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.

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Dynasty Trusts: A Great Estate Planning Tool

The WSJ has this useful perspective on dynasty trusts and inheriting in trust. Dynasty trusts enable families to take care of future generations and ensure their philanthropic and business legacy while protecting hard-earned wealth from creditors, divorcing spouses, and other potential money drains. My firm counsels Kansas and Missouri clients to use Missouri dynasty trusts to help achieve their estate planning goals.

My law firmJohnson Law KC LLC, has experience working with individuals and families to serve their business and estate planning. I enjoy working with a variety of clients – ranging from single young professionals with minimal assets to multimillionaire business owners with complex trusts. My firm has strong relationships with local and national trust companies to help administer all types and ranges of trusts. If my law firm can help you or your family with your estate planningelder lawasset protectionbusiness law needs, or digital estate planning, including advising on trustee removal or other fiduciary litigation, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2014, Stephen M. Johnson, Esq.

 

 

Collins: Choosing Your Funeral Plan in a Medical DPOA

Thursday I attended a Kansas City Estate Planning Society meeting. The luncheon speaker presented fascinating and thought provoking perspectives on fiduciary litigation. She highlighted the recent Collins decision, which dealt with selecting funeral plans under a Missouri medical durable power of attorney. Look for more posts soon discussing other fiduciary litigation cases in Missouri (and Kansas).

Collins focused on the right of sepulcher, choosing your funeral plans under a medical durable power of attorney. The facts: Betty Jean Collins was diagnosed with cancer, and on June 12, 2012, executed a medical durable power of attorney (with springing powers). (Springing powers only go into effect when your doctor certifies you as disabled or incapacitated. Immediate powers, by contrast, are effective the moment you sign the document.) Importantly, Mrs. Collins did not consult an attorney – she filled out a blank medical durable power of attorney form herself. Four days later, Mrs. Collins was killed instantly in a tragic car accident. Believing Mrs. Collins wanted to be cremated after she passed away, Mrs. Collins’ grand niece, Tina Shoemaker, wanted to have Mrs. Collins’ body cremated and give the remains to Mrs. Collins’ daughters. Mrs. Collins’ medical durable power of attorney had appointed Shoemaker to make this decision. But Mrs. Collins’ daughters went to court in Benton County, Missouri and argued Shoemaker didn’t possess authority to make the decision because Mrs. Collins was never found incapacitated, so the powers hadn’t sprung into effect, but  lay dormant for all of time in the deceased’s document. Mrs. Collins died, but she wasn’t certified as disabled or incapacitated, so the Collins daughters argued her power of attorney document was a worthless scrap of paper. One month later, the Benton County Probate Court sided with Shoemaker and said she had authority to have Mrs. Collins’ body cremated and give the remains to Mrs. Collins’ daughters. But the daughters appealed to the Missouri appellate court in Kansas City. And about 1 year later, the Missouri Court of Appeals reversed the Probate Court and sent shockwaves through the Missouri probate and elder law bar. The Collins Court strictly interpreted Mrs. Collins’ document and noted that while she could have chosen immediate powers, she chose springing powers instead, so since she was never certified as disabled or incapacitated, Shoemaker never had authority to act for Mrs. Collins.

The Missouri Court of Appeals decided Collins on August 6, 2013 per Judge Ellis. In Missouri, the right of sepulcher is “the right to choose and control the burial, cremation, or other final disposition of a dead human body.” Missouri law gives the final decision to the deceased person’s next of kin. And Missouri law defines “next of kin” by degrees of consanguinity (blood relation), similar to intestacy law (dying without a Will). Collins sparked a flurry of debate among the bar. If you’re dead, are you incapacitated? “No,” the Court said. This past week, the Missouri bar released these sample durable power of attorney documents (here for the complete DPOA packet or here, the fillable DPOA), and all Missouri attorneys should ensure their clients’ documents comply with the new provisions. Because of the complexity of these legal issues, Missouri residents should consult with their estate planning attorney to ensure their medical durable powers of attorney reflect their wishes and intent about the right of sepulcher. And if you live in Missouri and do not have estate planning documents in place, do yourself and your family a favor and execute documents at your earliest convenience. Use your freedom to make your own decisions. Don’t leave your estate planning to politicians in Jefferson City.

If my law firm, Johnson Law KC LLC, can help you or your family with your estate planning needs, call (913-707-9220 or email me (steve@johnsonlawkc.com) for a complimentary and convenient consultation.
(c) 2014, Stephen M. Johnson, Esq.

Long Term Care Choices

Driving to a lunch appointment with a friend, I heard the wonderful Up to Date program Tuesday on KCUR (Kansas City’s NPR affiliate), an elder law attorney friend gave some great advice to families considering long term care and elder law issues. As our family members and loved ones age, we can support them by having open and honest conversations about long term care and elder law issues and helping ensure their legal affairs are in order to give care and dignity to the final years of life.

The long term care discussion reminded me of this WSJ article. Anecdotally and in my practice, I’ve seen a real mix of retirees selling their homes and downsizing. Some people want to downsize long before they have any serious physical ailments or health related issues. Others may insist on living in their homes until their 80s or 90s, including spending for in-home health care services as needed (an expensive option). Ultimately the question hinges on (1) how much a client wants to stay in their home as their health issues arise and youthful vigor deteriorates, (2) how much in-home care they can afford, and (3) the family’s comfort level with the decision (including proximity to the elderly relative). 

My firm’s estate planning documents (wills/trusts, living wills, and durable medical and financial powers of attorney) include elder law protections standard and can be custom tailored (for free) to reflect a client’s beliefs, convictions, and long term care wishes. Here’s a basic explanation of the core estate planning and elder law documents. If you or a loved one need to consider your estate plan or elder law issues, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient consultation. Our passion and expertise is serving you and your family’s legal needs.

(c) 2014, Stephen M. Johnson, Esq.

Protecting Your Business and Assets

The Kansas City Business Journal has this helpful article with strategies for protecting your business and assets if a divorce or other unpleasantness arises in your life.

While divorce or creditor lawsuits are never welcome developments in someone’s game plan, the best offense is a good defense. My firm has experience working with individuals and families throughout the business and estate planning processes. I’ve enjoyed working with clients ranging from single young professionals who want to plan for the future to business owners with complex trusts and tens of millions in assets. If my law firm can help you or your family with your estate planningelder lawasset protectionbusiness law needs, or digital estate planning, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment. I want to make business and estate planning simple and straightforward to serve your legal needs and help protect you and your business from lurking liabilities.

(c) 2014, Stephen M. Johnson, Esq.

 

Need an estate plan?

CNBC has this helpful article reminding readers that every adult (regardless of wealth or marital status) needs an estate plan. A basic estate plan includes 4 documents: (1) a will, (2) a living will, (3) a medical durable power of attorney, and (4) a financial durable power of attorney. If you’re married, you and your spouse should each have these documents. If you’re a wealthy person or have complex financial holdings, you may need a trust or more sophisticated documents. My firm crafts tailored estate planning documents for you that are affordable, reliable, include cutting-edge provisions standard (like asset protection, probate avoidance, elder law, and digital estate planning), and work smoothly whether you’re in the U.S. or abroad.

My firm has experience working with individuals and families throughout the business and estate planning processes. I’ve enjoyed working with clients ranging from single young professionals who want to plan for the future to business owners with complex trusts and tens of millions in assets. If my law firm can help you or your family with your estate planningelder lawasset protectionbusiness law needs, or digital estate planning, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment. I want to make estate planning simple and straightforward to serve your legal needs and help protect you and your family’s legacy.

(c) 2014, Stephen M. Johnson, Esq.

Good Estate Planning – How to Prevent Disputes

The WSJ has this helpful article with tips on how to prevent estate disputes. Among their tips:

(1) talk with your family,

(2) write a memorandum,

(3) unequal treatment after death means family discord,

(4) hire a professional executor, and

(5) share your values.

In my practice, I’ve seen each of these techniques work well for individuals or families doing estate planning. I’ve also worked on numerous estate and/or trust litigation cases where major disputes arose because people didn’t communicate (and the only winners in estate or trust litigation are the lawyers who get paid by the hour to go to court). Kansas and Missouri law both include provisions for incorporating a written memorandum into your will or trust (a/k/a a separate personal property list) – see K.S.A. 59-623 and V.A.M.S. 474.333 – and I encourage all my clients to make a written memorandum at their convenience to supplement their will’s instructions to their executor and/or their trust’s directions to their trustee.

My firm has experience working with individuals and families throughout the business and estate planning processes. I’ve enjoyed working with clients ranging from single young professionals who want to plan for the future to business owners with complex trusts and tens of millions in assets. If my law firm can help you or your family with your estate planningelder lawasset protectionbusiness law needs, or digital estate planning, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2013, Stephen M. Johnson, Esq.

Estate Planning and Relationships

About a month ago, I had the pleasure of attending a wedding of two dear friends. A month or so before the wedding, I shared some advice with the groom (I’ve shared the same advice with other friends over the years). Every bride and groom encounter various financial, tax, and legal questions in the busy and chaotic wedding planning time and after the honeymoon’s over and the new couple adjusts to life together. Good planning is crucial. Nobel Laureate T.S. Eliot memorably wrote, “What we call the beginning is often the end/And to make an end is to make a beginning./The end is where we start from.” (The Four Quartets, Little Gidding, V). True with estate planning as with many endeavors in life. So what’s the end game? Start from there to figure out how to get there. 

Pre-wedding tips:

  • Don’t buy your fiancé expensive gifts in his or her name. Whether a car, house/condo, jewelry, vacations, clothes, furniture, artwork, antiques, or other big ticket items, wait until you’re married. Federal law allows you to give your fiancé a gift of up to $14,000 tax free per year, but if the item costs $14,001, you’ll owe gift tax and have to file a gift tax return (not fun or romantic). The IRS says a gift is anything you receive without paying fair market value. (Kansas and Missouri don’t have state gift taxes.) Instead buy the item in your name and give it to your spouse once you’re married, as husbands and wives can give each other unlimited gifts without tax consequences.
  • Don’t add your fiancé to real estate deeds until you’re married. Again, any gift (like a house or farm) over $14,000 will cost you gift tax and require filing a return with the IRS.
  • Don’t pay off your fiancé’s credit cards, car or student loans before you’re married. Gifts are romantic, but gift taxes aren’t. Wait until you’re married.

After the wedding:

  • Execute living wills, and durable medical and financial powers of attorney. These are inexpensive, but vital documents that can last for decades. Your spouse can’t talk with your doctor, authorize surgery, or make financial decisions for you without these documents in place. My firm’s financial powers of attorney include cutting edge digital estate planning and elder law provisions, standard. My firm’s living wills and medical powers of attorney include HIPAA, HITECH, and Affordable Care Act (ObamaCare) privacy releases and can easily be custom tailored at no extra charge to reflect your beliefs and convictions about end of life treatment issues. (Having these done as a single person is wise, especially if you have health issues, travel frequently, or have various assets (family business stock or a small business, home mortgage, intellectual property, etc) – you can change your attorney in fact (or agent) quickly and inexpensively once you’re married.
  • Execute a will and/or trust. Simple, no-frills wills for a couple are economical. Wills that include a trust (testamentary trusts), or pourover wills that leave everything to a standalone trust are also affordable. Kansas law automatically invalidates an existing will when you get married and have a child. Missouri law is different. A will or trust allows you to leave specific instructions for how you want your financial affairs handled, how much your spouse and children receive, who cares for your child, and so on. Kansas and Missouri both allow a separate personal property list (highly recommended) to leave specific items to different family members or friends. Whether you’ve got $5,000 in student loans or $5 million in your stock portfolio, you need a will or trust. If you die intestate (without a will), your family will pay more for probate administration and endure a longer, more complex court process than if you have a will. And who wants the government to dictate how their things are distributed and who gets what? My firm has worked on dozens of probate estates in Kansas and Missouri, but it’s easier on everyone to plan ahead. Avoid LegalZoom, Rocket Lawyer, and other do-it-yourself books or websites – I’ve seen (and fixed) online/DIY documents for clients that any practicing attorney would’ve been embarrassed to have drafted. Like many other services, you get what you pay for – good planning requires expertise. My firm has the training and expertise to guide you through the process, leavened with friendly counsel.

A few other ideas for newlyweds:

  • Joint or separate bank accounts
  • Change IRA/retirement plan beneficiary to spouse
  • Change life insurance beneficiary to spouse
  • Car titles – joint or separate
  • Real estate – joint or separate – joint tenancy in Kansas or Missouri; tenancy by the entirety in Missouri
  • If you’re moving to another state once you’re married, you have about 30 days to change your driver’s license, legal name, etc

My firm has experience working with young professionals, young families, and newlyweds to make the estate planning simple, easy, and inexpensive. My firm also has experience working with high net worth individuals and families with tens of millions in assets, closely held businesses, real estate, and other issues. We provide reliable, easy to understand documents so you can rest easy and enjoy your life. Give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a convenient, free consultation.

IRS CIRCULAR 230 Disclosure: Unless expressly stated otherwise, any U.S. federal tax advice contained in this blog post or links is not intended or written by Johnson Law KC LLC to be used to avoid IRS or other tax penalties, and any tax advice cannot be used to avoid penalties that may be imposed by the IRS.

(c) 2013, Stephen M. Johnson, Esq.    

Billionaires Win Through the Financial Crisis

According to this CNBC story, most of America’s billionaires have done very well amid the financial crisis and its aftermath, known to the history books as the Great Recession. Billionaires’ combined global worth has doubled. 61% are self made. 87% are men. 86% are married. And they’re quite mobile, with an average of 4 homes and 2 children.

Most of us will never have to worry about being billionaires, but good financial and estate planning is important for everyone. If my law firm, Johnson Law KC LLC, can help you or your family with your estate planning, elder law, asset protectionbusiness law needs, or digital estate planning, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2013, Stephen M. Johnson, Esq.

 

Small Business Law 101

There are 3 stages in the business law cycle, all of which my law firm, Johnson Law KC LLC, can help you and your business by coming alongside to provide experienced, friendly counsel leavened with an understanding of business, economic, and financial issues. The 3 business stages are: (1) formation, (2) maintenance/compliance, and (3) succession.

(1) Formation – At the formation stage, choice of entity and other considerations arise. Should the business be a corporation (C corporation or S corporation), a partnership, a limited partnership (LP), a limited liability partnership (LLP), a limited liability company (LLC), a series LLC, a professional corporation or professional association, or a family limited partnership (FLP)/family LLC? How will the business’ owners and employees, and other players relate to each other?

  • A sole proprietorship is the simplest form of business, where the owner gets all the profits, but is liable for all debts and losses, and doesn’t enjoy any limited liability.
  • C corporations and S corporations take their names from respective IRS Code chapters. Corporations have to follow corporate formalities, but get limited liability for their actions in return. Kansas corporations are formed under the Kansas General Corporation Code (K.S.A. 17-6001 et seq.), patterned after Delaware corporate law, while Missouri corporations are formed under The General and Business Corporation Law of Missouri (V.A.M.S. 351.010 et seq.).
  • A partnership (a/k/a general partnership) is a joint business venture between 2 or more equal partners. Both partners are entitled to a share of the profits, but both are also liable for the partnership’s losses and debts. Since 1998, Kansas partnerships have been governed by the Kansas Uniform Partnership Act (K.S.A. 56a-101 et seq.), while since 1949, Missouri partnerships have been formed under the Uniform Partnership Law (V.A.M.S. 458.010 et seq.).
  • A limited partnership (LP) has a general partner (who has voting rights and is liable for the partnership’s losses and debts) and one or more limited partners (who have limited liability, but don’t have voting rights). Kansas LPs can be formed under the Kansas Revised Uniform Limited Partnership Act (1983) (RULPA) (K.S.A. 56-1a101 et seq.), while Missouri LPs trace their lineage to the Uniform Limited Partnership Law (1985) (V.A.M.S. 359.011 et seq.).
  • A limited liability partnership (LLP) is a group of limited partners who enjoy voting rights and limited liability – many law firms, accounting firms, and other professional organizations are organized as LLPs. Kansas LLPs are formed under the Kansas Uniform Partnership Act (1998) (K.S.A. 56a-1001 et seq.), while Missouri LLPs are formed under the Uniform Limited Partnership Law (1985) (V.A.M.S. 359.172 et seq.).
  • A limited liability company (LLC) has members who have an interest in the firm, where a corporation has shareholders who own shares of stock or a stake in the firm. An LLC can be a single member or have multiple members. Single member LLCs are usually disregarded for IRS tax purposes (and taxed as a sole proprietorship) unless they elect S corp tax treatment. LLCs with multiple members are taxed like partnerships (flow through to individual partners) but with the limited liability of a corporation. Kansas LLCs are formed under the Kansas Revised Limited Liability Company Act (1999), part of the Kansas General Corporation Code (K.S.A. 17-7662 et seq.), while Missouri LLCs are formed under the Missouri Limited Liability Company Act (1993) (V.A.M.S. 347.010 et seq.).
  • A series LLC is a new business form in Kansas and Missouri. A series LLC has a parent LLC that acts like an umbrella to consolidate administrative and tax treatment into 1 entity, and an unlimited number of daughter series under the parent LLC’s umbrella, which can each have distinct business purposes, ownership, and functions. My law firm, Johnson Law KC LLC, is on the cutting edge of counseling local companies, small businesses, and entrepreneurs on using series LLCs. Kansas series LLCs (2012) are governed under Kansas LLC law (K.S.A. 17-76,143), while Missouri series LLCs (2013) are governed by the Missouri LLC law (V.A.M.S. 347.186)
  • A professional association (Kansas) or professional corporation (Missouri) is a special corporate form for regulated professionals – accountants, attorneys, doctors, etc – in a particular state. PAs and PCs can have one or multiple members, but each member must be licensed in the particular profession that the PA or PC practices.
  • A family limited partnership (FLP) or family LLC is an LP or LLC often used among family members for various business purposes. A family may own land, a second home, or a business property in a FLP or family LLC. A FLP has a general partner (with voting rights and unlimited liability) and limited partners (no voting rights but limited liability). Many FLPs will have a parent or grandparent as the general partner owning 1% (or so) of the FLP and children or grandchildren as the limited partners owning a majority of the FLP. FLPs and family LLCs can be advantageous for business and estate planning purposes, but must have a valid business purposes and must be carefully designed and maintained to avoid audits and heightened IRS scrutiny.

(2) Maintenance/Compliance – At the maintenance/compliance stage, the requirements for different kinds of business organizations are vastly different. Talk of maintenance or compliance often conjures up visions (or nightmares) of annual corporate minutes, annual reports, state and federal securities laws. Sole proprietorships have very little, if any, regular maintenance or compliance, but they also offer no liability protection – so no paperwork, no protection. C corporations and S corporations must file annual reports listing major shareholders and other relevant corporate data with the Secretary of State’s office in the state of incorporation (Topeka, Kansas or Jefferson City, Missouri). Likewise, C corporations and S corporations must have annual shareholder meetings, regular board of director meetings, and keep minutes from these meetings. Regular meetings and minutes ensures that the corporation is being honest and transparent with shareholders and giving them a chance to voice their approval (or concern) about the corporation’s leadership and governance direction. Many corporations must also comply with federal securities laws (primarily the Security Act of 1933 and Securities Exchange Act of 1934 and applicable SEC regulations) and state securities or Blue sky laws in the Kansas Uniform Securities Act (dating back to 1911) (K.S.A. 17-12a101 et seq.) and Missouri Uniform Securities Act (2003, dating back to 1956) (V.A.M.S. 409.107 et seq.). Corporations must also comply with applicable state and federal tax laws. Partnerships, LPs, LLPs, LLCs, series LLCs, and FLPs/family LLCs must file annual reports with the Secretary of State’s office and follow other applicable corporate, securities, and/or tax laws.

(3) Succession – at the succession stage, a business owner must decide whether to pursue a merger & acquisition (M&A), wind down, estate/tax planning for owners and/or key members, buy-sell agreements, installment sales, or other succession techniques. A business may be perpetual, but an individual’s ownership is not. Serial entrepreneurs may want to start their next business adventure. An entrepreneur who shepherded a business idea from the napkin drawing to sale to a large company may want to retire or embrace another phase of life. A business owner may want to hand the reins off to his children or her carefully chosen and groomed successors among the management or executive team. My law firm has experience counseling business owners and key executives on M&A issues, wind downs and dissolutions, estate and tax planning, asset protection, and other business succession issues.

If my law firm, Johnson Law KC LLC, can help you or your family with your Kansas or Missouri business law needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2013, Stephen M. Johnson, Esq.