Estate Settlement


As a way to avoid probate, some attorneys engage in the practice of recording deeds not when they are signed by clients but after clients have died. For example, a married couple wants their children to inherit their home after they have died, and come to an attorney to do a probate avoidance deed. The attorney suggests that they can sign a deed turning their home over to their children, but that the attorney will hold the deed and record it after the parents have died. This is called an unrecorded or “pocket” deed.

The basic problem with this sneaky practice is the deed that is retained by the lawyer, or even the client, violates the “delivery requirement”, which is needed before a deed is considered valid. Hynes v Halstead, 282 Mich 627 (1937). Recording a deed is the best evidence of delivery.

In our Firm’s 30 years of practice, we have seen four types of negative consequences from unrecorded deeds.

The first risk involves Medicaid if a nursing home admission occurs. In one case, a Medicaid agency made a fraud claim against a son who did not disclose an unrecorded deed when his mother applied for Medicaid but then recorded it after she died. In another Medicaid case, an administrative judge denied Medicaid because it held that the father’s camp was still a 100% countable asset even though there was an unrecorded camp deed to a son 10 years earlier. The judge said that since the father held the deed in his safe, it wasn’t a valid deed because of lack of delivery. As a result, family had to sell the camp.

A second risk is that an unrecorded deed might be lost at the time of the passing of the original owner, in which event probate would be required.

A third risk is that an unrecorded deed might cause property taxes to pop-up under the uncapping or loss of the homestead exemption rules.  Not recording a deed invites the assessor to take a negative position on property taxes.

A fourth risk is that the heirs of the property may have to pay unnecessary capital gains tax on the sale of the real property after the owner’s death because of the loss of the all-important stepped-up tax basis under IRC 1014.

These risks and the ethical dilemma of not recording a deed can be avoided by choosing to record deeds into living trusts or joint property arrangements. Sounds simple. The problem is that there are far too many disastrous risks –risks that can be avoided by choosing a recorded deed alternative.


When a loved one dies, it is difficult enough to cope with the loss and grief that follows, let alone deal with the complex wilderness of the trust settlement process. Unless the estate is small and the issues simple, there are just too many risks to try to tackle trust administration without the professional help of a Trust department or an experienced tax attorney available at Anderson, Brogan and Yonkers.

We have helped more than 7,000 families with their estate plans.

What Can Go Wrong?

1. Tax Traps Abound

We have seen surviving heirs make costly tax mistakes, such as taking a 100% lump sum out of IRAs, failing to distribute income before 12/31, and causing excise taxes on IRAs, just to name a few. Many accountants and investment advisors are unfamiliar with all the tax issues involved in Trust administration.

2. Suspicion, Resentment, Disharmony and Litigation Are on the Rise

When a family member has been appointed as Trustee, suspicion, jealousy, disharmony and even litigation have increased to 25%1. Why the increase? It boils down to (A) the sense of entitlement baby-boomers have once the parental glue that held the family together is no longer there, (B) the resentment and jealousy of those excluded from decision-making and, (C) the mistakes, delays, and controlling behavior of those in charge. An inexperienced Trustee will face a myriad of unfamiliar fiduciary duties which, if not carried out correctly, can result in liability to the Trustee. An experienced trust attorney can really help the Trustee satisfy duties and reduce Beneficiary suspicion and encourage harmony.

3. It’s A Wilderness Out There

To settle a trust means doing battle with powerful financial gatekeepers, creditors, and governmental agencies in order to obtain information, sell assets, pay bills, and distribute funds. Our team at Anderson Associates knows how to navigate through this maze. As Quarterback of the trust estate, we can solve problems efficiently and take the pain out of the Trustee’s job. We can also save on taxes and help prevent disharmony among the beneficiaries. We will work with the financial companies involved and the selected CPA or accountant. We did a good job in setting up the estate plan, and we are ready to be the trustworthy guide in settling it when death occurs.

1. In his law review article, Timothy P. O’Sullivan estimates current family conflicts at 33% in estate plans, see “Family Harmony: All Too Frequent Casualty of the Estate Planning Process”, p. 250, Marquette University Law School “Elder Advisor”, May 2007

© Copyright reserved by Anderson, Brogan and Yonkers  January 2016

What to Do After Death – A Non-Tax Checklist Rev. 3-3-2016