Transcript - Jules Haas Episode 3

This transcript was exported on Aug 26, 2020 - view latest version here.

Welcome to Financial Poise Presents, a production of Financial Poise Webinars, in which we take a deep dive into a specific topic by interviewing a single trusted advisor or expert on that topic.

Carrie Miller:

My name is Carrie Miller and I'm the Managing Editor of Financial Poise. With us today is Jules Martin Haas. Jules Haas is an experienced trust and estates attorney with vast experience in helping clients with their estate planning and helping their heirs and beneficiaries upon his client's passing. And he's here to tell you New Yorkers and everyone why you should have a will.

Jules Martin Haas:

We've had some preliminary considerations here, a lot of information to start to think about. And you may be saying to yourself, as a lot of clients and folks do, "Well, I can put my assets in "in-trust for" account or a joint account. And I don't have a gazillion dollars, so I don't really have to worry about taxes. Why do I need a will? Why don't I just do that? And I'm sort of done, end of story. I don't have to pay fees. I don't have to worry about provisions and things like that."

Jules Martin Haas:

Well, it's not as simple as that in all cases. If a person dies without a will, their estate is going to be distributed to their next of kin. It's an intestate estate, and what that means is that the state laws, here in New York and in every other state, is going to decide who gets their assets. If you take a look now, we have slide number three, it lists briefly in New York who those people are, and basically in New York, like most places, is a list of priority. You start with a spouse, you start with children. It goes down to parents, siblings, and so on, can could go down to cousins, more remote relatives.

Jules Martin Haas:

But the fact of the matter is that these are not necessarily the individuals that you want to inherit your estate. And if you have assets that are held, let's say as joint tenants or with rights of survivorship or "in-trust for" accounts, and that secondary person is not alive and you do not have a will, your estate is going to be distributed according to the laws of intestacy. And that might not reflect your intentions whatsoever. Also, if you have assets, and for some reason, they are not put into some sort of automatic, or what we call operation of law type of account, then again, you don't have a will, you're stuck with intestacy.

Jules Martin Haas:

And just one quick example. I've seen situations where people have their money, let's say, "in-trust for" account or beneficiary account with a certain institution, and then the institution, for whatever reason, goes out of business. Usually it's transferred to another institution. They say "We're closing XYZ bank and we're being taken over by ABC bank.' I've seen situations where the new institution says, "Well, you need to sign all new papers." Unfortunately, they send you papers that don't have that "in-trust for" other information, and the person doesn't realize that they haven't signed up for it or they don't prepare those documents correctly and their plan is not going to work. So you really should have a will to back up all those things that you intended to do. Okay?

Jules Martin Haas:

What other problems arise? If you don't have a will, you'll see here that there are some other considerations aside from it going to people that you don't necessarily want it to go to. It's a lack of control over dispositions, and that really means that it may end up going to people, but maybe not in the way that you want it to. You may have a group of people that are your brothers and sisters, but you don't want to treat them all equally. You may want one brother to get a little bit more, sister to get a little less, or whoever it is in the context of your disposition plan as far as dealing with your assets.

Jules Martin Haas:

So when you lose control over your assets, it's not really the best way to plan your estate, and that also goes to naming fiduciaries, which we'll talk about in a minute or two in another context. But when you're just dealing with fiduciaries, you can name your fiduciary or you can name your executor, whereas your administrator is going to be selected by the law. It would be the same people that you have under the law that are going to inherit your estate.

Jules Martin Haas:

So if you see item B here on this slide under Some Considerations, it talks about kinship issues. Well, again, this is also a big problem because in order to inherit, people have to prove that they are the next of kin of the decedent. That's not always easy to do, particularly if their lineage is remote. So to prove that you're a cousin or more remote descendant of this person can be very difficult, and it takes a lot of time and effort to try to prove kingship. Not only do you have to prove that you're related to a person, but you have to sort of prove the negative. You have to prove that there are no other people that are either equal to you that deserve to inherit or that there are no other people that have priority of you that would inherit instead of you. And it's not always easy to prove this. You have to show death records and birth records and disprove all of the other people to show that your lineage is the one that deserves to receive assets.

Jules Martin Haas:

I had a case and it was a probate case with a kinship issue recently. We had to do a kinship search, which took almost a year to do, and the family originally came from Ireland. After the research was done, the report that we submitted to court was 250 pages long and there was like a hundred exhibits. So if you have a wide-ranging family, particularly a family that's overseas, it may be difficult to locate people. Records may be destroyed, particularly if the family dates back many years through the Holocaust or through various wars in countries that have changed names and administrations over time. This can be a really big problem. So it's always best to do the will to try to lay out, even to whoever you're talking to and let them know what the kinship issue is. Particularly if there is a kinship issue, you can try to avoid that by doing a different type of planning, either a living trust or something along those lines.

Jules Martin Haas:

You also see an item here that we list as Administration Litigation, and what that means is in its simple terms, is this. If you don't have a will, not only does the law decide who is going to inherit your estate, those same people have a right to act as administrator of the estate. So let's take a simple example to the sort of see what we mean. Let's say a parent dies. Parent has seven children and no spouse. Seven children have a right to inherit the estate. Now, of course, all seven children want to be the administrator of the estate. Of course, they won't want to be in control and charge, and that's what their parents would want, so they say.

Jules Martin Haas:

The court's not going to appoint seven people as administrators of one estate. Court might appoint one, two. I've seen them do three. So what you end up having is that, particularly when they can't get along, you have all of these people fighting against each other in court. Different factions lining up with each other, three brothers here, four sisters there. This one's good, this one's bad. And then the court ultimately has to make a decision as to who's going to be appointed. Sometimes the court will appoint the administrator from the group, but sometimes the court may say "The heck with all of you. I'm going to appoint the public administrator, which is the public official, to deal with this because you guys don't get along, and I can't deal with this and nobody could administer this estate fairly."

Jules Martin Haas:

And in fact, if there are only remote relatives, such as cousins, the court's going to appoint the public administrator. So if you write a will, you're able to select. Let's say you want to treat all of the kids equally or whoever it is. But you say, "Well, this one person is the best person." You can write your will and say, I nominate so-and-so as the executor of my estate." Nine out of 10 times, the court's going to honor that nomination and you can select also an alternate executor or a successor executor. This avoids all of those issues, avoids those problems, and avoids the delay in administering the estate while all of those issues are being fought out in front of the surrogates court. That's not what you want to do.

Jules Martin Haas:

You also see an item here that we listed as a surety bond? Now, what a surety bond is it's basically a bond that's issued by a surety company. It's like an insurance policy and it's issued to an administrator or an executor of an estate. It's meant to act as an insurance policy to prevent the fiduciary, the executor or administrator, from running away with all of the estate assets. It protects the interests of the beneficiaries, creditors of the estate, people that are interested in the estate.

Jules Martin Haas:

In most administration cases where you have an intestate estate, courts want a bond to be posted. Most of the time when you have an executor and you don't have to post a bond, the will, will say that we waive the requirement of a bond. Problem here is that most surety companies are sticklers and they want you to have good credit. So you may have a very trustworthy person who could qualify as the administrator of your estate, but they can't get bonded because their credit is not good, because the sureties will do a credit check on them.

Jules Martin Haas:

Their credit may be poor for reasons that are really that are really not having anything bad to do with them. For instance, let's say they went through a divorce and that adversely affected their credit, or they have a big student loan, or someone tried to interfere with their credit card accounts and stole their credit card numbers or things like that. They don't have good credit. They may not be able to qualify for a bond. They can't act as the administrator.

Jules Martin Haas:

So, again, these are things that are very important to consider. So when you say, "Do I need a will?" There are many overriding reasons, even if you decide to set up "in-trust for" other accounts, to still do a will to back that up, and one does not exclude the other. You can have some stuff that is transferred under your will, some items that are transferred automatically to people. But you really need to look at it and decide what's best for you and not ignore the fact that a will can serve a purpose, even if you're going to use predesignated types of [inaudible 00:11:41].

Carrie Miller:

Just a quick question. You mentioned all these fights and probates. Can I avoid probate by doing a living trust, or is there a way to avoid probate?

Jules Martin Haas:

When a person dies with a will, their will, will be probated, which means that it will be filed with the court. And basically the court has to review the will and other documents and validate the will and the provisions in the will. In most instances, it's a fairly straightforward procedure. You don't have a will contest, you have a spouse, you have children, whatever. You can avoid probate in certain ways, certainly by "in-trust for" accounts or joint accounts or things that go outside of a will. You don't need to probate the will because nothing's passing under it.

Jules Martin Haas:

You can also take all of your assets and put them into what you refer to as a living trust or a grantor trust or a revocable trust, same type of thing. In that case, the trust, to effectuate its provisions when someone dies, does not have to be filed with the probate court. It's self-effectuating, and the trustee, whoever the trustee is, the successor trustee can then just follow the provisions of the trust.

Jules Martin Haas:

There are various reasons to use a trust. It may help in a kinship situation if you're not sure who kinship might be. You want to avoid probate. If you think that a will might be contested, you don't want to have to put the will out there and invite people to come in to contest it. But in most situations, probating will is not going to involve all of those things. But the living will, will avoid probate. In order for the living will to be effective, you need to go ahead and transfer all of your assets into the living will, and therefore you don't need to probate, even though you will do what we call a pour-over will, sort of a backup in case you miss something.

Jules Martin Haas:

The fact is that you need to retitle everything. So if you have a house, you have to change the title into the living trust. If you have a bank account, if you have a brokerage account, it all has to be in there for this to be effective. Many people, particularly if it's sort of a straightforward type of thing, don't want to go through the hassle of retitling all of their assets into the name of a living trust. There's more expense, costs upfront to create two documents instead of one document. But again, you're doing what's best for you. While it's a consideration, if it's the thing that's best, then obviously you would do it. So there are various things to consider, and it's certainly something within the realm of your estate plan that you need to think about and discuss.

Speaker 1:

Thank you for attending this edition of Financial Poise Presents. Financial Poise has one mission, to provide reliable plain English business, financial and legal education to individual investors and private business owners.

Jules Haas Episode 3 Revised (Completed 07/29/20)
Transcript by Rev.com