Disinheriting Someone

Occasionally it happens that a parent wishes to cut off a child from any inheritance.  Rarely one spouse wants to exclude the other.  The question arises, can that be done?

The answer is "yes" if the heir is a child or anyone besides a spouse.  In Utah a spouse is entitled to what he or she would receive if the decedent died intestate (without a will) even if the will says the spouse is to receive nothing.  This is called the spouse's elective share.  When it comes to anyone besides a surviving spouse a person is entitled to include or exclude whomever she sees fit.

Before deciding to exclude someone from a will, it's important to think through the reasons for wanting to do this.  Usually the person disappointed the decedent in some way, such as by dropping out of school, marrying the "wrong" person, becoming involved in drugs, crime or some other illegal or immoral activity.  Then think about the legacy you as the maker of the will that excludes this person will leave.  How will you be remembered by this person and any others who learn of the decision to exclude that person?  Is that a legacy you want to leave?

Distributing one's estate shouldn't be about rewarding or punishing anyone.  It's about giving away what you can't take with you.  You have no use for anything after you're dead; why should you care particularly who receives it or what they do with it?

Walk Away

One of the hardest things for many bankruptcy clients to do is just walk away from their house or car.  People form emotional attachments to both houses and cars, especially the former.  It's the place where the kids grew up, where there were good times and bad, the place that was always refuge from the storm.  But in bankruptcy the house might not be refuge; it might well be the cause of the storm.

The current economy has put a lot of homeowners under water with their mortgages, to where some owe twice as much as the house is worth.  Look at it objectively:  If you were buying a house, would you pay twice as much as it is worth?  But that's exactly what some people do when they reaffirm on the mortgage debt.

If you're filing bankruptcy and looking for a fresh start, look first at your mortgage.  The sensible thing might be just to walk away.

So You Want to Stay in Business With Your Ex-Spouse

It should seem obvious that if two people can't get along as husband and wife they can't get along as business partners.  Yet a recent case from New Jersey addressed the situation of former spouses who tried (and failed) to maintain their business relationship post-divorce.  In Mariello v. Mariello (http://www.judiciary.state.nj.us/opinions/a4044-10.pdf) the New Jersey Appellate Court held that a property settlement agreement (PSA) between the parties as part of the divorce was binding and the ex-wife, who became unhappy over how the rental properties were being managed, was not entitled to the usual remedy available to joint owners, that of partition.  Partition means the court equitably divides the property.  Here the appellate court found that the PSA had addressed the issue of partition and the parties had agreed not to partition in the event of a dispute.  The moral of the story is, be very careful about staying in business with an ex-spouse.

How Are Your Assets Titled?

When it comes to estate planning, how something is owned, i.e. how the title reads, is almost as important as what is owned.  Many people own property as joint tenants so that either of them can deal with the property.  This makes good sense from an administrative standpoint, but not necessarily from an estate planning standpoint.  Property held in joint tenancy automatically passes to the other joint tenant or tenants upon the death of one of the joint tenants.  This might or might not be what the parties had in mind.  For example, suppose Mom transfers her bank accounts into her and her sister's names so the sister can help Mom, who is getting older, deal with her bills.  Mom has a will that says that on her death the money will go to her children.  But when she dies the joint tenancy automatically transfers the accounts into the sister's name, regardless of what the will says.  If the sister wants to force the issue, the kids might be out of luck.

When planning your estate, always be aware of how your property is titled. 

Posthumously Conceived Children Can't Necessarily Get Social Security Benefits

The Supreme Court of the United States has just announced a fascinating decision.  In a unanimous opinion the Court sided with the Social Security Administration in holding that a child conceived posthumously (after the father's death), such as by way of preserved sperm, is not automatically entitled to Social Security benefits as a surviving heir unless the child is entitled to inherit from the father under state intestacy or inheritance law.  Simply put, such a child cannot rely solely on the fact that it is the genetic offspring of the father.  The child's right to receive benefits depends on whether state law would recognize the child as the father's child.  Since most state intestacy laws were enacted well before medical advances allowed for the preservation of the father's sperm and insemination of the mother by artificial means, this is an open question in most states that will require either legislative clarification or interpretation by each state's courts.

The case is Astrue v. Capato, docket number 11-159, opinion issued May 21, 2012.

Adult Adoptions

A Florida man, John Goodman, recently made news when it was announced that he intends to adopt his girlfriend, Heather Hutchins.  This prompted speculation that the move was designed to protect some of Goodman's fortune (he's a wealthy socialite in Florida) because in March he was found guilty of DUI manslaughter in the death of Scott Wilson in an automobile accident in which Mr. Goodman was driving under the influence of alcohol.  Wilson's family sued for damages.  The case has been dismissed, suggesting a settlement.

The question immediately comes to mind, can one adult adopt another and, if so, why?  The answer is yes, one adult can adopt another adult.  There are several reasons.  One of the most common is in the case of a remarriage where the new spouse has adult children.  Each spouse might wish to solidify the blended family by adopting each other's children, thus making one big, happy family.  Another reason is in states that do not recognize same-sex marriages, one member of the couple might adopt the other to give them both something similar to marriage under laws of inheritance and benefits such as health.

For a more detailed look at adult adoption, see this good post by the firm of Bryan Cave:
http://trustbryancave.com/girlfriends-come-and-go-but-daughters-are-forever-the-case-for-adult-adoption/#page=1

Two Common Bankruptcy Myths

There are a lot of myths surrounding bankruptcy, about what it can or can't do, who can file, who can't, that you can except certain debts, etc.  Two of the more pervasive myths are (1) that you need a minimum amount of debt in order to file and (2) that you have to repay all your debts in Chapter 13.  Both are false.

Anyone can file bankruptcy with any amount of debt.  In theory if you owe someone $25 you can file, though you'd probably be committed because the filing fee is $306.  But the truth is, there is no minimum amount of debt required.  Whether you file is a personal decision.  For some people, $5,000 is too much debt.  For others, $500,000 is not too much.  It all depends on the individual.

When it comes to Chapter 13, you do not have to repay all your debt.  It would be a foolish program if it required full repayment.  Think about it.  If someone can't repay their debts NOW, how are they going to be able to repay them in only 60 months, the maximum time allowed under Chapter 13?  What Chapter 13 does is look at what you can afford to pay and require you to pay that for the length of the plan, which is 36 or 60 months, depending on a number of factors.  At the end of the plan, any remaining debt is discharged, just like in a Chapter 7.  But Chapter 13 has advantages over Chapter 7:  There is no means test, which disqualifies some debtors from Chapter 7; you get to keep assets that you might otherwise lose in Chapter 7 (such as cars, houses, stocks, etc.); and some debts that can't be discharged in Chapter 7 can be discharged in Chapter 13.