New Estate Planning Ruling: Trustee Needs Standing to Appeal Court Order

September 16, 2014,

In a recent ruling, a state Supreme Court ruled that a bank, operating as a trustee for two trusts, lacked the standing to appeal a court order when it failed to maintain its status as trustee and only afterwards tried to appeal as an individual with a personal stake in the outcome of the case. The parties to the case were Hanover College, the beneficiary, and Old National Bancorp, the trustee.

Facts of the Case

Hanover College was the beneficiary of two trusts created in 1949 and in 2004. Old National Bancorp was the trustee for both trusts. In June 2012, Hanover College filed a motion in Indiana state court under Indiana Code Section 30-4-3-24.4. The college claimed that maintaining the trusts as entities separate from its own endowment fund was wasteful, provided lower investment returns, and impaired the trusts' administration.

Hanover College wanted the court to terminate the trusts and have their funds be held as part of its endowment. The court agreed with Hanover College, and it ordered that the two trusts should be dissolved "effective immediately." The trust assets were to be distributed to Hanover in order to incorporate them into the endowment funds.

Old National, as trustee, did not try to stop or stay the trial court's orders to dissolve the trusts, but instead the bank directly appealed the decision. On appeal, Old National challenged the trial court's determination that dissolution of the trusts to Hanover College was warranted. Hanover argued that Old National had already transferred all of the trusts' assets to the college. Therefore, Old National therefore lacked standing as a trustee to pursue an appeal.

Old National then argued that under the Indiana trust laws it was permitted to appeal as an "aggrieved person." It argued that it was not pursuing the appeal in its representative capacity as the former trustee of the dissolved trusts but instead was appealing in its individual capacity as a bank.

Indiana Court Decision

The Court of Appeals concluded that Old National lacked standing in its representative capacity as the trustee of the two trusts because it failed to obtain a stay and dissolved the trusts. As a result, it was no longer the trustee. In addition, the Court of Appeals held that Old National did not intervene in its individual capacity as an "aggrieved person" at the trial level so it could not appeal as one now.

The case went up to the Indiana Supreme Court, and this court agreed with the ruling of the Indiana Court of Appeals. It stated that "the general rule has always been that the powers of a trustee--like that of many fiduciaries--cease when the trust is dissolved or otherwise terminated; including the power to litigate as a representative of the trust." Therefore, it could not bring an appeal as a trustee once the trusts were dissolved.

Furthermore, the Indiana Supreme Court stated that the bank also had no personal standing to bring the appeal as an "aggrieved person." Old National never intervened as an aggrieved person at the trial level. In addition, it is equally apparent that it did not appeal in its individual capacity, either. Old National filed its notices of appeal from the trial court orders dissolving the trusts with "trustee" still in the name. It paid its attorney fees, accrued during the course of the appeal, from the assets of the trusts which can only be done as a trustee. And finally, Old National's substantive briefs on appeal are full of references to its status as trustee, and fully without any references to its status as an individual aggrieved person.

The court found the bank's actions completely inconsistent with the argument that it was acting in its individual capacity. Therefore, the ruling of the Court of Appeals was affirmed.

Estate Planning Mistakes in Beneficiary Designations

September 14, 2014,

One of the most common estate planning mistakes comes in the handling of beneficiary designations. Many people do not understand that inheriting retirement accounts, life insurance, and other assets that involve a beneficiary designation are different than inheriting from a will. Here are some of the most common mistakes that occur with beneficiary designations as well as steps that you can take to ensure that the retirement money that has been diligently saved will be passed on to the person you intend.

Common Mistakes in Beneficiary Designations

While many people go to an estate planning attorney for help drafting wills and trusts, most do not rely on their expertise for beneficiary designations. As a result, those that you wished would inherit your retirement accounts and life insurance receive less while creditors, former spouses, and miscellaneous relatives could get it all. Here are some of the most common mistakes and misconceptions that lead to problems with beneficiary designations:

Beneficiary forms must be filed with a custodian.
If the form is not on file with a custodian it does not count. Even if it is filled out completely and accurately by the account holder and sitting on the owner's desk it does not count. A beneficiary form must be sent to a custodian before the account owner dies.

Beneficiary designations cannot be left blank or name a deceased person.
If you fail to name a beneficiary or name someone that is deceased the financial institution will decide who gets the money. Regardless of the account owner's wishes, the institution will look to state law and the asset agreement to determine how the account assets are distributed.

An estate does not have a life expectancy.
The required minimum distributions from an inherited account are determined by the beneficiary's life expectancy. This allows withdrawals to be stretched over time, saving money in taxes and other fees. According to the IRS an estate has no life expectancy, and as a result all money must be withdrawn from the accounts as quickly as possible.

Naming your estate can be worse than naming no beneficiary at all.
Besides the tax downsides of pulling all money from the accounts, naming the estate as beneficiary has other problems. The most important of which is that an estate does not have the same protections as a human beneficiary, and all money that is given to the estate is subject to creditors. In addition, the funds used to pay off the creditors are then subject to income tax, which must also be paid off using the funds from the estate.

Steps to Avoid Beneficiary Designation Mistakes

There are ways to avoid making mistakes in beneficiary designations. Going over all of your estate planning information, including your beneficiary designations, is a good place to start; however, these steps will also help ensure that your retirement and other accounts will go to who it should.

· Name a primary beneficiary
· Name an alternative beneficiary in case the primary beneficiary dies before you
· Do not name your estate as a beneficiary
· Review beneficiary forms once per year to check that they name who you want
· Update your forms more often to reflect changes or other life events such as a birth, death, marriage, divorce, or adoption
· Every time that you change a form send it to the institution that is holding the account and ask them to acknowledge receipt of the change.

Do I Really Need a Will? Yes, You Do

September 12, 2014,

A lot of people who have not started estate planning often ask if they really need a will, or if any estate planning is really necessary? Usually, it is followed with a statement about how the children will take care of it, or that the situation is pretty straight forward, so why deal with it. The truth is if you have no children, no spouse, no heirs, and few worldly possessions then you can probably get away with not needing a will. Otherwise, a will and other estate planning documents are very important for your wellbeing and for your loved ones.

Why You Need a Will

One of the most basic tasks a will accomplishes is naming an executor or executrix of your estate. This is the person who will handle all of your affairs after you pass on. This includes gathering all assets of your estate, paying debts or taxes owed, and distributing the remaining property to your heirs. If you do not have a will the court will appoint an executor to your estate. That person may not be aware of what your final wishes were for your property or know what you wanted your heirs to receive.

Intestacy Laws

If you die without a will you are considered intestate and your estate goes into intestacy. That means that your state court and the state laws will determine who gets what from your estate. These rules vary from state to state, but generally the immediate family will get the assets first. The proportion of assets also differs from state to state between the spouse, children, and any living parents.

If you are single and die without children or surviving parents the probate court will decide who is the most important of your remaining relatives. If there is no one then the assets in the estate go to the state. Friends, charities, and the like are not usually considered for an intestate estate.

New York Intestacy

In New York, intestate succession depends on whether or not you have a spouse, children, or surviving parents. A quick overview of intestacy is as follows:

Descendants but no spouse: Descendants inherit everything

Spouse but no descendants: Spouse inherits everything

Spouse and descendants: Spouse inherits first $50,000 and one half of the remaining balance of the estate, descendants inherit everything else

Parents but no spouse and no descendants: Parents inherit everything

Siblings but no spouse, descendants, or parents: Siblings inherit everything

Descendants apply to children, grandchildren, and great-grandchildren. Children's shares in New York intestacy depend on the number of children and whether or not you are married. In addition, in order for the children to inherit in intestacy they must be yours legally.

Adopted children: Receive the same share as biological children

Foster children and stepchildren: Not legally adopted and therefore do not automatically get a share

Children placed for adoption: Children legally adopted by another family will not get a share. Biological children adopted by your spouse will get an intestate share.

Posthumous children: Your death prior to their birth will not affect the intestate share

Children born out of wedlock: For a father's intestate estate the child born out of wedlock must have acknowledged paternity by the father or be established in some other way under New York law

Grandchildren: These descendants only get an intestate share if their parent has died before them

Joan Rivers: Big Funeral, Big Tax Break

September 10, 2014,

Comedian and trailblazer Joan Rivers passed away this week, with friends and family saying goodbye at a memorial service in Manhattan. Details about her estate and funeral have not been made public, but it was no secret that Joan Rivers wanted her funeral to be as extravagant as the rest of her life.

In her 2012 book, I Hate Evenyone...Starting with Me, she detailed her wishes for her funeral by writing, "When I die, I want my funeral to be a huge showbiz affair with lights, cameras, action...I want Craft services, I want paparazzi and I want publicists making a scene! I want it to be Hollywood all the way. I don't want some rabbi rambling on; I want Meryl Streep crying, in five different accents. I don't want a eulogy; I want Bobby Vinton to pick up my head and sing 'Mr. Lonely.' I want to look gorgeous, better dead than I do alive. I want to be buried in a Valentino gown and I want Harry Winston to make me a toe tag. And I want a wind machine so that even in the casket my hair is blowing just like Beyoncé's."

However, what may come as a surprise is the federal tax deduction that can come with such a funeral, and how it can apply in other people's estates.

Federal Estate Tax and Funerals

Federal estate tax applies to all estates that amount to more than $5.34 million. In Joan Rivers' case, with a $30 million penthouse and infamous Faberge egg collection, federal taxes will definitely apply to her estate. However, an estate is allowed to claim certain deductions against the overall estate, and under the federal tax code expenses that are associated with a funeral are considered tax deductible.

There is no dollar cap limit on funeral expenses in the federal code. Instead, the limit on deductions for a funeral is whatever is "allowable under local law." The only solid rule about funeral expenses is that they may not exceed the overall value of the estate.

The IRS provides some brief guidance through memos and court cases. The cap on funeral expenses is generally interpreted in accordance with state and local law but is also considered in light of a person's life and circumstances at the time of their death. This means that if Joan Rivers' got the funeral she wished for it would most likely be deductible from her estate because it reflected her wealth and lifestyle at the time of her death.

Deductible Expenses

Deductible expenses for a funeral include those that you would expect, such as costs for the funeral home, gravestone, transportation to the cemetery, and payments to a church or other religious institution. Other expenses that most people do not realize can be included are flowers and a funeral luncheon. However, these types of expenses are only allowed if a solid paper trail exists and the event of extras is clearly part of the funeral service.

Funeral expenses are also deductible on state estate taxes, if your state imposes that type of tax. In places like New York and Connecticut where Joan Rivers had property there is an estate tax imposed on certain estates.

Estate Planning for People Without Children

September 8, 2014,

A number of seniors who are preparing for retirement and estate planning do not have children. Some childless retirees plan on hiring a child - a younger caregiver who will look after them in their old age. Children usually serve as the caregiver and beneficiaries to an estate, and they can typically be relied upon to ensure that their parents' wishes are taken of. As a result, seniors without children need to take extra precaution when making arrangements for care and estate planning than seniors with children that can double check their plans.

Choose Your Advocates Wisely

You need to make sure that you pick advocates that you can trust with your estate planning needs. An advocate can help with housing arrangements, medical, dental, and financial affairs in addition to estate planning. Your support team can include your spouse, siblings, other relatives, family friends, or a trustee. Make sure that everyone knows who you are relying on as an advocate and what your preferences are regarding all aspects of your estate planning to make sure that your wishes are followed.

Set Up a Healthcare Proxy

A healthcare proxy is also known as a healthcare power of attorney. This person is authorized to make health care decisions for you in a situation where you are unable to do so yourself. Make sure that this person is authorized to review your medical records and is aware of your wishes regarding life support, surgery, organ donation and other important medical decisions regarding your care.

Consider a Durable Power of Attorney

This document appoints a person to make legal decisions on your behalf. A power of attorney can make financial and legal decisions for you if you are unable to do so yourself. A durable power of attorney form can be effective immediately or stipulate effectiveness on a particular event, such as your incapacitation. If you do not appoint someone and you do not have children the court will appoint a guardian for you. The lack of knowledge on the part of a court-appointed guardian could mean that your estate planning wishes are not fulfilled.

Purchase Long Term Care Insurance

Long term care insurance can help you afford the type of care that you need if your health begins to fail. This type of insurance helps pay for treatments needed for chronic care that are typically not covered by regular insurance, Medicare, or Medicaid. Services included in long term care insurance can also entail home care, assisted living, adult day care, respite care, hospice, and care at a nursing home facility.

Decide How Assets Will Be Distributed

One of the most important things for a senior without children to do in estate planning is make sure that everything is in order regarding the distribution of the estate. Whether it is drafting a will, creating a trust, or establishing a foundation you need to specific how and to whom your assets will be distributed.

You can give away parts of your estate to a spouse, family members, friends, charities, or whomever you like. Without the proper estate planning documents in place, state statutes and the probate court will determine who gets your estate, regardless of whether it aligns with your final wishes.

Go over your estate plan with an experienced estate planning attorney to ensure that everything is covered properly within the proper documents. You should also check the beneficiaries of any retirement funds, insurance policies, and bank accounts to make sure that they are all up to date.

The Hazards of Unequal Inheritance

September 7, 2014,

When many people begin the estate planning process, they sometimes believe that they are doing the right thing by giving more to one child than the other. One child may be making more money, is more successful, or has married into wealth of his or her own. Parents think that giving an unequal share of the estate to one child over the other is the best way to rectify the situation; however, unequal inheritance comes with hazards that parents may not consider when creating an estate plan.

Punishing Success

By giving one child an unequal share of the estate, it punishes the success of others. In addition, with today's economic and financial climate the success of one child today does not guarantee it for life. A lot can change over the course of five, ten, or twenty years to your children financially. The more successful child could fall on hard times, and the less successful child could start doing much better financially.

Creating Family Drama

More importantly, unequal distribution of an estate can lead to resentment among children after their parents die and create a lot of family drama. At the very least, the more successful child is going to be asking why, and questioning whether the parents did not love them as much as the child that got more. Unequal distribution can lead to fights among siblings, and accusations of undue influence could be raised to challenge the will.

Fights among siblings can lead to long, protracted legal battles in probate court that can destroy a family and burn through the estate assets. Some estate battles take years and the estate only serves as a legacy of pain.

Creative Solutions

One solution that some parents attempt when unequally distributing an estate is to discuss with their children the reasons behind it. Explaining why there is an unequal distribution can at the very least eliminate the questions of "why" after the parents have passed away. Typically, this can temper some of the family anger but in the end the parents are still punishing the success of some of their children.

Another way to account for children's differing financial situations without showing favoritism in the will is to use an irrevocable trust. The parents appoint a trustee that is not one of the children, and they place the assets of the estate into the trust. The trustee then has the authority to make distributions to the children based on need or other specifications left by the parents. This way, the child that is having more trouble financially can be supported by the trust at an unequal rate to their siblings. In the future, if the financial situation flips for the children the trust can then provide for the child that was more successful at the time when the parents created the trust.

The irrevocability prevents the children from opposing the trust instrument and keeps the estate out of probate court. It can provide the flexibility of unequal distribution without the hazards of explicit unequal division of assets in a will.

LGBT Estate Planning Questions a Year After DOMA

September 5, 2014,

A little more than a year ago, the United States Supreme Court struck down Section Three of the Defense of Marriage Act. In doing so, the federal government gave same sex couples access to the same federal rights as heterosexual couples. Many of these rights involve taxes, housing, Social Security, and estate planning issues. However, more than one year after the decision, many same sex couples are still struggling with understanding the new benefits available to them.

LGBT Benefits Study

In a study released by Wells Fargo, after one year of access to new federal benefits LGBT investors are struggling to make sense of the new legal landscape. In total, 83% of participants surveyed who were LGBT stated that they do not fully understand how new state and federal laws apply to them in the estate planning sector. Of those people, 67% were in legal same sex marriages. However, most troubling is that around forty percent of LGBT investors surveyed believed that the federal government would treat a state sanctioned civil union or domestic partnership just like a marriage, which is not the case.

LGBT Marriage in the United States

The shift in estate planning for LGBT individuals and couples has been monumental over the last year. However, adding to the confusion of all of the new planning opportunities are the challenges that come with differing states' laws regarding same sex marriage. When the court overturned Section Three of DOMA last year they did not discuss Section Two, which gives the power to individual states to define marriage within their borders.

The federal government, nineteen states, and the District of Columbia all recognize same sex marriage and give these couples the same rights and benefits as heterosexual couples under state and federal law. Nevertheless, 31 states that have yet to recognize same sex marriage have a confusing mishmash of conflicting state and federal rules. This has a significant impact on estate planning, taxes, and other aspects of life for a same sex couple.

Effects of Conflicting Marriage Laws

The same study also looked at the reasons behind LGBT marriages after the repeal of Section Three of DOMA. For one thing, 62% of LGBT investors surveyed responded that the financial needs as a couple are different than those of a heterosexual couple, and 36% of LGBT participants stated that financial and legal rights are the most important reason to be married. Only 8% of heterosexual couples feel the same way.

For same sex couples residing in a state that has not recognized same sex marriage, estate planning can be an incredibly complex process. Same sex couples must file taxes as singles, and in terms of estate planning the surviving spouse will be forced to pay state inheritance taxes that a heterosexual spouse would be exempt from paying. However, the same surviving spouse will be exempt from paying the federal inheritance taxes because the federal rules apply to all same sex couples, regardless of the state where they reside.

Lessons Learned: The Anna Nicole Smith Battle Still Rages On

September 1, 2014,

After nineteen years of battling from probate court all of the way to the United States Supreme Court twice a recent court ruling seems to have ended the battle between the estates of Anna Nicole Smith and Pierce Marshall, for now. Called "The Grand-Daddy of all Estate Battles" these two estates have been battling over the $1.6 billion fortune left by Ms. Smith's husband and Mr. Marshall's father, J. Howard Marshall, for almost two decades.

History of the Feud

Federal court proceedings began regarding this estate in 1996 when Anna Nicole Smith filed for bankruptcy in California. The bankruptcy led to a $475 million judgment against Pierce Marshall, but only temporarily. The judgment was reduced to $88 million on appeal, and then appealed again, making to the United States Supreme Court on two separate occasions. After the second trip to the Supreme Court, where the judges rejected Anna Nicole Smith's claims, it had appeared then, too, that the battle was over.

However, in May 2013 a federal district court in California issued a new ruling in favor of Anna Nicole Smith's estate and against Pierce Marshall's estate. During all of the legal battles both Anna Nicole Smith and Pierce Marshall had died, leaving the estate planning attorneys to continue to do battle with one another in probate court.

This new ruling allowed Ms. Smith's attorneys to collect significant sanctions, yet to be determined, against Mr. Marshall's estate because of unethical conduct that included destroying and hiding evidence, falsifying documents, and causing undue delays. The ruling also applied to the elder Mr. Marshall's estate planning attorney, as well, who routinely referred to Ms. Smith as "Miss Cleavage."

This latest ruling was then placed on hold because the California judge was unsure of how to proceed. On one hand, he had an obligation to uphold the Texas court's ruling in Pierce Marshall's favor that stated that his father's final estate plan was valid. On the other hand, the same team had also conducted itself unethically during the proceedings.

The Current Ruling

The California judge waited over a year before making a decision on the ruling handed down in May 2013. Recently, the judge decided to reverse his prior ruling and dismiss the sanctions against Pierce Marshall and J. Howard Marshall's estates. The judge came to this decision based on the Texas probate court ruling in addition to the impossibility of determining what amount of sanctions would be appropriate given that the actions took place so many years ago.

However, while that ruling may have ended the court battles in California, Ms. Smith's attorneys still have the right to appeal the judgment in Texas. An appeal was filed in 2002 after the 2001 ruling, but it was put on hold while the California issues were fought. If Ms. Smith's estate wins its appeal in Texas then the California ruling could be overturned, and the battle continues to rage on.

Lessons Learned from Anna Nicole Smith's Estate

Ms. Smith's estate provides a valuable lesson for everyone creating an estate plan about the danger of family feuds. While two-decade long court battles are not the norm, even modest estates can face battles that last a year or more in probate court. While nothing can be done to completely eliminate the possibility of family fighting there are steps that an estate planner can take to minimize the chances of it occurring.

Try to avoid probate court as much as possible when planning an estate, and consider using trusts and other tools for your assets. In addition, have a discussion with your heirs and explain why you are making your estate planning choices. This knowledge is usually enough to quiet any complaints that may have happened further down the road.

Estate Planning Long-Term Mistakes To Avoid

August 29, 2014,

It is important to consider two different scenarios when planning for retirement and drafting an estate plan. The first thing is to consider what will happen to your estate after you die. However, the second is to consider what will happen to your estate if you live a long life but are not in the best of health and require permanent assistance from others. Creating a comprehensive estate plan can help prepare for both of these scenarios by protecting assets that can either be passed down to heirs or used if you become disabled and need long-term support.

The Need to Plan for Long-Term Care

Most seniors drafting an estate plan today ignore the biggest risk to their estate - needing money for long-term health care. According to the U.S. Department of Health, over 70% of our country's population over the age of 65 will need some type of long-term care, and more than forty percent will need nursing home care for some period of time.

Many people do not have the insurance coverage for this type of risk, and Medicare does not cover long-term care. If care is needed, those that did not plan for this type of event rapidly deplete their savings and homes are sold in order to cover the costs. Estate planning solutions exist that can protect the assets, income, and home of a person while still allowing for access to long-term care programs like Medicaid.

Long-Term Mistakes to Avoid

When creating an estate plan that accommodates for both possibilities, it is important to avoid some common long-term mistakes. Many people make these mistakes because they are only thinking in terms of their heirs and not of themselves.

· Don't tie up money in long-term investments.

· If considering long-term care insurance check the benefits, the inflation rider, and any possible increases in premium.

· Make sure you have the proper advance directives in place, specifically a health care proxy and power of attorney.

· Put someone knowledgeable in charge of managing all real estate.

· Take advantage of possible penalty-free transfers when applying for programs like Medicaid or spending down for nursing home care.

· Don't stay in an investment that should be sold just to avoid capital gains taxes, especially if you need money for long-term needs.

How to Avoid Long-Term Mistakes

An experienced estate planning or elder law attorney will be able to go over your estate plan and look for any major long-term planning errors. In addition, the easiest ways to avoid making these types of mistakes is by checking the following:

· Plan for liabilities and expenses that can be foreseen, especially for long-term care.

· Update beneficiary designations on bank accounts, investments, retirement funds, and insurance policies

· Take steps to avoid confrontation and potential litigation among family members and other heirs. Using a trust or will with specific instructions can be very helpful.

· Draft and update your estate plan with an experienced attorney. Downloading estate planning documents off of the internet may not comply with your state law and cannot give you proper advice.

· Transfer real estate to heirs through the estate plan and avoid making transfers during your lifetime to avoid high capital gains taxes.

Estate Planning Assets: The Good, The Bad, and The Ugly

August 27, 2014,

Some assets are fantastic to hold onto in estate planning but others can be bad for you and your heirs. One of the key objectives when planning your estate is to keep the tax bill as low as possible for your heirs when they are bequeathed portions of your estate. The following is a ranking of the good, the bad, and the ugly of retirement assets that you should leave for your heirs.

The Good

Depleted partnerships: The best asset to keep in an estate plan is also a bit of a head-scratcher. While the taxation of partnerships is complex and at time counterintuitive, there are two important things to keep in mind.

First, the IRS takes a harsh view of selling partnership stocks, even if they have depreciated over time. Often, a sold partnership will get hit for capital gains tax as well as be taxed on what the IRS considers "recapture of depreciation." Second, if you pass a depleted partnership onto your heirs they receive it at the stepped-up value and do not have to pay for the capital gains or recaptured value up to that point.

Collectibles: This category includes assets like artwork, gold, coins, and similar valuable collectibles. These assets are taxed at a 28% rate if sold during the lifetime of the buyer, so it is smarter to hold on to collectibles and sell lower taxed items like stocks and bonds.

Highly appreciated stock: The same concepts in a depleted partnership apply to highly appreciated stocks. Let your heirs receive the stepped-up basis and waive the capital gains tax.

Roth IRAs: Once you have paid the income tax on a Roth IRA the income is tax free for your heirs. The money compounds in the Roth IRA tax free, and the withdrawals are tax free.

The Bad

Somewhat appreciated stock: While these assets can have some benefits, typically the value is not as much as a tax-free Roth IRA or higher appreciated stock.

Taxable IRAs: These include all retirement funds that contain untaxed contributions. If you cash in a taxable IRA before death then you pay income tax on the withdrawals, and if the heirs receive it then they pay taxes, too.

Bonds: Similar to somewhat appreciated stock, the return on bonds for your heirs will not be nearly as great as other assets in this list. If a bond has appreciated in value over time it has only been by a little. These are safe assets to liquidate and invest in better options.

The Ugly

Cash: Simply bequeathing cash to your heirs gives them no added benefit compared to the other assets in this list. Not only will the cash be taxed, there are no other tax incentives that come with receiving cash in an estate.

Depreciated securities: If you pass away with a depreciated asset the entire capital loss deduction is erased. This is the mirror image of the stepped-up rule; this is the stepped-down rule. You can use capital loss deductions to offset capital gains plus up to $3,000 per year of ordinary income. In addition, unabsorbed losses are carried forward into future years. All of these benefits are lost if you wait and attempt to pass these assets on in your estate.

Lessons Learned: Robin Williams and His Estate

August 25, 2014,

The tragic death and apparent suicide of master comedian Robin Williams has left millions of family, friends, and fans grieving for his loss. Reflecting on his legacy and memory, many people now wonder what is next for his family. He is survived by his third wife, Susan Schneider, to whom he was married for three years, and three adult children ranging in age from 22 to 31 from his two prior marriages.

Williams' Estate

Robin Williams complained to an interviewer last year about the lifestyle changes he has had to make because of how much money he lost in his previous two divorces. Reportedly, it amounted to around $30 million. He admitted to returning to television, The Crazy Ones, because of bills to pay and listed his Napa Valley property for sale. Public records show that his real estate has significant value. The Napa property, named Villa Sorriso, has been on the market since April for $29.9 million. Williams also owns a 6,500 square foot property in Tiburon, California, valued at around $6 million. After deducting the mortgages on the homes the real estate alone is worth around $25 million.

Besides the real estate properties, Robin Williams had other assets, royalties, and the like to leave for his heirs. While some experts believed that he was worth as much as $150 million, recent estimates pegged his net worth closer to $50 million. However, that is still a substantial amount to leave for his wife and children. This number also does not include death benefits from life insurance or other unknown assets.

Williams' Trusts

Robin Williams' comedic genius apparently went along with some estate planning genius as well. It looks as though Williams created at least two different trusts for real estate and other property in his estate. His real estate trust is entitled, "Domus Dulcis Domus Holding Trust." It contains both pieces of his real estate, and it was set up specifically to hold the land in trust. Two men, Hollywood producer Stephen Tenenbaum and New York accountant Joel Faden, were named as trustees.

In 2009, a different trust created by Robin Williams was leaked to the public. This occurred in the middle of his divorce from his second wife, Marcia Garces. The trust reportedly named his three children as beneficiaries and split the assets of the trust into three equal parts. The trust was to distribute funds to his children when they reached ages 21, 25, and 30. Because the trust appeared to transfer the money regardless of whether Robin Williams was alive or dead, this trust was likely established in part because of the divorce settlement and in part for estate planning purposes.

Lessons Learned

Regardless of the motivations behind the creation of the trusts, Williams took advantage of sophisticated estate planning tools to protect his loved ones, unlike other celebrity estates like Philip Seymour Hoffman or James Gandolfini whose estates have been public knowledge since their deaths. The trusts minimized the estate taxes for Williams on his property, and safeguarded his family from the public scrutiny of probate court.

While nothing can make the terrible loss of Robin Williams better for all who knew him, at the very least he appeared to have taken steps before his death to ensure that his family was well taken care of after he was gone. It is a lesson that others can learn from, as well. While most people do not have the level of wealth of Robin Williams, using estate planning tools like a revocable living trust can help your heirs avoid the cost, pain, and publicity of dragging your estate through probate court.

Two Estate Planning Documents Every 18-Year Old Should Sign

August 22, 2014,

Many people believe that estate planning is only for the elderly or those at retirement age. However, there are some documents and tools within estate planning that should be considered at a much earlier age. If you have a child that is about to leave for college or go on a gap-year trip there is one last thing that you should do as you prepare for the separation: ask your child to sign a durable power of attorney and health care proxy forms.

Why These Forms are Important

Estate planning forms like a durable power of attorney and health care proxy forms are important for a number of reasons. Without them, most states will not allow a parent of an adult child to make health care decisions or manage money for their kids. This applies even if the parent is paying for college, claiming the child as a dependent on tax returns, and still covers their kid for health insurance. Without these estate planning forms if your child is in an accident and becomes disabled, even temporarily, you would need a court order to make decisions on their behalf.

The risk for these possibilities is very real. Accidents are the leading cause of death for young adults, and over 250,000 people in the United States between the ages of 18 and 25 are hospitalized with nonlethal injuries every year. Without these documents, even finding out about your child's medical condition can be a challenge, let alone gaining the authority to make medical choices on their behalf.

Why Some Children Do Not Want to Sign

A few different reasons have routinely been cited for why a child is hesitant to sign a durable power of attorney or health care proxy form. One big reason is because at this age, adult children are finally attempting to become independent for the first time. Most kids think that they know better, do not want their parent's help, or want to try to do everything for themselves. Another major reason why children do not want to sign these documents is because as a power of attorney a parent can gain access to their child's grades.

Different Ways to Approach the Situation

Even though at this age most children believe that their parents are clueless, there are ways to approach the subject of estate planning forms and becoming your adult child's proxy. Gentle persuasion is usually the most effective technique. Explain that these documents can help in case of an emergency, wiring money to a bank account, and signing forms like an apartment lease when the child is gone.

Another tactic is to make the forms a condition of your child's education or trip. In exchange for signing the estate planning documents, the parent agrees to help pay for college or time abroad. A final way of approaching the situation is to have an experienced estate planning attorney draft the forms as a back-to-school package. You all sit down as a group and have the attorney explain the significance and importance of the documents to your child.

Three Important Estate Planning Questions to Ask Your Spouse

August 22, 2014,

Estate planning is not many couples' idea of fun, but it is necessary to ensure that your loved ones are cared for after you are gone. An experienced estate planning attorney can handle drafting the proper documents and explaining the law behind estate planning; however, there are three important questions that you should address with your spouse or significant other regarding an estate plan.

How well does my spouse know my estate planning attorney?

If you are the one in charge of the estate planning process and the finances of the family, it is possible that your spouse has never met, or only met once, your estate planning attorney. Perhaps they met to briefly sign some papers, but the client/advisor relationship is not very strong.

If you are the first to pass away, your spouse would be relying on a person that they barely know during the most difficult time in their life. Since your estate planning attorney will know about every asset, final wish, and plan for the estate it is important that your spouse form a strong relationship with your estate planning attorney.

Does my significant other know where all of the accounts are located and how to access them?

The surviving spouse or significant other will need to access money immediately in order to pay for funeral expenses. Even if an insurance policy covers funeral expenses the reimbursement does not come until weeks or months later. Hospital bills and the daily expenditures of everyday life also need to be taken care of. Your spouse will not have time to search everywhere trying to figure out what accounts exist and how to access them.

You need to ensure that your significant other is aware of all financial accounts and how to access them after you pass away. It is helpful to make a list (or two) and leave them for your spouse that includes:

· Password lists for all online accounts and memberships
· Names of all accounts and memberships, online and offline, along with any necessary instructions
· Location of all estate planning documents
· Names, addresses, and phone numbers of all lawyers, financial planners, accountants, and others who helped create the estate plan

Are all of our estate planning documents and beneficiary designations up to date?

Life events such as births, deaths, marriages, divorces, and job changes can all necessitate an update to your estate plan. This applies to the will, estate planning documents, and any beneficiary designations. Be sure to check:

· Retirement plans (401K plans and IRAs)
· Life insurance
· Annuities
· Taxable investment accounts

...and other assets that require a beneficiary designation.

By talking with your spouse or significant other about these important aspects of your estate plan you can minimize the stress and confusion of the entire process. If your spouse has a good relationship with your estate planning attorney, is knowledgeable about your accounts, and has worked with you to update the estate plan and beneficiaries you can be assured that your loved ones will be properly cared after you are gone.

Celebrity Legacies Teaching Lessons About Estate Planning

August 18, 2014,

A new show premiered on the Reelz Channel this week called Celebrity Legacies, a documentary series highlighting the estates of famous deceased celebrities. The show explores a different celebrity's estate plan every week, discussing their legacy, estate, and problems that arose after the celebrity's death. It also explains how a celebrity's estate can continue to increase after their death and why some deceased celebrities still make the "highest paid" lists years after they are gone.

Premiere Episode: James Gandolfini

The premiere episode of the series focused on the estate of James Gandolfini, and subsequent episodes include famous names like Anna Nicole Smith and Jim Morrison. Gandolfini died unexpectedly of a heart attack at age fifty-one in 2013 while on vacation in Italy with his son. The actor, known primarily for his work on the television show The Soproanos, left behind two children from two different marriages and a messy, largely unfinished estate plan.

Celebrity Legacies provided legal and financial commentary on the outcome of Gandolfini's estate. Done as a "Band-Aid" measure after the birth of his daughter, Gandolfini relied primarily on his will for his estate plan instead of placing his assets in something more secure like a revocable living trust. As a result, his estate and the affairs of his family came under public scrutiny when his assets became public record in New York's probate court.

Gandolfini's estate was estimated between $70 million and $80 million at the time of his death, and it was divided amongst his family members as well as some close friends. However, he did not contemplate what he was going to do with his Italian properties or consider whether his children would be mature enough to handle their massive inheritances when they come of age at twenty-one.

Celebrity Legacies as a Teaching Tool

One of the great things about this new show on the Reelz Channel is that it can serve as a teaching tool for its viewers. Celebrity estate stories can be used to educate people, including families and professionals, about how celebrity errors in estate planning can help them avoid issues in their own plans. Most people think that celebrity estates could never be relatable to their own situations, but in reality many people make the exact same mistakes in their own estate plans. Regular families routinely face sibling squabbles, public court battles, and other issues that also arise in celebrity estates.

Gandolfini's estate taught many important lessons for viewers in the premiere episode of Celebrity Legacies. He was only fifty-one years old when he died, and Gandolfini started planning his estate before he left for vacation - intending to finish when he returned. Like Gandolfini far too many people put off estate planning, and it can have tragic consequences for the rest of the family. His incomplete estate plan could have been avoided and all of the complications, publicity, and estate taxes could have also been sidestepped if he would have stopped procrastinating.

As obvious as it may seem, for most people it is not. In fact, as many as two-thirds of the U.S. population has neglected to fill out even a simple will. Hopefully, shows like Celebrity Legacies will highlight the dangers of putting off estate planning and help viewers avoid the same fate.

Estate Planning Issues Involving Pets, Pt. 2

August 14, 2014,

In the first part of this article the importance of planning for pets in the estate planning process, common reasons why pet planning often fails, and the documents needed for proper pet planning were discussed. However, there are other issues that must also be reviewed when including a pet in the estate planning process.

Issues to Consider When Planning for a Pet

Regardless of the document(s) you choose to develop your estate plan for your pet, the following issues also need to be considered for their wellbeing and needs. By clearly detailing every one of the following aspects you can be sure that your pet will be properly cared for in your estate plan.

Pet Owner: It is important to establish who the true owner of the pet is because a pet is considered personal property. The issues that arose with pet ownership after Hurricane Sandy are another good example of why it is important to establish ownership of a pet.

Pet Guardian: The pet guardian can be a person or organization. The guardian typically keeps the pet and cares for it under the instruction of the will or pet trust. If an organization is the guardian then instructions about adoption should be included in the estate plan.

Funding: Providing funding for a pet trust or pet provision in a will is highly recommended for a pet in the estate planning process. The funds can be a percentage or fixed amount from the estate and can come from bank accounts, retirement funds, insurance policies, or from the selling of personal items in the estate. You should include in your consideration for funding the possible future expenses of the pet as it ages, level of comfort you wish the pet to have, and whether you want to include compensation for the pet guardian.

Remainder Beneficiaries: It is vitally important to consider who or what will receive the remainder of the funds set aside for your pet after it dies. If a remainder beneficiary is not set up the court will decide who gets the rest of the funds in the pet account. Most people designate the remainder of the pet trust to go to families, charitable organizations, or the pet guardian. Another important consideration if you are leaving the remainder to multiple beneficiaries is to designate the amount in percentages rather than whole numbers because it is incredibly difficult to figure out ahead of time how much will be left in the pet account.

Pet Description: This is done for the protection of the pet to ensure that the pet guardian does not destroy the animal or replace it with another after it dies to illegally extend trust distributions or benefits.

Instructions for Care: Detailed instructions help ease the transition for the pet from its owner to its new guardian. However, the instructions should also allow the pet guardian some discretion in care.

Keeping Pets Together: If more than one pet is being planned for consider adding a provision in the will or pet trust that keeps the pets together. Keeping pets together is not automatic, and it can have a significant impact on who will agree to be pet guardian.

Including Present and Future Pets: All pets should be included in the estate planning process, including those not yet owned. The care for all present and future pets can be included in the estate planning process. Using the term "all of my pets" in the documents is the best way to make sure this is accomplished.