If you're just joining us, you might want to go back and read the 24 April blog for the first set of executor challenges we discussed. It's not critical to this week's topics, but there's some good stuff in there. By the way, most of these answers apply to both independent executors ("IE", named in the will and received letters testamentary from the court) and independent administrators ("IA", not named as executor, or there was no will, but got letters of administration from the court - when I use "executor", I generally mean either of these). Now, to jump into more potential headaches!
1. The person whose estate I'm administering owned a home and either (a) he bequeathed it to a particular person or (b) it's part of the general estate and the beneficiary wants to keep it. What do I do? This is a fairly uncomplicated one - as the executor, you can transfer the property by way of an Executor's Deed to the beneficiary. The deed should be filed in the property records of the county where the property is located - if it's in the county where the probate was granted. One thing to be aware of is that most wills transfer property "subject to all liens and encumbrances", which means that if there's a mortgage on the property, the person who gets the property also is responsible for the mortgage.
2. Okay, but he also had a vacation home in another county - can I just do another deed? Yeah, not exactly. Real property (land) that passes by will or inheritance has to be probated in the county in which it's located (called in rem jurisdiction - interesting but nobody cares except lawyers). What usually happens is that after the will has been probated in the county where the person dies, there's a (usually purely paper) process called "ancillary probate", where the court documents from the first probate are filed in the records of the county(ies) where any other real estate of the decedent is located. THEN an executor's deed is filed in the applicable county.
3. How about the real property he owned in another state? How does that get treated? The answer depends on the state where the other property is located. Every state has different requirements: in my experience, most will have an ancillary probate process that much like the process in Texas (purely paper); however, some states (Florida and New Mexico come to mind) require a partial or complete probate process that may force you to hire an attorney licensed in that state to get property transferred. The best thing to do is TELL YOUR PROBATE LAWYER ABOUT ALL THE PROPERTY THE DECEDENT OWNED right at the beginning, so the complexity and cost can be factored in.
As always, this legal information is based on Texas law because I'm a Texas lawyer. It's not legal advice, and each case is different, so be sure to contact a law firm or attorney who practices a lot of probate if you have questions about your situation.
At the Jacobson Law Firm, a significant part of our practice is business law, including formation of businesses, serving as "outhouse counsel" (for companies that can't afford in-house counsel) and serving as registered agents for many of our business clients. For Texas business entities (LLCs, corporations, limited partnerships, etc.), there are two required annual reports that must be filed by May 15th: the Public Information Report (PIR) and the Franchise Tax Report, which for most small businesses is a "Report of No Tax Due" (RONTD). Stay with me here...
The PIR lists the people who are in charge of the business (directors, managers, general partners, members, etc.). The RONTD is, as the name indicates, a statement that the business doesn't have enough assets to have to pay franchise taxes. Failure to file either report can get the business's certificate of formation revoked and result in involuntary termination - meaning that the liability shield that the owners can disappear altogether. This is a bad thing.
Another bad, and related, thing is that many business owners don't remember they have to file these reports, and they rely on the annual reminder the Comptroller sends out. Here's the problem: most of our business clients have not received this reminder for 2018 yet. A contact at the Comptroller's office told my staff earlier this week that they've had a number of complaints that the notice hasn't been received, and we can verify that most of the clients for whom we serve as registered agents haven't received their notices. Guess what? Failure to receive the notice doesn't relieve the business from having to timely file the reports.
So, Texas business owners, be sure to get your reports filed by the May 15 deadline! Your CPA can help you with the RONTD - they probably did it when they did your tax return. Either they or your attorney can help you with the PIR. Both forms are also available on the Comptroller's website at the following link: comptroller.texas.gov/taxes/franchise/forms/2018-franchise.php
As always, this legal information is based on Texas law because I'm a Texas lawyer. It's not legal advice, and each case is different, so be sure to contact your attorney (or CPA, in this case) if you have questions about your situation.
We do a lot of estate planning and probate here at the Jacobson Law Firm. That means we draft a lot of wills and trusts, as well as other advance directives, and we help a lot of people through the probate process. One of the great honors in life is to be asked to serve as the executor under the last will and testament of a friend or family member. This means the testator (person making the will) trusts you to take care of his or her estate and the needs of his/her family during the most difficult time many of them will ever face. [Side note: his/her is awkward, but I can't bring myself to use "their" - "he" or "she" is singular, "their" is plural, and that is just a syntactic bridge too far for me. Back to the topic.]
Although it's an honor, there are things to consider both in naming someone and in accepting the assignment. I'm serving for the second time, for my father's estate, and between my own experiences and those of hundreds of clients over the years, certain things keep cropping up that make an executor think, "Now why, exactly, did I accept this honor?" This is not an exhaustive list (and probably just the first of a number of posts), but will give you an idea of some of the challenges of serving as an executor.
1. "I know he had insurance, but I can't find the policy anywhere. And is that my job?" Yes, but only to the extent that the policy payout has to go through the estate. If there's a beneficiary named, your legal duties as executor are over, because those proceeds don't pass through the estate - but your mom probably still needs for you to help.
2. "I have a job, but all the companies, government offices and businesses I have to talk to are only open during my work day." This is one of the biggest challenges: balancing your normal life with the added duties of being someone's executor. The problem grows if your profession has you charging by the hour for your time. Just sayin'...
3. "She was a military veteran/retired military - does that complicate things?" Yes - yes, it does. Dealing with the Department of Veterans Affairs (VA) and the Defense Finance and Accounting Service (DFAS) can be the most frustrating part of trying to settle an estate and get the surviving spouse/kids set up with a new payment schedule and amount. If you've never been in the military or been a military family member, the language and acronyms alone can drive you nuts, and the required paperwork and "That's not something this office can help you with" answers are extremely challenging to negotiate.
4. "He was a retired teacher - does that complicate things?" - Don't GET me started on how unresponsive the Texas Teacher Retirement Services office is. Best to just drive up to Austin and stand in their faces. And wait.
5. "We were going through his files and found some old stock certificates, but they're for a company I never heard of. What do I do with those?" Tracking down companies that may have been sold, merged, etc. can be a challenge. Google is your friend on a lot of these issues. You may find that the stock is worthless, but you may also find that it's split 6 times since the stock was bought.
As noted, these are just a few of the practical issues that may arise if you serve as an executor. Before you say yes (or before you name somebody), consider how much time it requires and whether you (or the person you name) have/has the temperament and time to negotiate challenges like those discussed above. It's not "rocket surgery", but it does require a modicum of patience and organizational skills.
As always, the above is legal information based on Texas law because I'm a Texas lawyer. It's not legal advice, and since every case is different, you should contact an estate planning and probate lawyer to discuss your particular case or concern.
We're a firm that does a lot of probate, and sometimes an easy fix will come up of which I should have been aware but which had escaped my notice. We're in the midst of settling both my father's estate and my father-in-law's estate at the moment, and I have discovered (or re-discovered) one of those things: In Texas, there's an easy way to take one load off of your spouse when you die, and that is to designate ownership of your vehicles as "joint tenants with right of survivorship".
When a person dies owning a vehicle, the inevitable hassle begins as to how the car gets re-titled. Even if both names are on the title, the state presumes it's community property and so the decedent's half has to be conveyed to the survivor. That requires either a probate action or an affidavit of heirship for transfer of motor vehicle, both of which take time and cost money and involve dealing with sometimes surly employees. However, there's a place down at the bottom of the form (see below) where you and your spouse can choose to own the vehicle as "joint tenants with right of survivorship (JTWROS). When you make this election, when the first spouse dies, the surviving spouse just keeps on owning the vehicle - no need for an affidavit of transfer or probate.
Making use of this option will give your surviving spouse one less thing to fret about. That may seem small, but in the midst of grieving and changing accounts, and getting Social Security (or, worse, the Texas Teacher Retirement System - don't GET me started) to respond, and probate, anything that lessens the burden helps immensely. Do each other a favor: sign the JTWROS statement on your car title.
As always, this blog is based on Texas law because I'm a Texas lawyer, and it shouldn't be construed as legal advice, just legal information. Every case is different, so if this raises questions in your mind, please consult a lawyer who deals in this sort of thing.
As an estate planning, probate and business law firm, we see a lot of the same things when people do their own legal work: things left undone that can come back and bite you. For example, a lot of entrepreneurs will either file an assumed name certificate (a "DBA") and think they're protected from something (they're not), or start an LLC by filing a Certificate of Formation with the Texas Secretary of State and think they're good to go (they're not). Likewise, people who do their estate planning online will crank out a "Texas-specific" will or power of attorney without checking with an honest-to-goodness Texas estate planning lawyer and think their family will sail through probate when they die. Often, they won't.
A couple of weeks ago I talked about the fact that "boilerplate" language is in contracts because at some point in the past, the thing it's designed to avoid actually happened. In much the same way, setting up your business correctly will go a long way toward protecting you from liability, but ALSO, every business needs to have a corporate book where the annual meeting minutes are kept. This means you need to actually do annual meeting minutes, which waaaaay too many entrepreneurs forget about. The fact that, unless somebody actually sues the business, nobody will ever see those minutes except you and perhaps the law firm who drafted them for you, doesn't mean they don't need to be done. They keep your business healthy and protected.
Likewise, when you do a will or other estate planning (EP) documents without running them by somebody who's seen all the bad stuff that can happen if they're not properly prepared or executed, you leave yourself and your heirs exposed to the possibility that when you need those documents, they won't be correct and complete and therefore won't do what you wanted them to do. Examples? In Texas, a will that's not self-proved can't be admitted to probate without having one or more of the witnesses come and testify. If you had some bank employee or neighbor serve as a witness and there's no self-proving affidavit or the language that both attests and self-proves the will, it's entirely possible your heirs' attorney, the person trying to probate the will for them, won't be able to find those witnesses. Does that online will have the proper language? How do you know?
The title of this blog, "Legal Floss", points to the things that a lot of people don't bother with, thinking it's just a bother and not necessary - kinda like flossing your teeth. Ask my friend and dentist, Dr. Jip Holmes (www.smilesbydrholmes.com/), and he'll tell you, "You only have to floss the teeth you want to keep." Likewise, you only need to have a lawyer look at the documents you or your heirs need to rely on later. As I've mentioned before: when you need them, it's too late to get them.
As always, this blog is legal information, not legal advice, and it deals with Texas law because I'm a Texas lawyer. Your facts will determine the advice you get from a lawyer. If you have questions, go see a lawyer who practices a lot in the area you need, whether business, estate planning or probate. And remember: prevention can keep you from needing a cure!
A client came in a while ago to review the draft of an estate planning document I had prepared for him. He's a smart man, but his first statement was, "We need to pare this down a lot. Most of it is boilerplate and some of it's just gobbledygook to me." I'll tell you what I told him.
Just as things become trite or hackneyed by being true, what you may think of as "boilerplate" language in a will or trust or lease, or any other legal document, is in that document for one reason: at some time in the past, the event that the language is designed to prevent - HAPPENED.
I look at a document with lots of "just in case" language - boilerplate, if you will - like a Swiss army knife: I have several SAKs, and in each of them is a blade I've never used. Heck, I don't even know what some of them are supposed to be used for! But here's the deal: when I'm in a position where that blade is the only one that will get me out of trouble, I'm awfully glad it's there. Similarly, the 20 pages of language in a trust about what the trustee can do in certain situations may never be needed, but when it IS needed, the trustee or trustmaker or beneficiaries will be very glad it's in there.
By the time I got through discussing my client's estate planning document with him, he understood why things were written as they were. I actually thanked him for reading it so closely! When your attorney prepares a document for you, please read it. I can't tell you how many clients have "no questions" about their powers of attorney or wills until I start pointing things out. ASK QUESTIONS. A lot of legal stuff is non-intuitive, and even smart people can be ignorant in an area in which they don't operate or aren't trained. Your lawyer should be educating you. If he/she is not doing so, find another one.
As always, the above is legal information, not legal advice, and it's based on Texas law because I'm a Texas lawyer. Your situation may be different, and even if it's not, please consult an attorney who practices in the area of law to which your question pertains if you have questions or concerns.
As I type this, I'm sitting on the judge's bench waiting for a jury trial to begin. The defendant is an attorney of my acquaintance who has his own attorney (so, not a fool). The jury panel consists of 20 or so people who are waiting patiently for me to begin, unlike the last time we attempted to try this case, when only 6 people showed up for jury duty. I'm glad of that, because otherwise, I would have had to send the police out to round up a "pickup jury" - which, as the name implies, consists of currently available hapless citizens of the municipality - which is never a fun process.
The prosecutor in this court is a judge in another jurisdiction. He's also my backup prosecutor in a court where I'm the primary prosecutor. I'm the backup judge in another jurisdiction for the judge in the court where I'm the primary prosecutor. Confused? Don't be. This is an issue of jurisdiction. Each city is its own judicial jurisdiction, which means that I can be a prosecutor in one city, a judge in another and a defense counsel in a third without running afoul of the conflict of interest provisions of our Texas Disciplinary Rules of Professional Conduct. It's a question of hats: I can deal with another attorney where I'm the prosecutor and he or she is the defense counsel, and deal with that same attorney where I'm the defense counsel and the other attorney is the judge.
There are those who would say there is no way one person can deal with another in two different relationships, that there must be some favoritism or bias that keeps these relationships from being ethical. I've been a prosecutor for 32 years, a defense counsel for 29 years and a judge for 13 years. In all that time, I've only been approached one time to give a defendant a break because of a relationship I had with his attorney. My word is a precious thing, as it should be for every lawyer. Those who try to turn relationships to unfair advantage are the exception rather than the rule. And a reputation, once sullied, is hard to retrieve.
We do a lot of probate at the Jacobson Law Firm, and I see a common misperception when it comes to real estate: the kids will come in to probate Dad's will,and they've agreed to sell the house and split the proceeds; however, as we get deeper into our discussions, it turns out that nobody probated Mom's will when she died 6 years ago. When I ask why, the answer is invariably, "All of their property was community property so Dad didn't need to probate the will. Besides, Dad had the appraisal district change the house into his name alone, so that should be enough."
There are two problems with this logic. The first is this: when it's time to sell the old homestead, the title company likely won't issue a policy until Mom's will has been probated, because there's no record that Dad inherited her half of the house. If there's no title insurance policy, the value of the house goes way down because the buyer can't be sure he or she is buying all of everybody's interest in the house. Another concern is that here in Texas, a will has to be probated within four years of the person's death; however, there are a couple of ways to clear the title even after four years have passed. It just prolongs the time it takes to complete the probate of Dad's estate, sell the house and split the money.
The second problem is that the folks at the county appraisal district don't give a rip who owns the property, they just want to have somebody on the hook to pay the taxes. They'll change the name and address of the person responsible for the taxes pretty much whenever they're asked to, but that's not an official change of title. In order to pass clear title to real estate, the deed records have to reflect the changes in ownership, by filing one of the following:
As always, the above is legal information, not legal advice, and since I'm a Texas lawyer, it's based on Texas law. As many of you know, my father passed away last October. My mom is fortunate that her son practices probate law and knows probate lawyers. Children of a surviving parent can do that parent a great service by suggesting a visit to a law firm that practices a lot of probate, for a review and recommendations on how to get that brand new widow or widower through a difficult time with one less worry.
I had my right knee replaced a couple of weeks ago, the fourth surgery on this knee. The last time I had surgery this serious (ACL replacement, same knee) was 38 years ago, when I was 22 years old. I'm a pretty fit guy, and I did the pre-surgery physical therapy exercises, so I figured I'd wake up, start the PT and be back at work in no time. Not so much. To my surprise and chagrin, my body at 60 years old doesn't respond nearly as quickly as it did when I was in my twenties. As Mike the PT guy said when I complained that I wasn't progressing as fast as I thought I should, "He basically cut your leg off and then put it back on. Give yourself a break."
Patience not being my strong suit, I'm having to constantly remind myself that my approach has to be different than it was when I was younger.
Which brings me to the topic of today's blog: circumstances change, and we need to be willing to examine the arrangements - wills, powers of attorney, investments - we made last year, or last century, and see if they still address our current lives. The end of a year seems a good time to take stock of things, so here are some questions to get you started:
Now pardon me while I do some more PT.
In the Spring of 1991, Major General Edgar "Andy" Anderson, the commander of Wilford Hall Medical Center, had just learned that one of his recently promoted senior NCOs had cheated on his promotion test. He called his acting Director of Medical Law, a mid-level JAG Captain (me) into his office, shut the door, explained the situation and said, "What do you think I should do?" I, eager young buck that I was, went into great detail about the options open to him as the commander, the military justice and administrative procedures to be followed, etc., when he stopped me with a look of slight exasperation and lots of wisdom and said, "Dana, I know what I can do. I want to know what you think I should do." Even in his disappointment with the cheater, he was a mentor, a teacher, an example of leadership.
I've never forgotten that, "I hoped for more from you" look, followed by deep mentoring. The idea of "can, may and should" plays a big role today both in our advising of clients and in my interactions with my business law students. Simply put, that I can does not mean I may, and that I may does not mean I should. "Can" connotes ability. "May" connotes permission or authority. "Should" deals with things like judgment, ethics, morality and charity. The first two are largely a matter of fact: when I'm a kid, I either can or can't ride a bike. I either may or may not ride down to my friend's house. However, whether I should depends on the weather conditions, or what I'm going there to do, or what time I have to be home.
In estate planning, it might play out as follows: you can hire a lawyer to write a will, and you may give away the stuff you own to pretty much whomever you wish. The "should" sometimes comes when a client wants to, for example, not only disinherit a child, but state in great detail in the will the ways in which that child has disappointed him or her. That's where we sometimes stop being attorneys and start being counselors. I'll write your will however you want it within the bounds of the law, but I reserve the right to say, "Is that really how you want to say it?" In probate, it might be whether to contest a will when all the assets could be depleted in the litigation. In business, whether to form a company with a friend as "50/50 partners" (almost always a bad idea). Some people don't like it and we've been fired more than once for making unappreciated observations, but we take seriously the firm motto - "helping people for life". Making a decision in anger, or greed, or out of spite - or even compassion - often gives rise to regret. The "should" part of the equation is the part we all sometimes need a little help with.