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Get Your Estate Plan Right

A column I came across in the Wall Street Journal the other day got right to the point when it comes to estate planning.

Last Will And Testament (Photo credit: Ken_Mayer)

Start out by making a will.

The column quotes a financial advisor from Illinois who says he has clients in their 40s and 50s who have never done a will.

But it says there is now a “growing urgency” among Baby Boomers to get their estate plans in order. And this is especially important for those who have children with disabilities.

The will, the column says, is the foundation of any estate plan. It says who gets what and appoints guardians for children or adult children with disabilities.

Without a will, the state will decide these things for you.

Estate plans may also include trusts in the will to take care of children and name trustees to oversee those trusts. Without a trust, the children would get their inheritance right away once they are of age.

A special needs trust is a must if you have a child with a disability who is unlikely to be able to support himself or herself, the column points out. If your assets were to go right to the child, he or she might be disqualified from government benefits. The trust gets around that.

One reason many parents delay setting up trusts is that they don’t know whom to name as the trustee. The column’s advice for these people: name someone and you can revisit it later if you want.

If the child is one with disabilities, you may want to consider naming more than one person to handle different duties for the child.

There are many things to think about. The message of the column — and of this blog post — is that you need to get on this if you haven’t already.

You never know what is going to happen in life. Better to be prepared.

Actor Hoffman Made Mistakes With His Will

I came across an interesting article recently about the actor Phillip Seymour Hoffman and how he made numerous mistakes in his estate planning that are going to impact his partner and kids.

I thought his story could serve as a cautionary tale.

Hoffman, who died of a drug overdose earlier this year, supposedly did not want to make “trust fund kids” out of his three children. That may be admirable, but the way he went about it will actually do harm to his long-time partner and kids.

According to the story on marketwatch.com, probate court documents reveal that Hoffman’s wishes were that his kids get no part of his $35 million estate and that all of it go to his long-time partner Mimi O’Donnell, the mother of his kids but to whom he was not married.

When a wealthy person dies, he or she can do one of three things: leave the money to their family; leave it to charity; or leave it to the IRS in the form of estate taxes.

Hoffman’s lack of planning maximized the IRS’s take with no benefit to his family or to charities.

While I understand the desire not to create “trust fund kids,” there are ways to do it so they do not become spoiled layabouts.

Now, about 40 percent of Hoffman’s estate over the first $5.4 million will go to the IRS because he and O’Donnell were not married. That’s $12 million.

Much of that could have gone to charities he cared about.

And the matter of no trusts for his kids? What about their education? He could have set up trusts to fund just that. Or trusts to fund medical costs if ever necessary. Or he could have set up trusts that kick in only if the kids accomplish certain goals or earn a certain amount of money on their own. Apparently, he did include his first child in his will, but not the second and third since they had not yet been born when he made out the will.

Another reason why updating wills periodically is important.

Lessons In Estate Planning From Casey Kasem

If you have spent time online or watching the news recently, you have probably heard about Casey Kasem’s disturbing final weeks. The legendary host of American Top 40 and longtime voice of Shaggy from Scooby Doo passed away last weekend at the age of 82.

Photo taken at the 41st Emmy Awards 9/17/89. Photo by Alan Light. (Photo credit: Wikipedia)

There are so many lessons to be learned from Casey’s last weeks that it is hard to know where to begin. I have provided two links to articles about recent developments. The Forbes article discusses in detail the battle between Casey’s second wife, Jean, and his daughter Kerri over control of Casey’s care. The second article, from Find Law, discusses some of the estate planning tools and strategies involved in the case. In this post, I would like to focus on the latter article.

Health Care Proxy/Advance Healthcare Directive/Living Will. This document allows a person to give authority to another adult to make healthcare decisions on his or her behalf in the event of incapacity, and specify the types of treatment desired in an end of life situation. Casey signed such a directive in 2007, placing his daughter Kerri and her husband in charge of making healthcare decisions for him.

Power of Attorney. A Power of Attorney is different from an Advance Healthcare Directive, but it too authorizes another adult to make legal and financial decisions on behalf of an incapacitated person. Some Power of Attorney documents may include authority to make health care decisions, which can lead to conflict between the documents. In 2011, Casey designated his wife Jean as Power of Attorney, and this superseded Casey’s 2007 Advance Healthcare Directive. This illustrates the problem of naming separate parties, at separate times, to make decisions on one’s behalf.

Guardianship and Conservatorship. Casey’s daughter was able to successfully argue for and obtain Conservatorship a month before Casey’s death. This gave her control over Casey’s financial and medical decisions. (It is important to note that in Massachusetts, Conservatorship names a person to make financial decisions on another’s behalf, while Guardianship can authorize a person to make medical decisions.) In this way, she was able to enforce Casey’s Advance Healthcare Directive, which stipulated that he did not wish to be kept alive if doing so “would result in a mere biological existence.”

While it is advisable to be more specific in making one’s Advance Healthcare Directive, Casey’s condition was so dire that his doctor concluded that continuing artificial nutrition and hydration would “at best prolong the dying process for him and certainly add suffering to an already terribly uncomfortable dying process.”

It’s a sad story, one that will no doubt get even uglier as the parties battle over Casey’s estate and allegations of elder abuse. But hopefully, it will serve as a reminder about the importance of open communication between family members and the need for comprehensive, consistent end-of-life planning.

Estate Planning Is No Game, Especially When You Own A Professional Sports Team

While virtually everyone can benefit from having an estate plan of his or her own, proper planning is particularly important for people of means—for example, owners of professional sports teams. Let’s take a look at what happened following the death of three such owners.

Joseph Robbie
Joseph Robbie was a highly successful businessman and attorney. He also owned one of the most successful teams in National Football League history, the Miami Dolphins. When Robbie passed away in 1990, his estate was valued at slightly less than $100 million, nearly 50 percent of which was lost to federal estate taxes. This, together with bitter infighting between family members, forced Robbie’s family to sell the team at a fraction of its value—a result that could have been avoided through proper planning.

George Steinbrenner

George Steinbrenner 1930-2010 (Photo credit: Wikipedia)

George Steinbrenner, the owner of the New York Yankees, a team worth approximately $1.6 billion according to Forbes, passed away in 2010. However, at the time of his death, the franchise was 95 percent leveraged due to debt from construction of the Yankee’s new stadium. While this sounds like a recipe for disaster, Steinbrenner had the “good fortune” to die in a year when there was no federal estate tax. In effect, he saved his heirs approximately $600 million by passing away in 2010. In the world of sports, pundits often say, “It’s better to be lucky than good.” In Mr. Steinbrenner’s case, it would appear that this cliché rang true.

Ralph Wilson
Ralph Wilson died earlier this year. He was the sole owner of the Buffalo Bills. He never made public his intentions for the franchise, so it is unknown if ownership will transfer to his family members, or the team will be put up for sale. The result may wind up revolving around the issue of estate taxes and whether Wilson put in place a plan to reduce or eliminate payment of these taxes upon his death.

If he did nothing, his family may have to pay hundreds of millions of dollars in state and federal estate taxes. However, if he left the team to his wife, his estate would pay nothing, thanks to the marital exemption. There are a number of other estate planning tools he could have used to protect the family’s assets, together with the Bill’s future in Buffalo. Given how little time has passed since Mr. Wilson’s death, it’s simply too early to tell what will happen to his estate and the franchise.

To learn more about the estate planning issues associated with these professional sports team owners, click on the links below.

A Tale of Two Families

How Steinbrenner Saved His Heirs a $600 Million Tax Bill

Estate taxes may hold key to Bills’ future after Wilson’s death

The Dangers Of Using Cookie-Cutter, Downloadable Legal Forms

When people learn that I am an estate planning and elder law attorney, some of them ask what I think about “do it yourself” wills, trusts, and other estate planning forms that can be found online. Of course, when I tell them that it is advisable to hire an attorney, it sounds rather self-serving.

Last Will And Testament (Photo credit: Ken_Mayer)

A recent article in the ABA Journal speaks to my concerns about the potential pitfalls and unwanted consequences of using downloadable forms. It discusses the case of a Florida woman, Ann Aldrich, who used an “E-Z Legal Form” to create her will in 2004. In the will, she left all of her assets to her sister, with the caveat that if Aldrich’s sister predeceased her, the assets would go to her brother.

Sounds simple enough, right? So why, then, did the Florida Supreme Court rule that Aldrich’s two nieces were entitled to part of her estate? Because the E-Z Legal Form failed to include what is known as a residuary clause providing for property not listed in the will. That is, assets acquired by Aldrich after 2004, when she made her will, were distributed according to the laws if intestacy. With regard to these assets, it was as if the will had never been created in the first place! Florida intestacy laws mandated that the nieces inherit these assets, not Aldrich’s brother.

One of the concurring justices in the case, Barbara Pariente, said: “While I appreciate that there are many individuals in this state who might have difficulty affording a lawyer, this case does remind me of the old adage ‘penny-wise and pound-foolish.’ I therefore take this opportunity to highlight a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. As this case illustrates, that decision can ultimately result in the frustration of the testator’s intent, in addition to the payment of extensive attorney’s fees—the precise results the testator sought to avoid in the first place.”

Thank you, Justice Pariente. I couldn’t have said it better myself.

Who Should Get What: Factors To Consider When Leaving Unequal Inheritances To Your Children

When many parents create an estate plan, they simply divide their assets equally among all their children. While there is certainly nothing wrong with this, in some situations it might not be the best, or even the fairest, approach.

(Photo credit: Muffet)

For example, one of your children may earn significantly more money than your other children. One might have several children, another one child, and another no children at all. Perhaps one of your children has served as a caregiver for you or your spouse while the others have not. Or maybe one of your children has disappointed you so often that you would prefer to leave him or her nothing at all.

These are difficult decisions in and of themselves. Worse, when one child is favored over another in a will or other estate planning document, the decisions may be open to legal challenge by the child who believes he or she has been treated unfairly.

Here are a couple ways to help ensure your wishes will be carried out in the event you decide to leave unequal inheritances to your children.

Include a no-contest clause. This typically stipulates that if a beneficiary contests the will’s validity or its provisions, his or interest in the will is forfeited. Of course, you have to leave the heir in question enough of an inheritance to motivate him or her not to challenge the will.
One strategy that I have used is to have the client write a letter with a simple explanation for what they have done. This is not a legal document, but can be shown to the unhappy heir if necessary. Only if the child or other heir contests the legal document is this letter unsealed.

For additional strategies, or to discuss any aspects of your plan, feel free to contact me. I am here to help you make these and other difficult decisions, and guide you through the entire process.

Lessons In Estate Planning From Deceased Celebrities

Many of us think, “If I was rich and famous, I wouldn’t have a care in the world.” However, as the recent passing of two Hollywood stars shows us, when it comes to estate planning we all grapple with similar concerns and hopes for our loved ones.

Philip Seymour Hoffman won a Academy Award for...

Philip Seymour Hoffman (Photo credit: Wikipedia)

Consider the case of Phillip Seymour Hoffman, who recently died of a heroin overdose. His plan contained a provision requesting that his son, Cooper Hoffman, be raised in or near the cities of Manhattan, Chicago, or San Francisco. Why would he include such a provision? Hoffman’s Will stated, “The purpose of this request is so that my son will be exposed to the culture, arts and architecture that such cities offer.”

Phillip wanted to pass some of his values onto his son, and used his estate plan to make it possible.

Paul Walker (Photo credit: Wikipedia)

Or consider Paul Walker, the star of Fast & Furious who was recently killed in a car accident. He left his entire estate to his daughter, Meadow, with the provision that she cannot access the money until she becomes an adult. Paul also named his mother, not Meadow’s mother, as Medow’s guardian. Paul apparently felt more confident that his mother would be the better guardian and manager of Meadow’s newfound wealth.

Naming guardians, teaching our children proper values, determining “who gets what, and when.” These are difficult issues that all families face, not just celebrities.

I welcome the opportunity to help you make decisions like these and plan for whatever the future holds.

Why Create a Trust?

Due to changes that limited federal estate tax to only high valued estates, many people believe there is no reason to set up a trust to guard their assets. However, a recent article outlines five reasons that trusts might be the right choice even for smaller estates:

2. A trust will avoid the often long and costly, and always public, probate process, where the will, the accounting of the estate disbursements and revenue, and the probate asset inventory will all be available to the public.

3. Allowing assets to be distributed through a trust will give parents the ability to moderate how much access a young child has to a house, life insurance, retirement assets, or cash, so that the children are not put in a position to misuse estate assets. It may also help where there is concern over poor money management skills, business liability, or creditor problems.

(Photo credit: MyTudut)

4. A child’s eligibility for public benefits can be affected if the child receives an inheritance. Whereas, holding assets in trust for the benefit of the child will help ensure that the child remains eligible and that resources are there to provide care over the long term.

5. A revocable trust also gives a person the ability to determine how he or she will be cared for and how decision will be made in the case of incapacitation.

An Estate Planning Success Story

In an article, Pat Mertz Esswein explains how her mother took all the right steps in laying out her estate plan, so that when she passed nothing was left undone and no one was left to deal with unanswered questions.

(Photo credit: footloosiety)

Pat’s mom kept her will, power of attorney, and advanced directives accurate and up-to-date, and stored them together in a large white envelope. After a health scare in 2008, during which the family could not find the envelope, Pat labeled it “THIS IS IT” so that there would be no confusion.

In addition, after 2008, Pat’s mom registered her power of attorney at the county courthouse, and added her as a co-signatory on her safe-deposit box, so that Pat could start planning and organizing her mom’s financial affairs while she could still communicate her wishes. The experience was helpful later on when Pat was tasked with being executor of her mom’s estate.

Pat’s mom was clear about what kind of funeral she wanted, including specifics such as the dress she wanted to be buried in and who should serve as the pallbearers. Pat’s mom made it simple to contact friends and relatives with up-to-date holiday and email lists. Also, she left a list of her “team,” including her lawyer, accountant, stockbroker, priest, and insurance agent. In her will, Pat’s mom even left her daughters some advice and instruction saying, “Please do not have any hard feelings over things. Your relationship as sisters is far more important.”

Learn From These 6 Estate Planning Mistakes of NFL Players

In honor of the Big Game, a recent article explains six of the estate planning mistakes that NFL players commonly make. While not everyone will earn as much as an NFL star, the average American can still benefit from avoiding these mistakes in their own lives.

(Photo credit: Wikipedia)

1. Living in the present, instead of planning for the future: NFL players earn most of their lifetime income in their 20s and 30s, and then retire early. As a result, it is especially important for them to plan for retirement early.

2. Choosing the wrong professional adviser: NFL players sometimes make the mistake of choosing a family member to help with financial planning instead of an estate planning professional. This can be a mistake if the family member is not experience in managing large quantities of assets.

3. Spending beyond their means: It is important to spend based on the cash you have available, not the salary total that appears in a contract.

4. Not maintaining liquid funds: Maintaining liquid funds to cover living expenses in case of an emergency is especially important for NFL players, who could experience a career ending injury at any moment.

5. Leaving assets exposed: Assets can be protected from creditors through trusts, incorporating limited liability entities, and under any state laws that protects specific assets, such as a person’s home.

6. Failing to see the bigger picture: Because NFL players retire earlier than most Americans, it is especially important for them to consider how they will live during retirement. Plans for a second career or to starting a business should be reflected in the estate plan.

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Posts Categorized: Estate Planning