. For federal tax purposes, the federal government will only tax the deceased person's estate if the value of the estate (including prior gifts made above the annual exclusion amount) exceeds $5.45 million in 2016.
Receiving a gift from someone who is still living is different from receiving an inheritance. You, as the beneficiary, will not be required to pay taxes on the receipt of a gift. Instead, the person making the gift is responsible for paying the applicable taxes. This is the "gift tax." There should not be any immediate tax consequences for the gift recipient because gifts are not included as part of your taxable income. But, there may be future tax consequences if you sell the gifted property later. The recipient of the gift receives a "carry-over" basis, which means that if they later sell the gifted property they may be responsible for paying the capital gains tax.
You can reject an inheritance if you choose to, and in some cases, it may be a good idea. Understand though, that rejecting an inheritance requires more than simply telling the executor you do not want the assets you are set to receive. There are laws that govern the proper way to disclaim an inheritance. Essentially, if you need to make sure you are not considered the legal owner of the inherited property, there are specific steps that must be taken. To make matters worse, there are very strict rules about the timing required to properly disclaim an inheritance.
In order to correctly disclaim an inheritance, you need to put your disclaimer in writing and deliver it to the person in control of the estate. In most cases, that person is the executor of the estate, or trustee of the trust, that holds the property. In most cases, the disclaimer should be submitted to the executor or trustee within 9 months of the person’s death. The most important thing to remember is that you must not accept any benefit from the property if you want to actually reject the inheritance.
If you believe it is in your best interest to reject an inheritance, it is very important that you discuss this decision with a Nevada inheritance planning attorney before you take any action. Your attorney can take whatever steps are necessary to ensure that your disclaimer is handled properly. Ultimately, receiving proper legal advice can decrease your chances of facing problems in the future. As with any estate plan, your inheritance plan should address both your present and future financial goals.
If you decide to ultimately accept the inheritance, then you need to consider the nature of the assets you will be inheriting. If you are married, there are important steps that should be taken if you want to keep the inherited assets separate from the marital assets. If you need to sell an inherited asset, but you wait too long to do so, you could increase the risk of unfavorable tax consequences. Also, it is important to determine how you will handle any retirement accounts you may inherit, including planning for how you will withdraw the retirement funds. Understanding your options, while creating a plan that will protect you from potential tax consequences, is an important part of inheritance planning.
If you have questions regarding Nevada inheritance tax, estate tax, gift tax, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
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It is not that uncommon for heirs to be disinherited for one reason or another. Regardless of the reasoning, if you feel the need to disinherit someone from your estate, a disinheritance clause in a will is the most common and most effective way to do so. Even so, you may not be able to completely disinherit someone. Here is what you need to know.
In order to disinherit an heir you need to include clear disinheritance language in your will. However, depending on the law in your state, you may not be able to completely disinherit certain heirs. Some state laws, including Nevada, include specific inheritance rights for surviving spouses and children, regardless of any testamentary language you may include in your will. If your desire is to disinherit a spouse or child, you may need to consult an attorney for assistance. If you do not use the appropriate language, the result may be expensive and time-consuming will disputes which will ultimately reduce the inheritance intended for your remaining heirs or beneficiaries.
Before you start making amendments or revisions to your will in order to disinherit an heir there are a few things you should know. First of all, there is no need to disinherit someone who is not a relative because they would not inherit from you under the laws of intestate succession anyway. Nevada has rules of consanguinity in its intestacy laws that will find an ultimate relative (whether it is a fourth-cousin thrice-removed, or a great-great-uncle) to inherit your estate if you have nothing in place; unless a relative is the next-in-line to inherit, there is no need to disinherit them. Also, be careful disinheriting anyone who you need to handle certain matters upon your death, such as a guardian for your children or the executor of your estate, unless you have discussed the decision with them ahead of time and they understand your reasons.
If you have been through a divorce but did not revise your will or trust, then you need to consider the need to disinherit your ex-spouse. You can either execute a codicil or amendment that revises your estate plan, or create a new plan that includes a disinheritance clause. Whichever method you choose, be sure to make the disinheritance clear. The same may be done even during a legal separation or while a divorce is pending.
The law presumes that most people want their children to inherit from their estates. So, in order to overcome that legal presumption, your will must include a very clear disinheritance clause to show that you did not unintentionally overlook your child. A child that you intend to disinherit must be specifically mentioned by name. If you simply leave your child out of the will, your state may assume it was a mistake and award that child his or her intestate share of your estate, as if you died without leaving a will at all (the child will be considered a "pretermitted heir"). There is no requirement that you state a reason for the disinheritance in the will. If you are going to disinherit a child, you should also consider whether or not you intend to disinherit their descendants (your grandchildren).
There is a big difference between disinheriting a child and leaving your property to your children in unequal shares. It is not uncommon for parents to divide their estate in a variety of ways for a variety of reasons. Some parents decide to leave one child a large portion of the estate than others. Some parents feel the need to take steps to protect a particular child's inheritance from others, for various reasons. All of these wishes can be accomplished easily, through proper estate planning. Most properly drafted trusts will have language that provides a "No Contest Clause," clarifying that if a child receiving a smaller inheritance wishes to challenge the validity of the estate plan, they will forego the right to any inheritance. This type of language will help avoid potential litigation for your children needing the greater portion of the estate.
Many people have the mistaken belief that the way to properly disinherit someone is to state in your will that you are leaving them one dollar or some other nominal amount. The problem is, if you do that, you are not foreclosing the possibility that the person will contest the will. The best way to disinherit is to include language similar to the following: "I have intentionally failed to provide for my son, John." Be sure to mention everyone by name in order to avoid confusion.
It is important to remember, however, that regardless of the language you include in your will, you cannot prevent an heir from contesting the will by filing a lawsuit against your estate. Any person who has standing and states a claim can contest your will, but a good attorney can help avoid these contests with the proper language in your estate plan.
If you have questions regarding disinheritance clauses, or any other estate planning issues, please contact the experienced estate planning attorneys at Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
The last will and testament is probably the most common estate planning tool. Creating a will is relatively easy, but there are a few requirements that must be met in order for your will to be valid. One of the most important requirements is that the person creating a will must be competent to do so. If a person lacks the legal capacity to create a will at the time it is executed, the will may be invalidated upon a challenge by an interested party.
The basic purpose of a will
Wills allow you to pass on your assets to whomever you choose after your death. A basic will should specify to whom you want to leave your property, identify a guardian to take care of any minor children in the event of your death, and name the person who will have the authority to carry out the terms of your will, which is known as a Personal Representative in most states.
How is legal competency defined
What many people do not realize is that not everyone is competent to make a will in Nevada. Generally speaking, the testator must be old enough to create the will and must be able to identify their family and understand the nature and extent of the property in their estate. In Nevada, a testator must be at least 18 years old and of sound mind.
Nevada's requirements for a valid will
Nevada law spells out who can draft a will under NRS 133.020:
Every person of sound mind, over the age of 18 years, may, by last will, dispose of all his or her estate, real and personal, the same being chargeable with the payment of the testator’s debts.
“Sound mind” means someone who has testamentary capacity. This capacity is often described as the ability to recognize the natural objects of one's bounty, the nature and extent of one's estate, and the fact that one is making a plan to dispose of one's estate after death. In Nevada, a will is not valid unless it is in writing and signed by the testator, or by someone expressly directed by the testator to attend. The will must also be attested (or witnessed) by at least two competent witnesses who sign the will in the presence of the testator.
Nevada recognizes self-proving wills
A self-proving will can speed up the probate process because the court will be able to accept the will without obtaining testimony from the witnesses who signed it. Under NRS 133.050, to make your will self-proving in Nevada a witness to a will must sign a declaration under penalty of perjury or an affidavit before a person authorized to administer oaths (i.e., a Notary Public), stating such facts as the witness would be required to testify to in court to prove the will. The declaration or affidavit must be written on the will or, if that is impracticable, on some paper attached to the will. The sworn statement of any witness so taken must be accepted by the court as if it had been taken before the court.
The effects of mental illness
A common misconception is that a person with a mental illness does not have the mental capacity to create a will. That is not the case. Having a mental illness or disease does not mean you automatically lack the required mental capacity. As long as you can show that you have periods of lucidity, you may still be competent to sign a will. Millions of people are affected by dementia. Unfortunately, many of them did not create a proper estate plan before the symptoms began. If a loved one has dementia or some other mental illness that may affect their capacity, it may not be too late. It is best to consult an estate planning attorney to determine whether the criteria are met to establish competency. In borderline cases an attorney may recommend the person be evaluated by a neuropsychologist for a clinical determination of capacity.
What happens in Nevada if you don't have a will?
If you have no plan then Nevada’s laws on intestate succession will how your property will be distributed. Based on these laws, to whom your property will be distributed depends on which of your relatives have survived you. Another thing dying intestate means is that you have no control over who your heirs are and what each of them will receive. Under NRS 135.050, in Nevada your property goes to your spouse, children, parents or siblings, in that order. In other words, if only one of these relatives survives you, that relative inherits everything. If for example, you have two children or two siblings they will divide your property equally.
Attend a free Webinar! If you have questions regarding creating wills, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
If you are thinking about drafting your last will and testament or revocable living trust yourself using one of those do-it-yourself ("DIY") products, you may want to reconsider. Despite how popular these form documents have become and the reduction in cost they promise, these computer generated products do not compare to professional legal work. Even if the document you bought has some of the hallmarks of a professional document, there is always a risk that DIY wills or trusts may not work the way you expected, or even prove to be invalid.
A last will and testament is a written legal document that describes to everyone who survives you how you intend for your estate to be distributed. A revocable living trust is used by many as a substitute to a will to achieve a more efficient distribution of estate assets outside the purview of the probate courts. Both documents may be revised or rescinded at any time during your lifetime to take into consideration changes in your family circumstances or state or federal laws. There are numerous clauses that are important to consider including in a thorough, well-drafted will of trust. The vast majority of the DIY products we have reviewed in our office lack the detailed provisions you may need to meet your estate planning goals and objectives.
Before you make the decision to substitute professional advice with online estate planning products, you need to first understand the risks of doing so. This is especially true in complex legal matters like estate planning. Most of the mistakes that occur with DIY wills come from how the document is executed. For instance, often people fail to have the document properly witnessed, which typically requires two independent witnesses signing the document simultaneously. If the DIY will is not properly witnessed when executing the will that could be held to be invalid and crest a serious issue. Many states require that at least one witness not be a beneficiary. Other very common mistakes include misspelled names and ambiguous terms that require interpretation by a court. In the realm of DIY trust planning, the DIY service providers generally provide very little guidance on funding the trust properly, and none of them we have experienced provide customized advice on how to coordinate beneficiary designations on IRAs or tax qualified retirement plans with the overall estate plan. This can result in retirement plan assets being distributed to unwanted beneficiaries upon your death.
Some of these common mistakes can easily result in real legal issues that require a petition to the probate court for instructions after your death. Most these issues cannot be quickly rectified with a few simple modifications. The American Bar Association has created a Task Force to evaluate the use of certain do-it-yourself methods in estate planning, including DIY will and trusts. The biggest danger clients face in preparing their own estate plan with a do-it-yourself product is the false sense of security, because they are unaware of the errors which will potentially undermine their plans. In addition, unlike an estate planning attorney, these companies do not carry professional malpractice insurance, so the risk of their mistakes is merely covered by the assets of the company.
There are some very limited situations in which a do-it-yourself estate planning product may be sufficient to meet your needs. In situations where clients have very limited assets owned in the client's name alone, a DIY Will may be sufficient when the client intends to leave that property to their closest living relative outright. On the other hand, if a client has substantial assets that are more complicated, or there are other issues that by their nature do not generally surface in a DIY estate planning process, the use a DIY estate planning solution could have serious consequences.
While a DIY will may be an inexpensive alternative to an estate planning attorney, the consequences of executing an invalid estate planning document can be very serious. Not only do you risk leaving your family in financial and emotional turmoil, but your legacy could be lost to enormous legal fees or unnecessary taxes.
The job of an estate planning attorney is to provide legal advice in a legal field that typically requires drafting complicated documents. Those documents typically result in serious consequences when not properly drafted. An experienced estate planning attorney will ask the appropriate questions to identify all the issues that should be addressed in a complete estate plan. That is why the American Bar Association's Task Force encourages people to reconsider using do-it-yourself documents when creating their own estate plan.
The risk of errors in executing DIY Wills is not the only reason you should reconsider the use of those products. Wills are not one size fits all by any means. Wills, as well as most other estate planning documents, are meant to be customized as no two clients have the same family or financial situation. That is why it is important to work with an estate planning attorney who has the knowledge and experience to help you create the perfect plan. Otherwise, your estate plan may not be valid or may not work the way you expected.
Attend a free Webinar! If you have questions regarding DIY wills or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
It may come as a surprise but for some people finding out that you are about to receive an inheritance is not always good news. For people who are currently receiving some form of income or asset based government benefits, such as SSI or Medicaid benefits, there is always a concern that an inheritance may jeopardize their eligibility for those benefits. For others, the thought of receiving certain types of assets, such as a family-owned business, may seem overwhelming. If you are about to receive an inheritance you should contact your estate planning attorney to determine if inheritance planning is something you may need.
Before you can successfully plan, you need to know, at least in general terms, what type of inheritance you will be receiving. For example, if you are inheriting from a parent, then you should obtain a list of assets and a copy of your parent's will if there is one. That way you can get at least a rough estimate of the size of the estate and what your share will be. Depending on the size of the inheritance, you will need to consider how to modify your own estate and financial planning strategies.
Exactly how you should integrate inherited assets into your own finances depends on several factors, including the nature of the assets you inherit, the financial and estate planning strategies your parent may have used, your marital status and potential desire to keep your inherited assets separate from your marital estate, and your own financial situation. Again, if you receive government benefits of any kind, your eligibility for which are dependent on your financial resources, you will need specific inheritance planning to protect that inheritance as well as your benefits, and time is usually of the essence.
Typically, inheritances include mostly cash, along with some heirlooms and other tangible property that often has more sentimental value than real financial worth. In most cases it is easier for the Personal Representative of an estate to distribute assets to heirs after they have been liquidated. However, there can be situations where you may receive shares of stocks, mutual funds, individual bonds, real estate or an interest in closely held business. Depending on the size of these types of assets, you may prefer to sell them and reinvest the proceeds using a different strategy. Your estate planning attorney can help you make these decisions.
Depending on the nature of the assets you expect to inherit, there are certain actions you may need to take sooner, rather than later. For instance, if you wait too long to sell an asset you inherited, you could increase the chances of recognizing unfavorable tax consequences. If you are inheriting a retirement account, you need to have a plan as to how you will withdraw those retirement funds, and the retirement account must be retitled as an inherited retirement account by September 30 of the year following the account owner's death. Being aware of all of your options is important when creating an inheritance plan, especially if your goal is to reduce your tax liabilities as much as possible.
Once again, if you receive income-based government benefits, receiving a significant amount of income from an inheritance could put your eligibility for those benefits in jeopardy. If inheritance planning will not provide the protections you need or the risk is not worth the value of the inheritance, you may want to consider rejecting it if state law permits such an approach. Many people do not realize that you can reject an inheritance and there are situations where that may be the best course of action.
It is important to note that rejecting or disclaiming an inheritance requires more than simply telling the Personal Representative you do not want the money or property. There are specific laws that dictate how you can reject an inheritance. If order to be sure that you never become the legal owner of the property, there are very specific steps that need to be followed.
In nearly every case, you need to put your disclaimer in writing and deliver it to the person in control of the estate if you want to properly reject your inheritance. Typically, that would be the Personal Representative of the estate or the Trustee of the trust that holds the subject property. This disclaimer should normally be submitted within nine months of the person’s death. It is very important to note that, in order to effectively reject the inheritance, you may not accept any benefit from the property whatsoever.
Attend a free Webinar! If you have questions regarding inheritance planning or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
Being asked to serve as a trustee of a trust is a very important job. The decision of whether or not to accept the appointment as trustee should not be taken lightly. The role of a trustee is essential to successful trust administration. As trustee, you are the person responsible for making sure the terms of the trust document are fulfilled. You are also responsible for managing trust property and maintaining accurate records regarding any transactions you make involving the trust. In consideration of these and other duties of a trustee, here are five common mistakes in trust administration that must be avoided.
A trustee is always required to manage the trust property while keeping the best interests of the beneficiaries in mind. A fiduciary duty is one of honesty, impartiality and trust. All actions taken on behalf of the trust and its beneficiaries must be above board. A trustee must avoid engaging in transactions that may be construed as a conflict of interest. Under state law, trustees are also required to invest trust assets prudently and must avoid investing too speculatively. If a trustee fails to satisfy these requirements and the trust assets suffer a loss, the trustee can he held personally liable.
In light of the substantial responsibility of a trustee and the numerous state and federal laws that govern trust administration, we recommend that a trustee seek professional assistance when carrying out the trustee's responsibilities in administering a trust. When a trust becomes irrevocable upon death of the creator of the trust (commonly referred to as the "Trustor" or "Settlor"), the trust becomes a separate taxable entity which subjects the trust to a number of federal (and state if the trust is being administered in a state that has an income tax) tax compliance requirements. A trustee also has responsibilities to provide beneficiaries information about the trust and its administration and to provide annual accountings to the beneficiaries either annually or upon request. Finally, it is highly advisable for a trustee to delegate the responsibility of prudently investing trust assets to a qualified financial professional. This shifts the duty to invest trusts assets prudently from the trustee to the financial advisor and insulates the trustee from any potential personal liability for poor investment choices or investment performance. Investment management is the most highly litigated issue in trust administration.
As a fiduciary, you are required to look beyond your own interests and enforce the terms of the trust document impartially in every decision you make. This may be more difficult than it seems, especially if you have some type of relationship to one of the beneficiaries of the trust, or even if you have emotional ties to the family in general. For example, suppose you are the trustee and have discretion to make distributions of income among your children and other more remote family members who are all beneficiaries of the trust. Such relationships often create the perception, if not a presumption, of a lack of objectivity which could lead to the trustee being removed and replaced with an independent trustee.
As mentioned briefly above, a trustee has a duty to provide beneficiaries a complete and accurate reporting of all transactions involving trust property. This is another very highly litigated area of trust administration. For this reason, it is very important that, as trustee, you are aware of all that your responsibilities encompass and understand the potential risks for liability. State trust accounting laws mandate the information and format in which an accounting must be provided to beneficiaries. Aside from documenting and reporting all the financial transactions of a trust, the trustee's rationale behind each decision he or she makes that relates to trust property should also be documented, especially the trustee's decisions to approve or deny distribution requests from beneficiaries. If a trustee keeps detailed, accurate records of the trust administration, the trustee will be prepared to defend his or her decisions and protect him or her from personal liability if there is ever a dispute.
Trustees are typically entitled to a fee for their services. However, what constitutes a reasonable fee can differ from one state to the next. In some cases, the trustee will not request a fee depending on their relationship to the Trustor and/or the beneficiaries. Unlike corporate trustees, which usually have a set fee schedule, an individual, non-professional trustee will need to negotiate a reasonable fee for his or her services. If a trustee fails to discuss fees up front, when the issue of compensation arises later it may come as a surprise to the beneficiaries who may then challenge the fee. In some situations, a trustee may serve in that role for several years without being paid. Later on, when the time and effort required to fulfill the duties has increased significantly, the trustee may try to seek compensation. If compensation was not discussed at the beginning, the beneficiaries may take issue with paying a fee now, which may result in the need for court intervention.
If you are in the process of establishing your trust and you are considering who to select as trustee, there are many factors you should consider. You should choose someone whom you believe will provide careful management of your trust assets, someone who will exercise the right level of attentiveness when implementing your instructions, and who will demonstrate the ability to place the interests of your beneficiaries above all others. Most importantly, you should select a trustee who will form and maintain a relationship with your beneficiaries and their families. Talk to your estate planning attorney for guidance in choosing the right trustee for you.
If you have questions regarding trust administration, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455.
When it comes to planning for your future and the future of your family, the advice of an estate planning attorney can be invaluable. Estate planning attorneys can provide the guidance you need navigate through the numerous choices available.
An estate planning attorney specializes in preparing clients for, not only death, but also the possibility of mental incapacity. Estate planning attorneys offer customized advice based on each client's needs and goals. For example, clients may want to involve their family members in the management of their estates, while others might not. Your attorney will describe all of your options and help you decide what you need to accomplish your goals for your estate. An attorney is also invaluable when it comes to ensuring your plan meets state guidelines. That way, your plan will be valid and you can avoid most potential disputes.
Because estate planning is not a "one size fits all" venture, it is vital that you work with an estate planning attorney who has the knowledge and experience required to advise you. In order to be the most effective, your estate planning attorney should be very knowledgeable about the applicable laws in your state. This would include the laws that regulate probate, wills, and trusts. Otherwise, your estate plan may ultimately be invalid or not operate the way you intended. It is also important to be as detailed about your life, your goals and your family situation, in order for your estate planning attorney to be able to create an appropriate plan. If not, your estate plan will not likely meet your expectations or your personal goals.
If your goal is to make sure you and your family are prepared for what happens after your death, an estate plan is what you need. Estate planning can also prepare you for potential incapacity which could keep you from handling your own affairs. There are several different estate planning tools which an experienced estate planning attorney can use depending on your specific needs. With an inclusive estate plan, you can simply prepare for both incapacity and death.
Planning for the future is always an important goal in many areas of your life. When it comes to your estate, planning ahead provides you with the opportunity to decide who should inherit your property upon your death. Estate planning can also be helpful in reducing your estate taxes. In the event that you become incapacitated for any reason, whether temporarily or permanently, your estate plan can also give your family the authority it needs to manage your affairs if you are unable to make financial and medical decisions for yourself.
Your estate planning attorney can explain how the part of your estate plan that relates to your death will work. Your plan should first pay off your debts and then it should specify who will receive your remaining assets once your debts have been paid. The most common estate planning tool used to accomplish this is a Will. A will is essentially your written instructions on how you want your estate to be handled upon your death. A will should also identify the individual you have chosen to manage the distribution of your estate.
Very similar to planning for death, planning for the possibility that you may become incapacitated requires two components. In case you suffer an injury or medical condition that makes you incapable of handling your own affairs, you will need someone to take make the important decisions for you. The first part of a typical incapacity plan addresses your personal and health care needs, while the second part addresses your financial affairs. On the other hand, if you become incapacitated but do not have an effective incapacity plan in place, it will likely be necessary for a court-supervised guardian to be appointed to care for you and handle your affairs. Guardianships can be very expensive and require you to relinquish control of your affairs entirely. For these reasons, planning ahead is critical.
If you have questions regarding estate planning, please contact Anderson, Dorn & Rader, Ltd. for a consultation, either online or by calling us at (775) 823-9455. Attend a free Webinar for more information.
If you are a gun collector, or maybe just a gun owner, you may be wondering, what is the best way to pass on your firearms to your heirs? You may have even heard of a gun trust, a specific type of trust designed to address to the unique laws applicable to firearms. A gun trust can be beneficial in handling the inheritance of certain types of weapons, especially those that are governed by federal and state regulations. At the very least, you want to keep your heirs from inadvertently violating the law.
Whether it is necessary to place certain weapons in a gun trust depends on the type of weapon and whether it is regulated. There are two federal laws that might apply: the National Firearms Act of 1934 (NFA) and Title II of the Gun Control Act of 1968, which revised the NFA. NFA weapons include machine guns, silencers, short-barreled rifles, and short-barreled shotguns (including sawed-off shotguns), grenades, and other similar weapons.
Under federal law, NFA weapons are required to have a serial number and be registered with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, commonly referred to as the ATF. An NFA firearm can only be possessed and used by the registered owner. For this reason, special arrangements need to be made in order to pass these weapons on to someone else. The catch is, if such a weapon has not already been registered, it cannot later be registered and is illegal to own. To transfer a registered firearm, the owner must obtain ATF approval and pay a $200 tax on most transfers. It also requires receiving permission from the local chief law enforcement officer (CLEO) and being fingerprinted and photographed.
There are several advantages to utilizing a gun trust. First, the trust can help you to avoid certain federal transfer requirements. For example, if you name more than one trustee of your gun trust, each of those individuals will have the right to possess or use the trust firearms. Also, you can draft your trust in a way that it remains in effect after your death. Since the firearms remain in the trust at your death, the need to transfer those firearms is avoided. In other words, your heirs will not be required to pay the $200 transfer tax and satisfy the other transfer requirements.
The typical executor is not familiar with the various rules and regulations governing ownership and possession of NFA and other weapons. That means, without proper guidance, your executor could violate criminal laws by transferring a weapon in your estate without going through the proper procedure. An executor could also make a mistake by taking or sending an NFA weapon to a state where it is prohibited or giving it to a person who is not permitted by law to own that weapon. However, if you use a gun trust, those issues can be handled ahead of time.
The Gun Control Act makes it unlawful for certain individuals to possess firearms. For instance, the following categories of people are restricted from possessing firearms, among others:
A gun trust is different from the common revocable living trust. A simple living trust provides for the transfer of trust assets without going through probate court. This generally saves time and money after your death. A living trust often terminates shortly after your death, after the trust assets have been distributed to your heirs.
A gun trust, on the other hand, commonly has multiple trustees and is intended to last for more than one generation. Gun trusts must also take into account state and federal weapons laws. For these reasons, it is important to consult a lawyer who has significant experience with the applicable state and federal laws governing the legal use and possession of weapons and how they must be transferred.
If you have questions regarding gun trusts or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455. Attend a free Webinar!
In the event you become unable to make decisions about your own medical care, due to illness, injury, advanced age or some other reason, having the right legal documents in place can be a lifesaver. Simply writing down your wishes ahead of time may not be enough because you cannot anticipate every situation. You also need to select someone you trust to manage your care, instead of relying on a doctor, estranged relative, or even a judge, none of whom are likely to be aware of your preferences. Consider a medical power of attorney.
In order to accomplish a comprehensive medical power of attorney in Nevada, you need three different types of health care documents: the durable power of attorney for health care, a living will, and a HIPAA authorization form. The durable power of attorney for health care allows you to select someone you trust to manage your health care when you are unable to do so, based upon predetermined statements of your desires. That person you appoint is your “agent” for all medical decisions that need to be made during your incapacity. The second document, the living will, allows you to specify in writing the type of medical treatment you agree to receive (or not receive) in certain situations. This can include “do-not-resuscitate” orders and other living saving procedures. The HIPAA authorization form allows you to identify all people that you wish to receive your medical information that would otherwise be protected under HIPAA laws and regulations.
The person you select to make your health care decisions is called your agent. It is common for people to name a spouse, partner, relative, or close friend as an agent. However, in Nevada your agent may not be:
These restrictions do not apply to your spouse, legal guardian, or next of kin, however. So if your spouse happens to be employed at a health care facility, the restriction would not apply.
Despite the name, a living will is nothing like a conventional will (also commonly referred to as your "last will and testament"). It does not address the disposition of your property or assets upon your death; it only provides instructions regarding your health care preferences. It can be as general or specific as you want it to be, as long as it provides sufficient information to health care providers about your preferences. Generally, most living wills will be a directive to your physical to cease or not provide life-prolonging or life-sustaining treatment if the patient has a permanent, terminal, and irreversible condition that will cause the patient's death within a relatively short period of time. This can avoid the family arguing over whether you would have wanted them to "pull-the-plug" or not.
In order to create a legally valid power of attorney or living will, you must be considered “legally competent.” In this context, competency refers to mental capacity, age and maturity. In order to enter a legally binding agreement, you must have reached the age of majority established for your state. In Nevada, the age of majority is eighteen (18). This requirement is based on the presumption that individuals who are still immature are too inexperienced to understand or properly execute a contract or legal document.
A power of attorney for health care is typically drafted so that it goes into effect once a physician has determined you are incapacitated and unable to make your own health care decisions. Lacking capacity generally means that either you can no longer understand the nature and consequences of the health care choices that are available to you, and/or you are unable to communicate your own wishes for care, either orally, in writing, or through gestures. In other words, if you are so ill or injured that you cannot express your health care wishes, your power of attorney or living will spring into effect immediately. If, however, there is some question about your ability to understand your treatment choices and communicate clearly, your doctor (with the input of your health care agent or close relatives) will decide whether it is time for your health care documents to become operative.
In Nevada, you can authorize your health care agent to take over your medical care immediately upon execution of the document, which is preferable since accidents can never be foreseen. In the event of something happening, there will be no need for a physician to determine whether you are incapacitated or not. Instead, you agent will have the ability to step in and make decisions on your behalf at any time. As long as you are competent, you will still be able to dictate your own medical care. Regardless of when the document goes into effect, your health care agent is always required to act in your best interests and follow your health care wishes as you have expressed them.
If you have questions regarding a medical power of attorney, or any other elder law issues, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455. If you are in the Reno, NV area, be sure to schedule an appointment to speak with us about a Reno power of attorney for your medical needs!
Trusts are a key element of every good estate plan. Knowing which type of trust you should have is also key, and the most popular type of trust is a Revocable Trust (also commonly called a Living Trust). It is often necessary to review and revise your trust to address changes in your finances, family, and other aspects of your life, and the need to change the terms of your trust can arise more than once throughout your lifetime. For clients who create revocable trusts, it can be easily amended or revoked whenever necessary, and the flexibility of a revocable trust is one of its greatest benefits.
There are several different types of trusts, but they are all basically categorized as either revocable or irrevocable. There is a very important difference between a revocable and irrevocable trust. A revocable trust permits the grantor(s) (the person(s) creating the trust) to make changes to the terms of the trust. You can also revoke the trust altogether, at any time, during your lifetime. Once you pass away, the trust usually becomes irrevocable. Because revocable trusts can be modified when your life circumstances or intentions change, they are very flexible estate planning tools. With a revocable trust, the trustee takes over only upon your death or incapacity.
An irrevocable trust is different because, by definition, it cannot be modified once it has been executed. Despite the fact that irrevocable trusts cannot be modified, there are a great many benefits to this type of trust. Because the trust is irrevocable, the assets are basically out of the reach of estate taxes, probate court, and in some cases, your creditors. Though you may lose control of your assets, you gain favorable tax consequences and other protections.
In order to enjoy true asset protection, your trust must be irrevocable. That is because, after your money has been transferred to the trust, it is no longer considered your money. In other words, it is no longer subject to your creditors. Note, however, that there are certain exceptions for fraudulent transfers, and there are certain look-back periods that might make those assets available to creditors. Contrarily, with a revocable trust, if you maintain the right to amend the trust and have the authority to transfer the assets back to your control, then a creditor can still reach those assets.
There are generally two ways to modify a revocable trust. It can either be amended or restated. Revoking a trust is usually more complicated because the property included in the trust has already been transferred and must be transferred again. This adds complexity, time, and cost when changing a revocable trust and is not generally recommended. It is important to understand the state laws that govern your trust, and a qualified attorney should be able to review your trust documents to help determine if anything needs to be updated. That way, you can ensure your amendment or restatement will be valid.
There are some situations where an amendment is sufficient to account for changes in your life. For example, if you get married or have a baby, or when you have a substantial increase in your trust property, then an amendment could do the job to make sure your goals are met. If your beneficiaries change, either because someone has died, or you changed your mind about who you want to inherit a particular piece of property, then an amendment can update these parts of your trust without affecting the rest of the documents. Additionally, if there have been minor changes in the law that would not otherwise affect the majority of your trust, an amendment can specifically identify and update those terms of your trust to reflect the most current law and legal practices.
Adding amendments to an existing trust can often be the simplest way to modify your trust, but amendments can become confusing. When amending a trust, an attorney must first look to the original trust document, and every subsequent amendment, to make sure the proper language is in your trust agreement. If you have made multiple amendments to your trust, it can be a nightmare to track each change through each separate legal document. Other times, the changes needed will require amending large portions of your trust, which adds times, cost, and complexity. One solution is to restate an existing trust without revoking the trust entirely; in other words, start over from scratch in writing the trust agreement. That way, you can simply include the necessary changes, while keeping the original date of the trust. Then, the trust property that is already held in the trust will not need to be transferred again.
Creating a shared trust with a spouse is quite common. With a shared trust, either you or your spouse has the authority to revoke the trust as long as you both are alive. If you decide to amend or restate the terms of the trust, both you and your spouse must agree to those changes in writing. Shared trusts can be drafted a number of different ways, so that after the death of one spouse the trust can either limit the surviving spouse's ability to amend the trust, or it can provide complete flexibility allowing the surviving spouse to amend the entire trust.
If you have questions regarding revocable trusts, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
You are probably not surprised that contesting a will is very common. Regardless of the desire to eliminate family disputes about who should receive what, they are often inevitable. You can take certain steps to avoid them and your estate planning attorney can help.
There are generally four different legal bases for challenging the validity of a will. The four grounds include:
Each of these grounds can be difficult to prove. Contesting a will can also be a very expensive court process, yet that fact does not discourage everyone.
State law regarding wills in Nevada govern the specific requirements for a valid will. The document must be signed by the testator (person creating the will) and by two witnesses who must be present during the execution of the will and each signature. Many will contests challenge the authenticity of the signatures. The validity of the will may also be challenged when a required signature is absent.
A will cannot be validly executed if the testator lacks the required testamentary capacity. In Nevada, the term "incapacity," which would prevent a testator from executing a valid will, is defined as follows:
“Incapacitated person” means a person who is impaired by reason of mental illness, mental deficiency, advanced age, disease, weakness of mind or any other cause except minority, to the extent of lacking sufficient understanding or capacity to make or communicate responsible decisions.
Even if in cases of temporary incapacity, it is necessary to establish that the testator was not incapacitated at the time the will was executed. Proving incapacity can be difficult to do in most cases and pursuing this avenue of contesting a will is often expensive.
Regrettably, there are many situations where it is suspected that undue influence or coercion have been used to coerce a testator into either creating the will or including certain provisions in the will. This is a common challenge when there is evidence that the testator may have been emotionally vulnerable in some way. Indeed, as we age it is possible to lose some mental faculties, which may then be exploited by someone close to us. As with showing incapacity, proving undue coercion can be hard.
Deception is a major issue in creating wills. Like undue coercion, fraud in the creation of a will is also an issue. A will may be challenged by evidence that the testator may have been tricked into signing the will or including terms in the will that the testator did not intend. For example, a testator may be given a document that is represented to them as a deed or power of attorney, when in fact it is a will. The problem with proving fraud is that the primary witness, the testator, is no longer around to testify. The witnesses to the will become extremely important.
If you want to be sure that your family won't waste time contesting a will after your death, you might want to consider creating what is called a "self-proved" will. This specific type of will, recognized in the state of Nevada, takes the guesswork out of will authenticity. You simply sign your will in the presence of a notary. Your witnesses sign in front of a notary, as well. Additionally, you and your witnesses need to sign a notarized affidavit that sets out who you are and confirms the fact that each of you knew you were signing the will. This affidavit is always kept as a separate document.
The greatest benefit in using a self-proving Will, in addition to preventing contests, is that it speeds up the probate process. The probate court does not need to obtain testimony from the witnesses in order to prove the Will's validity, which makes the process faster.
Please join us for a free Webinar! If you have questions regarding your last will and testament or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
While most of us would probably be excited to receive news of an inheritance, that is not the case for everyone. The reality is there may be certain situations where receiving an inheritance is not in your best interest. There are many different reasons this may be the case. So, you may find yourself wondering how to reject an inheritance. This can be an important part of inheritance planning.
The answer is yes, you can reject an inheritance. However, it is a bit more complicated than simply telling the executor you don’t want it. Certain rules must be followed if you want to ensure that you never legally become the owner of the property. First, the disclaimer must be put in writing and delivered to the person who is in control of the estate. That would typically be the personal representative or trustee. In most cases, the disclaimer should be completed within 9 months of the person’s death. The most important thing to remember is that you cannot accept any benefit from the property you are rejecting.
If one spouse dies, the surviving spouse can inherit the entire estate tax free, based on the unlimited marital deduction. However, once the inheritance is added to the surviving spouse’s estate, it may cause the surviving spouses' estate to exceed the lifetime credit of $5.45 million. Only estates that are valued under that amount can be passed on without incurring estate taxes. Any excess amount will be taxed at 40 percent. In this situation, it may be a smart choice to disclaim the inheritance from your deceased spouse, allowing it to pass directly to the next beneficiaries, typically your children. Before making this decision, discuss this with your estate planning attorney as part of your inheritance planning.
In some cases, the beneficiary of an inheritance may also be the recipient of state or federal benefit programs, such as Social Security or Medicaid – benefits programs that are based on income or need. In those situations, accepting an inheritance, depending on its size, could effectively disqualify the beneficiary from those benefits. It may be more important to that individual to preserve continue benefits, than to receive an inheritance.
Regardless of the reason you may need to disclaim an inheritance, it is essential that you discuss your decision with an estate planning attorney. They can help you to ensure that the disclaimer is handled properly, so you can avoid problems in the future. Inheritance planning requires consideration of your present and future financial goals. There are several steps for developing this plan, which you and your attorney can follow.
In addition to an inheritance plan, you need to have a tax plan as well. While an inheritance is not generally considered income for purposes of federal income taxes, subsequent earnings from the inherited taxes are. That means, you will be taxed on any interest paid on inherited cash in a bank account or dividends on inherited stocks or mutual funds. Also, any gains you have when you sell inherited investments or property are generally taxable. Luckily, you can claim losses on these sales as well.
If you have questions regarding inheritances, or any other inheritance planning issues, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
