Category Archives: Contracts

Estate Planning After A Divorce

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A divorce is an emotionally draining, frustrating and exhausting time. The last thing anyone wants to think about is more legal paperwork. However, a divorce is one of those life changes when an examination of your estate plan is especially important. It is a time that requires either an update or a whole new estate plan to avoid unintended consequences for you and your family.

Discuss Potential Changes to Your Estate Plan with Your Spouse Before Filing for Divorce

 In general, once you file for a divorce you will be bound by a temporary restraining order, which may limit your ability to modify your estate plan or make major financial changes until the divorce is complete. While it may not always be possible to have an open conversation with your spouse about estate planning before you file a divorce, it is still a good idea to have discussion with your spouse, and attorney, about potential changes or modifications to your estate plan, or a revocation of your existing wills before or during your divorce.

Before your Divorce is Finalized

First, it is very important to keep in mind that you are not legally divorced until the judge signs the final decree. The process of actually getting a divorce can take several months or even years before it is finalized. In the meantime, unless you have updated your estate planning documents, your soon to be ex-spouse could still inherit from your estate; or in the event of an accident or a major health issue, your soon to be ex-spouse may able to continue to make financial or health care decisions on your behalf.

Update, or Execute New Health Care Documents

A health care power of attorney allows you to appoint another individual to make your health care decisions in the event that you are unable to do so for yourself. Within the process of your divorce it is important to make sure that your health care power of attorney is updated so that your soon to be ex-spouse no longer has the ability to make health care decisions on your behalf. If you do not already have a health care power of attorney in place consider executing one to make clear you do not want your former spouse to have any input into decisions and that your important health care decisions will be provided for by the person you choose.

Update Your Financial Power of Attorney

If you had executed a Durable Power of Attorney for financial decisions, which appoints your soon to be ex-spouse as your agent you may want to immediately revoke it and execute a new power of attorney. A Durable Power of Attorney for financial decisions gives the individual of your choosing an immediate and present power to sign documents on your behalf, access to bank accounts and all other financial powers. While an automatic temporary restraining order will likely be in place during your divorce, it is still important that your power of attorney is updated or revoked to avoid any unintended consequences.

After Your Divorce is Finalized

If you have already been through the divorce process and are ready to move on with your new life now is the time for a new estate plan. While in Montana any nominations of the former spouse, or distributions to a former spouse, are automatically revoked after a divorce, this default can provide for some odd and unintended consequences. A new estate plan enables you to be in control of what happens to your property upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, as well as your family, financial, and heath care decisions.

Create a New Estate Plan

At a minimum your estate plan should include a Last Will & Testament, Power of Attorney for Financial Decisions, Power of Attorney for Health Care Decisions, and a Living Will. Even if you are not quite ready to execute a comprehensive estate plan, it is critical to at least have a minimal will, which appoints your personal representative and sets out your plan of distribution.  In addition, durable powers of attorney for health care and financial decisions allow youto be in control of your life in the event of a disability or incapacity. These documents allow your life to carry on during a disability; your bills will be paid and your care will be provided for by the person you choose.

Review & Update Beneficiary Designations

After a divorce, updating your beneficiaries is especially important. The last thing you want your family to have to deal with is removing a former spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes.

Plan For Your Children

While you may not be able to control all aspects of planning for your children after a divorce, you can decide what assets your children will inherit from your estate and how and when they will receive funds from your estate. For younger children, you may consider setting up a trust for their inheritance wherein a trustee of your choice will manage funds for your children until they reach the age of majority. This allows you to control how your children will receive these funds and provides for financial management of your estate separate from your former spouse.

Don’t Procrastinate

After a divorce you likely feel like you have had enough paperwork and attorneys to last your lifetime, but do not put off updating your estate plan. Discuss your thoughts and concerns with an estate planning attorney to ensure that your estate plan reflects your current situation and ensures that you and your loved ones are protected and prepared. 

 

Removal of a Personal Representative

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WHEN IS IT APPROPRIATE TO REMOVE THE PERSONAL REPRESENTATIVE?

The most basic duty of a personal representative to act in “the best interests of the estate.” This means that the personal representative must be loyal to the to the estate, as well as to the heirs and devisees, and not co-mingle his or her assets with the assets of the estate.  A failure to act in a manner that is within the best interests of the estate may result in removal of the personal representative, or even separate legal action against the personal representative.

WHAT TYPE OF ACTION RESULTS IN REMOVAL OF A PERSONAL REPRESENTATIVE?

Montana Code Annotated (MCA) section 72-3-526 sets out the grounds for removal of a personal representative. According to Montana law, the breach of a single duty is sufficient to remove a personal representative. A simple failure to provide a timely inventory, or failure to give notice to all heirs can result in removal.

Recent Montana Case Law on the Removal of a Personal Representative

Recent case law in Montana in the case of the Estate of Hannum, illustrates a failure by a personal representative to properly administer an estate (see , DA 12-3, 8/10/12). In Estate of Hannum, the personal representative provided an accounting of the estate that was “highly speculative,” and included undocumented and unverified loans and gifts. The unverified gifts and loans increased the value of the estate by more than $1.3 million, resulting in increased personal representative fees to himself in an amount over $32,000, as well as over $49,000 in attorney fees to his daughter. The personal representative also claimed that other heirs owed the estate over $300,000, while he and his brother were to be awarded $600,000 from the estate, leaving a relatively minimal amount for distribution among the other heirs.

Additionally, the court determined that the personal representative in Estate of Hannum breached his duties by: failing to follow the plan of disposition set out in the Last Will & Testament; failing to file an estate inventory within 9-months of appointment; and failing to send notice of his appointment to all heirs as required.

Although this case illustrates an instance in which the personal representative breached multiple duties charged to him, a simple failure to follow any of the basic duties of a personal representative can result in removal. It is important for every personal representative to understand all of the duties and obligations of a personal representative and precisely follow Montana law. An attorney experienced in Montana probate law can guide a personal representative through the probate process to avoid removal, or even separate legal action.

With questions about the duties and responsibilities of a personal representative, or the probate process in general, contact Kalispell, Montana probate attorney, Kelly R. O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373 to schedule an appointment.

What Does a Personal Representative Do?

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The Duties and Obligations of the Personal Representative in the Probate Process

In general the personal representative of an estate, also known as an executor or administrator, is the individual responsible for gathering up the assets of the decedent; paying off debts and expenses of the estate; and distributing assets either to the individuals named in the will, or in the event the decedent did not leave a will, according to state law. How the distribution of an estate is accomplished depends on the specific nature of the estate and assets, and whether or not there was a will. However, there are a few key tasks and duties that are essential to every probate process.

Tasks of a Personal Representative

First and foremost the personal representative should attempt to locate the Last Will & Testament, and all other financial information of the decedent. Ideally, the decedent would have provided the location of this information to the personal representative. If not,  his or her attorney may have this information. It is important to locate the original Will and not a copy, as  the personal representative must file the original Will with the probate court.

To actually carry out the role of personal representative, the individual appointed must file an application for appointment with the probate court. Often this is accomplished with the assistance of a probate attorney that will draft the application and appropriate documents to file with the court.

Upon approval of appointment by the probate judge, the court clerk will issue testamentary letters or letters of administration (depending on whether or not there is a will), certifying the appointment of the personal representative. The Letters verify that the personal representative is authorized to deal on behalf of estate for actions such as opening a bank account, selling property, and collecting and paying debts.

Once the personal representative has been appointed by the probate court, it is important that the personal representative take immediate action to further the probate process. One of the first actions after appointment as personal representative is to notify the interested parties and potential creditors of the estate. No later than 30 days after appointment, the personal representative must provide notice to heirs and interested parties of his or her appointment as personal representative; information regarding the court where the personal representative filed the probate documents of the estate; and whether or not a bond was filed.

In addition, the personal representative must publish a notice to creditors in a local newspaper. As soon as possible after appointment, the personal representative should publish the notice to creditors. The notice puts creditors on notice that they have four months within which to file claims against the estate for payment of their accounts.

Depending on the nature of assets and type of probate proceeding, an inventory of the estate assets may be required. An inventory must be filed within 9 months of appointment of the personal representative. The the inventory accounts for the estate assets, which consists of all property owned, individually, by the decedent.

Upon the expiration of the four month creditor claim period, the personal representative can pay the creditors. In the instance of a formal probate the personal representative must file a final accounting with the court which accounts for all receipts and disbursements during the probate process. Once judge approves the accounting, the personal representative pays the creditors and taxes of the estate. Then, the remaining assets of the estate can be distributed to the heirs and devisees.

Duties of A Personal Representative

The personal representative has a duty to act in the best interests of the estate. The personal representative also has a duty of loyalty to the estate, as well as to the heirs and devisees. These duties are of the utmost importance as failure to act in a manner that is within the best interests of the estate may result in removal of the personal representative, or separate legal action against the personal representative.

This means that the personal representative must: avoid conflicts of interest; use reasonable care, ordinary skill and prudence in carrying out the duties of the personal representative; direct any benefit derived from the appointment to the decedent’s estate to the beneficiaries; and  not use any of the assets of the estate for his or her own, personal benefit.

Montana law requires that a personal representative specifically acknowledge these duties. The personal representative must sign and verify, before a notary public or under penalty of perjury, an acknowledgment of fiduciary relationship in the application for appointment.

Perhaps one of the best ways for a personal representative to avoid breaching his or her duties is to maintain detailed records of the estate assets and accounts. The assistance of a probate attorney can be beneficial in maintaining records of the estate, and keeping up with the probate timelines and requirements.

If you have questions about the role of a personal representative, or probate in general contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. (406) 752-6373.

 

 

Transferring Your Family Farm or Business to the Next Generation, Part II

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Planning for the Retirement or Unexpected Death of an Owner: Advice from a Montana Business and Estate Planning Attorney

Business succession planning is the process whereby the business, and its owners, to agree in advance to issues such as what consent is required to transfer business interests, to whom may an owner transfer business interest to, or how to determine the value of those interests. Two major considerations in this process are what happens in the event of a death or incapacity of an owner, and what happens upon retirement.

Planning for the Unexpected Death or Incapacity of an Owner or Manager

While most individuals do not want to think about death, planning for an unexpected death or incapacity of an owner or manager will enable the business to carry on even if a key individual in the business may no longer be able to manage the business.

When discussing how to plan for an unexpected death or incapacity of an owner or manager, consider the following:

  • Buy-out: Do you want the business to buy-out the heirs or family members?
  • Financing: What resources are available upon death? How to finance the buy-out of family members? Some options may include: installment payments, life insurance or the creation of a separate fund.
  • Price: How do you establish a price to buy out? Price can often be calculated as book value, multiple of annual earnings, by appraisal, or otherwise by agreement of all owners.
  • Control & Management: If the business decides to buy out heirs, does it want those heirs to have an active role in managing the day-to-day operations of the business or simply receive income from the business?

Planning for Transfers of Ownership Pursuant to Retirement

While retirement may seem to be a long ways off for many small business owners, planning for retirement of an owner or manager will ensure that the business has both the funding available and capable individuals in place to handle retirement. Some of the same considerations discussed above also apply to retirement, and in addition the business should consider the following:

  • Who Will Take Over Leadership: Decide who will be the successors will be. Identify key individuals who may already have a role within the business. Discuss whether family members may have a role in the business and the potential role of current owners, managers and third parties.
  • Timelines & Transitions: Discuss the ideal timeline for retirement and what gaps in management may exist upon retirement. Discuss what training may be necessary and how to accommodate the different skills and interest of those taking over.

Communication is the Key to Successful Business Planning

The most critical component of successful business succession planning is communication. Communication between business owners, managers and all family members involved will facilitate a smooth transition. The business succession planning process does not have to be complicated, a simple discussion of these issues and a basic plan is better than waiting for the unexpected to happen and then trying to come to an agreement about what to do next.
If you have questions about business succession planning, contact Kelly O’Brien, Measure, Sampsel, Sullivan & O’Brien, P.C. at (406) 752-6373/ www.measurelaw.com

The Benefits of Year End Charitable Giving

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Year-end Tips from a Montana Attorney

It is that time of year where we reflect on the previous year and start to plan for the year ahead. It is also a great time consider year-end donations to the charity of your choice. Not only does giving to a charitable organization provide you with the satisfaction and good will associated with giving back, charitable gifts to 501(c)(3) organizations are tax deductible. So, in addition to that good feeling associated with giving, you get the good feeling that is associated with saving on taxes. If you need to make some additional tax deductions for 2011, a gift to a charity is a great way to save.

While we typically write a check to make a charitable donation, there are many other ways to give to a charity that provide significant tax benefits. CNNMoney.com recently posted an article on different methods for making charitable donations that can provide additional tax benefits. These include:

Gifts of Appreciated Securities

By donating a stock, bond or mutual fund to a charity, you will avoid having to pay any capital gains taxes on the appreciation in value. Moreover, if you have owned the security for over a year, you can deduct the full market value rather than just the amount you invested.

Give from your IRA

For those of you over the age of 70 1/2, if you have not taken the required minimum distribution from your IRA this year, you can rollover a portion of your IRA to a charity. Currently, you can donate up to $100,000 to a charity, and the portion you donate will not be included in your taxable income. A rollover of your IRA to a charity can also make it easier to claim deductions, among other added tax benefits.

Donate to a Community Foundation or Community Fund

In addition to the federal tax benefits of charitable gifts, giving to a community fund can also provide state tax benefits. The state of Montana, provides a tax credit program for donations to a community foundation. Individuals are allowed a tax credit of up to 40% of the charitable contribution, with a maximum credit of $10,000 or $20,000 if filing jointly. Business entities are allowed of up to a $10,000 a year tax credit, or 20% of the  donation amount.

Charge Donations & Payoff Next Year

Often the holidays can take a toll on our cash situation, however we still want to donate to charities before the end of the year. If this is the case in your particular situation, consider donating via credit card and paying it off next year. The IRS permits you to take the deduction when the donation is made, rather than when it is paid, so you will still receive the tax benefit this year.

If you have questions about charitable giving, contact estate planning attorney, Kelly O’Brien at (406) 752-6373.

 


Estate Planning Essentials for Women

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Simple Advice From A Montana Estate Planning Attorney

A friend of mine was recently divorced. After her divorce was finalized, she asked me whether a will or trust was necessary for her. My friend is a mother of two young children with a successful business of her own. She is fairly young, and does not own a home and does not have a large amount of wealth accumulated, so she felt that estate planning was not necessary. In response, I explained that everyone needs some type of estate plan. However, women who have recently experienced a major life change such as a divorce, or the death of a spouse, are especially susceptible without a plan that reflects their current life situation. In the case of my friend, without an estate plan, she could not direct how her money was distributed to her children in the event of her death, or who would manage her assets for her and her children in case of an unexpected disability.

Women today take on more roles in the household and more financial responsibilities than ever before. Moreover, women tend to live longer than men so the chances of outliving a spouse and being directly impacted by an estate plan (or lack thereof) are greater than for our male counterparts. With that in mind, it is crucial for women to take an active role in estate planning. Every woman should understand the essential elements of estate planning and have a plan in place that addresses what happens in the event of an unexpected death or disability. Perhaps more importantly, women need to ensure that these documents are updated when life changes.

Whether you have accumulated a large amount of wealth, or only have a few assets, everyone has an “estate.” By understanding a few key elements, you can help protect yourself, and your loved ones, from unnecessary complications.

What is Estate Planning?

Essentially, estate planning enables you to be in control of what happens to your property upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, family and heath care decisions. At a minimum, your estate plan should include the following elements:

–A Will and/or Revocable Living Trust: These are formal documents that describe how and when to divide and distribute your assets upon your death. Whether you need a simple will, or a more complex, revocable living trust, depends on your specific situation. Discuss your situation with an estate planning attorney to determine which makes sense for you and your family.

–Durable Power of Attorney for Financial Decisions: A durable power of attorney for finances allows you to appoint another individual to make financial decisions on your behalf in the event that you are unable to make these decisions yourself due to incapacity or disability.

-Durable Power of Attorney for Heath Care Decisions: A durable power of attorney for healthcare allows you to appoint another individual to make medical decisions on your behalf including decisions regarding medical consents and life support issues in the event you are unable to make these decisions yourself.

-Beneficiary Designations and Payable on Death Designations: If you list an individual as a beneficiary of a financial asset, that individual becomes the legal owner, immediately, upon your death without the need for probate.

Aside from understanding the basics, there are a couple of issues that are critical for women to address.

First, Take Care of Yourself

Women often prioritizing caring for their children and family over caring for themselves, but making sure that you have appointed a power of attorney both for financial and health care decisions, is vital both for you and your family.  One of the most overlooked issues in estate planning is how to manage your estate in the event of an incapacity or disability. Planning ahead, with durable powers of attorney for financial and heath care decisions, allows you to be in control of your life. These documents allow your life to carry on during a disability; your bills will be paid and your care will be provided for by the person you choose. Moreover, powers of attorney provide your family with the peace of mind that they are carrying out your wishes, instead of being left to question what you would have wanted them to do.

Take Care of Your Children

If you have children, especially if they are minor children, it is essential to plan ahead. If your children are minors, make sure that you nominate a guardian. This is one of the most important estate planning decisions, so take the time to think it through. Have conversations with your spouse and family members about who would raise your children in a manner most like you. Think about issues such as age, education, lifestyle, religious preferences, geographic location and parenting style.

In addition to determining who would care for your children, think about who would manage the finances for your children if you are unable to do so. For younger children, consider setting up a trust for their inheritance.  With a trust for minor children, a trustee of your choosing will mange funds for your children. The trustee will distribute funds for their general care until they reach the age of majority, or until such age or life event that you deem appropriate. The trustee could be a friend, relative, or even a financial institution; anyone whom you feel can be responsible with money and respectful of your wishes for your children’s future.

Designate Beneficiaries & Keep the Designations Updated

Perhaps one of the easiest and most important things you can do to take control of your estate plan is to make sure that you have designated beneficiaries for all of your financial assets, and keep these beneficiaries updated. Keep a list of all of your financial assets, including life insurance policies, retirement accounts, investment accounts, stocks, bonds, and bank accounts, along with the specific beneficiary for each account.

If you experience any major life change, such as a divorce, death, or major change in assets, review this list and make the appropriate changes. After a divorce or death of a spouse, updating your beneficiaries is especially important. The last thing you want your family to have to deal with is removing an ex-spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes.

Plan ahead

Whether you are a working mother or a retired widow, keeping up with a busy life can be a challenge. When a major life change occurs, such as a death or divorce, it can be overwhelming. Take a bit of time, now, to prepare yourself and your family for the unexpected so that you control these important decisions. Your family will thank you.

If you have any questions about estate planning contact Kelly O’Brien, Measure Law Office, P.C. at (406) 752-6373/ www.measurelaw.com

Article previously published in the October/December issue of

406 Woman Magazine http://406woman.com/

When should you update your will or trust?

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Reviewing & Updating Your Will or Trust

Advice from a Montana Estate Planning Attorney

Wills and Trusts are highly effective tools in distributing assets upon your death and reducing family stress and conflicts. However, Wills and Trust are only effective estate planning tools if they are kept up to date. An outdated Will or Trust and be just as ineffective as nothing at all, or worse.

Instead of thinking of your Will, Trust or other estate planning documents of something you do once, then lock away, I always recommend you keep copies of these documents in a safe, but in a handy place. It is important to review and update these documents on a regular basis. In addition, there are some specific instances where it is especially important to take some time to review, and if necessary, update your estate plan. Some examples of these situations include:

 

  • After the death or incapacity of an individual nominated in your will or trust as a personal representative, trustee or beneficiary
  • After you are married or divorced
  • After birth or adoption of a child
  • After purchasing or selling real estate or other large asset
  • Prior to a major operation or other medical procedure
  • After receiving a large inheritance
  • After moving to another state or purchase assets in another state
  • After any major change in your income or income earning capacity
  • After a minor child reaches the age of majority or completes college
  • Upon the marriage of a child or other beneficiary
  • Anytime you change you change or mind about how your want to distribute your assets and to whom you want to distribute those assets 

There are many other situations where you might need to update your estate plan, but the important thing is to get in the habit of reviewing your estate planning documents when your life changes. If you have questions about how or when to update an estate plan, speak with a local estate planning attorney. Making a change to your estate plan is usually quite simple and reduces complications for your family later.