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Apr 06
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Probate & Estate Administration During COVID-19

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Probate Challenges and Estate Administration Roadblocks During COVID-19 Corona virus Pandemic

Many of our clients are in the midst of settling the estate of a deceased loved one or have just had a loved one pass away and are wondering what comes next. An event such as this has both personal and legal consequences. Below are observations on issues that may immediately present themselves.

• Immediate steps may be limited by circumstance. If someone has just died and the cause of death is unknown, public health officials may limit the immediate steps one would usually take until the cause of death is determined and no known COVID-19 risk exists. Depending on circumstances, there may be some delay in physically getting access to the premises, securing them and searching for a will and other documents if they are not in possession of the family or the decedent’s attorney. It is always wiser to have one’s original estate planning documents safely secured off the premises and make sure a trusted individual has access to the storage place.

• Once access is permitted, secure the premises if they become unoccupied. Subject to the necessary steps to ensure everyone’s safety (which may include disinfecting) the nominated personal representative may take steps, such as changing locks, necessary to secure the physical contents and financial documents which may remain in the home. These steps can be taken before one’s official appointment. If additional or condominium fees must be paid to allow enough time for an orderly inspection, appraisal, or the like, this can be treated as an expense of the estate.

• The legal process of estate administration can begin and continue. While the probate courts of the states in which we conduct estate administrations have limited or closed off physical access to the public, emergency hearings (conducted telephonically) continue and many routine documents can be e-filed. Routine non-contested wills can still be allowed; while reduced staffing at courts may stretch the time frames somewhat, these processes, at least for the present, continue as before. Where that time frame may cause harm to a beneficiary or in some cases, the assets, if the court deems such circumstances an emergency, a hearing to rush the appointment of a temporary fiduciary, called a “executor” or “special personal representative,” can be requested.

• Most financial activities can be conducted. With overnight shipping, and technologies such as scanning, secure e-mail, electronic funds transfers, and electronic document signatures, most financial transactions can be conducted virtually once the identities of the parties are established in a fashion compliant with the financial institution’s practices. Thus assets can be transferred to estate or trust accounts, sold and reinvested if desired in order to properly pay estate expenses and distribute funds to beneficiaries. Notarizations still require physical presence although there is a move afoot to accept signatures performed over a videoconference.

• Once appointed, electronic communications are vital. As a fiduciary, personal representatives and trustees must take special care to maintain transparency and good chains of communication with each other and the beneficiaries. In a typical administration, one or more introductory or status meetings may occur between co-fiduciaries and the attorney, some with beneficiaries present. Since these will not occur during this unprecedented time, most communication should be in writing. Email has become the standard, often with multiple co-recipients.

Need to speak to an attorney about issues your confronted with during the Pandemic, call our office 401-274-0300 for a no cost phone consultation.

Sep 05
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9 Estate Planning Terms You Need To Know

By Estate Planning

Estate Planning Terms

No one likes to think about one’s own death. However, planning ahead can help your family avoid unnecessary complications, delay, and expense. This may be done through wills, trusts, joint ownership, and life insurance. In addition, modern estate planning also includes “life” planning through powers of attorney and health care proxies. These enable someone else to act for you in the event of your incapacity. Understanding the following terms is the first step toward planning your estate. However, no estate planning steps should be taken without consulting with a qualified professional.

  • Probate

This is the name for the process in the Probate Court through which the ownership of your assets passes to your heirs. It includes the collection of your assets, the payment of your bills, and the distribution of your estate. It only covers what you own outright, not joint property, trust property, life insurance proceeds, or any assets that have beneficiaries or payable-on-death terms.

  • Will

Your will is a legally binding statement of who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will only covers probate property.

  • Estate Tax

The estate tax applies to both the probate and the nonprobate property of the decedent. For federal purposes, the amount free from taxation is $5.6 million as of 2018 per individual, $11.2 million per married couple. For Rhode Island, a person can pass $1,537,656 free from estate taxation.

Reading your Estate Planning documents is critical to understanding your plan

  • Marital Deduction

On the federal level, anything passing to the surviving spouse of a decedent is not included in the taxable estate and, consequently, is not subject to taxation. All of the couple’s assets are then taxed upon the death of the surviving spouse, unless an estate tax plan has been executed.

  • Trust

A trust is a legal entity under which one person—the “trustee”—holds legal title to property for the benefit of others—the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. An irrevocable trust is one that cannot be changed after it has been created. A revocable trust is one that may be changed or rescinded by the person who created it. Trusts are often used for tax planning, to provide for someone with expertise to manage assets, or to shelter assets to protect them from creditors or for long-term care planning.

  • Durable Power of Attorney

Under a power of attorney, you may appoint someone else to act for you when you are unable to do so yourself. The reason may be your mental incapacity or your inability to be somewhere when needed. The person you appoint—your “attorney-in-fact”—must always act in your best interest and try to make choices you would make if you were able to do so.

  • Health Care Proxy

Similar to a power of attorney, through a health care proxy you may appoint someone else to act as your agent—but for medical, as opposed to financial, decisions. Unlike a power of attorney, the health care proxy does not take effect until your doctor determines that you are incapable of making decisions yourself. Before that decision, your agent may make no decisions on your behalf. You may include in your proxy a guideline for your agent to use in making decisions. These may include directions to refuse or remove life support in the event you are in a coma or a vegetative state. On the other hand, your instructions may be to use all efforts to keep you alive, no matter the circumstances.

  • Community Spouse Resource Allowance (CSRA)

If your spouse has to move to a nursing home, you will have to pay for his or her care out of pocket until he or she qualifies for Medicaid. Under the Medicaid program the nursing home spouse may only have $4,000 in “countable” assets. (Noncountable assets include your home, household belongings, one car, and prepaid funeral plans.) The amount the healthy spouse is permitted to keep under the Medicaid program is known as the “community spouse resource allowance” or “CSRA.” The CSRA is all of the couple’s combined assets up to a cap of $123,600 (in 2018). In some cases, the community spouse is entitled to retain assets above the $123,600 limit when her income is less than the minimum monthly maintenance needs allowance, which is described below.

  • Minimum Monthly Maintenance Needs Allowance (MMMNA)

The Medicaid rules also govern the amount of income the community spouse is entitled to once the nursing home spouse qualifies for Medicaid. Normally, the community spouse keeps his or her income and the nursing home spouse pays his or her income to the nursing home, keeping only a $50.00-a-month “personal needs allowance.” However, if the healthy spouse’s income is low, he or she may be entitled to a share of the nursing home spouse’s income. In each case where a married nursing home resident qualifies for Medicaid, the Department of Human Resources calculates a “minimum monthly maintenance needs allowance” or “MMMNA” for the community spouse based on his or her housing costs. This will range from a low of $2,057.50 to a high of $3,090.00 a month (in 2018). If the community spouse’s own income is below his or her MMMNA, he or she will be entitled to a share of the nursing home spouse’s income to make up the difference.

Want to learn more? Contact Attorney Matthew J. Leonard, Esq. at 401-274-0300 or at mleonard@smsllaw.com to arrange for a free consultation.

Jul 27
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What are the 4 different Trusts used in Estate Planning?

By Uncategorized

Ever since watching Gilligan’s Island as a kid I have secretly wondered how and what Thurston Howell, III and Lovey Howell meant when they mentioned their “Trust Accounts.” I thought it was something only related to rich people. Now I know it is not about being rich as much as it is about being smart.gilligans-island-Howells

What is a trust and why should I have one in my estate plan?

Trusts have been used for estate planning and asset protection for centuries. Their usefulness and flexibility for these purposes have been proven by the test of time. The origin of trusts can be found in the eleventh century crusades. Crusading English knights left their manors and estates in the care of trusted friends for safekeeping while themselves away on crusade. However, trusts are not just some dusty, antiquated notion from manorial England! Trusts

A trust is a separate legal entity for holding and investing property. One or more persons (the “trustee”) holds property, usually real estate or investments, for the benefit of another or several other people (the “beneficiary”). The person who gives the property for the trust is known as the “donor” or “grantor” or “settlor.” The trustee holds legal title or interest and is responsible for managing, investing, and distributing the assets or property of the trust. The beneficiary holds an equitable or beneficial interest.

  • What are the benefits of establishing a trust?

Depending on your situation, there can be several advantages to establishing a trust. The most well known benefit is avoiding probate. That is, in a trust that terminates with the death of the donor, any property in the trust prior to the donor’s death passes immediately to the beneficiaries by the terms of the trust without requiring probate. This can save time and money for the beneficiaries. Certain trusts can also result in tax advantages both for the donor and the beneficiary. Or they may be used to protect property from creditors, to help the grantor qualify for Medicaid, or simply to provide for someone else to manage and invest property for the grantor and the named beneficiaries. Trusts are private documents and only those with a direct interest in the trust need know of trust assets and distribution. If well drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.irrevocable-trust

  • What kinds of trust are there?

There are several types of trusts, some of the more common of which are discussed below:

  • Revocable Trust

A revocable trust is sometimes referred to as a “living” or “inter vivos” trust. Such a trust is created during the life of the donor rather than through a will. With a revocable trust, the donor maintains complete control over the trust and may amend, revoke, or terminate the trust at any time. So, the donor is able to reap the benefits of the trust arrangement while maintaining the ability to change the trust at any time prior to death. The disadvantage of a revocable trust is that the trust assets are countable to the donor for purposes of determining Medicaid eligibility and does not provide protection against creditors or in the event of a divorce.

  • Irrevocable Trust

An irrevocable trust is created during the life of the donor, who thereafter may not change or amend the trust. Any property placed into the trust may only be distributed by the trustee as provided for in the trust instrument itself. For instance, the donor can provide that he or she will receive income earned on the trust property. An irrevocable trust that provides for the donor to retain the right to income only is a popular tool for Medicaid planning.

  • Testamentary Trust

A testamentary trust is a trust created by a will. Such a trust has no power or effect until the will of the donor is probated upon his or her death. Although a testamentary trust will not avoid the need for probate and will become a public document as it is a part of the will, it can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can be used to provide funds for the surviving spouse in a form that should neither be considered available nor have to be spent down if he or she should seek Medicaid eligibility to pay for long-term care. Though a testamentary trust is an available tool for estate planners, it is rarely used as there are better more effective trusts that can achieve the same goals as a testamentary trust without the possibility of probate court involvement.

A supplemental needs trust can be created by the donor during life or as part of a will. Its purpose is to enable the donor to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust will have access to the trust assets for purposes other than those provided by public benefits programs. Thereby, the beneficiary will not lose eligibility for benefits such as Supplemental Security Income, Medicaid, and low-income housing.

  • How can I find out if I should have a trust?

As with all estate planning, anyone considering a trust should contact our office at (401) 274-0300 to schedule a free consultation to discuss how trusts can best work for you.

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Jun 13
Love0

Probate Process – The Pain After The Passing

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Probate Process and Probate Courts – Dealing With A Deceased Assets

What is the probate process?

Probate is the process by which a deceased person’s property, known as the “estate,” is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, usually takes about a year. Although distributions from the estate prior to its closing is possible – it would be done at the risk of the executor so it is often avoided until the claims period has expired and a court has approved the terms of distribution to the heirs and beneficiaries.

What propertprobate process4y is subject to the probate process?

The probate estate includes all property held in the decedent’s name. Certain kinds of property, such as property owned jointly by the deceased and another person, life insurance, and property held in trust, are not part of the probate estate and are not subject to the probate process. For example, jointly owned bank accounts pass automatically to the surviving joint owners upon the death of one of the owners without going through probate. The nonprobate property, however, is part of the decedent’s taxable estate (see below).

How is the probate process started?

First, a petition for probate of the will must be filed with the probate court, along with the original will and a certified copy of the death certificate. Each City and Town in Rhode Island has its own probate court and the petition should be filed with the probate clerk of the city or town the decedent lived in. Notice must be mailed to all of the decedent’s heirs at law (usually the surviving spouse, children, and children of any deceased children), to those named as beneficiaries in the will, the Division of Medicaid Assistance and, if a charity is involved or there are no heirs at law, to the Attorney General. Notice must be also published in a local newspaper. If no one objects by a deadline set by the court, the personal representative or executor named in the will is appointed by the court.

What does the personal representative/executor do?Probate

The personal representative or executor is responsible for collecting the probate property and for paying any debts of the estate. The personal representative or executor must file with the probate court an itemized list, known as an “inventory,” of the probate property, including the value of each item. The personal representative must file an estate tax return within nine months of the date of death. This is true even if no estate tax is owed, if the decedent owned real estate or the personal representative wants his or her final accounting (see below) allowed by the probate court. Creditors of the estate have one year from the date of death to bring claims against the estate. Personal representatives generally wait until this claim period has expired to complete distribution of the estate according to the terms of the will. As his or her final responsibility, the personal representative must file an accounting with the probate court showing the income and expenditures of the estate administration.

The probate process is one that many people wish to avoid because of the time and expense involved. Through the drafting of a proper estate plan, many of the issues and inconveniences can be avoided. Contact our office to discuss the probate process in greater detail and a estate plan that best works for you.

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Jun 10
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GUARDIANSHIP: What You Need To Know

By Uncategorized

What is guardianship?

Guardianship is a legal relationship whereby the Probate Court gives one person (the guardian) the power to make personal and financial decisions for another (the ward). Some states have separated guardianship into two roles—a guardianship or power over the person, and a conservatorship for power over the finances. A guardian may be appointed when a Probate Court determines that an individual is unable to care for herself and her estate by reason of mental illness, inguardianship-handstellectual disability, or physical incapacity.

When is guardianship appropriate?

Guardianship is appropriate when impaired judgment or capacity poses a major threat to a person’s welfare. A medical evaluation by a licensed physician is necessary to establish the proposed ward’s condition. However, only a court can determine the need for a guardian.

How can I become a guardian?

Assuming that a physician is prepared to attest to the proposed ward’s incompetence, a petition must be filed with the Probate Court requesting the appointment of a guardian. Two petitioners must sign the petition and the proposed guardian must file a bond with the court. Then, the court directs that the heirs of the ward and the ward herself receive notice of the filing of the petition for guardianship. The court sets a date by which anyone wishing to object may do so, including the proposed ward. Then a hearing is held where a judge decides whether a guardian should be appointed.

How long does this appointment last?

A temporary appointment can last 90 days. A permanent appointment may last until the death of the ward or the guardian, until the ward is able to establish that she is competent, or until the guardian resigns or is removed by the Probate Court.

What authority does the guardian have?

Unless limited by the court, the guardian has total control over the finances and the personal decisions of the ward. This includes deciding where the ward will
live, determining how the ward’s funds will be spent, and making routine medical decisions for the ward. For medical decisions involving extraordinary medical care, the administration of antipsychotic drugs, commitment to a mental health facility, or the sale of the ward’s real estate, the guardian has to seek the approval of the court in a separate proceeding to expand his or her powers.

guardianWhat are the responsibilities of the guardian?

In addition to those concerning authority to consent to medical treatment, the guardian must account carefully for all of the ward’s income and any expenditures made on his or her behalf. This is accomplished by the guardian filing an inventory listing the ward’s assets with the court as of the date of appointment and by filing annual accounts with the court detailing all the income and expenses the ward has. A final account must be filed when the guardianship is terminated. The guardian is liable for her acts until the court allows (approves) the account.

What are the alternatives to guardianship?

There are several less restrictive alternatives to guardianship. These include the durable powers of attorney, representative payees, trusts, and health care proxies. Each of these options may avoid or delay the need for a guardian. These documents need to be executed before the individual is incapable of doing so due to mental impairment.

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