For informational purposes only. Always consult an attorney to obtain competent legal advice.

Wills, Trusts & Estate Planning
 

In General

  • For many people, whether single or married, a fairly simple Last Will and Testament is sufficient. The Will identifies beneficiaries who will inherit the probate assets of the deceased person; identifies any secondary beneficiaries who will inherit assets if a primary beneficiary is deceased; stipulates the minimum age and any other conditions for any beneficiary to take assets directly rather than through a trust; and identifies the executor that will "administer" the probate estate.

  • Probate Assets vs. Non-Probate Assets: The single biggest mistake in estate planning is to assume that all of the assets that you owned upon your death will automatically become part of your probate estate and will be distributed under the terms of your Will. The fact is that funds in accounts that either have named co-owner(s) or named direct beneficiary(s) ordinarily transfer automatically upon your death to the co-owner(s) or direct beneficiary(s) and will never become part of your probate estate and will not be transferred under the terms of your Will (even if these assets are listed in your Will!).  

  • A direct beneficiary of any assets -- including bank accounts, investment accounts, IRAs, CDs, life insurance policies or an annuity -- is distinguishable from a beneficiary named in your Will. A beneficiary named in your Will receives assets from your probate estate. Assets that are transferred automatically upon your death to either co-owner(s) or direct beneficiary(s) named on the account will not become assets of your probate estate

  • The same is true of any real estate that you owned as of your death that had the name of any joint owner(s) on the deed. The property will ordinarily pass to any joint owner(s) upon your death and will not pass under your Will. In fact, some people transfer title to their real estate to other person(s) during their lifetimes and actually no longer own the property at death. 

  • There are some exceptions to the above general rule, so it is important to consult with an attorney or other estate planning professional. For example, a bank account standing in your name and the name of another that is designated as "for convenience only" should not pass upon your death to the other person named and should instead pass to your probate estate and be distributed under your Will.  

  • Similarly, your share of any real estate held by you and one or more other persons as "tenants in common" (rather than "joint tenants") will not automatically pass to the other tenant(s) in common upon your death because under Rhode Island law this type of tenancy does not include the "right of survivorship." 

  • Also, laws govern how property left to either a direct beneficiary or a beneficiary under your Will who dies before you. Other laws may allow persons not named in your Will to receive a share of your estate, such as a child or grandchild born after you signed your Will.

  • Knowing which of your assets will pass to others directly upon your death and which assets will pass to your probate estate and be distributed under your Will is absolutely crucial to any estate plan.

  • Bottom Line: It is a big mistake to believe that all of your assets will become part of your probate estate and will pass according to the terms of your Will when you have previously named beneficiaries or joint owners for some or all of your assets, or if your have transferred ownership during your lifetime.

 
 

Simple Estate Plan

  • A typical estate plan for a couple or a single person includes fairly simple Wills. For example, for a couple that have only common children between them, simple "husband and wife" Wills can be appropriate. In this case, the Wills of each spouse are similar, and usually provide that the surviving spouse will inherit all property of the deceased spouse, and then when the surviving spouse dies, any remaining assets are divided equally among the couple's children.

  • Of course, the share for each child can be increased or decreased, or specific assets, such as jewelry, can be given to one child.

  • See below for more information about Wills.

 

Second Marriage Estate Planning

  • A simple Will may not be appropriate for a couple or person with special estate planning needs.

  • Many couples, whether married or not, have children from a previous relationship that they naturally want to provide for in their estate plan. Or, perhaps the couple never had children and each partner wants to ensure that something will be left to their side of the family in the event that they are the first spouse to die.

  • A special estate planning need arises among couples when the group of intended beneficiaries comes from separate blood lines, different families, or are otherwise not common beneficiaries of both spouses or partners.

  • To highlight this important but often ignored dilemma, take the example of a "traditional" couple that got married, had children, and never divorced. A typical estate plan for such a couple would be simple "husband and wife" Wills in which after the death of the first spouse, the entire estate goes to the surviving spouse; and upon the death of the surviving spouse, the entire estate is divided equally among the children.

  • Compare the above example to a couple who each have had one or more children from a previous relationship and want to ensure that if they die first, the surviving spouse or partner will leave a portion of the estate to their children. In the above example of the simple "husband and wife" Wills, the surviving spouse inherits the entire estate and may then change his or her Will to leave everything to his or her children, cutting out the children or family of the deceased spouse.

  • Even a trusted surviving spouse may divest the children of the first deceased spouse because of a change of heart, or perhaps more commonly due to "undue influence" or fraud exerted by one or more of the surviving spouse's family members. Hard feelings and even litigation between the families may ensue.

  • Especially if the surviving spouse lives many years after the first deceased spouse, or suffers from declining faculties, or has substantial assets that may draw the attention of his or her family members or others, the chances that a disposition of assets that both spouses agreed upon during life will be changed following death of the first deceased spouse are dramatically increased.

  • Many couples assume incorrectly that when they both sign "husband and wife" Wills at the same time, that the surviving spouse can't change his or her Will after the death of the first deceased spouse. In fact, the surviving spouse is perfectly free to inherit all of the assets of the deceased spouse and then promptly sign a new Will that completely divests the deceased spouses' children or family members entirely. Such changes are often the result of pressure from family members of the surviving spouse or outright fraud, either of which is difficult to prove after both spouses have passed away. 

  • The same is true for couples who have no children and who want their assets to be divided equally among each of their families. In these cases, simple Wills offer no guaranty that the surviving spouse will not change his or her Will to divest the family of the deceased spouse. The fact that changing a Will or naming new beneficiaries is very simple and inexpensive simply adds to the likelihood that the first deceased spouse's beneficiaries will be left out.

  • Even if the surviving spouse never changes his or her Will, if the original Will is never found, then the assets will ordinarily pass by law to the heirs of the surviving spouse after he or she passes, and the heirs of the first deceased spouse take nothing.

 

Family Trust Solution

  • Instead of distributing assets after death through Wills, a couple can instead transfer some or all of those assets during their lifetimes to an irrevocable Family Trust. If children of both spouses are named beneficiaries of the Family Trust, then the surviving spouse may not be able to divest the family members of the deceased spouse.

  • The Family Trust assets may still be made available to the surviving spouse during his or her lifetime for his or her care by simply adding both spouses as beneficiaries of the Trust. However, other terms of the Trust may prevent the surviving spouse from transferring any share of the assets that are earmarked for the deceased spouse's family. In such a case, upon the death of the surviving spouse, the remaining Family Trust assets are distributed to the Trust beneficiaries.

  • A Family Trust, like most trusts, can be a very flexible document. For example, even irrevocable Trust assets can ordinarily be bought or sold as long as those assets are replaced by other assets. Also, the Trust beneficiaries may be changed while the Trustees are alive; and the Trustees may also be named as Trust beneficiaries.

  • Family Law issues may also come into play for couples who were previously married. For example, a Pre-Nuptial Agreement may be necessary in order to designate which assets are to become "martial property" of the new marriage

 

Other Issues in Estate Planning

“My Kids Won’t Fight Over My Estate”

  • These are famous last words. Even children (or other beneficiaries) that got along fine during your lifetime can become bitter enemies if any of them believes, rightly or wrongly, that another child has cheated your estate -- even if the amount involved is small.

  • Family strife occurring after a person’s death is a very sad and all-too-common development and extra care should be taken to minimize this possibility. Misunderstandings between heirs and beneficiaries are common and unfortunately the person who is best able to clear up any misunderstanding is deceased.

  • Also, the child or person you name as executor in your Will may not have the time or patience to learn the intricacies of properly administering a probate estate, which can then become a source of frustration among your other beneficiaries.

Steps to Avoid Disputes Over Your Assets:

  • Give a great deal of thought in preparing your estate plan.

  • First, determine which of your assets are likely to become assets of your probate estate to be distributed to the beneficiaries you name in your Will; and which assets will be transfered automatically upon your death to direct beneficiaries or co-owners.

  • Second, decide what share of your probate estate you want distributed to each beneficiary named in your Will.

  • Third, have your estate plan professionally prepared and fully explain your reasons to the professional so that he or she can best ensure that your wishes are carried out.

  • Fourth, if you name more than one beneficiary in your Will, name your lawyer or other unbiased person as executor or co-executor of your probate estate. You should especially avoid naming one of your children as the sole executor as this may put him or her in the difficult position of having to make choices that may alienate siblings. Practically speaking, any child named as executor will need to obtain the advice of an attorney anyway, so you may as well name your own attorney to serve in this capacity.

  • Simarily, name your attorney or other professional as Trustee or Co-Trustee of any trust you set up to hold any assets.

  • Even if the above steps are followed, friction can still occur among your family members and other beneficiaries. But making your intentions clear and naming an unbiased person to administer your estate should at the least minimize the chances of misunderstandings.

Should I Transfer My Assets to My Children Now? 

  • Transferring your assets to your children or others during your lifetime in order to avoid the possibility of those assets being depleted in the event that you require nursing home care in your later years poses some risks.

  • In general, before the state of Rhode Island will pay any amount to subsidize the cost of nursing home care, it will "look back" five years to determine if the individual transferred any assets without fair consideration. Any such transfer found can disqualify an individual from state aid up to the amount of the disqualifying transfer. 

  • Transferring your assets to others to minimize the value of your assets raises other issues. For example: What if the person or persons decide not to care for you when you need their help? What if a child that you transferred assets to becomes a party to a divorce and the spouse then claims a share of those assets? What if the person you transferred the assets to dies before you? What if you outlive your remaining assets; how will you care for yourself? What if you decide to move to a warmer climate but can't sell your home because you put the names of one or more of your children on the title?

  • Be careful, consult professionals, and consider all possibilities before doing anything that cannot be easily undone. 

 

What happens to my Email and other Electronic Data when I Die?

  • This topic has rightfully garnered much attention lately, as important information of a person’s assets are no longer restricted to their “personal papers” that can be obtained and examined by the executor or administrator of the estate.

  • For example, data stored on a PC, mobile device or online data stored in the "cloud" -- whether emails, social profiles, account statements, receipts, bills of sale, etc. -- may be needed to find your assets following your death.

  • Some online services will only reveal this information in response to a Court Order.

  • Even the process of retrieving data from a decedent’s password-protected personal computer or mobile device can be difficult.

  • Therefore, a person putting together an estate plan should give some thought to which digital information will be needed by his or her estate representative. An authorization allowing this access can be signed and kept with the person’s Will; and/or a provision in the Will can clearly grant the estate representative the power to obtain this information so that the probate court judge can promptly issue any necessary court Order.

 

Estate Planning Documents

Last Will & Testament: 

  • This is the most common estate planning document. However, simply having a Will prepared and signing it does not guaranty that your original Will will be found after your death; or, if your Will is found, that the person or persons who found it will actually bring it to a lawyer so that it can be presented to the probate court.

  • Your original Will must be presented and "admitted" to probate court  for the Will to have any legal force and effect.

  • If you keep your original Will at home or in a location where others have access, it is possible that a child or other family member may find your Will, either before or after your death, and will intentionally destroy the document. Such an act is more likely if the child or family member will receive a greater share of your probate estate if your Will is never found.

  • If no Will is found, your probate assets will be distributed to your "heirs-at-law" rather than to the beneficiaries named in your Will. Thus, any person not named in your Will that is one of your "heirs-at-law" -- generally a spouse, child or, if your have no children, your closest blood relatives -- may have a monetary incentive to ensure that your Will is never found. 

  • Any spouse is entitled to a "spouse's share" of your probate estate, whether or not he or she is named in your Will.

  • Leaving your original Will with your attorney is one measure that will increase the likelihood of your original Will being found and properly presented to the probate court. 

 

General Power of Attorney:

  • In my opinion, this can be a dangerous estate planning instrument. The person given a General Power of Attorney can ordinarily transfer any and all assets of the person who signed the document. Bank accounts can be withdrawn, real estate sold or mortgaged, or assets transferred, all without specific permission or oversight.

  • Even if the person to receive a General Power of Attorney is a "trusted" person, greed, financial need, or improper influence by others can easily result in the General Power of Attorney being used to gain improper appropriation of your assets without your permission or knowledge. Obviously, a person should be very careful about signing such an instrument.

 

Health Care Documents:

  • These documents include the Durable Health Care Power of Attorney, and Living Will, both of which are available for download from the R.I. Dept. of Health website.

  • The main purpose of these documents is to indicate your wishes concerning end of life health care, including the administering of life support measures by your doctors, and to name a person to serve as your health care agent if you are unable to make decisions yourself.

  • Copies of these documents are ordinarily provided to your health care providers.