Recently in Estate Planning Category

Obama Wants Tougher Rules for Retirement Fund Brokers

April 15, 2015,

The White House administration is pushing for legislation that would make it harder for retirement fund brokers to push higher fee mutual funds or other expensive products to people who are trying to save for retirement. The plan, issued by the federal Labor Department, would require brokers to act in the best interests of their clients, which is a change that could drastically affect the earnings of financial advisers in the handling of retirees' funds.

Old Brokerage Rules

President Obama said that the current regulations regarding brokers are out of date and come from an age where employees could rely upon a pension from their employers. "Financial advisers absolutely deserve fair compensation," the President said, "But they shouldn't be able to take advantage of their clients." Under the current rules, brokers can sell any financial product that they deem "suitable" for an investor, which means that it fits the client's needs and financial risk.

The opposition has beaten other attempts to curtail brokers' fees in the past, especially with more banks investing in more capital-intensive trading units. Finance groups say that the White House has distorted the issues and disregarded already tough laws on financial brokers that are enforced by both the Securities and Exchange Commission as well as the Financial Industry Regulatory Authority.

White House Proposed New Rules

This plan would impose a fiduciary duty on the brokers that would "crack down on backdoor payments and hidden fees." The main gist of the proposal is an effort to tighten the legal standard that brokers have in handling retirement funds, accounts, and 401(k)'s. Currently, American retirees have more than $11 trillion in retirement funds.

The Labor Department plans on sending the proposed new rules to the Office of Budget Management and Review next week, but it could be several more months before the official details are released to the public. However, this will also give interested parties like the securities industry and lawmakers the chance to comment on the new rules before the final regulation is issued.

How a Broker Profits

Under the current rules, a broker earns money from the sales commission of financial products or through fees paid by investors in mutual funds. This incentivizes brokers to push the financial products that net the highest fees and not necessarily the highest gain for retirees. Because of this incentive structure, investors lose as much as $17 billion per year. "The corrosive power of fine print, hidden fees and conflicted advice can eat away like a chronic illness at people's hard-earned retirement savings."

The area where investors are most vulnerable to conflicts of interest with the brokers is when they are moving investments from a 401(k) or other employer sponsored account to an IRA. The brokers can steer investors into products that net the brokers higher fees, and the average IRA rollover for investors between the ages of 55 and 64 years old was over $100,000 in 2012.

Estate Planning Tips for Newlyweds

April 13, 2015,

When a couple is getting married the last thing that they are typically worried about is estate planning. However, once the honeymoon is over you should sit down with your new spouse and update your individual estate plans to reflect the new status of your marriage. The following tips are a good place to start when combining two individual estate plans into one.

Visit the HR Department

Nowadays, your employer typically handles your retirement accounts and life insurance forms. Once you have been married, you should visit your HR department to update the beneficiary forms for these documents to include your new spouse. Beneficiary accounts are different from other assets in an estate, so if the beneficiary is left as someone different the value of the account will go to them and not the spouse.

Update Life Insurance

After you are married, it is a good time to review the status of your life insurance needs. Some employment-based life insurance has a fairly low cap, so it may be necessary to look at other options for increasing the amount of your life insurance policy. If you are considering having children, you should factor that into your consideration now, when the premiums for life insurance are low.

Draft a Will

Even though you may not have accumulated that much wealth by the time you get married, you should still execute a basic will that leaves what assets that you do have to your spouse. Dying without a will, or intestate, leaves the estate in the hands of the state courts to distribute and not all states give the entire estate automatically to the spouse.

In addition, if a prenuptial agreement was signed prior to the marriage, the terms of that agreement should also be addressed in the will. Your estate plan should reflect the prenuptial agreement to ensure that it is carried out in the way that it was intended.

Create Durable Powers of Attorney Forms

Despite the fact that you are married, in the unfortunate case that you become in capacitated and cannot make decisions for yourself your spouse does not automatically get to make your decisions for you. In order to ensure that your spouse has the right to make legal, financial, and medical decisions on your behalf you should both execute durable power of attorney and advance directive forms. You should formally name your spouse as your decision maker in this event and name an alternate in the event where an accident incapacitates you both.

Discuss Home Ownership Documents

If you and your spouse bought a home prior to getting married, you need to sit down after the wedding and discuss the terms of home ownership. If only one person was named on the deed it may make sense to put the house in both names. Changing the ownership of the home to a joint tenancy or tenancy by the entirety (depending on where you live) can ensure that the home avoids the probate process.

Estate Planning Tips for U.S. Expatriates

April 10, 2015,

Living and working abroad while maintaining your United States citizenship can add a layer of complexity to the estate planning process. International property, assets, accounts, taxation, and other issues that can affect estate plans must be considered that normally do not complicate the estate planning process. If you expect to be working as an expat, consider looking into the following issues for your estate plan before you go.

Review Your Estate Plan

It may seem basic, but review your estate plan before you go abroad. Update any necessary documents or beneficiary forms before leaving and make sure that everything is set with your attorney in the United States before going abroad. It would also be helpful to review the interactions between the U.S. legal system and the laws where you will be going to so that you can understand how your estate plan may be affected by the move.

Understand Domicile and Residence Laws

For expatriates, it is very important that you understand the difference between a domicile and a residence. In some cases, documents drafted in one country do not comply with the laws in another. The creation of trusts within an estate has been known to cause serious problems with foreign taxes, so it is important to establish through your estate plan that the United States is still considered to be your domicile.

You can change your residence without needing to change your domicile, and you can only have one domicile at a time, whereas you can have multiple residences at once. Domicile and residence rules can have a massive effect on your estate plan.

Look Out for Double Taxation

If you have property, assets, accounts, or other things of value in more than one country there is the possibility that multiple countries will claim taxes on the estate. There are agreements with some countries that prevent double taxation, but it is a good thing to check on before you go abroad.

Be Careful with Foreign Life Insurance

Consider purchasing life insurance from a United States company before you go abroad. It can be incredibly difficult to purchase life insurance from a U.S. company once you are residing in a foreign country. Furthermore, purchasing life insurance from a foreign country might not conform to U.S. laws. It can result in the policy being denied outright in the U.S. or subject it to very unfavorable tax treatment.

Review Foreign Estate Disposition Laws

The United States probate system is known for letting people dispose of their property however and to whomever they see fit. However, in many civil law countries the courts compel the estate to be distributed under their "forced heirship" principles. This means that children inherit the assets of the family upon the first parent's death, and spouses are not typically considered when distributing the estate. However, some civil law countries have amended their laws to allow for a person to distribute their estate according to the laws of their domicile, but it must be made explicit in your will.

Removing Roth IRA Limits with 401(k) Contributions

April 8, 2015,

A lot of people who are saving for retirement prefer to use Roth IRAs as part of their retirement plan. This after-tax income can go a long way in retirement, but annual contribution limits can place a constraint on how much money can be saved. Fortunately, there are "back door" options for funding a Roth IRA that get around the contribution limits and allow the account to grow more quickly. One of the fastest growing back door options is using the funds in an employer-sponsored 401(k).

401(k) to Roth IRA Strategies

An employer-sponsored 401(k) account is mainly used to defer the traditional pre-tax contribution limit. For 2015, the limit is $18,000 or $24,000 for employees over the age of fifty years old. However, some 401(k) account holders have started to use the after-tax contribution limit as a way to contribute to a Roth IRA. This system works because the after-tax limit for a 401(k) allows the client to defer money than the pre-tax limit, which for 2015 is a total of $53,000.

The IRS has also made it easier for employees to fund a Roth IRA with funds from a 401(k) by treating the 401(k) distribution as a single distribution, despite having both pre-tax and after-tax contributions mixed together. This rule even applies if the 401(k) distribution will be rolled into different accounts so long as the 401(k) distribution is made all at once.

Employees that can contribute more than the pre-tax contribution and can also give after-tax contributions can then "overfund" a Roth IRA at a later time. The after-tax contributions can be separated and rolled into a Roth IRA when the employee exits the employer-sponsored plan without any tax liability. However, in order to roll the entire 401(k) into a Roth IRA you must move the entire 401(k) balance into a new account.

Practical Concerns

There are a couple of issues with using a 401(k) to fund a Roth IRA that you should be cognizant of. First, making an after-tax contribution to a 401(k) is different than making a normal contribution to a Roth IRA. For a Roth IRA, contributions are limited to a pre-tax amount, and earnings in that account grow tax-free whereas after-tax contributions are only made tax-deferred.

In addition, earnings on after-tax contributions do not begin to generate tax-free growth until they are rolled into the Roth IRA. However, by making these types of contributions, you can indirectly fund a Roth IRA more than what you could through the maximum contribution limits for that type of account.

Finally, you should check to see whether your employer allows for back-door funding of Roth IRAs through a 401(k). Some employer plans do not allow after-tax contributions so it is important to check before you start making transfer plans for the two types of accounts. However, if it is allowed, over funding a Roth IRA through a 401(k) can be a great, tax-free way to fund your lifestyle after retirement.

Woman Admits to Digging Up Father's Grave Searching for "Real Will"

April 1, 2015,

In a bizarre care, a woman in New Hampshire admitted in court that she told police that she dug up her father's grave in search of his "real will" but was rewarded with only vodka and cigarettes. Melanie Nash, 53, pleaded guilty last week as one of four people who opened her father's vault and rifled through his casket last May.

According to the prosecutor, the scene was reminiscent of an Edgar Allen Poe tale. Ms. Nash believed that she was unjustly shorted out of her part of her father's estate when he died in 2004. She did not receive anything when he died and had been thinking of digging up her father's grave for years to try and prove that her sister hid the will in his casket. Her sister, Susie Nash, has always maintained that there was only one will created in 1995 along with the rest of the estate planning documents and that everyone involved in the process knew about it.

In Search of the Real Will

Melanie Nash gave a written statement to police last June admitting that she met up with three other people at the cemetery last May and that "All this was done for the right reasons and I know my father would be OK with it." She then added that "What we all did was to dig up my father's coffin, Eddie Nash, looking for documents. We did it with respect." Two of the three other people pleaded guilty to their offenses and the third was acquitted.

Ms. Nash's attorney claimed that the statement was inadmissible because the statement was given before her Miranda rights were read, but the judge ruled that the statements were given freely to the police after a warrant had been issued for her arrest and she voluntarily gave the statements. She was supposed to go to trial in March but instead pleaded guilty to charges of criminal mischief, interference with a cemetery, conspiracy and abuse of a corpse.

Her father, Eddie Nash, died of a heart attack in 2004 at the age of 68. He was the founder of an equipment business in 1979 that is still run by his family today. Melanie Nash's sister Susie told the media that since the incident her father has been reburied. Melanie Nash will face sentencing for her crimes on May 5.

Estate Planning Lessons

There are a few important takeaway lessons from this story regarding estate planning. First and foremost is the importance of communication. It is important to communicate with everyone who may be affected by your will and estate plan to know that you are drafting a will. Second, it is equally important to communicate with family members or others who expect to share in the estate but have been written out. It can be an uncomfortable conversation, but it can avoid awkward situations like this one later down the road. Finally, review the estate plan with everyone that is involved, and if you make any updates or changes to the estate be sure to communicate that with others so that there are no surprises when the estate is distributed.

Court Rules Payable-on-Death Accounts Not Part of Estate

March 30, 2015,

A Florida Court of Appeals sorted through a complicated question of bank accounts and estates in a case at the end of last year. This case illustrates the complexities of banking law and administering estates in addition to the importance of reviewing the state law regarding estate administration before creating an estate plan.

Facts of the Case

In the case of Brown v. Brown, Elizabeth Brown died in 2007, leaving behind six adult children. She had an estate plan in place that distributed several specific bequests and left the remainder to be distributed equally amongst her children. She named one of her children as the executor of the estate, and he filed this lawsuit against one of his siblings, Joseph.

Ms. Banks had multiple bank accounts that were either joint accounts or payable-on-death (POD) accounts naming Joseph as the survivor or beneficiary. The lawsuit sought to declare that the funds in those accounts were part of the estate and should be split equally amongst the children and not pass directly to Joseph in their entirety.

Ruling of the Trial Court

The trial court in Florida held an evidentiary hearing on the matter and appointed a magistrate for the issue. The magistrate found that all of the funds from all of the accounts, joint and POD alike, should be deposited into one account for the estate and distributed equally to the children. He did so after hearing evidence that Ms. Banks' intent was for all of her children to share equally in the funds after her death.

The magistrate also relied on Florida law, where Section 655.79 states that "a deposit account in the names of two or more persons shall be presumed to have been intended by such persons to provide that, upon the death of any one of them, all rights, title, interest, and claim in, to, and in respect of such deposit account . . . vest in the surviving person or persons." However, the same section also provides that The presumption created in this section may be overcome only by proof of fraud or undue influence or clear and convincing proof of a contrary intent."

The magistrate found that the executor of the estate had proven by clear and convincing evidence that there was intent by Ms. Banks to distribute all of the money to her children and not have it pass to just one. The trial court agreed and upheld the decision of the magistrate. Joseph Banks then appealed.

Reversal on Appeal

The appellate court disagreed with the findings of the magistrate and ruling of the trial court. It stated that the section of law referenced in the trial court's findings only applied to the joint bank accounts in Ms. Banks' estate. POD accounts differ from joint bank accounts and are governed by different law. In a POD account, the creator of the account names a beneficiary for the account funds to pass to upon the creator's death.

Differing from a joint account, Section 655.82 of the law states that for a POD account "on the death of the sole party, or the last survivor of two or more parties, sums on deposit belong to the surviving beneficiary or beneficiaries." There is nothing in the law regarding POD accounts that allows for a rebuttable presumption like it does for joint accounts. As a result, the joint accounts were distributed amongst the children equally, but the POD accounts remained solely with Joseph as part of his inheritance.

Estate Planning Tips Before and After a Loved One's Death, Pt. 2

March 27, 2015,

The first part of this article dealt with tips to keep in mind when helping an aging loved one with estate planning matters. This included watching for waning mental capacity, exercising any necessary swap powers, reviewing trust principal distribution standards, adjusting the timing of any charitable gifts, amending family limited partnerships, and providing for any shifts in the trust situs. This section of the article discusses tips to keep in mind after your loved one has passed in order to derive the most value possible for the heirs.

Tips for After the Passing

In addition to looking out for an estate before a loved one passes, you should also keep in mind what is important after they pass away. There are many different opportunities available to ensure that the heirs of the estate also get as much value as possible that their loved one wished to pass on. Issues that can arise after the passing of a loved one can include:

Executor Commissions
Traditionally, it has been commonplace for a family member to take executor commissions. The commission provided a valuable estate tax deduction for estates taxed at higher rates. However, with the exemption level eliminating estate taxes for most people, paying executor commissions may generate a significant income tax for the executor without reducing any estate tax. Once reviewed, if it does not make sense to take a commission, the executor can formally waive receiving any money for the responsibility.

Unfunded Trusts
Although it is constantly warned against, many people do not revise their will for years. Some older estate plans include funding a credit shelter trust on the first spouse's death, but many families do not want to do it if the estate tax benefit no longer exists. Some even go so far as to attempt to distribute the assets outright to the named beneficiaries and skip the trust. However, you need to legally address the termination or nonuse of the trust before making distributions in order to avoid legal ramifications.

Funding Bequests or Appreciated Assets
If your loved one attached a dollar figure in a bequeathing that is met using appreciated assets, a taxable gain can be triggered at distribution. As a result, you should be careful when deciding what assets should be sold in order to fund specific bequests.

Asset Distributions
While many wills and estate plans provide for the equal distribution of assets to heirs, sometimes the beneficiaries would much prefer to receive non-pro rata distributions of various assets in the estate, as long as they are of equivalent value. For example, one heir may want to inherit the family home, while other heirs receive their portion in stocks and financial assets. However, you should be aware that unless the will or state law permits non-pro-rata distributions, the IRS may view this as the equivalent of a sale and an exchange of the various assets, so be sure to review the documents and law before executing an estate in this manner.

Estate Planning Tips Before and After a Loved One's Death, Pt. 1

March 25, 2015,

Estate planning lawyers agree that there has been a fundamental shift in their clients' estate planning concerns over the last couple of decades. There has been less worry about estate tax minimization and more concern for income tax minimizations and other valuable planning ideas. Thankfully, there are things that can be done with an estate before and after your loved one passes away that can add value to an estate for them as they age as well as for their heirs.

Tips for Aging Loved Ones

If you are going over your elderly' loved one's estate plan, there are some important items that you should review or look out for in their estate. These issues can include:

Watching for Lack of Capacity
Your loved ones can lose mental capacity as they age, and it is important for the purposes of estate planning that you monitor their ability to make rational decisions on their own. It is important to update estate planning documents while they can still articulate them and not be challenged later for a lack of capacity.

Exercising Swap Powers
Many irrevocable trusts include a right for the person who sets up the trust to exchange assets outside the trust for assets in the trust. If highly appreciated assets are transferred back into the trust before death, the tax basis is stepped up at the date of death.

Review Principal Trust Distributions
While most trusts pay out income to beneficiaries, some trusts also allow for the payment of the principal. There are pros and cons to this type of trust structure, and you should review it with your loved one and an attorney to decide if this is the best setup for you loved one's assets.

Shift Timing of Charitable Gifts
Only estates that are taxable can benefit from an estate tax charitable contribution gift. If you review the estate of your loved one and know that they are below the estate tax exemption level, you should prepay charitable bequests while they are alive so that they can qualify for income tax deductions. However, you should also get it in writing from the charity that the donation is a prepayment of the bequest under the will so that it is not paid double at death.

Amend any Limited Partnerships
This applies if the limited partnership is also a family limited partnership. In the past, family limited partnerships were formed to provide tax valuation discounts. However, at current exemption levels, this type of partnership may not help so much as hurt. Because the discount could reduce the basis step-up on death and cause higher capital gains taxes when a sale is made in the future, it is important to review them now.

Trust Situs
The situs of the trust is the state where it is based and subsequently dictates the governing law. However, now more than twenty states permit "decanting" of trusts where one trust can be merged into another. As a result, it is becoming increasingly important to draft trusts with provisions permitting a change in situs and governing law.

Repeal of Federal Estate Tax Gaining Traction

March 23, 2015,

On March 3, a bipartisan bill was introduced in the House of Representatives in Washington D.C. that would take away the federal estate tax. The Death Tax Repeal Act, otherwise known as HR 1105, is the first bill of its kind in over ten years that has actually reached the point of a vote on the floor. The House Ways and Means Committee plans to vote next week on a bill to repeal the U.S. estate tax.

Key Points of Legislation

The main points in the Death Tax Repeal Act can be boiled down to three key areas: estate tax repeal, generation-skipping transfer tax repeal, and the modification of gift taxes. First, the bill eliminates the federal estate tax for "decedents dying on or after the date of the enactment of the Death Tax Repeal Act of 2015." In addition, "with respect to the surviving spouse of a decedent dying before the date of the enactment of the Death Tax Repeal Act of 2015--[federal estate taxes] shall not apply to distributions made after the 10-year period beginning on such date, and . . . shall not apply on or after such date.''

In regards to generation-skipping transfer taxes, the bill would eliminate federal taxes on "the estates of decedents dying, and generation-skipping transfers, after the date of the enactment of this Act." Finally, the bill also modifies gift taxes and the overall exemption limit on gifts. Under the bill, the gift tax would be calculated according to a new rate schedule, and the lifetime gift exemption for a single person would be $5,000,000 plus any inflation.

Subcommittee Hearing

On March 18, the Ways and Means Subcommittee on Select Revenue Measures held a hearing to examine the burden the estate tax places on family businesses and farms. One of the representatives that introduced the bill stated that "The Death Tax is still the number one reason family-owned farms and businesses in America aren't passed down to the next generation . . . After a family loses a loved one, why should Uncle Sam swoop in and take much of the nest egg they spent a lifetime building? Especially when it forces the survivors to sell their land or business just to try to keep what they worked so hard to earn."

The subcommittee hearing recognized that the federal estate tax hurts many businesses and farms. However, Democrats and Republicans differed slightly in their opinions about the measure. While Republicans want a complete revocation of the federal estate tax, Democratic leaders are leaning more towards carving out specific exemptions to the federal estate tax, such as for farms and family businesses. Since this meeting, the full Ways and Means Committee, run by Representative Paul Ryan, has stated that it intends to hold a vote on the bill in committee. If successful, HR 1105 could be sent up to an April House of Representatives floor vote for approval, making it the first House vote on stand-alone repeal legislation since 2005.

Issues to Consider with IRAs

March 20, 2015,

An IRA, either in its traditional form or as a Roth, gives you the opportunity to reduce your taxes and grow your wealth for the future. The deadline for 2014 IRA contributions this year is April 15, and the maximum contribution amount is $5,500. If you are fifty years old or older, you can contribute another $1,000 annually as a catch-up contribution. However, many people do not understand the differences between IRAs or what other opportunities exist that can help you with your retirement wealth.

Traditional v. Roth IRAs

There are two main types of IRA accounts. The first is a traditional IRA, where earnings can grow tax deferred until you reach age 70½ years old. However, if you make withdrawals before age 59½, you may incur both ordinary income taxes and a ten percent penalty. As soon as you reach 70½ years old, you are required to start taking the minimum required distributions (MRDs) and start paying taxes on that amount.

A Roth IRA contribution is not tax deductible the year that you make it, but the money in the account can grow tax-free. In addition, the withdrawals are tax-free in retirement as long as certain conditions are met. Contributions to a Roth IRA are subject to income limits and early withdrawal penalties. However, Roth IRAs do not have MRDs like traditional IRAs.

One final option is a spousal IRA. This type of account allows a spouse that does not earn wages to contribute to their own traditional or Roth IRA. However, the other spouse must be working, and the couple must file a joint tax return. Eligible married couples can each contribute up to $5,500 for the 2014 tax year to their respective IRA, and spousal IRAs are also eligible for a $1,000 catch-up contribution.

Opening an IRA for Family

If your children or grandchildren are working and earn a taxable income, you can gift them their annual contribution to an IRA. Up to $5,500 can be deducted from your annual gift amount of $14,000 without repercussions with gift taxes. However, a contribution cannot exceed the amount that your child or grandchild earns in the year if it is lower than the contribution maximum amount.

Investing Your IRA Contribution

Many people forget about making an IRA contribution until right before the deadline of April 15, and they simply put it into a money market account. However, they do not ever think to go back and place that money in an investment. This situation is not ideal because the best way to grow an IRA is to invest in a mixture of stocks, bonds, and mutual funds. If you do not feel skilled enough as an investor, there are other options available.

You can consider a target fund date, where a manager selects, monitors, and adjusts the mix to match a target retirement date. Another good option to consider is a managed account, where the managed account provider determines an asset mix based on your financial circumstances, time horizon, risk tolerance, and investment goals. A skilled financial advisor can set up either option for your IRA account.

How to Reduce Taxes and Pass On Values

March 18, 2015,

Many people who are planning their estate are told by advisors to give annual gifts to children and grandchildren up to the $14,000 yearly limit. It can help you avoid the estate tax of up to forty percent if your estate exceeds the federal exemption level. This year, the exemption is $5.43 million for a single person, $10.86 million for a couple. However, there is a lot more that you can do with this money than simply give it away. You can pass along wealth and wisdom through these annual gifts in a variety of ways.

Why Give Differently

The problem with giving an outright gift to a child or grandchild of up to $14,000 per year is that it may not have the intended effect that you had hoped. If the gifts are significant over time, your loved ones may take advantage or feel like they do not need to accomplish as much. However, you can use these gifts to create a different set of incentives for your loved ones that will help them for years down the road if you invest your annual gift in an alternative way.

Fund a Roth IRA

Children can open a Roth IRA as soon as they start to earn income, and you can help make contributions to the account up to the yearly amount of $14,000. The compound interest in a Roth IRA can return massive rewards in the form of tax- free wealth at retirement. In addition, helping your loved ones find ways to earn income to add to the Roth IRA is a great way to instill income while simultaneously reducing your overall estate. Investing the gift in an account that should not be touched until retirement also keeps your loved ones from accessing the money irresponsibly too early.

Pay Loved Ones' Taxes

It can be easy for children and grandchildren to question why they work so hard when taxes take so much of each paycheck. State taxes, federal taxes, FICA, and more all take away parts of a person's paycheck. By using part of your annual gift to pay the taxes on their paychecks it can keep your loved ones interested in working. In addition, it continues to lower your overall estate for your own tax purposes when it comes to the federal exemption level.

Cover Health Insurance

Many people do not like to purchase health insurance because it is expensive and most believe that they will never need it. Others feel stuck in jobs that they do not like because it is the only way that they can keep good health insurance without overpaying. By covering your children or grandchildren's health insurance coverage, it can free them to pursue a career that they love without regard to a health plan.

Court Rules on Inter Vivos Gift

March 16, 2015,

The Eighth Circuit U.S. Court of Appeals recently ruled on a case where an estate claimed that the decedent made a gift during his lifetime that actually belonged to the estate after his death. The court ruled that the gift was actually a conditional gift that had its reversionary interest end when the decedent died without asking for the gift back from the recipient.

Facts of the Case

In the case of Estate of Pepper v. Whitehead, Sterling Pepper Jr. owned a large collection of Elvis Presley memorabilia. When he moved into a nursing home in 1978, he told Nancy Whitehead to "keep it." Mr. Pepper died two years later in the home, and Ms. Whitehead kept the Elvis collection. In 2009, after maintaining the collection for over thirty years, the Pease Family Partnership put it up for auction, and it sold for more than $250,000.

The estate for Mr. Pepper filed a lawsuit against Ms. Whitehead, alleging that Mr. Pepper retained ownership of the Elvis memorabilia as well as that the ownership interest passed to his heirs at his death. At trial, the jury found that Mr. Pepper made a conditional gift to Ms. Whitehead. As a result, when Mr. Pepper died the reversionary interest was no longer valid, and Ms. Whitehead was entitled to the collection. The Pepper estate appealed the trial court's decision.

Ruling of the Court

The appellate court first looked at what is considered a conditional gift. Under the law, to create a conditional gift the donor must "deliver the personal property to the donee . . . with the manifested intention that the donee acquire an ownership that terminates after the passage of some period of time or on the occurrence or nonoccurrence of some event or condition." In doing so, the donor of the conditional gift retains a reversionary interest in the gift. However, the law also states that the reversionary interest in a conditional gift terminates automatically at the death of the donor.

According to the testimony at the trial court level, Ms. Whitehead testified that Mr. Pepper never gave her specific instructions for the collection, only to "keep it." She said that if he had ever asked her to return it she would have done so. There was no evidence proffered at the trial level to indicate that Mr. Pepper ever meant for Ms. Whitehead to keep the collection merely for safekeeping or as a bailment.

Finally, the court of appeals agreed that the evidence at the trial level supported the finding that the Elvis collection was meant as a conditional gift. Mr. Pepper and Ms. Whitehead both shared a love of Elvis, and Ms. Whitehead was considered a nurse and close friend. She also testified to how close of a relationship they had, how she brought him items to the nursing home, and how his family members were not even aware of its existence. Furthermore, Mr. Pepper did not want his relatives to be entrusted with the collection. Therefore, the Court of Appeals agreed with the trial court and found that the collection belonged to Ms. Whitehead.

Steps for a Financially Secure Retirement

March 13, 2015,

One of the biggest concerns for people entering retirement is whether they will be financially secure, and many think that it is impossible to save enough given a limited income and never ending expenses. However, there are several steps that you can take to ensure that you will have a more financially secure retirement. The most important aspect of planning is to focus on what you can control, and not the unknown.

Steps for Financial Security

By starting early, saving the right amount, and investing wisely you can be financially secure in your retirement. The following steps can allow you to focus on the most important parts of your retirement savings plan.

Save the Right Amount
All in all, you should save between ten and thirteen percent of your gross income for retirement and that amount includes any employer matching. So for example, if your employer matches two percent of your income, you should be saving eight to twelve percent.

Cut Down on Spending
Try to cut down on unnecessary expenses in your daily life, and save that money for retirement. Cut things that do not mean much to you or that have cheaper alternatives. One way to accomplish this is by creating a line-item expenditure list and cut back item by item.

Invest Wisely
Assess your tolerance for risk in the market, and invest your funds appropriately. Most people believe that as you age your investment choices should become more conservative, but you can invest in whatever way fits your lifestyle best. A financial planner or estate planning attorney can help you assess your risk tolerance.

Take Advantage of Tax-Deferred Accounts
Roth IRAs, 401(k)s, 403(b)s, and other accounts are all tax-deferred and not subject to income tax like a normal IRA account. By maximizing your contributions now, you can defer more income taxes and save that money for retirement.

Evaluate Healthcare Coverage and Medical Services
Healthcare coverage and medical services are of utmost importance after retirement. It is important that you do your research and evaluate all of your options for care. This includes the cost of Medicare, qualifying for Medicaid, and any long-term care insurance policies. Even once you do qualify for Medicare, you will probably need a supplemental policy to cover what it does not.

Research Housing Options
Deciding where to live in retirement is one of the biggest decisions that you will make. Most people like to retire in their home because of family and community ties. However, you may save money if you move to a state where it is less expensive. Cost of living, property costs, taxes, and other expenses differ from state to state so it can be worth it to do some research if you are willing to move.

Even if you do not want to move out of state, you may want to consider downsizing your home to something smaller. You can cut down on property costs and utilities while still staying in the same community. Retirement communities also provide a third option for housing once you are retired.

Think about Social Security
Finally, consider when you want to start taking Social Security in retirement. The age that you start to take Social Security can drastically affect the amount that you receive as well as how you are taxed. You can start taking Social Security anytime between the ages of 62 and 70 years old, but full retirement age is considered 66 years. If you can hold off taking Social Security, you can receive much more in the long run.

Mentally Ill Man Kills Mother and Still Wants Inheritance

March 10, 2015,

In 2010, John Armstrong killed his eighty year old mother, Joan Armstrong, by bashing her head in with a brick and then stabbing her body repeatedly to drain the body of blood. However, despite this gruesome crime his attorney is arguing that he should still get his part of his mother's inheritance. He is one of five children of Ms. Armstrong, who enjoyed success as an artist before her death and included all of her children in her will. His attorney is challenging the state's slayer rule based on mental illness and incompetence.

No one disputes that Mr. Armstrong killed his mother in 2010. On August 7, the Ocean Springs Police Department responded to a call from Ms. Armstrong friend who said that when he knocked on her door, Ms. Armstrong showed up at the door covered in blood. Ms. Armstrong was found on her back in the apartment with a large open wound to her forehead. John Armstrong told police that he killed his mother because he didn't want her to leave and go to the pool in the complex. In his mind, he thought she was abandoning him by going to the pool.

A mental exam in 2012 found John "seriously and persistently mentally ill," and the recommendation of the psychiatrist was that "it is not clear that, even with treatment with antipsychotic medications, Mr. Armstrong can be restored to competence to proceed legally."

The Slayer Rule

Mississippi, like most of the other states in the nation, has what is known as a "slayer rule." It states that a person cannot profit from an inheritance if they caused the death of the person that they are inheriting from. In essence, a killer is prohibited from inheriting any property from a person that the killer murdered. The courts treat the killer as though he predeceased the victim of the crime, thereby forfeiting any rights in property interests. However, this rule only applies if the killing was "knowing and intentional," so a crime like involuntary manslaughter would not qualify under the doctrine.

Issues in this Case

The Mississippi Supreme Court will decide whether Mr. Armstrong should be allowed to inherit from his mother's estate. The attorney for the estate says that he should not be given his portion of the inheritance. "The results of this case is that John is not prosecuted or punished for his unlawful act, but neither does John gain from causing the death of his mother . . . Though it hadn't been mentioned, the decedent's other beneficiaries, her children, have been deprived not only of the assets of her estate but also her love and companionship. It would be a perversion of law and justice to allow John to inherit from his mother's estate to the detriment of his siblings."

This case is different because the court has never had an issue where the killer has been deemed incompetent to stand trial. There have been other cases where the defendant has been found not guilty by reason of insanity, but this differs. Most likely, the decision will be rendered on the interpretation of the state's language. In Mississippi, the state law uses the word "kill" and not "murder," which could bar inheritance under the slayer rule.

When Heirs Fight Over Sentimental Assets

March 6, 2015,

Robin Williams' widow and his children from previous marriages were in court more than eight months after his death arguing over what personal items should go to whom. His wife, Susan Schneider, conceded that the children should get the suspenders that he wore on the television show, "Mork and Mindy," but wanted to keep the tuxedo that he wore at their wedding. These were two items in a list of assets that have more sentimental value than monetary value, but it is often an overlooked part of the estate planning process.

Robin Williams' Estate

Robin Williams was very careful about his estate plan. He left money and property in trust to his children, set up a trust for his wife, and masterfully protected his publicity rights through the creation of a nonprofit 501(c)(3). However, the terms in his estate plan regarding his personal, more sentimental assets were left unfortunately vague. He left clothing, jewelry, and personal items accumulated before his last marriage to his children.

However, Robin Williams also left the home and its contents that he shared with his wife to her. She also claims that someone took personal items from the home after his death, but that claim remains unproven. Furthermore, there are other items in storage as well as in collectible sets that remain up for debate.

Fighting over Sentimental Items

For most families, fighting over personal effects is usually less about the monetary value of an item and more so about the sentimental value that it possesses. Squabbles over the smallest items can turn into the biggest fights, and arguing over sentimental items of value can lead to many hurt feelings or family feuds. While estate plans tend to mostly focus on the big-ticket items, it is the smaller tokens of personal sentimental value that cause the most contention.

There are a few solutions to the issue of passing along personal items without family infighting. One option is to create a qualified terminable interest property trust (QTIP trust) for the big ticket items like the home in addition to the smaller personal effects to be used during one person's lifetime before being passed along to heirs.

Another possible option is to create a list of the personal items that you wish for certain family members to inherit after your passing. Then give the list to your estate planning attorney, but do not add it as part of the estate planning documents. That way if the IRS audits the estate and asks for the items in the list, they will not be impossible to track down. If more items need to be added or changed, you can simply edit the list of items and send a new copy to your attorney.

It is also important to remember in these situations that family is the most important thing. When arguing over sentimental items, try to remember who you are inheriting these pieces from and how they would want you to act with your fellow family members. It is also important to remember that sentimental value is not equivalent to monetary value, so it can be difficult to apportion personal effects based on one or the other.