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An Executor Has Dominion – But not Superpowers

12.17.2019 by Stacey Romberg //

An executor who has been granted nonintervention powers by the court has dominion over the decedent’s estate. The court has authorized them to administer the estate without court involvement. According to RCW 11.48.010, “The personal representative shall be authorized in his or her own name to maintain and prosecute such actions as pertain to the management and settlement of the estate, and may institute suit to collect any debts due the estate or to recover any property, real or personal, or for trespass of any kind or character.” For example, an executor can initiate a wrongful death lawsuit in order to pursue a recovery on behalf of the heirs.

Although an executor with nonintervention powers has much authority, there are limits, as described by a recent New York Times article “DNA Tests Could Clear an Executed Man. Why a Judge Said No.” The article discusses the Tennessee case of Sedley Alley, who was executed thirteen years ago for the 1986 rape and murder of a 19-year-old woman, Lance Cpl. Suzanne Collins. Prior to his execution, Mr. Alley’s attorneys requested that articles of clothing worn by Ms. Collins at the time of the attack be tested for DNA. The request was denied.

April Alley, Sedley Alley’s daughter, was appointed as the executor of her father’s estate. In that role, she sought to exert superpowers – by making another request for DNA testing on behalf of the estate. Shelby County judge Paula Skahan denied the executor’s request on the basis that the estate lacked standing to make the request. The New York Times article states, “Judge Skahan said state law governing DNA tests after conviction did not explicitly permit an estate to ask for them. No court in Tennessee had faced this issue before, she said, and the State Supreme Court might come to a different interpretation. The State Legislature could also act to permit the testing, she said.” According to an additional article written by the case in the ABA Journal, “Estate of executed man has no standing to obtain DNA testing, judge rules”, “Skahan stated ‘Petitioner has not pointed this court to any authority stating that the execution of a family member is an ‘injury in fact’ for standing purposes.’” “In addition, Skahan said, ‘This court is incapable of providing a remedy that would address any potential injury in this case. Mr. Alley’s sentence has been carried out—he has been executed.”’ The executor, who is being represented by the Innocence Project is appealing the court’s ruling.

It will be interesting to see whether the pending appeal is successful. It’s a novel concept to argue that an executor’s dominion extends beyond actions designed to provide a financial benefit to the estate, and that the executor possesses the superpowers necessary to pursue setting aside the conviction of an executed man.

Can’t Afford to Do Anything About Estate Tax?

12.03.2019 by Stacey Romberg //

estate-tax-in-washington You may have noticed a recent article by James Drew in The News Tribune, a Tacoma newspaper, entitled “We in Washington pay highest estate tax in the nation. There’s a reason, officials say.” The article states, “Washington has the nation’s top graduated rate in its estate tax — at 20 percent — and is the only state without an income tax that levies a death tax, according to the Tax Foundation, a conservative think tank in Washington, D.C.” The article continues, “Washington’s death tax, which kicks in for those with estates of $2.2 million and above, has generated from $134 million to $203 million a year in recent budgets. The rates range from 10 percent to 20 percent, depending on the estate’s size. The funds are spent on K-12 education.”

Usually, when I see the term “death tax,” I tend the view the information with a bit of skepticism – assuming that the intent is to politicize the issue rather than to provide accurate information. Estate planning attorneys use the term “estate tax” – which is the correct terminology. I found my skepticism to be well placed as I continued reading the article, and found the following quote attributed to Jason Mercier, the director of the Center of Government Reform with the Washington Policy Center: “Mercier said those are who most impacted by the death tax are the estates of individuals and small businesses that are slightly above the $2.2 million threshold and can’t afford the legal expertise that would help cut their tax bills. ‘Who you are hitting are those who can’t do the estate planning,’ he said.”

Really? Let’s take a look at that claim. A small business does not have an estate tax obligation – period. Perhaps a small business owner has an estate tax liability, but the business itself does not. Second, according to MarketWatch, “[t]he medium net worth of the average U.S. household is $97,300.” Individuals who pass away with an asset level high enough to incur Washington estate tax liability have, at a minimum, over 22 times the assets of the median household. Yet, somehow, according to Mr. Mercier, these poor impoverished souls cannot afford to pay legal fees associated with their estate planning.

Of course, Mr. Mercier’s assertion is patently absurd. In a prior blog post, I outline some basic strategies for minimizing or avoiding the Washington estate tax including annual gifts, charitable donations, and testamentary trusts. The first two strategies require no “legal expertise” – they are quite self-evident. The third strategy does require the advice and counsel of an estate planning attorney. That legal advice does not need to be exorbitantly expensive, and a household possessing assets of that nature can, in all likelihood, afford the attorneys’ fees for this type of work. In addition, Mr. Mercier’s statement implies that someone with over $2 million in assets doesn’t need estate planning work outside tax planning considerations, and couldn’t afford to pay an attorney to prepare a Will. That’s simply not true.

If you have concerns about potential Washington estate tax liability, please do not pay attention to this type of misinformation. Our firm, among others, will be happy to answer your questions and provide assistance.

Do You Have Trust Issues? Considerations in Funding Trusts

11.26.2019 by Sherry Lueders //

trust-attorney-seattle-washington A trust is an entity that holds title to assets for distribution to its beneficiaries for a particular purpose and that provides for distributions of these assets by the trustee to the beneficiaries according to the terms of a trust document. A beneficiary may be a person, a charitable organization, or an animal. The person who sets up the trust (the Grantor) decides which assets will be used to fund the trust, determines the purpose of the trust, and sets the standards for the timing and reasons for making distributions to the beneficiary. For example, an education trust provides for payment of expenses related to education, while a special needs trust can provide supplemental support for a beneficiary who receives government benefits. Other trusts are intended for the general support of its beneficiaries and might provide for distributions for the beneficiaries’ maintenance, education, support, and health. A pet trust typically provides for distributions for pets’ veterinary care, food, and general comfort (treats, toys, and companionship) so the Grantor’s pets can enjoy the same standard of living after the Grantor dies.

In establishing a trust, whether it is a testamentary trust created by a Will or a trust created during the lifetime of the Grantor, it is important for the Grantor to have a clear understanding of the purpose of the trust and whether the assets designated to fund the trust are sufficient for that purpose. If a trust is not sufficiently funded, the Grantor’s intended purpose for establishing the trust may be frustrated, and the beneficiary may also be frustrated when they discover that a trust they believed would fund a Stanford education through graduate school only has enough money to pay for two years of tuition at the local community college.

Recently, I was present in the courtroom for a hearing involving a trust matter in which the beneficiary’s expectations of the manner in which the trust could support her diverged from the reality of the funds available for distribution to her in the trust. The beneficiary, who had a limited ability to earn income, wanted the trust to purchase a modest house for her. The trustee refused to grant this request. The trustee was concerned that, if the trust purchased the house for the beneficiary, the trust’s assets would be depleted and the trust would not be able to continue to make distributions to the beneficiary to pay for other expenses – or to pay for expenses related to maintenance, insurance, or taxes for the property. In this case, the judge found support for the trustee’s decision to not purchase property for the beneficiary. Instead, the trustee was authorized to continue to make distributions from the trust to supplement the beneficiary’s rent payments. The beneficiary was not happy.

The hearing did not address whether the Grantor who established the trust for this beneficiary ever intended for the trust to purchase a house for the beneficiary. If the Grantor had intended for the trust to provide a house for the beneficiary to live in during her lifetime, their intent failed, because the trust lacked the assets to purchase a house. It is also possible that the Grantor of this trust understood that it would be modestly funded and never intended for trust to provide more than supplement rent on an apartment for the beneficiary. One way or another, this trust failed to meet expectations, perhaps those of the beneficiary, or perhaps those of the Grantor.

How can such a result be avoided? The best advice is to consult with advisors when considering establishing a trust to make sure that the trust will be sufficiently funded for its purposes, or, if the funds available for the trust are modest, that the trust’s purpose is crafted in a manner that sets up reasonable expectations of the intended beneficiary. (An exception should be noted here for pet trusts. A cat’s expectations are seldom reasonable.) Do you have a question about trusts? We’re happy to help!