Wills, Trusts & Estates Prof Blog

Lamar Odom Shows Dangers Of Poor Estate Planning While Divorcing

The Kardashian clan has been useful to many pundits as examples of how not to live one's life (unless the only goal is to be famous and rich) and has not let us down again following the health crisis of Lamar Odom.  Odom is in the process of divorcing Khloe Kardashian which, since the dissolution is not yet final, left in her in charge of his health care decisions and as the beneficiary of his estate in the event he died. This is not what Odom would likely have desired under normal circumstances and shows the need for those in the process of divorce to create a living will and health care directive as well as a traditional will that would prevent the estate from passing to the estranged spouse. A marriage that is not yet dissolved still imparts privileges on a spouse no matter if the parties intended for all marital rights to cease so additional planning will be need to cover the gap between separation and the legal end of the union. While Odom appears to have avoided the worst consequences of his ex being in charge, this will not always be the case so always prepare for the worst case scenario involving divorce and an unexpected health crisis.

See John P. Dedon, Kardashian Family Continues to Teach Estate Planning Lessons, National Law Review, October 29, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

 

Late In Life Divorce Sees Surge Among Older Generation

Late in life divorce, also known as silver or gray divorce, is becoming increasingly frequent as the population ages. This trend is caused in part by the change in status for women over the last few decades which has allowed them the resources to cut ties with a partner without facing serious financial burdens. Greater longevity also plays a part since living with someone when only five or ten years of life remains is easier than the potential decades that couples may stay together after retirement. As the Baby Boomers retire, many expect the number of silver divorces to increase as couples realize that their relationship cannot stand the constant companionship that accompanies leaving the workforce. Because of this, estate planners should keep on an eye on the marital health of clients since the old assumption that a decades long marriage will continue to death is becoming obsolete. A late in life divorce could lead to major changes to retirement planning as well as decision making authority that has been delegated over the years on the assumption a marriage would not end until death.

See Abby Ellin, After Full Lives Together, More Older Couples Are Divorcing, New York Times, October 30, 2015.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

Social Security Changes Causing Advisers To Rethink Retirement Plans

Major changes to Social Security contained in the recent budget legislation has financial advisers struggling to develop new retirement plans.  The new Social Secure measures will do away with the file-and-suspend claiming strategy.  This new legislation that was passed by the Senate on Friday morning also places restrictions on filing for a restricted claim of spousal benefits.  There are many people that have relied on these claiming strategies when making their retirement plans that are now going to have to scramble to adapt.  Many senior citizens might either have to keep working or learn to live with less.  Clients that have not saved enough will no longer be able to depend on the extra boost that they would have gotten from these Social Security claiming strategies. 

See Mark Schoeff Jr., Advisers rethink retirement plans amid Social Security changes, Investment News, October 30, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

What Type Of Assets Do The Wealthy Possess When They Pass Away?

This article discusses the type of assets that very wealthy Americans often have in their possession when they pass away.  The Internal Revenue Service (IRS) has recently released estate tax data showing what sort of property the wealthiest Americans possess.  Only a very small portion of the population has to pay a Federal estate tax.  The tables provided in this article show a difference in the types of assets owned by those classified as merely rich and those that are very rich.  The people that are very wealthy tend to have more invested in bonds and real estate and also invest more in art and often own stock in closely held businesses that they can pass onto future generations.  Those that are merely rich tend to have more invested in their homes and in retirement accounts. 

See Richard Rubin, When the Superrich Die, Here's What's in Their Wallets, The Wall Street Journal, October 30, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

Happy Halloween

Many law school classes have one or more holidays which are especially relevant. 

For example, Family Law has Valentine's Day, Mother's Day, and Father's Day, Labor Law has Labor Day, Environmental Law has Earth Day, Military Law has Memorial Day, and Law and Religion has Christmas, Hanukkah, Ramadan, etc.

Halloween, with its fascination with death, may be the most relevant holiday to those of us interested in wills, trusts, estates, probate, and estate planning.

So, however you celebrate, have fun and be safe!

Tolkien Estate Involved In Copyright Dispute With Warner Brothers

A recent judicial memorandum filed Wednesday leaves the door open for Warner Brothers and the estate of legendary author J.R.R. Tolkien to continue a legal dispute over the marketing of products associated with ‘The Lord of The Rings’ and ‘The Hobbit.’  The Tolkien estate filed a lawsuit in 2012 against Warner Bros. claiming that the company exceeded the limits of the licensing agreement.  When Warner Bros. counter sued the Tolkien estate tried to get the claim dismissed under California’s anti-SLAPP statute.  In 2013, a U.S. District Court denied the Estate’s request for dismissal and the 9^th Circuit Court has recently upheld the district court decision. 

See Mark Sommer, Appeals court decision reopens Warner Bros. and Tolkien Estate battle, Examiner, October 29, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Why Using Retirement Money To Pay Taxes On Roth Conversions Is A Bad Idea

In this column, Dan Moisand explains why it is a bad idea to pay taxes on a Roth IRA conversion using the 401(k) retirement account.  When converting a traditional IRA account into a Roth IRA people should pay the taxes on that conversion using a non-retirement account.  Roth conversions make the most sense to taxpayers when they expect tax rates to be higher in the future.  Another catch with paying taxes out of the retirement account is that the amount of the traditional IRA not being converted into a Roth is treated as a distribution instead of a conversion.  If a person is under the age of 59 ½, they would owe a 10% penalty for taking an early distribution. 

See Dan Moisand, Don’t pay taxes on Roth conversions with retirement money, Market Watch, October 30, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.  

License Plate From JFK Limo Will Be Put On Auction In Dallas

The license plates that were on the limousine that carried President John F. Kennedy when he was assassinated will be sold at a Dallas auction on November 7, 2015. There is currently an opening bid of $40,000 for the plates that were saved from the trash 52 years ago by Willard C. Hess, owner of the company that retrofitted the presidential limousine Hess & Eisenhardt.  For the last half century the valuable license plates have been kept in a drawer in an Ohio kitchen after being consigned by Jane Walker.  According to Don Ackerman, Consignment Director for Heritage Auctions, there are ”very few pieces of this caliber, that were so close to the assassination on the fateful day, and that could potentially mean as much to collectors."

See License plate from JFK’s limo, saved from trash 52 years ago, at auction in Dallas, Art Daily, October 30, 2015.

Florida Court Addresses Issues With Foreign Will

A Florida Court has recently had to contend with issues surrounding a Will that was executed in Argentina by an Argentine citizen.  The Will was valid in Argentina but Florida law disallowed it.  The document that was created in Argentina was considered a nuncupative Will because the person that executed it dictated the Will orally to an Argentine notary who then transcribed the Will in the presence of three witnesses.  Florida law currently bars nuncupative Wills, but the law does not clearly define what is a nuncupative thus leaving the interpretation open to courts.  “The court relied on an outside treatise that defined a notarial will as an orally declared will that is put in writing by a notary, then signed by the person writing the will, witness, and a notary.”  In this case the testator did not sign the Will.

See Tom Nawrocki, When foreign wills become a problem, Life Health Pro, October 29, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

Article On The Threat Of Small Trust Termination Statutes

Alyssa A. DiRusso (Professor, Cumberland School of Law) recently published an article entitled, Euthanizing small charities: the threat of small trust termination statutes, 45 Cumb. L. Rev. 473-485 (2014-2015). Provided below is an excerpt from the article:

Perpetual charitable trusts are increasingly a luxury available only to the most affluent class. In a growing number of American states, generous people of moderate means can no longer create a charitable trust with the assurance that it will outlast them. Whereas donors of all wealth backgrounds may design their charitable trusts to be perpetual, modest trusts are at growing risk of involuntary termination.

With the widespread adoption of the Uniform Trust Code, many American states are enacting statutes that grant a trustee full discretion to terminate a trust on the sole ground that it has too little money to justify administrative expenses. Section 414(a) of the Uniform Trust Code states: "After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than [$ 50,000] may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration." The Uniform Trust Code also permits a court to terminate a trust, or modify its terms or trustee, if the court reaches the same conclusion on the relationship between trust value and administrative costs.