If one person owns a home in his or her own name, that person might consider deeding the home to a loved one by way of “deed upon death.” That is a deed that conveys the home to, say, a sister or a child, is recorded now, but which provides on its fact that the grantor can revoke it at any time before he or she dies. As the home is the major asset of many Nevada families, this is a good way to avoid having the home probated. However, it is not without its drawbacks. For example, NRS 111.689 makes it very difficult, if not impossible, for the grantee loved one to sell the property for 18 months after the grantor dies. If there is a mortgage on the property, the kids may not be able to make payments that come due during that year and a half wait. Therefore, normally at least, a Will is preferable to a deed upon death for passing title to kids.
Taking for a minute a brief break from probate and bankruptcy law.:
Nevada law may or may not require parents to support an adult child that is disabled. NRS 125B.200 is less than a model of clarity. It defines a “minor child” as anyone “under a legal disability.” Not under 18 or 19, but “under a legal disability.” Presumably a 38 year old who is under a legal disability is a minor child.
So what, pray tell, does “under a legal disability” mean? Clearly a minor is under a legal disability. See Wren v. Dixon, 40 Nev. 170, 161 P. 722, 167 P. 324 (1916). A guardian’s ward (protected person) is likely also under a legal disability.
What if the ward is not under a legal disability when he turns 18, but is later adjudged in need of a guardian. Has the statute of limitations run? These and similar questions await resolution in Nevada. What is clear is that, at common law, a parent of a disabled child had a duty to support that child into adulthood. See Nelson v. Nelson, 548 A.2d 109 (D.C. 1988). It is also clear that, in Nevada, the common law rules prevail in absence of a controlling statute. NRS 1.030.
A fellow and his wife were in today for a new will. We talked a bit at first, so I could find the proper form. They told me that their estate was about a million dollars, including their Reno area home. They had about $10k in cash in the bank, and told me that their home was owned by the two of them as joint tenants. Their bank account was a joint tenant POD account, meaning that they had told the bank that on the death of the first spouse, the survivor would own the account and that on the death of the surviving spouse, their adult son would own the account. They mentioned that their largest asset was the husband’s 401k retirement account, which was owned jointly, and that they had told the account manager to pay their son on the death of the survivor of them. All but one of their cars was owned by the two of them, as joint tenants.
I explained to them that theirs was a fairly typical situation and that on the death of the first spouse, the other would own everything without need of probate. The exception to this was their car, which was owned by the husband alone. I explained that so long as the size of their probate estate was less than $100,000, their estate would not be probated but rather would be set aside to the survivor. They said that another attorney had told them that their estate would be probated unless their assets were owned by a living trust and I explained that the other attorney was just trying to sell them a living trust…that if their desire was to avoid probate, that no probate would be needed on the death of the first of them to die.
They were quite concerned about the possibility that both of them might die in a common accident or some such and I told them that in that remote eventuality, there would probably be need for probate. However, I wondered aloud whether the hassle and expense of a living trust would be justified just to avoid probate in the event of that remote possibility. Far better, I explained would be for the surviving spouse to come in and do up another will after the first spouse died. At that time, she could change or update the POD accounts, do up a “death deed” on the house, and still avoid probate. Despite all this, I told them that they should have a will. Everybody should have a will. You just never know what might end up being in your probate estate.
Most real estate professionals seem to recommend that married buyers take title to their new home as joint tenancy with right of survivorship. Not all that bad. But it is generally advisable for a Nevada couple to take title as “community property with right of survivorship.” Though we are not tax experts, we understand that the reason for this is a tax reason: when one joint-tenant spouse dies, the deceased spouse’s half interest in the property gets a stepped-up basis. The surviving spouse’s interest keeps the date of purchase basis. If the couple has owned the home for many years, the tax consequence can be significant.
If, instead of joint tenancy, the couple held their home in community property with right of survivorship, the basis in BOTH the deceased and the surviving spouse’s interest in the home is stepped up to the date of death of the deceased spouse.
Another thing. If, say, to avoid probate you put one of your kids on title to your property as a joint tenant, thinking that will avoid probate, you are right. But if your kid is sued, you risk losing your house. That is because each joint tenant owns 100% of the house, via a legal fiction. It is generally better, therefore, to keep the kids off of the title and, if you want to avoid probate, deed it to your kid via a Nevada deed conditioned on death or, better yet, just make your kid a beneficiary in your Will. That way the kid has no ownership interest in the home until you die. You can change your mind, give it to someone else or sell it without your kid’s permission. And, if the kid throws money around or gets into serious financial trouble, you can always (if still competent) give it to him or her by way of a spend-thrift trust, which will protect it from his creditors.
If you do, or already have, be sure to pay your homeowner’s association dues. If you don’t, the HOA can and often will sell your home. You should get normal notices that you are behind with your dues and the HOA or its agent is required to also give you notice that if you don’t pay up, your home will be sold (I’ve had clients swear to me that they never got this notice). The next notice you get will be from whoever bought your home, giving you three days to vacate the premises. You may still be liable on your mortgage, but you’ll be on the street and someone else will own your home.
If you have a lot of money to hire a lawyer, you MIGHT be able to set the sale aside. But don’t count on it.
A Will, often referred to as a Last Will and Testament, is a pretty important document, as explained elsewhere on this site. But it only passes assets to your heirs AFTER your creditors have been paid and often, the expenses of a last illness are so massive that all of the estate goes for medical expenses.
This is why a living will, or, more property, a Durable Power of Attorney for Health Care Decisions, is often the more important document. Who cares who takes under a will if there is nothing left to take after expenses of last illness are paid? And the sad part about it is that those expenses often are incurred to preserve a life, the quality of which is such that the patient would far prefer to be dead. He didn’t work hard all his life to leave his estate to Renown, St. Mary’s or some stranger doctor.
And this isn’t intended to criticize doctors or hospitals, for their job is to save lives and they do a darn good job of it. BUT, If the quality of your life is so bad, if you are so miserable, unable to make decisions for yourself, wouldn’t you at least consider asking your health care agent to see if the doctor would pull the plug? Especially if the chances of recovering to the point of enjoying life again were very remote. If you could talk to your doctor, intelligently . . . if the doctor knew you were in your right mind, he or she would, no doubt, honor your reasonable DNR wishes. But what if you are in a coma? What if Alzheimers has taken control of your mind? In those circumstances, the doctor needs a bit of help and, though you might not be able to help her then, you can help her NOW, while you are not in a coma and before Alzheimers takes over. You do this by executing a living will. A living will is sort of a schizophrenic document…it does two things: First it tells your doctor what your wishes are if you are in a terrible way with no prospect of recovery and no ability to communicate. Secondly, it authorize a trusted person to tell the doctor what you want done in regards to DNR matters.
If, on the other hand, there is some possibility that some miracle cure might show up and you are the type of person who wants your life prolonged for as long as possible, your living will can so instruct your health care agent and doctor..
Since you might be the only one who knows where your living will is, and since that won’t help much if you are not able to speak when the living will is needed, Nevada’s secretary of state has kindly agreed to store your living will for you. Just get on to her web site NevadaLockbox.nv.gov and follow the directions to the “Living Will Drop-Box.”
So, is your will more important than your living will? I don’t know. You tell me. Probably depends on the circumstances. But as we see it, you need them both.
- If you die unmarried and without children, a will is needed to avoid disputes among your heirs and, occasionally, to prevent your assets from escheating to the State.
- If you die with children or a spouse, a will is needed to ensure that your heirs don’t fight over who is going to be your personal administrator. Also, a will enables you to disinherit heirs who have proved themselves undeserving of your largess.
- If you want to tell anybody anything concerning the disposition of your assets after you die, you must have a will. A living trust does not do this as it deals with assets owned by the trust and not with your assets.
- A will can save on probate costs if it authorizes your Personal Administrator to administer your estate under Nevada’s Independent Administration of Estates Act (NRS 143.300 et. seq.).
- Unlike most living trusts, a will preserves your right to have a guardianship court determine, after notice and a hearing, when you have become unable to handle your person or affairs.
- No matter how big you are, unless you have inherited great wealth, you are probably not too big to fail.
- Develop a financial disaster plan. If you have a year or two advance warning, consider putting your business assets into a separate business entity such as a corporation or an LLC.
- Don’t give an unlimited personal guarantee of corporate debt. If the bank insists, seek another bank. See if the bank will accept security in lieu of a personal guarantee. Sometimes the bank will settle for a “bad boy” guarantee, wherein you simply promise not to interfere with the bank’s attempts to collect its loan.
- Keep good books and records. When times get tough, don’t lay off the bookkeeper.
- If you have to “feed” your company on Thursday, to make payroll, take back a secured interest in company assets later on that same Thursday Perfect that security interest immediately.
- Don’t wait until you are too broke to fund a chapter 11 or chapter 12 proceeding before seeing a bankruptcy lawyer. He or she will need a good retainer as you won’t be able to pay attorney fees after you file without a court order.
- Remember, if your business is earning enough to cover rent/mortgage/utilities/payroll and payroll taxes, no matter how much debt you have, you may be able to reorganize in Chapter 11 or 12.
- Don’t wait until the bank is ready to foreclose before seeing a bankruptcy lawyer.
- If your attorney recommends a bankruptcy lawyer, go back to that attorney after your bankruptcy case is concluded for your other legal needs.
- Report ALL your assets and ALL your liabilities on your bankruptcy schedules, no matter how disputed, no matter how contingent.