How controlling can I be from the grave?

A recent Illinois Supreme Court case upheld a will provision which disinherited descendants if they did not marry a fellow Jew.

http://www.google.com/hostednews/ap/article/ALeqM5j8QwP4ZvRjh-5EDghmS7q9wwP_DgD9ATRI300

As in this case, most American jurisdictions follow the general rule that a testator, or one writing the will, has (almost) free reign to dictate how their assets are disposed of upon their death. However, most jurisdictions limit this free reign by allowing courts to strike provisions that are "against public policy". That was the argument in the Illinois case. The descendants argued that the provision amounted to religious intolerance, which they argued is against public policy. The Court demonstrated just how much leeway a testator can be given, stating that the Court was not in a position to ensure that a grandparent treats "grandchildren who reject his religious beliefs and customs in the same manner as he treats those who conform to his traditions".

Minnesota courts have not spoken on whether such religious clauses would be upheld. However, two cases give guidance on how a Minnesota court might evaluate a questionable clause. In its 2008 ruling, In re The Estate of Peka, the Minnesota Court of Appeals upheld a provision that prohibited an ex-wife from living in the testator's house, which was placed in trust for the benefit of the parties' minor child, rejecting an argument that the provision was against public policy in promoting separation between parent and child.

The Minnesota Supreme Court, all the way back in 1897, showed that they are willing to strike down a provision as being against public policy. In Morse v. Blood, the testator stated in his will that his spouse would inherit his estate, but that she would be prevented from giving, either during her life or through her will, "one cent" to either her relatives or his. Among the issues created by this clause, the Court pointed out that if the spouse invited her family over for dinner, she would run the risk that the entire estate would be forfeited. The Court called the provision "mischievous and technical" and struck it down as against public policy.

If you're thinking of putting a ... creative... provision into your will or trust. Remember that, although you will enjoy a certain amount of leeway, you run the risk that a court could strike the provision. Make sure that you meet with a licensed attorney who can draft the provision, which could increase the chances that it would later be upheld by a court.

For a good chuckle....

CNN recently posted a collection of odd will provisions. Take a look at it when you need a good laugh.

http://www.cnn.com/2009/LIVING/wayoflife/08/31/bizarre.will.stipulations/index.html?iref=mpstoryview

If you're contemplating a will, including if you're thinking of leaving your fortune to your dog Gunter or want to leave your birthday to your friend... as always, talk to a licensed attorney.

Comment Moderation Policy

This blog is implementing a policy regarding comments... which I'm taking as a sign that at least someone out there is looking at the blog.

Comments will be reviewed before being posted to the blog. Any comments that attach links to commercial sites or are otherwise off topic will not be posted. Comments and links to facillate the sharing of information will be welcomed and appreciated.

I got what? From who? From where??

Every once in a great while you may find yourself on the receiving end on an estate. Whether it's your beloved grandmother's doll collection or an interest in property worth millions from your distant bachelor farmer great-uncle, there are certain things to keep in mind.

First, you likely do not need to worry about taxes. Taxes on the transfer of the property would have been dealt with through the estate tax, paid before you received the property. If you receive an inheritance that doesn't create income, you will not need to include it in your personal income taxes. However, if your inheritance generates income, for example if your uncle's farm is rented and you receive monthly checks, or if you sell that doll collection, you may have personal tax liability. In that case, you should work with an accountant to properly report that income or gain.

Second, you likely do not need to worry about debt from the estate. In the United States, debt cannot be inherited. Additionally, if the estate was administered through a probate process, debts should have been taken care of through that process. However, if a lien or other debt exists on the property and it wasn't paid off by the estate, you could run the risk of taking the property subject to that debt. If you believe this is the case, you should contact a licensed attorney in order to explore the possibility of disclaiming, or declining, that inheritance.

Finally, and this doesn't come up often but when it does it's extremely important, if you inherit from a distant relative in the old country, you need to contact a licensed attorney who is familiar with international estate planning. Unlike the United States, some other countries allow debts to be inherited. Most countries allow for a limited period to disclaim that debt, but only for a LIMITED period. You need to act quickly in determining whether you are inheriting debt and to disclaim that inheritance. If you don't, what you think will be a golden egg from Opa Fritz could turn out to be a major liability.

If you have received an inheritance and have any questions, including whether you will have a tax liability or whether you should disclaim the inheritance, contact a licensed attorney.

The Power of Joint Tenancy

One of the many vehicles to transfer real property, or real estate, outside of probate is through owning the property in joint tenancy.

There are two forms of real estate ownership in Minnesota when there are multiple owners. The first is tenants in common. In this form of ownership, the parties each own a distinct percentage of the total ownership in the property. For example, if a husband and wife own property, husband owns 50% of the total property and wife owns 50% of the total property. In this form, if one of the parties dies, their distinct percentage transfers through probate.

The other main form of ownership in Minnesota is joint tenancy. In this form, the parties have an undivided interest of the total ownership of the property. In this case, both husband and wife each own 100% of the total property. This may seem like a minor distinction, but it has a big effect. Upon the death of one party, the other party automatically owns the entire property without the probate process.

In order for the property to be owned in joint tenancy, the deed must specifically state that the property is owned as such. For example, "Property X is granted by Mr. X. to Husband and Wife, as joint tenants." If the deed does not specifically state that it is in joint tenancy, then it is owned as tenants in common.

If you own property with another person, and both of you intent that the other should automatically receive your interest without the probate process, review your deed. If the deed does not state "joint tenancy", contact a licensed attorney to execute and record a deed that does.

Can't stress it enough... if you have kids, you MUST have a will.

The recent passing of the King of Pop, raises an issue that comes up again and again in estate planning, those with children need to have a will in place.

http://www.cnn.com/2009/SHOWBIZ/06/26/jackson.children.will/index.html

Not only can a will deal with some financial issues, as blogged in my July and August 2008 posts, but it can also be a vehicle to name who you want to serve as guardian for your children. A court may ignore a provision naming a guardian, if it does not serve the best interests of the child, such as if the other parent is living and fit to parent or if the named guardian poses some threat of endangerment. However, if you fail to prepare a will naming a guardian, you leave it entirely up to a judge who is a stranger to your family and may not place your children with the most appropriate caregiver.

If you have children and do not have a will, contact a licensed attorney.

Special Needs and Supplemental Needs Trusts

I realized I skipped last month. I'll try not to do a cop-out by talking about two, very related, topics: Special Needs Trusts and Supplemental Needs Trusts.

Typically, state and federal governments will ignore trusts and include amounts in trusts as an asset of the beneficiary for purposes of determining eligibility for state benefits. Two exceptions are Special Needs Trusts and Supplemental Needs Trusts. Both trusts are vehicles to allow a person who is recieving disability benefits, additional income and assets to meet needs beyond what the government benefits cover. Essentially, these trusts allow disabled persons to have a lifestyle beyond what the government benefits provide, without jeopardizing their ability to receive those benefits.

Special Needs Trusts are funded by the individual’s own assets. Supplemental Needs Trusts are funded by a third party’s assets. There are strict rules on how these trusts are established, funded and what types of expenses can be paid for by the trust. If you fail to meet these rules, the trust will be disregarded and the trust assets could be counted against the beneficiary. The rules surrounding these trusts are very specific, ridgid and highly technical. If the trust provisions violates an applicable federal or state law, the trust is disregarded. If a Special Needs Trust or Supplemental Needs Trust might be right for your loved one, it is very important that you work with a licensed attorney.