Wednesday, October 8, 2014

The Real Property Probate Trap

In previous blog posts I have discussed the benefits of avoiding probate in the State of Nevada.  One of the most common assets to land you in probate is real property.  Real property is generally a probate trap because unlike financial assets, beneficiaries are not commonly named on real property assets.  There are several ways to keep your real property out of probate:

  • Creating a properly funded revocable trust;
  • Recording a beneficiary deed naming beneficiaries to the property; or
  • Holding title to the property in joint-tenancy.
Determining the best option depends on several factors such as the size of the estate, the age and relationship of the beneficiaries and your overall estate planning goals.  It is important to note that there are risks involved with some of the options listed above, such as being subject to liability as a result of owning property in joint-tenancy with someone other than a spouse.

Avoiding probate with real property assets can be easy.  However, avoiding probate generally requires filing the correct documentation with the Recorder’s office in the county in which the property is located.  I often times meet with clients who do not realize that the current titling of their real property could be causing undesired probate consequences for their spouse or beneficiaries.  If you have any questions regarding whether your real property assets may be subject to probate, contact your estate planning attorney to find out more.

Tuesday, September 30, 2014

The Impact of a Nevada Court of Appeals on Probate and Trust Cases

It is not hard to tell when it is election time in Clark County.  Everywhere you look there signs asking for your vote.  While the candidates are highly publicized in advance of the election, the ballot measures often do not get as much attention.  One of the ballot measures this fall asks voters to approve the addition of a Court of Appeals in the State of Nevada.  Nevada is one of only a handful of States that do not have a Court of Appeals.  Among the States without a Court of Appeals, Nevada has the largest population and highest caseload per justice.
As it stands right now, all appeals from the District Court go directly to the Supreme Court of the State of Nevada.  Given the high rate of population growth and the increased caseloads, the limited resources of the Supreme Court are being taxed in order to sustain a timely resolution of all of the cases in the pipeline.  An overburdened appellate court creates a backlog of cases on appeal waiting to be heard.  In turn, individual litigant’s access to justice can be delayed for several months or even more than a year.
Under Nevada’s model, the addition of an appellate court would enable the Supreme Court to refer cases to the Court of Appeals in appropriate cases.  These would typically be housekeeping cases or those that do not concern an important policy of the State of Nevada.  More cases could be processed and justice will be served in a more timely manner.

Like any other civil case, a will contest, a trust contest or other litigation involving trusts and estates can be appealed from the District Court.  The addition of a Court of Appeals would allow these types of cases to be more swiftly determined on appeal.  This is especially important in the context of wills and trusts, since the overall objective of the probate code and trust code is to resolve such matters on a more expedited basis than an average civil case.  That objective is thwarted when these cases get tied up in the appeal process since it prevents the estate and/or trust from being finally settled and distributed to the rightful parties.  Having a Court of Appeals would further the overall goal of allowing the trust or estate to be ultimately administered and distributed without unnecessary delay.

Wednesday, September 24, 2014

Please join Attorney Collins Hunsaker 
at the Annual ASDO Caregiver Conference

Wednesday October 22, 2014
8:30 am - 4:30 pm

2716 N Tenaya
Las Vegas, NV 89128

5 CEU's approved for nurses, social workers
and long term care administrators.

Call (702) 363-7566 to Register.

Thursday, September 18, 2014

Thursday, September 11, 2014

Come Bearing Annual Exclusion Gifts

As we near the end of the third quarter of 2014 I ask myself, where has the year gone?  It seems it was just yesterday that I was indolently celebrating the New Year.  Now, I have come to realize that we are coming into the last few months of 2014, and with that, the holiday season is impending. Fearing that I may be perceived as one of those people who begins their Christmas countdown months too early, I am reluctant to say that Christmas is in fact around the corner, and the time to begin shopping for gifts is uncomfortably near.  In the spirit of this gift-giving discussion, I wish to remind those of you who are benevolently inclined or who are looking to transfer assets free of gift tax that in addition to budgeting for the latest and greatest toys and gadgets for your young children and grandchildren (toys and gadgets that we only dreamed of as kids), you must also budget for your annual exclusion gifts.  
Internal Revenue Code section 2503(b) provides in relevant part:
(1) In general.-- In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a) [defining the term “taxable gifts”], be included in the total amount of gifts made during such year. (Emphasis in original.)
In 2014, the $10,000 figure above, which is indexed for inflation, increased to $14,000.  Thus, in 2014 taxpayers can gift up to $14,000 per donee, and married couples can gift twice this amount, or $28,000.  This can be a useful tool to transfer value out of ones estate free of gift taxes.  And, if a taxpayer has many donees to which he or she is prone to make gifts, the annual exclusion can be especially effective.  So again, for those of you who are altruistically disposed, before you get caught up in the holiday cheer and before the year-end comes and goes, be sure to budget you annual exclusion gifts.    

Wednesday, September 3, 2014

AFR's for September announced

September Annual Semi-annual Quarterly Monthly
Short-term 0.36% 0.36% 0.36% 0.36%
Mid-term 1.86% 1.85% 1.85% 1.84%
Long-term 2.97% 2.95% 2.94% 2.93%

Thursday, August 21, 2014

Trust Beneficiary Receipts and Releases

When a Trustee is ready to terminate a Trust and make distributions to the Trust beneficiaries, it is important that a written Receipt And Release signed by the beneficiary is obtained.  Oftentimes a Trustee will ask why is this necessary as there will be a cancelled check that is evidence of the distribution to the Trust beneficiary and the amount thereof.  There are a number of good reasons for the Receipt And Release. 

First, a written Receipt And Release signed by the beneficiary will avoid any future dispute as to whether the beneficiary received all that he or she is entitled to under the terms of the Trust agreement.  For example, a beneficiary may die shortly after the distribution and the deceased beneficiary’s surviving spouse and/or children may dispute that the decedent received his or her full share.  The Trustee will be required to prove that the decedent received all he or she was entitled to, possibly in a court of law.  This situation can be avoided with a signed Receipt And Release that states that the beneficiary acknowledges that the beneficiary has received any and all Trust property and assets that he or she is entitled to under the terms of the Trust agreement.

Second, a Trustee does not want a beneficiary to use the distribution to hire an attorney to sue the Trustee for alleged wrongdoing in the administration to the Trust.  The Receipt And Release will state that the beneficiary releases the Trustee from any and all claims, damages, legal causes of action, et cetera, known or unknown, regarding the administration of the Trust.    

Third, there may be unknown liabilities at the time of the distribution, most commonly income tax.  The Receipt And Release should provide that the beneficiary agrees to immediately refund to the Trustee part or all of the distributed Trust property and assets (or the cash proceeds resulting from the sale thereof) that may be requested in writing by the Trustee if it is subsequently determined that: (1) part or all of the distribution should have been paid to someone other than the recipient, or (2) funds are needed for the payment of claims or other obligations entitled to be paid from the recipient’s share of the Trust.  Item No. 2 is important in the event the decedent’s final income tax report has not been filed, plus the IRS can audit the decedent’s income tax returns previously filed.  Generally speaking, the IRS has three (3) years after a return is filed in which to audit the return.  However, there is no time limit if the IRS is claiming fraud.
For these and other reasons, it is always best practice that a Trustee obtain a signed, written Receipt And Release from a beneficiary at the time of distribution.  
-Attorney John R. Mugan