Estate Planning, Probate & Elder Law Attorneys

» The Reverse Mortgage Probate Problem, and Liquidity

Reverse mortgages have become more popular in recent years. The concept, in a nutshell, is this:

-you (62 years old or older) borrow against the equity in your home
-instead of paying down the mortgage over time, your mortgage grows. But it doesn't have to be paid back until the house is sold or until you die

I've encountered this situation in the probate context a few times recently: mom dies, reverse mortgage is now due, and guess what? The house can't be sold because of the bad real estate market.

The bigger problem, of course, is one of estate liquidity. When a person dies, there are bills that have to be paid. Some of those bills are small, and some of them can be avoided. But certain bills can't be avoided, and are going to cause a real headache for your survivors if you've left them with no liquid assets. There are lots of older people, even those who aren't particularly sophisticated, who take action to prevent their heirs from being stuck with hard-to-pay bills. That's why there's funeral insurance. But you also have to think about the extent to which your assets are in illiquid forms like real estate.

» Landheer and UPL

I've got a libertarian bent, so I'm not a big fan of UPL (unauthorized practice of law) statutes. I realize that they help me by restricting competition, but I'm not sure that they really help the general public. There are a lot of bad attorneys out there, and probably a lot of people (like your better accountants and CFPs) who could do many of the things some attorneys can do, maybe even do them better. Instead, the bar seems to pick and choose what it considers to be the practice of law, keeping the good stuff for itself and pushing down the boring or "unsexy" work to non-lawyers.

All of which brings me to the case of Landheer v. Landheer (available heer, er, here as a PDF). The case involved a dispute among siblings over whether their father's trust amendment was valid. While Landheer does not depend on the UPL statutes, it uses another statute (the Consumer Fraud and Deceptive Business Practices Act (the "Act")) to reach a horrifying result. Here's the relevant language of the Act:

The assembly, drafting, execution, and funding of a living trust document or any of those acts by a corporation or a nonlawyer is an unlawful practice within the meaning of this Act.

There are also potential criminal penalties under the Act, but the bombshell dropped by the court here is that, because it was drafted by a non-lawyer, the trust amendment is null and void, and has no effect. Note that this result would be reached even if there was extensive proof that the living trust amendment reflected the wishes of the person who signed it.

Does this sound like a good decision to you?

»  Keeping Family Wealth From The Taxman
Here's an overview of some popular ways to transfer assets across generations without a huge tax hit.

» Florida's financial regulator latest to resign

» Legacy Planning, A Step Beyond Estate PlanningLoading...

Legacy planning has been described as the soft side of estate planning. Unlike estate planning, which deals primarily with the client's assets and what happens to them in the event of the client's death, legacy ...