Law of Office of William J. Sweeney

Law of Office of William J. Sweeney

Mom died and left her mountain cabin equally to all five children. Can we keep it, or do we have to sell it?

by William J. Sweeney on 04/07/15

(Mr. Sweeney is an attorney licensed in California. The comments below are not intended as legal advice for any specific situation and may not accurately reflect the law in other jurisdictions. There may have been changes in the law since this was written.  You should always consult an attorney in your own jurisdiction.)

Assuming the property does not have to be sold in order to pay your mother’s creditors, if you all agree, typically you can retain it. Whether probate or trust administration, at the time of distribution, title will typically be changed from your mother’s name to the names of all five children as equal owners.

While this may be a good idea and can possibly work well for a long time, the more people you have as “partners” in a property, the greater the likelihood there will be some disagreement at some point.

During a probate proceeding, the executor is in control, subject to a duty to act in everyone’s best interest. The same is true during trust administration when the trustee is required to act in everyone’s best interest. The beneficiaries may not agree as to how things should be handled, but as long as they are handled appropriately, the executor or trustee has control and can ultimately determine whether the property is to be sold or distributed.

Typical problems that arise down the road with multiple ownership include the nature and amount of any repairs or maintenance, as well as situations where one or more partners want out. I have found it is common for one or more partners to want to “fixup” the place, while others are satisfied with it the way it is. This can cause discord among the children. Some may not be in a financial position to expend funds to do it.  Other situations occur when one partner wants to let someone else use it and the others don’t agree. Sometimes it is felt one or more partners monopolize use of the place, to the exclusion of the others.

Even if the foregoing situations don’t occur, at some point one or more of the partners will grow tired of the property and its expense, or may need the value of their share of the property for some other personal obligation. Some want to sell, while others do not.  Usually the ones using it the most don’t want to sell.  

While it is possible those wishing to retain the property can “buy out” the interest of the other, it is not always feasible. Depending on the personal situation of each of the children and the cost of the property, they may not have the resources to purchase the interest. Aside from that, if they can use the property frequently and only incur a fraction of the operating expense, they may prefer to continue to do so rather than to acquire total interest in the property and have to pay all the expense.

In my experience, at some point down the road the partners will either have to agree to sell the property, or one or more of the partners will bring a legal action to get a court order to sell it. While typically successful, a lawsuit does nothing to breed goodwill among the children and can result in significant expense.

Retaining a property with multiple owners should be given considerable thought before the decision is made to retain the property. While it may seem a good idea and sentimental to retain the property you were able to use as you grew up, it’s unfortunate when it creates a situation that creates tension and ill will among the siblings.

An experienced attorney should be able to point out the pros and cons of your particular situation and provide some advice on how to address the issue.

William J. Sweeney
Attorney at Law
915 Highland Pointe Dr., Ste. 250
Roseville, CA 95678
(916) 786-2011

My husband is not an American citizen. Can we still have a trust?

by William J. Sweeney on 03/31/15

(Mr. Sweeney is an attorney licensed in California. The comments below are not intended as legal advice for any specific situation and may not accurately reflect the law in other jurisdictions. There may have been changes in the law since this was written. You should always consult an attorney in your own jurisdiction.)

The answer is yes, but there are some things you need to know.

If a couple creates a revocable trust and one of them is not a U.S. citizen, some different rules apply. Initially, it would be treated like any other trust. In the event the non-citizen spouse is the first to die, no particular special action is necessary, the trust would be handled just as any other trust would be handled when one spouse dies.

The difference arises if the citizen spouse is first to die. By way of background, the U.S. tax law provides that for a married couple, no estate taxes are due on the death of the first spouse, irrespective of the amount of assets. This is called the "Unlimited Marital Deduction". Any tax due would be payable at the time of the surviving spouse’s death.

Non-citizens are not automatically provided this type of deduction. Because of concerns the U.S. government has that a surviving, non-citizen spouse might leave the country without paying any taxes due, special requirements are in effect. The non-citizen can have what is called a "Qualified Domestic Trust" otherwise known as a "QDOT" trust. These requirements allow the non-citizen to remain as a trustee of the trust, but require that either a citizen of the United States, or a U,S, corporation serve as a co-trustee. There are also requirements that the citizen trustee has the authority to withhold from any distributions, an amount sufficient to pay any taxes. If the assets exceed a certain amount, a bond or Letter of Credit may be required to assure payment of taxes. Other rules and regulations apply, however they are too technical for these comments.

Canadian citizens are afforded another option in lieu of the QDOT trust should they wish to avail themselves of it. It is a simpler procedure, but there are time limits when elections have to be made or the choice can be forfeited.

The bottom line is, if you are a non-citizen of the United States you need to talk to a qualified attorney regarding the necessary steps to take to avoid having tax payments become due prematurely.

It is simple to address these issues by contacting an experienced attorney.

William J. Sweeney

Attorney at Law

915 Highland Pointe Dr., Ste. 250

Roseville, CA 95678

(916) 786-2011

What is a “Special Needs Trust?”

by William J. Sweeney on 03/24/15

(Mr. Sweeney is an attorney licensed in California. The comments below are not intended as legal advice for any specific situation and may not accurately reflect the law in other jurisdictions. There may have been changes in the law since this was written. You should always consult an attorney in your own jurisdiction.)

A "Special Needs Trust" is a form of trust that typically is used to allow someone who is receiving federal or state assistance such as Supplemental Social Security Income (SSI) or Medi-Cal (Medicaid) to remain eligible by holding other assets in a trust under which they have no control.

Without such a trust, an individual receiving a lump sum of money as small as a few thousand dollars could be deemed ineligible for benefits until they exhaust the lump sum, at which point they would have to reapply for benefits. By creating a Special Needs Trust, the recipient has no control over the funds, and they are not counted as part of their assets. Such a trust cannot have any required distributions and the trustee must have absolute discretion as to how and when the funds are spent on behalf of the recipient. A required distributions could jeopardize receipt of Supplemental Social Security Income (SSI) and/or Medi-Cal.

The trustee should not use the funds to pay for what are considered the "necessities of life" such as food, shelter and clothing. These items should be paid for out of the government benefits.

The trustee can use the funds in the Special Needs Trust to improve the recipient’s living conditions by paying for special and supplemental needs, sheltering assets from the beneficiary’s creditor’s claims and from the demands of the beneficiary himself.

Needless to say, while a Special Needs Trust can be particularly beneficial in the right circumstances, it is a very technical area of law and should be prepared by a knowledgeable attorney. Failure to draft it properly could result in the loss of government benefits.

It is simple to address these issues to make sure your wishes are carried out by contacting an experienced attorney.

William J. Sweeney

Attorney at Law

915 Highland Pointe Dr., Ste. 250

Roseville, CA 95678

(916) 786-2011

What happens if I don’t have a will or trust when I die? Does the state take all my property?

by William J. Sweeney on 03/17/15

(Mr. Sweeney is an attorney licensed in California. The comments below are not intended as legal advice for any specific situation and may not accurately reflect the law in other jurisdictions. There may have been changes in the law since this was written. You should always consult an attorney in your own jurisdiction.)

It is unlikely in California the state would get your property when you die because you don’t have a will or trust. California law decides who inherits your estate if you don’t have a will or trust. In the unlikely event there are absolutely no relatives that meet the criteria of the statute, the state possibly could receive your property.

The more important question is who will receive your property when you die without a will or trust? While California statutes determine who receives property in that circumstance, those persons may not be the ones you would choose to leave it to, or in the proportions you would like.

Just recently, I was talking to an attorney friend who had a client with three children. One of the children unfortunately was addicted to drugs. The client had a fairly substantial estate and was concerned if money was left to the child with the drug problem, he would use the funds to buy drugs and harm himself. The client wanted to leave the estate to the other two children. Two days before the client’s appointment with the attorney, the client died leaving no will or trust. Since the client had no surviving spouse, under California law the estate was divided equally among the three children. This was not what the client wanted, but because no provision had been made prior to the client’s death, an equal distribution occurred.

Over the years I have encountered people who have multiple children. While they would like to divide their estate equally, they realize because of health or other issues, one child is not able to earn a living, adequately care of themselves and/or needs additional assistance. In those cases they have provided for an unequal distribution, leaving more to the needy child because of their situation.

In other cases, a child may be receiving MediCal (Medicaid) and even a small bequest can cause loss of benefits. As soon as they exhaust the bequest, they have to go through the application process all over again to regain the benefits. By setting up a Special Needs Trust, you can avoid the loss of benefits while still leaving something to the child.

On occasion, people are concerned one of their children may lack sufficient mental capacity to handle an inheritance. While they want an equal division among the children, they do not want to make a bequest outright to that particular child. Frequently, they will provide for an outright distribution to the healthy children and retain the other child’s share in a trust supervised by a trustee of their selection to make sure that child receives what they need, when they need it.

It is so simple to address these issues to make sure your wishes are carried out by contacting an experienced attorney.

William J. Sweeney

Attorney at Law

915 Highland Pointe Dr., Ste. 250

Roseville, CA 95678

(916) 786-2011

My brother was on Medi-Cal (Medicaid) when he died. Do I have to notify anybody he has died?

by William J. Sweeney on 03/10/15

Medi-Cal is a federally subsidized California program that pays for medical services and premiums for people who are unable to pay for them themselves. In all other states the program is known as Medicaid.

When someone on Medi-Cal dies, the agency handling his case, typically the county welfare or social services department, should be notified right away.

When a recipient of Medi-Cal dies, their estate, or the recipient of their estate, may be required to repay the cost of care the recipient received. If repayment is required it would come from the decedent’s estate and would not exceed the value of the estate. There are some exemptions that might delay, or even forgive repayment. There are also provisions in the law for a waiver or reduction of repayment when it would create a "substantial hardship".

Aside from notifying the local agency, under California law, the person handling a decedent’s estate is required to give Notice of Death to the California Department of Health Care Services within 90 days of date of death. Along with that notice you are required to enclose a copy of the Death Certificate. After giving the notice, you will either receive a letter from the Department of Health Care Services indicating they do not have a claim against the estate, or may receive a claim for repayment. Any request for a waiver for repayment must be filed promptly as there are deadlines.

The Notice of Death must be given with every death, whether or not the individual received Medi-Cal. If you are the person responsible for handling the decedent’s estate, failure to give the appropriate notice could expose you to liability.

You should always contact an attorney experienced in handling Trusts and Estates to make sure that you have complied with statutory requirements to avoid problems later on.

William J. Sweeney

Attorney at Law

915 Highland Pointe Dr., Ste. 250

Roseville, CA 95678

(916) 786-2011