Stop Writing Deeds

Deeds. They are simple documents that transfer property from one person to another. Anybody can get a deed form, fill it out, and take it down to the county recorder to be recorded. With less paperwork than it takes to get a library card you can transfer the title to a million dollars worth of real estate.

I have a lot of examples of screwed up deeds in my office--so many that I have threatened to open a museum of horrible deeds. To lawyers, they are funny. To the families who have to deal with the consequences, they are disasters.

More often than not these deeds are the result of do-it-yourself estate planning. Somebody decides that instead of going to see a lawyer and paying all those fees, the family should just “put the kids name on” the house. Children use the phrase “put the name on” because they don’t want to come out and say the truth: that the children are inducing the elder to give away everything the elder owns while he or she is still alive. Why wait until mom or dad is dead when you can get the stuff right away.

It is not, however, always greedy or ill-informed children who come up with the deed idea. Sometimes it is the elder who has decided he or she needs to avoid probate. This kind of elder has often paid a lawyer for a perfectly good estate plan, and then at the last minute destroys it all with a flurry of amateur deed writing. The children come to me holding mother’s will. They are upset because one child now owns everything. I learn that in an effort to avoid probate, mother put that child on the deed to the house. The house was mother’s only important asset, so there is nothing left to be distributed to the other children according to the directions contained in the will.

Think of a will as a coffee canister. On the outside of the canister the owner writes directions about who will get the coffee inside when the owner dies. The owner directs that the coffee will be measured out and divided equally among the owners children. A lot can happen to the coffee before the owner’s death. The owner could drink all the coffee so that the canister is empty when he or she dies. The owner could also empty the coffee canister and give all the coffee to her next door neighbor or one of her children. The canister only works to distribute the coffee to her children if there is some coffee in it when she dies. A remarkable number of families get together at the time of mother’s last illness and decide to empty the canister. When it doesn’t work out because one child ended up with all the coffee and now declares that mom wanted it that way, the other children bring in the empty canister and, pointing to the directions on the outside, complain that they didn’t get their fair share of coffee. Some times I can help. Many times I cannot.

The most common way to empty the coffee canister is with deeds. Sometimes the elder signing the deed knows that she is giving away everything she owns. Sometimes she thinks that she will continue to own it until she dies and then it will go to the other name on the deed. Sometimes the deed is so incomprehensible and the testimony so conflicting that it is impossible to ascertain what the elder meant.

I want the deed writing to stop. There are ways to make gifts to children while the elder is still alive. There are ways to avoid probate if probate needs to be avoided. Deeds may be part of the plan, but the plan itself needs to be reviewed by a lawyer. Many families have found that the simple deed form from the stationary store that they bought for two dollars, turns out to be--after all my fees are paid to fix the damage--the most expensive money saver in the history of the family.

When it comes time to talk about mother’s last illness and what will happen, somebody in the family is going to hint at getting a deed form and putting another name on the house. When you hear that, stop them. Run away. Protest. Don’t do it, This is the time to pay for a lawyer.

Should I put my children on my bank accounts?

People are all the time telling me, “I put my son's name, on my account, so that he can get to my money to pay for my funeral. Most folks create joint accounts or joint ownerships as a do-it-yourself way to plan for disability or death.  However, hearing the phrase “I put somebody's name on  . . .” makes Oregon elder law lawyers cringe. Let me explain why.

Assume I have a checking account with $50,000 in it, and I decide to put my son's name on it. To me it is a convenience in case I can't pay my bills and he needs to do it for me. To the bank, however, is is gift of an undivided interest in the account. As far as the bank is concerned, my son owns that money as much as I do. He can take any amount of money out of the account for any reason he wants, because he owns it too. I may intend that he use the money to pay my funeral expenses and doctor bills after I die. He doesn't have to, however, because when I die, he owns it all and can do what he wants with it. I may expect him to divide what isn't needed for bills with my daughter. He might do that. Or he might not, and making him do it will require more legal fees than I want to pay.

In addition, once I have put his name on the account, the money becomes a target for people who are trying to get money from my son. If he gets sued, or goes bankrupt, or gets in trouble with the law and has to pay restitution, folks may come around looking for the money in that account to pay his debts.

Now let's say I die. All my money is in the account with my son's name on it. My will says that I want my house sold and the money divided between my son and daughter. Before that happens, though, my bills have to be paid, my funeral has to be covered, and all the expenses of preparing the house for sale have to be paid by somebody. Unfortunately, the money in my account all went to my son because it was jointly owned by the two of us. He doesn't have to pay my bills, pay the expenses related to the property, or split the money with my daughter. He might do that, but he doesn't have to. If he refuses to contribute, he leaves my estate cash poor and unable to pay expenses until the house is sold. This will force a premature sale and a poor selling price.

A parent is often concerned that upon his or her death, the children will be unable to access accounts quickly enough to pay bills. That is seldom the case. If there is a will, a personal representative can be appointed in plenty of time to take care of expenses. If there is a trust, the successor trustee can take control in a timely manner.

The bigger concern is having a child able to access funds in case the parent is disabled. This is a more serious concern. Conservatorships are cumbersome and expensive. Powers of attorney are unreliable. I have seen joint accounts that have allowed Social Security to be automatically deposited and transferred to care givers years after the elder has lost capacity to handle money. In those cases joint accounts worked beautifully. Beyond that they make me very nervous.

I am comfortable with my elderly clients having a small operating account on which a child is authorized to write checks. The account should normally have under $10,000 and not be the only source of cash for the elder. Other than that, I want to leave the accounts in the name of the elder and use a well-written power of attorney to cover disability issues. If the elder has a lot of money, the protection offered by a conservatorship is worth the expense and paperwork. 

Joint accounts should play a very limited role in the estate plan of an unmarried elder. Consider carefully the dangers and weigh them against the advantages. The best way to do this is to make the conversation about joint accounts not one that you have with your children, but one you have with your estate planning lawyer.

When to file a guardianship or conservatorhsip?

I have clients show up at my office saying that the folks at the care center or some service provider says their elder family member needs a guardian or conservator. They have come to me to start that process. My response is to ask what task are they trying to accomplish that cannot be done without the court order appointing a guardian. Who is standing in your way and saying you can't do what you want to do without court authority?

The fact is that a lot of elder care is done with a wink and a nod. People who are disabled with dementia enter contracts for long term care and live for long periods of time in care centers. Children take over the finances for their disabled parents using joint accounts or a power of attorney. Problems do occur—such as when the children clean out mom's account to buy drugs—but most of parent-child financial arrangements work out just fine.

(Elder financial abuse is real. Those who commit it need to be chased down and walloped many times with axe handles, but most children do not steal from their parents.)

I don't advise having a court appoint a guardian or conservator until there is no choice. If you get the call from Tuality Hospital telling you that grandma is being held in the geriatric psych unit and that they will not release her unless there is a court appointed guardian to make placement decisions, then your have to get yourself to the courthouse. If mother is sending all her money to internet scammers in Nigeria and the bank tells you that she is over twenty-one and can do whatever she wants, then it is time to go to the courthouse.

On the other hand, if your mother has dementia but is willing to go to a care center, you should talk to the people at the care center. Even is mother is not technically competent to understand all the fine print on the long term care contract, chances are she will be admitted anyway. Don't go to court unless there is no other choice.

If you talk to the people who work for the probate courts, you are likely to hear that the judges and others who work there are the last bastion of protection for the disabled and elderly. There is some truth to that, and in the bad cases the court plays a crucial role in protecting the vulnerable. On the other hand, the courts provide neither care nor money for care. The courts provide oversight, but at an enormous cost. Filing fees are significant and attorney fees make any trip to the courthouse an expensive proposition. The paperwork required to satisfy court oversight goes on and on. There exists a small cadre of attorneys, visitors, professional fiduciaries, and experts who make a living off the state court system for protecting the vulnerable. I am one of those. You do not want your mother's money going to keep all these people in business unless you have no choice.

There is an axiom in my business that the court ill not allow prophylactic protection in fiduciary proceedings. That is a fancy way of saying that the court will not appoint a guardian or conservator because the elder might need one in the future. The need must be immediate and serious. This should be your standard as well.

This is not to say that you shouldn't go see an Oregon elder law lawyer until you have hit the brick wall. A consultation with a lawyer early in the process can set you in the right direction and educate you about your real-life options. An elder law lawyer not only knows the law of guardianships and conservatorships, he or she knows local court procedures, how things work in practice (rather than in theory), and  the attitude toward various kinds of cases taken by the local probate court. Sometimes, knowing the personalities of the people who will be handling your legal paperwork is as important as knowing the law. It is well worth the money to get this kind of insider insight from a lawyer early in the process,

To sum it up, go to a lawyer at the first sign of trouble and go to court when you have no other choice.

How to use a trust to avoid probate?

You have heard horrible things about probate. It will be long. It will be expensive. The government will get all your money?

Before you buy into all the hype, review my post explaining probate in Oregon. You may not want to avoid it at all. For a lot of people probate has advantages, the most important of which is that it forces your family to administer your estate in the way it ought be done. With the help of modern technology, lawyers can get you through probate fairly cheaply, and the time it takes is reasonable for the amount of work that has to be done. Before you run off avoiding probate be sure you know what you are running from.

Let's assume you have read my post about probate and no matter what anybody says, you hate the whole idea of it. You can avoid it by being poor.  You can avoid it with an estate plan that relies on joint ownership and beneficiary designations. Most people, however, when trying to avoid probate, look to a trust.

Those of you who have read my post on trusts know a trust is a legal agreement between three people: a person called a settlor who puts up the money, a trustee who takes care of the money, and a beneficiary who gets the stuff that the money buys.  So how does this three-way legal relationship let a person avoid probate?

The answer is  . . . . drum roll . . . by letting one person serve as three. Instead of three people, we clever lawyers create a trust controlled by one person wearing three different hats. You, the settlor--because you settled on creating a trust rather than going through probate--transfer all of your  property to your trustee. And who serves as trustee? You do. It is your job to hold and invest your property and use it for the benefit of the beneficiary. And who is the beneficiary? You are, of course. You give all your property to yourself to be held for the benefit of yourself for as long as you shall live. And just in case anything goes wrong, you reserve the right to revoke the trust and take back your property any time you want.

You might well think that this is far to clever too work in real life. Who would believe in such a thing? A lot of people agree with you. The Internal Revenue Service is one of those people. As far as the IRS is concerned this is a sham and it will call your trust a "disregarded entity."  Money earned by this kind of trust is taxed as if it came directly to you. If you owe money, the people you owe can sue you and get at the money in the trust as if the trust did not exist. The only people willing to buy into this scheme are people who live in the world of probate and estate planning.

Here is how it works. Your trustee--who is you--owns all your property. Your trust says that if you die, your trusted son, Harold, will take over as  trustee. It says that since you can no longer be the benefiiciary--you being dead--Harold and his sister, Maude, are to be the new beneficiaries. The trust tells Harold to sell all your property, pay your bills, and divide the money between himself and Maude. So when you die, the trust lives on. While you were alive the purpose of the trust was to keep you happy. Now that you are gone, the purpose of the trust is to pass your property on to your children.

Let's compare the workings at death between a will and a trust using your biggest asset, your house, as an example.

Let's assume that you wrote a will naming Harold and Maude to receive your house. After you die, Harold wants to sell your house and split the money from the sale with Maude. He goes down to Infidelity National Title Company and they explain to him that the only way he can sign the deed necessary to sell the house is to be appointed personal representative of your estate. This means he has to take the will to the courthouse, pay a filing fee, and open a probate. He will not be able to sell the house until he does.  After he starts the probate he will have the court looking over his shoulder from then on to make sure he pays your old bills, does your taxes, and distributes the money exactly as the will says.

Next let's assume you wrote a revocable trust, transferred your house and your other property to the trust, and named Harold to be the trustee when you die. Once again, you are gone, and Harold wants to sell your house and split the money with Maude. He goes down to Infidelity National Title and says my father's trust owns the house and I am now the trustee. The title company will make sure what Harold says is true and then will allow him to sell the house. He can split the money with Maude and the courthouse is out of the loop. You have avoided probate.

That is how it works. You know the downside to probate: higher costs, public filings and the supervision of the court. What are the down sides to a trust?

Trusts cost you more money today. Trusts are harder for your lawyer to write than wills and he has to makes sure that all your property is transferred into the name of the trust. Deeds have to be written and your investment accounts all have to be changed. I explain to clients, "I am going to get your money. You can pay me now by doing a trust or you can do a will and let your children pay me later." Some folks want to make it as cheap as possible for the kids. Others think that because the kids are getting all that money for nothing, the least they can do is pay the costs involved. I don't care. I get paid either way.

One upside to trusts--freedom from court oversight--is a downside if you don't have a trustworthy, competent, and diligent person to take over the trust when you die. If the personal representative named in a will isn't doing the job, the court will replace him or her with someone who will get it done. When you have a trust there is no one to make sure your bills get paid and your property distributed. If Harold, in our example, happens to be living in your house when you die and has no inclination to sell his rent-free home and split the money with his sister, the only way Maude can get her inheritance is to hire a lawyer and sue Harold. In a lot of families, a little court oversight is a good thing.

At the end of the day the choice is yours. Think about what you own, who you can nominate to take charge when you die, and how much you want to pay for estate planning right now. Then collect your questions and talk to a lawyer.

Social Security Addresses Early Onset Alzhemiers

In February the Social Security Administration added early-onset Alzheimer's disease (and 37 other disabling medical conditions) to its list of conditions which qualify for compassionate allowance. Compassionate allowances are made for medical conditions so serious that they obviously meed the Social Security disability standard.

Applicants for social security disability are often denied benefits on the initial application and thereafter win on appeal. Time, however, is the enemy of the early-onset Alzheimer's patient. He or she needs help immediately. With this change in Social Security policy, those with early-onset Alzheimer's will be able to get Social Security disability support in a timely manner.

What to do with the property of someone who dies with very little?

After reading my post about probate, a reader asked me what happens when a relative dies with only a bank account, or a car, or some items of personal property. It is a good question.

The amount of complexity required to administer an estate is directly related to the amount of money the dead person had when he or she died. If the person died with nothing, nothing has to be done. The debts of the dead person will remain unpaid forever. The deceased owns no property, so there is nothing to distribute.

If the deceased owns property of certain types, there may be laws that apply to the particular type of property.

Bank Accounts:  If the deceased had money in the bank, but less than $25,000, a spouse or close relative can fill out a sworn statement requesting the bank deliver the money to the relative. The relative must promise to pay from that money the expenses of the dead person's last illness and buriel and all debts owed by the person when he or she died. The person who fills out this statement is normally the heir to the estate. Once the heir pays off the funeral expenses, the medical bills, and the dead person's Mastercard bill, the heir gets to keep the rest.

Cars. If the deceased own cars or trucks at death, those items can be transferred to the heirs by filling out an inheritance affidavit, that you can find at the Oregon DMV website. All natural heirs must sign the affidavit.

Accounts with Beneficiary Designations. Life insurance, deferred compensation accounts, 401(k) accounts. Pay on Death (POD) accounts and IRA accounts pass to family members through beneficiary designations. They do not pass through the probate process even if there is a will and a subsequent probate. If there is a beneficiary designation and you are the beneficiary, you get the money.

If the procedures listed do not work because, for instance, the deceased had more than $25,000 in the bank or the deceased left a will which gave the money to someone other than an heir, then there is a short form of probate specifically for the handling of small estates. To qualify as a small estate, the property owned by the deceased on the day of death has to have been worth less than $275,000 with no more than $75,000 in cash or personal property and no more than $200,000 in real estate.

If the estate qualifies as a small estate any person who has a right to some of the estate of the deceased can file an affidavit of claiming successor.  The affidavit is a short form of a probate petition. It gives the name of the deceased, the names of the heirs, and lists the property and debts of the dead person. If there is a will, the will must be attached. Copies of the affidavit must be sent to the other heirs, the State of Oregon and all creditors of the deceased. The person filing the affidavit is responsible for (1) sending copies, (2) collecting property owned by the deceased, (3) paying all the debts owed by the deceased, and finally (4) distributing the money to the heirs or the persons named in the will.

The filing fee for a small estate affidavit is currently $78. After accepting the affidavit for filing, the court takes no part in administration of the estate. There is no accounting and no judicial oversight. The administration only comes to the attention of the court if there is a dispute about the handling of the deceased's money. The small estate procedure is a fair amount of work and is easy to screw up if you don't follow the law carefully. It is, however, less expensive and far less burdensome than a full probate. If a person can use the small estate procedure, he or she should.

It is best to consult with a probate attorney about small estates, or to obtain a bank affidavit for the transfer of accounts. The legal fees are small, but the dangers of going it alone fairly large.

What happens to all that stuff in grandma's house?

Grandma is gone. The lawyer is working on how to sell her house and collect the money she had in her retirement account. There are a lot of questions about how to deal with all the stuff in her house but the lawyer doesn't seem to want to answer those questions. Why is that? What is a family supposed to do?

We lawyers call grandma's stuff "personal property." Personal property 

means her dishes, her furniture, her old car, and that collection of ceramic figurines she was so proud of. Lawyers and judges do not want to deal with grandma's stuff. We want the personal property to go away--quietly with no fighting or bickering.

Despite hating it we do hear about it. We hear about it a lot.

The reason lawyers and judges don't want to hear about personal property is because (1) it is always at the center of family battles, and (2) it is seldom worth any money. Often when a parent dies, the children go temporarily crazy. Sibling rivalries that have lain dormant for years spring up as if the parties were all ten years old again. These long-simmering disputes usually make an innocent hunk of personal property the centerpiece. 

"I don't care what the will says," one of the children proclaims, "mother always wanted me to have the toilet plunger and after putting up with my brothers and sisters all these years, I deserve it." To the lawyer, these disputes sound crazy. Elder law and probate lawyers charge over two hundred dollars an hour. Simply talking about personal property with a lawyer costs more than the property is worth. The family tells me it is not about the money; it is about fairness. No it isn't. It is about some deep seated family dysfunction that nobody understands except the family members. Lawyers don't get it; judges don't get it. We don't want to talk about it because we have no idea what the clients are talking about and why they care.

Sometimes the family is not fighting but has gone all money-eyed on the theory that mother's collection of Swedish-Korean wind chimes has to be worth at least a hundred thousand dollars. I have overseen the sale of a lot of personal property. I have learned to hate cars, jewely and collections. Cars are only valuable if you don't have one and need to go somewhere. If you have to sell grandma's car, hope for low low blue book and thank your lucky stars if you can sell it at all. Mother's jewelry may be insured for a bundle, but you can guarantee that nobody wants to buy it. Give it to the daughters and forget it. A collection is a side effect of having a hobby. The only people who make money off collecting are the people who write those collectors guides--the ones with the ridiculously high values that no one  actually pays. Collections are not investments; don't pretend that they are. 

When I file a probate petition, I have to file an inventory of the property that belonged to the deceased. The personal representative appointed in the will often looks at me incredulously and says, "But mother's house is packed from floor to ceiling with stuff. How can I inventory all that?" I tell him or her to walk through the house, wave an arm at all the stuff and say,"personal property, five hundred dollars." I put that in the inventory and no one complains unless it is somebody  in the family going wacko over the car, the jewelry or the figurine collection. Good families get together, split up what they want and donate the rest. Bad families fight and go to court over it.

Don't get me wrong. I love stuff. I buy nice stuff and don't want to lose it. The fact is, however, that once I have put my grubby hands on the stuff, it is not worth much any more. If I keep it a long time, it is worth even less. Keeping it a very very long time and calling it an heirloom doesn't change that.

So what happens to grandma's stuff? In most cases, whatever the family decides. A judge will decide if you insist, but it will be expensive and the judge will not be happy about being made to do it. You do not want decisions about your grandma's stuff being made by an grumpy judge. Follow your lawyers advice; make the personal property disappear. If you family members don't bring up where it went, nobody else will either.