The Ruddy Law Firm

Estate planning is about protecting what is important to you. Although much of the traditional estate planning conversation focuses on surviving spouses, children, grandchildren, and charities, many pet parents wonder what could happen to their “furry children” after their death.

Enter the pet trust. This tool is something that can be easily incorporated into a new or existing estate plan to provide a strategy for your pet’s care. Even if you anticipate outliving your pets, it is always better to be safe than sorry.

How a Pet Trust Works:
The majority of pet trusts are incorporated into the foundational document of your overall estate plan. In establishing a pet trust, you must first determine the amount of money you want to leave for your pet’s care. When the pet trust becomes active (upon your death) and while your pet is alive, a trustee will manage the money you have set aside for your pet’s benefit. Second, you must decide on a caretaker who will have custody and responsibility for your pet’s care. Lastly, you will determine who will receive any remaining money in the trust after your pet’s death.

What a Pet Trust Avoids:
Frankly, it can be chaos for your pets if you die without a plan in place. With the shuffle of so many other important tasks, a pet can sometimes be overlooked, abandoned, or even euthanized. A pet trust provides a legal tool to ensure that your beloved dog, cat, or other pet is not left without care merely because you are not here any longer. Proactively including a pet trust in your plan is especially important when you have family members who may be unable or unwilling to care for your beloved pets.

Planning for the Future:
You might be thinking that you will outlive your pets, so there is no reason to plan. But what if you do not? The entire purpose of estate planning is to ensure that you have legally memorialized your wishes and fully protected your whole family—including your furry, four-legged children. Give us a call today so we can work with you to protect what is important to you.

People often engage in transactions that result in money being owed to them, such as loaning money to a friend or business partner or renting a house to a tenant. But what happens if someone passes away before they receive the money owed to them? Can someone else collect these debts? If your loved one has died and you think they were owed money at the time of their death, keep the following information in mind.

Does the Debt Die with the Person?

The fact that someone dies does not mean that the outstanding debt owed to them disappears or is no longer owed. The debt survives the death of the creditor and is then owed to the deceased creditor’s estate. In fact, a debt that is owed to the estate is considered an asset of the estate. The estate is entitled to collect the debt as part of the probate process that includes the distribution of the deceased person’s assets to the beneficiaries named in their will or to the beneficiaries designated by state law if the deceased did not have a will. Similarly, if the debt is owed to the deceased person’s trust, the trust’s right and obligation to collect the debt continues after the trustmaker’s death.

Who Can Collect the Debt?

Before anyone can act on behalf of a deceased person’s estate, they must be appointed by the probate court. If the deceased person had a will, they probably named someone they trusted to act as their executor (also known as a personal representative). If the deceased person did not create a will, a person who is given priority in their state’s probate law, generally a family member, can petition the court to name them as the administrator of the estate. Once appointed, the executor or administrator of the estate is authorized—and has a duty—to act on behalf of the estate to collect the debt. Similarly, if a debt was owed to a deceased person’s trust, the successor trustee has the obligation to try to collect the amount owed to the trust.

How Can an Executor or Trustee Discover If the Deceased Person Was Owed Money?

If the executor or trustee is the deceased person’s spouse, they may be very familiar with the assets owned by their deceased spouse, including how much money their spouse was owed and who owed it, but a nonspouse executor or trustee may be less knowledgeable about the assets owned by the deceased person. All executors or trustees should examine the deceased person’s important papers and financial records to determine if there is any evidence that money was owed to the deceased.

Optimally, there will be a written loan agreement, mortgage document, or other contract that provides clear evidence of both the existence of debt and the terms of repayment. However, even if there is no formal contract, other written evidence—for example, an email or even a text message demonstrating that someone owed money to the deceased person—can be used to establish the existence and terms of the debt.

Although written evidence is considered more reliable, the trustee or executor may also rely on witnesses who heard the deceased person and the debtor discussing a loan or other business transaction to establish the existence and terms of the obligation. Similarly, debtors themselves may make statements to the trustee or executor acknowledging the debt.

What Happens After the Debt Is Discovered?

Once the executor or trustee is aware of a debt that is owed to the deceased person’s estate, they should provide a formal written notice to the debtor that the deceased person has passed away and the date of death, that the estate is their new creditor, and that future payments should be made to the estate via the executor or trustee. The executor or trustee should make efforts to collect any past due amounts and to facilitate the payment of amounts that will be due in the future, for example, rental payments for the remaining term of a lease agreement that extends beyond the date of death.

What If the Debtor Will Not Pay the Amount Due?

Although an executor or trustee will initially attempt to collect a debt by contacting the debtor and requesting payment of the amount due, if those collection efforts are not successful, they may need to seek the help of a lawyer to send a demand letter to the debtor or file a lawsuit on behalf of the estate to collect the amount owed.

We hope this information is helpful to you!

The Ruddy Law Firm Our firm’s primary objective is to help clients achieve their business and personal goals by offer

At a time of record home unaffordability, more people are teaming up with friends and relatives to realize the home ownership dream. Purchasing a property with other people can help a buyer to lower their individual costs while building equity. However, going in on a house together can also create trouble spots, including survivorship and inheritance issues. When buying a home with another person, the co-owners must decide how to hold the title so that it aligns with their wealth-building and estate planning goals.

Co-Ownership and Home Titles:

Typically, co-owners are not only listed together on the mortgage loan, but on the home title. Having more than one person on the title raises estate planning issues that may not immediately arise but should be thought about.

Property can be titled in different ways. Common ways of joint ownership titling include tenants in common, joint tenants with right of survivorship, and tenants by the entirety.

Tenants in common: With this type of title, property shares may or may not be divided equally between owners. Each owner’s share might be equal to their investment in the property or the shares may be divided equally among the owners. However, the co-owners still have equal rights to use all areas of the property. They can also choose who receives their interest when they die; it does not automatically pass to the other owner(s).

Joint tenants with right of survivorship: Under this arrangement, each owner has an undivided interest in the property. They own the property in equal shares and have the right to use the property however they wish. The right of survivorship means that, when one of the joint owners dies, their property interest passes to the surviving joint owner(s).

Tenancy by the entirety: This title option works the same way as joint tenants with Right of Survivorship but is only available to married couples in certain states. It also provides valuable creditor protection because property owned in this way is not subject to the creditors of just one spouse.

Joint Ownership and Estate Planning:

For most people, a home is their greatest investment and the primary driver of household wealth. Even if somebody co-owns a house, their investment in the property is likely to dwarf their other accounts and property. Deciding what to do with shares of a jointly-owned property is a major estate planning consideration.

When co-buying a house, each owner should understand how it is being titled and make sure the titling matches their estate planning wishes. For example, joint tenancy might make sense for a married couple but be a poor choice for friends or unmarried partners because they give up the right to leave the property to anyone other than the co-owner.

In the latter case, tenancy in common is likely a better option. Each tenant in common has the power to dispose of their property interest however they choose—but only if they indicate their wishes in their estate plan. Otherwise, their share of the property passes according to state law when they die.

For those who already own a house, how the property is titled is no less important to their estate plan. Circumstances change. The original title terms may no longer reflect a person’s current priorities. While changing a joint tenancy may not always be possible or practical, at the very least, a person should know how a home title affects their property rights, the rights of any heirs, and tax obligations.

Choosing how to title a co-owned home, and how this choice fits into your estate plan, depends on the people and property involved, your estate planning goals, and state laws where the property is located. An estate planning attorney from our office can explain the pros, cons, and consequences of each type of joint ownership to help you decide which one best fits your situation.

You have two primary options for leaving an inheritance to a child. The most straightforward is to give it to them in a single lump sum, with no strings attached. But this might not be the best option for some children. You may be concerned about the child’s ability to handle the money responsibly, want to avoid the need for a court-ordered conservatorship if the children are minors, or have some other reason for wanting to set conditions on their inheritance.

Estate planning lets you control from beyond the grave who receives your money, when they receive it, and how they may use it. If you wish to restrict the flow of inherited money to your child, you can do so through your will or trust.

Ways to Use Conditional Gifts:

An estate plan allows parents to require or disincentivize specific actions before a child receives all or a portion of their inheritance. This type of provision is known as a conditional gift. There are two main types of conditional gifts:

● A condition precedent gift is only given upon a beneficiary meeting a certain requirement

● A condition subsequent gift refers to gifts that are given unconditionally but can be later revoked if a specific event transpires

Condition precedent gifts are frequently tied to age, with money given to beneficiaries upon attaining certain ages or intervals of time (e.g., disbursements made one, three, and five years after the parent’s death). Usually, such restrictions are put in place because a parent is concerned that their child is not mature enough to manage a large sum of money immediately.

Parents may also choose conditions related to certain life events, such as the child graduating college, getting married, buying a home, or starting a business.

Whether a parent is trying to develop a sense of purpose in their child, discourage bad behavior, or align their child’s values with theirs, any number of strings can be attached to a bequest.

Consider these less common conditions:

● Making an extra distribution for a certain grade point average or volunteer work
● Setting distributions that match amounts earned at a job
● Restricting distributions if the child is not working
● Providing seed money to start a business
● Conditioning a gift on the ability to pass a random drug test

Not All Conditions Will Hold Up in Court:

Although parents can be highly creative and detailed in structuring conditional gifts, their freedom to impose terms is limited. In general, courts will not uphold conditions that are illegal, uncertain, unreasonable, impossible, or contrary to public policy.

Here are some guidelines parents should consider when they create conditions for their children’s inheritances:

● A beneficiary should not be asked to engage in activity that breaks the law or is unconstitutional.

● The conditional gift should be executed in clear and precise language.

● There must be a chance that the beneficiary can satisfy the condition.

The way courts interpret a conditional gift based on public policy is not always obvious and can be very fact-specific. It may come down to precedent from past cases and judicial discretion.

Some courts, for example, have refused to enforce conditions contingent upon a beneficiary getting divorced, but enforced marriage conditions based on age and marrying within the same religion.

Ask an Estate Planning Attorney:

Parents and children do not always see eye-to-eye—in life or in death. Each may have questions about conditional gifts in an estate plan that may be best answered by a discussion with an attorney.

These issues tend to be personally sensitive and legally complicated, involving not only family dynamics but also state law and court decisions. Whether you are a parent setting a conditional gift or a child receiving one, our estate planning attorneys can help you understand your rights, obligations, and options.

One important purpose of estate planning is to facilitate the transfer of ownership of your money and property to your family and loved ones when you pass away. For this transfer to be as stress-free and efficient as possible, it is crucial that estate planning documents provide all necessary information. Nevertheless, there is some information that should never be included in your estate planning documents.

Social Security Numbers:

You may think that it would make sense to refer to yourself and your family members or loved ones by using their Social Security numbers to ensure that they are correctly identified when the time comes. However, using full legal names, including middle name or initial, is typically adequate. Providing Social Security numbers would leave the individual vulnerable to the risk of identity theft because there are several estate planning documents that may become part of the public record.

Account Numbers:

Similarly, unauthorized people may use account numbers to steal money from your accounts if those numbers are listed in your estate plan and become part of the public record. It is important to keep your account numbers in a secure location rather than including them in your will. You also should be cautious about making them readily available to family members unless you have designated one or more of them to act as your agent under a power of attorney, guardian, trustee, or a similar role.

Disparaging Remarks:

Many people have difficult family relationships. Some may think that their will is a means by which they can have the last word, so to speak, in a contentious relationship. However, a few courts have held an estate or the executor of an estate liable for testamentary libel, that is, publishing a false statement that is damaging to a person’s reputation in a will. So it is prudent to call upon the better angels of your nature and use your will as a means of blessing those you love instead of blasting those you dislike.

As experienced estate planning attorneys, we will make sure that the information necessary to achieve your wishes is included in your estate planning documents and that anything that would risk damage to your estate and ultimately, your beneficiaries, is excluded.

The Ruddy Law Firm Our firm’s primary objective is to help clients achieve their business and personal goals by offer

Testamentary bequests offer a remarkable opportunity for you to leave a meaningful impact on charitable causes close to your heart. In essence, they are provisions in your estate plan that enable you to designate specific gifts or donations to charitable organizations or causes that are meaningful to you. These bequests provide a structured and legally binding means for you to distribute their assets and support the charities you care deeply about even after your lifetime, making a positive and enduring contribution to the world.

Here are a few ways testamentary bequests can be utilized to support the charitable causes you hold dear:

1. Personalized Giving: You have the freedom to tailor your bequests according to your preferences. Whether you wish to donate a specific sum, a particular asset, or a percentage of your estate, the choice is entirely yours.

2. Creating a Lasting Legacy: By incorporating testamentary bequests into your estate plan, you can create a legacy that reflects your values and passions. Your generosity will be remembered and appreciated for generations to come.

3. Maintaining Control: Rest assured that your chosen charitable organizations will benefit from your support. Testamentary bequests allow you to retain control over the distribution of your assets, ensuring your philanthropic goals are realized.

4. Tax Advantages: Making charitable donations through testamentary bequests can lead to potential tax benefits for your estate, which may reduce the overall tax burden on your beneficiaries.

5. Inspiring Family Philanthropy: Your decision to support charitable causes in your estate plan can inspire and encourage your loved ones to continue your tradition of giving back to the community.

Testamentary bequests need to be crafted correctly be an experienced estate planning attorney. We are here to assist you throughout the estate planning process and guide you in making informed decisions. Together, we can create an estate plan that protects your loved ones, addresses your personal goals, and fosters a positive impact on charitable causes you hold dear.

If you would like to take the next step, call us at 703-383-9000.

When you form a trust as part of your estate plan, one of the most important decisions you will make is who will oversee the trust’s management when you are no longer able to manage it (also known as your successor trustee). Because a trustee’s work may be time-consuming, complicated, and risk liability, many people who create a trust consider naming a professional fiduciary as their trustee. When looking to hire a professional to serve as your trustee, the following are several red flags you should keep in mind.

Do They Have Adequate Resources?

A professional’s agreement to act as your trustee does not guarantee that they have the resources needed to administer your trust properly. Trust administration is an important job, and you should satisfy yourself that the person you appoint as your trustee is well-equipped to fulfill the role.

The professional you hire should have a good system for trust accounting. Trust funds must be held in a separate account that is not commingled with their business’s funds, and there must be a system in place to keep separate records of income and principal, disbursements, receipts, and more. The professional trustee has a duty to provide information to the trust’s beneficiaries, and current income or principal beneficiaries are entitled to a detailed accounting to enable them to have a full understanding of the trust’s transactions, accounts, and property.

The professional must also be equipped to handle many other recordkeeping responsibilities as your trustee, including preparing tax returns (even if they are hiring someone else to do this), handling trust-related correspondence, and keeping records of steps performed to ensure that discretionary distributions from the trust were proper.

Is the Trustee Accessible?

Does the trustee you are considering have enough time in their schedule to handle the responsibilities required by the trust? It is important for a trustee to be responsive and accessible, especially when the terms of the trust provide for thoughtfully evaluated distributions, such as for a beneficiary’s health, education, maintenance, and support. The beneficiary and trustee will need to communicate often if distributions are likely to be made on a regular basis.

Administering a trust can be time-consuming, especially if a trust has a complex distribution scheme. For example, if a special needs trust is involved, significant attention and knowledge of the beneficiary’s needs will be necessary to ensure that distributions are properly made so that governmental benefits are not lost due to mistakes in the administration of the trust. In addition, if a trust is designed to care for a beneficiary who has an addiction and distributions are to be made to support recovery, the trustee must become familiar with the situation and be willing to spend the time needed to administer the trust in the beneficiary’s best interests.

Does the Trustee Have a Succession Plan?

If the trust will continue for many years, it may not be prudent to hire someone who will retire soon, especially if your trust beneficiaries are minors. Regardless of the age of the trustee, it is important to ask if the trustee has a succession plan in place, because no one can work forever. Although the terms of your trust should address who will act as a successor trustee if the trustee you initially appoint is unable to continue in the role, if your trust gives the trustee the power to designate a successor, you should ask who will step into their shoes if something happens to them.

Is the Trustee Willing to Work with Other Advocates for Your Beneficiaries?

In some situations, for example, if a beneficiary is a minor or has special needs, the trustee will need to cooperate and communicate with other caregivers. In the case of a special needs trust, for example, the beneficiary may be incapable of safeguarding their own interests. In such a situation, it is essential that there be a caregiver or advocate who can effectively communicate the needs of the beneficiary to the trustee. The trustee must have the time and willingness to maintain regular contact with those advocates.

We understand how important it is to choose the right trustee. If you need help choosing a trustee or would like us to meet with your chosen trustee to explain their role in your trust, please give us a call. You can reach us at (405) 928-4075.

The Ruddy Law Firm Our firm’s primary objective is to help clients achieve their business and personal goals by offer

Important Things to Know About the Beneficiaries of Your Pension
Pension and retirement accounts often form a large portion of an individual’s wealth and should be accounted for in an estate plan. If a retirement account holder completes a proper beneficiary designation, their account assets will bypass probate. Account holders often designate a surviving spouse or children as beneficiary, but they could also name a trust or a charity.

Retirement accounts must be owned by an individual, so they cannot be transferred into a revocable living trust during the participant’s lifetime like most other financial accounts or property. Further, they cannot be jointly owned. Thus, the only way to control how these accounts transfer at the time of the participant's death is through the use of properly designated beneficiaries.

In general, participants in an ERISA-covered plan can select anyone to be the plan’s beneficiary when they die.

● Most plans regulated by ERISA name a person’s spouse to automatically receive the benefit if the account holder dies first.

● If the account holder wishes to select a different beneficiary, their spouse must consent by signing a waiver. Otherwise, the spouse is entitled to 50 percent of the plan’s benefits, even if somebody else is named as the plan beneficiary.

● An ERISA plan holder who divorces and remarries should update the beneficiary designation to their current spouse or else the former spouse may be in line to inherit the plan benefits.

● An account holder who does not have a spouse can name an alternate beneficiary. This may be a person such as a child, parent, or sibling, but it can also be a charity or a trust.

● The named beneficiary of an ERISA retirement plan takes precedence over somebody designated in a will as the plan’s beneficiary when there is a conflict between the two.

IRAs are not covered by ERISA. An IRA account holder can name a beneficiary (or multiple beneficiaries) to receive the account assets. They can also name their probate estate to be the beneficiary of the IRA, in which case the account proceeds will be distributed according to their will (if they have created one) or according to state intestacy law (if they have not created one). A trust or charity can be designated to receive IRA funds as well. An IRA with no beneficiary designation is distributed pursuant to the IRA’s governing document.

Employees with a non-ERISA employer-owned pension plan may be able to name a beneficiary, but this right is not guaranteed. For a this type of plan, a current spouse may be entitled to a qualified joint and survivor annuity (QJSA) death benefit paid out over their lifetime. The plan may provide the annuity payout percentage, which could be at least 50 percent but no more than 100 percent of the annuity paid to the participant. It may be possible, with spousal consent, for a participant to waive the QJSA and select a different payment option.

Retirement assets can transfer directly to properly designated beneficiaries outside of probate. But these assets will be subject to federal and state income tax, and possibly even estate taxes. The SECURE Act could further impact your estate planning efforts.

Your retirement accounts could be the single largest store of economic value that you leave behind. To maximize their value to loved ones after you are gone, be sure that you understand the different inheritance and tax rules that may apply, review beneficiary designations regularly, and speak to an estate planning attorney about how to best provide for your family’s future.

Compared to residents of other wealthy nations, Americans are more likely to give their time and money to help others. In 2023, the United States ranked ninth in per capita gross domestic product (GDP) but fifth on the World Giving Index rankings.

Polling shows that Americans trust nonprofits more than government or business, but they generally know little about charitable giving and philanthropy, such as how these organizations distribute their funds and the rules that govern their activities.

Giving money to charity can provide personal and financial benefits to donors and be a part of the legacy they leave behind. If you are thinking about making a charitable gift—either now or when you pass away—there are some things to be aware of so you can make the most of your donation.

Fewer Americans Donating to Charity:

Total charitable giving in the United States dropped 10.5 percent from 2021 to 2022, according to the report conducted by Giving USA 2023. As a percentage of disposable personal income, giving declined to a 40-year low of 1.7 percent. Overall, the number of US households that annually give to charity declined from 66 percent in 2000 to less than 50 percent in 2018.

Some statistics paint a rosier picture of American generosity. Adjusting for inflation, charitable giving by Americans was seven times greater in 2016 than it was in 1954. US charitable giving as a proportion of GDP has also increased slightly over this period but has remained at around 2 percent for decades.

Americans grew more generous during the pandemic, with 2020 and 2021 donations both topping 2019 giving levels. A recent Gallup poll reveals that 81 percent of Americans donated money to charity over the past year, with the percentage of those giving rising in proportion to household income. Around 90 percent of households making $100,000 or more give money to charity each year.

Where Americans are Donating:

There are approximately 1.5 million charitable organizations in the United States. Generally, the Internal Revenue Service (IRS) defines public charity as any organization that receives a substantial portion of its income from public donations.

Many—but not all—charities qualify as tax-exempt under IRS rules. The 501(c)(3) tax exemption, known as the charitable tax exemption, allows qualified organizations to avoid paying federal corporate and income taxes for most revenue sources.

Designated 501(c)(3) charities are also able to solicit tax-deductible contributions that allow donors to deduct money given to these organizations on their tax returns. A gift made to a qualified tax-exempt organization as part of an estate plan can help to reduce estate taxes as well.

The nation’s top 100 charities received more than $61 billion in private donations in 2023. They include Feeding America, United Way, St. Jude Children’s Hospital, Salvation Army, Habitat for Humanity, Goodwill, YMCA, and the Boys & Girls Clubs of America.

Get Estate Planning and Tax Advice Before Giving:

It is not too late to make philanthropy a part of your legacy, but whether you are new to charitable giving or want to step up your gifts, there are strategies to follow that can increase the value of your charitable efforts.

However you plan to give and whoever you plan to give to, the rules around charities can be complicated and options abound. For professional advice about giving to charities, choosing what and where to donate, and the different gifting strategies that are available, schedule a consultation with our estate planning attorneys at 703-383-9000.