Estate Planning Issues

Perry Pirsch, Esq.

PIRSCH LEGAL SERVICES, PC, LLO

www.pirschlegalservices.com

Death and disability are as inevitable as junk mail and telemarketers.  What should a reasonably prudent person do in recognition of inevitable disability and death?

First option: do nothing.  It’s free and it doesn’t take any effort.  If you don’t have a will, state statute provides one for you (called dying intestate).  Contrary to popular misconception, your belongings do not escheat to the state unless you have no close relatives.  Your estate is basically divided up between spouse (if applicable), children (if applicable), possibly parents, or other relatives.  It only escheats to the state if you have no close relatives or only “laughing heirs.”                  

Second option: create a will.  A will has numerous advantages over dying intestate.  With a will you can nominate a guardian for your minor children, select a personal representative in whom you have confidence, or create a testamentary trust whereby children would not receive a distribution at the age of maturity in Nebraska, nineteen, but at a more seasoned age, such as twenty-five. You can disinherit unworthy children.

Whether dying intestate or by will, your property will go through probate.  Probate is essentially a fair process where a decedent’s assets are retitled into the name of beneficiaries after the decedent’s expenses are paid.  A personal representative is recognized by the court to step into the decedent’s shoes to wind up affairs: inventory your assets; pay the costs of administration; pay debts; and distribute the remainder to beneficiaries. You can avoid probate altogether through several methods.  Probate can be unnecessary, expensive, and time-consuming, depending on the size of your estate.  

Third option: you can hold property jointly with right of survivorship.  This is a very common method for spouses to hold real estate and financial accounts.  Upon the death of one of the parties, his ownership simply dissolves, leaving the survivor as the only owner.  While there are advantages to joint tenancy, there are some disadvantages.  If you add children as a joint owner and they take everything you own, the police call it a “civil” matter.  It may also lead to claims by their ex-spouses or creditors.

Fourth option: payment on death provisions (“POD”) allows for property to pass without probate and without giving someone an immediate interest in your property.  It is very common in financial accounts and the Nebraska Legislature recently created a similar provision for a revocable deed that provides transfer of real estate upon death.

Note: if you draft a will naming your spouse as a beneficiary and you subsequently get divorced, the law will treat your ex-spouse as if he predeceased you.  In contrast, with joint bank accounts or payment on death beneficiaries, the right is contractual and does not end at divorce.

Fifth option: trusts.  If you have a special needs child; if spouses have children from prior relationships; for a large estate; if children have substance abuse problems; or a number of other circumstances, you might consider a trust.  Trusts are a way of controlling assets even beyond death, with legal ownership residing in someone responsible and beneficial ownership residing in a beneficiary.

Trusts avoid probate and can serve many beneficial purposes, but there is generally a greater expense in creating a trust then simply creating a will.  It is also important to ensure they are fully funded.

Oftentimes a combination of all the above is employed in a good estate plan; however, it should also include powers of attorney for financial matters and powers of attorney for health care decisions, with a living will provision. This is to protect the client during a period of incapacity and prevent the need to go to court for a guardianship or conservatorship. 

Unfortunately, Nebraska also has an inheritance tax and even transfers outside of probate – and even before death – can be subject to the tax.  While there is an exception for spouses beneficiaries under 22-years, and 501c3 charities, even children of a decedent are subject to a tax of one percent after the first $100,000 of assets per recipient for deaths. 

A good estate planning attorney can walk you through many issues in preparation of death or incapacity.  Contact Perry@NebraskaBusiness.Legal for a free initial evaluation.