Wednesday, July 23, 2014
James Gandolfini’s will made headlines for the tax implications that his estate planning decisions created. The Soprano’s star left gifts to his sister and daughter totaling 80% of his estate, which was then taxed at 55% in “death taxes.” Here are six lessons learned from Gandolfini’s will:
- Without the public nature of probate, the media craze could not have happened.
- A revocable trust would have been an inexpensive way to keep the process private
- It is not the end of the world if Gandolfini did pay the reportedly high amount of taxes, if his estate went to who he wanted it to.
- There are ways to limit the tax bill, including how Gandolfini left his son $7 million through a life insurance trust.
- It is important to adjust provisions for the age that children will recieve inherited funds based on how responsible and mature they are over time.
- It is important to remember that foreign property may be subject to foreign laws, such as Gandolfini’s Italian property.
See Robert Wood, 6 Estate Planning Lessons from James Gandolfini’s Will, Forbes, July 20, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Tuesday, July 22, 2014
As I have previously discussed, Philip Seymour Hoffman’s will included a request that his son, Cooper, be raised in cities other than Los Angeles. Through reports by Hoffman’s accountant, the will provision and other surprising estate planning decisions by Hoffman were intended to serve a protective purpose for his children. Hoffman was worried about his children becoming dependant on a large trust fund and took steps to prevent that outcome, including limiting the uses of the trust for Cooper to "education, support, health, and maintenance."
See Suzy Byrne, Why Philip Seymour Hoffman Didn’t Leave His Fortune to His Children, Yahoo, July 21, 2014.
Monday, July 21, 2014
When someone dies, their assets become the property of their estate. Before an estate can distribute assets to beneficiaries, each estate is obligated to pay all debts, costs, taxes and other liabilities due.
Yet who manages this? When writing wills, it is usual to appoint an executor to handle the tasks associated with an estate. Under “fiduciary duty,” executors are legally required to act with complete and transparent good faith while carrying out the deceased’s wishes.
If no will is written, a state’s probate court can appoint an administrator, who has the same powers as an executor. While there is a hierarchy of people who are asked to take on the role, nobody can be forced to be an executor or administrator unless they want to be.
When debt is passed on there are two key things to understand: (1) The debt does not die with the decedent, and must usually be paid; (2) nobody can inherit debt. If the estate does not have enough money to cover debt, lenders will write off their losses. With some rare exceptions, heirs are not liable for the deceased's debts. These exceptions include: surviving spouses in community property states, adult children of a late parent who could not pay for his or her long term care, and heirs legally responsible for managing the estate.
See Peter Andrew, What Happens to Card Debt When Someone Dies, Desert News, July 18, 2014.
Sunday, July 20, 2014
New Hampshire has enacted a trust bill that includes a provision for pre-mortem probate proceedings. The proceedings can be brought by an individual during their life to have the judge rule on the validity of their will. Interested parties must be given notice of the proceedings, including the spouse and potential heirs.
Special thanks to Todd Mayo (Perspecta Trust LLC) for bringing this article to my attention.
Saturday, July 19, 2014
Anthony Bluml, 19, was arrested last year for the deaths of his adoptive parents. Bluml allegedly killed his parents with the help of four other friends, in an effort to expedite his inheritance.
On Thursday, Branden Smith, 19, took the witness stand as part of a plea deal in which he agreed to testify against his friends. Smith told the court Bluml moved in with him after his adoptive parents kicked him out of their house for using marijuana. Late last year, Smith and Bluml drove to San Diego so Bluml could reconnect with his biological mother and stayed with her for almost two months.
When Smith drove back to Witchita, Bluml and his biological mother accompanied him. The plan to kill the Blumls was brought up on the way back. Smith said Bluml told them, “If we kill my parents we can get will money,” referring to an inheritance he thought his adoptive parents would leave him. Smith then admitted to giving Bluml the gun that was used in the shootings.
See Roxana Hegeman, Witness: Friend Killed Parents for Inheritance, The Modesto Bee, July 17, 2014.
Friday, July 18, 2014
As your child prepares to leave for college, they may not be thinking about their estate plan. However, this is a great time to prepare important legal documents such as health care power of attorney, a HIPAA authorization, a financial power of attorney and a will.
In the majority of states, an individual is considered an adult at age 18. Absent legal documents, parents do not have access to their adult child’s financial information, medical records or basic information about their child’s medical conditions.
If your child becomes incapacitated, it is likely they would want you (thier parent) to be able to communicate with medical professionals in the case of an emergency. In terms of financial institution representatives, your child may want you to have the ability to report a lost debit or credit card.
See Child Heading Off to College? Why an Estate Plan is Important, Taft Law, July 14, 2014.
Thursday, July 17, 2014
Many people fail to consider what will come of your online accounts when you die. While grieving relatives might want access for sentimental reasons or to settle financial issues, you may not want a spouse going through every single e-mail.
The Uniform Law Commission was on track Wednesday to endorse a plan that would give loved ones access to, but not control over, the deceased’s digital accounts, unless otherwise specified in a will. If the legislation is adopted by the legislature, a person’s online life could become as much a part of the estate plan as deciding what to do with physical possessions.
Privacy advocates are skeptical of the proposal. “The digital world is a different world from offline. No one would keep 10 years of every communication they ever had with dozens or even hundreds of people under their bed.”
While some tech providers have come up with their own solutions, the Uniform Law Commission’s proposed law would trump access rules outlined by a company’s terms of service agreement, although the representative would still have to abide by other rules including copyright laws.
See Anne Flaherty, What Happens to Your Online Accounts When You Die? Associated Press, July 16, 2014.
Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.
Many different events occur throughout your life that may trigger the need for a new or updated estate plan. Marriage, divorce, birth or death are just a few examples of events that create the need to change existing planning documents. Yet oftentimes, people avoid creating their estate plan because they are unsure of what exactly they need to include. Below is a list of the most important things to include in your estate plan:
- Updated Will. If you die without a will, the court will not know how you wanted to distribute your assets and distribute them based on the distribution schedule established in the state probate code. It is therefore important to have a proper will in place and update it so you are prepared for any unexpected event.
- Ancillary Documents. There are several documents that should be included in your estate plan including a durable power of attorney, medical power of attorney, HIPPA power of attorney, and beneficiary designations/guardians.
- Setting Up a Trust. Depending upon the size of your estate, it may be necessary to include certain trusts. These may include a bypass trust, a marital deduction trust, a survivor’s trust and a revocable living trust.
See Caroline Marciano, Estate Planning for Busy Executives: How to Get the Basics in Line, Wealth Management, July 15, 2014.
Wednesday, July 16, 2014
Sometimes heirs who are not money savvy can end up blowing it all on a more lavish lifestyle. In some cases, an unequal inheritance may create rifts between relatives or trigger guilt in someone who had not expected a large windfall. Below is a list of potential mistakes heirs make and how to avoid them:
- Careless Spending. Receiving large sums of money can lead to big purchases, “If a beneficiary hasn’t had access to money before, it’s that Sudden Money Syndrome . . . What may have taken mom an dad a lifetime to build can be quickly frittered away.” It may be helpful to consult a financial professional they trust before making large purchases with an inheritance.
- Letting In Jealous Tension. When survivors do not get the inheritance they expect, there can be resentment among family members. When dividing up an asset that may have more emotional than financial value, it may be best to do a bidding system where people place sealed bids and give up that portion of their financial inheritance to pay for the item in dispute.
- Not Getting An Expert’s Opinion. A professional may advise you to renounce part of the inheritance or help you consider other tax implications.
- Losing Other Income Sources. Receiving an inheritance may disqualify beneficiaries who receive income based or asset based government benefits.
- Giving All the Money to Others. Sharing is not a mistake. Giving away large sums of money out of guilt could lead to problems. This could jeopardize your financial security as a result.
See Susan Johnston, 5 Inheritance Mistakes for Heirs to Avoid, U.S. News, July 15, 2014.
Not only is Walmart rolling back prices on toilet paper and snack food, but the store is now selling wills for only $99.
Axess Law has startedw offering legal documents to shoppers at several Walmart locations in Ontario, with plans to expand across Canada.
Although there are advantages to purchasing an inexpensive will, there are caveats. Many people are unaware that even the most minor legal language can have implications that consumers may not appreciate at the time. Furthermore, a will is just one piece of a larger plan that should encompass other documents such as powers of attorney and Do Not Resuscitate orders. “Estate lawyers frequently see the costly mess that is created when people die with a low cost will and a poorly planned estate that results in a lengthy estate process with thousands of dollars in unnecessary legal fees and higher estate taxes that easily could have been avoided.” Low-cost products and will kits place too much emphasis on wills being the only focal point of an estate plan. “By paying a little more for a will and proper estate planning advice upfront, will makers can rest assured their family will not be burdened by unnecessary taxes or be tied up in emotional court battles long after they’re gone.”
See Gail Johnson, Wal-Mart Wills: Should You Trust Estate Planning to a Big Box Store? Yahoo Finance, July 14, 2014.