Finding Lost Life Insurance Policies

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by Jody H. Hall

As a probate paralegal, I often assist personal representatives, trustees and family members in collecting information about their loved one’s assets.  Life insurance proceeds can be a blessing to the family to pay for expenses and in relieving the financial burden after a death.  However, while the client may think they remember the deceased person having life insurance, they may not be able to locate any existing policies or have access to related documents.  In addition, the life insurance company may have changed names or merged, many times more than once, since the policy was issued.  If the policy was paid up, no correspondence may have been sent to the insured for literally decades.  A non-family member or professional fiduciary may not have any information about insurance at all.

In 2016, the National Association of Insurance Commissioners (NAIC) created the Life Insurance Policy Locator to help address the growing problem of millions of dollars in unclaimed life insurance proceeds.  The Life Insurance Policy Locator along with Frequently Asked Questions can be found here:  https://eapps.naic.org/life-policy-locator/#/welcome

The client should continue to review the deceased’s important papers, research bank accounts for evidence of premium payments, and search online to find successor companies for old policies.  But when specific information cannot be located, this resource could potentially find those lost benefits for the family.  The requestor should need to be a person authorized to received information (note that the Attorney or Legal Representative for the Deceased is an option on the NAIC request) and will need to provide pertinent details about the deceased.  According to the Colorado Department of Regulatory Agencies, more than $92.5 million in life insurance proceeds was matched with beneficiaries in just the first year of the locator.

I have not yet used the Life Insurance Policy Locator, but I am thankful to have a resource to provide to those clients where that illusive policy just cannot be located.

Safeguarding Estate Planning Documents

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by Carol Warnick

In light of the recent dramatic weather events, including hurricanes and tornadoes, it is a good time to discuss preservation of estate planning documents.  In many instances, people escape from their homes with only the clothes on their back, or even if they do have a bit of time to gather items to take, they may not think about their estate planning documents.

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Best Practice Tip: TPP Memos

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by Brooke Simons

When viewing an estate as a whole, Tangible Personal Property (“TPP”) is not usually the most financially significant component.  However, it is often the single most bitterly disputed area in an estate. 

Often times, when TPP is being administered under an estate, there are specific provisions in the will as to how the estate should be distributed, but nothing directly addressing specific items of TPP, such as the china collection or Mom’s recipe box.  If one spouse dies first, then under C.R.S. § 15-11-805, there is a general presumption that all TPP in the joint possession or control of spouses is held in a joint tenancy with right of survivorship.  (“[T]angible personal property in the joint possession or control of the decedent and his or her surviving spouse at the time of the decedent’s death is presumed to be owned by the decedent and the decedent’s spouse in joint tenancy with right of survivorship if ownership is not otherwise evidenced by a certificate of title, bill of sale, or other writing.”).  This means that if you are married when you die, then your TPP will go to your spouse, who will then own the TPP outright and be able to dispose of it as they see fit.

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No-Contest Clause Upheld by the Wyoming Supreme Court With No Probable Cause Exception

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by Carol Warnick

No-contest clauses (sometimes called in terrorem clauses) are extremely common in today’s litigious society. A no-contest clause essentially makes all gifts under the will or trust conditional upon not challenging the document. Many clients are concerned about a beneficiary (or a disinherited heir) contesting their estate planning documents, especially if the client wants to hold a beneficiary’s assets in trust or restrict or cut off a potential beneficiary’s idea of what they might inherit.  In my practice, clients are asking for them much more frequently than when I first began doing estate planning in 1990.  This is particularly true with blended families where there may be a greater potential for disagreement among the various beneficiaries or between those who are favored by the plan and those who feel they were wronged by the dispositive terms.  Trust and estate litigation is frequently driven by emotion, and many times the beneficiary’s complaints are not rational, thereby leading to protracted litigation and waste of the trust or estate’s assets.  This is what the settlor is typically trying to avoid by the use of a co-contest clause. Read more

Your Secret’s Safe with Your Estate Planning Attorney, Or Is It?

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by Lauren A. Morris

A mother visits her attorney to discuss her estate plan. She expects that the conversations she has with her attorney will be forever confidential and privileged, particularly when she wishes to guard uncomfortable realities from her family members, such as her desire to disinherit her son. Upon the mother’s death, her disinherited son figures out that he is in fact removed from her estate plan. Here we have the classic scenario in which a snubbed child wants to challenge the provisions in the estate plan to prove that the decedent did not intentionally fail to provide for him. But with the mother now deceased, how do we determine her actual intent?

The mother’s estate planning attorney is in the next best position to ascertain her intent, but doesn’t the attorney’s duty of confidentiality to the mother prevent him from disclosing any information he may have regarding her intent, specifically when the mother thought she was speaking in confidence? Read more

When Beneficiaries are Not Heirs

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by Jody H. Hall, Paralegal

The terms Beneficiary and Heir both refer to someone who receives an inheritance after someone passes away.  However, while the terms are often used interchangeably, they do not always refer to the same individual or set of individuals.  Heirs can be beneficiaries but beneficiaries are not always heirs.

In our practice, we often see issues arising when these 2 sets are not identical or are different than the expectations of the parties. Read more

Planning Opportunities Under the New Tax Cuts and Jobs Act

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By Chelsea May

In December, President Trump signed into law what is commonly referred to as the Tax Cuts and Jobs Act.  This legislation, which is mostly effective as of January 1, 2018, is the first major reform to the federal tax code since 1986 and affects almost every individual and business taxpayers in some way or another. For individuals, the top tax rate has temporarily dropped from 39.6% to 37% and the standard deduction has nearly doubled.  Personal exemptions are repealed and the mortgage interest deduction is limited to interest on a mortgage of $750,000 or less per married couple. The AGI limitation for deductions of cash donations to public charities increased from 50% to 60% and the deduction for alimony payments was repealed (for divorces or separations executed after December 31, 2018).  Corporate tax rates have dropped from a 35% top rate to a permanent 21% flat rate, a 20% deduction is now available for certain pass through entity income and the corporate AMT has been repealed.

The new tax act also increased the federal estate and gift tax exemption amount. Specifically, for lifetime gifts and the estates of any decedents passing between January 1, 2018 and December 31, 2025, the estate tax and GST tax exemption amounts were increased to $10 million per person, adjusted for inflation occurring after 2011 (expected to be about $11.2 million for 2018). The marginal transfer tax rate remains at 40%. Read more

Estate Planners Alert: Are Your Clauses Coordinated? Are Your Terms Clearly Defined?

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by Carol Warnick

What is the definition of the "residuary" of a trust or a will? Is it clearly defined in all of our documents or do we assume that it will be easy to figure out? Or do we even think about it since we clearly know what the residuary is? I have seen several instances lately where the actual residuary was not well-defined in the document and thus became the subject of very expensive litigation.

It is not just a matter of who gets what assets, but since taxes and administrative costs often come out of the residuary, it is important to make sure it is clear what that means. In one instance I have seen, it was clearly defined where taxes were to be paid from, but very unclear as far as administrative expenses are concerned. In some estates or trusts, that might not be such a big deal because the costs may be fairly nominal. However, there may be unexpected circumstances. (What percentage of our trusts/estates actually don't have something expected arise?) What happens if the trust or estate, through no fault of its own, becomes embroiled in litigation between the beneficiaries or if the fiduciary has to defend the document against an undue influence claim? The allocation of administrative expenses in that situation can create additional litigation even after the first lawsuit has been resolved.

Remember that the attorneys chosen by a beneficiary to litigate such an issue very often are not lawyers with a background in trusts and estates. As such, they are not familiar with what many of us consider the "common sense" assumptions we make with trust and estate administration. General trust and estate concepts that we work with every day will not be recognized by attorneys outside of this practice area. When other attorneys in a litigation case ask me for authority for such concepts, the actual authority is often hard to come up with. "Because we all know that is the way it is," is not a helpful comeback. In addition, how many of our state court judges actually have a trust and estate background?

It may make sense to have someone else in your office read through the will or trust (perhaps with a prepared checklist) to look for problems like this that may arise. Often, when drafting, we become so engrossed in the document and adding in all of the "special things" that our clients request in their documents, that we don't see it when provisions don't track in the document. Often we have added in other language, and possibly deleted a sentence or two here and there, and unwittingly created another problem that we don't see because we are too close to the document. Such a problem may not only relate to defining the residuary for the purpose of tax and cost apportionment clauses, but could also easily create issues with tax clauses, conflicting powers given to the fiduciary, unintended consequences related to trustee removal and replacement, or other types of problems. Another option would be to let the document sit for a day or two and then reread it. This has to be done with a critical eye, however. It is still easy for the drafting attorney to not look critically at how the provisions might be interpreted or to think about what unintended circumstances might occur. As drafters, we know the family (or so we think) and we just tend to look to see how the document will play out in the circumstances we expect to occur.

The more trust and estate litigation I do, the more critical I become about the documents that I draft. If there is a way for a clause to be interpreted differently by a beneficiary who has a beef with the way the assets are being divided, you can bet it will be read that other way and will provide fodder for a lawsuit. It behooves all of us who draft to look for clauses in our documents that might be unclear or might be the subject of multiple interpretations. In doing so, there will be less work for those of us who litigate these cases, but we will all have happier clients years down the road.