Small Estate Affidavits; Or, How to Know If Someone Has Authority to Act on Behalf of an Estate – Part II

scales-of-justice  In my previous blog post, I addressed how you know whether someone has authority to act on behalf of an estate. I explained that letters testamentary, provided they are recently certified, furnish proof that the person in question has been appointed executor or personal representative of the estate. What if the person presents not letters testamentary but an affidavit?

Suppose for example that you are a bank clerk in Twin Falls, Idaho. A woman comes in to your branch and shows you an affidavit saying that a bank customer who was a resident of Elko, Nevada has died and she is entitled to receive the whole of the customer’s estate. The account has $9,000 in it and there is no “pay on death” beneficiary. The affidavit is supported by a will purportedly signed by the customer and leaves everything to the woman in question, who is a cousin of the decedent. It also identifies a vehicle of the decedent. The affidavit purports to be made pursuant to NRS 146.080.

What should the bank clerk do? How does the clerk know if the affidavit is true? Should the clerk get more documentation? Can the clerk demand a court order instead of the affidavit?

NRS 146.080 allows a beneficiary of a will or an heir of an intestate estate to obtain the decedent’s property if the decedent left less than $20,000 (excluding sums due for service in the armed forces) and no real property in decedent’s individual name. An affidavit can be used if at least forty days have elapsed since the decedent’s death. It must identify the affiant (the person making the affidavit) by name and address and state that the affiant is entitled to the decedent’s property. The affidavit has to state, among other things, that there is no petition for the appointment of a personal representative pending in any jurisdiction nor has any such petition been granted, and that all of decedent’s debts have been paid or provided for. It must describe the personal property claimed. It must state that the affiant has given written notice by personal service or certified mail, identifying the affiant’s claim and describing the property to all persons whose claim is equal or greater than affiant’s, and that fourteen days have elapsed since such notice was given. Additional requirements are listed in the statute.

Effective October 1, 2015, the small estate affidavit rules have been revised to allow a surviving spouse to obtain property up to a value of $100,000, and any other qualified person to receive property up to $25,000 by this method. The legislative changes also provide that the affidavit must state that the affiant has no knowledge of any existing claims for personal injury or tort damages against the decedent. Finally, the value of decedent’s motor vehicles is now to be excluded when calculating the value of the estate. Note, however, that the DMV will still need to see the affidavit and the affidavit must identify any and all vehicles that the affiant wishes to transfer.

Back to our example: if the affidavit is properly completed and the bank clerk has no reason to believe anything is amiss, it is proper to give the money to the person presenting the affidavit. The bank fulfills its obligation to the heirs or to the estate if it relies in good faith on the affidavit. That said, very often banks and brokerage firms outside of Nevada are not familiar with this provision of Nevada law and do in fact insist that a court order be obtained. If the bank refuses to turn over the account, the beneficiary may have to file a petition in court to set aside the account to herself.

If you are presented with a question about whether a small estate affidavit is valid under Nevada law, you should consult with a Nevada probate attorney before taking action.

How to Know If Someone Has Authority to Act on Behalf of an Estate

banner-1[1]            How do you know whether someone has authority to act on behalf of an estate? Suppose the following scenario: You own a jewelry business in Fallon, Nevada. A customer orders an expensive ring and pays for it up front. She dies shortly thereafter, prior to delivery of the ring she purchased. The customer is owed a refund. A few weeks later a young man shows up at your store and says he is the customer’s son and he wants to collect the refund. He shows you a copy of a will purportedly signed by the customer that leaves everything to him. The will states that the son is to be the executor. It expressly disinherits the customer’s other children. The son offers nothing else to support his request that you issue the refund to him personally.

What if you give the money to the son and later find out that the will was invalid, the customer’s daughter is appointed personal representative of the estate, which proceeds by intestate succession because no valid will is ever found? What if the son was actually raised by his father and step mother and had been adopted by his step mother? Would payment of the money to the son discharge the jewelry store’s obligation to refund the customer?

Nevada law provides for procedures by which a will is presented and admitted to probate and an executor or personal representative is appointed to administer the estate. A will by itself is not adequate to support a request for property belonging to the deceased. Why not?

First, because the will may not be valid. It may not have been properly witnessed. It may not be the last will and testament; it may have been revoked by a later will. It may be phony altogether. It may be real, but the product of undue influence or incapacity. By filing a petition in the county court where the deceased resided and giving notice to all interested parties, these issues may be raised and adjudicated. Only after the court has examined the will for validity and all interested parties have had the opportunity to raise any issues that may exist does a court admit a will to probate.

Second, perhaps the will is valid but the person presenting it is not the proper representative of the estate. The fact that the person is named in the will to be the personal representative does not mean he is qualified or has been appointed. Sometimes the person named in the will to act in this role will not be appointed by virtue of having been convicted of a felony, or because he has a conflict of interest or is improvident. Even if the person qualifies, he must actually be appointed to act before he has authority to collect debts owed to the Estate.

How does someone demonstrate he or she is the personal representative of an estate? In an estate where a will is admitted to probate, a personal representative receives letters testamentary. The letters testamentary demonstrate the authority to act on behalf of an estate. This is a short document that is issued by the court and contains an oath signed by the personal representative. It should state any restrictions on the authority granted on the front page. It should also be certified by the court, meaning it has the court’s seal and a stamped statement on the back verifying that the letters are both genuine and current.

Third, even if the will is valid, the decedent may owe money to creditors. Numerous costs must be paid before beneficiaries or heirs receive a share of an estate. These include costs of administration of the estate, costs associated with the decedent’s final illness and with burial, and creditors’ claims. Following proper court procedures ensures that these costs are properly paid before any distribution is made to beneficiaries or heirs.

So—what should the jewelry store do? Without evidence that the son has authority to collect the money on behalf of the estate, such as letters testamentary showing he has been appointed personal representative of the estate, the store should not give him the refund. Payment to the son will not satisfy the obligation to refund the money to the customer; only the customer’s personal representative has authority to collect the money. The store owner should ask the son for current, certified letters testamentary. In the alternative, if the estate is small, the son may furnish what is called a small estate affidavit—this option will be the subject of Part II of this blog post.

How might this have played out if the store did not follow the sage advice contained in this blog? The store cut a check payable for the full amount to the son. Thereafter, the daughter petitioned for appointment as the personal representative of the estate. A will similar to the one presented to the store was presented for probate by another relative, but it was never admitted to probate because it was invalid on its face for defects in the witnesses’ signatures. The estate proceeded according to intestacy laws and the son was not entitled to inherit at all—because he had been adopted by his step-mother, and adoption severed the natural right to inherit from his biological mother. The personal representative sued the store on behalf of the estate for a refund.

If you are presented with a question about whether someone has proper authority, the best course of action is to consult with a qualified probate attorney before taking action.

When Should I Do My Estate Planning?

carpe-diem  Today is a good day to start thinking about your estate planning. Who should have a will or trust in place? Do I need this now or can I put it off?  Do I need some kind of health care document? What about powers of attorney? There are lots of questions to consider.

  1. No Estate Planning. If you have never done any estate planning, you should consider at least creating a will and putting in place a health care power of attorney and a regular power of attorney. A will allows you to name a relative or friend you trust to handle your affairs after your death. It also gives you the opportunity to direct how your estate will pass at your death; you can omit disfavored relatives, or include relatives or friends who would not otherwise inherit from you if you died without a will. You can also direct that beneficiaries receive a different share than what the law would otherwise provide, or that certain persons receive particular assets.

If your assets are more significant (neighborhood of $200,000 or more), you should also consider creating a trust in which to hold your property. This can minimize taxes, and if properly funded, will avoid the expense of a court supervised probate proceeding—which is generally required when only a will is in place.

You should have a health care power of attorney in place to nominate the person(s) you want to make decisions for you if you become unable to do so, and to express your wishes as to what kind of medical treatment you want and whether or not you desire food and water even after medical treatment has ceased. A power of attorney for financial matters is also helpful and can avoid the necessity of a guardianship should you become incapacitated.

  1. Minor Children. If you have minor children, you should definitely have a will in place. Even if your assets are not significant, a will can (and should) contain a clause that appoints a guardian for your children should you die. This allows you to plan for your children so that there will be a smooth transition at your death. Under Nevada law, the only place to nominate a guardian for minor children is a will. You should, of course, ask the persons you wish to nominate in advance to make sure they are willing.
  2. Outdated Estate Planning. If your estate planning was done a long time ago, you should review it to see whether there are any changes you would like to make to those you have designated to take care of trust or estate business after your death, and to those who will receive your property. Also, tax, real estate and other laws affecting trusts and estates change over time, sometimes quite dramatically. Even if you have no changes to the substantive provisions of your estate planning documents, you should have a lawyer review your documents every couple of years or so to recommend any updates.
  3. Major Life Change. If you have recently been through a major life event such as marriage or divorce, or if there has been a death or a birth in your immediate family, you should get your estate planning in place or have it updated. A new spouse should either be included in your estate planning as receiving something, or should be mentioned in a way that makes it clear the spouse is not intended to be included. In Nevada, there are statutory provisions that revoke a will or beneficiary designation made in favor of a spouse upon divorce from that spouse; but it is best to re-do your estate planning after divorce rather than to rely upon the statutory revocation. Similarly, the law makes certain provisions for what happens to gifts when the intended beneficiary has died before the person making the will, and for additional family members who are later born; but the law may or may not express your preference.

In sum, seize the day! You do not know how long you will live or when you will die. You will buy yourself peace of mind and you will save your relatives and loved ones a lot of trouble by doing proper estate planning now. To begin the process, contact a qualified estate planning attorney today.

The 4 P’s of Protecting Your Family’s Legacy Home

Lake CabinThe lakefront home, the mountain cabin or the ocean-side estate all require special planning to protect and enhance these legacy homes. From Lake Tahoe to Donner Lake, from downtown city condos to Pacific Ocean properties, we advise our clients to give special attention to these legacy homes. These special properties need the “four P’s:” protection, privacy, probate avoidance and planning.

Protection:

These types of properties need comprehensive insurance coverage for potential damage to the structure, adequate liability coverage and an ownership structure that provides protection from outside creditors. Under Nevada law, limited liability companies (LLCs) offer tremendous protection, particularly if you or your family rent or lease the legacy home. A Nevada LLC may not prevent a lawsuit, but it will certainly deter potential creditors.

Privacy:

You and your family may not want to divulge the ownership of the real property. Nevada counties have very transparent real property records. Anyone with basic internet search skills can locate the owner of real property, past and present, and the price paid for the real estate. To provide a privacy shield, ownership of the legacy home can be held by a legal entity such as a trust or LLC, with a name unconnected to the family. You should consult with a lawyer to determine which device, trust or LLC, will best meet your objectives as simply titling your legacy home into an existing business entity is not a great solution. Doing so could subject your legacy home to the claims of existing or future business creditors.

Probate Avoidance:

Many people understand the primary benefit of a revocable living trust is probate avoidance. What many do not understand is that a revocable living trust can hold title to real property, like legacy homes, in other states. Families with real property in more than one state must have a trust to avoid probate. An existing revocable trust could be a ready-made device to hold title to your legacy home.

Planning:

Plan now if you want to keep the legacy home in your family. If you do not provide directions or instructions to your family, anxious beneficiaries can force the sale of the legacy home. You must establish a clear succession plan establishing how the property will be managed, maintained and eventually distributed to the next generation or beyond. Please contact a qualified estate planning attorney to discuss how to preserve and protect your legacy home.

What Does a Surviving Spouse Receive if Omitted from the Will?

Wedding ring  In my previous blog regarding lost wills, I discussed a client whose husband’s original will was lost. One discerning reader asked what happened to the client—wouldn’t she inherit everything from her husband anyway? In that case, I wish it had been so. Unfortunately for the client, that was not the case, even though it had been her husband’s intention.

Since the later will could not be offered for probate, we had to go back to his previous will, which was made before his marriage and left everything to his siblings. All was not lost, however. Where a person marries after making a will and his spouse survives him, Nevada law provides that the will is “revoked as to the spouse,” provided that the deceased spouse did not make provision for the surviving spouse by marriage contract or otherwise make it clear in the will that he intentionally omitted her.  The technical term for the inadvertently omitted spouse is a “pretermitted spouse”, from the verb “pretermit” which means to leave undone or to neglect. The law also provides for pretermitted children, i.e., children born after the deceased makes his or her last will.

The term “revoked as to the spouse” does not mean that the wife received all of the deceased’s property. The rule about a pretermitted spouse has to be read together with Nevada’s laws regarding persons who die without wills. In my client’s case, her husband owned the property in question before their marriage; it was his separate property. Since he died without surviving parents or children, one half of his separate property was allocated to her as his pretermitted spouse, and the other one half was allocated as provided in the will he made before their marriage.

That was not the end of the story. We contacted the relatives, explained the situation to them and requested that they disclaim their interest to our client, since that was her husband’s intent per his later, lost will. One of the deceased’s siblings was willing to do so. The rest refused; they thought they were going to get a big windfall. Since our client had maintained the property for twenty years, paid all taxes and maintenance, and born all losses, we obtained court approval to shift their share of the proceeds of the sale of the property to her in compensation for her labor and out of pocket costs. All’s well that ends well, I suppose; but the loss of the husband’s true last will and testament caused a huge legal mess that could have been avoided if the original had been maintained.

If you have a question about your rights under a will as a pretermitted spouse or child, contact a qualified probate attorney.