By Beth A. McDaniel

 

In a syndicated ‘Ask Amy’ column, dated September 3, 2023, a reader shared her distress over her father-in laws informing her husband two years prior that he was being ‘disinherited’ in favor of his sister, who served as his full-time caregiver and needed his financial support. The reader expressed her difficulty in coming to terms with this decision and sought advice.

 

I have many thoughts surrounding the issue of inheritance. First, inheritance is a privilege, not a right. Everyone has the right to designate their estate beneficiaries and distribution as they see fit.

Here, the father-in-law proactively conveyed his wishes to his son. By doing so, he may have averted a future ‘will contest’ initiated by his son based upon his suspicion of undue influence brought on by his sister. Likewise, sharing this information with his son allows him to process the information and his emotions prior to his father’s passing, hopefully preventing any posthumous resentment towards his sister for blindsided him with the news.

It is not uncommon for a caregiver child to be ‘compensated’ following the parent’s death, especially as the funds may likely be tied up during the parent’s lifetime.

 

In my view, inheritance is a multifaced topic. At least one study shows that receiving an inheritance brings a surge of happiness, which is likely short-lived as at least one other study shows that few people retain any substantial portion of their inheritance one year later.

It is intriguing that the estates where the inheritance was unexpected (and the inheritor likely did not have a relationship with the relative who died) generate the most phone calls to our office with individuals impatiently inquiring about the timing of their inheritance. Perhaps this stems from the apprehension that an unexpected windfall could easily dissipate.

 

This year, we have encountered our first probate cases involving ‘inheritance advance loan companies’ in which an heir takes out a loan with a company, with ridiculous terms, in exchange for the company’s directly receiving a portion of the inheritance from the estate. If I were to ever represent such a beneficiary, I would encourage patience and not “spending” the inheritance before it is received.

In my perspective, inheritance is not just about money, it is often a final expression of love. While I can appreciate disinheritance due to estrangement, I often encourage estate planning clients to think twice about ‘disinheriting’ a child solely because another child or children ‘need it more’, as may unintentionally punish the disinherited child for being successful. As someone wiser than me pointed out, this action can have listing, multi-generational repercussions.

 

When it comes to more distant relatives, the children’s story of ‘The Little Red Hen’ often comes to my mind. In that story, the Little Red Hen repeatedly asks for help from her friends who provide excuses as to why they are too busy to help. In the end, the friends show up to reap the fruits of the Little Red Hen’s labor and the Little Red Hen turns them away. In short, I think it is entirely acceptable for someone like an aunt to allocate her estate to those nephews and nieces with whom she shares the closest bond, rather than distributing it equally among all nephews and nieces equally, regardless of the nature of their relationship.

Inheritance is undeniably intricate and warrants thoughtful consideration. On the recipient’s end, it’s wise to maintain modest expectations and keep any sense of entitlement in check.

 

For more information, or to schedule an appointment, please call 425-251-8880 or email info@bethmcdaniel.com

 

First Published: September 2023

By Beth A. McDaniel

Do you have — or does someone close to you have – a significant other? If so, are you familiar with the term ‘committed intimate relationship?’

Based upon my informal polling, I am guessing the answer to the last question is “no.” Committed intimate relationships (“CIRs”) appear to be a booming area of law in our state. I continue to be surprised when yet another colleague tells me of a lawyer in their firm who has CIRs as a main part of their law practice. Clearly it is something that should be given attention.

 

In accordance with a 1984 Washington court case, In re Marriage of Lindsey, a CIR is a stable, marital-like relationship where both parties cohabitate with the common knowledge that a marriage between them does not exist. In determining whether a CIR exists, the court considers the following nonexclusive relevant factors:

1. Continuous cohabitation

2. Duration of the relationship

3. Purpose of the relationship and whether it is inclusive

4. Pooling of resources and services for joint projects

5. The intent of the parties

 

Pursuant to a 1995 Washington court case, Connell v. Francisco, for a court determine whether a CIR exists, a three-pronged analysis if followed: 1) the court must look at the relevant factors and determine whether a CIR exists; 2) if a CIR exists, then the court must evaluate the interest of each party in the property acquired during the relationship; and 3) based on such information, the court must make a just and equitable distribution of property.

The purpose of Lindsey Connell, and similar cases is to protect individuals who may be left at a financial disadvantage upon the termination of such a relationship due to death of one of the partners. Such surviving partners may feel helpless watching their deceased partner’s family members ‘swoop in’ to claim assets.

 

On the other side, the advent of CIRs may have unintended results. For example, during a relationship there may have been a mutual understanding that everything is separate and that assets will go to the deceased partner’s children upon the partners’ respective deaths. Note that it may not make a difference if the deceased partner remembered their partner in their Will or named them as an asset beneficiary.

When a partner of a CIR dies, the surviving partner may submit a petition to the court requesting the estate assets should be distributed based upon the existence of a CIR, leaving them open to objections filed by surviving family member of their deceased partner.

 

In amicable instances, a mutual agreement may be reached by thesurviving partner and the deceased partner’s family members as to how the assets will be distributed.

A written agreement clearly stating the intentions of each partner can avoid the filing of such a petition or the need to execute a post-death agreement. An agreement should be considered even among platonic, long-term roommates, especially if the roommates previously had a romantic relationship

 

For more information, or to schedule an appointment, please call 425-251-8880 or email info@bethmcdaniel.com

 

First Published: July 2023

By Beth A. McDaniel, JD, CELA

 

Individuals and couples include revocable living trusts as part of their estate plan for a variety of reasons including probate avoidance, privacy, added incapacity protection, and estate tax planning (for couples).

 

For such an estate plan to be effective, all assets which would be subject to probate need to be retitled into the name of the trust.

 

Examples of such assets include real property; investment accounts; savings bonds; CDs; stocks; time share interests; bank accounts; interests in a partnership, corporation, or LLC; oil, gas, and mineral rights; and unsecured loans. In Washington, tangible personal property (vehicles, jewelry, household items, clothing, tools, art, etc.) is included in revocable trusts automatically via a general trust provision.

 

If it is discovered following the death of someone who had a Trust that one of the above assets was not properly retitled to the Trust, a probate may be required. This, of course, requires additional expense and may thwart the desire for privacy because of the requirement to provide notice of the probate to individuals who were specifically excluded as trust beneficiaries.

 

It is also possible for assets to pass to the Trust via beneficiary designation, including non- qualified annuities, life insurance, or investment accounts.

 

It is most common to not name the beneficiary of a 401K or IRA as a revocable trust, especially if the beneficiary is the survivor spouse or adult children. 

 

It is possible, however, to name a Trust as the beneficiary of a 401K or IRA with the same required minimum distribution requirements if the Trust contains qualifying language. Naming a Trust as the beneficiary should be considered when there is a minor or disabled beneficiary. In addition, a Trust can be the beneficiary of an IRA or 401K when it is a second marriage, and the account owner wants his or her spouse to receive the required minimum distributions but also assure that his or her children receive the remainder should the survivor spouse die with funds remaining in the 401K or IRA. Note that in most cases the decedent’s interest in the 401K rolls over to an inherited IRA.

 

It is important that your Durable Power of Attorney document allows for your agent to transfer assets or change beneficiary designations to your Trust if necessary.

 

Yes, transferring all the above assets to a Trust takes time and effort; however, a ‘fully-funded’ Trust is certainly a gift to your named Trustee – and trust beneficiaries — as it will make your estate a lot less time-consuming and expensive to administer.

 

 

For more information, or to schedule an appointment, please call 425-251-8880 or email info@bethmcdaniel.com

 

First Published: May 2023