By Beth A. McDaniel, JD, CELA

 

You are probably familiar with mortgage ‘due-onsale’ clauses. If a mortgage contains this clause, a sale or partial sale of the mortgaged property may require the mortgage or other loan to be paid off in full.

The Garn-St Germain Depository Institutions Act, signed into law by President Ronald Reagan on October 15, 1982  introduced adjustable-rate mortgages, removed interest limits on banks and savings and loans, affirmed that due-onsale clauses are legal, and provided several exceptions for a due-on-sale clause. Here are defined situations in which a due-onsale clause cannot be enforced: 

• Creation of a second mortgage
• Purchase money liens for household appliances
• Termination of joint tenancies (where all joint tenants, but one, die or assign his or her interest to one remain tenant/owner)
• Leases of less than three years
• A transfer to a relative resulting from the death of a borrower and the relative uses the residence as his or her primary residence (note: the act does not define ‘relative;’ thus, nieces, nephews, or a stepchild are likely covered, but it is not clear)
• Divorce or legal separation settlements or court orders
• Transfers into an inter vivos trust (most commonly, a revocable living trust), if the borrower is a beneficiary of the trust
• Transfers approved by the relevant federal agency

Note that the exceptions apply only to residential properties; however, a five-unit apartment or less would still qualify as residential property if a unit was occupied by the borrower.

It is helpful to know that inheritance of a house by a relative does not require the relative to refinance the property. The relative can continue to make payments on the existing mortgage.

Obviously, the relative should have the means to make the payments on time and in full along with the ability to pay other obligations associated with the property, such as insurance and property taxes. In this situation, it is optimal for the relative to have good credit should he or she wish to secure a better interest rate or more favorable terms than the original mortgage.

Should you intend for a relative to inherit your residence and assume your mortgage, unless the relative is your only child, you need to make this intention known in your will or trust. Upon your death, your acting trustee or courtappointed personal representative should familiarize themselves with the terms of your mortgage.

They should contact the mortgage company and request any mortgage assumption forms the company requires. Consider too that if there are other heirs who have an equal interest in the residence, the relative needs to have the means to pay the other heirs for their interest in the residence. Sometimes this can be done with other inherited assets, but not always.

 

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

 

First Published: June 2023

By Beth A. McDaniel, JD, CELA

 

On Tuesday, April 25, 2023, Governor Inslee signed into law House Bill 1240, which made Washington the 10th state to ban the sale of AR-15s and other semi-automatic rifles.

 

By the next day, two federal lawsuits were filed in opposition to this new law; thus, the permanence of the law is still to be determined.

 

Section 3, Subsection 2 of the House Bill 1240 gives exceptions to the prohibition of manufacturing, importing, distributing, selling, or offering for sale any assault weapons.

 

One of the exceptions is transferring ownership of such a weapon upon death to a beneficiary. One of the requirements for this exception is that the beneficiary must be able to prove the decedent was the legal owner of the weapon, ideally by being in possession of a receipt which clearly shows the decedent was the legal owner of the weapon. Another feasible way to establish that the decedent was the legal owner is for the weapon to be specifically bequeathed to the beneficiary through a provision in a Trust or a Will.

 

Under the current law, a beneficiary can only sell or transfer an inherited assault weapon to a licensed dealer, a federally licensed gunsmith for purposes of repair, or to a law enforcement agency for the purpose of permanently relinquishing the weapon.

 

Since July 1, 2019, it has been the law in our state that ownership of inherited pistols and semi- automatic rifles must be transferred through a licensed dealer within sixty days of the owner’s death. It is also the law in our state that certain persons cannot possess firearms. For example, there are prohibitions related to ownership by someone under the age of twenty-one. Thus, there should be a plan for interim safe possession should someone want to name a beneficiary who is under the age of twenty-one.

 

In short, legal gun ownership requires responsibility and a working knowledge of related state and federal laws. Please contact our office should you wish to include provisions in your estate plan relating to the transfer of firearms or need a referral to a licensed dealer.

 

 

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

 

First Published: May 2023

By Beth A. McDaniel, JD, CELA

 

Estate planning is a crucial step in ensuring that your wishes are carried out after your death.

 

Having an up-to-date estate plan can give you peace of mind knowing that your family, loved ones, and/or causes you support will be taken care of when you are gone. It is important to review and update your estate plan regularly to make sure it reflects any changes in the law, life events, or relocation.

 

A comprehensive estate plan includes a Will, powers of attorney for health and finances, HIPAA authorization, healthcare directive, advanced dementia directive, and directive regarding disposition of remains. A comprehensive plan may also include a revocable living trust to help eliminate probate and/or to provide a mechanism to manage assets upon your incapacity.

 

Wills should be updated as your life changes, including deaths, divorces, new relationships, estrangements, or births. Wills should also be updated as your life evolves. For example, if you have minor children, it’s likely that not only will your children someday no longer need a legal guardian, at some point they may be able to take on fiduciary roles like personal representative under a Will or agent under a durable power of attorney. Your planning needs may change as your estate increases. For example, did you know that Washington state has an estate tax for estates over $2.193 million and that if a married couple does proper planning they can protect twice that much?

 

An estate plan may need to be revised late in life in consideration of a possible longterm care need or to best provide safeguards against financial exploitation by a family member, neighbor, or caregiver at a time when you are most vulnerable and will rely on others for assistance.

 

It is the best practice to update Durable Powers of Attorney every 4-5 years. Some institutions may consider older powers of attorney stale and be reluctant to honor them. The same applies to health care directives.

 

Directives regarding disposition of remains should be updated as your wishes become more clear and perhaps to take advantage of newer available options like composting or alkaline hydrolysis.

 

In summary, just as your finances need to be regularly reviewed, so do your estate planning documents so that they are current under the law, are in accordance with your wishes, and most appropriate to your circumstances. 

 

 

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

 

First Published: March 2023

By Beth A. McDaniel, JD, CELA

 

A new preliminary study regarding factors which may prevent dementia was released on February 27, 2023, and its findings will be presented at the American Academy of Neurology’s Annual Meeting in April 2023.

 

During the study, 13,270 women were followed for 20 years to analyze their risk for developing dementia. At the end of the 20-year study, 13% of the study’s participants had developed dementia.

The main takeaway is that the American Heart Association’s ‘Life Simple Seven,’ which are the most important predictors of heart health and cardiovascular health, are also good for promoting good brain health:

1. Being Active
2. Eating a better diet.
3. Maintaining a healthy weight
4. Not smoking
5. Keeping normal blood pressure
6. Controlling cholesterol
7. Having low blood sugars

In short, although not all dementia risks can be modified, such as genetics, the more eliminated unhealthy habits, the lower your dementia risk will be in the future.

 

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

 

First Published: March 2023

By Beth A. McDaniel, JD, CELA

 

Sometimes estate planning documents are signed which sound really great and appropriate at the time, but the purpose for those documents – and whether they are still wanted – or needed – may become less clear over time.

 

Revocable Living Trust. – Definitions: A Revocable Living Trust is a document created by one or more persons during his or her lifetime – “Revocable” implies that the trust’s creator (“Trustor” or “Settlor”) can revoke or amend the Trust provided he or she is competent and able to do so. For a Revocable Living Trust to be effective, the Trustor’s assets (real properties, accounts, stocks, bonds, and any other assets which would otherwise be subject to probate), need to be retitled into the Trust’s name. For example, instead of an investment account being owned by ‘John R. Smith, the ownership would be changed to the ‘John R. Smith Trust’. The process of retitling assets into the Trust’s name is referred to as “funding the trust.”. 

 

The Trustee of the Revocable Living Trust is the person, persons, or corporation who manages the Trust’s assets in accordance with the Trust’s terms. Typically, the Trustor serves as the Trustee until he or she dies, resigns, or is no longer able to do so due to incapacity. When the Trustor can no longer serve as Trustee, the named successor Trustee continues to manage the Trust’s assets. The Trustee has the highest fiduciary responsibility under the law with regards to the management and distribution the assets in accordance with the terms of the Trust Agreement.

 

An individual who creates a Revocable Living Trust, still must have a Last Will and Testament, also known as a “Pour over Will.” The sole beneficiary of a Pour over Will is the Revocable Living Trust. The Pour over Will used only if it was discovered after the Trustor’s death that one or more assets were in the Trustor’s sole name (versus the Trust) and thus subject to probate. 

 

Pros of a Revocable Living Trust: If a trust is fully- funded (everything which is otherwise subject to probate has been retitled into the Trust name), there will be no probate upon Trustor’s death. If the Trustor (or his agent) retitles property interests he or she has in other states into the Trust prior to death (including time share interests), probate will be avoided in those states as well.

 

In simplest terms, probate is the process is in which a court order is signed stating the Will is the Last Will and appoints an individual (“personal representative”) to carry out the Will’s terms. There are many statutory deadlines the personal representative must meet. In most cases, the attorney fee is the largest fee in a probate.

 

In Washington, the attorney can charge a ‘reasonable fee,’ which is typically hourly. In other states, the attorney gets a percentage of the probate assets (ranging from 6% to 10%, depending upon the state) as the fee. In most Washington probates, the attorney fee is less than 1%. An average probate takes 18 months to complete.

 

Different from a probate, with a Revocable Living Trust, upon receipt of a death certificate, the successor Trustee (the person or company whom the Trustor has designated to be Trustee upon his or death) will be empowered to administer the Trust. This includes paying creditors, selling assets, and ultimately distributing the assets to the beneficiaries. In a typical trust administration, the attorney’s involvement is to help provide notice to the Trust beneficiaries, to prepare documentation which shows the Trustee is authorized to act, to prepare a final account for the Trust’s beneficiaries, and finally to prepare receipts, releases, and waivers for the beneficiaries to sign once they receive all the assets to which they are entitled. Trust administration is ultimately a gift to the successor Trustee, who is likely a busy individual with other life demands. 

 

Unlike a probate, Trust administration is private. Thus, the terms and beneficiaries of a Revocable Living Trust do not become a matter of public record.

 

Unlike a Last Will and Testament which is state law specific, if all assets are titled in the name of your Revocable Living Trust, it does not matter where you live as your estate will not be subject to the probate court. However, if you do relocate, it is advisable to meet with an attorney of the new state so, at minimum, an amendment can be created which states that if there is a dispute the law of that state will apply.

 

A Revocable Living Trust can be a great vehicle in the case of incapacity as it provides for the continuous management of the Trust assets when the Trustor is no longer able. It is possible to have an incapacity plan with a Last Will and Testament through a General Durable Power of Attorney; however, a General Durable Power of Attorney may not cover every financial situation.

 

It is still important for someone who has a Revocable Living Trust to also have a General Durable Power of Attorney to cover situations outside the Trust, such as the ability to sue on your behalf, transfer assets to the Trust, file for bankruptcy, revoke documents, change beneficiary designations, manage your retirement accounts, and file taxes.

 

An agent under a Power of Attorney cannot access Trust assets. Thus, if a neighbor or caregiver with ill intentions persuaded you to appoint them as power of attorney, the financial damage would be minimized as they would not be able to access your Trust assets.

 

Compared to a probate, it is more difficult to contest a Revocable Living Trust. In a probate, if someone wishes to contest a Last Will and Testament, he or she simply needs to file a motion and note a hearing. In contrast, to contest a Revocable Living Trust, an individual would need to hire a lawyer (and likely pay the lawyer a sizeable advance for the attorney’s fees) to commence a lawsuit.

 

Cons of a Revocable Living Trust: -There are three significant cons to a Revocable Living Trust. First, there is more initial expense for creation of a Revocable Living Trust versus a Last Will and Testament. The initial expenses for the Trust may be two to three times more.

 

However, as stated above, if the Revocable Living Trust is fully funded (there are no assets outside of the Trust which are subject to probate), with little exception, the Trust administration will be significantly less costly than a probate.

 

Second, there is more work initially in that any asset otherwise subject to probate (real property, accounts, stocks, bonds, partnership interests, etc.) must be retitled into the Trust name. One way to look at it is that you do the work that otherwise would be done in a probate to make your estate more organized and easier to administer for your successor Trustee.

 

Third, as previously mentioned, unlike a Last Will and Testament which, aside from a periodic review, you can tuck away in a safe place and forget about, you must remember that you have a Revocable Living Trust. Thus, any time you acquire a new property or open a new account, you need to make sure the new asset is in the Trust name. Otherwise, although a Revocable Living Trust may be properly funded initially, years later there may be assets outside the Revocable Living Trust requiring a probate.

 

Is a Revocable Living Trust right for you?

There are definite circumstances in which a Revocable Living Trust should be considered:

1. You own real property interests in other states
2. You own multiple parcels of real estate (the more real estate an individual owns, the more drawn out – and expensive – probate will be)
3. You want to privatize the administration of your estate, for example, to avoid a possible Will contest
4. You are concerned about the continuous management of your assets upon incapacity
5. You think you may relocate to another state
6. You want to make it more difficult for someone to contest the administration of your estate
7. You want to make the administration as simple as possible
8. You want to better protect yourself from financial exploitation
9. You are married and have assets which total more than $2,193.000.00. In this case estate tax planning should be considered. In this situation, a Trust can help avoid two probates (one on the first death and one on the second death).

 

You may not be a candidate for a Trust if?

1. Your assets are less than $100,000.00 and you do not own real estate
2. All your assets are considered ‘nonprobate’ and thus will transfer to beneficiaries outside of probate. Here, it is important that , none of your beneficiaries are irresponsible, disabled, or a minor, and you have planned for payment of your final arrangements, liabilities, and administrative expenses
3. A Last Will versus a Revocable Trust is your preference

 

 

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

 

First Published: February 2023

By Beth A. McDaniel, JD, CELA 

 

Over the years we have developed a few different resources that we provide to clients when informed of the death of a loved one. For example, there are so many entities which need to be contacted, like voters’ registration and the credit bureaus.

 

Some time ago a client remarked that although such lists are great, what about a list of things to do before you die? I have never forgotten that request. Here are just a few of the many things that should– ideally – be done before you die: 

 

1. Check your Beneficiary Designations. I advise that beneficiary designations be checked routinely for errors and accuracy, especially as situations change. For example, you don’t want your late spouse to be the sole beneficiary of your life insurance policy. After being married to me for about five years, my husband looked up his 401K beneficiary online and discovered that one of his brothers was listed as the beneficiary. I was relieved when he immediately changed the beneficiary to me. About three years later, he checked it again and found his brother was STILL listed as his beneficiary! Clearly there was a glitch in the system, which thankfully is now fixed.Likewise, I recently checked the beneficiary designations of a few life insurance policies of mine and noticed that my husband’s last name was misspelled. If you have a Will with provisions for minor or disabled children and wish to a minor or disabled child as a beneficiary, it is important that the beneficiary designation states the beneficiary is a testamentary trust (a trust created by your Will) versus directly to a minor or disabled child.

 

2. Consolidate Finances. Trust me, your spouse or children do not deserve the headache of spending hours and days contacting or visiting multiple financial institutions upon your death – I have one client who had to visit EIGHTEEN different banks upon her loved one’s death. It is a gift for those you leave behind if your checking and savings accounts are at one financial institution and you consolidate all those 401Ks you still have from various jobs so that they are managed in one place.

 

3. Tackle Your Paper. A client recently commented that her loved one left paper behind in four different parts of the house. It hit me that I too had paper in four different parts of the house (kitchen, playroom, music room, and a filing cabinet in my son’s closet – largely the result of our home office being used temporarily as a bedroom). I am happy to report that now I just have paper records two parts of the house – in our home office and in a few boxes in our playroom – quite the improvement. I have heard many stories of deceased parents who ‘kept every bank statement since 1965.’ Stay vigilant and with keeping paper organized and in control. Keep all your important papers in one place. Take advantage of periodic free community shred events to get rid of outdated statements or statements for closed accounts. Go paperless when possible.

 

4. Consolidate Passwords. Consolidate passwords for your online accounts and applications. Yes, you can keep them all in a book, but there are also helpful password managers. During Covid, my husband and I moved our passwords to LastPass. It has been a gamechanger. Other password applications include 1Password and NordPass. I suggest researching them to determine which one is right for you. Of course, it is important that someone knows where to find the login information for the manager. Do not forget to document those secret questions as well as someone not being able to answer one may cause headaches. I read about a widow who was unable to remove her late husband’s Comcast account as she did not know the name of his childhood best friend.

 

Yes, there are a lot of little things which can be done before we die to make life easier for those left behind. 

 

In her 2018 book ‘The Gentle Art of Swedish Death Cleaning’ author and artist Margareta Magnusson describes a long process of embracing minimalism and starting the process of decluttering yourself of things that are not meaningful to you, or you do not use on a day-to-day basis. This is done by gradually giving away, selling, donating, recycling, or trashing items . Per the author, a good place to start is with clothes closets as it is easy to determine what no longer fits, what is no longer in style, or what is no longer worn.

 

Part of the author’s ‘death cleaning’ process is to advise loved ones of your intentions and to create a storage system for sentimental mementos and photos.

 

I recommend the book for anyone who embraces the concept of a minimalist lifestyle or desires to make the administration of his or her estate as simple as possible. It is a short read (the audio book takes only two hours and 37 minutes) and the author uses her own experience to illustrate her charming, practical approach.

 

If have questions or wish to make an appointment, please contact our client care coordinator, Margo Passeau, at (425) 296-3121.

 

First Published: December 2022 and January 2023

By Beth A. McDaniel, JD, CELA

 

There are many important reasons to execute a Will, including to nominate a personal representative; nominate a guardian for minor children; establish trusts for minors, disabled beneficiaries, or irresponsible beneficiaries; and to dispose of personal property.

 

It is possible for a properly drafted Will to be ‘evergreen’ and never require updating if it nominates alternative fiduciaries and provides contingencies for deceased beneficiaries. 

Here are 12 reasons a Will should be updated:

1. There is a change in marital status. If you marry, it is imperative that you update your Will. Otherwise, the law presumes you ‘forgot,’ and requires your spouse to receive the same amount they would have received if you had died without a Will (intestate). This may not have been your intention, especially if it is a second marriage and you and your spouse have taken pains to keep your assets separate. Likewise, Wills should be updated if you divorce.

 

2. You cohabitate or are in a long-term committed relationship. If you cohabitate or are in a long-term committed relationship, it is important to update your Will to acknowledge the relationship, even if you do not intend to leave something to your partner under that Will. 

 

Note: the best practice is for both partners to also sign an agreement in which each partner waives his or her right to make a claim against the estate of the other.

 

Otherwise, upon your death your partner could make a claim against your estate, claiming that they were in a committed intimate relationship with you and are entitled to a ‘community share’ of your estate. This very well could have been your intention; but sadly, now your partner is left to pursue a claim through litigation.

 

3. Life Change for Beneficiary. If one of your beneficiaries becomes incarcerated, drug addicted, disabled, or missing. It is important that your Will properly protects their share of your estate and that your intentions are memorialized.

 

4. Estrangement. If you become estranged from a beneficiary and no longer wish for them to receive anything from your estate or serve as your personal representative.

 

5. You were estranged but have now reconciled. Likewise, you should update your Will if you have excluded someone from your Will because you were estranged, but now you have reconciled, and you now want to include them. Sadly, sometimes this happens too late, as the individual may no longer has the capacity to execute an updated Will or the new Will does not get signed prior to the individual’s death.

 

6. Your net worth changes. Washington has estate tax for estates over $2,193 million (2022). If your wealth has increased to over that amount since your Will was executed, it is important to update your Will to do proper estate tax planning.

 

7. Wish to Change Fiduciaries. You wish to change your personal representative, trustee of any trusts under your Will, or the guardian of minor children you have nominated under your Will.

 

8. Changes to Distribution of Personal Property. You may like to change how your personal property or assets are allocated/distributed.

 

9. Add or Remove Bequest. You wish to add or remove a specific bequest to a charity or individual.

 

10. Disability of Spouse. Your spouse has become disabled.

 

11. Relocation from another state. You have moved to a different state (Wills are state law specific)

 

12. Provisions for Pets. You wish to provide for your pets or exclude provisions for pets that you no longer own. 

 

If do not have a Will and need one, or you wish to review your existing Will, please contact our client care coordinator, Margo Passeau, at (425) 296-3121.

 

First Published: October 2022