What Happens if I Make a Will and a Beneficiary Dies Before I Do?

Jan 25, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning, Wills and Trusts

When you create your will you decide who receives your property after you die. Those you select become known as your beneficiaries and, as long as you do not change your will, they will inherit your property. But what happens if one of your beneficiaries dies before you do? Who inherits the property then?

When the beneficiary dies before a testator—a person who makes a will—the gift the beneficiary would have received is said to have lapsed. All states have created what are known as anti-lapse laws, or anti-lapse statutes, that direct how lapsed property passes in this situation.

However, you do not have to rely upon your state’s anti-lapse laws to address this possibility. You can create your own anti-lapse provision or clause in your will to determine what happens should the beneficiary predecease you. In this situation your anti-lapse clause will take precedence over state law.

For example, let’s say your state has a law that directs that any lapsed gift will pass to the deceased beneficiary’s descendants. This means that if you leave your child an inheritance and the child dies before you do, that inheritance will pass to the grandchildren.

But, you can also create an anti-lapse clause in your will that differs from state law. So, you might say that any lapsed gift will pass according to your residuary clause. Your residuary clause might state, for example, that your residuary property will pass to a charity.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Using Trusts in Your Estate Plan to Help Your Troubled Child

Jan 24, 2013  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning, Wills and Trusts

As a parent, you will always worry about your children. Fortunately, these concerns will be largely unnecessary since most children learn how to handle the ups and downs of the world from their parents’ love and guidance. However, some concerns are justified because some children, no matter what age, seem to always need parental guidance. And, while you are alive, you can provide the direction and encouragement to steer your child clear of their compulsions, such as gambling, drug abuse or excessive drinking. But, is there something you can do now to make sure your child does not chip away at their future inheritance, or take away from your ability to plan for your own future?

One effective estate planning tool to protect your assets, and your children’s inheritance, is to create a trust. A trust is very flexible, allowing you to set the terms for releasing monies to your children or other heirs, and to change the terms of the trust during your lifetime, if needed. Some establish the trust so that additional money is set aside to one child to take care of anticipated expenses for a more troubled child. Some trusts require that a beneficiary pass a drug or alcohol test before funds are disbursed; others write their trust to have a third party manage the funds for the beneficiary to limit the amount of access a beneficiary has to their trust funds. Although you may not be comfortable treating your children differently, circumstances may dictate that you do so to best provide for the future of your loved ones.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

What Being Silent in Estate Planing Leads To

Oct 15, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Inheritance Planning

Most people don’t have any kind of estate plan, and that isn’t likely to change anytime soon. Those who don’t have a plan essentially choose to remain silent. Because this is so common, the law has come up with a variety of ways to deal with estate planning silence. Here are three examples of what will happen if you don’t speak up and make an estate plan.

Your Property Will Still Go to Someone Else

Assuming you die leaving behind assets that are greater than your debts, some of your property will likely pass to your inheritors. Once your debts are paid off, anything left over will likely go to your spouse, child, or closest living relative. In the exceptionally rare event that you have no identifiable living relatives, your property will be transferred to the state in which you live.

Your Stepchildren Get Left Out

While your children stand to inherit your property, anyone not related to you by birth or marriage will be left out. If, for example, you have stepchildren, your state has no laws which say that your stepchildren stand to inherit any of your property.

Your Partner Will be Left Out

If you aren’t married but are living in a committed relationship, your partner is essentially out of luck when it comes to inheriting your property. Even if you have lived together for decades, state law does not provide an inheritance for a girlfriend, boyfriend, or committed partner.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

You May Not Get an Inheritance

Jul 11, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Financial Planning, Inheritance Planning

According to recently released survey data, Americans expecting to receive an inheritance from their wealthy parents may be in for a bit of bad luck. The recently released study conducted by Bank of America’s private wealth management division, U.S. Trust, reports that 32% of parents of high and ultra-high net worth say that it isn’t important to them to leave an inheritance to their children. Of the baby boomers surveyed, 45% of them say the same.

The most often cited reason for the desire not to leave money to children was that the parents stated they believed each generation should be able to earn their own wealth. Others stated that they would rather use their money to donate to charities or to help solve various social problems.

About 25% of those surveyed said they would prefer to give their wealth to a charitable organization, while another 25% said they wanted to use the money themselves to enjoy life. A very small percentage, 7%, said they probably wouldn’t have any money left over to leave to either charity or their families.

Others surveyed stated that though they planned on leaving an inheritance to their children, they did not plan on leaving their entire estates to them. Many of these respondents stated that they did not inform their children how much money they have because they believed that doing so would negatively impact the child’s work ethic.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Religion and Estate Planning

Jun 25, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Final Arrangements, Inheritance Planning

As a recent Wall Street Journal article points out, religious concerns in estate planning are often more important to people than questions about financial or material concerns. Your estate planning attorney exists to help you develop a plan that not only meets your needs, but also your desires. If you have specific religious concerns about your estate plan you need to inform your attorney about these concerns so you can both develop a plan that takes them into consideration.

1. Medical directives.

For some religious people, the question of medical treatment near the end of life is of prime importance. You may have religious concerns about some of the types of treatments you may or may not wish receive in the event you’re incapacitated. If this is the case, you should carefully review your medical directives and include specific terms detailing your desires.

2. Inheritances

Some people choose to leave inheritances based upon certain religious restrictions, such as requiring that a grandchild marry someone of a specific faith. While this type of restricted inheritance is generally permissible, it can lead to legal conflicts that end up costing the estate money. In this situation, it may be more beneficial to create a trust and nominate a trustee who can manage the trust in accordance with religious principles.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Common-Law Marriages And Estate Planning

May 03, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Inheritance Planning

Common-law marriages are one of the most widely misunderstood areas of the law. When you are making your estate plan, it’s important that you speak to your attorney about any questions you have about the legal status of your relationship. In general, common-law marriages are very rare as only a small minority of states allow people to get married through common-law provisions.

  • Common-Law States: Only 9 states currently allow people to get married through common-law. All other states, with a couple of exceptions, do not recognize common-law marriages as legally valid. However, if you are married in a state that does recognize common-law marriage and then move to a state that does not, your marriage is still valid.
  • Common-Law Requirements: In order to be married through common-law you must meet very specific requirements. Though each state has its own terminology, the three requirements are: being of legal age (typically 18), agreeing to become married, and holding yourself out to the public as a married couple.
  • Seven-Year Requirement: There is no state that imposes any minimum time requirement for common-law marriage. You can become married through common-law after a day, a year, a decade, or at any other time as long as you meet the requirements. Living together or cohabitating for a certain number of years will not make you common-law married.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Unintended Disinheritance: One More Reason You Need An Estate Plan

May 02, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning, Wills and Trusts

The majority of Americans, according to survey data, do not have any type of estate plan at all. While we’ve blogged regularly about the importance of having an estate plan, it is also important to keep reminding ourselves why such plans are important and why you should regularly review your plan to keep it up-to-date. One of the more troubling aspects of not having an up-to-date estate plan is the prospect of an unintended disinheritance.

Unintended disinheritances can happen for any number of reasons. For example, if you created your last will and testament after the birth of your first child, you may have named that child as your sole inheritor. If you later have a second child and fail to update your will, you may accidentally disinherit the second child. Though this may not be very likely, you can easily account for such an error by changing your will to include broader terminology that will encompass all of your children, or by naming specific gifts for each of your children and updating the will after a new child is born.

Another potential cause for unintended disinheritance is when you have multiple wills or create a will on your own that is later deemed invalid. If, for example, you create one will when you’re single and another after you get married, you should be sure your second Will is drafted properly. If a court finds that your second Will is invalid and you didn’t properly void your first Will, it might use your first Will instead.

Needless to say, regularly updating and reviewing your estate plan will go a long way in preventing any unintended disinheritances. You should make it a habit to review contact your estate planning attorney every year to discuss potential changes you may need to make.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Estate Planning For Washington Gun Owners – Gun Trusts

Apr 06, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Inheritance Planning, Wills and Trusts

For anyone in Washington who owns a gun, your estate plan should make specific provisions for the transfer of your weapons. In some situations it may be best to create a gun trust in order to transfer specific types of firearms restricted under federal law. Let’s take a look at a gun trust and the purposes it serves.

Issue 1: Restricted firearms.

Under the National Firearms Act, certain types of weapons cannot be owned, used, or transferred unless you first meet specific legal requirements. If you own a machine gun, sawed-off weapon, silenced weapon or explosive device, you must usually get the approval from your local chief law enforcement officer before you transfer such weapon to a new owner. By using a gun trust to transfer your weapons, you can avoid this step and instead apply directly to the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Issue 2: Privacy.

A gun trust allows you to transfer your firearms without having to go through the probate process, and it does not require you to file or register the trust with any government authority. However, you must still meet federal background check and restricted firearms registration requirements in order to transfer the weapons.

Issue 3: Creation and use.

While a gun trust is basically the same as other types of revocable living trusts, it is different in that you must ensure the trust has specific provisions that allow you to legally transfer restricted weapons. If, for example, your trust does not adequately allow for the transfer of trustee responsibilities if the current trustee is deemed ineligible to own or transfer restricted weapons, your trust could be invalid and may result in criminal sanctions against the trustee or the beneficiaries.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

What To Do About Sudden Wealth – The Problems Of Inheritance

Apr 04, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Estate Planning, Inheritance Planning

It sounds like the ideal problem to have, doesn’t it? A wealthy family member dies, leaving you a substantial inheritance that effectively means you never have to work again. It means that you can leave money to your children and ensure a lifetime of ease and comfort.

While that is the fantasy, the reality is often far from the truth. For many people who come into sudden wealth, a new set of problems often arises that can leave their lives worse off than they were before. Regardless of the source of the wealth, whether it is by some sort of lottery winnings or inheritance, people often do not know how to deal with the emotional, social, and psychological problems associated with sudden riches. If you are creating an estate plan and are planning on leaving a lot of money to others, you should carefully consider what this may mean as you create your plan.

Issue 1: A change in your life.

Becoming wealthy impacts every aspect of your life, including those aspects you may not want to change. For people who suddenly inherit money, they often find that friends, family members and strangers will treat them far differently than they had before learning of the new wealth. This can come as a shock and lead many people to depression and even seclusion. Many people with wealth often become very guarded as they feel that many of the people they meet are only interested in the person because of his or her money.

Issue 2: A lack of meaning.

Scientists who study happiness have found that while not having money can impede a person’s ability to be happy, having over a certain amount is no indicator of increased happiness. This essentially means that you need enough money to live, but having more money will not make you happy. Happiness often derives from a sense of purpose and meaning in your life, and having too much money can get in the way of developing these feelings as you are never really challenged to overcome any material or personal obstacles.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

What are Specific Gifts?

Nov 24, 2011  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: Inheritance Planning

When you are creating your estate plan, you have the opportunity to provide specific gifts to loved ones, beloved neighbors, charities, or anyone you’d like.  These are called “specific gifts.”

Here are some examples of specific gifts:

  • $25,000 to the University of Washington, general scholarship fund.
  • $10,000 to the American Cancer Society.
  • $20,000 to a trust for grandchildren.
  • My GE stock to Cousin Betty
  • My electric guitar to my brother, Riley.
  • A dozen red roses to my neighbor, Alice.

If you want to make specific gifts, list them in your will or trust; however, if you’d like to change the gifts more than once every three to five years, use a memorandum that is referenced in your will or trust.

Keep in mind that the memorandum doesn’t have the force of law, unless it’s executed in the same manner as a will.  Memorandums tend to be honored by loved ones.  But, if you think there’d be an issue or it’s a cash gift, put it in your will or trust.

Anything that is not specifically noted in your will or trust is part of your residuary estate.  In other words, if an asset is not specifically mentioned, it’s part of the residuary.  You must also name beneficiaries of your residuary estate; if you don’t, state intestacy laws will dictates how those assets are divided (and, it might not be what you’d choose for yourself.)

Specific gifts are special for children and grandchildren, especially if they hold sentimental value.  For example, when your daughter was little, the two of you made hot cocoa and drank it from special tea cups.  Pass those tea cups to your daughter with a note, explaining why.

If you would like to include specific gifts in your will or trust, consult with a qualified estate planning attorney.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.