[WSBAPT] question on right of retainer

Mon Sep 11 15:22:22 PDT 2017

Similarly, I often include language to indicate that any unpaid balance of such loan(s) be treated as a portion of the owing child's distributive share of the estate. I have spent countless hours explaining this math to clients, and neither the debtors nor the other beneficiaries ever seem very happy about it. I also avoid using any language about "forgiving the debt" so as to avoid any tax on discharge of indebtedness.

Here is some language I might have included for a hypothetical client recently:

"A portion of my estate is comprised of certain loans I have made to my children over the years. As of the date of this Will, Child One owes me $47,000.00, Child Two owes me $110,000.00, and Child Three owes me $13,000.00. I maintain a record of repayment of each loan with the promissory notes documenting these loans. I direct my Personal Representative to allocate the outstanding principal balance of such loans against each child's share of my estate, provided, in no case shall a child be required to repay any portion of such outstanding loan balance at my death if the outstanding loan balance exceeds their distributive share of my estate."

Heather

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Douglas Bratt
Sent: Monday, September 11, 2017 2:53 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] question on right of retainer

Hello:

Perhaps I am not understanding Rebecca's use of the phrase "NAME1's share of my estate shall be offset by any remaining unpaid loan balance."

>From my perspective, there needs to be a two-point consideration of the unpaid loan amount.

Say the Decedent wants an equal split of her Estate between her two kids.  One of the kids owes the decedent $10,000.00.  Assume the other property in the estate is worth $110,000.00 (all cash).  (We won't worry about costs of administration in this comment.)

It seems to me that the total estate is worth $120,000.00.  Each kid is to get $60,000.00. The non-debtor receives $60,000.00 in cash.  The debtor kid gets  the $10,000.00 debt excused and an additional $50,000.00 in cash.

So, I would add language that would direct that the amount of debt be considered one of the assets of the Estate when computing the total value of the Estate, with the debtor's share to then include the excusing of the debt as part of the debtor's share of the distribution of assets from the Estate.

Is that an offset??

Regards,

Doug Bratt

Douglas J. Bratt
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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Rebecca King
Sent: Monday, September 11, 2017 1:18 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] question on right of retainer

Sharon, this is the language we often use in such situations:
NAME1 is currently indebted to me in the principal sum of $_____ resulting from loans made by me. This loan amount is non-interest bearing.  I direct that no action to collect such debt be taken at my death. However, NAME1's share of my estate shall be offset by any remaining unpaid loan balance.  The burden of proof shall be on NAME1 to substantiate that the loan has been partially or fully repaid.

Some of the language may not be applicable to your situation, but I hope it will serve as a starting point.

Regards,
Rebecca King
Attorney

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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Sharon Rutberg
Sent: Monday, September 11, 2017 1:01 PM
To: wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] question on right of retainer

Happy Monday, list mates --

I am writing wills for clients who are concerned that if their estate were divided among their three children at the death of the second spouse to die, one child might have an outstanding debt to the parents that should be offset from her distributive share. As I read the law of Washington, the doctrine of retainer says that the debt should indeed be set off or "retained" before the shares are distributed.  Does anyone include language in their wills to account for this circumstance - that is, to refer to the loan and express the intent of the testator that the offset should occur?

Thanks,

Sharon

Sharon C. Rutberg, Attorney at Law

Salmon Bay Law Group, PLLC

1734 NW Market St.

Seattle, WA 98107

206-735-3177, ext. 2

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