Tag Archives: diesmart

Can celebrities teach us about estate planning?

be83d9254a85f218c3e112c005779b85We came across this post by John J. Scroggin, AEP, J.D., LL.M. and thought it was worth reposting.  Too many people think that things will take care of themselves…but they won’t.

“It is interesting how the common estate planning mistakes of average clients are so often replicated and exaggerated in celebrity situations. This column will discuss some of the things we can learn from high-profile celebrity estates, recognizing that our typical clients receive much less media attention and, often enough, have a few less zeros on their estate values. It is not that celebrity estates are more confounding than your average client’s estate. It’s that most celebrities have been allotted more than 15 minutes of media time, with much of it collected after they die.

Dying Without a Will

Dying without a will doesn’t damage the deceased, but it sure makes it hard on the survivors. Abraham Lincoln was shot on April 14, 1865. He died the next morning without a will despite being a skilled and successful attorney. He left an estate of $110,296.80 (the equivalent of several million dollars today).1

Prince died without a will on April 21, 2016. His estate has been estimated to be worth $300 million.2 His sister and five half-siblings initially appeared to be his only intestate heirs, until Carlin Q. Williams, a 39-year-old convicted felon being held in a maximum security prison, claimed to be the love child of Prince from a one-night-stand when Prince was a teenager.3If DNA tests had proven his relationship to Prince, Williams could have inherited 100 percent of Prince’s intestate estate.

Unfortunately, a significant number of Americans seem to be following Paul Simon’s perspective from his 1965 song Flowers Never Bend with the Rainfall: “So I’ll continue to continue to pretend that my life will never end.” The 2014 Rocket Lawyer Make-A-Will Month survey showed that 64 percent of Americans do not have a will.

Estate planning sounds as if it is for the wealthy when, in fact, it applies to everyone at every adult age (Georgia is the only state that allows a person as young as age 14 to sign a will).

In many states, each child and the surviving spouse will inherit an equal percentage (with the surviving spouse inheriting some minimum amount). If a trust is not established by a will, a minor child may be entitled to receive inherited assets by age 18, before they may be mature enough to handle the money. Ex-spouses may have control of the inheritance until the children reach adulthood.

In 1994, Kurt Cobain committed suicide at the age of 27. He left behind a detailed suicide note, but had not signed a will. Cobain’s wife and daughter were his only intestate heirs. In 2010, control of Cobain’s Right of Publicity passed to his daughter on the day she turned 18, and the next year the daughter reportedly purchased a $1.8 million home in Hollywood.

Intestacy can create messy dispositions based upon the order of death. For example, in most states, if a married couple with no descendants and no wills were injured in the same accident and one spouse survived the other by a few seconds and then died, the surviving spouse’s relatives could inherit all of the couple’s joint estate with the other spouse’s family receiving no assets.4

Professional wrestler Chris Benoit murdered his wife and son before taking his own life in 2007. In the probate hearings, the order of death became the pivotal issue for the disposition of assets. Under Georgia law, Benoit was considered to have predeceased both his wife and son.5 If the wife died first, then for the short time his son was alive, he would have inherited his mother’s and father’s assets, which would pass by intestacy at his death to Benoit’s two children from a prior marriage (as the closest living relatives of the deceased son). But if the son died first, then the wife’s closest relatives (her mother, in this case) would have inherited all the assets. Apparently the two families reached an out-of-court settlement in 2008.

Without a will, the courts will have to decide on the person(s) to manage assets for any minor children (and potentially during adulthood). Martin Luther King Jr. was assassinated in 1968 and died without a will. Particularly since the passing of his widow, Coretta Scott King, their children have fought over the control and benefits of his legacy and assets.

In the event of an intestate estate or the failure of all named personal representatives, state statutes generally set an order of appointment, with the surviving spouse normally being the first person to be appointed, followed by the closest blood family members. Note that the statutory appointment is by relationship, not competence. Do you really want that brother who has been bankrupt twice running the estate for your minor children?

Prince’s death without a will created an environment in which the six equal intestate heirs will control his vast music empire and the release of previously unreleased songs. None of the siblings have experience handling either his business interests or his significant estate. Recent reports indicate that conflicts are emerging among the six intestate heirs over the management of the estate.6

Many clients provide some level of support for their parents and other family members. When the client dies intestate, the surviving spouse and/or children of the deceased generally have first-priority rights to the assets. Thus, other family members who may have expected to receive continued support lose it. NFL player Steve McNair purchased a million dollar home for his mother to live in, but retained title to the residence and failed to create a will passing the house to his mother. When he died, his wife demanded that his mother pay $3,000 per month in rent. The mother moved out because she could not afford the rent. After she moved out, the estate billed her $53,363 for appliances and other items she took out of the house.7

Failing to Plan for Incapacity

Every adult of every age should plan for their incapacity.

According to the American Bar Association, only 33 percent of adult Americans have executed a medical directive. In 2000, AARP reported that only 45 percent of Americans over the age of 50 had executed a durable general power of attorney. And a 2009 Lawyers.com study reported that only 29 percent of Americans had either a medical directive or a general power of attorney.

Media mogul Sumner Redstone is one of the wealthiest people in America with an estate estimated to be over $42 billion. In 2015, a series of conflicts began over his competence and control of his estate. As the fights continued, Redstone’s granddaughter said her aunt and other family members had “succeeded in reversing decades of my grandfather’s careful estate planning and are poised to seize control of Viacom and CBS.”8

Clients may revise their dispositional documents when they are of marginal competence, and therefore, inappropriately influenced. A person who lacks the capacity to enter into a valid contract may still have the ability to sign an enforceable will.9

With a low standard for determining competence, it is generally hard to succeed in such a challenge to a testator’s competence, even when their behavior is odd or erratic. For example, the Michigan Supreme Court ruled in 1879 that “[a] man may believe himself to be the supreme ruler of the universe and nevertheless make a perfectly sensible disposition of his property, and the courts will sustain it when it appears that his mania did not dictate its provisions.”10 And the California Court of Appeals ruled: “Appellant produced evidence of forgetfulness, erratic, unstable and emotional behavior, and of suspicion, probably delusional at times, on the part of the testatrix. This is of no avail unless it were shown, as it was not, that it had direct influence on the testamentary act.”11

When a client dies, the first priority may be to change the locks to the house. Conflicts over dispositions of personal property appear to be endemic to all levels of wealth. In February 2015, The New York Times reported that Robin Williams’ widow and his three children from his two prior marriages were in conflict over the issue of how his “cherished belongings that include his clothing, collections, and personal photographs” should be passed.

Disposing of tangible personal property seems to be the most forgotten part of the average client’s estate plan. It is the author’s experience that this is single-greatest source of conflict among surviving family members.”

For more information about estate planning, check out our website www.diesmart.com.

 

Should Alan Thicke’s widow or sons inherit his estate?

imagesAlan Thicke died on December 13, 2016.    His two older sons, who are co-executor’s of their dad’s living trust, have filed a petition in court to get instructions on how his 1988 trust (amended last year) and a 2005 prenup signed by him and his third wife, Tanya Callau should be considered.  Basically, what’s in question is what’s separate property, what’s community property, and how it should be split among the co-executors and their third brother and Callau.

“It’s a question of what Alan wanted, and we’re just attempting to honor his intentions and enforce his trust,” says Alex Weingarten, the litigator representing Thicke’s sons. “It was Alan’s money; it was Alan’s career; it was Alan’s talent; he had the right to decide what would happen to it upon his passing.”

The prenup, attached to the court petition, shows that before the couple built a life together, with Callau helping to raise Thicke’s youngest son, Carter, they came into the marriage with vastly different resources. Thicke listed his net worth as $14 million at the time. By contrast, Callau, a model, listed a $40,000 ring as her sole asset, and $3,700 in debts.

According to the article in Forbes, one big issue in the estate dispute is the division of the $3.5 million Carpenteria, Calif. ranch which Thicke listed as separate property in the prenup but the couple called home. The prenup says Thicke was to name Callau as beneficiary in his will to get 25% of his net estate, including a 5-acre parcel split of the property, but the trust doesn’t give her any part of it, just the right to live there so long as she pays 100% of expenses.

Unfortunately, these disputes between later spouses and kids from earlier marriages are common. There are so many lessons in these battles. One—As circumstances change, know that a prenup can be revoked by both parties, or amended by a postnup. You need good advice—separate advisors for each party– from both a divorce lawyer and an estate lawyer in either case.

For more information about estate planning, go to www.diesmart.com.

Have you made these 5 life insurance mistakes?

life insuranceWe came across an interesting article about life insurance on the Edward Jones web site.  It gives you some valuable information and some things to think about.  It’s reposted here in its entirety.

“If you already have life insurance, you’ve taken an important step to ensure your family is taken care of in case of an unexpected event. But just having it isn’t always enough. Do you have the right type or amount? Have you reviewed your policy lately?

These are the 5 most common life insurance mistakes people make.

1.  Having the wrong amount of coverage

Studies show that 1 in 4 people feel they need more life insurance protection.* So how do you decide how much is enough? Use our life insurance needs calculator, or “L-I-F-E,” to get a quick estimate. It will help you calculate your:

    • Liabilities (mortgage, car loans, student loans, other debt)
    • Income replacement – how much your family will need for ongoing living expenses and savings needs
    • Final expenses
    • Education expenses for your children or children

Once you have that number, compare it to your current policy amount and see how close you are.

2. Having the wrong type of policy (term vs. permanent)
Do you need insurance to cover you while you have a mortgage to pay or children at home? Or are you looking to build cash value in a policy that you can later pass on to your heirs? Each insurance type has its own advantages. Here are the basic differences:

Term insurance covers you for a specific time frame, typically less than 20 years. It’s the most basic, and affordable, type of insurance, which makes it a popular choice for young families who are balancing debt and saving for the future.

Permanent Insurance provides lifetime coverage and allows you to build cash value that you can later pass on to your beneficiaries. It’s more expensive than term insurance, but the premiums typically don’t increase with age.

Learn more about the differences between these two insurance types here.

3.  Relying solely on employer-provided insurance

Life insurance coverage provided by your employer might be okay if you’re single and without kids, but if you have dependents and large financial obligations, it may not be enough. Employer policies rarely cover more than 3 times an annual salary (the general recommendation is 10 times your annual salary) and sometimes only cover as little as 6 months’ salary. Plus, if you change jobs, you can’t take your policy with you.

4.  Neglecting to designate beneficiaries

Naming beneficiaries helps ensure that your insurance money goes directly to the people you intended, helping them avoid probate (the legal process of distributing your estate). This could save your family time and expense. If you have insurance from Edward Jones, your financial advisor can help you set up beneficiaries for your policy.

5.  Ignoring your policies

Life insurance is an important part of your overall financial plan and should be reviewed at the very least every 3-5 years. If you’ve recently gotten married, divorced or welcomed a new baby in the home, it’s time to review your policy to ensure your coverage amount and policy type still work for your situation.”

For information about financial and estate planning, check out our website www.diesmart.com.

What happened to Ernie Ulrich’s estate?

ErnieWho, you might ask, was Ernie Ulrich. 

Ernie was just an average blue collar guy who served in the army during World War II and died in Chicago at age 85 on December 21, 1999.  He never married and had no children.  His two sisters were his only family.  One sister, Margaret, died three months before him and his other sister, Lillian, died one month after him.

What he did have was a $1.5 million estate.  In his will, which was prepared in 1992, he specified that if his sister, Margaret, predeceased him, the entire estate was to go to charity.  He didn’t leave anything to Lillian because he felt that she was well provided for.

Late last year, more than 17 years after his death, it was discovered that his $1.5 million had never been distributed as he specified.  The lawyer who was supposed to be his executor never carried out his wishes and, since the lawyer died in 2007, there’s no way to find out why.

Most of the money was in investment accounts which were eventually declared inactive.  Once that happened, his assets went to the Illinois state treasurer as unclaimed property.  That included 155 unclaimed properties such as 5,344 shares of Exxon Mobil stock and 6,460 shares of AT&T.

In November 2014, Michael Frerichs became the new state treasurer and he made it a priority to try to resolve high dollar unclaimed accounts.  Ulrich’s was one of these.  Using information from Ulrich’s financial records, the treasurer looked for rightful heirs and, eventually, located the will.

A new executor was named and she finally was able to fulfill Ulrich’s last bequests.  He bequeathed  one third of his estate to the Salvation Army; the remained was to be split among five other charities.

This is definitely a case of better late than never.

I know you can’t guarantee that your executor won’t make a mistake.  However, you should take steps to ensure that more than one person knows where your will is located so that, hopefully, it won’t take 17 years for your estate to be distributed after you die.

For information about estate planning, go to our website www.diesmart.com.

 

Are you making celebrity estate planning mistakes?

Prin eThis article appeared in the September 17, 2016 edition of cnbc.com.  It contains some important information you should review.

“Celebrities, they’re just like us. At least, they are when it comes to estate-planning mistakes.

You’d think that high-profile individuals with substantial and varied assets, often-complex family lives and a team of high-powered advisors at their disposal would have this locked down, more so than your average American. But that’s not so, attorney John Scroggin, a partner with Scroggin & Company in Roswell, Georgia, told advisors Thursday at the Financial Planning Association’s annual conference in Baltimore.

“Celebrities make the same mistakes,” he said. “It’s just that the nature of their celebrity exaggerates and balloons the impact of what the mistake was.”

Mistake #1: Not having a will

Nearly two-thirds of Americans don’t have a will, according to a July survey by Harris Poll for Rocket Lawyer, which queried 2,000 consumers. Famous individuals who have died without a will, include Abraham Lincoln, Prince, Sonny Bono, Jimi Hendrix and Pablo Picasso, according to Scroggin.

Not having a will can result in a number of potentially disastrous consequences, notably that assets may not be distributed in the manner in which you would have liked — or even intra-family battles. State intestacy laws will apply, and dictate who gets what share of the estate. (State law often cuts out stepkids, for example.)

Without specific instructions from the deceased, an estate may also be subject to drawn-out court battles as family members fight for what they perceive as their fair share.

“A lack of a will for any individual increases the conflict and increases the cost,” Scroggin said.

Mistake #2: Not having a current will

Signing a will is the beginning of the process, not the end, Scroggin said. Regularly update estate planning documents and beneficiaries as your financial and personal situation changes.

He points to the estate of singer Barry White, who was separated but not divorced from his second wife at the time of his death. His wife got everything, Scroggin said, while White’s live-in girlfriend of several years got nothing.

Mistake #3: Not planning for taxes

Even if your wealth falls under the federal estate tax threshold — in 2016, up to $5.45 million per person is exempt — it may be subject to state estate taxes, which often have lower caps.

Poor planning could force your heirs to sell valuable or sentimental items because they don’t have the liquid assets to pay those taxes, said Scroggin. He used the example of Joe Robbie’s family, which sold its stake in the Miami Dolphins and Joe Robbie Stadium to pay estate taxes. 
Mistake #4: Not mentioning for personal property

Robin Williams’s family has engaged in a legal battle over the late actor’s film memorabilia, Scroggin said, while Martin Luther King Jr.’s children fought over his Bible and Nobel medal.

Individuals often fail to account for personal property in their estate planning, which can generate plenty of fights (legal and otherwise) over the future of family heirlooms, collectibles and other items of sentimental value.

Even when such items are mentioned, Scroggin said, it can be difficult for heirs to prove provenance if another party disputes the claim — that this is mom’s vase, for example, and not a newer one the deceased gifted to his second wife.

Scroggin also had some advice on this point for clients untangling the estate of someone recently deceased: “Change the friggin’ locks.”

It’s not unusual for family, friends and neighbors to help themselves to items they say the deceased told them they could have, he said.”

For more information about estate planning and how to get your affairs in order, check out our website www.diesmart.com.