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This article sheds light on the above question. It should also convey the importance of simple business succession planning by business owners.

Generally, when a member of a limited liability company (LLC) organized under Washington law dies, the terms of the operating agreement govern the procedure relating to appointing the successor and/or purchase of the deceased member’s membership interest. If there is no operating agreement in place that addresses these issues, relevant provisions Washington’s Limited Liability Company Act (the Act) and probate code fill the gaps. Certain relevant provisions of Washington law are discussed below.

Dissociation of Deceased Member from the LLC

The death of an LLC member causes that member to automatically dissociate from the LLC. RCW 25.15.131(1)(a). When a person is dissociated as an LLC member, “the person’s right to participate as a member in the management and conduct of the LLC activities terminates.” RCW 25.131(3)(a). So, if the operating agreement is silent and the deceased member’s interest passes to his/her estate, such interest does not entitle the executor to manage the LLC.

Technically speaking, the estate’s interest would be that of a “transferee” of the deceased member’s membership interest. As transferee, the estate should be entitled to receive distributions from the LLC that the deceased member would be entitled to if he/she were alive. RCE 25.15.251(2).

Rights to LLC Financial Information

Generally, a transferee of a membership interest is not only prohibited from participating in the LLC’s operational management, but the transferee also cannot make a demand to inspect the LLC’s financial records. RCW 25.15.136. Under Washington law, only members have the rights to inspect various financial records required to be kept by the LLC. These records may include such documents as tax returns and financial statements. Although transferees cannot view LLC financial records, the Act makes an exception for executors of an estate. RCW 25.15.136(11). Executors may demand, on 10 days’ notice, financial information related to the LLC for the purposes of settling the estate.

What Happens to the Business?

Again, the operating agreement will control. To the extent it is silent on this issue, the LLC will automatically dissolve (and its affairs must be winded up) if the deceased member was the sole member of the LLC unless, within 90 days, the party that received a transfer of decedent’s membership interest votes to admit a new member to the LLC. RCW 25.15.265. Regarding management, if the decedent was the manager of the LLC, then the LLC becomes member-managed unless a successor manager is appointed within 90 days. RCW 25.15.181.

Other relevant statutory law is found at RCW 11.48.025, which provides that an executor lacking nonintervention powers may petition the court for an order allowing executor to continue decedent’s business that is not a partnership. RCW 11.48.025 doesn’t apply with respect to nonintervention wills or where decedent left a will that enabled the executor to liquidate the business.

Seek sound business succession planning so that the state of Washington does not dictate how your business may be run in the event of your passing.

Contact the law office of Christopher R. Chicoine, PLLC.

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

DISCLAIMER - THIS IS FOR INFORMATION PURPOSES ONLY; IT'S NOT LEGAL ADVICE. DON'T ACT OR REFRAIN FROM ACTING BECAUSE OF THIS. NO REPRESENTATIONS OR WARRANTIES OR ANY KIND ARE MADE. CONSULT AN ATTORNEY.

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Generally, heirs are not personally liable for the debts of a loved one when that relative passes away. If the heir is a co-signer of a loan with decedent, that heir will be personally liable, but not by virtue of the deceased relative. Instead, the personal liability of the co-signer is derived from his/her financial obligations under the contract. Personal liability means the creditor that is owed money can sue the obligor, obtain a money judgment against that person and then execute on that judgment against the personal assets of the obligor.

Community Debts in Probate

Since Washington is a community property state, the decedent’s surviving spouse may be liable for estate debts as follows. Debts incurred during marriage or registered domestic partnership are generally community debts (from which community property can be used to satisfy such community debts) to the extent consideration for the debt benefitted the community.

Relevant Washington probate code provisions at RCW 11.02.020 provide:

“Except as provided in RCW 41.04.273 and 11.84.025, upon the death of a decedent, a one-half share of the community property shall be confirmed to the surviving spouse or surviving domestic partner, and the other one-half share shall be subject to testamentary disposition by the decedent, or shall descend as provided in chapter 11.04 RCW. The whole of the community property shall be subject to probate administration for all purposes of this title, including the payment of obligations and debts of the community....”

This means that when a spouse dies, ½ of community property goes to the surviving spouse. The other ½ (decedent’s interest in the community property) is either distributed according to his/her will or Washington’s laws of intestate succession. Notwithstanding, the whole of community property can be made available for, among other things, payment of community debts. Graham v. Radford, 71 Wn.2d 752, 755 (1967).

Abatement of Estate Assets

Although the heir or beneficiary entitled to probate asset (asset that passed to an heir via last will and testament or via intestate succession) is generally not personally liable for decedent’s debts, estate assets may abate to satisfy creditor claims. Abatement is the procedure whereby inheritances are reduced in order to pay claims against the estate.

Liability of Beneficiary of Nonprobate Asset For Decedent’s Debts

The beneficiary of a nonprobate asset that was subject to decedent’s general liabilities immediately before decedent’s death, takes that asset subject to liabilities, claims, estate taxes, and the fair share of expenses of administration...” and accordingly, is liable to the executor to the extent necessary to satisfy such liabilities, expenses and/or taxes, and abate similar to probate assets. RCW 11.18.200. Nonprobate assets that abate are generally considered specific gives for purposes of determine order of abatement.

Moreover, certain assets that are otherwise considered nonprobate assets (because they pass to the beneficiary by means other than a will) are statutorily excluded from the definition of nonprobate assets and, therefore, cannot be made available to satisfy estate claims. These include life insurance proceeds, or payable on death benefits from an annuity or pension plan. RCW 11.02.005(10).

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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One of the several core documents an individual should have as part of his/her estate plan is the medical power of attorney (POA). This document generally authorizes an agent to make medical decisions on behalf of the principal. To give the POA its intended effect, and for other reasons discussed below, the POA should be accompanied by a written release of the principal’s protected health information to the agent (and perhaps others) that complies with the Health Insurance Portability and Accountability Acy (HIPAA).

HIPAA Release Requirement

“A covered entity may not use or disclose protected health information without an authorization that is valid.” 45 CFR § 164.508(a)(1). In other words, generally a covered entity, such as a health provider, cannot disclose protected health information without a valid written waiver. Therefore, all estate plans should include as a written HIPAA release. This may be included in the power of attorney documents or as a stand-alone document. The language used must be valid according to the relevant HIPAA statute.

HIPAA Privacy Rule

HIPAA’s privacy rule protects “individually identifiable information” held by a “covered entity” (e.g., health care provider). This is information created or held by the covered entity that pertains to the individual's past, present or future medical condition that identifies the individual.

Potential Reasons for HIPAA Release In Addition to Medical POA

A written, valid HIPAA release should be one of your core estate planning documents for several reasons.

First, as indicated, there are stiff penalties for HIPAA violations, such as fines and potentially jail. Covered entities will strictly construe any purported waiver/release so as to err on the side of caution. Simply conferring the authority to make health care decisions to an agent on behalf of the principal in a power of attorney (a document created under state law) does not necessarily qualify as a valid release under federal HIPAA law. That power of attorney may be virtually useless if the health care provider will not communicate with you regarding the principal’s health condition due to lack of valid HIPAA release.

Second, a valid HIPAA release allows the persons designated in the release to obtain the patient’s prior medical, mental health history. This information may very will bear on the individual’s current medical predicament, and thus allow the POA agent to make the most informed medical decision on behalf of the principal.

Third, a valid HIPAA release will provide designated persons access to information to ensure all outstanding medical bills are paid and/or to coordinate insurance coverage in that process.

Contact the law offices of Christopher R. Chicoine, PLLC to discuss your estate planning needs.

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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This relates to Washington law. In Washington, an executor is entitled to reasonable compensation for administering a probate estate. This is true even if the underlying will fails to provide for compensation. RCW 11.48.210. Adequate and contemporaneous time records must be kept.

However, the executor is given a choice. The executor may opt for the compensation set forth in the will. If the executor does not wish to accept the compensation provided in the will (in which case a timely renunciation of such compensation must be made), or if the will provides for no compensation whatsoever, the executor may apply to the court for “just and reasonable compensation.”

If the court determines the executor did not fulfill any of his/her duties required by law, the court can deny compensation altogether or reduce compensation as it deems fit under the circumstances.

What’s “Just and Reasonable” Compensation?

Washington courts consider following in determining “just and reasonable” compensation:

“the amount and nature of the services rendered, the time required in performing them, the diligence with which they have been executed, the value of the estate, the novelty and difficulty of the legal questions involved, the skill and training required in handling them, the good faith in which the various legal steps in connection with the administration were taken, and all other matters which would aid the court in arriving at a fair and just allowance.”

In re Bailey's Estate, 56 Wn.2d 623, 627 (Wash. 1960)

How and When Is Just and Reasonable Compensation Determined?

For estates being administered with nonintervention powers, final approval of all fees paid to professionals, including the executor, is determined at time of closing the estate. To close the estate, the executor with nonintervention powers can either a) file a declaration of completion; or b) petition for a final decree closing the estate.

If the executor files a declaration of completion, the executor must provide the amount of fees paid or to be paid to professions, including the executor. RCW 11.68.110(1)(g). Unless a valid, written waiver is provided by all heirs and interested parties, the executor has 5 days by which to provide the declaration of completion to heirs and interested parties, as well as a notice that provides such heir or interested party has 30 days to object to the fees. If no timely objection is filed, the estate will close and the declaration of completion will be deemed a final decree approving the amount of the fees set forth in the declaration.

If the executor files a petition for a final declaration instead of a declaration of completion, the executor must “state the fees paid or proposed to be paid to the personal representative…”. RCW 11.68.100(2). The petition will be set for hearing, and advance notice of the hearing and the petition itself must be given to any heir or interested party who has an interest in an estate asset that may be reduced by the proposed fee. Id. The probate court will make a final determination of reasonable of compensation at the hearing.

Executors without nonintervention powers must petition the court for a final decree closing the estate. Such petition must include an accounting setting forth fees paid to executors and allow for an opportunity for objections.

Contact the law offices of Christopher R. Chicoine, PLLC to discuss these or other issues pertaining to estate planning or estate administration.

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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What’s Community Property?

Washington is one of 10 community property states. Under Washington’s community property laws, property acquired after marriage or registration of a domestic partnership is considered community property. An exception is any property acquired during the marriage or domestic partnership is not community property if it was received by one spouse or partner as a gift or inheritance. Each spouse has an equal ½ share in community property.

As to community property, each spouse or registered domestic partner (RDP) has the right to act alone in managing community property except:

Neither can devise or bequest (via last will and testament) more than his/her ½ share in community property;
Neither can give away community property without the consent of the other spouse;
Neither can sell or encumber community property without the consent of the other spouse;
Neither can enter into a contract to purchase community real property without the consent of the other spouse;
Neither can encumber (by security interest) or sell community personal property without the consent of the other spouse;
Neither can buy, sell or encumber assets of a business in which both spouses participate in its management.

Separate Property

Property (and debts) owned or acquired prior to marriage or domestic partnership is separate property. A spouse can do as the spouse so chooses with separate property without the need to obtain consent of the others spouse. In the estate planning context, a spouse can give away separate property under the last will and testament as if he/she were unmarried. RCW 26.16.010, 26.16.020. Moreover, separate property of one spouse cannot be used to satisfy the separate debts of another spouse.

Commingling

Separate property may be recharacterized as community property when the separate property is commingled with community property during marriage or domestic partnership. For this to occur, the separate property must be commingled to the point that the separate property may no longer be traceable or identified. Mumm V. Mumm, 63 Wn.2d 349, 352 (1963). This is more prone to occur with respect to funds held in bank or brokerage accounts.

Community Property Agreement

Couples in a marriage or registered domestic partnership may enter into an agreement concerning the status of community property. In that agreement, commonly referred to as a community property agreement, all property may convert to community property on the death of one spouse and vest entirely in the surviving spouse and avoid probate. Community property agreements traditionally have 3 prongs (although couples do not need to follow this approach and may alter it as they see fit):

The first prong may provide that presently-owned property becomes community property;
The second prong may provide that after-acquired property becomes community property; and
The third prong provides that on death of one spouse, the surviving spouse obtains entirety of the community property.

See, e.g., Mariage of Pletz, 71 Wn.App. 699, 708 (1993).

For more detailed information on community property agreements, read here.

Attorney, Chris Chicoine

www.chrischicoinelaw.com

Christopher R. Chicoine, PLLC

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A person may need or desire to change his/her last will and testament for a variety of reasons. This article explores the options available in Washington state.

Codicil

A codicil is a testamentary document that modifies or partially revokes an existing earlier will. RCW 11.02.005(2). A codicil should be used to make minor changes to a will to avoid redoing the will altogether. Examples of circumstances that may be addressed via codicil include: changing legal guardian for minor children or executor nominations, changing specific gifts mentioned in the will, or changing/adding beneficiaries (as to probate assets).

Moreover, a codicil is technically a will under Washington law. Therefore, for the codicil to be valid it must meet the formal requirements for making a valid will. Generally, these requirements are:

· Sound mind, no undue influence of testator;

· Testator over the age of 18;

· Signed by the testator;

· Witnessed and signed by two disinterested witnesses.

For more detailed information on the requirements for making a valid will in Washington state read here.

Personal Property List (Changes to Tangible Personal Property Dispositions)

Washington law provides that a separate writing may dispose of the testator’s tangible personal property. RCW 11.12.260. To be valid, the following requirements must be met:

· An unrevoked will or trust refers to the writing;

· The writing is either in the handwriting of or signed by the testator; and

· The writing describes the items and the recipients with reasonable certainty.

If the writing meets the above requirements, it will be treated as if it were a part of the will or trust.

If the testator wishes to make changes to the personal property list, he/she can do so by making subsequent changes either in his/her own handwriting or by signing the changes in the writing.

New Will

If the desired changes are sufficiently significant then another option is to revoke the existing will and create a new will. In Washington, a will can be revoked as follows:

· By a subsequent will that revokes the prior will; or

· By being “burnt, torn, canceled, obliterated, or destroyed, with the intent and for the purpose of revoking the same.

Changes Related to Nonprobate Assets

Nonprobate assets are those that pass on a person’s death by a written instrument other than a will. Examples of nonprobate assets include:

Statutory examples of nonprobate assets per RCW 11.02.005(10) include:

· Property passing via joint tenancy with right of survivorship

· Joint bank account with right of survivorship

· Transfer on death deed

· Payable on death account

· Transfer on death investment account

· Trust property if the trust becomes irrevocable on the person’s death

· Community property agreement

· IRA

· Bond

Any changes to an estate plan must be mindful regarding the nature of the asset to which the change relates. Changes to beneficiaries of nonprobate assets should be made on the title to the nonprobate asset (e.g., beneficiary designation form on an investment account).

Attorney, Chris Chicoine

www.chrischicoinelaw.com

Christopher R. Chicoine, PLLC

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This is a common question for several good reasons. Anyone interested in becoming an executor must first confirm another person has not already been appointed. Some are rightfully concerned another relative may want to gain control of decedent’s assets for the wrong reasons.

How to Look For an Open Probate Case in Washington

Do a Washington statewide case search by clicking the following link. Alternatively, do a google search of “Washington case search”. This will take you to the Washington court system website. From there click the “case search” tab on the home page.

Once you reach the case search page, you will be asked to complete various fields to run your case search. Enter “Superior Courts” in the court level field. Washington superior courts have jurisdiction to hear probate case. Therefore, all petitions to open a probate proceeding and get appointed as executor in a probate case must be filed in a superior court in Washington.

In the “Search by Type” filed select name search.

The “Court Name” field is the superior court in which the case was filed. Each county has its own superior court. You may have to run multiple searches to get the correct county. Typically, this will be the county where decedent resided, maintained assets, or where the petitioning executor lives.

In the case type field, enter “Probate/Guardianship.”

In the “Year Filed In/After” field, enter January 1 of the year in which the decedent passed.

In the first and last name search fields, enter the name of decedent.

The results from this will give you the case number.

How to Obtain Probate Court Documents to Determine What’s Happened Already

Once you obtain the case number and the court in which the probate case is pending, it is relatively simple to obtain case documents.

If the case is pending in King County, go to ECR online (electronic court records) to obtain documents. First time users will need to create an account and put money into it to download the documents. Alternatively, go to King County Superior Court Clerk’s page by clicking here or googling King County case records search. One the left-hand side of the page click “ECR Online/e-Access Documents.

In most other counties, such as Snohomish County, you can look at case activity (but not view case documents) using the Odyssey Portal by clicking here.

Infrequent Odyssey portal users can visit the Snohomish County clerk in person to purchase copies of documents, or purchase the documents online via Washington State Digital Archives portal.

Click here to access case documents via Washington State Digital Archives portal. You will need to qualify your search by selecting the court and inputting the case number (obtain from Washington case search above). From there you can select the documents you wish to purchase. This option is available for probate cases in the following counties: Chelan, Franklin, Columbia, Island, Jefferson, Snohomish, Skagit, Kitsap and Kittitas.

Attorney, Chris Chicoine

Estate Planning, Probate

www.chrischicoinelaw.com

Christopher R. Chicoine, PLLC

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As explained in a prior post here, there is no technical requirement to give creditors notice. However, it is often wise to do so. Giving creditors notice of decedent’s death and the method to present claims against the estate creates a deadline by which claims must be made. If claims are made after the deadline, such claims are forever barred. The manner notice is given impacts the applicable deadline by which the creditor must present its claim.

Time Frames

If actual notice and legal publication is given, then the creditor has the later of 30 days from receipt of notice or 4 months from the date of first publication. If actual notice is not given but notice is published, the deadline depends on whether the creditor’s claim was reasonably ascertainable. If it was not reasonably ascertainable, the creditor has 4 months from the first date of publication by which it must file its claim. If the creditor’s claim was “reasonably ascertainable” and no actual notice is given, the creditor has 24 months from date of decedent’s death by which to file its claim. If neither legal publication nor actual notice is given, the creditor has 24 months from date of death to file its claim.

Actual Notice

The notice to creditors must be in the statutory form described at RCW 11.40.030.

To provide actual notice to creditors, the foregoing notice must be served on the creditor or mailed to the creditor’s last known address by regular first-class mail, postage prepaid. RCW 11.40.020(1)(c).

Next, the notice must be provided to the Department of Social and Health Services, office of financial recovery with decedent’s social security number. RCW 11.40.020(1)(d).

Next, the notice must be filed in the probate case. RCW 11.40.020(1)(a).

Once notice is given, proof of giving notice must be filed in the probate case. This is done by completing an affidavit identifying the creditor that received notice, the manner of giving notice, and the address notice was sent to. RCW 11.40.020(1)(d).

How to Publish Legal Notice

If the personal representative publishes legal notice, then the time frame as to the creditor whose claim is not reasonably ascertainable is 4 months from the first date of publication. The publication must be a “legal publication.” The clerk of the superior court of each county must keep and post a list of approval legal publications. RCW 65.16.070.

For the King County Clerk’s list of legal publications, click here.

For the Snohomish County Clerk’s list of legal publications, click here.

Publish by emailing the legal publisher you select a word file of the notice to creditors described above. Once publication is complete (once per week for three consecutive weeks), the publisher should provide its affidavit of publication. This affidavit should be filed in the probate case.

Attorney, Chris Chicoine

www.chrischicoinelaw.com

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What the Bankruptcy Discharge Does and Does Not Do.

A bankruptcy discharge is a permanent injunction that bars creditors from seeking to enforce personal liability of a debtor for a discharged debt. 11 U.S.C. § 524(a). More specifically, the discharge: (1) voids any judgment to the extent it seeks to impose personal liability on the debtor; and (2) bars any action to collect a discharged debt from the debtor.

Barred collection actions may be judicial and non-judicial in nature. Judicial collection activity include filing lawsuits against the debtor after the discharge, or continuing an existing lawsuit that commenced against the debtor before bankruptcy. Nonjudicial collection actions include phone calls or collection letters (note, however, if this occurs the debtor may have a claim against the offending creditor for damages under the Bankruptcy Code and the Fair Debt Collection Practices Act).

Does a Discharge Wipe Out All Debts?

Practically speaking, the answer is yes as to unsecured debt. While personal liability on secured debt is also wiped out, the creditor of a secured debt may still enforce its lien against collateral securing the discharged debt. To understand how this process works, you need to understand the meaning of bankruptcy discharge, secured and unsecured debt. Unsecured debt is any debt that is not secured by property of the debtor as collateral for the debt. A secured debt is secured by collateral.

As to unsecured debt, the creditor holds a claim against the debtor for personal liability that is personal in nature or “in personam” (i.e., a promise to pay under the credit agreement). If the debtor breaches this agreement the creditor’s sole recourse is to sue the debtor to get a money judgment against the debtor. This claim for personal liability does not attach to any assets of the debtor. Because the discharge voids all judgments for personal liability and bars collection actions seeking to impose personal liability of the debtor, for all intents and purposes, the bankruptcy discharge does wipe out these unsecured debts (although in the technical sense these debts are not legally extinguished).

As to secured debt, the creditor holds the in personam claim described above plus a claim against the debtor’s property, or “in rem” claim that attaches to assets of the debtor (i.e., the creditor’s lien against debtor’s property that comprises its collateral). Although the bankruptcy discharge may “wipe out” the secured creditor’s claim against the debtor for personal liability, because the discharge order is an in personam injunction that precludes imposing personal liability, it does not prevent the creditor from seeking to enforce its in rem claim against its collateral by foreclosing on its lien against the collateral.

This does not necessarily mean a debtor that has received its discharge will lose all assets encumbered by a lien in favor of a secured creditor. All this means is that the discharge injunction imposed by the bankruptcy code does not extend to in rem creditor remedies. To enforce such remedies the creditor will still have to comply with applicable state law and the underlying security agreement. If conditions for enforcement of the lien have not been met per the agreement (for example, the debtor is current on its installment payments), then the creditor cannot foreclose its lien and the debtor will be able to keep its asset.

Attorney, Chris Chicoine

www.chrischicoinelaw.com

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One significant benefit of chapter 13 is the ability to “cram down” liens by reducing the total debt secured by such lien to the value of the collateral it secures, and also reducing contract interest rate to a market rate of interest.

What’s a “Cram Down”

A bankruptcy cram down is any type of modification of the pre-bankruptcy agreement between the debtor and creditor. A debtor can modify secured claims so long as the secured claim isn’t a home mortgage. “Secured claim” is the Bankruptcy Code’s terminology for “lien.” Therefore, as long as collateral securing the creditor’s lien is not the debtor’s primary residence, the debtor’s chapter 13 plan can modify that lien if other requirements are met. Such collateral may include a boat, car, trailer, investment property, or any other asset so long as its not the debtor’s primary residence. A typical lien cram down is a reduction in the balance of the lien so that it is no more than the value of the collateral it secures.

Attorney, Chris Chicoine, Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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5 Biggest Mistakes to Avoid When Filing Bankruptcy.

If you or your client is contemplating bankruptcy, make sure you take the following action to avoid costly mistakes related to your bankruptcy. Steering clear of these errors will keep the debtor out of trouble and preserve the debtor’s discharge. It will also make your life much easier during and after bankruptcy.

For full details and description read my blog post on this topic here.

#1 Disclose, Disclose, Disclose.

#2 Don’t Repay Friends or Family Shortly Before Filing.

#3 Don’t Transfer Any Assets Out of Your Name.

#4 Don’t Run Up Your Credit Card After You Know You’re Going to File Bankruptcy.

#5 Don’t Cash Out Your Retirement Before Bankruptcy.

Attorney, Chris Chicoine, Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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As a general proposition it is a myth that the mere act of filing bankruptcy will cause the debtor to lose his/her assets.

The bankruptcy does not cause debtors to lose their assets to a creditor (only failure to make payments to the creditor will cause this). To the contrary, and regardless of which chapter a debtor files, bankruptcy can only increase a debtor’s chances of keeping his/her assets. In a chapter 7, although a debtor cannot “cram down” a lien, a debtor will discharge his/her unsecured debts. This will free up cash to pay secured creditors holding liens against the debtor’s assets.

In addition, a chapter 7 allows a debtor to redeem personal property such as a vehicle. Under a redemption, the debtor pays the secured creditor a cash lump sum equal to the value of the vehicle. In return, the secured creditor’s lien is extinguished and the debtor owns the vehicle free and clear of such creditors lien.

In a reorganization chapter, such as chapter 11 or 13, the debtor can modify liens securing his/her debtor by reducing the balance of the loan to the value of the collateral (except for home mortgage securing the debtor’s principal residence).

Also like a chapter 7, the chapter 13 debtor will likely pay a fraction of nonpriority unsecured creditors, thus also freeing up disposable income towards secured creditors.

Trustee

A debtor can lose assets to the trustee as to an asset in which there is non-exempt equity beyond a secured creditor’s lien in the asset.Non-exempt” equity means just that. A debtor is entitled to exemptions in certain assets. If equity in an asset is exempt, then the trustee does not hold legal title to such equity and cannot liquidate the same.

When a debtor files in Washington state, the debtor can choose between: (1) exemptions provided by state law plusexemptions provided by federal, nonbankruptcy law; or (2) only the bankruptcy exemptions. The exemptions amounts are not the same. A debtor cannot pick some Washington state exemptions and some bankruptcy exemptions; it’s one or the other. Therefore, it is imperative that the debtor assess his/her financial scenario and choose the set of exemptions that make sense.

The Washington state bankruptcy exemptions include: $125,000 for equity in homestead or The county median sale price of a single-family home in the preceding calendar year; $3,000 wildcard exemption; $3,250 vehicle exemption; $6,500 household goods exemption per individual.

The bankruptcy exemptions are listed and set forth at §522(d)(1) of the Bankruptcy Code. Some include: $25,150 for equity in homestead; $4,000 for vehicle; $1,700 for jewelry; $13,400 aggregate value for household goods (clothes, appliances, etc.,); $13,900 unused homestead exemption.

In sum, only assets in which the debtor has sufficient equity i.e., equity beyond the value of the lien and the value of an applicable exemption, will the trustee be entitled to take that asset to realize the excess equity. But, if that is the case, the debtor can avoid such scenario by filing a chapter 13.

Attorney, Chris Chicoine, Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

UPDATE RE: HOMESTEAD EXEMPTION: IN WA, NOW THE GREATER OF $125,000 OR THE COUNTY MEDIAN SALES PRICE OF A SINGLE FAMILY HOME IN THE PRECEDING CALENDAR YEAR.

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Discuss the tests to determine whether you may file a Chapter 7 bankruptcy.

Go over means test. The concept behind means test and mechanics of that test, if it applies.

Attorney, Chris Chicoine

www.chrischicoinelaw.com

DISCLAIMER - THIS INFORMATION IS FOR INFORMATIONAL PURPOSES ONLY; IT IS NOT LEGAL ADVICE. THIS INFORMATION DOES NOT CREATE AN ATTORNEY CLIENT RELATIONSHIP. DO NOT ACT OR REFRAIN FROM ACTING BECAUSE OF IT. Chris Chicoine AND CHRISTOPHER R. CHICOINE, PLLC MAKE NO REPRESENTATION OR WARRANTY OF ANY KIND. CONSULT AN ATTORNEY FOR LEGAL ADVICE.

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The “Executor” for Federal Tax Matters

Federal tax law defines the personal representative of decedent’s estate as the executor, administrator, or anyone in charge of the decedent's property. For estate tax purposes, if there is no executor or administrator appointed by the probate court, then the term “executor” includes anyone in actual or constructive possession of any property of the decedent.

The court-appointed personal representative or administrator must file IRS Form 56 at the beginning of the case to notify the IRS of the existence of the person’s fiduciary relationship with the estate, as well as at the end of the case to notify the IRS that such relationship as terminated. Link to Form 56 can be found here.

An individual who has not been appointed as personal representative or administration but who intends to file decedent’s final individual income tax return must first file Form 56 in lieu of proof of court appointment.

Final Income Tax Return of Decedent

The personal representative must file the final income tax return of the decedent for the year of death, and any returns not filed for prior years. If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year that just closed will not be the final return. The return for that year will be a regular return, and the personal representative must file it. See IRS Publication 559 (2020).

The IRS gives the following example: Decedent died on March 21, 2020, before filing his 2019 individual tax return. His personal representative must file his 2019 return by April 15, 2020. His final tax return covering the period from January 1, 2020, to March 20, 2020, is due April 15, 2021.

Potential For Personal Liability of Personal Representative

If the estate is insolvent (not enough assets to pay debts) then the federal tax liability takes priority over all other claims. 31 U.S.C. § 3713(b). Any conflicting Washington law to the contrary is trumped by § 3716 via the Supremacy Clause of the U.S. Constitution. When the estate is insolvent, the personal representative is personally liable to the extent the personal representative paid other claims before federal tax liability. Steps to avoid personal liability of personal representative will be discussed separately in greater detail.

How to Get Information From the IRS to Determine Decedent’s Tax Filing and Payment Obligations.

First, file Form 56 as discussed above to be able to communicate with the IRS. Next , either request a tax transcript or decedent’s prior year returns. Tax transcript requests can be done via the IRS’s online portal, phone, or by mail after completing and signing IRS Form 4056. Here is a link to obtaining a tax transcript and/or prior year return. In addition to determining whether decedent faces an existing federal tax liability this will reveal whether prior year returns need to be filed in addition to decedent’s final income tax return.

Attorney, Chris Chicoine

Estate Planning and Probate

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com.

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Washington law creates a scenario where the surviving spouse, registered domestic partner (RDP) or children of decedent may still inherit from decedent notwithstanding contrary Will provisions or that the estate may be insolvent. The mechanism for doing so is a petition for a “basic award” from the estate pursuant to RCW 11.54.010. (Also called family allowance).

What is the Basic Award?

The amount of the basic award is Washington’s homestead exemption amount, which as of 2021 is now the greater of:

$125,000;
the county median sales price of single-family home in the preceding calendar year as provided in the data compiled by the “Washington center for real estate research”; OR
the value of the property if it’s subject to foreclosure due to a judgment in favor of the state of Washington for failure to pay state taxes on certain benefits.

“Traditionally, the purpose of the homestead statute has been to protect the homesteader and his dependents in the enjoyment of a domicile. In re Poli's Estate, 27 Wash.2d 670, 674, (1947). It specifically protected and benefited the surviving spouse and/or minor children. In re Estate of Dillon, 12 Wash.App. 804, 806, (1975). It also provided a means for maintaining the family after a death occurred. In re Estate of Scheldt, 13 Wash.App. 570, 572, (1975).” Estate of Garwood, 39 P.3d 362 (Wash. Ct. App. 2002).

Conditions To Basic Award

The court may not make an award unless funeral expenses, expenses of last sickness, and expenses of administrating the estate have been paid or provided for. Also, no award will be made if the person seeking such an award participated in the unlawful killing of the decedent.

Increase/Decrease of Basic Award Amount

The amount of the basic award may be increased by the court pursuant to its discretion and upon consideration of the factors identified at RCW 11.54.040, provided that the person making the request can show sufficient need and doing so will not conflict with decedent’s intentions.

If the person seeking the award will not receive any other property from the decedent, then a court can decrease the award amount. In exercising its discretion on whether to do so the court will consider certain factors identified at RCW 11.54.050.

Priority of Basic Award

The basic award has priority over all other claims against the estate. Moreover, once in the hands of the recipient, the basic award is exempt from estate claims as well as debts of the surviving spouse or RDP that existed at the time of decedent's death.

If necessary, probate and non-probate assets that would otherwise be distributed will abate in order to satisfy the estates obligation to pay the basic award. Again, abatement is the procedure where an inheritance is reduced or eliminated to satisfy an estate obligation.

Who May File a Petition for Basic Award?

The surviving spouse or RDP may petition the court for the basic award. If the decedent is survived by children who are not children of the surviving spouse or RDP, then such child can seek to have the basic award divided in order to share in a portion of the basic award. The petition for division by the child can only be filed after a petition is filed by the surviving spouse or RDP. However, if there is no surviving spouse or surviving domestic partner, then any minor child may petition for the award.

Chris Chicoine, Estate Planning and Probate Attorney

Chrischicoinelaw.com

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If an estate doesn’t have enough liquid funds to pay creditors, then estate assets must be liquidated, claims must be ranked by priority level, and assets “abated.” Abatement is the reduction in gifts to beneficiaries to pay estate claims. Certain assets are not subject to abatement. These issues are discussed in more detail below.

Ranking Creditor Claims

Under Washington law, if an estate does not have enough assets that may be liquidated to pay all creditor claims in total, then claims against the estate must be paid in the following order (per RCW 11.76.110):

Expenses incurred in administering the estate;
Funeral expenses;
Expenses related to the decedents’ last sickness;
Wages for labor performed within 60 days immediately before the death of decedent;
Debts that otherwise have preference under federal law;
Taxes and other debts owed to Washington state;
Judgment liens and mortgages; then
All other claims against the estate.

These categories reflect “classes” of claims. If there is not enough money to pay off an entire class in full, then creditors in such class receive a pro-rata distribution based on the amount of their claim. No lower class of claims can get payment until a higher priority class gets paid in full.

Abatement of Inheritances

Abatement is the procedure whereby inheritances are reduced in order to pay claims against the estate. In Washington state, unless a person’s will provides for a different order of abatement, abatement occurs in the following order, without preference to whether the asset is real property or personal property:

Intestate property;
Residuary gifts;
General gifts;
Specific gifts.

Intestate property is property that is not covered by decedent’s Will. Residuary property (also known as the residue of the estate), is property that is covered by a Will but is not specifically mentioned in the Will. General gifts are those of a certain quantity of an asset. Specific gifts are gifts of an identifiable asset.

Liability of Beneficiary of Nonprobate Assets For Estate Claims

A nonprobate asset may be used to satisfy estate claims, estate taxes or expenses of administration only to the extent that such asset could be used to satisfy decedent’s debt during decedent’s lifetime.The following are limited examples of nonprobate assets that may be applied towards payment of estate claims, estate taxes or expenses of administration:

Property passing under a community property agreement;
Property held as joint tenancy with right of survivorship;
Payable on death accounts, bonds, or securities;
Property titled as transfer on death deed;
Property held in trust where decedent that decedent benefited from during decedent’s life; and
Community property may be subject to claims of estate creditors to the same extent if such property passed.

Washington law defines nonprobate assets as those that pass by written instrument other than a Will (e.g., beneficiary designation form). Certain assets that seem to fit this definition that are excluded from the category include payable on death proceeds from life insurance, an annuity, or employee benefit plan, and can't be used to pay creditor claims. RCW 11.02.005(10).

Attorney, Chris Chicoine

Estate Planning and Probate

www.chrischicoinelaw.com

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The personal representative or administrator (executor) has the obligation to pay all claims against the estate. RCW 11.48.010. Claims against the estate include all debts owed by decedent as of the date of decedent’s death.

Claims must be presented in the manner and by the deadline set forth in the executor's notice to creditors. The deadlines can vary from 30 days, 4 months to 24 months.

“Reasonably Ascertainable” and Related Affidavit

If a creditor did not receive actual notice of when and how to present its claim, the deadline for such creditor to present its claim turns on whether that creditor’s claim was “reasonably ascertainable” by the executor.

A claim is reasonably ascertainable if the executor would discover it upon the exercise of reasonable diligence. RCW 11.40.040(1). The executor is deemed to have exercised reasonable diligence upon conducting a reasonable review of the decedent’s correspondence, including correspondence received after the decedent’s death, and financial records, including personal financial statements, loan documents, checkbooks, bank statements, and income tax returns, that are in the possession of or reasonably available to the executor. RCW 11.40.040(2).

Once the executor conducts this review reflecting reasonable diligence, the executor should file an affidavit stating such review has been conducted. By doing so, a creditor whose claim is not discovered in this process is presumed to not be reasonably ascertainable. This is important for determining the deadline for a creditor to bring a claim who has not received actual notice from the executor (4 months instead of 24 months. See RCW 11.40.051).

What Happens When a Creditor Files A Claim?

The executor must allow or reject a claim. If the executor has taken no action on a presented claim within the later of 4 months from the date of first publication of the notice to creditors, or 30 days from receipt of the claim, the creditor can give notice to the executor that the creditor intends to have the court decide the claim.

If the executor still takes no action on the claim within 20 days after receiving such notice from the creditor, the creditor can petition the court for a hearing to determine whether the claim should be allowed or rejected. If the court sides with the creditor, the court can award the creditor attorneys’ fees incurred to get the court involved.

How to Allow a Claim

If the executor allows a claim, the executor should promptly notify the creditor of such allowance. This can be done by regular first-class mail sent to the address of the creditor listed on its claim.

How to Reject a Claim

The executor may notify the creditor of the rejection via personal service or certified mail addressed to the creditor or its agent per the address listed on the claim. If the creditor wishes to pursue its claim, it must initiate a lawsuit against the executor no later than 30 days after receiving notification that its claim has been rejected.

Alternatively, the executor can negotiate and compromise claims if doing so represents what the executor believes to be in the best interests of the estate.

Attorney, Chris Chicoine

Washington Estate Planning and Probate Attorney

www.chrischicoinelaw.com

DISCLAIMER - THIS IS FOR INFORMATION PURPOSES ONLY; IT'S NOT LEGAL ADVICE. I MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND. CONSULT AN ATTORNEY. DO NOT ACT OR REFRAIN FROM ACTING BECAUSE OF THIS INFORMATION. THIS ALSO DOES NOT CREATE AN ATTORNEY CLIENT RELATIONSHIP.

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An Executor Must Timely Inventory and Appraise Estate Assets. What Are the Rules and How Is this Done?

Consistent with the executor’s duty to marshal estate assets, the executor must inventory and appraise all probate assets. Probate assets are those that pass under decedent’s Will or, if decedent left no Will, then assets that pass under Washington’s laws of intestate succession.

In Washington this must be completed no later than 3 months after the executor is appointed by the probate court. As part of this obligation, the executor must provide a list of any liens or encumbrances against such probate assets.In other words, as to each asset, the executor needs to determine the fair net value, as of the date of decedent's death. Once this is completed, the executor must verify the accuracy of the inventory and appraisement by affidavit.

The inventory and appraisement must classify the following categories of assets:

Real property (must identify by legal description);
Stocks and bonds;
Mortgages, notes, and other written evidences of debt;
Bank accounts and money;
Furniture and household goods;
All other personal property accurately identified, including the decedent’s interest in any partnership.

The executor should attach to the executor’s affidavit, a schedule that includes each asset and corresponding encumbrance, lien or other secured debt against such asset. The schedule should be organized according to the above-described categories of assets.

The executor may hire appraisers and other valuation experts to properly value the property.

What To Do With the Inventory Once Completed?

As of 2021, Washington law does not require the executor to file the inventory and appraisement in the probate case. However, if an interested party requests in writing to see a copy of the inventory and appraisement, the executor must provide that party with a copy no later than 10 days from the request. An interested party may include a legal heir, beneficiary, unpaid creditor who has filed a claim in the probate case, beneficiary of a nonprobate asset, or the Washington Department of Revenue.

What About Business Interests?

If the decedent operated or had an interest in a business at the time of decedent's death, Washington law requires that the executor include in the inventory, the decedent's share in any partnership. The executor is not required, however, to include any assets owned by the partnership (a partner does not own partnership assets as the partnership is a separate entity). The executor can request an inventory of partnership assets from surviving partners (must provide within 3 months from request).

Sole proprietorships different from partnerships in that SP not entity distinct from the sole-proprietor owner.

This topic should be handled very delicately. Consult attorney, valuation expert. Can pose implications on potential estate tax issues.

Attorney, Chris Chicoine

Washington Estate Planning and Probate Attorne

www.chrischicoinelaw.com

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Washington state imposes various duties and obligations on estate executors. One is the obligation to give certain parties notice of the probate proceeding. The following are the common notice requirements imposed on Washington state executors shortly after being appointed as such in a probate case.

Notice of Appointment of Personal Representative and Pendency of Probate – Heirs and Beneficiaries.

No later than 20 days after appointment, the personal representative must give notice of his/her appointment and the pendency of probate proceedings.

Notice goes to each legal heir, beneficiary of an estate asset, person named in the Will, and beneficiary of a nonprobate asset. If the trust is a beneficiary, notice goes to the trustee of the trust.

After notice has been provided, the personal representative must file in the probate case proof of giving such notice via affidavit.

Notice to DSHS

Provide same notice described to heirs above if no notice to creditors (described below) is provided to DSHS. Notice must include decedent's SSN.

Notice to Creditors

The personal representative may give notice to creditors. Failure to give notice affords any creditor of decedent 2 years by which to present its claim (unless earlier barred by an applicable statute of limitation). Giving notice as outlined below can shorten this deadline to 30 days or 4 months, depending on the method of giving notice.

If notice is given, it must contain the language found RCW 11.40.030 (link here). The notice also must announce the personal representative’s appointment and require that parties with claims against the decedent must present their claims within the time specified in RCW 11.40.051 or lose their claim against any of decedent’s probate and nonprobate assets (timeline summarized below).

If notice is given:

The personal representative must file the notice with the court;
The personal representative must publish the notice once per week for 3 consecutive weeks in a legal newspaper in the county where the estate is being administered;
The personal representative may give actual notice to any creditor by mailing to its last know address; and
The personal representative must mail a copy of the notice to the DSHS with decedent’s social security number at its office of financial recovery.

Notice to IRS

IRS Form 56 is used to notify the IRS of the creation and termination of a person’s fiduciary relationship as executor of decedent’s estate. Therefore, it should be filed at the beginning and end of the probate matter. A link to this form can be found here.

Notice to Washington Department of Revenue

Washington law provides that, within 60 days of appointment as executor of an estate, such person and any notice agent shall provide notice of appointment to the Department of Revenue if the decedent was “engaged in business.” Failure to give notice to the Washington state Department of Revenue may cause the executor to be personally liable for any taxes and penalties decedent owed. RCW 82.32.240.

The notices described here do not represent an exhaustive list. Other notices may be required based on the circumstance.

Attorney, Chris Chicoine, Washington State Estate Planning and Probate Attorney

www.chrischicoinelaw.com

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When Does Probate Require the Executor to Post Bond?

A bond protects an estate’s heirs, creditors and other interested parties from dissipation or loss of assets of the estate during its administration. In probates without a valid will, the executor is usually required to post a bond prior to obtaining letters of administration authorizing the executor to settle Decedent’s estate.

In Washington state, the executor is not required to post bond if:

The Will indicates the executor can serve without bond;
The executor is the surviving spouse or registered domestic partner of Decedent and it appears the entirety of the estate will be distributed to such surviving spouse or registered domestic partner;
A bank or trust company is the executor; or
Waived by the court.

When Might the Court Waive the Bond Requirement?

The court may waive the bond if all other heirs and beneficiaries give consent to waive the bond. If consent is obtained, this should be filed with the court with the petition asking for waiver of the bond. Note, if you are asking for heirs to waive right to notice of nonintervention powers, it would be wise to include in that same document a waiver of the requirement that the executor post bond.

Alternatively, the court may waive the bond if an alternative form of security is provided. Since the bond amount is typically based on the amount of liquid assets of the estate, one such form is acceptable replacement security is a signed receipt from the financial institutions holding such liquid assets that the executor is blocked from accessing funds unless and until ordered by the probate court. RCW 11.28.185, 11.88.105.

How Much Does a Bond Cost?

According to a local surety company, as of 2021, bond premiums charged by that company equate to 0.5% (or $500) for every $100,000 of estate assets.

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

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A power of attorney is a document that grants authority to an agent to act in the place of the principal. There are generally two types of powers of attorney: (1) property power of attorney (or financial); and (2) medical power of attorney. Financial powers of attorney confer decision-making authority to an agent over the principal’s property, which can be real property or personal property. Medical powers of attorney allow the named agent to make general decisions regarding the principal’s healthcare. Powers of attorney can be as limited or broad as the principal decides.

What is a Durable Power of Attorney?

A “durable” power of attorney is one that does not terminate when the principal becomes incapacitated.

Benefits of Power of Attorney

A power of attorney allows a person to act on another’s behalf without the need to initiate guardianship proceedings, which can be time consuming and expensive. Certain limited powers of attorney may be utilized for convenience, such as when a person is out of the country and legal documents must be signed (e.g., home refinance documents). In the latter scenario, the power of attorney can be tailored to achieve a limited purpose and only such purpose.

Financial Power of Attorney

The financial power of attorney may grant the agent “general authority” over the principal’s finances and property. General authority will allow the agent to act on the principal’s behalf, unless the power of attorney provides otherwise, over basically all types property and financial matters of the principal (found RCW 11.125.260-410). POA will not allow the agent to make decisions re: estate planning, gifting, delegating POA authority, or healthcare unless the POA says otherwise.

Medical Power of Attorney

This type of power of attorney permits the agent to make healthcare decisions on the principal’s behalf. This typically includes the power to make decisions regarding whether to withdraw or withhold life sustaining treatment. Healthcare powers of attorney do not enable the agent to make decisions for the principal covered under Washington’s Death with Dignity Act.

When Does a Power of Attorney Become Effective?

POA becomes effective when signed, unless the principal indicates it shall become effect at a later date, or upon the occurrence of a future event (such as when the principal becomes incapacitated).

If the power of attorney is to take effect upon the incapacity of the principal, it is deemed to be a “springing” power of attorney since the agent’s powers spring into effect upon such event. The principal will specify in the POA how his/her incapacity shall be determined (for example, examination by one or more licensed, treating physicians).

Termination– What If You Change Your Mind?

The power of attorney terminates when:

The principal dies;

the principal becomes incapacitated, if the power of attorney is not a durable power of attorney;

the principal revokes the power of attorney;

the power of attorney provides that a terminates;

the purpose of the power of attorney is accomplished; OR

the principal revokes the agents authority or the agent dies, becomes incapacitated, or resigns, and the power of attorney does not provide for another agent to act.

Attorney, Chris Chicoine

Christopher R. Chicoine, PLLC

www.chrischicoinelaw.com

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What is a Living Will and How Do You Create One?

A living will is also known as an advance directive. It is commonly referred to as an advance directive because it represents a person’s instructions on how he/she wishes to be treated in the event of a “terminal condition” or “permanent unconscious condition.” If a person is in either state, the person may wish to have medical personnel withhold or withdrawal life sustaining treatment.

What is Permanent Unconscious Condition or Terminal Condition?

This is basically when a person is in an irreversible coma or a vegetative state and there is little to no chance the person will get better.

Washington has defined permanent unconscious condition as “an incurable and irreversible condition in which the patient is medically assessed within the reasonable medical judgment as having no reasonable probability of recovery from an irreversible coma or persistent vegetative state.” RCW 70.122.020(6).

Washington has defined terminated condition as “an incurable and irreversible condition caused by injury, disease, or illness, that, within reasonable medical judgment, will cause death within a reasonable period of time in accordance with accepted medical standards, and where the applicable of life-sustaining treatment serves only to prolong the process of dying.” RCW 11.122.020(9).

The attending physician or 2 other physicians must make the assessment of a permanent unconscious state.

What Are the Legal Requirements for Creating a Living Will in Washington State?

In Washington, a living will must be signed by signed by the adult person making the living will, and be either notarized or witnessed by 2 disinterested witness (cannot be a relative, creditor or person who stands to inherit property from the patient).

What Are the Benefits of a Living Will?

A physician may continue to assist the patient who may be suffering in a vegetative state. This could be distressing for loved ones. Without a living will, loved ones might otherwise be forced to litigate to obtain a court order to allow a person to die peacefully. The Terri Schiavo case is an example. Ms. Schiavo was in a persistent vegetative state. Her husband wanted her artificial life support to end. Her parents disagreed. It took approximately 7 years of litigation before the husband ultimately prevailed in court.

What is the Difference Between Living Will and Healthcare Power of Attorney?

The healthcare power of attorney operates in a much broader set of circumstances since it allows the agent to make general decisions regarding your healthcare. The living will only applies when the person is in a permanent unconscious or terminal condition. The healthcare POA can allow the agent to make certain end of life decisions for the principal, such as whether to withdraw or withhold life sustaining treatment.

Contact the law office of Christopher R. Chicoine, PLLC with any questions regarding this or other estate planning, trust or probate administration topics.

Attorney, Chris Chicoine

425-243-4158

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Handling Probate Involving Minors or Disabled Adults.

This article addresses probate administration when the decedent is survived by persons who stand to inherit from the estate who are deemed “incapacitated”. In such instances, Washington law requires that there be a mechanism in place to ensure the incapacitated person’s interests are adequately represented through the probate proceeding. This is done via the appointment of a disinterested party called a probate guardian ad litem (“GAL”).

What Does It Mean to Be Incapacitated?

Under Washington law, a person is generally considered legally incapacitated if a) such person is under the age of 18; or has demonstrated an inability to b) adequately care for one’s own nutrition, health, housing or personal safety needs; or c) manage one’s property or financial affairs. RCW 11.88.010.

The Requirement to Appoint a Probate GAL.

If the executor knows the decedent is survived by an incapacitated person, such as a minor child, then the probate court must appoint a probate GAL. The executor must call such issue to court’s attention in the petition (which is one reason why the petition for probate must include a list of all heirs including age). If you appear before the commissioner to present the petition and other documents required to open probate, it is wise to additionally speak this fact to the commissioner. The commissioner will enter an order appointing a probate GAL for the alleged incapacitated person as required under RCW 11.76.080(2).

Note, there need not have been a formal determination that a person is incapacitated for the requirement of the probate GAL to apply. A probate GAL must be appointed if there is any allegation that the person in question may be incapacitated.

Exception to the Requirement of Probate GAL

The court need not appoint a probate GAL if a) the incapacitated person is incapacitated only because he/she is under the age of 18; b) there is a surviving spouse or registered domestic partner who is the sole beneficiary under the Will; and c) the minor child is also the child of such surviving spouse or registered domestic partner.

If the latter exception exists, the executor may file a motion to waive the requirement that a probate GAL must be appointed for the minor child.

How Can Distributions to Minor Be Made?

When it is time to make a distribution to a minor beneficiary, the executor must do so via one of the following three methods:

Deposit the money in an FDIC insured bank for the benefit of the minor, where such funds cannot be withdrawn until the minor is 18 years old or when the court enters an order approving such withdrawal;
Delivering property or money to an appointed guardian of the minor to hold for the minor’s benefit; or
Delivering property or money to a custodian pursuant to the Uniform Transfers to Minors Act. (For details on UTMA such transfers read here).

Attorney Chris Chicoine, Christopher R. Chicoine, PLLC

WWW.CHRISCHICOINELAW.COM

425-243-4158

DISCLAIMER: THIS IS FOR INFORMATION PURPOSES ONLY; IT'S NOT LEGAL ADVICE. I MAKE NO WARRANTY OF ANY KIND. THIS DOESN'T CREATE A LEGAL RELATIONSHIP. DON'T ACT OR REFRAIN FROM ACTING BECAUSE OF THIS INFORMATION. CONSULT AN ATTORNEY.

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How Does the Executor Prove the Will is Valid?

It is not enough that the Will meets the requirements for a valid Will in Washington state. When the executor petitions the court to admit the Will, the executor must demonstrate to the court that it meets the requirements for a valid Will. Proving a Will is valid is typically done via affidavits of the attesting witnesses (the persons who witnesses the testator sign the Will).

Option 1: Self-Proving Will Affidavit.

The court will accept a self-proving will affidavit signed by both attesting witnesses as sufficient proof. As explained in a prior post, it is highly recommended that a self-proving will affidavit is signed by both attesting witnesses at the same time the will is signed. This will avoid significant proof issue that may crop up when it comes time to prove the Will (such as when one of the attesting witnesses is deceased, incompetent, or cannot be located).

The self-proving will affidavit must:

Be notarized
Signed by each attesting witness
State the facts the court requires to prove the Will.

To satisfy the last requirement, the Court will want to know that:

The testator signed the Will and declared it to be his/her Will;
The attesting witnesses witnessed the testator sign the Will in their presence;
When the testator signed the Will, he/she did so voluntarily, without duress or undue influence, possessed a sound mind, and was 18 years or older;
The testator asked the attesting witnesses to sign the Will;
The attesting witnesses signed the Will.

The statements contained in the self-proving will affidavit are treated the same as in-person testimony before a judge.

Option 2: Declaration of Attesting Witnesses After Death of Testator.

If the Will you are seeking to probate lacks a self-proving will affidavit, the most efficient option under such circumstance would be to locate the two attesting witnesses and have each sign a declaration that would state the same facts that would have been stated in the self-proving will affidavit. In other words, follow the same requirements as option 1 and present that to the court. The only difference is the affidavit would be executed after the testator’s death and, therefore, not contemporaneous with the Will signing.

However, this is only an option if both attesting witnesses are alive, can be located, and recall the facts surrounding the testator’s Will signing.

If any attesting witness is unavailable, then the executor must resort to other means of proof described below.

Option 3: Submit Evidence the Signature of the Testator and Attesting Witnesses Are Genuine.

The last option is to establish the authenticity of the signatures of both the testator and the attesting witnesses. This is typically done by testimony of the person familiar with such signatures. This may be a costly and time-consuming endeavor. A decision should be made as to whether it is worth trying to admit the Will in question. If the distribution to the heirs reflected in the Will is the same as the distribution that would occur without the Will, then the decision might be an easy one. If a Will is not admitted to probate, the court will deem the testator to have died without one. In that case, the laws of intestate succession dictate which heirs receive distributions from the estate.

Attorney Chris Chicoine, Christopher R. Chicoine, PLLC

WWW.CHRISCHICOINELAW.COM

425-243-4158

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Nonintervention powers allow probate estate to be administered much more efficiently than without them. Generally, nonintervention powers allow estate executors to settle a decedent’s affairs without involvement of the probate court. RCW 11.68.085.

Nonintervention powers extend to a broad array of actions the executor may take in order to settle an estate. Limited examples of nonintervention powers include selling property of the estate; determining who stands to inherit from the estate; making distributions to heirs.

The probate process is less costly and less time-consuming when nonintervention powers are granted. Nonintervention powers are available whether the decedent left a valid will or not. The procedure for obtaining nonintervention powers, however, is easier if the decedent left a will that indicates the nominated executor may serve with nonintervention powers.

How to Obtain?

To obtain nonintervention powers the executor must request nonintervention powers in the petition to probate the Will and appoint the executor. Language to this effect must be included in the petition. Also, the proposed order that is presented to the commissioner must award nonintervention powers and direct that the clerk shall issue nonintervention powers. This must be done in all requests for nonintervention powers, regardless of whether notice or a hearing on such request is required.

Is Advance Notice and Hearing Required?

Generally no if the decedent left a valid will. The statute says a hearing is not required if a) there's no Will that prohibits nonintervention powers; b) the estate is solvent; and the person asking is either 1) the nominated executor in the Will; or 2) the surviving spouse or registered domestic partner, the estate consists entirely of community property, and the decedent is not survived by children from another relationship.

If Notice and Hearing is Required By Law

Schedule a hearing on the request for nonintervention powers. Advance notice of the hearing must go out to each "heir." An heir is defined as a person who stands to inherit under Washington's laws of intestate succession.

Alternatively, the hearing may be avoided if each heir provides a signed, written waiver of the right to the hearing or states he/she consents to nonintervention powers.

Steps for giving notice and scheduling a hearing will be discussed in detail separately.

Attorney, Chris Chicoine

Law Office of Christopher R. Chicoine, PLLC

425-243-4158

DISCLAIMER: THIS IS NOT LEGAL ADVICE. IT IS FOR INFORMATION PURPOSES ONLY. IT DOES NOT CREATE AN ATTORNEY CLIENT RELATIONSHIP. I MAKE NO REPRESENTATION OF ANY KIND REGARING THIS INFORMATION. DO NOT ACT OR REFRAIN FROM ACTING IN ANY WAY BECAUSE OF THIS INFORMATION. CONSULT AN ATTORNEY FOR LEGAL ADVICE.

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The steps to retitle assets left by a loved one in Washington state depend on the type of asset in question. Generally, assets of decedent’s estate are either probate or nonprobate assets. Probate assets are those that get retitled pursuant to the decedent’s last will and testament. Nonprobte assets are those that get retitled in the name of the beneficiary designated in the account forms.

Retitling Nonprobate Assets

First obtain a certified copy of decedent’s death certificate. Follow this link to order a death certificate in Washington state.

The death certificate proves to the party that holds the asset that the owner has died, and the asset must be retitled (e.g., a bank that houses decedent’s checking account). The next step is to prove the identity of the beneficiary who stands to inherit the asset as reflected on the beneficiary designation form.

Retitling Probate Assets

Step 1: Is Probate Required? If Not, Use the Small Estate Affidavit Procedure

Probate is required if decedent left probate assets that are collectively valued at less than $100,000 and did not include real property. If both requirements are met, then Washington law deems decedent’s estate to be a “small estate” that does not require probate to retitle decedent’s assets. Assets are retitled by presenting the death certificate and completed small estate affidavit.

Step 2: If Probate Is Required Get Letters Testamentary (or Administration)

If decedent’s estate consists of probate assets that do not qualify for the small estate affidavit procedure, then the executor must obtain letters testamentary (or administration if there was no will) in order to retitle decedent’s assets. This is done through probate once the will has been admitted and the executor is appointed. It is through probate that letters are issued. The letters represent the executor’s legal authority over assets of decedent’s estate.

The nominated executor must petition the probate court for letters. This is done by presenting the death certificate and will to the court. The court will want to see that the will is valid and, in fact, correctly nominates the executor to serve as the personal representative of decedent’s estate. Once the court is satisfied it will direct the clerk of the court to issue letters testamentary to the personal representative.

The process is nearly identical if the decedent left no valid will, except the appointed executor is called the administrator who receives letters of administration. Letters of administration confer the same powers to the executor as the letters of testamentary confer to the personal representative.

Once letters testamentary or administration are issued, the executor will retitle all probate assets (when the time is appropriate and after valid debts, expenses and taxes are paid), pursuant to decedent’s last wishes as reflected the will. If the decedent left no will then the assets will be retitled in accordance with the laws of intestate succession. If the probate asset is held by another party (e.g., a bank housing decedent’s bank account), the executor presents the letters to the bank.

Attorney Chris Chicoine, Law Office of Christopher R. Chicoine, PLLC

425-243-4158

crc@chrischicoinelaw.com

DISCLAIMER - THIS IF FOR INFORMATIONAL PURPOSES ONLY. IT'S NOT LEGAL ADVICE. IT DOESN'T CREATE AN ATTORNEY CLIENT RELATIONSHIP. I MAKE NO WARRANTY OF ANY KIND. CONSULT A LAWYER. DON'T ACT OR REFRAIN FROM ACTING BECAUSE OF THIS INFORMATION.

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A trust is a distinct legal entity that holds assets for the benefit of certain individuals. There are 3 parties involved with any trust: 1) the trustor; 2) the trustee and 3) the beneficiary. The trustor is the person who created the trust. The trustee is the person who holds legal title to trust assets, who is charged with the legal and fiduciary obligation to manage trust assets for beneficiaries pursuant to the trust rules set by the trustor when the trustor created the trust.

Trusts must be funded in order to achieve any purpose of the trustor.

Why create one? Some of the most common reasons include:

Probate avoidance. Spare your loved ones the time and expense of the probate process.
Ancillary probate avoidance. If you own real estate outside Washington you’ll likely need to open probate in that state to retitle the property. This second probate is referred to as an ancillary probate.
Potentially reduce or eliminate estate taxes. For example, married couples with assets putting them in the “zone” of Washington’s estate tax of $2.193 million should strongly consider a credit shelter trust to maximize each spouse’s exemption amount of $2.193 million (this includes all real and personal assets, including certain life insurance policies, real estate and business interests). Unlike with federal estate taxes, Washington state does not allow for “portability”. Portability involves the surviving spouse using (or porting) the decedent spouse’s exemption amount that was unused by that individual’s estate.
Transfer Assets to Minors or Immature Heirs. A trust offers a solid, flexible solution to transfer assts to minors (minors cannot receive property via inheritance) as well as immature or fiscally irresponsible heirs. Having a trust manage such inheritance per the rules you create and under the terms you define when creating the trust can preserve family assets (e.g., the heir may receive income or assets for health, education or maintenance needs).
Preserve Assets For Your Blood Line Heirs in a Blended Family. Similarly, a trust can be a good vehicle to make sure your children are protected, and your inheritance is not squandered if your spouse remarries unwisely.

6. Protect from Creditors. Trusts can include spendthrift clauses that can protect trust assets from being transferred to creditors of your beneficiaries.

7. Medicaid Planning. Trusts can be used as part of your long-term care and Medicaid planning strategy.

8. For Children with Special Needs. A trust, often referred to as a special needs trust, can be created for the benefit of children with special needs. A special needs trust must be designed so that the special needs child benefits from assets of the trust, but at the same time those trust assets are not counted for purposes of qualifying for public assistance.

9. Privacy. A trust avoids making your assets and liabilities a public record. One of the duties imposed on your executor as part of probate is to create an inventory of all your assets and debts as of the date of your passing. This could potentially be filed with the probate court which and accessible to the public.

Contact the Law Office of Christopher R. Chicoine, PLLC if you have questions regarding estate planning, trust or probate administration.

DISCLAIMER - THIS IS FOR INFORMATIONAL PURPOSES ONLY. IT'S NOT LEGAL ADVICE. I MAKE NO WARRANTY OF ANY KIND. DON'T ACT OR REFRAIN FROM ACTING BECAUSE OF THIS INFORMATION.

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What is a TOD? How is it different than JTWRS? How May it Be Used to Avoid Probate?

A transfer on death deed is just that (“TOD”). It is a deed to property that transfers the property to the designated beneficiary named in the deed on the death of the owner. Property subject to a transfer on death deed is a nonprobate asset. As such, it passes to the designated beneficiary outside of probate without the need to commence a probate proceeding. A transfer of death deed for real property is not subject to being overridden by an inconsistent “Super Will” provision executed after the execution of such transfer on death deed.

Accordingly, a transfer on death deed may make sense as an estate planning tool with a person whose estate consists of real property plus personal property worth less than $100,000. In Washington state, a person can avoid probate and retitle assets of a decedent’s estate if 1) the probate estate does not include real property; and 2) the value of estate assets is less than $100,000. This is done by using the small estate affidavit procedure (plus other documents would need to be drafted).

Requirements for Valid Transfer on Death Deed

A transfer on death deed must:

1) Contain all elements of a regular deed for real property;

2) State that the transfer to the designated beneficiary is to occur on the transferor’s death; and

3) Be recorded before the transferor’s death in the public record’s office of the county where the property is located (e.g., recorder’s office or auditor’s office).

Moreover, transfer on death deeds are effective even if no notice of is given to the beneficiary and/or without consideration. It can be revoked at any time. In addition, the transfer on death deed does not affect any right or interest the owner has in the property. Not only may the owner maintain exclusive possession of the property for his period of ownership of the property, but the TOD may freely sell or encumber the property as he/she sees fit. The property is not subject to the claims of the beneficiary’s creditors, nor does it count towards the beneficiary’s eligibility for public assistance.

What’s the Difference Between Transfer on Death Deed and Joint Tenancy With Right of Survivorship?

A joint tenancy with the right of survivorship is, like the transfer on death deed, a nonprobate asset in that ownership of the property automatically vests in the surviving joint tenant upon the death of the other. This occurs without the need to open a probate proceeding. However, a joint tenancy involves concurrent and joint ownership of the property; meaning two or more persons co-own the property. Each joint tenant has an equal ownership stake in the property. A joint tenant cannot sell or encumber the property without the consent of the other joint tenant. Two or more persons can acquire property as joint tenants with the right of survivorship, or one person owning property outright can transfer that property to himself and other person together as joint tenants. If the latter occurs, the transferor cannot simply revoke the transfer since the transfer created equal ownership rights in another person. This is unlike a transfer on death deed with may be held by one owner and is revocable during that owner’s lifetime.

Contact the Law Offices of Christopher R. Chicoine, PLLC, if you have any questions regarding estate planning, probate or trust administration. We can be reached at 425-243-4158 or crc@chrischicoinelaw.com

DISLCAIMER THIS IS FOR INFORMATIONAL PURPOSES ONLY. IT'S NOT LEGAL ADVICE AND DOESN'T CREATE AN ATTORNEY CLIENT RELATIONSHIP. I MAKE NO WARRANTY OF ANY KIND. DON'T ACT OR REFRAIN FROM ACTING BECAUSE OF THIS INFORMATION

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Washington Law Allows For “Super Will” Provisions. What Does That Mean?

Nonprobate assets are those that pass by written instrument other than a will (e.g., beneficiary designation form on an investment account). The executor of one’s estate has no authority over the disposition of nonprobate assets. Probate assets pass pursuant to a testator’s last will and testament. Generally, the designated beneficiary of a nonprobate assets takes title to that asset upon the death of the original owner, regardless of any inconsistent will provision to the contrary.

Washington law, however, includes a wrinkle in this general scheme. For certain nonprobate assets, a testator’s will may supersede an inconsistent beneficiary designation. Such provisions contained in a will are known as “Super Will” provisions. The legal authority for the same is found at RCW 11.11 et. seq., which is known as the “Testamentary Dispositions of Nonprobate Assets Act” (the “Act”).

Super Will Rules

RCW 11.11.020(1) provides:

“Subject to community property rights, upon the death of an owner the owner’s interest in any nonprobate asset specifically referred to in the owner’s will belongs to the testamentary beneficiary named to receive the nonprobate asset, notwithstanding the rights of any beneficiary designated before the date of the will.”

In identifying which nonprobate assets are subject to be overturned by a superseding Super Will provision, the Act defines nonprobate asset as any nonprobate asset except:

Right or interest in real property passing under joint tenancy with right of survivorship;
Deed or conveyance for which possession is postponed until the death of the owner;
Transfer on death deed;
Right or interest passing under a community property agreement; and
IRA or bond.

Limited examples of nonprobate assets that may be disposed of via Super Will provisions include:

Assets disposed of via intervivos trust (a trust that is revocable while the trust created is alive);
Bank accounts titled as joint tenancy with right of survivorship (because not real property);
Payable or transfer on death bank accounts (because not in the form of deed).

For a Super Will provision to supersede an inconsistent beneficiary of a nonprobate asset, the Super Will provision must have been drafted after such nonprobate beneficiary designation. Therefore, if the owner designates a beneficiary for a nonprobate asset afterthe date the will is executed, any attempt to make a testamentary (via will) disposition of the nonprobate asset will fail. RCW 11.11.020(4). Moreover, it should be noted that community property rights cannot be superseded via super will provisions.

What Language Must Be Used For Will to Become a Super Will

A person intending to invoke Super Will provisions of Washington law to dispose of a nonprobate assets must be careful in the language he/she uses in the will. Simply making “a general residuary gift in an owner’s will”, and a “will making general disposition of all the owner’s property does not entity the (beneficiary) to receive nonprobate assets of the owner.” RCW 11.11.020(2).

Language in the will that disposes of “all nonprobate assets” or all of a category of nonprobate assets that are subject to the Super Will provisions described above will suffice. Examples include: “all of my payable on death bank accounts” or similar language. RCW 11.11.020(3).

Contact the Law Offices of Christopher R. Chicoine, PLLC if you have any questions regarding estate planning, probate or trust administration in order to schedule a free 15 minute consultation.

DISCLAIMER THIS IS FOR INFORMATION PURPOSES ONLY. IT'S NOT LEGAL ADVICE. CONSULT AN ATTORNEY

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Valid Last Will and Testament Requirements

In Washington state, for a last will and testament to be valid, it must be

In writing;
Signed by the testator;
Signed by two adult, disinterested witnesses.

Effective January 1, 2022, the witnesses need not sign in testator’s physical presence but instead, may sign in testator’s “electronic presence” (e.g., Zoom meeting).

Washington state has long refused to recognize a “holographic will”.

Self-Proving Will Affidavit

To be adjudicated as a valid will by a probate court, the court must receive proof that in fact the will meets the requirements for a valid will. This is done in the form of testimony of the two persons who witnessed the will signing that in fact, such witnesses witnessed the will signing and then signed the will as witnesses.

The requirement of proof can cause practicable problems given the passage of time between signing a will, and presenting it for probate after the testator dies. For example, you may have trouble locating a witness or the witnesses themselves have died. Washington law allows an executor to bypass the initial hearing in probate court if the will is presented to the court with a “self-proving” will affidavit.

To qualify as a self-proving will, the two witnesses must give a sworn statement setting forth the fact that they witnessed the testator sign the will. This affidavit must be notarized. The self-proving will can be executed before the testator dies, or after at the request of the executor. The self-proving will affidavit can be affixed to a will or attached to a photocopy of the will. RCW 11.20.020.

Although not technically a requirement to establish the validity of a will, it is advisable that any person making a will further direct the witnesses sign a self-proving will affidavit to be acknowledged before a notary public.

Requirements of Person Making a Will (Testator)

The person making the will must be 18 years old and of sound mind. For clarify in sound mind requirement, see In re Estate of Bottger, 14 Wash. 2d 676, 685 (1942). Testator must not have been unduly influenced. The most important undue influence factors are listed in Dean v. Jordan, 194 Wash. 661 (1938).

The above only described requirements for valid will (nothing about substantive terms which vary per individual circumstance). Although I will separately address in greater detail, effective wills must at a minimum address the following in order to be functional in carrying out one’s last wishes:

Identity of the testator;
Identify of the testator’s family and legal heirs;
Identity of the executor and any successor(s);
Whether the executor may serve with nonintervention powers and without bond;
Identity of any legal guardians for minor children;
How minor children will receive property (e.g., via trust or UTMA);
Any specific gifts, bequests or devices;
How the residue of the estate will be divided.

Contact Law Offices of Christopher R. Chicoine, PLLC with any questions regarding estate planning, probate or trust administration. We can be reached at 425-243-4158 or crc@chrischicoinelaw.com.

DISCLAIMER THIS IS NOT LEGAL ADVICE AND FOR INFORMATION PURPOSES ONLY. NO ATTORNEY CLIENT RELATIONSHIP IS CREATED AND I MAKE NO WARRANTY OF ANY KIND REGARDING THIS INFORMATION. DO NOT ACT OR REFRAIN FROM ACTING BASED ON THIS INFORMATION. CONSULT AN ATTORNEY. CIRCUMSTANCES VARY.

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Washington law prohibits gifts or transfers to minors (under 18 years old). Generally, assets are transferred to minors via use of a trust or the transfer is made to a guardian pursuant to the Uniform Transfers to Minors Act (“UTMA”) at RCW 11.114 et. seq. While trusts offer much more flexibility, the simplicity and relative low-cost an UTMA account (if funds are transferred) might make sense. This article explores both options.

Transfers Via Trust

A trust is a distinct entity, separate from its creator (called the trustor or settlor). The trustee of the trust holds title to its assets, and manages the trust’s assets for the benefit of the beneficiaries of the trust. The trust is administered by the trustee pursuant to the terms of the trust, as defined by the trustor. A trust can be created during life (i.e., an inter vivos trust) or pursuant to a will, in which case it would be a testamentary trust taking effect upon the death of the testator.

Transfers to a trust for the benefit of a minor child offers the transferor much greater flexibility over the gift, including:

· the date when distributions may be made;

· the circumstances under which a distribution may be made (e.g., for the child’s health, support, or education);

· whether assets earmarked for distribution to a child may be shielded from his/her creditors (spendthrift provision).

UTMA

The simpler, less expensive method to transfer assets to a minor would be to do so pursuant to the UTMA. The UTMA defines minor as an individual who has not reached the age of 25 years old. Therefore, the transferor can utilize the UTMA in lieu of a trust for transfers to persons younger than 25. This is done by transferring the asset to a qualified custodian that satisfies other requirements of the UTMA. The custodian must manage the UTMA assets (i.e., “custodial property”) much like a trustee of a trust. RCW 11.114.120.

For example, in dealing with custodial property, the custodian must observe various fiduciary duties, including:

· Exercising the appropriate standard of care;

· The duty to not commingle personal property with custodial property;

· The duty to keep adequate records; See, RCW 11.114.120(2)-(5).

Effecting Transfers Under UTMA

To properly effect a transfer under the UTMA, the transferor must title the property in question as specified by RCW 11.114.090. This can depend on the type of asset transferred. By limited example, if money is to be transferred, it must be delivered to an account in the name of the transferor or other adult followed in substance by the words: “…as custodian for … (name of minor) under Washington uniform transfers to minors act”.

Transfers to Minors from an Estate

For an executor to carry out any provision of a person’s last will and testament that provides for distribution to a minor (or pursuant to Washington’s laws of intestate succession), the executor must do one of the following:

Deposit money in a bank or investment account for benefit of the minor subject to withdrawal only pursuant to order of the probate court or the minor becoming 18 years old;

Pay the money over to a qualified, appointed guardian over the minor;

Transfer the money to a custodian pursuant to the UTMA provisions at 11.114.

Law Offices of Christopher R. Chicoine, PLLC can be reached at 425-243-4158.

DISCLAIMER - THIS IS FOR INFORMATION PURPOSES ONLY. IT'S NOT ADVICE AND DOESN'T CREATE ATTORNEY/CLIENT RELATIONSHIP. I MAKE NO WARRANTY OF ANY KIND. DON'T ACT OR REFRAIN FROM ACTING IN ANY WAY BECAUSE OF THIS INFORMATION. CONSULT AN ATTORNEY. ALSO, IT ONLY ADDRESSES Washington State LAW.

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The trustee self-dealing prohibition under Washington law is found at RCW 11.98.078(2), which provides in part:

“…a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or which is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary affected by the transaction…” (emphasis added).

A transaction involving trust property and the trustee is presumed to be “otherwise affected” by a personal conflict of the trustee if the trustee enters into the transaction with his/her relative, agent/attorney, or business in which the trustee holds an interest. RCW 11.98.078(3).

A transaction between the trustee and trust assets for the trustee’s personal benefit is voided without the need to present any further proof other than the that the trustee participated in such transaction.

Limited examples:

· Trustee gifting him/herself trust property;

· Trustee loaning trust money to him/herself;

· Trustee selling trust assets to him/herself;

· Selling trust assets (that beneficiaries wish to keep) to generate commission or kickback;

· Trustee pays him/herself too much for trust-related services;

· Moving into a trust home without paying rent.

Not all self-dealing transactions are voidable and/or expose the trustee to personal liability. Statutory exceptions include:

· The trust expressly authorized the transaction;

· The transaction was approved by the court or in a nonjudicial binding agreement (TEDRA settlement) that complies with Washington law governing the same (see RCW 11.96A.210 thru 11.96A.250);

· The affected beneficiaries did not timely commence a judicial proceeding;

· The affected beneficiaries either consented to the trustee’s conduct, ratified the transaction, or executed a valid release; or

· The transaction involved an agreement trustee entered into prior to contemplating to become a trustee.

For irrevocable trusts created after 12/31/2011, and revocable trusts that become irrevocable after 12/31/2011, within 60 days of appointment as trustee, the trustee must give notice to qualified beneficiaries setting forth:

· The existence of the trust;

· The identity of the trustor (person who created the trust);

· The trustee’s name, address and phone number;

· The right to request information reasonably necessaryto help the beneficiary determine if his/her rights are being protect

Contact the Law Offices of Christopher R. Chicoine, PLLC at 425-243-4158 or crc@chrischicoinelaw.com if you have any questions regarding the trust or estate administration matters.

DISCLAIMER - THIS IS FOR INFORMATION PURPOSES ONLY; IT'S NOT LEGAL ADVICE. I MAKE NO REPRESENTATION OF ANY KIND. CIRCUMSTANCES VARY, LAWS CHANGE. THIS DOESN'T CREATE AN ATTORNEY CLIENT RELATIONSHIP. DON'T ACT OR REFRAIN FROM ACTING IN ANY WAY BECAUSE OF MY COMMENTS AND THE INFORMATION PROVIDED. CONSULT AN ATTORNEY BEFORE DOING ANYTHING.

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When a person dies leaving probate assets in the state of Washington involving real property, or an estate greater than $100,000, a probate proceeding is typically required to retitle such assets. Probate assets are those that pass to beneficiaries pursuant to one’s last will and other than one’s will. Property that passes under a valid community property agreement avoids probate, and the assets it governs are considered nonprobate assets.

Whether it makes sense to execute a community property as part of your estate plan is a separate, important question. For married couples with moderate-sized estates (no Washington estate tax issues), seeking to leave all property to the surviving spouse or domestic partner and whose main estate planning objective is to avoid probate, a community property could make sense. This article explores the rules governing community property agreements.

Requirements for Valid Community Property Agreement (CPA)

RCW 26.16.120, which sets forth the requirements of a valid community property agreement.

Procedurally, the community property agreement must be in writing, signed by both parties, and notarized.

Substantively and traditionally, a community property agreement contains 3 “prongs” whereby:

The first prong may provide that presently-owned property becomes community property;

The second prong may provide that after-acquired property becomes community property; and

The third prong provides that on death of one spouse, the surviving spouse obtains entirety of the community property.

See, e.g., In re Marriage of Pletz, 71 Wn.App. 699, 708 (1993). A community property agreement may be a variation of these 3 prongs.

Advantages include the ability to pass property to the surviving spouse and probate avoidance.

However, a community property trumps a valid last will and testament. If a spouse’s will reflects his/her desire to leave property to a loved one other than the other spouse (such as children from prior marriage), the community property agreement will supersede the inconsistent will provision, and no such inheritance would reach the non-spouse beneficiary. By the same principle, a community property agreement may frustrate inconsistent will provisions that provide for a credit shelter trust (which may be there for estate tax reasons).

Also, a spouse may not want future acquisitions of separate property to become community property (e.g., one spouse obtains a gift or inheritance).

Probate will be required in the case of the surviving spouse, as well a circumstance in which both spouses die at the same time.

Moreover, one spouse may need nursing home care. If so, his/her share of the community property may preclude entitlement to Medicaid benefits, in which case another estate planning strategy should be considered.

A termination clause should address whether the community property agreement may be rescinded upon the filing a petition for divorce, entry of divorce decree, or legal separation.

Contact our office if you wish to discuss incorporating a community property agreement into your estate plan. It is crucial good legal counsel is provided as circumstances vary. Our office can be reached at 425-243-4158 or crc@chrischicoinelaw.com

DISLCAIMER THIS IS FOR INFORMATION PURPOSES ONLY. IT'S NOT LEGAL ADVICE. THIS DOESN'T CREATE AN ATTORNEY/CLIENT RELATIONSHIP. I MAKE NO WARRANTY OF ANY KIND REGARIDNG THIS INFORMATION. CIRCUMSTANCES VARY, LAWS CHANGE. ALWAYS CONSULT WITH AN ATTORNEY.

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Probate is the process whereby a court-appointed legal representative administers the estate of a deceased person. The process is commenced by the filing of a petition commencing a legal proceeding before superior court (the probate case). The legal representative is the personal representative if the decedent left a valid last will and testament, or the administrator) if the decedent left no such will (either may be referred to as the executor).

The estate consists of both assets and liabilities of the decedent at death (debts and claims against the estate). Therefore, administration of the estate by the executor includes the collection, safeguarding, and distribution of decedent’s probate assets after payment of valid claims against the estate, taxes and expenses of administration.

In Washington state, an executor may serve as such with “nonintervention powers” if certain requirements are met, such as by the decedent creating a valid will that specifies the personal representative may serve with nonintervention powers. Nonintervention powers enable the executor to complete many of his/her legal duties without the need for court approval (i.e., intervention of the court). Nonintervention powers allow probate proceedings to be administered more efficiently and cost-effectively.

Probate assets

A probate asset is one that passes pursuant to the terms of decedent’s last will and testament. Generally, a probate asset is one such that it must be retitled through a probate proceeding in order to be administered properly (but read here for small estate affidavit procedure in lieu of probate).

Nonprobate assets

Nonprobate assets are “those rights and interests of a person having beneficial ownership of an asset that pass on the person's death under a written instrument or arrangement other than the person's will.” RCW 11.02.005(10). In other words, in Washington, nonprobate assets pass outside a person’s will.

Statutory examples of nonprobate assets per RCW 11.02.005(10) include:

Property passing via joint tenancy with right of survivorship;

Joint bank account with right of survivorship

Transfer on death deed

Payable on death account

Transfer on death investment account

Trust property if the trust becomes irrevocable on the person’s death

Community property agreement

IRA

Bond

The definition of nonprobate assets expressly removes certain assets that otherwise would qualify as nonprobate assets from the definition of nonprobate assts. RCW 11.02.005(10) adds the following exception to its definition of nonprobate assets: A payable-on-death provision of a life insurance policy, annuity, or other similar contract, or of an employee benefit plan..."

As such, these assets are neither probate nor nonprobate assets under Washington law. While confusing, the rationale for so doing is simple: protect these assets from creditor and other claims.

Contact our office if you have questions about probate or estate planning. The Law Offices of Christopher R. Chicoine, PLLC can be reached at 425-243-4158 or crc@chrischicoinelaw.com

Dislcaimer This is for information purposes only; no attorney/client relationship is created. This isn't legal advice. I make no warranty of any kind regarding this information. Contact an attorney.

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Overview:

In the estate planning or taxation context, a disclaimer is the refusal to accept property that would otherwise be transferred to by gift or inheritance. Disclaiming often plays an instrumental role in implementing a sound estate planning strategy. A person may wish to disclaim property for a number of reasons, including:

1) reducing estate taxes through, among other things, maximizing use of a deceased spouse’s exemption (no portability of unused exemptions in some states, such as Washington);

2) asset protection if the disclaimant has creditor problems

3) the property may be burdensome to maintain.

Gift Tax Issues Raised By Disclaimer:

Internal Revenue Code (I.R.C.) § 2511 imposes a gift tax on transfers of property, “whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible…”. Disclaimed property, if done incorrectly, would fall under § 2511 as an indirect transfer of property by claimant (disclaimant is transferring his/her interest in property to other beneficiaries whose inheritance will increase because of the disclaimer). Qualified disclaimer may avoid this.

A qualified disclaimer means an “irrevocable and unqualified refusal by a person not to accept an interest in property.” I.R.C. § 2518(b). A qualified disclaimer will be recognized only if:

Refusal is in writing;

Refusal delivered to transferor (or legal representative such as trustee or executor) no later than 9 months from later of:

“the day on which the transfer creating the interest in such person is made”; or

The person’s 21st birthday;

The person has not accepted the interest or any of its benefits; and

As a result of the refusal, the interest passes without direction of the person making the disclaimer and passes either:

To the surviving spouse or to someone other than the person making the disclaimer.

If a qualified disclaimer is timely made, the I.R.C. will treat the disclaimed interest as having never been transferred to disclaimant for purposes of federal estate, gift and generation-skipping tax purposes I.R.C. § 2518(a); Treas. Reg. § 25.2518-1(b). Instead, it is considered as passing directly from the transferor of the property to the person entitled to receive the property as a result of the disclaimer. Accordingly, a person making a qualified disclaimer is not treated as making a gift. Id.

Other rules governing disclaimers exist, and do other examples of disclaimer techniques that may benefit one’s estate planning strategy. The rules are complicated and circumstances vary. Under no circumstance should one decide to disclaim or attempt a disclaimer without consulting an attorney.

Call our Law Offices of Christopher R. Chicoine, PLLC to discuss your estate planning needs. We can be reached at 425-243-4158 or via email crc@chrischicoinelaw.com

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Noncitizen surviving spouses are not afforded the unlimited marital deduction for property received on decedent spouse's death. An exception applies for property transferred to qualified domestic trust (QDOT) for the benefit of the surviving spouse. Various rules apply. Trustees and beneficiaries need to be vigilant avoid triggering estate tax associated with QDOTs.

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Washington allows deduction for Qualified Family-Owned Business Interest ("QFOBI"). Deduction up to $2.5 million if various requirements are met.

Overview of rules for eligibility for QFOBI deduction.

Review and explain significant terms applicable to QFOBI (qualified heir, material participation).

Identify and explain "additional estate tax" trap for qualified heirs who do not maintain applicable requirements 3 years after decedent's passing.

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Overview of filing and payment requirements.

Threshold amount for determining whether Washington estate tax return must be filed. ($2,193,000 as of 2021).

Concept of taxable estate by looking at gross estate, available deductions, exclusion amount.

Time for filing, payment of tax. Potential for installment payment agreement.

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Explore concepts of federal estate tax system and role in calculation of estate tax due, if any.

Unified nature of gift and estate tax systems (same rates, unified credit that can be used against gift and estate tax liability).

Property included in gross estate.

Deductions from gross estate to determine taxable estate.

Tentative tax (add taxable gifts to get tax base, apply applicable rate schedule per I.R.C.).

Subtract unused unified credit (exemption) to tentative tax (and other credits available) to get final estate tax.

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NOTE DISCLAIMER

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General requirements for use of procedure. Must be sufficiently small estate involving probate assets, among other things.

Person seeking to use affidavit must be qualified.

Affidavit must satisfy statutory elements.

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Basic terms applicable to intestate estates explained.

Small estate affidavit procedure may be used in certain circumstances allowing one to bypass probate.

Does not apply to non probate assets. Recipient of such asset passes pursuant to separate, governing instrument outside of intestacy succession laws.

Intestacy laws explained (largely depends on a person's relationship to decedent and extent to which decedent survived by other relatives).

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In this episode I go into detail regarding the requirements, creation, scope, priority, taxpayer due process rights and release.

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This episode explores a potential "get out of jail free" card for owners facing personal liability for L and I taxes imposed on the employer/business.

Washington State law imposes personal liability for L and I tax premiums on the "responsible person" who willfully causes the business employer to fail to pay such taxes.

Washington law relieves personal liability for L and I taxes imposed on the responsible person of an LLC or corporation if such entity is placed in bankruptcy or receivership.

What is the downside risk if the entity is defunct and without assets, and the individual owner is facing collection action by Washington Department of L and I?

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Rules for dischargeabilty of income tax debt.

The 3 time frames that must be satisfied in order to discharge income tax debt.

Tolling events (Offer in Compromise, Collection Due Process Hearing).

How to calculate whether old debt will be discharged.

the trusts and estate planning podcast: Recent Episodes

Chris Chicoine