Brenner: A Kansas Probate Loophole

The Kansas Court of Appeals decided the Estate of Brenner last Friday. Brenner comes to us from the fine town of Goodland, in western Kansas (Sherman County, near Colorado on I-70). Mrs Brenner died and her daughter asked the Court for letters of administration more than 6 months after her mother’s death (red flag). Mrs Brenner’s obituary tells the charming story of her life; unfortunately, after her death, conflict erupted.

Earlene F. Brenner died January 26, 2014. About 7 months later, on August 18, 2014, her daughter, Beverly Goodman, asked the court to open her mother’s estate and grant Ms Goodman letters of administration. The trial court (via Judge Scott Showalter) said “no,” refusing to open Brenner’s estate or grant Goodman letters. Brenner’s children disagreed if her estate had any probate assets – Brenner had some Texas real estate and bank accounts that passed outside probate.

Writing for the Court of Appeals (the daughter won, 2-1), Judge Kim Schroeder reversed the trial court, and granted letters of administration (K.S.A. 59-2232), as he found the “petition for administration [wa]s timely filed” (Slip, 10). The Court distinguished opening an estate for administration (no deadline) from filing a creditor claim (6 month deadline, K.S.A. 59-2239), and declared that “[a]n action to marshal assets does not invoke the non claim statute [59-2239]” (Slip, 9). The Court says “no harm [no foul]” – when Brenner’s estate is opened, if assets exist, the estate can administer them; if the estate’s empty, “the estate can be closed” (Slip, 10).

Judge Joseph Pierron was the lone dissenter, arguing that letters of administration fall under the 6 month deadline, like filing a will or creditor claims (Slip, 11), and observing that “the issuance of letters of administration is rarely a challenged issue” (Slip, 18). In addition to the daughter missing the 6 month deadline, Judge Pierron argued there were no probate assets, so no need to open a Kansas estate (Slip, 17).

Brenner‘s story may yet have another chapter. Goodman’s losing siblings in Brenner could ask the Court (1) to rehear or modify the case (Rule 7.05), (2) to hear the case en banc (Rule 7.02(a)(1), (b)), or (3) petition for review with the Kansas Supreme Court (Rule 8.03(e)(2)). And in 2016, the Kansas legislature could clarify the probate deadline, to check or balance the growing trend of courts freely reading the statutes of limitation (an arc going back to at least Tracy (2006)).

Bottom line: Kansas’ 6 month filing deadline only applies to wills and creditor claims, not letters of (intestate) administration. If someone dies without a will, their estate can be opened for administration after 6 months, and the estate opening window looks indefinite, a classic carte blanche loophole (“we can find no statutory bar to this action,” Slip, 10). Brenner adds an arrow to our quiver, expanding the attorney’s probate repertoire. And Brenner is yet another reason to encourage clients to do estate planning during their lives, as the Court’s decision arguably undermines probate’s finality (Slip, 11-12).

More food for thought for the bar: could Brenner affect the timing for filing (1) a small estate affidavit (K.S.A. 59-1507b) or (2) a determination of descent (K.S.A. 59-2250)? If letters of administration can be granted more than 6 months after death (even years later under Brenner‘s logic), that could delay the small estate affidavit or determination of descent, since those probate routes assume it’s too late for letters of administration (or that letters won’t be sought or granted) (Slip, 10, 17-18).

My law firmJohnson Law KC LLC, is experienced counseling clients on probate, estate planning, and trust administration. Call (913.707.9220) or email me (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Cresto: Kansas Undue Influence in Wills

Here’s the Kansas Supreme Court’s interesting undue influence opinion in the Estate of CrestoCresto is a Johnson County case involving alleged undue influence, children from different marriages being disinherited, an out of state attorney who had a relationship with a Will beneficiary, distinguished local counsel (who was not informed of the out of state attorney’s relationship with the Will beneficiary), and other adventures. And here’s the Kansas Supreme Court’s oral argument video.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on Wills and other estate planning documents, as well as the estate and trust administration processes. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

 

FLP 101

A family limited partnership (FLP) or family LLC is an entity that holds a business, real estate, or other asset within a family, allowing for flexible control and succession, while achieving various tax benefits. A FLP or family LLC can be used to for gifts or sales, to give multiple generations ownership, leadership experience, and a voice, and often allow significant valuation discounts to reduce tax bills.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on FLPs, family LLCs, and other entities to solve clients’ business, estate planning, and tax issues. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Beneficiary trust 101

A beneficiary trust is a tax term for a trust whose income taxes are paid by the beneficiary (person who gets the money from the trust). The IRS Code has special rules that effectively allow for estate planning to use a long standing gap between estate taxes and income taxes to save clients and their families money.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on beneficiary trusts, taxes, and other estate planning issues. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Grantor trust 101

Many trusts are grantor trusts. A grantor trust is a fancy tax term for a trust whose income taxes are paid by the grantor or settlor (person who sets the trust up). The IRS Code has grantor trust rules (Code Secs. 671-678). Grantor trusts can be used effectively for estate planning to use a long standing gap between estate taxes and income taxes to save clients and their families money.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on grantor trusts, taxes, and other estate planning issues. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Minor Trust 101

What’s a minor trust or a grandchild’s trust? States don’t allow minors to own property in their own name, so when a minor is to inherit property under a Will or trust, a minor trust is set up for the child’s benefit. The minor trust owns the property until the child becomes an adult, then the trust pays the child the money, distributes the property, or continues to hold the property according to the trust’s terms.

A grandchild’s trust is a type of minor trust that a grandparent starts for a grandchild. Often a grandchild’s trust is involved in dynasty trust or generation skipping trust planning.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on every aspect of estate planning and various trust options. We can help you answer all your estate planning and asset protection questions with confidence and friendly expertise. Please call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Installment Sales 101

What’s an installment sale? An installment sale occurs when an asset is sold to a trust, individual, business, or entity over a period of time, often 10 years. Installment sales get special tax treatment and can be a good way (when used with life insurance or other assets as collateral) to move highly appreciated land or business assets into a trust, while minimizing taxes.

My law firmJohnson Law KC LLC, is experienced counseling clients on installment sales as part of a sophisticated, complex, and holistic estate plan and business succession plan. We can help you answer all your estate planning, asset protection, business succession, and buy-sell questions with confidence and friendly expertise. Please call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Prenups 101

What’s a prenuptial agreement or prenup? Do I need one? What if I have one and want to get out of it?

These are all great legal questions and our firm has answers to serve our clients’ prenup needs.

A prenuptial agreement is a contract a couple signs before they get married, that specifies which spouse gets which assets (from before and during the marriage) if the couple gets divorced in the future. Prenuptial agreements often are used where (1) one spouse has a lot of money or assets and the other doesn’t, (2) one spouse has children from a prior marriage, or (3) one spouse is involved in a family business, farm, vacation house, or other asset that needs to be kept separate from the marriage. Sometimes prenups get a bad reputation in society, but they can be a useful tool and helpful protection for individuals, families, and businesses.

My law firmJohnson Law KC LLC, has experience counseling individuals, families, businesses, and couples on various aspects of estate planning, business planning and succession, and prenup issues. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Deeds 101

A deed is a legal document that transfers real estate or land from one person to another.

There are several types of deeds, including:

  • Joint tenancy with rights of survivorship (JTWROS) – joint tenants means the people listed own the property together at the same time. Joint tenancy avoids probate when one person dies, since the property goes automatically to the surviving joint tenant.
  • Tenancy by the entirety (Missouri married couples only) – tenancy by the entirety is a type of joint tenancy that only Missouri allows for married couples.
  • Transfer on death (TOD) deeds (Kansas) – in Kansas, a transfer on death deed allows you to leave your house to a child or someone else. The deed only applies at your death, so you have to own the property when you die, and the recipient (child or whomever you choose) doesn’t own the property during your lifetime. A transfer on death deed is recorded before you die with the local county Register of Deeds office, and after your death, the recipient records your death certificate with the same office, and takes title to the property, all without any Probate Court involvement.
  • Beneficiary deeds (Missouri) – in Missouri, a beneficiary deed is very similar to a transfer on death deed in Kansas. A beneficiary deed allows you to leave your house to a child or someone else. The deed only applies at your death, so you have to own the property when you die, and the recipient (child or whomever you choose) doesn’t own the property during your lifetime. A beneficiary deed is recorded before you die with the local county Register of Deeds office, and after your death, the recipient records your death certificate with the same office, and takes title to the property, all without any Probate Court involvement.
  • Warranty deeds – a warranty deed can be done in Kansas or Missouri, and involves the seller promising the buyer to legally defend the buyer’s right to the property and to use/enjoy the property. A warranty deed usually contains 6 covenants of title and use/enjoyment. A warranty deed is the strongest legal guarantee you can get or give with real estate – if there’s any legal problem or question, the seller’s going to ensure the buyer gets the property.
  • Quit claim deeds – a quit claim deed can be done in Kansas or Missouri, and involves the seller giving the buyer whatever rights the seller has to the property. The seller’s saying “I may or may not have rights to this property, but whatever rights I have are yours now,” or a sort of legal washing of the hands. A quit claim deed doesn’t contain covenants of title and use/enjoyment. A quit claim deed is the weakest legal guarantee you can get or give with real estate – if there’s any legal problem or question, the buyer’s on their own to get the property and resolve any issues.
  • Trustee deeds – a deed to or from a trust, used when a trust owns a house or other real estate.

My law firmJohnson Law KC LLC, can help you prepare, file/record, or review deeds for your house or other real estate. We do deeds quickly and affordably to serve each client’s real estate needs. We have experience working on deeds and real estate throughout Kansas and Missouri, in the cities and rural areas. We also have experience working with realtors and reviewing real estate contracts, helping clients are real estate closings, and related legal services. Each trust our firm prepares comes with a free deed to move your house into the trust. Call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.

Trusts 101

What’s the difference between a living or revocable trust and an irrevocable trust? Change.

Living/Revocable Trusts

A living or revocable trust is a stand alone estate planning document, often executed with a pour-over will. A revocable trust can be changed or amended over time as circumstances and needs change (K.S.A. 58a-601, 602) – e.g. someone gets married, divorced, has children, receives an inheritance, retires, or dies. A revocable trust becomes irrevocable when the settlor or grantor (the person who set up the trust) dies (K.S.A. 58a-813(b)(3)).

Irrevocable Trusts

By contrast, an irrevocable trust usually cannot be changed or amended, although some exceptions, including “decanting” exist. Since 2011, Missouri has allowed decanting by statute (V.A.M.S. 456.4-419); Kansas allows decanting under common law with court approval. The administrative terms of an irrevocable trust can often be changed (e.g. a new trustee appointed, the trustee changing locations, the trust moving from Kansas to Missouri or vice versa). But the substantive or dispositive provisions of an irrevocable trust often cannot be changed – who gets what, how long the trust lasts, and other issues. An irrevocable trust must also file a federal fiduciary income tax return (Form 1041) if income exceeds $600 for a fiscal year, and pay a higher income tax rate than an individual on a compressed tax schedule. Learn more at Taxes 101.

My law firmJohnson Law KC LLC, is experienced counseling clients from all stages and walks of life on every aspect of estate planning and the probate process. We can help you answer all your estate planning and asset protection questions with confidence and friendly expertise. If we can serve you or your family with your trust or estate planning questions, please call (913.707.9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2015, Stephen M. Johnson, Esq.