Wednesday, July 20, 2016

Determining The Validity Of Your Will During Your Lifetime

One of the common fears of clients when doing their estate planning is that the terms of their last will and testament and/or their revocable trust will not be followed after their death.  In this regard, there are a limited number of legal theories to challenge the validity of a will or trust of a decedent.  The two most common legal theories are: (1) the decedent lacked the necessary legal capacity at the time the will (testamentary capacity) or trust (contractual capacity) was created, and (2) the decedent was unduly influenced by someone at the time the will or trust was created. 

When a will or trust is so challenged, one of the main problems is that the person who made the will or created the trust is now deceased.  The maker of the will or trust is no longer available to confirm that these are their intentions, that they have the necessary legal capacity, that they are not being unduly influenced, and if necessary explain to the court or jury the reasons for the terms of their will and trust such as why a child is disinherited.  This unavailability of the maker of the will or trust may lead to speculation on the part of the judge or jurors, and the substitution of their judgment of what they believe the will or trust should provide such as a child should not be disinherited.  At least as to wills, there is now a solution to this problem in Nevada.

For many years under Nevada law, the maker of a will, trust or other writing constituting a testamentary instrument could have a court determine any question of validity arising under the instrument and issue a declaration of rights. In other words, a Nevada court could issue a declaratory judgment as to the validity of a will or trust. Specifically, the law is Nevada Revised Statute 30.40(2). However, until recently this statute has been construed to mean that such a determination and declaratory judgment of the validity of a testamentary instrument by a court could not take place until after the death of the maker. This has now changed as to wills. The 2015 Nevada legislature passed a law that states if a declaratory judgment is entered under Nevada Revised Statute 30.40(2) during the lifetime of a decedent declaring a document to be the valid will of the decedent, the validity of that will is not subject to challenge after the death of the decedent. Of important note is this does not prevent the person from later revoking the will or making a new will during their lifetime.


However, of particular concern is that the Legislature did not include trusts in the new law.  This is most unfortunate in that revocable trusts are the primary estate planning tool in this day and age as opposed to wills.  One saving grace may be that in most instances the will is executed the same day as the trust.  Accordingly, a determination by the court during the lifetime of the maker that a will is valid should at least indirectly assist in later establishing the validity of a trust that was signed on the same day as the will was signed by the now deceased maker.  A potential problem is that a trust may be amended or restated after the date the will is signed.  Hopefully, a similar law for determining the validity of trusts during the lifetime of the trustor will be enacted in the next session of the Nevada Legislature. 

Tuesday, July 19, 2016

AFR's for August

August AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 0.56% 0.56% 0.56% 0.56%
Mid-term 1.18% 1.18% 1.18% 1.18%
Long-term 1.90% 1.89% 1.89% 1.88%
The Section 7520 rate is 1.4%