ESTATE PLANNING
Life throws us curve balls that you may never be prepared for. Estate planning provides a way for people to have some security in knowing that important life decisions will be planned for, and the planning devices will be enforceable under Kentucky law, such as trusts, wills and guardianship appointments, among others. Whether you want to plan for future medical care, distribution of certain assets, or a transfer of ownership of a business upon someone’s death, estate planning can provide you peace of mind that the inevitable consequences of future life events are already taken care of.
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We often hear individuals say that they do not own enough to need an Estate Plan. An estate doesn’t have to be in the millions! Everyone has an estate and it includes your home, autos, stocks, bank account, personal collections and furniture. Make sure you take the time to create an estate plan that protects your family. With proper estate planning you, and not the government, decide how your affairs are handled for your family.
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IF YOU DIE WITHOUT A PLAN, THE STATE DECIDES WHO RECEIVES YOUR ASSETS
Kentucky law, for instance, states that without a will, your estate goes first to your children, then to your parents, then to your siblings and finally to your surviving spouse! With a proper estate plan you avoid this disposition scheme and you decide who receives your assets.
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IF YOU WAIT TOO LONG, YOU MAY LOSE THE ABILITY TO MAKE A PLAN
As estate planning lawyers, we see many situations where clients are unable to plan because of incompetency caused by disease and illness. It is important that an estate plan be put into place early in life so as to convey your wishes and to avoid the government from dictating everything.
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REVOCABLE LIVING TRUSTS ARE CRUCIAL TO A COMPREHENSIVE ESTATE PLAN
Implementing a Revocable Living Trust as part of your estate plan ensures there is NO court action necessary to transfer your assets upon your death and allows your surviving spouse and/or other heirs to immediately receive their inheritance. It also allows you to dictate who will receive such assets and the way in which they receive them. This is very important as it allows you to protect the inheritance you leave for your loved ones from taxes, spousal rights (assets are protected from in-laws / divorce), creditors and ensures your loved ones are the only beneficiaries of your estate. Additionally, with proper use of a Revocable Living Trust, the need for attorneys can be greatly minimized. Lastly, a Revocable Living Trust allows you to decide out of the public view and without court intervention, who will be in charge of administrating the inheritance you leave your loved ones.
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One Question We Get Asked A Lot Is Whether It is Best to Use a Will or a Trust
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Using a Revocable Living Trust is Definitely the Best Option
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If You Have a Will Your Family Goes Through Probate
Probate is the court supervised and lengthy procedure that removes the name of a deceased person from assets and transfers them to one’s heirs. There are many problems with Probate:
All claims, real or imagined, must be settled in court
Probate takes time… many months or even years and the incurrence of unnecessary attorney fees and court costs
Probate fees… 4% to 8% of the estate value are typical
Probate is public, so the whole world will know your affairs
A Will is of no help if you become incapacitated
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If You Use a Revocable Living Trust There Will Be NO PROBATE
A Revocable Living Trust is the sure fire way to pass along your estate to your heirs without lawyers, courts or the probate system. It also allows your assets to be transferred immediately without the lengthy time and high costs of traditional probate. There are many benefits of using a Revocable Living Trust:
Keeps you in total control for as long as you live and are competent
Eliminates court interference if you become incapacitated and can’t manage your own affairs
Allows you and not the government to dictate who is in charge and where your assets go upon your passing
Allows your heirs to do final settlement of your estate without cost or delay
Allows all your affairs to remain private and minimizes taxes
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WHAT IS ESTATE PLANNING?
Our seasoned attorneys will evaluate what assets you have to determine what type of estate is best for you upon your passing. This process involves the decision to set up trust accounts, create wills, appoint guardians for your minor children in the event of unexpected death, among other estate planning tools.
Along with an estate and administration of an estate comes a cost. If you do not have a large amount of assets, it may not be necessary for you to have a formal estate set up, or the best decision for you may be to have a small estate that only protects specific pieces of property that will not be subject to probate in court, as discussed below. See our probate practice area page for more information on the types of assets that our probated.
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HOW YOUR ASSETS CAN DETERMINE WHAT PLAN IS BEST FOR YOU
If you are an individual with a large amount of assets, such as stocks and bonds, real estate, and other savings, our attorneys will help you formulate a plan that adequately protects these significant assets. Along with setting up an estate upon a loved one’s passing comes the responsibility to think about drafting a will. While not required, a will can alleviate many problems that arise among family members upon a loved one’s passing. Our wills practice area page provides detailed information on the drafting of a will and the execution of a will.
Further, our trusts practice page provides you guidance on the different types of trust accounts that may be set up to protect assets and control how and when those assets are distributed. Likewise, if you own a business and want the integrity and value of the business to continue upon your passing, our firm can help you with business succession planning. We also have a practice area page devoted to this particular topic for further, detailed information.
Whether your estate plan involves complex decisions arising from a diverse set of assets, or whether your estate plan involves very basic and easily identifiable assets, it is imperative that a law firm that dedicates estate planning as a practice area is consulted in order to ensure the validity of any estate planning documents that you execute.
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SMALL ESTATES
If you do not have many assets, as discussed above, a small estate may enable you to avoid probate proceedings. In Kentucky, if the estate of a decedent is small enough, the administrator or executor may avoid probate proceedings and receive the estate’s assets without opening what is called a formal estate, necessitating the need to go to court and endure probate proceedings.
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WHAT IS ESTATE ADMINISTRATION?
Once you have met with one of our attorneys to determine what estate plan is best for you, the next step is ensuring that your estate is properly administered. An individual administers a loved one’s estate once that loved-one has passed away. Under Kentucky law, provided in Chapter 395.00 of the Kentucky Revised Statutes (KRS), a personal representative of the deceased becomes the administrator or executor of the estate, depending upon whether a personal representative was named in a will. If a personal representative is named in a will, then the person is called the executor of the estate. If there is no will, then the personal representative is appointed as administrator of the estate. A court chooses and appoints this person, typically a close family member or heir.
It is important to note that Kentucky law provides that an administrator or executor of an estate be at least 18 years old. In some cases, if the deceased so desires and intends, a minor may be able to execute or administer the deceased’s estate, according to the terms of the will. However, this only occurs in rare cases.
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ESTATE TAX PLANNING
As you plan for the future, you should consider how taxes will have an impact on your estate when the time comes for the assets in your estate to be distributed. Tax planning is a very complicated area of the law that requires the skill of an attorney experienced in estate planning. Tax planning is individualized for each person, as we all have unique financial situations. Upon someone’s passing, that person’s estate may be large, or it could be very small. Some estates qualify for tax exemptions, and some don’t. Only an attorney can help you determine if you qualify for such exemptions.
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In Kentucky, estate taxation involves the imposition of both the federal estate tax and the Kentucky inheritance tax. These two taxes are often referred to collectively as “death taxes.” These taxes are imposed on deceased individuals who own property at the time of their death. As with most taxes, the amount that an estate will be taxed is dependent upon the value of the property in the estate.
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THE ESTATE TAX
On January 1, 2013, the federal estate tax was set at a maximum deduction of $5,250,000. This means that individuals can exclude up to this amount from their estate (this includes gifts given during one’s lifetime). Estates for the average person do not come close to this generous amount, therefore, most Kentucky citizens, and most Americans, are not subject to the federal estate tax. However, for the individuals who do have very large estates, the estate tax may have an impact. The tax may be minimized with smart estate tax planning, by putting assets in trust accounts where they would not be subject to the federal estate tax. One key thing to remember is that while life insurance proceeds may be inheritance and income tax free, they count towards your federal estate tax.
While most Kentuckians will not be subject to the federal estate tax, most will be subject to Kentucky’s inheritance tax, as described below. Kentucky is one of only a handful of states that imposes an inheritance tax on beneficiaries who receive assets from a loved one’s estate.
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THE INHERITANCE TAX
The inheritance tax is imposed on a beneficiary’s right to receive property from the deceased person’s estate. The amount of the inheritance tax depends on the value of the property being received. The amount is also dependent upon the beneficiary’s relationship to the deceased person. If the beneficiary is a close family member, such as a spouse or child, there is a greater exemption amount, in contrast to situations where the beneficiary is not a family member at all.
Kentucky has three classes of beneficiaries to help determine the amount of an inheritance tax, as defined below:
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Class A – surviving spouse, parent, child, brother, sister, grandchild, half-brother, and half-sister
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NOTE – Class A beneficiaries are exempt from paying the Kentucky inheritance tax if the deceased family member was born AFTER June 30, 1998.
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Class B – niece, nephew, half-niece, half-nephew, daughter-in-law, son-in-law, aunt, uncle and great-grandchild
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NOTE – Class B beneficiaries receive an exemption in the amount of $1,000, and the tax rate ranges anywhere from 4% to 16%.
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Class C – individuals in this category include any person NOT included in Class A or Class B (for example, this may include cousins or even friends of the deceased)
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NOTE – Class C beneficiaries receive an exemption in the amount of $500 and, like with Class B beneficiaries, the tax rate ranges anywhere from 4% to 15%.
No matter what the amount of the inheritance tax comes out to be, the amount of the inheritance tax will be discounted by five percent if it can be paid within nine months of the date of the deceased’s death. This is not widely known, and it is all the more reason to allow an estate planning attorney to evaluate your situation and ensure you minimize your taxes as much as possible.
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HOW TO MINIMIZE TAXATION ON YOUR ESTATE
The best way to minimize tax burdens on your estate is to effectively plan in advance for all potential consequences. As you grow older, your estate will likely grow as well. Your assets may appreciate in value and this will undoubtedly have an effect on what amount you may be taxed, if you are subject to the federal estate tax, and what tax your beneficiaries may be subject to. Many people do not realize that spouses can combine their exemptions. For example, the federal estate tax deduction limit of $5,250,000 could be doubled to $10,500,000. This is quite a substantial amount that doesn’t apply to everyone, but it is still something to consider.
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As you can see by the information above, tax planning is complex, and it requires the assistance of someone who knows the ins and outs of estate and tax law. While you are certainly able to fill out Kentucky tax forms and go through the planning process yourself, if you seek the aid of an estate and tax planning attorney, you will be ensuring that you make the most out of potential exemptions, limiting the effect taxes may have on your estate. Have peace of mind knowing that you are doing everything you can do to prevent taxes from draining your estate.
ESTATE CONFLICT REPRESENTATION
Conflict arises in all areas of our lives. Whether it be a dispute involving medical care, an injury someone sustained at work, or a dispute between family members regarding the property included in a loved one’s estate, conflict creates a stressful environment that leaves people feeling helpless and with very few options.
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In times of need, you deserve the assistance of attorneys that have experience in both estate planning, which involves the creation of an estate as well as probate proceedings, in addition to conflict resolution experience. Goeing Goeing & McQuinn is a law firm that can provide you with that all-around service you are looking for.
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COMMON ESTATE CONFLICTS
There are unlimited potential conflicts that may arise when an estate is being disputed. The list below lays out some of the most common disputes that leave family members in shambles, whether it is because they are fighting amongst themselves, or fighting with creditors.
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Contesting the Validity of a Will: examples include (1) whether the testator (person writing or making the will) had capacity to do so; (2) the true intent of the will; (3) whether the will was written by fraud, duress or coercion; and (3) whether the will is valid under Kentucky law
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Creditor Claims Against the Estate: there may be creditor liens on estates if the decedent had debt at the time of his or her death; for example, this may include judgment liens that creditors win in court
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Disputes Regarding Inheritance: heirs and beneficiaries may disagree as to who is owed what; such disputes can tear families apart
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Disputes About the Estate’s Personal Representative: if heirs and beneficiaries do not like how the personal representative is managing the estate, then these individuals may challenge to have the personal representative removed
When disputes arise, it is essential to have legal counsel on your side to help guide you through the process of resolving any conflict. Fighting in court with family members can ruin your relationships and this is never a desirable way to resolve any dispute. While going to court may be inevitable and the only option in some circumstances, dispute resolution outside of the courtroom is a much better way to resolve estate conflicts.
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ALTERNATIVE DISPUTE RESOLUTION FOR ESTATE CONFLICTS
Just as with all disputes, the resolution process involves a variety of options, including negotiation, mediation, arbitration and potentially litigation as a last resort. Negotiation, mediation and arbitration fall into the category of “alternative dispute resolution,” also commonly known as simply “ADR.” The summary below describes each of these types of resolutions in regards to estate conflicts. Our Estate Litigation practice area page will provide you with further information on litigation as a method of conflict resolution.
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Negotiation: this method of dispute resolution should be the first step to resolving disputes regarding an estate. If you retain counsel and you are having conflict with another heir or beneficiary to the estate, or if you wish to challenge the personal representative’s capacity to manage the estate, your attorney can work directly with the other party’s attorney to come up with an equitable resolution. Negotiation will keep you out of court and minimize the cost of potential litigation. This method is a good way to quickly settle any disputes regarding the estate in question.
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Mediation: this method is similar to negotiation, however, it differs in that the parties can talk to each other directly with the help of an impartial mediator. The mediator is present to help the parties discuss the conflict and come up with ways to resolve any issues. In the end, it is the parties that make the ultimate decision, and not the mediator.
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Arbitration: this method is similar to a court proceeding, but is quicker and the parties can choose the arbitrator who will make the final determination. Arbitration can still be costly, so negotiation and mediation should be considered as possible estate conflict resolution methods first.
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HOW TO AVOID ESTATE CONFLICT RESOLUTION
There is never a guarantee that conflict can be avoided. However, if certain measures are taken, it is certainly possible to minimize the threat and possibility of conflict resolution.
First, if you have a will, you should ensure that it is valid, and your true intent is voiced in the will. Specifically list out who the heirs and beneficiaries are, what they are to receive so that any dispute could be easily resolved by looking at the will, and interpreting your will after the time of your passing when your estate is being administered and settled.
Second, make clear what debt you owe. List out all of your creditors and do your best to pay off as much debt as you can. Leaving mountains of debt is not always avoidable, but the less debt you have, the much better off you and your family will be once your estate is probated.
Third, choose an Executor you trust. You can name this person in your will. If you don’t name an Executor, a court will appoint one. Disputes tend to arise more when a court must appoint an Executor. If you have the Executor chosen ahead of time, you can have peace of mind in knowing that your estate will be managed and administered by someone who you know will look out for the best interests of your heirs and beneficiaries.
ESTATE LITIGATION
When your efforts to resolve estate conflicts outside of the courtroom simply do not work, you may have to turn to litigation as the only way to get your estate conflicts resolved once and for all. Litigation is not always desirable, and many people do not like the idea of going to court to have an issue decided. However, when alternative dispute resolution options such as negotiation, mediation and arbitration are not helpful, you will need the help of seasoned estate and litigation attorneys to fight for you in the courtroom.
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WHAT TYPES OF ESTATE DISPUTES TYPICALLY RESULT IN LITIGATION?
Unfortunately, the bulk of estate litigation involves disputes between beneficiaries of an estate. This may include brothers against sisters, mother against son or daughter, or even grandparent against grandchild. Family is the most important aspect of life for many people, and litigation can push family members apart. However, when beneficiaries cannot agree on a solution to their disputes, litigation provides a mechanism for determining how an estate’s assets should be distributed, and how debts should be paid.
Disputes regarding the meaning or validity of a will are very common. When a will is not clear as to intent and how assets are to be distributed among beneficiaries, then it is difficult to establish a fair resolution without having a court help in interpreting a will.
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For example, if the deceased loved one had a handwritten will, a beneficiary may contest the will as not being valid, especially if that beneficiary is not named in the will, or if the beneficiary is named in the will, perhaps what that beneficiary is to receive is not as much as expected. In such cases, witnesses may need to testify to validate the will. Is the handwriting really that of the deceased loved one who drafted the will (called the testator)? Is there anyone who witnessed the testator write the will? Did the testator have capacity to even write the will? These questions arise more often than many people realize. See our Wills practice area page for more detailed information on this area of our estate planning law firm.
Litigation regarding estate matters doesn’t always involve family members. Creditors often fight to get judgment liens on estates if they believe the decedent owed debt at the time of death. Further, estate litigation doesn’t always involve disputes regarding one’s estate, but could also involve disputes about a trust account.
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WHAT SHOULD I EXPECT FROM ESTATE LITIGATION?
Estate litigation, like any other litigation (such as medical malpractice, breach of contract, or personal injury), can take a very long time. Litigation can take years. It is always in the best interest of all parties to get litigation resolved as quickly as possible and not be stuck in court for two or three years until a trial date is set. As a party to litigation, you should expect the following:
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A very time-consuming process;
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Constant contact and communication with your attorney;
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Possible depositions where you and other beneficiaries may have to testify;
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Resistance from the opposing party; and
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An equitable resolution once the litigation process is over, whether it ends in a trial verdict or settlement prior to going to trial
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While the litigation process will undoubtedly cause you stress, if you put your trust in experienced estate and litigation attorneys, you can be rest assured that your interests are being protected and your attorney is advocating for you. Patience is the key to a successful resolution to your estate conflict, whether it involves disputes with other beneficiaries regarding the meaning of a will, a dispute with creditors, or even a dispute regarding a trust account. If you can bear through the process of litigation, you will find that in the end all parties will receive what they deserve.
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WHAT IF MY CASE GOES TO TRIAL?
If your case must go to trial, you are in good hands with Goeing Goeing & McQuinn. Our attorneys take pride in the fact that they have experience in all aspects of the law and are prepared to go to trial at any time. A trial is the final step after the litigation process. Most of the time, parties will consider settlement prior to the case ultimately going to trial. When negotiations for settlement are unsuccessful, your case will go to trial in front of a judge or jury. The plaintiff in the case can request a jury trial. If the trial is before only a judge, it is called a bench trial.
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If your case goes to trial and you are before a jury, the attorneys representing both parties will have to explain what could be complex issues to a jury of your peers. The attorneys will tell a story that ensures the jury members understand the importance of the issues and can put themselves in the shoes of the parties involved. If, on the other hand, you have a bench trial before a judge, the judge will interpret Kentucky law and apply the facts of your case to the law. For example, if a will is contested, the judge will determine if the will satisfies the requirements of Kentucky law.
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Regardless of whether you are the plaintiff or defendant in an estate dispute, and regardless of whether your case is a bench trial or jury trial, the experienced estate and trial attorneys at Goeing Goeing & McQuinn will put forth full effort into advocating on your behalf, doing everything they possibly can to ensure your goals are met.