How Does My Co-op Fit into My Estate Planning?

Parents bought a studio apartment in a New York City co-op for their adult son with special needs. He’s able to live independently with the support of an agency.

The couple asked the co-op board to let them transfer the property to an irrevocable trust, so when they die, the son will still have a place to live. However, the board denied their request.

An individual with special needs can’t inherit property directly, or he’ll no longer be able to receive the government benefits that support him. What should the parents do?

The New York Times’ recent article entitled “Can I Leave My Co-op to My Heirs?” explains that parents can leave a co-op apartment to their children in their will or in a trust. However, that doesn’t mean their heirs will necessarily wind up with the right to own or live in that apartment.

In most cases, a co-op board has wide discretion to approve or deny the transfer of the shares and the proprietary lease.

If the board denied the request, the apartment will be sold and the children receive the equity. Just because the will says, ‘I’m leaving it to my children,’ that doesn’t give the children the absolute right to acquire the shares or live there.

In some instances, the lease says a board won’t unreasonably withhold consent to transfer the apartment to a financially responsible family member. However, few, if any, leases extend that concept to include trusts.

The parents here could wait to have the situation resolved after their deaths, leaving clear directives to the executor of their estate about what to do should the board reject a request to transfer the property into a trust for their son. However, that leaves everyone in a precarious position, with years of uncertainty.

Another option is to sell the co-op now, put the proceeds in a special-needs trust and buy a condo through that trust. The son would then live there.

Unlike co-ops, condos generally allow transfers within estate planning, without requiring approval.

While this route would involve significant upheaval, the parents would have more peace of mind.

However, before buying the condo, an experienced estate planning attorney should review the building’s rules on transferring the unit.

Reference: New York Times (Oct. 1, 2022) “Can I Leave My Co-op to My Heirs?”

How to Help Create an Estate Plan

We all have assets that need to go to someone when we die. Without an estate plan, the decision as to who gets your assets is left to state law, explains Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan.”

You don’t have to delay until you’re gray to get an estate plan in place. Estate planning can benefit you at any age. No one can predict the future, and if the unexpected occurs and you pass at a young age, an estate plan can designate who will get guardianship of your minor children or the pets you leave behind.

Hiring an experienced estate planning attorney who can write up the necessary legal documents may be smart when you decide to put together an estate plan. You can also take these steps to put your estate plan in place.

  1. Make an inventory of your assets — list your tangible and intangible assets and their estimated value. Tangible assets include your home or other real estate holdings, vehicles, fine jewelry and collectibles. Intangible assets are things such as your bank account, life insurance policies, retirement accounts, investments (stocks, bonds, and mutual funds) and businesses you own.
  2. Review your beneficiaries — make certain your retirement account and life insurance policies have designated beneficiaries and the information is up to date.
  3. Review the estate tax and inheritance tax laws in your state.
  4. Review your estate plan regularly — things in your life may change, so you should reassess your estate plan when these changes happen. Life events, such as marriage, divorce, having a child, losing a loved one, or getting a new job, are all good times to take another scan of your estate plan.

Failing to have an estate plan can cause a lot of stress for your family. They can be torn apart in disputes over the division of assets after a loved one dies.

Life is full of unknowns, so whether you’re a young parent or a senior, having an estate plan in place to carry out your wishes after you die will lessen the burden on those you love and give them time to grieve.

Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan”

Do I Need to Name a Life Insurance Beneficiary?

When a loved one dies, there are questions to address, such as how to pay for a funeral and other death expenses. A life insurance policy may help. However, the deceased must have made sure the proper beneficiary is named.

If a beneficiary isn’t designated, some issues with the estate could arise, or the policy could go to the decedent’s estate. Likewise, the same is true if the one beneficiary preceded the decedent in death.

Yahoo Finance’s recent article entitled “What Happens If I Don’t Name a Life Insurance Beneficiary?” explains that a life insurance policy is a contract you enter into with a life insurance company.

When you set up your life insurance policy, you have the right to name one or more beneficiaries who’ll get the proceeds of the policy when you die. You pay premiums on the policy until your death, to guarantee your beneficiaries that right.

You might designate just one beneficiary to receive all the proceeds. In addition to the primary beneficiary, you can name contingent beneficiaries who will receive the proceeds of the policy if the primary beneficiary predeceases the policyholder.

It is important to add as much identifying information about your beneficiaries as possible, so they can be easily identified. It’s also important to keep your policy up to date on the information of your beneficiaries.

If there are no beneficiaries living, either the proceeds of the policy will enter the probate process, or the life insurance proceeds will pass to the decedent’s heirs-at-law who are those people who are close to the decedent and would probably inherit, if there was a beneficiary designation or will.

Heirs-at-law are also defined as those people who will inherit your assets, if you die intestate.

Dying without a beneficiary in place or leaving your estate as beneficiary of your policy have different rules in each state.

Ask an experienced estate planning attorney about your state’s rules and the rules of the life insurance company when you’re setting up your life insurance policy and will.

Reference: Yahoo Finance (Dec. 10, 2022) “What Happens If I Don’t Name a Life Insurance Beneficiary?”

Can I Contest Dad’s Will While He’s Still Living?

The Maryland Daily Record’s recent article entitled “Wills cannot be challenged until testator dies, Md. appeals court says” explains the Court of Special Appeals said a will or revocable trust is only a draft document until its drafter, or testator, has died.

As a result, those challenging a living person’s will or trust would be merely “presumptive heirs” who have no legal standing to challenge a legal document that’s not yet final.

“Pre-death challenges to wills may be a waste of time – the testator might replace it with a new one, die without property, or the challenger might die before the testator,” Judge Andrea M. Leahy wrote for the Court of Special Appeals.

The appellate court’s decision was the second defeat for Amy Silverstone, whose legal challenge to her mother Andrea Jacobson’s will was dismissed by a Montgomery County Circuit Court judge for lack of standing.

Silverstone argued that it should be declared void based on her claim that her aunt unduly influenced her mother. The mother suffers from dementia and memory impairment.

This undue influence led Silverstone’s mother, Andrea Jacobson, to change her will in 2018 to expressly “disinherit” Silverstone and her son, Silverstone alleged.

The mother’s new will stated that Silverstone and her son shall not “in any way be a beneficiary of or receive any portion of the trust or the grantor’s estate.”

The disinheritance came amid a falling out between mother and daughter, according to court documents.

Silverstone’s challenge to the will and related trust is premature while her mother is alive, the court held.

Reference: The Maryland Daily Record (Dec. 12, 2022) “Wills cannot be challenged until testator dies, Md. appeals court says”

Can I Leave Money to My School in My Estate Plan?

Mahlon “Jack” Kohler passed away in September 2021, at the age of 96. In his will, he left $40,000 to Northeast Community College in Norfolk, Nebraska for nursing and optometry scholarships. The gift has been placed in an endowment as a charitable donation and will provide assistance for nursing students in perpetuity.

News Channel Nebraska’s recent article entitled “Norfolk man leaves $40,000 to Northeast Community College for nursing scholarships” reports that, prior to graduating high school, Mr. Kohler was called to duty by the United States Navy in 1943.

After basic training, he was sent to the Pacific Theatre where he was stationed at Guadalcanal, New Guinea, Russell and Amerilites Islands. He then returned to the Brooklyn, New York Naval Base in 1945. He received an honorable discharge on May 6, 1946.

After his discharge from the Navy, Mr. Kohler moved back to Norfolk and worked for American Optical Company for 33 years. He was recognized as a World War II Honorary Sentinel in front of over 86,000 fans at Memorial Stadium in Lincoln during a Cornhusker football game just after celebrating his 95th birthday.

“Jack lived in the Norfolk area for many years and was always fond of education,” said his stepson, Ronald Kotrous. “He decided to choose nursing (for his benevolence) because of the people. In the last few years, they were really good to Jack and to my mom, so they wanted to give back to that community.”

“Endowed scholarships are a great way to create a legacy,” said Dr. Tracy Kruse, vice president of development and external affairs at Northeast and executive director of the Northeast Foundation. “The principal of an endowment is invested, and scholarships are paid from the earnings.”

Kruse encouraged others to consider Northeast Community College in their estate planning.

“Planned giving provides an opportunity to make a large gift while still caring for your loved ones,” she said. “An estate gift is probably the largest charitable donation you will ever make, and the best opportunity to leave a lasting legacy.”

Reference: News Channel Nebraska (Nov. 29, 2022) “Norfolk man leaves $40,000 to Northeast Community College for nursing scholarships”

Can Executor Take the Money and Run?
Living trust and estate planning form on a desk.

Can Executor Take the Money and Run?

What if your executor or trustee decides to run off to the Bahamas with all your assets, leaving heirs with nothing? Ohio Farmer’s recent article entitled “What if trustee runs off with assets?” says that safeguards should be in place to protect the heirs of an estate.

The most common way to protect against this possibility is a fiduciary bond. An executor, trustee, or guardian would get a bond early in a probate case and file it with the court. The bond would remain in place while the fiduciary is serving his or her role. If the fiduciary absconds with estate assets, the bond is there to help the beneficiaries.

This expense would be covered by the fiduciary, who would need to find a bond company willing to issue it. The bond amount is connected to the value of personal property, such as financial accounts, vehicles and personal effects.

Do you need a bond to cover the value of land? No. The primary difference is that land can’t be picked up easily and moved, making a bond unnecessary. It’s also very hard to transfer land without extensive safeguards. In some cases, court permission is required for a transfer. To sell a farm or ranch, a title company might raise suspicion. Real estate-related actions are also often public record. In some cases, a court action can correct issues or order damages.

It’s possible to waive the requirement of a bond. That’s a default setting for bonds with estates, trusts, or guardianships. Most estate planning documents waive the bond requirement, because family members often serve as fiduciaries.

State law may also describe several situations where a bond isn’t required. However, if a party motions the court, and the judge thinks there’s good cause for a bond, one can be required for a fiduciary.

While a bond can provide some important protections for heirs, the likelihood of a fiduciary running off with assets is low. As a result, most administrations view the bond as an unnecessary step and expense.

However, if a family is concerned about the trustworthiness of a fiduciary, the bond requirement should be reinstated.

If an administration is pending, the family can petition the court to require a bond. Consult with an experienced estate planning attorney to determine the role of bonds for your estate plan.

Reference: Ohio Farmer (Nov. 22, 2022) “What if trustee runs off with assets?”

Giving to My Favorite Charity in Estate Plan

If you’d like to leave some or all of your money to a charity, Go Banking Rates’ recent article entitled “How To Leave Your Inheritance to an Organization” provides what you need to know about a charitable donation as part of your estate plan.

  1. Make Sure the Organization Accepts Donations. Unless you have a formal agreement with the charity stating they’ll accept the inheritance, the confirmation isn’t a binding commitment. As a result, you should ask the organization if there’s any form language that they may want you to add to your will or trust as part of a specific bequest. If the charity isn’t currently able to accept this kind of donation, look at what they will accept or if other charities with a similar mission will accept it.
  2. Set the Amount You Want the Charity To Receive. Some people want to leave the estate tax exemption — the maximum amount that can pass without tax — to individuals and leave the rest to charity. Because the estate tax exemption is subject to change and the value of your assets will change, the amount the charity will get will probably change from when the planning is completed.
  3. Have a Plan B in the Event that the Charity Doesn’t Exist After Your Death. Meet with your estate planning attorney and decide what happens to the bequest if the organization you’re donating to no longer exists. You may plan ahead to pass along the inheritance to another organization and make sure it receives the funds. You could also have the inheritance go back into the general distributions in your will.
  4. State How You Want Your Gift to Be Used. If there is a certain way that you’d like the charity to use the inheritance, you can certainly inquire with the organization and learn more. Find out if the charity accepts this type of restriction, how long it may last and what happens if the charity no longer uses it for this purpose.

As you draft charitable planning provisions, make sure you do so alongside an experienced estate planning attorney.

The provisions in your will should be specific about your desires and provide enough flexibility to your personal representative, executor, or trustee to be modified based on the conditions at the time of your death.

Reference: Go Banking Rates (August 26, 2022) “How To Leave Your Inheritance to an Organization”

Why Would I Need a Post-Nup?

Vigour Times’ recent article entitled “Here’s Why Married Couples Might Want To Sign A Postnuptial Agreement” looks at the situations that might prompt a couple to prepare a postnuptial agreement.

For example, married couples may need to adjust a pre-nup they signed before they were married. They want to make certain the new terms are based on the things that have occurred since that time.

Changes in marital dynamics can trigger a change in the terms of a pre-nup. For instance, couples may not have thought that one spouse would begin to earn a lot more than the other or that, as the marriage endured over time, greater trust grew between the partners.

A post-nup may also come into play when a couple is thinking about divorce but still trying to work things out. According to the Centers for Disease Control and Prevention, over 10 years as many as 43% of first marriages can fail.

Because divorcing sooner rather than later could be more advantageous to one of the spouses, their agreement may say the marriage ended as of the date of the post-nup for purposes of calculating alimony and property division, should efforts to repair a marriage be unsuccessful.

There are circumstances when a post-nup is needed to work around state laws to allow one spouse to leave the other one less than what is required by state law.

Many people don’t know that once they’re married, state law usually gives their spouse a minimum percentage of the estate, even if the deceased spouse tried to leave it to someone else. One example of this is where a person in a second marriage wants to leave all their assets to children from a previous marriage.

Ask an experienced estate planning attorney to make sure the plan is consistent with the estate documents, especially as to trusts.

There also may be external forces, such as a future change in wealth that trigger a post-nup. For instance, in the event of a potential inheritance, for example, an heir — or the relatives leaving the assets — may insist on a post-nup, so the wealth will stay on their side of the family and not be included in any possible divorce negotiations.

Reference: Vigour Times (Nov. 27, 2022) “Here’s Why Married Couples Might Want To Sign A Postnuptial Agreement”

The Basics of Estate Planning

No matter how BIG or small your net worth is, estate planning is a process that ensures your assets are handed down the way you want after you die.

Forbes’ recent article entitled “Estate Planning Basics” explains that everybody has an estate.

An estate is nothing more or less than the sum total of your assets and possessions of value. This includes:

  • Your car
  • Your home
  • Financial accounts
  • Investments; and
  • Personal property.

Estate planning is the process of deciding which people or organizations are to get your possessions or assets after you’ve died.

It’s also how you leave directions for managing your care and assets if you are incapacitated and unable to make financial or medical decisions. That is done with powers of attorney, a healthcare directive and a living will.

Your estate plan details who gets your assets. It also designates who can make critical healthcare and financial decisions on your behalf should you become incapacitated. If you have minor children, it also lets you designate their legal guardians, in case you die before they reach 18. It also allows you to name adults to safeguard their financial interests.

Your estate plan directs assets to specific entities or people in a legally binding manner. If you want your daughter to have your coin collection or your favorite animal rescue organization to get $500, it’s all mapped out in your plan.

You can also create a trust to safeguard a minor child’s assets until they reach a certain age. You can also keep assets out of probate. That way, your beneficiaries can easily access things like your home or bank accounts.

All estate plans should include documents that cover three main areas: asset transfer, medical needs and financial decisions. Ask an experienced estate planning attorney to help you create your  plan.

Reference: Forbes (Nov. 16, 2022) “Estate Planning Basics”

What Is Wife of Chrysler Building Billionaire Owner Entitled to Under Prenup?

Sixty-two-year-old Michael Fuchs and 47-year-old Alvina Collardeau-Fuchs, who are in the process of divorcing, lived the “billionaire lifestyle” during their marriage with a string of luxury properties around the world, reports The Digital Journal’s recent article entitled “French wife of Chrysler Building billionaire owner entitled to £37 mn under prenup.”

Money was “never a concern” and the couple enjoyed “fully staffed homes” in fashionable locations such as the Hamptons, New York City, Paris, Miami, Cap d’Antibes, Capri and London.

Fuchs is originally from Germany but moved to the U.S. in the 1990s. He and former journalist Collardeau-Fuchs married in New York in 2012 and went on to have two children. However, they separated in 2020, and the High Court in London was asked to rule on the amount to which Collardeau-Fuchs was entitled. Fuchs’ lawyers argued his estranged wife should get about $36 million, but she claimed it should be more than $53 million.

Despite the two having signed a prenuptial agreement, accusations have been lobbed both ways, including Collardeau-Fuchs’ alleging that Fuchs tried to control her spending and made her daily life “intolerable.”

At one hearing, the court heard that Fuchs had enjoyed an “extraordinarily successful career” and owned a “very significant amount of prime mid-town Manhattan real estate”. In fact, the Art Deco Chrysler Building on the East Side of Manhattan, one of New York’s most distinctive landmarks, is owned by Fuchs’ company. However, Fuchs said the value of his fortune had plummeted recently due to the turbulent economic climate.

Such litigation is usually avoided with a properly drafted prenuptial agreement.

A prenuptial agreement is a legal agreement between two partners engaged to be married and is effective upon marriage.

A prenup [also known as an antenuptial agreement or premarital agreement] can set out the property rights and financial arrangements upon which the engaged couple has agreed.

It also allows the couple to contract for themselves–how they want their property, assets, income and inheritance to be viewed or considered in their marriage.

Reference: Digital Journal (Nov. 14, 2022) “French wife of Chrysler Building billionaire owner entitled to £37 mn under prenup”