Thursday, March 26, 2009
Penalty ("in terrorem") Clauses. Occasionally, clients request that I include a provision in their trust disinheriting any beneficiary who contests the trust, brings an action against the trustee, or otherwise, as they put it, "causes trouble" when the estate is settled. Utah law (UCA 75-7-112) provides that any such clause which penalizes a beneficiary for bringing such an action is unenforceable, as long as “probable cause” exists for instituting the proceedings. However, frivolous actions by a beneficiary (or a non-beneficiary) could, indeed, result in a “penalty” being enforced and that beneficiary being disinherited. What is “frivolous?” Good question! Any estate contest should only be considered after obtaining proper advice from a competent estate planning attorney, and not just because you’re dissatisfied with a decedent’s estate plan or your share.
Settle A Decedent's Estate Promptly! When a loved one dies, it's important to notify us immediately, to insure that various tax benefits are achieved and to insure that the decedent's assets are distributed properly. For example, if you are married, and your estate exceeds $3,500,000, it's important to divide your trust assets between the Marital and Family trusts (assuming your trust contains these provisions!). This will reduce or eliminate death taxes for your survivors. Also, if any of your assets are not titled in your trust at your death, they can be "poured-over" to your trust by your "Pour-over Will." However, Utah requires all wills to be probated within 3 years of the decedent's death. If the decedent's estate is not settled within 3 years, his Will cannot be probated and will not be effective to transfer his probate assets into his trust. The assets will, instead, be transferred to his "heirs at law," who may be different from his trust beneficiaries whom he intended to receive his estate.
Excellent Estate Planning Article! www.nytimes.com/2009/02/26/your-money/estate-planning/26estate.html?em