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Elderlaw: 02/15/2019

Elderlaw Advocates Feb. 15, 2019

Dear Len & Rosie,

I made a new will after my husband died 10 years ago. I had five children, and my will divides my estate among them equally. Four years ago, my son Richard died. He had two children, and a wife, an awful woman named Margaret. There is no love lost between us. I want to make sure that she gets nothing when I die. Do I need a new will?


Dear Sarah,

Pull out your will and read the part that talks about who gets what when you die. Read it closely. There are two ways that Margaret could get your money. The first way is simple. The will must say that if Richard predeceases you, his share of the estate shall pass to his wife Margaret. If your will says this, then you definitely need a new will.

Even if Margaret is not getting Richardís share, you are not yet in the clear. If your will says the shares of your children are by ďright of survivorship,Ē then your estate will be divided among your then-living children after your death. Richardís two children will get nothing. If you want them to receive their fatherís share, the gift to your children should be by ďright of representationĒ, which means the share of a dead child would pass to his or her living descendants.

Margaret would still get nothing. But if Richardís children are under the age of 18, then any inheritance they receive from your estate cannot be distributed to them directly. It would be held in a guardianship or maybe by a custodian under the Uniform Transfers to Minors Act. And guess who is most likely to be guardian or custodian? Margaret. The money would belong to your grandchildren, but she would be in charge of it, and she would be in an ideal position to rip off her own kids.

To prevent this, your will should leave the shares of your estate passing to your grandchildren in either a sprinkling trust, or in a custodial account under the Uniform Transfer to Minors Act with your will spelling out that Margaret will never be trustee or custodian. Your will should also appoint the people you want as trustees or custodians who could then spend the money on your grandchildren to pay for their education and other needs. This way, even if Margaret continues to raise your grandchildren, she wonít get her hands on their money.

You should review your will with a trusts and estates or elder law attorney. You may also want to consider getting a trust to avoid probate. Probate is usually much more expensive than administering a trust and takes an average of one to two years to complete. Take care of this now, and youíll have the piece of mind of knowing that Margaret wonít get her hands on your estate.

Len & Rosie

Dear Len & Rosie,

My sister is renovating some space in her house so that our elderly father can live with her. We siblings want to give her money to help pay the cost of these renovations. How do we do this so that she does not have to pay income tax? Would these funds, maybe $65,000 altogether, be considered a gift to her?


Dear Sandy,

Itís refreshing to read about family members cooperating and helping one another in such a manner. We usually learn of arrangements such as yours only after problems occur.

Your situation is fairly straightforward. Your sister will not have to pay income tax on the money gifted to her from you and your other siblings. Gifts are received, not earned, so gifts are not subject to income tax, except for tax-deferred assets, such as a United States Savings Bond, and in that case the tax isnít due until the Savings Bond is cashed in.

You may give your sister as much money as you wish and she wonít have to pay any income tax. However, if you give her more than $15,000 during any one year, you will have to file a gift tax return, IRS Form 709, with the income tax return youíll have to file by next April 15. The amount you give her above $15,000 is subject to federal gift tax. You wonít have to pay any gift tax now, but the amount of the gift in excess of $15,000 will reduce the amount of your assets that avoid the Federal Estate Tax (the death tax) when you die. However, in 2019, up to $11,400,000 will pass free of the estate tax on your death, and well, you should have those problems.

There are even ways of getting around this. You may gift your sister $15,000. So may your spouse if you are married. Each of your other siblings and their spouses may gift up to $15,000 to your sister without causing any tax liability or the need to file a gift tax return. It should be easy to break the gifts apart into small enough pieces to avoid any gift tax issues.

Just make sure that you do not wind up in a situation that may break your family apart. It is clear to us that your purpose in giving your sister this money is to keep your father out of an impersonal care facility. Itís important for you to understand that your sister has a limit as to what help she can provide her father, even if she doesnít acknowledge this now. What will you do if she reaches her limit and your father has to be transferred to a nursing home? Will you be angry that your sister has a new addition that you paid for? Will you demand your money back? Itís best to resolve these potential problems now before they become problems.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at Len also answers legal questions each weekday, Noon-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.

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