Court Applies Disentitlement Doctrine in Estate Lawsuit

February 26, 2015,

This case centered on a dispute over the administration of a family trust as well as the interpretation of trust documents. Despite appealing the ruling, the defendant in the case violated court orders and, and the plaintiff moved to dismiss the appeal based on the rules within the disentitlement doctrine.

Facts of the Case

In the case of Adam J. Blumberg v. Gloria M. Minthorne, Gloria and Ralph Minthorne created the Minthorne Family Living Trust in 2008, with Gloria named as the sole trustee. Both parties had children and assets from previous marriages. In regards to the division and distribution of the trust property, one clause stated that the trustee was allowed to transfer the entire estate to a survivor's trust after the death of one spouse. Another clause left "all the rest, residue, and remainder of the trust estate, including the remainder one-half interest" in an apartment building to Ralph's children and grandchildren.

Ralph Minthorne died in November 2008, and Gloria's attorney informed Ralph's grandchildren, including Adam Blumberg, that the apartment building was to be sold and distributed to the family members. The building went in escrow at $925,000 but Gloria's attorney refused to give the grandchildren an accounting of the estate. Finally, in May 2009 Mr. Blumberg was informed that the price dropped to $800,000 and that the net proceeds were $313.000. Adam filed a petition in October 2010 to remove Gloria as trustee, recover trust property, compel an accounting, and appoint a successor trustee.

Ruling of the Court

The trial court found Gloria liable to Ralph's children and grandchildren. She was replaced as trustee by Adam Blumberg and was ordered to hand over property to the trust. She was also ordered to file an accounting with the court. Gloria appealed the ruling in December, 2012. The day before a status hearing on the appeal, Gloria quitclaimed the property in question to her daughter, and after months of promising to do so she never filed an accounting with the court.

Her and her attorney failed to appear for multiple court hearings, and she never disclosed the quitclaim deed to Mr. Blumberg. When he finally learned of the quitclaim, Adam filed a motion to dismiss Gloria's appeal. The appellate court agreed and based its decision on the disentitlement doctrine. This doctrine gives the court the right to dismiss an appeal if a party refuses to comply with a lower court's order.

Under this doctrine, a party cannot "ask the aid and assistance of a court in hearing his demands while he stands in an attitude of contempt." It is not seen as a punishment, but as a means to induce compliance with a valid order. In this case, Gloria disobeyed two court orders. First, she failed to submit an accounting of the trust and estate to the court. Second, she failed to quitclaim her property to Mr. Blumberg and in blatant disrespect of the court quitclaim the deed to her daughter. As a result, the disentitlement doctrine was properly applied, and Gloria's appeal was dismissed.

Social Media Estate Planning: Adding a Facebook Legacy Contact

February 23, 2015,

In a time where social media accounts are part of your estate plan, figuring out what should happen to your accounts when you die is something that must be considered. The developers at Facebook have been dealing with this issue for years. Previously, they allowed for a basic memorialized account that people could view but not manage. Now, Facebook has launched a new feature that allows you to choose a legacy contact, a trusted person who can manage the account after you die.

Purpose of a Legacy Contact

The purpose of a legacy contact is to allow someone to manage your social media account after you pass away. While technically you can just give your password to another person, it is a violation of Facebook's terms of service. In addition, there is no guarantee that the something might happen with your password that would lock your account manager out of your page.

When Facebook is notified of your death, the company will memorialize the account. The legacy contact is then notified and given access to the page. The legacy contact will be able to add a post to the top of the timeline, respond to new friend requests, update the profile picture and cover photo. You can also give the legacy contact the ability to download an archive of your Facebook activity which includes posts, pictures, and any updated profile information. However, the legacy contact cannot log in to your personal page or read any private messages.

How to Set Up a Legacy Contact

The first thing to consider when creating a legacy contact is determining who that person will be. Many people choose their spouse or partner, but for an older generation that person may not be technologically savvy. Other people have chosen their child or a grandchild as the legacy contact, or they have named the executor of their estate to also manage their social media websites.

In order to actually set up a legacy contact on Facebook, the process is the same on a mobile device or on a desktop computer. First, go to your settings and scroll down to the "Legacy Contact" option at the bottom. Then, select Edit and follow the prompts to select which of your Facebook friends will be your legacy contact.

It is important to note that Facebook will not notify the person that you have set as your legacy contact that they have been selected. The legacy contact is only notified by the company once your account has been memorialized. It might be in your best interest to give your legacy contact the heads-up that you have selected them so that they will be expecting the responsibility later on.

If having a legacy contact for your Facebook account does not interest you, there is one other option. The company does allow for you to select an option that permanently deletes your account from Facebook when it is notified of your death.

Tax Issues to Consider When Closing an Estate

February 20, 2015,

When a person dies, someone else must step up and close the estate. If that responsibility falls to you, as an executor you must identify all of the estate's assets, pay off creditors, and distribute what is left to the heirs. However, an added responsibility as the executor is that you must also file all of the tax paperwork for the estate, as well. There are four major tax considerations that you must complete as the executor of an estate.

Filing the Final 1040

The first thing that you must do as an executor is file the deceased's personal tax return for the year that the person died. The standard 1040 form covers from January 1 of that year until the date of death. If there is a surviving spouse, you can fill out the 1040 as a joint return and is filed as though the deceased lived until the year's end. A final joint 1040 includes the decedent's income and deductions up until the time of death in addition to the surviving spouse's income and deductions for the entire year.

Filing the Estate's Income Tax Return

In addition to filing the individual income tax return, as the executor you must also file an income tax return for the estate. Once the person has died, any income generated by any holdings is income of the estate. The estate's first year of income tax starts immediately after death and the end date can be the end of any month, so long as the time period for the return is twelve or less months. You must file a 1041 form with the federal government by the fifteenth day of the fourth month after the year-end date.

However, if the estate is less than $600, you do not have to file a 1041 on behalf of the estate. In addition, you do not need to file this form if all the decedent's income-producing assets bypass probate and go straight to the surviving spouse or other heirs by contract or operation of law. Examples of this include joint tenancy in property, retirement accounts, IRAs, and other beneficiary designated income.

Filing the Estate's Estate Tax Return

You must also file the estate's estate tax return, otherwise known as Form 706. This form is only applicable if the deceased's estate is worth over the federal exemption level, which is $5.43 million for 2015. However, the form is required if that person gave a sizable gift over the annual gift amount of $14,000 sometime within 2013-2015. If a sizable gift was made, it is added back to the estate for tax purposes to see if the estate would be over the federal exemption limit. If it is, there is a 40% tax on the excess amount.

The deadline for Form 706 is nine months after death, but a six month extension is allowed. It is also important to note that while life insurance proceeds are given income tax free, they are usually included in the decedent's estate for estate tax purposes. An exception to this is if the beneficiary is the surviving spouse.

Miscellaneous Tax Details

There are smaller other details that are necessary for filling out an estate's tax responsibilities. If you need to fill out a 1041 or Form 706, you must get the estate a federal employer identification number (EIN). This requires filling out another document, Form SS-4. You should also file a Form 56 that notifies the IRS that you will be handling the tax issues for the estate. Finally, these forms apply to the federal government, but do not forget to check and see if the state requires tax returns, as well.

Ernie Banks' Caregiver Claims to be Sole Heir

February 18, 2015,

Known and beloved as "Mr. Cub," Ernie Banks began his career in baseball earning only seven dollars per day in the Negro Leagues, before coming to the Chicago Cubs and becoming one of the team's all-time favorite players. After baseball, Ernie Banks continued a career in business and philanthropy, Mr. Banks earned the Congressional Medal of Honor in 2013. He passed away on January 23, 2015 from a heart condition, but the death certificate also listed dementia as a "significant condition contributing" to his death. This statement has become incredibly important because his caretaker is now claiming to be his sole heir.

Ernie Banks' Estate Plan

Three months before he passed away, Mr. Banks signed a new will and estate planning documents that included a power of attorney, healthcare directive, will, and trust. The new estate plan gave control of his entire estate to his caretaker and talent agent, Regina Rice. The will and trust also excluded his family members and named her as the sole beneficiary. In fact, the new documents expressly stated that nothing should go to his estranged wife or three children from a prior marriage. The new plan gives Ms. Rice all assets from Mr. Banks' estate, and it also allows her to profit off of his name, image, and likeness.

Banks' Family Contesting Estate

The Banks children have already stated that they plan to contest the new estate plan. They claim that Ms. Rice used Mr. Banks' dementia as a way to manipulate him into signing the new will. They also claim that in the months leading up to his death, Ms. Rice refused to let them speak to their father over the phone. Ms. Rice has refuted the allegations and has stated that "the record and those closest to Ernie will dispel any iota of concern regarding my relationship with Ernie and his trust in me to [carry] out his wishes."

Illinois Undue Influence Law

A new law was passed on January 1, 2015 in Illinois that makes it easier for families to challenge wills that favor a caregiver. However, it does not apply in this case because Mr. Banks signed his new documents a couple of months before the new law went into effect. That being said, the burden of proof to prove that there was no undue influence with Mr. Banks will lie with Ms. Rice.

The concept of undue influence means that a person was of sound mind and free from pressure or manipulation of another person when the estate planning documents were signed. The fact that Mr. Banks had dementia and completed the changes to his estate only three months before he died is questionable. And because Ms. Rice was in a position of trust over Mr. Banks at the time of the changes, as caregiver and talent agent, the law will automatically assume that she did use some level of undue influence when the documents were signed.

Rethinking Estate Planning with Proposed Tax Reform

February 16, 2015,

On January 17, President Obama proposed a new plan for the tax code that could have implications on estate planning. He proposed a revamp of the tax code that would include bumping up capital gains and dividend rates to 28%, treating bequests like realization events such as making beneficiaries pay tax on assets that have appreciated in value, and blocking contributions and accruals in qualified plans and IRAs once the account reaches $3.4 million. These ideas are forcing people to rethink their current estate plan and look ahead to the future.

Response to the Plan

The response from advisors, Republicans, and tax experts was not favorable to this new plan. It has also been noted that the chances of this proposal going through a Republican-dominated Congress are low However, legislators are telling people to pay attention because it gives an insight to where legislation may go in the future. Experts have noted that this type of legislation has been proposed before, and can give people planning their estates now a potential look into the future.

Contingency Planning the Estate

Experts are looking to charitable giving, donor-advised funds and charitable remainder trusts as the tools that estate planners can use to help contend with the potentially higher tax rates. Life insurance policies can also be a way to shield assets from higher taxes, especially if there is a cap placed on qualified account balances. What would typically go to a qualified plan or IRA could instead be invested in a life insurance policy. A cash value life insurance policy would combine the benefits of a tax-advantaged accumulation of funds along with tax-free withdrawals from the policy.

Another option for avoiding negative tax consequences in an IRA would be to cut the balance of an IRA reaching the maximum contribution limit and using the funds cut to make a Roth IRA conversion. Alternatively, you could use outside funds to pay the income tax on the Roth IRA conversion, which would allow you to preserve the value of the account and still receive tax-free withdrawals.

Current Trends in Estate Planning

If the tax reform is a success, many estate planners would be undoing years of work based on the current trends in estate planning. Most of the change would be tied to the proposed change in stepped up basis for appreciated assets. This is because currently, if a beneficiary inherits an appreciated asset, such as stock, the asset will pass to the heir at the value it was at the time of death. The heir receives the asset without having to pay capital gains tax on the appreciated value. Under the proposed tax reform, the stepped up basis will still be allowed, but the appreciation will be recognized and the heir will have to pay.

Another issue is that with the federal estate tax exemption now at $5.43 million, many estate planners are focused on taking advantage of stepped up basis to mitigate income taxes. One expert noted that "the planning has moved from getting assets out of the estate to keeping appreciated assets in the estate . . . Maybe they'd have to go back to getting property out of the estate and shifting the burden to beneficiaries in lower brackets. People would really have to revisit their estate plan from the ground up if any of this found its way into law.

Attorney Claims Judges were Bribed in Estate Case

February 12, 2015,

An attorney claims that he has evidence that a panel of judge in the Panama Supreme Court were bribed into stripping him of control over a $150 million estate. The lawyer, Richard Lehman, says that he has an affidavit that proves that the foreign court illegally removed him from his position as executor of the estate of his client, Wilson Lucom. According to Mr. Lehman, Mr. Lucom's final wishes for his estate were that the estate be overseen by Mr. Lehman and that a portion of the estate be donated to "needy Panamanian children." However, Mr. Lucom's took over the estate after her legal team bribed several judges.

Facts of the Case

This lawsuit stretches back to 2006, when Mr. Lucom passed away. A wealthy American expatriate living in Panama, he appointed both his widow Hilda Lucom and Mr. Lehman as the executors of his estate in his original will. However, he made modifications to the estate plan prior to his death that contributed to the legal battle over his estate as well as over its real estate holdings on the Pacific coast of Panama.

Over the years, Mr. Lehman has battles Ms. Lucom in Panamanian court claiming that the widow was ignoring her late husband's wishes to donate a portion of the estate to the needy children of the country. Ms. Lucom retaliated by filing criminal complaints against Mr. Lehman for "aggravated swindle" and the theft of family funds. As a result, Mr. Lehman was briefly on the International Criminal Police Organization's list of wanted men and was jailed in Panama for a short while before being cleared of the criminal charges.

As to the affidavit at issue, Mr. Lehman's lawsuit claims that "it's drawn from the statements of a 'prominent real estate developer' who heard a post-factum discussion about the briber . . . The corruption of the Panamanian judicial system is not mere speculation. The actual meeting where [the widow's] lawyer offered and negotiated a $1 million bribe to one of the Justices of the Panel, was reported ... to the prominent real estate developer."

Fallout of the Case

Back in the United States, a Florida Circuit Court judge issued a multi-million dollar judgment against Mr. Lehman for improperly removing funds from Mr. Lucom's estate to fund his courtroom drama with Ms. Lucom. The judge called Lehman's actions those of an "intermeddling volunteer" and stated that "Although Lehman attempted to portray himself at trial as a protector of the assets of the overall estate, the credible evidence showed him to be a covetous opportunist."

Mr. Lehman's latest lawsuit wants this judgment set aside and claims that the American judges have been misled by a corrupt Panamanian judge, Juan Molina and claims that three judges higher up on the Panamanian Supreme Court were all bribed, as well. Mr. Lehman claims that in 2010 when the Panama court gave Ms. Lucom control over the estate, they did so "in consideration of a several million dollar bribe paid to the three Panamanian Supreme Court Justices." Mr. Lucom is now suing the estate of Ms. Lucom, who passed away in 2011m as well as her attorneys and heirs for fraud and injunctive relief against the handling of the estate.

Looking Back at the IRA on Its 40th Birthday

February 11, 2015,

In 1974, the Individual Retirement Account (IRA) was born, and since its inception more than 43 million Americans have created at least one IRA account for their retirement savings. Over the years the IRA has transformed greatly and has the potential to continue to evolve over the coming years. In fact, the IRA today bears almost no resemblance to the retirement vehicle that was created forty years ago.

Brief History of the IRA

When the IRA was first introduced in 1974, it was only available to employees who were not already sponsored by employer plans. The maximum contribution per year was only $1,500, and 401(k) plans did not yet exist. In 1981, the IRA saw a massive increase in the number of accounts when a new tax law let anyone under the age of 70.5 years old contribute as well as increased the annual maximum amount of contribution to $2,000.

However, the Tax Reform Act of 1986 phased out the deduction for IRA contributions among the wealthy employees that were already covered by employer-sponsored plans. Since then, there has not been much significant change to the IRA outside of the creation of the nondeductible Roth IRA, the retirement withdrawals of which are typically tax-free. In addition, the maximum amount that a person can contribute per year has increased to $5,500 in 2015 and $6,500 for people over the age of fifty years.

Transformation of the IRA

IRAs today are mostly IRA rollover accounts, a place where an employee can move their employer-sponsored accounts when they leave their job and keep the money until they make withdrawals in retirement. Now, only eighteen percent of workers who are not offered a 401(k) plan save their money for retirement in an IRA.

Because most IRAs are rollover plans, they typically hold much more money than a defined benefit pension plan or a 401(k). In fact, the Federal Reserve reported in 2014 that there were $3.1 trillion in pensions, $5.3 trillion in 401(k)-type plans and $7.2 trillion invested into IRAs. Compare that to the numbers in 1981, when there was only $4 billion in IRA accounts.

The Future of IRAs

Legislators and employers are starting to look at IRAs once again as a source of retirement savings, instead of simply a bridge for employer-sponsored plans. In the coming years, experts expect to see an enormous growth in the number and value of IRA rollover accounts as an increasing number of Baby Boomers transfer their 401(k) money into an IRA when they prepare to retire. To put that in perspective, nearly 10,000 people from the Baby Boomer generation turn 65 years old every single day.

In addition, the Obama administration instituted the MyRA plan, which will begin in earnest this year. The MyRA has a lot of similarities to the original IRA of 1974 - this vehicle is a nondeductible Roth IRA for employees whose employers do not offer retirement plans and will be limited to people that make under $129,000 per year (or couples that make under $151,000). Some states are also developing their own automatic IRA accounts for citizens that do not have access to employer-sponsored retirement plans. For example, Illinois is rolling out its "Secure Choice Savings Program" starting in 2017.

Gun Trusts Hitting the Bull's-Eye with Estate Planning

February 9, 2015,

The sales of firearms in the United States is rising, and for people who want to pass on their collection of guns to the next generation, estate planning has been particularly difficult. However, with the advent of the "gun trust" there is now a way to ensure that your collection is passed safely and to the correct beneficiaries. The gun trust has become the go-to vehicle for bequeathing firearms in an estate for owners who do not wish to have their collections sold after their death.

Increased Demand for Gun Trusts

The FBI's National Instant Criminal Background Check System ran 21.1 million background checks for firearm purchases in 2013, a significant increase from the 19.6 million checks performed in 2012. The number of background checks also jumped in December of last year, with the FBI's system running more than 2.3 million checks in that month alone, compared to only two million checks the December prior. This system runs a background check every time that a person walks into a licensed gun dealer and wishes to purchase a firearm.

For clients that have now amassing a collection of guns, many are now considering who will inherit them in their estate plan. This is where the gun trust comes into play. "You want a mechanism where, if the person [owning the guns] loses capacity, someone can secure the assets, make sure they're safe and make sure they go where people would want them to go."

Benefits of the Gun Trust

There are two primary uses for a gun trust: easing the process of obtaining federally regulated firearms and easing the burden of possessing and transferring firearms between people in an estate plan. In regards to obtaining federally regulated guns, these are known mostly as Title II weapons. Title II weapons include such things as machine guns, silencers, and other firearms listed in the Gun Control Act of 1968.

The typical process to acquire a Title II weapon is to go through a fingerprinting and photo ID process, paying a tax stamp fee to the ATF, and getting the signature of a chief law enforcement officer that states that you should be allowed to possess such a firearm. With a gun trust, the trust itself can act as the purchasing agent for Title II firearms, easing the process for people who wish to make more than one purchase of these weapons.

Gun trusts also help with the transfer and possession of single firearms or weapons within an estate plan. A gun trust is particularly helpful when a gun-enthusiast passes away and the spouse has no knowledge about how to properly transfer the firearms to another person. If done incorrectly, you can be charged with a felony for improper transfer, even if you are passing it along to the person that it was intended for.

Legal Ramifications of Gun Trusts

The main benefit of a gun trust within an estate plan is that the trustee has knowledge of the proper state and federal procedures for transferring firearms from the estate to the intended beneficiaries. This includes notifying the proper authorities if Title II guns are crossing state lines as well as filing the proper forms with the ATF when possession of a gun transfers to an heir.

In addition, beneficiaries can also use a gun trust for income made off of the sale of the guns. The gun owner can control, through the details of the trust, where and how the profits of the sale of the gun collection should be used. The proceeds of the sale can go directly to the beneficiaries of the trust, or it can be set up as a charitable remainder trust to pass some of the proceeds to a worthwhile organization.

The Right Tools for Retirement

February 6, 2015,

Just like you would not attempt a do-it-yourself project around the house without the proper hardware tools, you should not go into retirement without the proper estate planning tools. This means that you need to have the right planning vehicles and strategies in place that will ensure that you are receiving a paycheck or funds for decades into retirement. Thankfully, there is a basic estate planning toolkit that can help you get started on your retirement planning.

Realistic Budget

The foundation of every retirement plan is a realistic budget that plans for all incoming money from things like Social Security, pensions, and savings as well as plans for all outgoing expenses like basic necessities, medical care, and miscellaneous costs. This is not a tool that is created and forgotten; you should revisit your budget frequently to make sure that your finances are still on track.

If possible, try to think of all expenses to add to your retirement budget like annual insurance premiums and other infrequent costs. You should also have a slush fund to account for any expenses that may occur without warning, such as a medical emergency, housing repairs, or a new car in addition to any money that you plan on using to help family members.

Asset Allocation

Even before reaching retirement, you should start to reallocate assets within your portfolio to match your lifestyle. This typically means taking more assets out of risky ventures and investing them in assets that can give you sustained, long-term growth. This helps prevent against inevitable market declines, especially when you do not have an employer's paycheck to rely upon.

An Experienced Attorney

While many people are uncomfortable discussing their personal lives with a lawyer, retirement age is not the time to shy away from asking for help from an experienced attorney. An estate planning attorney can go over what you have already done to prepare for retirement as well as draft the necessary documents that ensure that all of your affairs are in place. An attorney can also give you advice about the proper time to take care of things like Social Security withdrawals and structure your estate in a way that minimizes taxes.

Up to Date Documents

Updating all estate planning documents is also a must. Like the budget, your estate plans should not be something that is created and then ignored. As life events occur, you should be reviewing and updating your estate plans accordingly. This includes all actual documents regarding your estate that could pass through probate in addition to any and all accounts that include a beneficiary designation.

A Non-Financial Plan

Finally, you should also draft a non-financial plan to keep you and your loved ones physically and mentally engaged in retirement. Many retirees do not contemplate how such a drastic shift in living can affect them, body and mind. A lot of people who reach retirement find themselves depressed or becoming coach potatoes when they do not have a non-financial plan in place for their retirement years.

Who Should Run the Family Trust?

February 4, 2015,

When a trust is created, most often the creator turns to a trusted friend, relative, or confidant to oversee it. This makes a lot of sense to most people because the purpose of a trust is often personal in nature, and the creator wants someone to run the trust that has been a part of their life for many years. However, things like friendship, family drama, and emotions can all complicate the decisions that a trustee makes for a family trust in regards to carrying out the terms of the trust.

Use of Non-professional Trustees

The use of non-professional trustee has been growing as more people set up trusts to operate during their own lifetimes. A lot of these creators do not believe that they need to hire a professional because they can keep an eye on the trust while they are still alive. People are creating lifetime trusts for a variety of reasons. Many are looking ahead at minimizing estate taxes if their assets are above the $5.43 million exemption limit ($10.86 million for a couple). Others are attempting to minimize the level of current state taxes on their assets or gain financial control of their legacy.

Benefits of a Professional Trustee

Hiring a professional trustee to run a family trust can provide a lot of benefits to the creator and beneficiaries. For one, professional trustees are experts at running trusts and knowing how complicated, long-term trusts work. This is particularly important if your family trust is designed to last for more than one generation.

Another benefit of a professional trustee is that the person is removed from any potential family drama or biases. When a trustee controls how much money a beneficiary is entitled to receive, conflicts inevitably arise. If a professional trustee is handling the decision, family prejudice, jealousy, and bias can be eliminated as potential sources of conflict.

Having a personal trustee can also alleviate certain legal issues, as well. For example, a professional trustee is more apt to pay attention to when changes need to be made or when distributions are supposed to be made to beneficiaries. When these things don't occur, a lot of legal drama can result.

Potential Downsides of a Professional Trustee

There are also potential downsides to hiring a professional trustee to run the trust. First, professional trustees typically charge higher rates than a family member or friend would charge to manage the trust. It is not unusual for a professional trustee to charge as much as 0.25% per year to operate the family trust. In addition, there are sometimes concerns that a professional trustee is looking out more for the bank's interests than those of the beneficiary.

In order to alleviate these issues, some family trusts are now using a combination of non-professional and professional trustees to run the trust. Co-trustees are designated to both remain impartial in the management of the trust while still being attuned to the individual needs and backgrounds of the beneficiaries. Regardless of what type of trustee is chosen, experts agree that all trusts should include the proper documentation to remove and replace a trustee if the arrangement is not working out.

How to Avoid Blended Family Issues in Estate Planning

February 2, 2015,

Blended families, where there are children and spouses that have been through multiple marriages, come with estate planning conflicts that unblended families do not typically deal with. Children from previous marriages cut from wills, barred from seeing a sick parent, from attending a funeral, or inheriting part of a family business have all been issues that blended families have dealt with that come with complexities that an unblended estate plan does not have. With divorce and remarriage rates rising, the already delicate issue of inheritance can be an even bigger problem in blended families.

Blended Family Estate Planning

According to the National Stepfamily Resource Center, in the United States two out of every five marriages end in divorce, and almost half of all married people get married again at some point in their lives. In the unions of people who have married twice, around 65% involve children from prior marriages. This can make the transfer of brokerage accounts, real estate, and personal property very tricky.

The easiest way to avoid legal problems and family feuds between the surviving spouse and stepchildren is to share the details of the estate plan before a spouse's death. It helps to explicitly communicate with your children that this is the plan that you want to have followed and deal with any issues that arise head-on. While it may lead to some uncomfortable conversations, there are ways to tackle the challenge of keeping the peace when dividing blended family wealth.

Focus on Fairness
Some remarried couples choose to leave the entirety of their estate to their biological children. However, many people want their surviving spouse to inherit some, or even all, of their wealth. Biological children often feel cheated when their step-parent receives the substantial bulk of the family estate, especially when the surviving spouse could leave some of that estate to their own biological children.

The easiest way to deal with this potential issue is to divide your estate so that your spouse and children each get something from the estate. It alleviates any potential bitterness and allows your children to enjoy their inheritance that you have left for them.

Use Trusts
A well-crafted trust can increase the odds that children will not fight for a bigger share of the estate. For example, a QTIP trust gives all annual income from the estate to the surviving spouse but also lets you specify who gets the remainder at their death. Another option is to structure a trust to allow small distributions to be made to the children while the surviving spouse is still alive, allowing them to enjoy part of their inheritance before they grow old.

Keep Documents Up to Date
One of the most important things to do in a blended family estate plan is keeping all documents up to date. If you mistakenly leave the vacation house to your former spouse in the will or forget to make the change to a beneficiary form that property will pass to them at your death. Make sure that all titles records, accounts, and beneficiary designations are changed to reflect your new blended family.

Specify Medical, End-of-Life, and Burial Wishes
It is important to take a realistic look at family dynamics before making medical, end-of-life, and burial wishes in an estate plan. A remarried spouse named as healthcare proxy can keep the children from seeing their dying parent. In addition, the executor or durable power of attorney can have your remains buried or disposed of in a way that upsets your kids if you do not specify how you want these issues dealt with.

Estate Planning with Legacy Properties

January 30, 2015,

Many affluent families are increasingly building or buying legacy properties - multi-million dollar properties or compounds that are designed to be shared with family now and for generations to come. This trend comes with the rising interest in multi-generational living and vacationing as well as to be a place where family from around the country or world can gather to be together. However, estate planning with complex family dynamics, lifestyle issues, or logistical problems can often mar what is meant to be a place for family.

Legacy Homes

What make legacy homes different from just a large house are the resort-style amenities being built on the property. Many legacy homes have multiple master bedrooms or mini apartments, sport courts (volleyball, basketball, tennis, croquet), and swimming pools. In-home theaters or teen zones for digital gaming are also commonplace in a legacy home. Lakefront or seaside properties often come with their own dock, boathouse, or beach. Meanwhile, legacy homes in the countryside routinely come with shooting ranges, hunting areas, or equestrian facilities.

Architects focus on building common areas and open floor plans that create a feeling of togetherness that also have separate areas for activities like cooking, watching television, or playing. In addition, practical concerns like multiple car garages, extra-large kitchens, and large eating areas are also a must. These homes are meant to be more than just a place for vacations and are meant to be the backdrop for weddings, birthdays, graduations, holidays, and other family celebrations.

Estate Planning for a Legacy Home

To protect such a large investment like a legacy home, estate planning is vital. The "four P's" of estate planning are often emphasized by attorneys for such an asset: protection, privacy, probate avoidance, and planning.

Protection includes comprehensive insurance coverage for the home that can cover any potential damage, liability coverage, and an ownership structure that will protect the home from being seized by outside creditors.

In order to ensure privacy, discuss with your estate planning attorney about placing the title of the estate with a legal entity like a trust or limited liability company. It should have a name that is not linked to the family.

Probate Avoidance
One of the most important things is to try and avoid probate on the estate when the original owner passes away. By properly placing the legacy home in a trust or other estate planning tool, the home can avoid the lengthy, public, and expensive process of probate. It can also help to mitigate any estate taxes.

Finally, the owner of the legacy home needs to establish a clear succession plan for the estate that details who owns the property, how it should be managed, maintained, and eventually passed on to future generations. When this isn't implemented correctly, legacy homes that have been in the family for generations can be sold because of family disputes over who owns the home, how it should be maintained, or how it will be passed on to future generations of the family.

A Creative Estate Planning Use for Unneeded Life Insurance

January 28, 2015,

For people who are estate planning and have one of their goals as providing for their grandchildren's education, training, future home, or the like there are many assets that can be suited for that goal. However, there is one asset that does not often come to mind that can cover the expenses of future generations that most elderly couples already possess: life insurance.

Whole Life Insurance

Whole life insurance is a type of insurance that is designed to protect a person over their entire lifetime. Typically, an insured person pays a fixed periodic premium on the insurance, and a death benefit is provided to a named beneficiary when the insured dies. The policy builds in value over the lifetime of the insured as premiums are paid, and if at any time the insured person wishes to terminate the policy, the cash value is surrendered to them.

Most couples purchase life insurance to provide the other spouse with survivor income when the other passes away. These insurance policies come in most handy when the couple is younger because the survivor income supplants the wages that the deceased spouse would have made. However, once a couple reaches retirement age, whole life insurance is not as necessary if the proper planning has been accomplished.

Options for the Insurance

If an older couple wishes to get rid of their life insurance policy, one option is to surrender the policy and reinvest the cash value into other assets. For a couple looking to provide for their grandchildren, the cash value can be placed in an account for their use or to be gifted to them in the future. However, the tax implications of this plan would mean that the policy gets taxed as ordinary income upon surrender and would be reduced in value for the heirs.

Another option instead of surrendering the insurance is to gift the entire policy to fund an irrevocable trust created to benefit the grandchildren. The policy would then be outside of the estate, free from income and estate taxes. In addition, the life insurance policy would be considered "paid up," meaning that there is no need to gift more money to the trust to pay the premiums. Any annual dividends paid by the policy can be used to purchase additional insurance, thus increasing the trust's value.

Irrevocable Insurance Trust

An estate planning attorney can easily establish an irrevocable trust for the insurance policy. In order to gift the insurance, the trust should be named as the owner and beneficiary of the policy. In this way, the trust can be used to benefit grandchildren regardless of whether the owner of the policy has passed away. For example, if a grandchild needs money for college tuition and the insured is still alive, the cash value from the policy can be tapped from the trust. If the insured has passed away, the death benefits can be used to pay for tuition.

New York Adds Twist to Estate Tax Exemption

January 26, 2015,

In order to keep the wealthy and elderly citizens residing in the state, New York recently raised its state estate tax exemption to five million dollars, up from the mere one million dollar limit of previous years. Matching the federal exemption level, many people in the state were thrilled that their estates were now shielded from tax. However, legislators added a twist to the new limit that may put the wealthy at even more of a disadvantage than they were before.

New York Estate Tax Limits

Under the new law, the state estate tax threshold will gradually increase from one million dollars to five million dollars, indexed for inflation, so that it matches the federal estate tax exemption level by January 1, 2019. However, the new law also includes an estate tax "cliff" that applies to all estates that exceed the current exclusion amount by more than five percent. Those estates are taxed back to the first dollar, effectively eliminating the state estate tax benefits for any wealthy New York estates.

The current state exclusion, valid until April 1 of this year, is $2,062,500. Those estates that are valued at more than the original one million dollar limit but less than five percent of the current exclusion limit will benefit from the state's new law. However, for any New Yorker with a taxable estate of more than five percent of the current exclusion limit, the estate tax bill will be just as high as or higher than it was before the new laws were enacted. Applied to the current limit, this means that any New York estate valued in excess of $2,165,625 - 105% of the current exclusion amount - will be taxed on the entire amount of the estate, with no exclusions taken into consideration.

Other Issues of New York Estate Law

Along with the increased state estate tax limit and estate tax cliff, the new statewide estate tax laws also come with some other interesting issues. For one, the top estate tax rate in New York will remain at sixteen percent. The top rate remains in place despite a commissioned study that recommended that the top estate tax rate for the state be lowered to ten percent because the state legislature opted not to enact that particular change.

In addition, the new laws also incorporate a gift tax "add back," which calls for all gifts made within the last three years of a person's death to be added back to the estate for the purposes of calculating the estate tax. The purpose of this was to prevent deathbed gifts that would put the estate under the exclusion amount, but it is currently only limited to gifts made between April 1, 2014 and January 1, 2019 while the taxpayer was a New York resident. It also means that more careful planning must be done when gifting parts of an estate, both in the timing of gifts and the structure of how they are given.

The final issue is that New York also opted not to incorporate portability into their estate tax structure. Portability allows a surviving spouse to use the unused portion of their deceased spouse's federal gift and estate tax exclusion. Because of this, New York residents still need to use estate planning techniques and tools that will keep both spouses' exclusions intact.

Millions of UK Wills Available to Search Online

January 24, 2015,

The United Kingdom recently announced that it had digitized its archives of over 41 million wills registered in England and Wales, dating back to 1858, that will allow people to explore the wills of some of the most influential figures of the last century and a half in addition to researching their own family history. At the click of a mouse, people will be able to find out more about their own relatives as well as the last wishes of some of the most famous figures in English history.

Will Database Project

The HM Courts and Tribunals Service (HMCTS) teamed up with the storage and information management company Iron Mountain to digitize the 41 million wills and last testaments stored in the nation's archives. The purpose of the project was to open up more public services to the common people. It also allows requests to be dealt with quickly and without people needing to visit the probate registry in person to search the archives.

The Court Minister stated that "This fascinating project provides us with insights into the ordinary and extraordinary people who helped shape this country, and the rest of the world. It is a fantastic resource not only for family historians but also for anyone with an interest in social history or famous figures. I am delighted that HMCTS are leading the way in innovation and are helping deliver a more modern and efficient public service."

The availability of this database followed the first stage of opening the archives in a digital format when soldiers' wills dated from 1850 to 1986 were made available online for the first time in 2013. Since then, there have been over two million searches of the website, which shows people's interest in researching their family history. This latest phase allows people to request a specific will online and receive an electronic copy within ten business days.

The Commercial Director of Iron Mountain has gone on record as stating that this project "marks a significant milestone in a project to help deliver services online. The size of the archive is both humbling and impressive. The online availability of the wills is a welcome opportunity for anyone wishing to add detail to their family history."

Influential People of Note

Besides being allowed to request wills from ancestors and other extended family members, people can now also request the last will and testaments of famous figures in UK history. Influential members of note who's wills can be accessed online include:

· Prime Minister Sir Winston Churchill
· Economist John Maynard Keynes (who wanted his unpublished manuscripts and personal papers destroyed)
· Code breaker Alan Turing (sharing his possessions equally among friends, colleagues, and his mother)
· Author Charles Dickens (requesting no personal monuments put up in his name)
· Author AA Milne (leaving shares of his royalties and copyrights to a popular London club and his alma mater)
· Author Beatrix Potter (left most of her estate to natural science and conservation efforts)
· Author George Orwell (insisted that all notes, manuscripts, pamphlets, press cuttings, and other documents be preserved)