Family Feuds Over Inheritance While Parents Are Alive

Family inheritance disputes are extremely common.  In most of the cases that make headlines, a famous individual passes away without conducting thorough estate planning and various family members publicly feud to get their fair share of the individual's wealth.  Family disagreements regarding an inheritance are quite common, particularly when no planning is done and the matters must be left up to the court-centered probate process.  Sometimes, though, feuding occurs even before the family matriarch or patriarch passes away.  For example, a recent Sacramento Bee letter explored a situation where two siblings seemingly isolated an aging mother from other siblings. Claims of undue influence and abuse were made. The three ostracized siblings were left wondering what options were available to ensure they received their share of the inheritance.

The case: The 80-year-old mother drafted a will specifying that she wanted all of her assets split evenly between her children.  However, after the will was created, two siblings convinced the mother to take out loans totaling more than $100,000 for their children's college education and to purchase a house.  One daughter obtained power of attorney over the mother and moved into the mother's home.

The three remaining siblings became concerned about the situation, questioning whether their mother was being taken advantage of, and reported their suspicions to local authorities.  The mother is now on Social Security and has no assets other than her home, which may even have been used as collateral on the loans. The siblings are left wondering if they will have any inheritance at all.

This situation presents a wide range of legal issues, and the case is a reminder of the dangers of relying only on a will.  Legally, the resolution of these issues will depend on a range of factors, including whether the siblings signed promissory notes on the loans and whether any changes to the will were made in the time that the daughter has lived with the mother.  No matter how it ends, it is likely to be a contentious, drawn-out process.

The lesson: Parents can ensure that their children never deal with this situation by locking down inheritance affairs early on with more comprehensive legal tools, like trusts. Children are well-served by encouraging their parents to deal with these issues as soon as possible since planning will not only settle inheritance issues, but also save on taxes and provide for potential disability.

Did You Know Your Taxes Are Going Up?

At a recent national meeting of the American Academy of Trust, Estate and Elder Law Attorneys, a premier educational seminar for estate planning attorneys, a major topic we discussed was taxes.  There are some important increases that you should know about.

Taxes are scheduled to increase dramatically in 2013: 

 

                                                                           2012                  2013

Estate and Gift Tax – Top Tax Rate                       35%                   55%

Estate and Gift Tax Exemption                              $5 million           $1 million

Federal Income Taxes – top rates

         Capital Gains                                              15%                   20%

         Qualified Dividends                                      15%                   39.6%

         Interest & Compensation Income                  35%                   39.6%

        

In the current political climate, Congress and the President are not likely to reach a compromise on these issues.  What does this mean for you?  2012 is a year of opportunity while taxes are lower.  It would be wise to schedule an appointment to review your estate plan before September 1, and see if there are steps you can take to improve your family’s position.  If you wait to the last minute, it may not be possible to put a plan in place before the law changes.

VA Demands Compensation for Overpayment

If you are a veteran receiving benefits for non-service connected pension and Aid and Attendance, the VA may make a demand to be paid back for overpayment to you. What can you do?
 
The VA can forgive any debt if there was no indication of fraud, misrepresentation, or bad faith on the part of the claimant and recovery of the debt would be against equity and good conscience.  [38 USC § 3502 and 38 CFR § 1.963(a)]. You can submit a request for the debt to be forgiven or ask that there be a “waiver of the debt.”  The request must be in writing and received by the VA within 180 days of the VA’s request for repayment .  If you fail to request that the debt be forgiven within the deadline, the VA can garnish Social Security benefits, stop your VA benefits, and garnish any tax return you may be receiving.

In summary, pay attention to your mail if you have been receiving VA benefits.  If you receive a letter stating you have been overpaid, take action so that you don't end up on the hook for the overpayment.