Recently in Estate Planning Category

Big Estate Tax Win for Art Collector

October 1, 2014,

In a major victory for art collectors, the Fifth Circuit court recently gave a $14.4 million estate tax refund and affirmed the use of fractional interest discounts for artworks to reduce estate taxes. Rejecting the government's random assessment of a 10% discount on the valuation of the art, the Fifth Circuit instead agreed that the estate's assessment of 47.5% should be used. This ruling opens the door for art collectors to greatly reduce the taxable amount of their estates.

Art Collecting and Estate Plans

Prior to this ruling, there have been major issues for art collectors and estate planning. If wealthy families sell their art while they are alive, a 28% capital gains tax is added to any appreciation in the value of the art. If they keep the artwork in the estate after they die, the full value of the art is included in the estate at the full fair market value on the date of death.

The ruling in the Fifth Circuit that allows art owners to discount the value of their works is huge. Most art collectors do not want to part with their art, but most estate planning attorneys encourage it because it drastically reduces the overall value of their estate. Many art collectors are forced to sell, donate, or gift art to their children in their final years.

Elkins Artwork Case

In the case of Estate of James A. Elkins, Jr. v. Commissioner of Internal Revenue, the Elkins family began planning to transfer their artwork to the next generation. Mr. Elkins and his wife collected 64 different pieces of contemporary art over the last four decades that includes pieces from Picasso, Pollack, Cezanne, Twombly, Motherwell, Francis, and Hockney among others. The stipulated fair market value of these works is $24.6 million.

The couple used a variety of estate planning tools to begin transferring the artwork to their three adult children, including a GRIT, a co-tenancy agreement, a lease, and a disclaimer. When Mr. Elkins passed away, his wife predeceasing him, he held a 50% interest in three works and a 73% interest in the remaining 61 pieces.

The IRS claimed a deficiency notice on the estate, stating that it was impossible to own a fraction of a piece of art. The Elkins family disagreed, and they went to trial. The Tax Court dismissed all arguments made by the Elkins family and arbitrarily assigned a 10% discount to the art.

The family appealed, and the case went to the Fifth Circuit. This court overruled the Tax Court and agreed with the valuation of the fractionally owned artwork for the Elkins family. The Fifth Circuit stated that "...in the absence of any evidentiary basis whatsoever, there is no viable factual or legal support for the court's own nominal 10% discount," and "the Estate, as taxpayer, presented all of the evidence and a surfeit at that, further eschewing the propriety of a nominal discount."

Effects on Estate Planning

The fractional valuation is based on what an art expert would say is a fair price for the artwork, discounted to the fractional value of ownership. To see the idea in action, the Elkins' Jackson Pollack painting was valued at $6 million. Mr. Elkins had given away a 50% interest in the painting, dropping his estate tax value to $3 million. Taking into consideration the additional 47.5% fractional ownership discount the value added to his estate from that painting is only $1.59 million. This has the potential to greatly reduce the value of art collectors' estates and any taxes due.

New Law Allows Owners to be Buried with Pets

September 27, 2014,

All across the country there are cemeteries for people and cemeteries for pets. Virginia has become the third state in the nation to pass a law allowing pet owners to be buried with man's best friend. Joining New York and Pennsylvania, Virginia's new law went into effect in July and could affect many pet owners' estate planning options.

New Burial Law

In Virginia, a new state law allows cemeteries to set aside parts of their property to create sections where pets and humans can be buried next to one another. Most states do not allow for pets and humans to be buried together or their laws do not address it. This law was introduced by Republican member of the House of Delegates, Israel O'Quinn, and was passed in April.

The Code of Virginia Section 54.1-2312.01 states that a cemetery may have a section devoted to the interment of human and pet remains, provided that the following rules apply:

· The pet must be considered a companion animal under Virginia law
· The pet must have its own casket and cannot be interred with human remains
· The section of the cemetery must be clearly marked

The new law has a growing popularity in Virginia. Since its enactment in July, one funeral service owner already has a waiting list of 25 people who wished to be buried alongside their pets. Because the pets must be in their own caskets, funeral directors are working with specialty companies that make containers in pet sizes.

New York and Pennsylvania's Pet Burial Laws

Virginia joins New York and Pennsylvania in passing laws that allow human owners and their pets to be buried together. However, New York's law differs from that in Virginia. New York adopted regulations in June passed last fall which allows pet cemeteries to accept the remains of the pet's owner.

Under New York's regulation, human cemeteries do not set aside a specific section for combined burials. Pet owners can be cremated and their remains can be interred with their pets in a pet cemetery. The pet cemeteries are not allowed to charge a fee and cannot advertise their human burial services.

Pennsylvania has had a combined burial law on the books for almost eight years. Hillcrest Memorial Park in western Pennsylvania was the first to set up a cemetery where a human body, not cremains, could be buried with their pets. Like the regulations passed in Virginia, the cemetery in Pennsylvania has three sections: one for humans, one for pets, and a combined area.

Impact on Estate Planning

When estate planning it is important to consider what will happen to your pets after you are gone or to set aside money to take care of their remains if you expect your pet to pass away before you. Currently, professionals who dispose of pet remains estimate that over 90% of pet owners have their pet's remains cremated, compared to just 23% of humans. However, with new laws allowing for pets' bodies to be buried with their owners, those statistics may start to change.

If you are considering taking advantage of these new laws and being buried with your furry companion, it is important to make your wishes clear and plan accordingly in your estate. Consider purchasing a plot in a combined section of the cemetery ahead of time, make sure that there are funds for both you and your pet's interment, and specifically state within your will that you wish to be buried with your pet.

More Estate Planning Lessons from Celebrities

September 25, 2014,

Celebrity estate plans often come with extraordinary wealth and considerable resources. However, celebrities are still not immune to estate planning issues and the consequences of poor planning. Several recent celebrity estate planning issues in the news have highlighted the importance of proper estate planning getting the professional advice that you need.

Think Carefully about Who is Involved in Your Trust

When Robin Williams passed away in August, he had created an irrevocable trust to provide for his three children. One of the main reasons to create a trust is to protect your privacy in addition to caring for your loved ones' welfare; however, the trust documents were made public after one of the co-trustees also passed away. The other co-trustee had to make the documents public in order to petition the court to appoint a new person to the position.

The lesson to take away from Williams' estate is to make sure that you know what will happen if key people involved in your estate plan are no longer able to fulfill their roles. In addition, you should consider the age and maturity levels of your children, and have an honest contemplation about whether they will be capable of making big decisions regarding money.

Plan for Second Marriages

Casey Kasem's final months were full of tabloid fodder between his second wife and his children from his first marriage. His wife challenged the decision to make his daughter Kasem's conservator and removed him from his nursing home in order to have control over his medical decisions. The dispute lasted for months over his medical care, and since his death in June his family has been fighting over his estate.

The lesson to take away from Kasem's estate is to communicate. Try to foster a good relationship between the members of your family, especially if there is a subsequent marriage. If that fails be sure to clearly communicate to everyone in your family your wishes for your care and estate.

Don't Lose Your Money to the IRS

One of Phillip Seymour Hoffman's greatest fears for his children was that they would grow up as entitled, trust fund kids. In an effort to prevent that from happening, Hoffman gave his entire estate to his longtime girlfriend and mother of his children. Hoffman never created any trusts, never married, and his estate is going through public probate so there are no opportunities for his family to avoid estate taxes.

The lesson from Hoffman's estate is to plan in advance and make sure that your wishes are reflected properly in your estate plan. Trusts can be created that dictate when and how your heirs can receive money so that your wishes are still reflected in addition to help your family avoid probate and major estate taxes.

Remember to Update Your Plans

Michael Crichton earned millions from authoring popular novels, but he died unexpectedly while his fifth wife was pregnant with their child. Crichton never updated his estate plan to include his newest child, and the previous version of his plan specifically excluded future children from inheriting. It has resulted in a major court battle between his last wife, representing their child, and his adult children from his previous marriages.

The lesson to take away from Crichton's estate is to update your plans regularly as your life changes. Whenever there is a marriage, divorce, new child, new business, or a loss be sure to update your estate plan to ensure that it still reflects your wishes accordingly.

Estate Planning Errors to Avoid

September 22, 2014,

According to estate planning professionals, almost 65% of Americans do not have a basic will or estate documents drafted. Although it is nice to think that your family will be able to take care of your estate and know your wishes, the truth is that if you do not have your estate plan in place there could be fighting about what your final wishes truly were. Leaving a comprehensive estate plan with clear instructions to your heirs is the best defense against family discord after you are gone. Here are some of the most common estate planning blunders and how to avoid them in your planning process.

Mistake #1: Assuming Estate Plans are Only for the Wealthy

One of the most common misconceptions about estate planning is that it is only for the wealthy. The truth is that anyone who wants a say in their end-of-life medical decisions, assets, heirs' well-being, or general private affairs should have some kind of estate plan in place. If you want control over your life and drastically reduce the burden on your family after you are gone you need to draft an estate plan.

Mistake #2: Thinking that Your Finances are Too Simple for an Estate Plan

Many people think that their finances are so straightforward that they do not need to create an estate plan or that simply creating a joint tenancy in assets is enough to protect them. The reality is that no one's financial life is as simple as it appears. If you have young children, you need to consider appointing a conservator, and only establishing joint tenancies for assets can exclude other heirs from parts of the estate.

Mistake #3: Procrastinating in Your Estate Plan

The number one excuse of Americans who do not have an estate plan in place is that "they just haven't gotten around to it yet." For your own peace of mind, and to avoid any potential "what if" scenarios, you should consider starting the process as soon as possible. In addition to apportioning your estate to your heirs, it can help if you are no longer able to make decisions on your own and your family needs to know what you want if you become disabled.

Mistake #4: Forgetting about Your Digital Assets

Property is no longer what you physically own but what you digitally own, as well. Do not forget to include instructions in your estate plan about what to do with your digital assets. Create a list of online subscriptions, user names, and passwords so that your family can access your digital assets. You should also consider what you want to do with your social media pages and decide if you want your family to take those pages down or leave them up in memoriam.

Mistake #5: Not Preparing for "What If" Scenarios

While it is nice to think that your life will work out exactly like you planned, not every story has a happy ending. Marriages end in divorce, loved ones suffer addictions or pass away, business fail, and children can become estranged. Your estate plan can cover all contingencies, both good and bad.

Mistake #6: Forgetting about Your Pets

If you do not want your pet dumped at a shelter or euthanized after you can no longer care for it, you should include instructions for your pet's care in your estate plan. Legally, your pets are considered personal property, and you can dictate who gets your pet when you are gone. Creating a pet trust that sets money aside for your pet's care is also another option for your estate plan.

Mistake #7: Not Thinking Through Who to Name as Trustee

Deciding who will be in charge of your affairs and your assets once you have passed away should not be done arbitrarily. Name a person who is up for the job and knows exactly what responsibilities are involved. Also consider naming a backup trustee or executor in case the original person cannot fulfill the duties.

Estate Planning Errors to Avoid

September 22, 2014,

According to estate planning professionals, almost 65% of Americans do not have a basic will or estate documents drafted. Although it is nice to think that your family will be able to take care of your estate and know your wishes, the truth is that if you do not have your estate plan in place there could be fighting about what your final wishes truly were. Leaving a comprehensive estate plan with clear instructions to your heirs is the best defense against family discord after you are gone. Here are some of the most common estate planning blunders and how to avoid them in your planning process.

Mistake #1: Assuming Estate Plans are Only for the Wealthy

One of the most common misconceptions about estate planning is that it is only for the wealthy. The truth is that anyone who wants a say in their end-of-life medical decisions, assets, heirs' well-being, or general private affairs should have some kind of estate plan in place. If you want control over your life and drastically reduce the burden on your family after you are gone you need to draft an estate plan.

Mistake #2: Thinking that Your Finances are Too Simple for an Estate Plan

Many people think that their finances are so straightforward that they do not need to create an estate plan or that simply creating a joint tenancy in assets is enough to protect them. The reality is that no one's financial life is as simple as it appears. If you have young children, you need to consider appointing a conservator, and only establishing joint tenancies for assets can exclude other heirs from parts of the estate.

Mistake #3: Procrastinating in Your Estate Plan

The number one excuse of Americans who do not have an estate plan in place is that "they just haven't gotten around to it yet." For your own peace of mind, and to avoid any potential "what if" scenarios, you should consider starting the process as soon as possible. In addition to apportioning your estate to your heirs, it can help if you are no longer able to make decisions on your own and your family needs to know what you want if you become disabled.

Mistake #4: Forgetting about Your Digital Assets

Property is no longer what you physically own but what you digitally own, as well. Do not forget to include instructions in your estate plan about what to do with your digital assets. Create a list of online subscriptions, user names, and passwords so that your family can access your digital assets. You should also consider what you want to do with your social media pages and decide if you want your family to take those pages down or leave them up in memoriam.

Mistake #5: Not Preparing for "What If" Scenarios

While it is nice to think that your life will work out exactly like you planned, not every story has a happy ending. Marriages end in divorce, loved ones suffer addictions or pass away, business fail, and children can become estranged. Your estate plan can cover all contingencies, both good and bad.

Mistake #6: Forgetting about Your Pets

If you do not want your pet dumped at a shelter or euthanized after you can no longer care for it, you should include instructions for your pet's care in your estate plan. Legally, your pets are considered personal property, and you can dictate who gets your pet when you are gone. Creating a pet trust that sets money aside for your pet's care is also another option for your estate plan.

Mistake #7: Not Thinking Through Who to Name as Trustee

Deciding who will be in charge of your affairs and your assets once you have passed away should not be done arbitrarily. Name a person who is up for the job and knows exactly what responsibilities are involved. Also consider naming a backup trustee or executor in case the original person cannot fulfill the duties.

Should You Establish a Trust?

September 18, 2014,

There are a lot of benefits to establishing a trust in your estate plan. It can eliminate the need for probate, keep your affairs private, and reduce the chances of issues arising among your heirs regarding their inherited share. However, creating a trust is a big investment that involves a considerable amount of time and legal fees that should not be taken lightly. Here are some factors to consider when deciding whether or not to establish a trust in your estate plan.

Factors in Establishing a Trust

· How much of your estate can you shield from probate?
One of the main advantages of a trust is being able to bypass the process of probate, which can be expensive and time consuming. However, not all assets are subject to probate. Jointly owned assets with a right of survivorship and beneficiary designated assets do not go through the probate process.

· Will you qualify for simplified probate?
If your entire estate is going to a spouse or the estate is small enough it may qualify for simplified probate. You can find out what the requirements are for your state's simplified probate here, or you can consult with an experienced estate planning attorney.

· How expensive is probate in your state?
The cost of probate varies wildly depending on the state. For example, California has one of the highest costs of probate, with attorneys' fees starting at four percent of the entire estate. Because the legal fees can be so high, it may make more sense to establish a trust.

· Do you own property out-of-state?
If you own property out-of-state you should consider establishing a trust. The property that is located out-of-state must go through that state's probate process or ancillary probate in addition to the probate process in your home state. Placing all of the property in a trust is a much easier and cheaper option.

· How private do you want your affairs to be?
Another downside of probate is how public the process can be. All details of your finances and final wishes are on the public record and accessible to anyone. Establishing a trust can protect your privacy and avoid public disclosure of your estate.

· Do you have a child with special needs?
You should definitely consider creating a special needs trust if you have a child that will need help physically and financially after you are gone. If you do not establish a trust for your child with special needs, the inheritance could disqualify them from receiving government support or programs.

· Do you wish to do something original with your estate plan?
If you want to add specific instructions for inheritance or do something creative with your estate, establishing a trust is the best way to accomplish it. If the estate goes through the probate process your heirs do not have to comply with your final wishes before gaining access to their portion of the estate.

· Do you have a taxable estate?
Currently, the federal estate tax limit is set at $5.34 million, and estates worth less than that are not subject to the tax. If your estate is worth more you should consider placing assets in a trust to shield them from state and federal estate taxes.

· What are the chances of issues arising within your family regarding inheritance?
If you are dividing your estate unequally, or if there is a possibility of infighting amongst your heirs after you are gone, you should consider creating a trust to reduce the chances of that occurring. You can stipulate that any heir fighting their portion is eliminated from the estate, and keeping your estate out of probate eliminates the chances of an heir using the public information to sue for a larger part of the estate.

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.