Note from Sam
The Unintentional Estate Plan- Part 3 Many people are unaware of how the FORM and TERMS of their ownership of assets impacts their estate plans. In Part 1 of this series I discussed certain issues regarding transfers on death of real estate. In Part 2 of this series I discussed certain issues regarding life insurance and retirement plans (IRA and 401(k)). In this 3rd and final Part, I will discuss bank accounts and other financial accounts.It has become a common practice for elderly parents to "add" one of their children who are living in the same community to an account. This "addition" is almost always as a "convenience" for the parents. They simply want someone to be able to sign checks or make investment decisions if they are unable to do so. Often, although only one child is "added" to the account, it is the intent of the account "owner" that the assets in the account on the date of their death will either (or both) be shared equally by all children, or pass according to the Will. Unfortunately, banks and brokerage firms often "add" the local child by creating a "joint" account with the parent. By creating a "joint" account all of account holders own all of the account. Hence, when the parent "passes" the child who is "added" (by operation of law) attains the entire account- REGARDLESS of the terms of the "real" owner's Will. Hence, the creation of a "joint" account can, and often does, run contrary to the parents' estate plan and creates ill feelings among the surviving family members. A further unintentional consequence of the creation of a "joint" account is that the individual (child) who is added has a Hobbsian dilemma: a. If they give a share of the joint account to their siblings they have made a gift to their siblings which could have gift tax consequences; or b. If they disclaim their interest in the account to avoid the gift tax consequences, they relinquish their share of the joint account. A further concern is the "payable on death" (the P.O.D.) designation. Like life insurance, if a beneficiary is named, such beneficiary (or beneficiaries) "get" the account balance upon reaching the age of 21 regardless of any Will provisions to the contrary. Hence the funds "by- pass" the Will and any corresponding trust. There are several ways to provide clients with the comfort of having someone appointed to deal with the bank and brokerage firm accounts. The three primary ways which we recommend to our clients are: a. The account remains in the sole name of the "owner", but the "additional individual" can be recognized by the bank or the brokerage firm as a signatory on the account, but NOT as an owner. If the bank will not simply add a signatory without such signatory having "ownership" in the account, then, the account to remain in the owner's name (alone), but the owner, while capable/competent should issue a durable power of attorney for financial affairs, which "springs" into existence ONLY if/when the owner of the account cannot make a financial decision for themselves. In this case, the holder of the power of attorney has the ability to manage the account upon the occurrence of the owner's incapacity, but the account passes according to the owner's Will. b. In the absence of the issuance of a power of attorney for business affairs, when, but only when, the owner becomes incapable of handling their financial affairs, in a legal proceeding, a court can appoint a qualified conservator who will manage the financial matters of the incapacitated individual during their lifetime. The conservator must report to the court (at least annually) all the receipts and disbursements of the conservatorship. When the owner "passes" the assets previously held by the conservatorship are distributed in accordance with the individual's Will. Although the court has significant latitude in determining who should serve as conservator, the law allows capable/competent individuals to create a "stand-by" conservatorship, which designates the proposed conservator. Hence, a parent can designate one of their children as their "stand-by" conservator who will manage their accounts without creating a joint account. c. A trust can be established which becomes the owner of the account. Normally the person (or persons, in the case of a married couple) who previously owned the account becomes the trustee(s) and the beneficiary(ies) of the trust. However, if they become incapacitated, then a designated successor trustee takes over management of the trust's assets. Because the trust "owns" the account(s) the terms of the trust control the disposition of the trust's assets after the beneficiary(ies) "pass". Hence, the trust acts as a Will substitute and therefore it must be carefully drafted. Please contact us if you need assistance to be sure your current estate plan meets your goals and objectives.
Corporate Law
Managing a Corporation
A corporation is managed by its board of directors, which must approve major business decisions. A director can be, but is not required to be, either a shareholder or an officer. Like representatives in Congress, directors are elected by the shareholders and typically serve for a limited term. Each corporation must have at least one director.
Examples of procedures which must be approved by the board of directors include: - Declaring a dividend
- Electing officers and setting the terms of their employment
- Amending bylaws or the articles of incorporation
- Any corporate mergers, reorganizations or other significant corporate transactions
Directors of a corporation owe "duties of loyalty and care" to the corporation. Generally, this means the directors must act in good faith, with reasonable care, and in the best interest of the corporation. If a director stands to personally gain from a transaction with the corporation, he or she must disclose this fact and refrain from voting on the matter, if possible.www.legalzoom.com
| Legal Q & A
What is an Uncontested Divorce? An uncontested divorce is one in which both parties agree to the divorce and the terms of the settlement without going to trial. This does not mean there are no arguments or disputes between the spouses. It simply means the spouses reach an agreement without going to court and having a judge resolve contested issues. Uncontested divorces move much faster through the court system and are therefore less expensive. In addition, bypassing the lengthy litigation and trial process tends to reduce hostility and allows the former spouses to move on with their lives more quickly. How is Child Support Determined? Most state laws have guidelines to determine child support payments. The payment amount is based on each parent's income and the amount of time he or she spends with the children. The guidelines also provide for add-on amounts for the following expenses: - Child care
- Health care and health insurance
- Special educational or other needs
- Travel-related visitation
Parents can increase or decrease the guideline amount if the following conditions are met: - Both parents acknowledge they are fully informed of their rights under state law and the amount of child support is mutually agreed on,
- Both parents declare the agreed upon amount is in the children's best interests and will adequately meet their needs, and
- For welfare recipients, the right to support has not been assigned to the county, and neither parent has a public assistance application pending.
Keep in mind that the judges presiding over divorces are the ultimate authority on child support decisions. They can deviate from the guidelines as they see fit.What happens if we reconcile and want to cancel the divorce?
You and your spouse can dismiss the divorce after the papers have been filed. Simply request a dismissal form from the county clerk anytime before a judgment has been entered. If no response has been filed, the petitioner alone can file the dismissal form. If a response has been filed, both spouses must sign the dismissal form.www.legalzoom.com
Legal Calendar
February 10, 2009
Mike discussed the "Legal Aspects of Closely Held Businesses" at Des Moines Area Community College's Ankeny Campus on Tuesday, February 10, 2009 at 10:00 a.m.
March 10, 2009
Dave discussed the "Legal Aspects of Closely Held Businesses" at Des Moines Area Community College's Ankeny Campus on Tuesday, March 10, 2009 at 10:00 a.m.
April 14, 2009
Sam will discuss the "Legal Aspects of Closely Held Businesses" at Des Moines Area Community College's Ankeny Campus on Tuesday, April 14, 2009 at 10:00 a.m. This event is a workshop sponsored by the Service Corps of Retired Executives (SCORE) and the Small Business Association (SBA).SCORE is a national not-for-profit organization with 10,500 volunteer members and 389 chapters throughout the United States and its territories. SCORE is a resource partner with the Small Business Association. For more information on these events, please contact Sarah Bisbee at (515) 727-0926.
Estate Planning
When to What Happens Without a Will?
If you die without a will (known as "intestate"), the state, and not you, will decide how your property is to be distributed. In many states, your property will be distributed as follows: first, all of your joint property will pass to your spouse (if you have one). Second, your separate property will pass according to these rules: If you have a spouse, your spouse receives: - All of your property if you leave no children, or if all of your children are also children of your surviving spouse.
- If any of your surviving children are not also children of your surviving spouse, your surviving spouse gets half of all your property, or $50,000, whichever is greater.
All property not given to a spouse is distributed to the following persons in this order: - Your brothers and sisters or if they are not living, their children (i.e. your nieces and nephews)
- Your grandparents or if they are not living, their children (i.e. your uncles and aunts)
- Children of your deceased spouse
- Relatives of your deceased spouse
- The state of your legal residence
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