Archive for the 'Wills and Trusts' Category

Discriminatory Motives Not Enough to Invalidate Will That Disinherited Daughter

A New Jersey woman who claims she was disinherited from her father’s will because she married a Jewish man has lost another chance at having the will set aside.

Kenneth Jameson purposefully disinherited his daughter, Stacy Wolin, from his will, stating specifically that his daughter’s behavior “…brought me to my carefully considered decision that [Stacy] is to receive absolutely nothing from my estate.” It doesn’t appear to specifically mention any regard to his daughter’s relationship with her husband, but it does state that “…she acted with selfishness, manipulation, cruelty, and with abusiveness.”

Wolin cited her relationship with her Jewish husband as the reason for the strained relationship with her parents, who forbade her several times from seeing her now husband based solely on his religious faith. The couple eventually married and after her father passed away, the contents of Jameson’s will came to light.

Wolin filed a complaint alleging that the will should be invalidated, in part, because of its religious discriminatory intent.  Jameson’s estate filed a motion to dismiss Wolin’s claim based on a failure to state a claim—the lower court agreed and a New Jersey appellate court upheld the lower court’s decision.

Motives Behind Testamentary Wishes Don’t Really Matter

Although Wolin alleged other claims in favor of invalidity of the will, Wolin’s main argument stemmed from the fact that she claims her father’s alleged religious discrimination violates public policy. will

Unfortunately for Wolin, absent any evidence of undue influence, which she unsuccessfully argued, motivation of the testator is not relevant. When concluding that a court is bound to uphold the validity of a will so long as the testator was of sound mind and proper age at the time of execution, the court cited an 1849 case, Den d Trumbull v. Gibbons,

A will may be contrary to the principles of justice and humanity; its provisions may be shockingly unnatural and extremely unfair.

The court took it a step further and concluded that even if the will was motivated by discriminatory prejudice, it doesn’t violate public policy because the right to dispose of one’s property according to their wishes has been a long established right.

Just as with any other law, laws vary by state. When it comes to wills and testaments though, a few key principles generally apply everywhere and there’s only a handful of scenarios that could invalidate a will. If the testator executed the will with testamentary intent, without any fraud, duress, undue influence or mistake, was of sound mind, and executed the will in the presence of witnesses, then a court is bound to follow the testator’s wishes.

What Exactly Can’t You Put in a Will Then?

Obviously, there are certain items that cannot be included within a will, but for the most part a testator has extremely broad discretion when it comes to disposing of their property.

The number one thing states won’t let you do is disinherit a spouse, whether that be through a specific law prohibiting it or through laws put in place to protect spouses by allowing them to select what’s called an elective share of the estate.

Second, any terms contradicting the language of a contract regarding property won’t be enforceable either. Contract law will control over estate law and this is typically evidenced in the form of retirement, life insurance, and stocks, among a few others, which are disbursed according to their plan documents.

Third, putting illegal conditions on the terms of inheritance is also prohibited. As such, conditions on gifts that are contingent on the marriage, divorce, or change of religion of a recipient is illegal. Conditions on lesser matters are typically enforceable, though. For example, you could leave a gift to your child “if and when they obtain a liberal arts degree.”

Had Jameson left a provision in the will stating that Wolin were to only receive her inheritance if she converted from Judaism, she probably would have had a much better argument to invalidate the disinheritance clause.

Currently, Louisiana is the only state that won’t let you disinherit a child and that’s only if the child is mentally or physically incapacitated or is 23 years of age or younger. Most states want a specific intention to disinherit a child to be clearly written, which Jameson did, because a mere failure to mention a name in the will leaves wriggle room for a disinherited child to contest.

Prince’s Supposed Heirs Fight Over His Estate

“When Doves Cry,” “1999,” “Little Red Corvette,” “Purple Rain” – Prince Rogers Nelson had a number of hit songs. Throughout his career as a singer, songwriter, record producer and actor, Prince amassed $300 million dollars.

It was a shock when Prince passed away suddenly on April 21, 2016 at the age of 57. The cause? An accidental overdose of opioid fentanyl. Fentanyl is prescribed by doctors for cancer treatment, but it can be made illicitly and is blamed for a spike in overdose deaths in the United States. It’s 25 to 50 times more potent than heroin and 50 to 100 times more potent than morphine. Prince had no known living children at the time of his death. Prince

Now, Prince’s $300 million dollar estate is being sought after by his six siblings and numerous others who claim to be his secret love children, his nieces and nephews, and even secret siblings. A Minnesota judge overseeing Prince’s estate narrowed down the wide pool of potential heirs ruling out nearly 30 claimants. The judge also ordered genetic testing for six purported family members.

What could Prince have done to avoid all this fighting over his estate?

What is Estate Planning?

Prince should have created an estate plan, and so should you.

You may not think that you need an estate plan, but if you own anything, including your car, home, other real estate, checking and saving accounts, investments, life insurance, and personal possessions, an estate plan is wise.

You probably have an idea of how you want to distribute your possessions after you pass away. An estate plan helps ensure your wishes are met by specifically naming whom you want to receive things you own after you die. An estate plan can either be in the form of a will or a living trust. A will provides instructions on how to distribute your belongings after you die.

However, any assets titled in your name or named in your will must go through your state’s probate process before they can be distributed to your heirs. In layman’s terms, probate is a legal process the court takes to conclude all your legal and financial matters after your death. It can be a long and arduous process, especially for heirs who are waiting to move on from the death of their loved one.

Because wills still need to go through probate, a living trust is preferred by most families and professionals. Unlike a will, the trust doesn’t die with you. Instead, any assets in your trust can remain in trust until your beneficiaries reach the age you want them to inherit. For example, if you die when your child is only five but you don’t want your child to be able to access your assets until your child is twenty-five, a trust can ensure that your child will have to wait another twenty years.

A trust is more expensive upfront than a will, but because a trust avoids court interference (ie. probate), most people prefer paying more for a trust than a will.

What Happens if You Don’t Have an Estate Plan?

Each state has its own laws, but a person who dies without a will or trust will have his or her estate distributed and determined by the state’s probate court.

Prince passed away in his home state of Minnesota. If you pass away in Minnesota without a will or trust, your property is distributed through probate via intestate succession. In Minnesota, your spouse receives the entirety of your estate after debts and taxes, unless the person who passed away (known as the decedent) has children who are not also the children of the spouse.

In that case, the spouse receives the first $150,000, and the balance is divided among the children. If the decedent has no spouse and no children, the closest living relative (such as the sibling) will receive the estate. This is why Prince suddenly has a number of people claiming to be his relatives, most of whom he probably never met during his lifetime.

Let Prince’s ordeal be a cautionary tale of what could happen if you don’t have an estate plan.

How Can Your Foreclosure Affect You?

No one wants to foreclose, but it happens if you fall behind on your mortgage payments and have no way of catching up. While you want to move on from the whole experience, your credit score won’t let you.

A foreclosure can hit your credit up to 300 points, and if you’ve missed several mortgage payments before filing for foreclosure, it can negatively impact your credit score even more. A foreclosure appears on your credit report as of the date you file, not the date of sale. It stays on your credit report for seven years.

Besides carrying around the foreclosure on your credit report for years, what other affects can foreclosures have on your life?

Foreclosures and Family

After the housing bubble burst in 2008, foreclosure rates increased substantially. Many families lost their homes to foreclosure. Foreclosure Sign

Studies demonstrate that families who faced foreclosure saw their earnings fall more than families who did not experience foreclosure. After one earner lost his or her job, foreclosure was nearly inevitable. Moreover, families who lost homes to foreclosure were more likely to seek government assistance programs for support. They also tend to double up or share their home after filing for foreclosure, but before the house is sold.

Bankruptcy and Foreclosure

If you are contemplating bankruptcy, you may also be facing foreclosure. If you fall three months behind on your mortgage payments, it may be beneficial to think about filing for bankruptcy to avoid foreclosure. Although financially, bankruptcy is considered a “last-resort” option, it can hold off creditors, including your mortgage company, while you’re sorting out your financial troubles.

Bankruptcy only prevents foreclosure in some cases. If you file for Chapter 7 bankruptcy, it means you don’t have the financial means to pay any of your bills. In that regard, the bankruptcy releases you from your obligation to pay your debts. However, Chapter 7 bankruptcy does not prevent foreclosures. While your obligation to repay is released, the lien on the house isn’t canceled because it serves as collateral if you cannot repay. With Chapter 7 bankruptcy, the homeowner often surrenders his or her home.

Chapter 13 bankruptcy gives the debtor an opportunity to work out a new agreement with the lender. Lenders can come to an agreement with the debtor consisting of paying off the late payments and late interest for up to 5 years as part of a new loan agreement. If you can pay the new loan payment and make all your payments on time, after the five years are completed, you can keep your home.

It is important to note that while bankruptcy and foreclosure have a negative impact on your credit, foreclosures remain on your credit report for seven years, whereas bankruptcies remain for ten years. Nevertheless, creditors look at foreclosures more seriously than bankruptcy that don’t include a house.

Foreclosures and Your Estate Plan

If you inherit a house that is behind on its mortgage payments or already in foreclosure, you have a couple options. Assuming the homeowner is behind on mortgage payments, the person to whom the house is left does not have to accept the inheritance or the debt associated with the property. If the beneficiary can’t afford the mortgage payments, insurance or maintenance, the beneficiary may disclaim the property and it would be passed to the next person designated. If no one claims the property, the home would likely go into foreclosure.

If the house is going into foreclosure, you want to make sure the house is not in your name and is still the property of the estate. If it is in your name, the foreclosure will affect your credit. If not, it has no bearing on your credit. In that case, the estate may be responsible for the deficiency judgment.

Foreclosure and Divorce

Financial problems are cited as one of the leading causes of divorce, so it should come as no surprise that foreclosures and divorce often go hand-in-hand. If you’re behind on your mortgage and going through a divorce, you must figure out who is responsible for the mortgage debt.

Many couples take out their mortgage and hold title jointly. In that case, both parties are responsible for the debt. However, if either spouse holds title in his or her name alone, that spouse is solely responsible for the debt and is the only person the bank may pursue for any deficiency judgment after a foreclosure.

New Bill Makes it Easier for Surviving Spouse to Fight Foreclosure

California Attorney General Kamala Harris is supporting a bill that expands the state’s Homeowners’ Bill of Rights. Under the expansion, the Homeowners’ Bill will include a provision designed to help surviving spouses and children stay in their homes after the primary mortgage holder passes away.

All too often, a couple buys a property but only one spouse signs the original loan documents and thus becomes the primary borrower. After the primary borrower passes away, the remaining spouse (typically the widow) is unable to pay the mortgage. As a result, the house is foreclosed.

The bill is known as the Homeowner Survivor Bill of Rights, Senate Bill 1150. If enacted, it would expand the current California Homeowners’ Bill of Rights to provide protections for homeowners against foreclosure. In that regard, the Survivor Bill is meant to protect surviving spouses and children from losing their home after losing their loved one.

Homeowner’s Bill of Rights

The California Homeowner Bill of Rights was enacted in 2012 to ensure fair lending and borrowing practices, and to guarantee basic fairness and transparency for homeowners in the foreclosure process. For example, mortgage servicers were restricted from taking steps to advance the foreclosure process if the homeowner was working on securing a loan modification. Another provision required purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings. California Homeowner Bill of Rights

In its current form, the survivor spouse is at risk of losing his or her home due to foreclosure. Recent hearings on the Homeowner Survivors’ Bill revealed banks insist on speaking with the primary mortgage borrower. Even if the primary borrower has passed, the bank would not modify the loan to include the surviving spouse because the deceased spouse could not sign the loan modification.

Other supporters of the Survivors Bill reveal they had to send their deceased spouse’s death certificate twenty-five times to the bank before the bank would consider modifying the loan. This difficult process has caused many grieving spouses additional pain, annoyance, and heartache.

How Does the Survivor Bill Fight Foreclosure?

The Homeowner Survivor Bill of Rights addresses what its sponsors have defined as a “loophole in California law that fails to provide surviving spouses and children important protections against foreclosure that are available to other homeowners.”

Under the Survivors Bill, the surviving spouse would be able to apply for both a loan assumption and loan modification and become the single point of contact with the lender. In other words, the spouse would be able to assume the loan and modify it without the deceased spouse having to sign paperwork after death or having to send the bank numerous copies of a death certificate to prove the deceased passed.

The proposed legislation also requires mortgage servicers to communicate with the heirs and spouse directly instead of allowing mortgage servicers to foreclose without attempting to speak with the deceased’s family. The new legislation notifies the surviving spouse that they can step in, assume the loan and keep their home instead of inundating them with paperwork and conflicting, confusing information.

Removing Permanent Alimony for Divorcing Floridians a No Go

A previous blog discussed Florida’s child custody bill that would have started divorcing parents on equal ground in a custody battle with a presumption of 50/50 custody. Governor Rick Scott, who expressed creating a promise of equal custody would put the needs of the parents before the child, vetoed the bill.  The equal custody provision of the bill got more media attention. However, an even bigger portion of the bill was aimed at removing Florida’s current law regarding alimony.

Currently, Florida allows permanent lifetime alimony. Supporters of the alimony reform want to replace permanent alimony with formulas to calculate an award that would result in a fixed end date based off the length of the marriage and the spouses’ respective incomes.

Florida Judges Have Broad Discretion to Determine Who is Entitled to Alimony, the Amount, and For How Long the Alimony Can Last.

When determining whether to award alimony, the court will consider:

  • the standard of living during the marriage,
  • the duration of the marriage,
  • the age and the physical and emotional state of each party,
  • the financial resources of each party, including the nonmarital and marital assets and liabilities distributed to each,
  • the earning capacities, educational levels, vocational skills, and employability of the parties,
  • the contribution of each party to the marriage, including services rendered in homemaking child care education and career building of the other party,
  • the responsibilities each party will have with regard to any minor children they have in common,
  • the tax treatment and consequences to both parties of any alimony award, and
  • all sources of income available to the party.

Sounds fair, right? Well, the presumption for long-term marriages, 17 years or more, is that any determined award of alimony is permanent. It’s a rebuttable presumption, so the court can disregard the presumption. Nonetheless, that’s not a burden the breadwinning spouse should have to endure. Alimony

Under the vetoed alimony reform, alimony would have had an end date, rather than an indefinite time frame. Although the current law already requires judges to take the above factors into consideration when considering an award of alimony, the reform would have taken away the discretional decision-making component and required the number to be calculated based off the formula, and thus, resulting with a fixed end date.

Current Law Allowing Lifetime Alimony Is Unfairly Applied

It’s geared at stay-at-home parents, usually the mother, who could not easily re-enter the workforce. Florida’s rationale behind alimony is that they, as a state, don’t want to support the impecunious spouse. Instead of forking up the money via welfare and food stamps, legislative intent is to look to the breadwinning spouse to provide for the non-breadwinning spouse.

Spouses are expected to maintain the same standard of living that was held during the marriage, but, in reality, that’s an insane standard. That assumes divorcing spouses will not remarry and will not inevitably have to support another spouse or 2 separate households. Had a stay-at-home spouse never gotten married and had kids, that spouse would have had to learn to support themselves. Marriage ending in divorce should not be an equivalent to a lifetime financial contract.

Additionally, many spouses are forced to work longer than they normally would have, not being able to retire, because they can’t afford to make alimony payments otherwise. How is that fair?  Current law allows spouses to ask for reductions in their alimony payment for retirement purposes, but it’s often overlooked.

Is There a Better System?

A parent that sacrifices their ability to have a career to stay at home and take care of their kids is great and, don’t get me wrong, should be given an award of alimony, but requiring an indefinite award seems excessive.

Using a formula to calculate an amount with a fixed end date seems like a more reasonable system than a permanent award, as it allows the spouse time to get back on their feet without forcing a breadwinning spouse to work beyond retirement age just to afford alimony payments. While I agree with the intent of the alimony reform bill, how the formula plays out in actual divorces may be a different story and I think there’s room for improvement.

Other than lengthy marriages that involve a stay-at-home spouse taking care of children, I don’t see a useful purpose for including length of marriage as a hard factor into the formula. While it should be considered, especially if the couple had only been married for a short amount of time, 17 years of marriage shouldn’t automatically equate to an alimony award—the length of the marriage shouldn’t be weighed as heavily in calculating a figure.

Need should be the #1 factor in the formula, as using a basic pre-determined formula may unfairly hurt the paying spouse. Earning potential, education, children, cohabitation or re-marriage, among other factors, should all definitely be considered. An exacting formula may not be the best answer and that’s why allowing judicial discretion is important, but there definitely needs to be some hardline rules or ways to incorporate formulas that won’t unfairly punish the paying spouse by requiring lifetime alimony.

Florida’s current guidelines aren’t bad; it’s more the execution of allowing lifetime alimony awards that’s hurting breadwinning spouses. With the veto of the bill, it’s unclear whether any kind of alimony reform will happen in the foreseeable future.