Dead Hand Control: How Wills and Trusts Can Control Behavior
You may want to use your estate to influence your heirs in your absence. To a certain extent, this might be possible, but the process is delicate, and it requires well-designed structures.
By exerting what is called “dead hand control,” people may condition bequests in their legacies by framing bequests around required or forbidden activities. So, while you can do as you wish, you can’t expect everyone to be happy about it.
Disgruntled beneficiaries are sometimes quick to take their grievances to court. As a general principle, courts are inclined to deny provisions that could contravene accepted social norms or public policies.
For example, you cannot set up any of your beneficiaries in ways that would require them to perform illegal acts. You also cannot prevent them from marrying anyone, though in some cases, you may be able to enforce a narrower prohibition, such as marriage involving a particular faith or to someone of a specific ethnicity.
Ultimately, the outcomes of various probate cases always vary, and quite widely at that. Many details will impact the results, such as the jurisdiction in which everything is playing out. As the saying goes, the devil is in the details.
Bargaining from beyond
Provisions can often be manipulated, particularly when they are intended to achieve reasonable results. Any efforts to discourage beneficiaries from being lazy or attempting to alter what has been set up may appear fair on the surface.
However, a quick review of some probate judgments indicates that wills may be enforceable when they are designed to encourage positive habits. A major tip to keep in mind is to try making the goal relatively broad.
For instance, it might be allowable to require your nephew to graduate from college, but it would be too much to insist he attend Harvard or go to law school. Similarly, it would be appropriate to insist that your heirs not be convicted of a crime, although disinheriting an heir if he or she is found guilty of a trivial misdemeanor would not be.
You can have preferences and standards as long as they are not unrealistically strict. As another example, it would not raise eyebrows to insist that your beneficiaries vote, but you cannot specify that they vote for a particular party or a certain candidate.
Famous for setting demands that overstepped immensely, a woman by the name of Leona Helmsley stipulated that her grandchildren must visit their father’s grave twice per year. This in and of itself is not a duty that would be considered excessively onerous.
However, if she were to state that her grandchildren must allocate a certain number of hours visiting their father’s grave every week, then that might be considered as being over the top. Many testators will try to engineer ways to keep an elderly relative out of a nursing home, but those intentions may not necessarily remain intact as the testator originally intended.
However, courts will do their best to adhere to and uphold a testator’s wishes whenever possible. A prime example of this was when an Illinois dentist required that his grandchildren marry within the Jewish faith.
Although lower courts struck it down, the Illinois Supreme Court upheld the provision in 2009 on the basis that the values of the testator’s grandchildren reflected the values of the testator.
Avoiding trouble
What steps can you take to ensure that your wishes pan out? Here are a few suggestions that can assist you in setting your preferences up for success:
Use a professional fiduciary, whether that be an executor or a trustee, even if it costs more money to do so.
Draft your estate documents with no-contest clauses as a ploy to discourage disappointed beneficiaries. At the same time, make sure you leave any dissatisfied people just enough to make it easier for them to leave things as they are instead of trying to change the contents of the will.
Avoid probate altogether by using trusts.
If you decide to rely on a trust, it is a good idea to make it flexible. Be sure to state that trustees should act in ways that reflect the beneficiaries’ best interest as well.
You may also want to include a statement of wishes, which is not legally binding but can help trustees as they work to adhere to your intentions. Trusts can be a powerful tool when it comes to maintaining your legacy or just your personal inclinations in general.
Circling back to Leona Helmsley, she famously left behind a trust fund for her Maltese dog, Trouble, valued at $12 million. Trouble ended up dying when he was 12 years old in human years, which is 84 in dog years.
Now, while your final wishes may be more run-of-the-mill than those of Helmsley, it is still imperative that you consult your attorneys to ensure that you create a suitable trust and allocate your estate in the best way. Legal professionals can assist you in properly drafting all pertinent documents, so contact your lawyer as soon as possible.
You are heir to a house — hurray! But wait! There’s a mortgage on the property. What are your options? You have three options in this situation, two of which are relatively simple: You can sell it to pay off the mortgage and keep the rest of the money as your inheritance or you can keep it and pay off the mortgage with a lump-sum payment.
The third option is more complex, although not nearly as complex as financing a home on your own. You can take over the loan and become responsible for the mortgage payments. You do not have to go through an application process to do this. As an heir, you can be named the borrower without having to go through the normal loan approval process, which would require you to get your own financing.
Many wills contain standard language requiring all debts to be paid at death. This does not normally include any mortgage held by the decedent, but the provisions can be complex and there may be exceptions. Work with qualified professionals to make sure the law applies in your situation.
Another common situation is inheriting a house with a reverse mortgage. You’ll need to pay off the reverse mortgage if you want to keep the property, although the heirs often just sell the property to pay off the reverse mortgage and keep what’s left over.
What’s right for you?
To be sure that you’re making the right decisions, start by figuring out both the home’s value and the outstanding mortgage. If you inherited the home along with other heirs, all the homeowners should get together to discuss options. Would everyone be happy keeping the home as a rental or vacation property? Or do one or more heirs want to get the equity out of it without spending funds on the mortgage?
What if the mortgage is more than you can afford? You can consider the possibility of refinancing at a lower rate and longer term if your credit and financial situation allows you to do so. After all, you may also have a mortgage on your primary residence.
There are other expenses you’ll need to take into account to make sure keeping the house is financially feasible:
Any renovations that might be necessary.
Yard upkeep.
Roof and exterior maintenance.
Replacing or repairing appliances and other systems in the house.
Property taxes.
Heating and air conditioning.
Insurance.
On the other hand, there may be assets that go with the house, such as jewelry, art and furniture, that no one wants and that can be turned into cash to help pay off the mortgage. Once you’ve taken a full accounting of the finances, you’ll be in a better position to make a decision.
It is irresponsible enough that absent-minded parents occasionally manage to leave their children behind when they leave the park or get off the bus. Even so, it seems far more incomprehensible that parents could possibly forget to include one or more of their kids when they are in the process of drafting their wills and allocating their estates.
However, believe it or not, this happens often. Conscientious parents might draft their wills after the birth of a child or when the rest of their family is still relatively young.
But sometimes, another child will be born later on, and the parents will simply forget to update their wills after the fact. While it is not always a fatal omission or an intentional act, there are unlucky consequences that can arise as a result.
That said, many states will consider the child who was born later to be a beneficiary. This is because states will often revert to relevant intestacy rules, which are the default guidelines that govern situations where parents die without a will in the first place.
So, the courts have ways by which they can rectify an inadvertent omission or a clerical mistake. This should remedy the problem unless the wills left behind by parents have specifically excluded the omitted child on purpose.
How to leave a token bequest
Disinherited heirs may initially be shocked to find out that their parents left them either a very small amount of money or even nothing at all. Children may regard a situation such as this to be insulting, leading them to question the relationship they had with their deceased parent or guardian.
It makes sense to interpret such a situation as adding salt to the wound. Many estate lawyers suggest that testators leave at least a nominal amount of their estate to an heir whom they wish to cut off rather than simply failing to mention them by name.
At a bare minimum, this alternative offers some sort of closure to the child being excluded or omitted. That said, the bequest does not need to be in the form of money.
People often leave sentimental heirlooms with very little financial value as a gesture of affection. If you wish to bequeath your old, cracked teapot instead of allocating any of your money to your child, you could do just that while accomplishing the goal of including everyone in your will.
In all fairness, William Shakespeare left his wife his second-best bed in his will, and while beds were indeed much more valuable 400 years ago than they are today, the point still stands. You may also want to write a memo to yourself and state your decision to only leave a trivial amount to your child.
The document can serve to reinforce that your choice was not impulsive nor was it conceived as a result of external pressure. That said, be careful with your wording.
Try not to attempt to come across as being overly emotional or critical when drafting your justifications. If your will is ever challenged in the future, any circumstances you originally cited might no longer be true.
For example, if you describe your good-for-nothing son and state that he has never done a day of honest work in his life, he might be holding down a well-paid job when it comes time to challenge the contents of your will.
Less is more
While certain people will encourage testators to leave something small for all potential heirs, other experts will discourage people from even offering the tiniest of bequests. Those with this mindset would contend that it is more cost effective to merely acknowledge the relationship and leave it at that.
The real goal is to at least mention the disinherited person in a brief fashion so that you can address their existence while eliminating the possibility of them believing they were accidentally overlooked. Moreover, those who contest wills might latch onto situations, such as a one-dollar bequest, deeming it a cruel provocation that is out of character in regard to the testator.
For instance, the disinherited individual might use the minimal bequest as evidence of mental incapacity on the part of the testator. The less you give the disinherited individuals to work with, the more likely your requests will be upheld.
Another danger of leaving even a single dollar is that any amount of money will automatically make the child a beneficiary. Adding a beneficiary to the list can affect the protracted probate process.
Once you have officially transformed someone into a beneficiary of your estate, the executor will be obliged to distribute accounting documents, pleadings and administrative records to them as they must do for all beneficiaries. This costs money, and even the most mundane administrative tasks can take away from the estate’s assets while also delaying probate resolutions.
If you ultimately decide against a bequest, you can achieve similar results with the help of straightforward language. Your attorney can draft words to the effect that after thoughtful and careful consideration, you have decided not to include Junior.
There are a number of ways to phrase your intentions or state your preferences. For instance, you could include a clause such as “I am intentionally disinheriting Junior as well as Junior’s descendants for reasons I deem to be sufficient.”
It is always recommended you consult with a lawyer as you work to prepare your will. Seeking expert advice is imperative, especially if you are contemplating the idea of making a token bequest.
A premium tax credit is designed to lower the total cost of health insurance plans that are already relatively expensive in the United States. You can either apply the premium tax credit on a monthly basis to your insurance bill or choose to receive your premium tax credit in the form of a refund that is put toward your federal income taxes.
The premium tax credit is only an option if you purchased an insurance plan directly from a state or federal health insurance marketplace. Furthermore, eligibility for the tax credit is typically determined when you initially apply for your health insurance plan either through a state or federal health insurance marketplace.
The credit, which was originally implemented under the Affordable Care Act, exists for the sake of assisting eligible families and individuals with low or average incomes that find it difficult to afford health insurance on their own. Additionally, the amount of health insurance tax credits that are made available is dependent on a decision by the federal government.
This means the dollar value of the tax credits will be the same amount nationwide, no matter which state you call home. If you are interested in receiving this premium tax credit, you will need to meet certain requirements related to your income level and the number of people in your family and file a tax return alongside Form 8962: Premium Tax Credit.
If you decide to itemize your deductions in the Schedule A section of Form 1040, then you might be able to deduct any and all money that you put toward medical and dental care for yourself, your spouse and your dependents over the course of that taxable year.
That said, of your total medical expenses, you will only be able to deduct the amount that surpasses 7.5% of your total adjusted gross income. Additionally, another key detail to keep in mind is that people who sign up for catastrophic coverage automatically do not qualify for tax credits related to health insurance.
What is covered?
“Medical expenses” is a very broad term, but typically, these expenses will include any type of payment that has been put toward curing, diagnosing, mitigating, preventing or treating health-related concerns, ailments or diseases. Essentially, payments pertaining to any type of treatment that aims to heal, improve or care for the body are considered medical expenses in most cases.
In that line of thinking, medical expenses that can be deducted often include the following, though this list is not all inclusive:
Acupuncture.
Admission to receive medical care.
Chiropractors.
Contact lenses.
Crutches.
Dentists.
Doctors.
False teeth.
Glasses, both for reading and prescription-based lenses.
Hearing aids.
Inpatient care.
Insulin assistance.
Medical conferences.
Practitioners.
Prescriptions.
Psychiatrists.
Psychologists.
Rehabilitation centers.
Residential nursing homes.
Service animals.
Smoking cessation programs.
Surgeons.
Transportation related to medical care.
Weight loss programs.
Wheelchairs.
When considering which medical expenses can be deducted for the taxable year, you are only permitted to include medical expenses that you paid for during said taxable year. You are also required to reduce the total amount of deductible medical expenses for said taxable year by applying reimbursements that you received.
This is relevant whether you directly received the reimbursement yourself or the reimbursement was applied on your behalf to the total amount of medical expenses that you owe. If you are trying to figure out whether a specific expense of yours is deductible, refer to the official IRS website and contact a professional who has experience deducting medical expenses.
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