See the MEASURE LAW BLOG for more resources and information on estate planning, probate, real estate, business law, and related topics at:
Category Archives: Probate
Reducing the Potential for Conflict and Disputes Regarding Your Estate
While we all would like to believe that our family members will all get along after we are gone, unfortunately estate disputes are all too common. While some lawsuits relating to estates and probate are disputes about large sums of money, many of these lawsuits relate to modest-sized estates or small items of personal property. Even if your family gets along fabulously now, there is always the potential for conflict down the road, however by recognizing a few simple issues you may be able to reduce or completely avoid these situations.
Any estate may be subject to dispute, but there are some specific situations that may create a greater potential for disputes. For example, if you have remarried and have children from a prior marriage your estate may be subject to more scrutiny from your family. In addition, if your children do not get along with each other during your lifetime, it is more likely that they will dispute issues regarding your estate. Whether or not one of the situations mentioned above exist in your family there are some measures you can take to reduce the potential for conflicts between your family members.
Ways to Reduce Potential Disputes Regarding Your Estate
Don’t Put Off Estate Planning
Estate planning is a process that requires careful thought and consideration. Do not wait until you are faced with an illness, traveling out of the country, or dealing with potential capacity issues. Take some time to review and create an estate plan that addresses your unique situation while you still clearly have the capacity and health to make sound decisions.
Perhaps more importantly, clearly communicate your intentions with your family both during your lifetime and in your will or trust. If you talk to your spouse and children about your wishes during your lifetime you may be able to address, or event prevent, potential disputes that may arise with the distribution of your estate. Clear communication and planning can also provide you with the peace of mind that you may spare your family from conflicts or hurt feelings.
Make Sure Your Beneficiary Designations are Up-To-Date
It is also critical to review your beneficiary designations to ensure that the proper beneficiaries are named, and the beneficiary designations fit within your overall estate plan. Remember, a beneficiary designation can take precedent over a will, so keeping your beneficiary designations updated to reflect your current life situation is essential.
Specifically Recognize Any Lifetime Gifts or Loans in Your Will or Trust
If you loan money to one of your children, or give gifts during your lifetime, make sure that you recognize the loan or gift in your will or trust. Be specific about whether the loan is to be forgiven or repaid at your death. Additionally, document any loans or gifts you make during your lifetime, in writing, with the use of promissory notes, contracts, or other document, so that your intent is clear.
Be Specific About Personal Property
While most people may be more focused on the distribution of financial assets and real estate in their will or trust, personal property can often create more problems and disputes than larger assets. With that in mind, include a specific “Personal Property Memorandum” to attach to your will or trust, or include a specific provision directly in your will or trust that sets out the distribution of your personal property. This not only includes personal property with high monetary value, such as jewelry or art, but also any personal property that has family or sentimental value, or simply may cause an argument in your family.
Create a Revocable Living Trust to Avoid Probate
A revocable living trust is an estate planning tool that can eliminate the need for the probate administration process. If you have a trust in place, so long as you properly transfer title of your assets to your trust, probate will not be required for your estate. Probate is a public process, which requires filing an inventory and accounting of your assets. While the purpose of a probate proceeding is intended to be administrative rather than adversarial in nature, probate does provide a forum for heirs to contest terms of your will or dispute with other heirs and beneficiaries. Revocable living trusts are private documents not subject to probate proceedings, so the use of a trust can help to reduce the potential for conflict surrounding your estate.
Appoint a Neutral Trustee or Personal Representative
Instead of appointing your spouse or a child as the trustee or personal representative for your estate, consider appointing an institutional trustee such as your bank’s trust department, or professional fiduciary. A professional or institutional fiduciary is not subject to the same family pressures and can provide neutral management of your estate. While professional fiduciary may not be familiar with your family dynamics and can be a bit more impersonal, this approach can be quite advantageous in providing neutral administration and reducing conflict.
If You Intend to Disinherit Someone Clearly Explain Your Decision in Your Will or Trust
If you want to disinherit a family member, especially if it is a child, very clearly explain in your will or trust your intent to disinherit your child. List the individual by name and give a brief explanation of why you intend to disinherit him or her. However, don’t go overboard in your explanation and make sure that your reason for disinheriting the individual is not easily challenged or against public policy.
Communicate Your Intentions and Seek Professional Advice
These are some of the techniques available to reduce disputes and conflicts regarding your estate. By implementing some of these strategies and discussing an overall plan with your family that addresses any potential disputes or inequity problems, you may be able to avoid a dispute.
Your particular estate may have estate tax or other considerations, so seek the professional advice of your attorney, CPA or financial planner. Your advisers may also have additional ideas to help reduce conflicts based on your personal and family situation.
Estate Planning for Parents of Young Children
While parents of young children may be somewhat young as well, and do not consider themselves as having a large enough “estate” to require an estate plan, parents of minor children often have the largest concerns. Even a bit of simple estate planning will allow parents of young children to have some control over the care of their children in the event of untimely death, and the peace of mind that their children will be provided for in the proper manner.
The basic estate planning considerations for parents of minor children include:
-Who will take care of your children?
-Who is responsible for managing assets for your children?
-How to financially provide for your children?
Choosing a Guardian for Minor Children
Undoubtedly the biggest concern of parents of young children is who will take care of their children once they are gone. Determining the best individual(s) to act as a guardian for minor children can be difficult. However, for parents of young children, guardianship is the estate planning decision with the most potential impact. Consequently, every parent of minor children should consider who would raise their children if they were unable to do so
If you do not appoint a guardian for your children, in the event of death of both parents, the court will appoint a guardian for your children. The court is required to follow state law with regard to the priority of appointment of a guardian, rather than the specific individual(s) of your choosing. Most people would prefer to decide the guardian of their children themselves, rather than leave it to the court and state law to dictate this important decision. Therefore, it is important to take some time to consider a guardian for your children.
I recommend starting the decision making process with a list of good potential candidates for the role of guardian. This list may include brothers, sisters, aunts, uncles, grandparents or even family friends, basically anyone you can think of that may act as a guardian.
Then, consider the most important factors for you in raising your children. Factors to consider include: philosophies about child rearing; relationship with your children; age and stamina; geographic location; social, political, religious and moral values; financial responsibility; lifestyle and availability and interest in acting as a guardian for your children.
Once you have considered these factors, prioritize the factors that are the most important to you and determine which of the potential guardians possess the most similar qualities.
Open discussion with your family members, including your spouse, children and potential guardians is a key component in this process. Also, understand that circumstances may change as children get older, so it is a good idea to revisit the appointment of a guardian periodically to determine if it still remains a good fit.
After you have determined who would raise your children upon the death of both parents, then it is important to consider who is responsible for managing your estate and assets for the benefit of your children.
Choosing a Trustee for Minor Children
Who to appoint to manage assets for your children requires careful consideration of the nature and value of your assets, as well as your plan of distribution and the relationships between your family members.
Family Members or Friends
You may decide that a relative or close friend, or even your chosen guardian, is the appropriate individual to manage assets for your children. Appointing a family member such as one of your siblings or a close friend can be beneficial because they are familiar with your family dynamics, as well as your assets and your intentions. However, family members or friends often lack experience managing estate assets, financial investments, and methods for ongoing accounting of these assets.
Professional Fiduciary or Trustee
As an alternative to your family members or close friends, you may choose to appoint an institutional trustee such as your bank’s trust department, or professional fiduciary, to manage and invest your assets for the benefit of your children. One key advantage of a professional or institutional fiduciary is that they are not subject to the same family pressures and can provide neutral management. A professional fiduciary also has critical professional knowledge in working with wills and trusts, and managing and investing estate assets. However, a bank or trust company will charge a fee for its services, and are not necessarily familiar with your family dynamics. On the other hand, the impersonal aspect may be an advantage when it comes to providing neutral administration, especially with arguing family members.
Ultimately, you want to choose an individual or institution that is responsible, has the ability to follow with large amounts of estate paperwork, an ability to work with all of your beneficiaries, and is willing to seek the advice of qualified professionals.
In addition to choosing a guardian and trustee, also consider how your assets will be managed and distributed to your children; both the mechanism of distribution and the ages or events in which your children will receive a distribution.
Planning the Distribution of your Estate
In planning how and when your estate will be distributed to your children, the first decision is what specific mechanism you will use to manage and distribute your estate. You may decide that a simple will nominating a guardian and leaving all of your assets to your children outright, in equal shares is sufficient, or you may determine that a trust is more appropriate.
Outright Distribution
If you decide to make outright distributions to your children, you must consider the Montana Uniform Transfers to Minors Act (UTMA). Under to the Montana Uniform Transfers to Minors Act (UTMA), the assets are transferred to a custodian who holds and administers the property for the benefit of a minor. UTMA custodianship can be beneficial because any type of property can be transferred and the custodian does not have to post bond, or file accountings unless mandated by the court.
However, under a UTMA custodianship property must be distributed completely at either age twenty-one or age eighteen years, depending on the circumstances. Many parents do not necessarily feel comfortable with their child receiving full control of assets at age eighteen or twenty-one and may want to consider other options.
Outright distributions not only require consideration of the Uniform Transfer to Minors Act, but it provides for less over the distribution of your estate. With that in mind, you may determine that you do not want to leave your estate to your children outright. When providing distributions of your estate for your children, it often makes more sense to create a trust to manage the assets for your children, rather than provide for an outright distribution.
Trusts
A trust is a written agreement wherein a separate entity, the trust, holds title of property and assets and manages those assets on behalf of an individual. A trust is created by a grantor (also known as the “trustor” or “settlor”) and the assets of the trust are managed by a trustee for the benefit of the beneficiary. In general, the most commonly used trusts for children are testamentary trusts or revocable living trusts.
Testamentary Trust through a Will
A testamentary trust is a trust that is set out in a Last Will and Testament. A testamentary trust is only effective upon the death of the grantor through the probate of his or her Last Will and Testament. While testamentary trusts can be a simple and affordable mechanism, a probate of the estate is required before the trust can be funded and your children can receive any distribution from the estate. Not only does this delay the distribution of the assets because the assets must first go through the probate process, but the probate process requires additional fees and expenses, which will reduce the amount of assets available for distribution to your children.
Revocable Living Trust
A Revocable Living Trust is a type of trust that is immediately effective upon creation, but can be amended or terminated at any point by the grantor during his or her lifetime. A Revocable Living Trust offers much more flexibility in the distribution of assets than outright distributions or testamentary trusts.
Revocable Living Trusts do not have to go through the probate process, which permits distributions to begin immediately, in a private manner without the additional costs and fees associated with probate. Moreover, a Revocable Living Trust allows you to control exactly when and how your children receive assets. For example, you may direct that the trustee distribute 1/3 of the trust assets when a child reaches twenty-one; 1/3 when the child reaches thirty; and 1/3 at age thirty-five.
While Revocable Living Trusts can be beneficial estate planning tools, they are not necessarily advantageous for everyone. Revocable Living Trusts typically cost significantly more to create and administer than an estate plan with only a will. Moreover, Revocable Living Trusts require re-titling of assets in the name of the trust, and additional administration by the grantor. Therefore, it is essential to review you assets, family situation, and personal preferences with an estate planning attorney before deciding to create a Revocable Living Trust to benefit your children.
Consider Your Specific Circumstances
While these are the general issues to consider when providing for your young children in your estate, it is important to also consider your specific circumstances. If you have children from a prior marriage, or children with special needs, then you will need to take some additional steps in planning for their future.
If you have young children, even some basic estate planning will provide you with control over the care of your children and the peace of mind that your children will be provided for, both personally and financially, in the manner you see fit.
If you have questions or would like additional information regarding estate planning for minor children contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com
Trust Basics III: Do You Need a Trust?
Who Is a Good Candidate for a Trust?
You do not necessarily need to have a sizable estate for a trust, but it is essential to weigh the advantages and disadvantages of a trust to determine if a trust makes sense for your specific situation. If any of the advantages listed in my previous post seem to apply to your situation, or if you simply want greater control over the distribution of your assets, then a trust may be useful for you. In addition, if any of the following circumstances apply to your situation then you may consider a trust:
- Federal Estate Tax Concerns: If your estate exceeds the federal estate tax exemption amount, a trust can be helpful in reducing potential taxes. For 2014 the Internal Revenue Service has set out a federal estate tax exemption amount of $5,430,000.00 for an individual, or $10,860,000.00 married couple. If the value of your assets exceeds this amount then a trust may be highly beneficial for you and your family in potentially reducing the amount of taxes paid by your estate.
- Ownership of Real Property: If you own significant amount of real property or owner property in multiple states a trust can help limit the need for probate, or ancillary probate in multiple states. Real property is a type of asset that requires additional estate planning to pass to the next generation due to the manner in which it is titled. Unless you own all of your property in joint tenancy with rights of survivorship, a trust is one of the only manners in which to avoid a probate proceeding for the transfer of your real property. Moreover, if you own property in multiple states your estate may have to go through a separate, or “ancillary,” probate proceeding in each state where you own property. With a properly funded trust, the trust holds title to your property so no probate is required regardless of the location of your real property.
- Probate Avoidance: If you are simply interested in avoiding the cost and time associated with the probate process, you may consider a trust. With a properly funded trust, no probate will be required for your estate. The distributions of your estate can occur more quickly, privately, and without the costs associated with a probate court proceeding.
Seek professional advice
Trusts can be very effective estate planning tools if properly executed and funded. However, trusts do not make sense for everyone. It is important to review your particular situation with your attorney and tax advisers to determine the type of trust that is right for you and your family.
If you have specific questions about any of the issues discussed in this post or trusts in general contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at 
(406) 752-6373/ www.measurelaw.com
Trust Basics II: Advantages & Disadvantages of Trusts
In my previous entry I set out the definition of a trust and discuss some basic types of trust agreements. Understanding the basic definition and types of trusts is important, but what are the advantages of a trust versus creating a simple will? The focus of this entry is on the advantages and disadvantages of creating a trust in an estate plan as compared to other estate planning tools.
Advantages Creating a Trust in Your Estate Plan
• Greater control over distributions: Perhaps one of the most significant benefits of a trust is the ability to have greater control of the distribution of your assets. A trust allows you to set out exactly when, where, and how much each of your beneficiaries will receive from your estate, over time, rather than requiring immediate distribution of your entire estate.
For example, if you wanted to leave your estate equally to your two children, but wanted to ensure that they did not receive all of their inheritance at once you could specify in your trust that each of your children receive a percentage of your estate upon reaching a certain age, or achieving a certain life milestone (such as completing college).
• Probate Avoidance: Probate is a court proceeding whereby your personal representative (also called an “executor”) is responsible for gathering your assets, paying debts and expenses, and distributing your property either pursuant to your last will and testament, or by state law if no will is in place. However, if you have a trust in place, so long as you properly transfer title of your assets to your trust, probate will not be required for your estate. In Montana, the probate proceeding takes a minimum of six months before closing and distribution. However, with a trust, distributions can occur more quickly, privately, and without the costs associated with a probate court proceeding.
• Privacy: As mentioned above, probate is a public process. Probate requires filing an inventory listing all of your assets with the court as well as filing your original last will and testament which sets out your plan of distribution. This also means that the public could obtain and view copies of this information. A trust, on the other hand, allows for the private distribution of your assets.
• Reduce Potential Conflict: Because trusts are private documents not subject to probate proceedings, the use of a trust can help to reduce the potential for conflict surrounding your estate. While the purpose of a probate proceeding is intended to be administrative rather than adversarial in nature, probate does provide a forum for heirs to contest terms of your will or dispute with other heirs and beneficiaries.
• Incapacity Planning: A trust is a great mechanism for ensuring/providing that your property will be managed for your benefit during any period of incapacity or prolonged mental or physical illness. The terms of your trust can set out how to determine your incapacity, who is responsible for managing your assets, and how the assets should be managed upon a disability.
• Estate Tax Planning: While having a revocable trust does not necessarily mean that you can avoid taxes or estate taxes, they can be helpful vehicles in maximizing the estate tax exemption available to your family upon the distribution of your estate. For example, you may decide to create a “credit shelter trust” (also known as “bypass trust” ) within your trust, whereby you can take advantage of certain tax exemptions upon your death to reduce the overall amount of estate taxes paid.
• Caring for a Beneficiary with a Disability: If you have someone in your family with a disability, special needs, or who receives any type of disability benefits, they could risk losing these benefits if they inherit from your estate. A trust can provide for the basic needs of a disabled beneficiary while also maintaining their current benefits and care.
Disadvantages of Trusts
While trusts can be beneficial estate planning tools, they are not necessarily advantageous for everyone. If you have a fairly simple estate, both in the type of assets and value, a trust may not be necessary to accomplish your estate planning goals. The main drawbacks of trusts to consider are the costs associated with creating a trust and the increased administration required for a trust.
• Increased cost: Trusts typically cost significantly more to create and administer than an estate plan with only a will. Often a trust will cost three to four times as much as a basic will, depending on the complexity.
• Administration: For a trust to be effective the grantor’s assets must be re-titled in the name of the trust, or otherwise transferred to the trust. This means that upon initially executing a trust you would have to execute deeds for any real property to your trust and change bank and other financial accounts. While this often is accomplished upon initial execution of a trust, for some people the administration of a trust is enough to be a deterrent.
Trusts can be very effective estate planning tools if properly executed and funded. Consider your assets, family situation, and personal preferences with your attorney and tax advisers carefully before proceeding with a trust.
If you have additional questions regarding trusts contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373(406) 752-6373/ www.measurelaw.com
Trust Basics I: What is a Trust?
What Is a Trust ?
I frequently have clients that come into my office with questions regarding trusts. They may have heard something from a friend, or recently watched the latest Suze Orman Show, and are convinced that they need a trust. However, there are a lot of misconceptions about trusts, both good and bad. Trusts can be highly beneficial estate planning tools, but it is important to understand the basics of trusts, how they work, and whether or not a trust makes sense for his or her specific situation.
This is the first entry in a series of entries on trust basics. This article will focus on on the definition and types of trusts, I go into the and disadvantages of creating a trust and discuss the criteria and good candidates for a trust agreement in later entries.
What is a Trust?
A trust is written agreement wherein a separate entity, the trust, holds title of property and assets and manages those assets on behalf of an individual. A trust is created by a grantor (also known as the “trustor” or “settlor”) and the assets of the trust are managed by a trustee for the benefit of the beneficiary.
As an initial matter there are two general types of trusts: revocable living trusts (often called simply “Living Trusts”) and irrevocable trusts. Within these types of trusts there are numerous variations in techniques and complexity, but it is important to at least understand the basic distinction between a revocable and irrevocable trust.
Revocable Living Trust
A revocable living trust is a type of trust that can be amended or terminated at any point by the grantor during his or her lifetime. Typically, during the lifetime of the grantor of a revocable trust, the grantor is also the trustee and the beneficiary, so he or she retains complete control over the trust. It is only usually during a period of incapacity or death of the grantor that a successor trustee would step in and act on behalf of the trust.
Irrevocable Trust
An irrevocable living trust is a trust that, once executed, cannot be amended or terminated without court approval or consent of all the beneficiaries. Once the assets are transferred to an irrevocable trust the grantor no longer retains control of those assets. Irrevocable trusts can be important tools for estate tax planning or creditor protection purposes. However because they are irrevocable, the decision to execute an irrevocable trust depends on your specific tax and estate plan and should be discussed carefully with your attorney or tax adviser.
While it is important to understand the difference between revocable and irrevocable trusts, for purposes of this article, the main focus is on revocable trusts as they are more commonly applicable.
Seek Professional Advice
Trust can vary greatly in type, terms and complexity. If you are considering creating any type of trust it is essential that you review your particular situation with your attorney and tax advisers to determine the type of trust that is right for you and your family.
If you have specific questions about any of the issues discussed in this post, Contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com
Who is in Charge of Your Estate?
Choosing a Personal Representative or Trustee to Manage Your Estate
Choosing the personal representative of your estate or successor trustee in the event of a trust, is one of the most important estate planning decisions you will make. However, all too often people make this decision rather quickly without considering all of the options and potential long-term issues.
Take the case of Sharon. Sharon was a single woman with four grown children. She finally decided to get her estate plan in order. Due to the nature of her assets she determined that a revocable living trust was the best option for her. She put considerable time into creating her trust, and appointed all four of her children as co-trustees of the trust. Sharon’s four children were also her main beneficiaries and would receive most of the assets of her trust.
According to the terms of Sharon’s trust agreement all of the trustees were required to agree before they could distribute any assets of the trust. Upon Sharon’s death her four children were unable to agree on anything and make any decisions about the trust distribution. Consequently it took several years to settle her estate and had a traumatic impact on her four children and their relationship with each other.
This situation is actually quite common; parents nominate all of their children as their personal representative(s) or trustee(s) with the best of intentions, but the children cannot agree on any aspects of the distribution. As a result it can take years for an estate to be settled at the expense of family relationships.
How can you avoid this situation?
Choosing the personal representative of your estate, or successor trustee in the event of a trust, is one of the most important estate planning decisions you will make. It requires careful consideration of both your estate assets and family relationships.
What Does a Personal Representative or Trustee Do?
As an initial matter whether you appoint a personal representative or a trustee depends on your specific estate plan and whether you create a will or trust.
Duties of a Personal Representative
A personal representative (also known as an “executor” or “administrator”) is the individual responsible for the administration of your Last Will and Testament through probate. The personal representative is responsible for gathering up the assets of your estate; evaluating claims against the estate; paying the last debts and expenses of the estate; accounting for assets of the estate; paying taxes; and distributing the assets of your estate according to the terms of your will or trust.
Duties of a Trustee
A trustee is the individual you appoint to carry out the terms of your trust agreement and plan of distribution. You would nominate a trustee, or successor trustee, only if you have executed a trust agreement, most likely a revocable living trust. A trustee is required to collect the assets of the trust, pay bills of the trust, account for trust assets, and distribute those assets. Often a trustee is also required to invest and manage assets for the benefit of your beneficiaries over time. Unlike a personal representative, the duties of a trustee can carry on for many years, sometimes even multiple generations.
Who Should You Choose to Manage Your Estate?
Once you have created a will or trust, then who should you appoint to manage your estate? Again, who to appoint requires careful consideration of the nature and value of your assets, as well as your plan of distribution and the relationships between your family members. Typically, a married individual will nominate his or her spouse as a personal representative of their will, or a trustee of a trust. However, it can be difficult to determine who to appoint as an alternate personal representative of a will or alternate trustee of a trust.
Appointing Your Children
After appointing a spouse, people often appoint either one or all of their children as alternate personal representative(s) or alternate trustee(s). If you have a fairly simple will or trust, and a relatively small family with a solid, ongoing relationship, then appointing one or all of your children may be a good option. Your children are familiar with your assets and intentions. Accordingly, appointing your children to manage a simple estate can provide a relatively quick and economical solution.
However, as illustrated above children are also often the primary beneficiaries of an estate which can provide for unintended consequences. Even siblings with the best of relationships do not always agree to the management or distribution of an estate.
Appointing a Relative or Friend
Instead, you may decide to appoint a relative or close friend that is not one of your children and not a beneficiary named in your will or trust. Appointing a family member, such as one of your siblings or a close friend, can be beneficial because they are familiar with your family dynamics, your assets and your intentions. Moreover, an individual that is not named in your will or trust does not have a potential conflict of interest between the duty to manage your estate and the desire to receive certain assets from your estate.
While appointing a non-beneficiary family member or friend may help to reduce disputes between your children, there are drawbacks to consider. One common issue is that family members often lack experience managing estate assets, financial investments and methods for ongoing accounting of these assets. In addition, a relative or friend may not be immune to family disputes. One of your children may simple dislike or not agree with the personal representative or trustee, which makes it difficult for that individual to carry out his or her duties.
Appointing a Professional Fiduciary or Institutional Trustee
As an alternative to your children, relatives or close friends you may choose to appoint an institutional trustee such as your bank’s trust department, or professional fiduciary to act as a personal representative. One key advantage to a professional or institutional fiduciary is that they are not subject to the same family pressures and can provide neutral management. A professional fiduciary also has critical professional knowledge in working with wills and trusts, and managing and investing estate assets.
The use of a neutral professional may help to reduce family conflict, although there are other issues to considering when deciding to appoint a professional fiduciary or institutional trustee. The main consideration for most people is simply the cost of administration. A bank or trust company will charge a fee for its services, and usually have minimum fees that make it unaffordable for a simple estate. Another important consideration is that a professional fiduciary is not familiar with your family dynamics and can be a bit impersonal. However, the impersonal aspect may be an advantage when it comes to providing neutral administration, especially with arguing family members.
Qualities of a Personal Representative or Trustee
Ultimately the choice of who to appoint to manage your estate is personal and depends on your particular estate and family dynamics. It is important to consider the factors mentioned above and choose an individual or institution that is responsible, has the ability to follow with large amounts of estate paperwork, an ability to work with all of your beneficiaries, and is willing to seek the advice of professionals such as estate attorneys and CPAs. Discuss your thoughts and concerns with an estate planning attorney and your family members to ensure you have made the right choice for your family and estate.
If you have specific questions about any of the issues discussed in thispost, Contact Kelly O’Brien at Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com
Estate Planning in a New Year
Start 2014 Out Right By Getting Your Estate Plan in Order
Recently, a friend and client of mine asked me to help her update her will. My friend realized that her will might need a little updating, but she was shocked when she actually retrieved her will from her safe deposit box to see just how much in her life had changed since she executed her will. In my friend’s case she had been divorced and remarried, and instead of having minor children, her children were now grown with children of their own. While my friend was shocked (and a little embarrassed) I reassured her that no time is better than the present to finally update her will.
Organize & Update Your Estate Plan in the New Year
The start of a new year is an excellent time to think about your estate planning. Whether that means a simple review of your existing will or trust to ensure that it still works for your current life situation; or that means finally taking the step to get a will or trust in place, consider the start of a new year a perfect opportunity. Remember estate planning is not only about how your assets are distributed, it also means appointing the individual(s) responsible for carrying out your wishes for your family and health care decisions.
Individuals whom have recently experienced major life changes such as a divorce, or the death of a spouse, are especially susceptible without a plan that reflects their current life situation. In the case of my friend, while she did have a will, it was completely irrelevant to her current situation. Moreover, women without any kind of estate plan in place leave it completely up to state law to dictate matters such as how their assets will be distributed, who will care for their children, or who will manage funds for their children or grandchildren.
If You Don’t Already Have an Estate Plan, Take the Opportunity in the New Year to Finally Get a Plan in Place
Essentially, estate planning enables you to be in control of what happens to your assets upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, family and heath care decisions. At a minimum, your estate plan should include the following elements:
A Will and/or Revocable Living Trust
These are formal documents that describe how and when to divide and distribute your assets upon your death. Whether you need a simple will, or a more complex, revocable living trust, depends on your specific situation. Discuss your situation with an estate planning attorney to determine which makes sense for you and your family.
Durable Power of Attorney for Financial Decisions
A durable power of attorney for finances allows you to appoint another individual to make financial decisions on your behalf in the event that you are unable to make these decisions yourself due to incapacity or disability.
Durable Power of Attorney for Heath Care Decisions
A durable power of attorney for healthcare allows you to appoint another individual to make medical decisions on your behalf including decisions regarding medical consents and life support issues in the event you are unable to make these decisions yourself.
Beneficiary and Payable on Death Designations
If you list an individual as a beneficiary of a financial asset, that individual becomes the legal owner, immediately, upon your death without the need for probate.
If You Already Have an Estate Plan, Take the Opportunity to Review Your Existing Plan to Ensure it is Still Relevant to Your Life
As busy individuals today, we all know that life changes fast. Your will may have been drafted during a prior marriage, or when your now grown children were still minors. After any major life change, such as a divorce, death, or major change in assets, it is important to review your plan and appropriate changes.
When Should You Update Your Estate Plan?
While there are many life circumstances that warrant a change in your estate plan, below is a checklist of some of the life changes that may require an update to your plan:
- After a divorce or marriage
- After the birth or adoption of a new child or grandchild
- When your children or grandchildren reach the age of 18
- Death or illness of an individual named as personal representative, trustee, beneficiary or guardian
- A change in relationship with an individual, organization or other beneficiary named in will
- A sale or purchase of a major asset, such as a new home, a new business, or sale of business or home
- You move, especially if you move out of state
- There is a change in the state or federal tax law
- You experience a significant increase or decrease in the value of your assets, such as receiving an inheritance
Don’t forget to review & update Beneficiary designations
The last thing you want your family to have to deal with is removing a former spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes to reflect changes in your life.
No Time is Better than the Present to Review, Update or Create Your Estate Plan
We all know that it can be difficult to keep up with every little change in life. However, when a major life change occurs, it can sometimes be too overwhelming to think about your estate plan. Make it a resolution to consider your estate plan in the New Year to ensure that it works for your life. By taking the time to review your existing estate plan, or to finally execute a will or trust, you take control of what happens to your assets upon your death or incapacity. Review the checklist above and discuss any life changes with estate planning attorney to ensure that your estate plan reflects your current situation and ensures that you and your family are protected and prepared.
If you have additional estate planning questions contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373(406) 752-6373/ www.measurelaw.com
Removal of a Personal Representative
WHEN IS IT APPROPRIATE TO REMOVE THE PERSONAL REPRESENTATIVE?
The most basic duty of a personal representative to act in “the best interests of the estate.” This means that the personal representative must be loyal to the to the estate, as well as to the heirs and devisees, and not co-mingle his or her assets with the assets of the estate. A failure to act in a manner that is within the best interests of the estate may result in removal of the personal representative, or even separate legal action against the personal representative.
WHAT TYPE OF ACTION RESULTS IN REMOVAL OF A PERSONAL REPRESENTATIVE?
Montana Code Annotated (MCA) section 72-3-526 sets out the grounds for removal of a personal representative. According to Montana law, the breach of a single duty is sufficient to remove a personal representative. A simple failure to provide a timely inventory, or failure to give notice to all heirs can result in removal.
Recent Montana Case Law on the Removal of a Personal Representative
Recent case law in Montana in the case of the Estate of Hannum, illustrates a failure by a personal representative to properly administer an estate (see , DA 12-3, 8/10/12). In Estate of Hannum, the personal representative provided an accounting of the estate that was “highly speculative,” and included undocumented and unverified loans and gifts. The unverified gifts and loans increased the value of the estate by more than $1.3 million, resulting in increased personal representative fees to himself in an amount over $32,000, as well as over $49,000 in attorney fees to his daughter. The personal representative also claimed that other heirs owed the estate over $300,000, while he and his brother were to be awarded $600,000 from the estate, leaving a relatively minimal amount for distribution among the other heirs.
Additionally, the court determined that the personal representative in Estate of Hannum breached his duties by: failing to follow the plan of disposition set out in the Last Will & Testament; failing to file an estate inventory within 9-months of appointment; and failing to send notice of his appointment to all heirs as required.
Although this case illustrates an instance in which the personal representative breached multiple duties charged to him, a simple failure to follow any of the basic duties of a personal representative can result in removal. It is important for every personal representative to understand all of the duties and obligations of a personal representative and precisely follow Montana law. An attorney experienced in Montana probate law can guide a personal representative through the probate process to avoid removal, or even separate legal action.
With questions about the duties and responsibilities of a personal representative, or the probate process in general, contact Kalispell, Montana probate attorney, Kelly R. O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373 to schedule an appointment.
What Does a Personal Representative Do?
The Duties and Obligations of the Personal Representative in the Probate Process
In general the personal representative of an estate, also known as an executor or administrator, is the individual responsible for gathering up the assets of the decedent; paying off debts and expenses of the estate; and distributing assets either to the individuals named in the will, or in the event the decedent did not leave a will, according to state law. How the distribution of an estate is accomplished depends on the specific nature of the estate and assets, and whether or not there was a will. However, there are a few key tasks and duties that are essential to every probate process.
Tasks of a Personal Representative
First and foremost the personal representative should attempt to locate the Last Will & Testament, and all other financial information of the decedent. Ideally, the decedent would have provided the location of this information to the personal representative. If not, his or her attorney may have this information. It is important to locate the original Will and not a copy, as the personal representative must file the original Will with the probate court.
To actually carry out the role of personal representative, the individual appointed must file an application for appointment with the probate court. Often this is accomplished with the assistance of a probate attorney that will draft the application and appropriate documents to file with the court.
Upon approval of appointment by the probate judge, the court clerk will issue testamentary letters or letters of administration (depending on whether or not there is a will), certifying the appointment of the personal representative. The Letters verify that the personal representative is authorized to deal on behalf of estate for actions such as opening a bank account, selling property, and collecting and paying debts.
Once the personal representative has been appointed by the probate court, it is important that the personal representative take immediate action to further the probate process. One of the first actions after appointment as personal representative is to notify the interested parties and potential creditors of the estate. No later than 30 days after appointment, the personal representative must provide notice to heirs and interested parties of his or her appointment as personal representative; information regarding the court where the personal representative filed the probate documents of the estate; and whether or not a bond was filed.
In addition, the personal representative must publish a notice to creditors in a local newspaper. As soon as possible after appointment, the personal representative should publish the notice to creditors. The notice puts creditors on notice that they have four months within which to file claims against the estate for payment of their accounts.
Depending on the nature of assets and type of probate proceeding, an inventory of the estate assets may be required. An inventory must be filed within 9 months of appointment of the personal representative. The the inventory accounts for the estate assets, which consists of all property owned, individually, by the decedent.
Upon the expiration of the four month creditor claim period, the personal representative can pay the creditors. In the instance of a formal probate the personal representative must file a final accounting with the court which accounts for all receipts and disbursements during the probate process. Once judge approves the accounting, the personal representative pays the creditors and taxes of the estate. Then, the remaining assets of the estate can be distributed to the heirs and devisees.
Duties of A Personal Representative
The personal representative has a duty to act in the best interests of the estate. The personal representative also has a duty of loyalty to the estate, as well as to the heirs and devisees. These duties are of the utmost importance as failure to act in a manner that is within the best interests of the estate may result in removal of the personal representative, or separate legal action against the personal representative.
This means that the personal representative must: avoid conflicts of interest; use reasonable care, ordinary skill and prudence in carrying out the duties of the personal representative; direct any benefit derived from the appointment to the decedent’s estate to the beneficiaries; and not use any of the assets of the estate for his or her own, personal benefit.
Montana law requires that a personal representative specifically acknowledge these duties. The personal representative must sign and verify, before a notary public or under penalty of perjury, an acknowledgment of fiduciary relationship in the application for appointment.
Perhaps one of the best ways for a personal representative to avoid breaching his or her duties is to maintain detailed records of the estate assets and accounts. The assistance of a probate attorney can be beneficial in maintaining records of the estate, and keeping up with the probate timelines and requirements.
If you have questions about the role of a personal representative, or probate in general contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. (406) 752-6373.