Common Will Provisions: A Primer

Common looking people are the best in the world: that is the reason the Lord makes so many of them.

- Abraham Lincoln

When you sit down with your attorney to talk about writing a new will or (if you’re really on the ball) re-doing your old one, you typically discuss the special language that is required to make your goals happen. What doesn’t get discussed as much are the provisions that are necessary – or at least very, very beneficial – for every will. Check out these common will provisions and see what they bring to your will.

Executor:

“I nominate my son, John Doe, as Executor of this my last Will and Testament. I further direct that no bond or other undertaking be required for his faithful performance of the duties of my Executor.”

By choosing who will act as your executor, you make it easy for your family or heirs to determine which of them is responsible for managing your estate. The executor oversees your assets until the court authorizes distribution to your heirs. Because this is a “fiduciary” position, many states require that the executor be protected by a third party’s promise to compensate the heirs (called a bond), but most wills waive this requirement.

Personal Property Memorandum

“It is my present intention to dispose of items of tangible personal property in the form of specific bequest(s) under the terms of this Will by a writing executed or to be executed by me in accordance with Iowa Code Section 633.276. In the event a distributee identified in said writing predeceases me, then the specific bequest to that specific distribute shall lapse and shall pass along with the residue of my estate under the terms of the following articles.”

This clause allows you wait to decide who will inherit your grandmother’s china, your father’s baseball card collection, or that photograph of the family dog. By reserving the right to list which of your heirs will receive certain items of personal property, you give yourself the ability to change your mind without needing to revise your will every time you make a decision. It is important to note that this power only extends to personal property and not to land or cash, investments, or other intangible items.

Simultaneous Death Clause

This clause takes many forms. One that I frequently use is:

“In the event that my wife and I shall die under circumstances where it cannot be determined which of us died first, it shall be conclusively presumed for all purposes of this, my Last Will and Testament, that my wife predeceased me.”

Another might be:

“If my husband does not survive me by thirty days, then it shall be conclusively presumed for all purposes of this, my Last Will and Testament, that my husband predeceased me.”

The end result is the same, however. Both of these clauses are intended to prevent a “double taxation” of your estate at your death. Imagine if you died within seconds of your spouse. The transfer of your estate into your spouse’s hands would occur as of the moment of your death, with your spouse then transferring those assets into the hands of your kids. Practically, everything ends up with your kids, but technically it was owned by your spouse first. Depending on the estate tax picture at your death, your share of the estate might be taxed once when it passes to your wife and again when it passes from your wife to your kids.

Note: Currently, this is not possible because a spouse inherits free of estate tax. However, estate tax laws change, so it’s always a good idea to account for possible pitfalls.

Guardian

“In the event it becomes necessary to have a guardian of the person appointed for any of my children, I nominate Jack Dough and Jane Dough, or the survivor of them, of Nowheresville, Iowa.”

For those of you who have minor children, it is always a good idea to name the individuals you would like to have care for your children after your death. By specifically naming a guardian, you eliminate the need for opening a guardianship with the court and avoid conflict among your heirs as to who should take care of your kids.

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Lawyer Joke of the Day:

Five signs you need a new lawyer:

2. During the trial you catch him playing Angry Birds on his cell phone.

Three Questions About Probate: Finale

“All happy families resemble one another, but each unhappy family is unhappy in its own way”

- Ambrose Bierce

How much will probate cost?

Inevitably, this is the question everyone wants to know the answer to. Sometimes this is even the first question I get asked when someone sits down across my desk. It’s a tough question to answer and it can be a tough answer to hear.

The cost of probate is often determined based on the total value of the estate. Some lawyers will use the value of the inventory as the base number. Others will use the amount reported on the estate tax return. In Iowa, state statute limits attorneys to charging no more than 2% of the total value of the estate.

Some of my avid readers may have a bit of sticker shock thinking about 2% of the total probate estate. On a $1,000,000 estate, the fee would be $20,000. There are a number of reasons for setting a fee in this manner. At the outset, it is often difficult to determine just how much work will be involved in completing the probate process. Sometimes, when large families are involved, the amount of communications required to keep the heirs apprised of the process can be a substantial cost to the attorney. Other times, the attorney gets involved with settling claims made by third-parties like charities or in interpreting what the deceased meant by the terms in his will.

Because of these unknowns, attorneys are forced to estimate their costs, determine the amount of profit they need to stay afloat and try to stay competitive all at once. However, regardless of your attorney’s method of choice, always remember that the fee charged should be negotiated between you and your attorney at the time you choose to hire him. You may be able to negotiate for administrative costs (i.e. cost of publishing notice, postage, etc.) or even court costs, if the process is simple enough.

I hope you've enjoyed our little discussion of some of the basics of probate. If you'd like to learn more, please do not hesitate to contact our office by phone or e-mail.

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Lawyer Joke of the Day:

Q: What is the one word that can make a lawyer smile?

A: Fees!

Three Questions About Probate: Part Two

“He neither drank, smoked, nor rode a bicycle. Living frugally, saving his money, he died early, surrounded by greedy relatives. It was a great lesson to me.”

- John Barrymore

Today we continue our discussion of the three main questions I get from heirs and executors. Question two:

What happens during probate?

I like the way the ABA talks about probate in its book Guide to Wills and Estates, Third Edition. They describe probate as having six main phases. Each of these phases is necessary before the terms of a will are fully carried out. Here is my take on those six phases:

1. Open the Estate: Typically, when an individual dies, that person’s family tracks down a copy of his or her will and seeks the help of an attorney in deciding what the next step should be. If they hire that attorney, he or she will work with the executor to give the will its full effect. This involves filing a probate petition with the district court and giving notice to the creditors of the deceased.
2. Collecting the Estate’s Assets: Once the probate case has been opened, the family begins compiling a list of the deceased person’s assets. The myriad assets and their values are listed in the probate inventory and submitted to the court.
3. Management of Assets: Sometimes a probate occurs at a time when the deceased was scheduled to receive income. Other times, the probate process takes a long time to complete. In these situations, the executor must manage the estate’s assets. If income is received, it should be accounted for and saved or possibly invested.
4. Handling Taxes: An estate is subject to several different types of taxes. The ones most people think of are the “death taxes.” This includes federal estate taxes and state inheritance taxes. Under the new law that was passed in December 2010, the current estate tax is capped at 35% and only applies to individual estates worth over $5 million. Inheritance taxes vary from state to state and often change year to year. These taxes are imposed based on the heirs’ relationship to the deceased. An estate is also subject to income taxes if that estate should receive income before it is closed. In that instance, the executor will need to file an income tax return for the estate to report its income and potentially pay the resulting taxes.
5. Closing the Estate: Finally, after all the necessary notices have been given, the estate can be closed. Completing this phase typically requires filing lots of forms and getting a final order back from the court indicating that all necessary steps have been followed and the executor can distribute the assets. In Iowa, the executor files a final report showing how the property is passing to the heirs.
6. Distributing the Assets: Finally, after all five other phases are completed, the executor may distribute the assets of the deceased to his or her heirs.

Probate involves a lot of steps and requires a certain level of expertise or familiarity with the process to be efficient at it. It is always smart to seek the assistance of an attorney in the event that you are appointed as executor of a loved one’s estate. Contact us by phone or e-mail to see how we can help you through the probate process.

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Lawyer Joke of the Day:

Nugent needed legal advice, so he walked into the office of Gregory, Ellis and Gregory. Nugent sat down at the desk of the senior member of the firm.

"If you're not in really bad trouble, I'll take the case," said Gregory. "If you're in a real jam and want to get out of it, my partner will handle it.

“If, on the other hand, you're not involved and want to get in trouble, my son, who just graduated from law school, will take it!"

Three Questions About Probate: Part One

“Death is not the end. There remains the litigation over the estate.”

- Ambrose Bierce

The death of a loved one is a difficult time in anyone’s life. Being thrust into the role of executor can sometimes feel overwhelming. At my initial meeting with an executor of an estate, I often find that the best place to start is to answer the the three questions that are the subject of my next three blogs. First:

What is probate?

“Probate” can be used in two different ways. As a noun, “probate” means the judicial process of validating a will. A will must be submitted to the courts to make sure first that it is valid, second that its terms are legal, and third that its terms are carried out. As a verb, “probate” is the procedural steps an executor takes to settle an estate. Taking these steps is known as probating the will.

You may have noticed that one thing is consistent in both of these definitions: a will. In order to use the term “probate,” the deceased person must have prepared a will. If there is no will, it is not probate. There is still a procedure for distributing the estate, however. That procedure is called administration, and we’ll talk about it more on Friday.

Probating a will can take several different forms. If people know anything about probate, they almost always know about the judicial proceeding. This, however, is not always the most appropriate means of probating an estate. An estate with a low total value and no debts might qualify for a simple procedure called “small estate administration.” In Iowa, the maximum value for small estate administration is $100,000.

In even smaller estates, an affidavit can suffice in place of the probate process. To utilize this method, the estate must have a value of less than $25,000 and cannot include real property. The waiting period required before an estate can be closed is forty (40) days.

Choosing an inappropriate or improper method of dealing with your estate can be fatal. Always seek the advice of an attorney when dealing with a complex issue like probate.

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Lawyer Joke of the Day:

"You seem to be in some distress," said the kindly judge to the witness. "Is anything the matter?"

"Well, your Honor," said the witness, "I swore to tell the truth, the whole truth and nothing but the truth, but every time I try, some lawyer objects."