Should You Add a No-Contest Clause in Your Will/Trust

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As we all know, family dynamics can make estate planning challenging. When I have clients that are concerned about a specific individual challenging the validity of their will or trust, they often ask me if they should add a no-contest clause provision in their estate plan. In theory these clauses are designed to prevent unhappy relatives from challenging your will or trust. In practice, however, a no-contest clause truly only discourages someone who has something to lose by challenging your estate plan in court. 

Below is sample language of a standard no-contest clause:

“If any beneficiary under this will seeks to obtain in any proceeding in any court an adjudication that this will or any of its provisions is void, or seeks otherwise to void, nullify, or set aside this will or any of its provisions, then the right of that person to take any interest given to him or her by this will shall be determined as it would have been determined had such person predeceased the execution of this will without issue.”

Let’s say for example you have two adult children, each of whom is set to inherit $25,000. If one of those children is financially irresponsible and is really depending on that inheritance, he or she will likely think twice about launching a will challenge as a loss in court could cost them their much-needed inheritance. 

However, if you choose to completely disinherit someone, that individual would have nothing to lose by contesting your will. Going back to our example, if you disinherited one child, he or she would lose nothing by challenging your will because if they win (by having your will declared invalid), that child would theoretically inherit half of your estate. 

At Davis, Davis & Associates, we are here to help our clients navigate these difficult situations with alternative avenues to prevent estate plan challenges. Call us to set up your appointment today, (251) 621-1555.

Storage of Estate Planning Documents: What to Know

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I’ve been practicing for long enough at this point in my life that I can tell a real life story for almost every situation that occurs and boy, do I have stories about mishaps regarding the storage of vital estate planning documents. From Wills being locked in safety deposit boxes to Health Care documents being stored improperly during times of medical emergencies, I’ve seen it all. If you live down in this area of the state, you probably already have an emergency kit ready in the event of a hurricane. This probably includes medication, batteries, a weather radio, water, etc. However, it’s equally as important to take time storing and keeping tabs on your important personal documents such as estate planning documents, medical records, tax information, etc.  

When thinking about where to best store your estate planning documents you should put some thought into both the safety and durability of the storage device and the ease of accessibility to it in the event of an emergency. The most important thing is that YOU are not the sole individual who can access these documents. They should be accessible by appropriate, trusted people in your inner circle otherwise, they are virtually useless. Here are a few storage options to consider:

  1. A fire-proof and flood proof safe located in your home or office. Usually these are relatively inexpensive and more secure than something like a locked filing cabinet. Some best practices would be to keep the safe in a private area of your home or office, make sure it utilizes a combination lock or key and ideally, would be difficult to move. 
  2. A safe-deposit box at a bank. While these fire-proof metal boxes are used by many people for safe storage of important documents, keep in mind that they can be difficult to access in an emergency (for instance, when local banks/business are shut down). Also, access to safe-deposit boxes can be restricted by the bank to only yourself and could be frozen upon your passing. This would require that your family—if a separate individual is not explicitly listed on the box—go through the probate court to even obtain access to your documents.
  3. Online Storage. For the tech savvy, this may be a great options as there are a number of online cloud storage systems available these days. Keeping your documents online keeps them organized, protected from external damage and easily accessible from any digital device with access to the login and password. Keep in mind, however, that some medical/financial institutions may still require original documents, so it’s always best to keep the originals in one safe location, in addition to using a digital storage option. 
  4. At your attorney’s office. Many firms, including Davis, Davis & Associates, offer clients the option to retain original documents, free of charge. Allowing your attorney to safely store your documents is a great way to prevent the misplacement of vital original records, keep documents safe from getting into the hands of any unwanted individuals in your home and keep the records accessible to your trusted attorney, should your family need legal assistance. 

 

For more information on how to best organize and store your estate planning documents, reach out to your trusted financial advisor or legal professional. At Davis, Davis, & Associates, it’s not just our job, but our honor to assist you. 

Capacity Issues in Relation to Estate Planning

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A common misconception that often arises in my practice is that someone who is cognitively “stable” automatically has testamentary capacity and is capable of drafting (or directing someone to draft) their estate planning documents. According to the CDC, 1 in 4 Americans in 2023 have some form of a disability and according to the Alzheimer’s Association, an estimated 5.8 million Americans suffers from Alzheimer’s dementia today. That number is expected to triple by the year 2050. Because illnesses of this nature are progressive, persons in the mild to moderate stages often retain the capacity necessary to execute estate planning documents, while other may only have lucid intervals. 

In terms of determining testamentary capacity (the capacity to execute a last will and testament), the testator must generally know (1) what property he/she has, (2) what he/she wants to do with their property upon their passing, (3) know the individuals whom he/she want to receive said property and (4) fully understand the results of those choices. While an individual may be able to rattle off the street they live on or their birthday, these things are not relevant in terms of testamentary capacity. 

When drafting estate planning documents, attorneys must always exercise caution when there is a reason to question mental capacity because failing to do so can lead to disastrous consequences, such as will contests. Every attorney is different in their approach to this sensitive issue, but I have always found it best to meet with the client in person and without unnecessary family/friends in the room so I can ask the necessary questions I need in order to assess capacity. If I’m left feeling unsure, my next step is to require the client to provide a detailed written opinion from a doctor as to the testator’s capacity, preferably written within a week or two of drafting the estate documents. 

Of course the takeaway from all of this is that it is so very important to take care of your estate planning needs early on, before you or someone you love begins to experience a decline in mental health. You are never too young to have an estate plan in place!

 

To learn more about estate planning and how we can assist you, contact Davis, Davis & Associates today to schedule a consultation. (251) 621-1555. 

Funding a Revocable Living Trust

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As of late, many of my clients are choosing to structure their estate plan using a revocable living trust instead of relying simply on a will. They prefer to cost advantage, the privacy, the savings in time and the added control over assets that a trust can provide in the event of their incapacity and death. 

When properly prepared and funded, a trust can avoid the public, costly, and time-consuming probate process. It can let you provide for your spouse during your spouse’s lifetime and for your children after your spouse’s death, which can be important particularly in second marriages or for blended families. It can defer or reduce estate taxes and a trust can protect inheritances from court interference, creditors, spouses, divorce proceedings, and irresponsible spending.

Still, many people make a big mistake that sends their assets right into the court system: they do not fund their trusts.

Funding your trust is the process of transferring your assets from you (as an individual) to your trust (with you as the trustee of said trust). To do this, you physically change the titles of your assets from your individual name to the name of your trust. If you are married, you and your spouse might change the titles of your jointly owned assets to your joint trust or to each of your individual trusts, whether in equal or unequal portions.

If you have signed your trust agreement but have not changed titles and beneficiary designations, you are unlikely to avoid probate. Your trust agreement and trustee can only immediately control the assets you have put into the trust. You may have a great trust, but until you fund it (transfer your assets to it by changing titles or provide for transfer by beneficiary designation), it does not control anything. 

Below are a few examples of assets you may want in your trust and others which would not be appropriate to fund your trust:

Assets you probably want in your RLT:

  • Real property (home, land, other real estate)
  • Bank/credit union accounts, safe deposit boxes
  • Investments (CDs, stocks, mutual funds, etc.)
  • Notes payable (money owed to you)
  • Life insurance (or use irrevocable trust)
  • Business interests, intellectual property
  • Oil and gas interests, foreign assets
  • Personal untitled property

Assets you may not want in your RLT:

  • IRAs and other tax-deferred retirement accounts
  • Incentive stock options and Section 1244 stock
  • Interests in professional corporations
  • Funding real estate into an RLT is state specific and may not apply in all states

 

To learn more about estate planning and planning when new residency is involved, contact Davis, Davis & Associates today to schedule a consultation. 

What You Need to Know About Creditor Claims Against an Estate

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Try as we might to live (and die) debt free, most people do pass away with some debt. The Executor (also
known as the Personal Representative) of an Estate is legally obligated to notify known creditors that an
estate of a decedent is being probated and it’s also a legal obligation to publish notice that an estate is
being probated, thereby allowing any unknown creditors to come forward and make a proper claim
against the estate.

Now, every state has limits on the amount of time a creditor has to come forward and make such a claim
and, in Alabama, that time frame is six (6) months from the date the decedent’s estate is opened. If no
claim is filed within that time period, you are not obligated to pay that claim. A reasonable time limit
exists so that an Executor can eventually distribute inheritances, free from the potential of later claims by
unknown creditors.

The Executor, as a fiduciary, is responsible for properly addressing any creditor claims and every state
has certain steps that must be followed. If not followed accurately and timely, the creditor may be able to
make claims against the Executor’s own assets. Hence, the critical importance of hiring an experienced
probate attorney to help assist and advise you, as the Executor, through the timely and often times
complicated probate process.

To learn more about the probate process, contact Davis, Davis & Associates today to schedule a
consultation with one of our experienced probate attorneys.

The Probate Process in Alabama

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In reality, the probate process in any state could fill up an entire book, but this blog post will (hopefully) give you a general overview of what to expect if you are anticipating having to navigate the probate court for the purposes of handling a decedent’s estate. For the purposes of this particular blog post, we will be discussing the process as it relates to filing the Will for a decedent. If an individual dies without a Will, that process is called “Intestate Administration” and will require its own post.

Probate is the court-supervised process of validating someone’s last will and testament, resolving any outstanding debts or taxes and distributing assets according to the terms of the decedent’s will. While it is (in theory) possible to undergo the probate process without any attorney, it is a lengthy, expensive and complicated process that would be best undertaken with the assistance of a qualified probate attorney.

So, let’s get down to brass tacks; the general flow of the probate process when a decedent passes with a will is this—contact the court, get appointed as the personal representative, submit the Will, inventory and submit valuation of all relevant assets, have the court and beneficiaries approval, and finally distribute the assets to rightful heirs/beneficiaries. If you are serving as the Personal Representative (also known as an Executor) you are responsible for:

  • Filing a Petition to Probate the Estate
  • Marshalling together probate assets
  • Managing and locating assets
  • Valuing and appraising estate assets
  • Receiving payments on behalf of the estate and paying taxes on behalf of the estate
  • Setting up a separate bank account for the estate with a separate EIN
  • Interpreting the Will
  • Communicating and working with heirs/beneficiaries
  • Valuing and appraising estate assets
  • Notifying creditors
  • Following all legal deadlines/attending necessary court hearings
  • Paying funeral expenses (if necessary)
  • Filing estate tax returns
  • Submitting death certificates
  • Submitting distribution receipts and officially closing the estate

Don’t be fooled, there are a LOT of minute and nuanced steps that have to be taken in conjunction with everything listed above, but this is a general outline of the tasks involved when it comes to probating the last will and testament of someone. Hence, why I highly, highly, recommend hiring an attorney who specifically does probate work and is well-versed in the law and well-known in the County in which you are operating.

To learn more about the probate process or to speak to a qualified probate attorney, contact Davis, Davis & Associates today to schedule a consultation.