Estate Tax Update

The U.S. Senate adjourned on Thursday, December 24th without addressing the current estate tax law scheduled to enter one year of full repeal in 2010 followed by a return of the estate tax in 2011 with much lower exemption amount ($1 million) and a much higher maximum tax rate (55%).

On Dec 3, 2009 the U.S. House of Representatives passed H.R. 4154 which would have made the 2009 Estate Tax Level Permanent. For calendar year 2009, the estate tax exemption amount is $3.5 million ($7 million total for a married couple) and the maximum tax rate on estates is 45%.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

Removing a personal representative or trustee

I just posted a new article about removing a personal representative or trustee based on breach of fiduciary duty. You can read the article here.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

Transferring Property Without Probate

Clients frequently ask me something like the following: “I inherited a piece of property, do I have to go through probate just to transfer this one piece of property into my name?” In Arizona, the answer is often no.

If the property has $75,000.00 or less in equity, the land can often be transferred to the new owner without probate. In Arizona’s depressed real estate market, more and more properties now have less than $75,000.00 in equity and therefore qualify for transfer via an “Affidavit of Real Property Transfer.” (Real property just means land, as opposed to “personal property” which means cars, jewelry, furniture, etc.)

To determine whether the property has $75,000.00 or less in equity, simply subtract the outstanding balance of any lien against the property (a mortgage or “deed of trust”) from the assessed value of the land. For example, if the County Assessor’s Office values the land at $100,000.00 and the property has an outstanding mortgage balance of $50,000.00, this property has $50,000.00 in equity, and it qualifies for transfer via an affidavit.

There are some other restrictions, however. All of the following must be true to use an affidavit instead of probate:

-the prior owner must have died at least six months prior to filing the affidavit;
-a personal representative must not have been appointed over the prior owner’s estate in Arizona or any other state (if a personal representative has been discharged, an affidavit may still be used);
-the prior owner’s debts must be paid, including funeral expenses and expenses of his/her last illness.
-Title companies may require a probate even though you have met all of these other requirements. This is often because of the title insurance requirements.

There are a few additional restrictions, but if the prior statements all apply, you likely can use an affidavit rather than probate to transfer the property into your name. Feel free to contact us to determine if an affidavit can be used in your case. Deloughery Law Office, P.C. charges a low flat fee (plus filing fees which vary by county but typically total between $250.00 and $300.00) to draft and file the affidavit and all the other required documents.

If an affidavit is not available in your case, we can still assist you either through opening an informal probate or ancillary probate (which is used if the prior owner’s estate is being probated in another jurisdiction).

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

To my grandchildren who marry Jewish spouses, I leave ...

For all of you who want to control whom your children marry, here is an example of a method that worked (at least in Illinois). Max Feinberg died in 1986, survived by his wife, two children and five grandchildren. Prior to his death, Max established a trust and executed a pour-over Will. The trust provided that his wife, Erla, was the life beneficiary of both an A and B trust; following her death, 50% of the remaining trust balance would be distributed per stirpes to Max’s grandchildren; provided, however “any such descendent who married outside the Jewish faith or whose non-Jewish spouse did not convert to Judaism within one year of married would be deemed deceased.” The trust instrument gave Erla a limited testamentary power of appointment and a limited lifetime power of appointment. Erla exercised the lifetime power of appointment directing that, upon her death, each child and each grandchild who was not deemed deceased would receive $250,000. Erla’s disposition of the trust assets altered the distribution by adding the children and from a per stirpes distribution to per capita; however, it retained Max’s restriction on who could inherit. The record suggested that Erla’s gifts would deplete the trust, leaving no additional assets for future distribution. At the time of Erla’s death, all of the grandchildren were married, but only one met Max’s restriction. One of the non-complying grandchildren argued the restriction was against public policy; the trial court and court of appeals agreed. The Supreme Court held otherwise, reversing the decision below. While a restriction that discourages marriage or encourages divorce is generally against public policy, that was not the effect of the distribution here. First, the Supreme Court found that Max’s original plan of distribution created a mere expectancy and, thus, was not the operative distribution plan; the real distribution scheme was the one created when Erla exercised her power of appointment. Under Erla’s distribution scheme, the trust did not operate prospectively to encourage the grandchildren to make decisions about whom to marry; instead, it operated on the date of her death to determine which of her grandchildren qualified for a distribution on that date. Thus, it did not violate public policy. In reaching this conclusion, the court found three factors significant: (1) Illinois policy favors freedom of testation; (2) the grandchildren had no vested interest in the trust at the time of Max’s death; and (3) Erla’s changes in the distribution prevented it from having any prospective application.

The full case is In re Estate of Feinberg, 2009 Ill. LEXIS 1299, Appeal No. 106982 (September 24, 2009), which can be read at http://www.state.il.us/COURT/Opinions/SupremeCourt/2009/September/106982.pdf.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

Use of Small Estate Affidavit for Bank Accounts

I often get asked by an adult child if he or she can close out a small bank account using the "Affidavit for Collection of Personal Property." (The one that is authorized by A.R.S. 14-3971(B).) This works IF the person signing the affidavit is actually entitled to receive the property. The tricky part happens when the decedent had multiple children (or a surviving spouse and children). No one person can then sign that Affidavit.

If fewer than all people entitled to receive the estate sign the Affidavit, then it could be construed as theft (and I have actually seen that happen before).

If there is a pourover will that transfers the estate (including the small bank account) to a trust, then at least an argument could be made that the trustees can sign the Affidavit in their capacity as trustees. This seems technically correct, but I have not had very good luck actually getting banks to accept this.

I would certainly welcome any input on this issue.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

Self Settled Spendthrift Trusts

I generally believe that self settled spendthrift trusts (also called domestic asset protection trusts) are used more often than they should be. They are not a great asset protection vehicle, especially because of the new changes to the bankruptcy code that allows the bankruptcy trustee to look back 10 years. However, there are some good uses. One such use would be to essentially protect a person from himself or herself (i.e., to help conserve an asset or investment).

There is a new article about this topic on my website. Click here to see the article.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.

No Minimum Amount for Arizona Elder Abuse Claim

Here is an interesting fact. There is no monetary threshold for bringing an A.R.S. 46-456 claim in Arizona. There are two different prongs (paragraphs A and B) to that statute. If a person violates either prong (by any amount!) then the penalties apply. In other words, all it takes is for a person to retitle a car or withdraw $20from an ATM in violation of the statute to be totally disinherited, be subject to treble damages, as well as the other penalties in the statute. That's pretty severe stuff. The purpose is to scare away any potential offenders. (We can debate how well it actually works.)

Also, the statute is mandatory. There is no "the court may impose the following penalties" or any soft language like that. The penalties automatically apply.

If you have a question about whether someone has abused a vulnerable adult, please give me a call.

I hope this information is helpful. Paul Deloughery
(You can contact me directly by email at paul@delougherylaw.com or phone at 602-443-4888. For more information, visit www.delougherylaw.com)

The information in this blog is general in nature and is not intended to address any particular situation.