Inherited Property & First Time Homebuyer Credit

November 4, 2013,

Estate planning can seem like a simple process--but usually only when it works as intended. A well-designed plan can make the passing on of assets and handling of various end-of-life matters occur seamlessly. Alternatively, when there is no planning or only partial steps are taken, then the true complexity of the situation becomes clear. In other words, it is only when things do not go correctly that many appreciate the value of this work. But by then it is usually too late.

For one thing, many steps have unintended consequences. Consider inheriting a home. This seems like a straightforward task that is relevant for many families. The home is the largest single asset for many New Yorkers. Determining what happens to the property upon the owners death is an obviously critical step. But tangential effects of the step must be understood.

For example, what are the tax consequences for the one who inherits the home?

Recent Case
Last week, the U.S. Tax Court ruled on a case, Gary Herring v. Com. of Internal Revenue. The case hinged on the definition of "first time home buyer" in the U.S. Internal Revenue Code and the effect that inheriting a home has on one's ability to fit that definition. The general issue was that the IRS claimed that a man owed money (a tax deficiency) because he improperly claimed a first-time homebuyer exemption on a recent return. The taxpayer challenged that determination.

The facts of the case are somewhat convoluted but according to the court opinion, the man inherited a one-third interest in a family home about eighteen years ago upon his mother's death. The home was owned by himself and his two other brothers.

While the legal analysis is complex, the court essentially ruled that the one-third interest in the inherited house barred the man from claiming to be a first-time homebuyer on a subsequent property he purchased twelve years after inheriting. The opinion is somewhat unclear on whether the man's living in that inherited property for a few years as a primary resident affected its determination. In other words, if the man only inherited one-third interest and never actually lived in the home, the ruling may have been different.

Regardless, this case is an example of one of many countless issues that are often tied up in inheritance and estate planning matters. None of this means that one should allow such issues to determine inheritance decisions. But it is a reminder of the need to carefully think through all implications, preferably with the aid of experienced attorneys who understand these matters.

What Matters When Choosing an Executor?

November 1, 2013,

Understanding the specifics of the law is just one aspect of successful estate planning. Obviously it is critical that a will is created in a such a way that it will be upheld or that a trust will have legal effect (or that you take advantage of all available trust options to begin with).

But that legal knowledge is not enough to best prepare for the future. In addition, it is critical to understand the social, emotional, and practical considerations that affect these issues. Are certain family members more likely to feel jilted by a specific arrangement? Is there a financial danger that should be guarded against? These and hundreds of other questions must be considered when planning. Memorizing statutes and legal books will only provide so much guidance--experience on these issues fills in the gaps.

Advice for Executor Selection
For example, when creating a will it is important to name an executor. The executor is charged with ensuring that the provisions of the will are carried out. But what considerations should one make when deciding who to name? Choosing the wrong executor can lead to a myriad of inheritance problems and often spurs feuding.

A recent Advisor to Client article touched on a few important considerations. Even a quick perusal of the list of considerations makes clear that the choice must be guided by practical considerations (and not legal nuance).

For example, often the two most basic qualifiers are not considered: Is the executor capable of doing the job and does he or she even want the job? When it comes to capacity, it is important to select someone who is of proper age and in good health. Additionally, the task involves understanding many administrative matters, taxes, and more. If the executor is uncomfortable with these topics, mistakes are far more likely to be made. Similarly, forcing someone into the position is a recipe for disaster. Individuals may have very different reasons about why they do or do not want to play this role, but it is important to lay it all on the table at the beginning so an executor is not chosen who truly does not want the responsibility.

No one has better appreciates how an estate plan can go well (or poorly), then attorneys working on these matters. When choosing an estate planning lawyer be careful to select a team that has years (or even better, decades) of experiences to provide the practical advice you need to best position your family to deal with these matters in a timely, efficient, conflict-free manner.

Back to the Basics: Trusts Are Not Only For the Wealthy

October 31, 2013,

One of the biggest misconceptions about general estate planning is that a "trust" is something that only rich families need to consider. This perception likely arises from colloquial use of "trust funds" to signify wealthy individuals who are living off substantial earnings preserved for them in a trust.

A better understanding of the legal tool takes away much of the mystique. The bottom line is that trusts are for everyone, serving as an incredibly useful option for middle class New Yorkers to protect assets accumulated over a lifetime for themselves and their loved ones.

The Basics
So what exactly is a trust? In simple terms, it is a separate legal entity that you "create" by drafting formal documents. This entity then "holds" assets, and you can designate many details about the use, distribution, and management of those assets in the trust. There are different tax and creditor protection benefits that this separation allows. Various types of trusts exist, each with their own rules about how they operate and whether they can be changed. An estate planning attorney can explain exactly what trusts are right for you and how they work.

So do you need a trust?

Because of the widespread benefits, virtually all New York families can derive value from the use of trusts. A Fox Business article on the subjects lists a wide-range of situations where a trust is crucial. Some of the most apt include:

1) When you have a blended family. Trusts allow much more flexibility to provide for the needs of spouses and children who themselves are not related. Assets can be protected for children while still supporting a spouse without the potential for conflict down the road.

2) When you want to pass on assets automatically. Probate is a costly, stressful, time-consuming process. Trusts do not operate like Wills; they can work without the need for specific court direction.

3) When you worry about creditors. Because a trust is a separate legal entity, creditors are not always able to just take assets inside the trust when they are owed. For those with children or other loved ones who may be in debt, a trust is a great tool to pass on assets without worrying about them immediately being snatched away by others.

4) When you may need long-term senior care. A Medicaid Asset Protection Trust (MAPT) is just one of many special trusts which can provide very specific protections for likely events in the future.

If you live anywhere in New York, please consider contacting our experienced team of estate planning attorneys to learn more and see how you can take advantage of a legal trust.

Should You Spend Those "Reward" Miles Now?

October 28, 2013,

One of the baseline legal questions to consider when planning for inheritances is determining what can be passed on in the first place. This may seem like an unnecessary question. After all, can't you pass on all of your assets to another? Not quite. At least, you cannot pass on everything that you control while alive--some things may essentially disappear.

The most obvious categories of items where this might come into play are "digital assets." This includes items like a Facebook page, blog, Twitter account, online photo album, and many similar items. Many estate planning attorneys discussed these issues in recent years, noting that most decisions hinge on the specific terms and conditions for each social media site. The process for passing on access to these accounts varies. If you place particular value on these accounts, it is important to ask your planners more specifically about these issues to ensure your wishes are followed.

Reward Points After Death
But "digital assets" are not the only items where questions exist about passing them on at death. Consider "reward points" offered for loyalty by airline companies, credits card companies, and similar enterprises. As a recent CNBC story discussed, in many cases those points--or "miles" for airlines--are likely to disappear.

As with most digital assets, whether or not these loyalty points can be passed on at death hinges on the terms and conditions agreed to when first enrolling in the program. Considering the companies craft these terms on their own, it is not surprisingly that they are not very generous when it comes to allowing points to be transferred to friends or family.

Interestingly, this is not a minor issue. According to one research company's estimates, in the last year figures were available (2011), outstanding reward points had a total value of around $50 billion. That is a large asset to disappear upon death, often amounting to tens of thousands of dollars for single individuals.

As a practical matter, only those with significant loyalty points racked up have likely given much thought to creating a "mileage estate plan." But it is becoming increasingly important for New Yorkers to consider whether they need to include these details in a will or trust. If so, it is critical to plan carefully to ensure your will provisions comply with the program's terms and conditions. For example, some programs only allow transfers to certain people (a spouse) or require a death certificate. The contractual arrangements made ahead of time with the company will trump provisions of estate planning documents.

Deathbed Planning: In the Face of Serious Illness

October 25, 2013,

Most estate planning advice stories include one theme over and over--plan early and update consistently. Because no one know what the future holds and life changes occur frequently, it is critical to ensure your legal planning will work as you want it to when you need it.

However, that does not mean that there is ever a point when it is too late and not worth crafting a plan. Taking the time to put affairs in order even in the midst of serious illness or terminal conditions can make a world of difference for a family. A recent article provides a helpful discussion that touches on some of the key issues with regard to "deathbed planning."

Late Estate Planning
Is the individual competent to make legal decisions? One initial hurdle is identifying whether or not the ill party is still in a condition to assent to the crafting of a plan or updating of legal documents. It is important to have witnesses, verification from medical professionals, audio recordings, or other proof of competency just in case the issue is challenged down the road. If the individual is not legally competent, then the only other option is for one was previously given authority (via durable powers of attorney) to act on their behalf.

Assuming that the individual is competent or an agent exists, what are the main issues to consider during deathbed planning?

The general goal is to update an older plan or craft new one that covers all of the most fundamental issues. That includes ensuring that executors and trustees are properly named, the provisions of a will or trust documents still reflect the clients wishes, and similar matters. In addition, all beneficiary designations need to be considered. Is the beneficiary on a life insurance policy still correct?

If a plan was created years ago, there is a good chance some things have changed. For example, it is not uncommon for certain children, nieces/nephews, or grandchildren, to be named with others left out. Those not mentioned may simply not have been born at the time the original planning was conducted. Obviously, these oversights need to be corrected near the end.

Administratively, it is also helpful at this time to locate all necessary paperwork, records, and important information that will be needed for estate administration. Similarly, funeral and burial requests should be spelled out clearly. In the heart of grief, it is common for family members to disagree over even the most minor details. Preventing that possible feuding by making these wishes explicit is vital.

Of course there are many other potential issues to consider at this time. But, In short, most deathbed planning involves getting all of the "basics" correct so that assets will be transferred in the desired manner as efficiently as possible.

The Affordable Care Act and Estate Planning in New York

October 21, 2013,

With the recent launch of the President's health insurance marketplaces across the country, the Affordable Care Act has taken on a much more tangible character. Over 36 states are participating in the federally run internet exchange, while New York is one of a dozen of states running separate markets with its own operating system. The New York exchange is known as the "New York State of Health." In just a few months, the Affordable Care Act (ACA) will come into full effect. While parts of the law are already in place, 2014 will bring in a whole new set of changes, including dozens of tax provisions that can be difficult to understand.

With this in mind it is important to understand if and how the Affordable Care Act may affect your estate planning. Some of the provisions may have a relatively uncomplicated impact on your future. For example, nonmedical withdraws from health savings accounts will be taxed at 20%. Additionally, using pre-tax flexible spending accounts on nonprescription medications will be prohibited.

Other parts of the ACA's provisions, though, are exceedingly complex. Careful planning and advice will be necessary to ensure that you can reduce your overall tax liability. One of the largest effects to your estate comes from the investment income surtax of 3.8%, which applies to the lesser of the investment income or the amount that income exceeds over the threshold. The threshold is $200,000 of Adjusted Gross Income ("AGI") for unmarried filers or heads of household, $250,000 AGI for married filing joint, $125,000 AGI for married filing separate filers, and $12,000 AGI for trusts and estates. Further, there is an additional Medicare Earnings Tax on earnings above $200,000 for unmarried filers, $250,000 for married filing joint, and $125,000 for married filing separate filers. There is little that people can do to avoid these taxes, which will go up .9% from the existing rate to 2.35%. That is, except if you decide to earn less money!

You, however, are not without options concerning the new surtax. For example, investors can use Roth IRAs, which do not count as taxable income.

The American Institute of CPAs has put together a number of useful articles and webinars to help you better understand the how the ACA will affect your finances. Check out their site here and be sure to keep up to date on all of our analysis as the ACA continues its rollout!

Estate and Financial Planning Difficulties with Same-Sex Divorce

October 18, 2013,

Earlier this year, the Supreme Court's Decision in Windsor v. U.S. allowed same-sex couples to receive the same federal benefits as other married couples. This has had enormous implications for estate planning for same-sex couples, as was previously covered generally here, and more specifically here for retirement issues, and here for recent IRS guidance. However, there are still many challenges and uncertainties facing same-sex couples since the ruling.

One area providing significant confusion is how divorce will affect same-sex couples. Although same-sex marriage is available in 13 states and the District of Columbia, couples that establish residences outside of those states may not be able to obtain a divorce. In states like Virginia that do not recognize same-sex marriage, gay couples cannot get a divorce (In essence, because the state does not recognize the that the couple's marriage ever happened, it has no power to grant them a divorce). Moreover, if the couple does not have a legal residence in a state that does allow for same-sex divorce, they may not be able to obtain a divorce there either.

Even if the couple can obtain a same-sex divorce in their state, courts are often unsure how to handle a same-sex divorce. Take the case of Margaret Weing, a New York rabbi who got divorced earlier this year. Although she had only been married to her partner since 2008, she had lived with her partner in a registered domestic partnership since 1996. Weing and her partner had raised children together, merged their finances, and made each other beneficiaries of each other's pensions and life insurance policies. They had also made each other executors and health insurance proxies, and had given each other power of attorney. Yet, when the New York court heard their case, the court would only divide assets accumulated starting from when the couple married in 2008.

The troubles and uncertainties seen in Weing's case are not uncommon for same-sex couples seeking a divorce. In many cases, same-sex couples "have to be pioneers," says Susan Sommer, director of constitutional litigation for Lamda Legal, an advocacy group devoted to gay, lesbian, bisexual, and transgender issues. ""Until things get familiar, even in states like New York, where same-sex couples can marry, initially there will be a sense of, 'How do we do this?'"

However, being a pioneer in the legal field often comes with steep costs, and same-sex couples have found that their attempts come with high prices and expensive sacrifices. While the cost of divorce varies by city and state, heterosexual divorce in New York typically costs in the neighborhood of $10,000. Comparatively, Wenig said her divorce cost her over $120,000. Although Weing's case may be an exception, CNBC reports that same-sex couples usually pay twice as much for divorces as their heterosexual counterparts, and triple the price if children are involved.

NBC News reports that one of the top pitfalls for same-sex couples is not relying on an attorney with expertise in same-sex marriage and divorce. While experts believe that the law will eventually catch up as more gay couples divorce, planning now to avoid extraneous costs and will likely make the process smoother.

Criminal Charges for New York Estate Executor

October 16, 2013,

You have probably heard the term "Executor." Under New York law, this is the name given to the person (or trust company or bank) that is named in a Will and instructed to carry out the decedent's wishes as outlined in a Will. Executors are entitled to a fee for their work, and it is usually paid out of the estate itself.

While friends and family members are often named as executors, the required duties can be complex. They include collecting assets and paying debts, expenses, and taxes. The process usually takes months (if not longer) and involves tricky procedural chores. Making mistakes can result in significant personal liability to the Executor, and so it is important that no party is surprised by their duties or uncomfortable with the work.

Make a Careful Choice
One added reason to be careful about choosing an Executor is the fact that the position can be abused. For example, just last week the WCF Courier reported on the criminal case of a New York woman who faced theft charges as a result of her conduct while the Executor of a man's estate.

According to the report, the woman was named the Executor of Elias G. Grover Jr.'s estate. Grover Jr. was the former owner of a local construction company. The man died in 2007, and his Will was filed for probate shortly thereafter. However, while the matter was going through the process, the assets in his estate were seemingly wiped out.

At the same time, Grover's relatives (including 8 children) challenged the Will. They claimed that the woman and her mother unduly influenced the man to change an older Will, which was drafted in 1984 to exclude the children and leave everything to the two women (they were his caregivers). Eventually, the court agreed, throwing out the new Will. Sadly, by that time, most of the estate was already gone, as the Executor apparently spent over $140,000 on trips, casino visits, and gifts to others.

Recently, the Executor and her mother both entered pleas in their criminal cases--they will receive probation. Unfortunately, it is unlikely that either will be able to pay back much of what was taken from the estate, leaving the children out of luck.

This sad example is a reminder of the need to be very vigilant about all choices related to an estate plan, including the naming of an executor and trustees. An attorney with experience can identify possible issues to lower the risk that these sorts of crimes are committed in the case of your loved one.

Planning for Posthumous Children in New York

October 11, 2013,

One of the more unique estate planning issues arising in recent years relates to "posthumous births." This refers to a child who is born after one of their parents has already died.

This was always a possibility, as a parent could pass away in the months after a child was conceived by before the actual birth.

Yet, the issue has grown more acute with reproductive technology advances, including tools that allow the extraction and storage of genetic material, combined with in vitro fertilization. Children are now able to be conceived years after one of their parents has died. While the option is available to anyone, families in certain situations are currently more likely to take advantage of the technology, including those deployed in the military and when a partner has a serious medical ailment, like cancer.

Estate Planning Complications
As with all unique family situations it is critical to craft a tailored estate plan that takes these issues into account. Few laws exist which clearly explain how to handle these posthumous births for estate purposes. That makes it even more important to fill the gap and plan on your own to avoid a web of problems if left to unclear rules.

A recent Financial Advisor Magazine story touched on a few of these issues. Perhaps most obviously, there are concerns about inheritances. In most cases, after a passing an inheritance is doled out immediately. But does the child conceived later have any rights to that inheritance? If so, how long must one wait before those rights are extinguished? Should other beneficiaries receive their portion immediately?

There are no automatic answers to these questions, as they require a balancing of interests. It is therefore imperative for families who might be in this situation to have their clear wishes laid out in an estate plan ahead of time.

In New York, lawmakers are considering options to provide more concrete answers for residents who fail to plan ahead. As the FA story explains, "Legislation wending its way through the New York State legislature, for example, proposes that for a child born after the death of a genetic parent to be considered the offspring of that parent for inheritance purposes, it must be in utero within 24 months or born within 33 months."

On top of the proposed state law requires consent from the individual who is not alive at the birth. Without that consent, the child would have no inheritance rights, regardless of the time frame.

Tragic New York Murder Case, Inheritance, & "Son of Sam" Laws

October 9, 2013,

What happens if someone who intentionally causes a death is due to inherit from the person who died? Is the wrongdoer still able to profit from his or her actions?

In general, the answer would be negative. New York passed a statute known as the "Son of Sam" Law which essentially prevents a criminal from profiting from their crimes. This state law overlaps with a long-ago established common law principle known as the "slayer rule" which more directly affects inheritance issues, preventing someone convicted of causing a death to then profit by inheriting from the deceased person.

These rules are not new. But sometimes unique cases pop up which are hard to fit perfectly into the older rules, usually sparking legal challenges.

For example, consider a 2011 case from Suffolk County. A man attacked and killed his mother-in-law. He was sent to prison. Later, the man was set to inherit a large sum from his wife's estate--the daughter of the woman he killed. Much of his wife's assets were received directly from the mother--who had left her entire estate to her daughter via a will.

There was not a straightforward answer to this question, because the killer would not be profiting directly from his crimes. Instead, he would receive the assets indirectly. Does the slayer rule cover this case? Eventually, a New York court in this case ruled that the slayer rule was expansive enough to bar a killer accessing any of the victim's property, even if inherited indirectly.

Recently, yet another New York case is making headlines on another potential "loophole." Several years ago a young mother in Long Island drowned all three of her children in a bathtub. She was arrested and put on trial, however, she was found not guilty because of mental disease or defect. She has since been living in a psychiatric facility.

Now the mother is seeking a part of the children's $350,000 estate. Those funds were received as a part of a legal settlement with a local social service agency after questions arose regarding their conduct which may have prevented the incident.

But doesn't the slayer rule and Son of Sam laws bar her inheriting? If she was convicted of the murders, then yes. However, the woman was deemed not responsible because of her mental state, leaving open the possibility that the rule barring inheritance does not apply to her. A hearing on the matter is set for next month.

Will The Government Shutdown Affect Your Estate Planning?

October 3, 2013,

News this week is dominated by one topic: the federal government shutdown. Like most others, you may be wondering how (or if) the developments out of D.C. will affect you.

The Background
The shutdown itself is caused by Congress's failure to pass an appropriations bill allowing for the spending of money to fund day-to-day government operations. More specifically, Republicans in the House of Representatives are refusing to pass a bill that includes funding for the Affordable Care Act. Usually disagreements about these issues are handled separately from daily government funding, but the House GOP has combined the issues and refused to budge, leading to the shutdown.

The Consequences
From the closing of the national parks and postponement of National Institute of Health trials to thousands of furloughed employees, the temporary shuddering of the federal government directly affects the daily life of millions. Now, three days into the shutdown, the average New Yorker may still have have not felt any direct impact. The mail still arrives, the garbage is still collected, kids go to school, and (unless you are a federal employee) you still go to your job.

While your estate planning is unlikely to be impacted by this situation, one area where everyone may be affected is taxes. Most notably, what is the Internal Revenue Service (IRS) doing in the middle of this shutdown?

Taxpayer Effects
A story this week from the Journal of Accountancy discusses the current status of the IRS in the midst of the controversy.

The articles discusses how the IRS's usual contingency plan calls for the processing of returns throughout, but at this time "tax refunds will not be issued until normal government operations resume." At the same time, the IRS plans to continue various cases--liens, bankruptcies, seizures--to prevent statute of limitation issues.

Relatedly, federal courts will stay open for at least ten days to handle business, but if the shutdown lingers longer, then no court proceedings will occur. Please note, however, that this does not affect state court proceedings.

Most other IRS activity will stop during the shutdown, including audits, examinations, and responses to taxpayer questions. All told, about 86,000 IRS employees will stop working, with administrative services put on hold.

As a practical matter, if this shutdown lasts for only a few days more, then there may not be any long-term effects. However, all of these assessments will need to be re-evaluated if the shutdown is prolonged and commonly-used services remain out of reach for residents.

Tough Legal Questions: Inheriting Digital Media

September 30, 2013,

It is a cliche to assert that the world of estate planning is ever-changing. Of course, laws are frequently altered by policymakers which affect the best practices for passing on an inheritance and saving on taxes. For example, just this year Congress agreed on new federal estate tax rates, which may influence how some decide to use wills and trusts to best plan for the future.

But it is not only legal changes that impact these issues--technological and cultural changes can uproot estate planning details as well. On the cultural side, consider the changing gender roles. Only a century ago, in many families it was expected that the oldest male would inherit almost the entire estate, with daughter and younger sons receiving only a minimal inheritance. While similar arrangements can be made today, the practice is incredibly uncommon. Cultural changes since then altered how these distributions are normally made.

Technology Changes Estate Planning
Changes on the technology front can impact estate planning even more rapidly. Consider "digital assets." While the term is used loosely, it usually applies to anything of value that one owns in in digital form--like a blog, website, or social media profile. In the past we have talked extensively about the various ways to pass on access and ownership of these unique pieces of property.

One of the more interesting legal questions related to digital property involves not how to pass them on, but whether they can be passed on at all. For example, last year several online news sites reportedly--falsely--that actor Bruce Willis was threatening to sue Apple for the right to pass on his iTunes music collection. The story was fictional, but it did raise a question that many found interesting: Can you pass on assets like an iTunes collection--even though you may not own the actual copyrights to the music itself. Is this the same as passing on a physical CD or record to another?

Believe it or not, the Bruce Willis hoax actually spurred creation of an academic article recently published in the Santa Clara Computer & High Technology Law Journal. In analyzing the legal questions, the author explained that the law is different between physical assets (like a CD) and digital assets (like a song downloaded from iTunes). Physical assets can be passed on via the "first sale" doctrine which provides flexibility on the re-sale and use of the content. Alternatively, digital assets are governed by something called EULA--"end user license agreement."

In other words, the companies that control these accounts--like Google, Amazon, Apple, etc.--each have unique EULAs which dictate transferability. The article points out that in most cases, the agreements are very limiting, making it difficult to completely pass on accounts or downloaded media to another.

If this is an issue that is important to you, it is critical to talk with your estate planning attorney to learn more about how you can best have your wishes accounted for in your plan.

The Huguette Clark Drama Continues--Possible Settlement?

September 27, 2013,

The New York estate feud that dominated headlines for months may finally be nearing an end. Mysterious New York heiress Huguette Clark died in 2011 at the ripe old age of 104. For several decades before her death, Clark lived inside a hospital room--even though she was healthy enough to live elsewhere. Her several mansions remained empty for years. In fact, a documentary film based on Clark's life and death is currently in creation--several books have already been published.

Because of her unique lifestyle and secretive existence, many were intensely interested in her estate plan--curious as to how her $300 million fortune would be passed on. So began a complex back-and-forth between dozens of different parties who apparently had a stake in the estate--including Clark's doctor, lawyer, nurse, the hospital where she stayed, her distant relative, named charities, and more.

Clark's estate planning was relatively bare considering the size of the assets. Essentially two wills were produced. The two wills were both created in 2005. The terms of those two wills could not be more different. The first will gave most of her assets to her distant relatives. The second will cut the family out entirely and instead sprinkled money to her doctor, nurse, lawyer, accountant, and arts-related charities.

It was not long before the different parties at stake were locked in a legal battles. As a substantive matter, the main issues was which of the two wills should be followed. Last week, we explained how negotiations had broken down and the matter was set for trial.

Apparent Settlement
But on the eve of jury selection in the case, the New York Post is reporting that a settlement may have been reached. Per the terms of the possible agreement, a group of 20 relatives will split $34.5 million from that estate. Another major beneficiary would be the new foundation created and set up at Clark's California estate. The Corcoran Gallery will receive $10 million, the hospital where she lived would get $1 million, and a loyal doctor-friend would receive $100,000.

Interestingly, not everyone involved with walk away with some piece of the estate. For example, her attorney and accountant will not receive anything. In addition, Clark's nurse will not receive the nearly $7 million she would have per the terms of the second will.

The next step is for the settlement to be put before the judge. So long as he approves it, the matter may finally be settled.

Mysterious Will Filed in New York Intestate Case

September 26, 2013,

Earlier this year we shared information about a $40 million New York inheritance that was destined to go entirely to the government. 97-year old former NY developer Roman Blum died in January, leaving behind the multi-million dollar estate. Yet, it seems that Blum conducted no estate planning--no trust was created and no will was found. Not only that, but it was unclear if he had any living relatives. As a result, per intestacy rules in the state, the assets would eventually "escheat" to the government. This represented the largest unclaimed estate in New York history.

The case is often pointed to as a vivid reminder of the need to lay out your inheritance wishes ahead of time or risk losing control of the decision entirely.

Will is Found?
There was a new twist in the story last week, as a will purportedly for Mr. Blum was officially submitted to the Surrogate Court of Richmond County. The man who filed the will, in which he is named as the sole heir, is Anthony J. Allegrino II--an attorney from upstate New York. Thus far, he has not provided an extensive statement to the press, and so his exact relationship with Mr. Blum is unclear.

Now that the will has been officially submitted for probate, an initial hearing will be held next month. The document will then be scrutinized to determine its authenticity. Because the estate would go to the government otherwise, the attorney general will participate in the hearings as an interested party.

Expectedly, many familiar with the situation were immediately skeptical. For example, one of the few men close to Blum later his life--his friend and lawyer--voiced surprise at the filing of the will. He explained to the Staten Island Advocate: ""I don't even know how to react. Things should get very interesting. I represented Roman Blum for almost 30 years. If he was going to do a will, I would have known about it."

The entire case is an example of another problem with inadequate planning--it opens the door to potential abuse. Of course it is far too early to make any accusations against the man who claims to be the heir in this case. But the potential for fraud or forgery is undeniable in situations where a large fortune is left open. History demonstrates that one need not even have a large estate to entice wrongdoers to exploit the situation. The best preventative step is to have professional guidance when drafting a will and creating trusts so that, when the time comes, there is no mistaking your intentions.

State Supreme Court Sends Most of James Brown Assets to Charity

September 23, 2013,

One common misconception regarding estate planning is that simply getting wishes down on paper automatically means that those wishes will be carried out. Some New Yorkers, for example, may be under the too-optimistic assumption that drafting a quick will designating inheritances is enough to ensure that assets will go where intended.

It may be that simple in theory, but the reality is far murkier.

That is because challenges to wills and trusts are incredibly common. Disputes frequently result in compromises that are far different than what was originally intended. That is sometimes true even in cases where extensive planning was done ahead of time.

James Brown Estate
Take, for example, the prolonged battle over the estate of James Brown. The legendary singer died several years ago, leaving behind an estate worth tens of millions of dollars. Brown was prudent in his planning, and so he had a will and trust in place. Those arrangements provided that the vast majority of his assets be transferred into a new charitable trust. In short, Brown wished to give most of his money away, instead of leaving it to his purported spouse, several children, and other relatives.

However, shortly after the death, all of the involved challenged the will. The family members asked that the state's intestate succession rules be applied, which would have divided all of the assets between the spouse and children. Eventually, the state attorney general intervened, brokering an agreement that sent half of the estate to charity and that split the other half between the family.

The matter did not end there. That is because the court-appointed representative of the estate challenged the apparent settlement. In their eyes, Brown very clearly wanted his estate to go nearly entirely to the charitable trust, and there were no grounds for those wishes to be overturned.

Recently, in a new decision the state's Supreme Court (read the opinion here) agreed with the representatives and threw out the settlement. Specifically, the high court did not find the compromise plan to be reasonable. The opinion states that "The result [of the settlement] is to take a large portion of Brown's estate that Brown had designated for charity and to turn over these amounts to the family members and purported family members who were, under the plain terms of Brown's will, given either limited devises or excluded."

Fortunately, in this case, it seems the Brown's wishes will be preserved. However, many other cases end up with a different result. And, in any event, the ultimate goal is not to have a bitter, drawn out dispute in the first place.

That is where experienced professionals come in. Beyond ensuring that the procedural rules are followed and the technical work is completed with regard to wills and trusts, experienced estate planning attorneys are also valuable because they provide practical insight to account for unforeseen variables. The best way to prevent an estate plan from being challenged is by being aware of the potential dispute ahead of time.