A large number of individuals feel that adding their adult children to their banking accounts and property is a great way to keep those assets from passing through probate.  This usually causes more problems than it does by solving them.  Some jurisdictions will not allow an automatic transfer of those assets just like there is not always an automatic transfer of assets from a deceased spouse to the surviving one.

Additionally, the adult child has assumed some ownership of the account or property by having their name added.  This opens up those assets to any potential problems the adult child may run into.  A bankruptcy would open subject those assets to a possible seizure or dissolution.  The assets could also be subject to liens and/or garnishments if the adult child was involved in a serious automobile accident lawsuit.

Placing adult children’s names onto assets may also be looked upon as a gift by the IRS which could open up the gift of those assets to a hefty gift tax and could also reduce the total estate tax exemption.  There are estate planning tools which can accomplish the transfer of assets to children without subjecting those assets to the numerous problems discussed above.

http://www.advisorone.com/2012/04/02/5-important-steps-to-update-estate-plans

Drafting wills, trusts and other estate planning documents is the practice of law.  Even if the documents being offered are “written by lawyers,” laws on the administration of estates differ from state to state and can change year to year; generic forms cannot include any state specific references that could run afoul of another state’s laws.  Also, when you choose and complete your own forms, you have no attorney to ask (and answer) the right questions, decide the right estate planning approach, order and properly complete insurance and retirement plan forms, and confirm that all documents have been properly drafted, signed, witnessed and recorded.

As Timothy E. Kalamaros, a lawyer with his own practice in South Bend, Ind., says, using a DIY will is like “pulling your own tooth with a pair of pliers instead of going to the dentist.”  George Fox, a lawyer with Fox+Mattson in Atlanta, recently sent shared two of his favorite examples, gleaned from a tax group he frequents.  One involved someone who left the form blank where instructions for the DIY will said “[Insert name here]” and wound up leaving $200,000 to “[Insert name here]” instead of to a loved one.  And then there was the poor soul who left “$200.000 to my sister.”  The typo, putting a decimal point where there should have been a comma, became a source of contention.

Finally, having an estate planning attorney provides you with a source of ongoing representation, informing you of changes in the law that may impact your estate and require changes to your plan.

A Will only controls property that you own in your name alone.  Property that is jointly owned with rights of survivorship will pass to the joint owner.  Additionally, in most states spouses have marital rights in property owned and can elect certain shares of that property even if the spouse is left out of the Will.

Beneficiary designations in retirement accounts, insurance policies and banking accounts will also trump a will.  I recommend to my clients to have a beneficiary audit performed to ensure they are up to date.

This is a very common misconception.  I meet with a lot of folks who think if they create a will that states their house is left to their children then their house will avoid probate.  However, that house would still have to pass through probate even if the will stated specifically where it was to be distributed.

Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person’s property.  It is the only way to obtain a court order to change the name on legal documents such as titles and deeds.  There are court costs, fees and probate attorneys’ fees associated with probate, not to mention the amount of time the property remains held up in court.

A will guarantees that whatever property distributed under the terms of that will pass through probate.  There has to be something else along with that will that allows the property to avoid probate.  Placing property with titles and deeds inside a trust will allow that property to be distribtued per the terms of that trust outside of probate.

Other ways to avoid probate:

• Joint tenancy with rights of survivorship
• Designated benficiaries
• Payable on death
• Transfer on death
• Beneficiary deeds

Unfortunately, that is not always the case.  State laws do very, but if you die without a will (intestate), the inheritance from your estate will be divided among your spouse and children.

In Arkansas, if you have a spouse but no children, all of your assets pass to your spouse if you have been married for more than three years.  If you have a spouse but no children, only one-half of your assets pass to your spouse if you have been married less than three years.  If you have a spouse and children, your spouse will receive one-third of your assets and the remaining two-thirds will pass to your children.  If you do not have a spouse or children, then your assets will pass to your parents, then brothers and sisters then other relatives such as nieces, nephews, aunts and uncles.

Regarding land, if you have a spouse and children, your spouse will only receive a life estate in one-third of your land.  A life estate means that your husband or wife owns their share of the land only for their lifetime.  They do not have the right to say who gets the property at their death.

This is not what most people want to happen with their assets.  However, in reality, is it exactly what will happen with no planning or poor planning.

I wanted to speak to some of the more common “heir-ors” out there.  I’ll start with one of the big ones and address more in 2012.

Heir-or #1:  Only Rich People Prepare Estate Plans

Do you own anything?  If so, you need a will.  You see, a will allows you to designate who will receive your property should anything happen to you.  Continuing without one ensures that all of your assets will be distributed under the terms of your state’s “intestate succession” laws.  That means your money and property could end up with family members you haven’t spoken to in years instead of who you’d really like to see control your assets.  Failing to have a will in place is simply a decision to trust your assets to government bureaucrats who do not know you from Adam.

Do you have children?  If so, you need a will.  You will be able to name a guardian to take care of your children should you not be able to.  Without having this guardian clause in a will you will not be able to take part in the decision making process and a judge will decide where your children will live and who with.

Even if you think your situation if pretty straightforward, you may feel more comfortable hiring an estate planning attorney to help guide you the process.

A Gun Trust is a special purpose revocable living trust. A Gun Trust is written
to hold only firearms.

http://www.forbes.com/sites/peterjreilly/2011/09/22/gun-collections-pose-special-estate-problems/

Inheritances that are held in trust can be protected from claims by a spouse if your child or grandchild were to divorce.  The assets held in trust would most likely be viewed as not being joint marital property.  Additionally, if your child or grandchild has creditor problems the assets held in trust could possibly protect those assets from being levied upon or subject to a lien or claim.

Leaving those assets in a your revocable trust for children or grandchildren with health problems or who may be too immature to handle a large sum of money are also excellent reasons to have the trust distribute the assets.

To recap, here are the advantages of having inheritances remain in the trust and be distributed pursuant to the terms of your revocable trust:

• Protect inheritance against claims by child’s creditors or spouse
• You can choose to spread receipt of an inheritance over as many years as you direct
• You can choose to provide your child with an income for his or her lifetime, with the remainder passing on to your grandchildren

As always, this is not legal advice and should not be construed as such.  I am always available to discuss estate planning, and trusts specifically, with you and your family to see what would be a good fit.

I made my first trip to the West Coast in 2001.  It was a family vacation.  I am so much of a Raider fan that I located the office building headquarters of the Oakland Raiders and drove the entire family out there just so I could take a picture of the front of the building.  To make a long (and great) story short, we ended up seeing Al Davis getting into his car in the back parking lot.  I told him we were from Arkansas and he got out and talked with us for about twenty minutes.  It was fascinating.  He and ex-Arkansas Athletic Director Frank Broyles were pretty good friends and had even played golf together a few times.  Mr. Davis ended the conversation by thanking us for coming out and being Raider fans.  He slowly got into his car and the last thing he said to us was, “Don’t ever get old.” 

I am an estate planning attorney.  This blog is my only avenue to discuss my interests.  Since Al Davis passed away with a lot of wealth and a football franchise with an estimated worth of $761 million I decided I would combine the two.  Al Davis assumed the controlling interest of the Oakland Raiders in the early 1970′s.  He is more known for his controversial decisions in the 2000′s managing the Raiders than for changing professional football and creating the giant we all know today.  Al was the first coach to institute a true vertical attack passing game while he was in the AFL.  As commissioner of the AFL, he played the integral role in the AFL-NFL merger.  It was his idea for the best “old” AFL (now called the AFC) team to play the best NFL (NFC) team at the end of each year in a “Super Bowl”.  Mr. Davis sued the NFL for violating anti-trust laws when he wanted to move the Raiders from Oakland to Los Angeles and won.  Al Davis hired the first black coach, Art Shell, in the NFL.  He is widely known in the National Football League for going above and beyond the take care of former Raiders in dire straights coining the phrase, “Once a Raider, always a Raider.”  His other catchphrases are pretty much used on an everyday basis in the sports reporting world, “Just win, baby!”, “Commitment to Excellence” and ”The other team’s quarterback must go down and he must go down hard.”

The NFL bans outside corporations from owning franchises, requiring instead that the teams have a single principal owner.  Al Davis owned 47% of the Raiders when he passed.  Al battled the NFL, other NFL owners and other teams on a weekly basis.  His estate’s toughest battle will be dealing with estate taxes all the while keeping the Oakland Raiders intact and within the family.  The current estate tax exemption is $5 million.  That means anything over and above $5 million gets taxed at 35%.  It also appears that, on the outside looking in, Al Davis’s estate would owe $123 million to Uncle Sam for his ownership.  Carol Davis, wife of Al Davis, and their son, Mark Davis, will now own Al’s interest in the Oakland Raiders.  The real question then lies:  For how long?

It appears that Mr. Davis left some thorough and detailed estate and succession planning which ensure that the team will be owned by Carol Mark.  They can’t be forced to sell by their partners, by the league, or by operation of law.  As it relates to the other partners, the team operates as a limited partnership, with the Davis family being the sole and complete owner of the sole general partner.  Under the law of limited partnerships, that gives the Davis family full control over the business.  Mrs. Davis was married to Al for well over 50 years, and Mark is in his 50s.  They are a close family, and it’s believed that they have no desire to sell the team.  Mark grew up in and around the organization, and he has a passion for the franchise.

The other question of the estate tax still remains, however.  The large tax owed has caused many to speculate that the Davis heirs will
have no choice but to sell the team, like other NFL heirs have done.  But, in reality, Davis could have easily escaped estate taxes, at least for now.  The federal estate tax law includes an unlimited marital exemption.  This means that Davis could have passed as much as he wanted  onto his wife — both before he passed away through gifting, and after through his estate plan — and none of it would be subject to the 35% estate tax.  The fact that Al Davis has only one child removes one of the other potential catalysts for a sale.  If multiple children inherit a team and one or more want to cash out, the others may have no alternative to selling the team in order to raise the money to buy out a sibling or two.  The estate of Carol Davis may have to deal with this tax issue when she passes, but there are other ways that Al Davis may have planned for this as well.  He could have purchased life insurance to handle some of that brunt, he could have gifted some of the ownership away to his son or used other planning methods such as charitable giving.

Raider fans, myself included, can rest assured that the team will probably remain in the Davis family for quite some time due to Al’s planning.  The team is young and playing well.  It is still great to be a Raider fan.  Just keep winning, baby.

I want to thank and credit Andy and Danielle Mayoras and Kay Bell for supplying a lot of the information that I used.