Tag Archives: inheritance

50% of Prince’s estate value goes to pay estate taxes

PrinceYesterday, Prince’s estate had to file an estate tax payment plan.  Since his estate was valued at about $200 million, the taxes are expected to be about half of that – 40% to the federal government and 16% to the state of Minnesota.  Allowable deductions and exclusions will reduce that amount to 50%.

If Prince had an estate plan with trusts to benefit relatives and charities he chose, the amount of taxes due would have been very low.  Instead, only about 50% will go to his six siblings and the government will take the rest.

Prince’s estate didn’t have to actually have to pay the entire $100 million yesterday; it can make payments over time.  That’s a good thing since Prince’s estate isn’t very liquid.  There are many entertainment assets which are still being valued and it can take a long time since their actual worth will be determined.

It’s not clear whether the IRS and Prince’s estate will agree on the value of his music catalog; it’s difficult to put a dollar value on this kind of asset.  The estate can learn from the experience of Michael Jackson’s estate.  He died in 2009 and yet his estate is still not settled.  The tax case will go on trial in Los Angeles next month where there will be a dispute about more than $700 million in taxes, interest and penalties.

You probably aren’t worth this kind of money but even if your estate is only worth a few hundred thousand dollars, you should still have an estate plan.  It will make it much easier for your heirs and will enable them, rather than the government, to share in the total value of your estate.

For more information about estate planning, go to our website http://www.diesmart.com.

What’s a big problem in China?  No wills!

chinese-will-centerIt’s only been in the last 30 years that China has allowed people to accumulate wealth.  Prior to that, it really didn’t matter.  There was no private property to pass along to a descendant so a will was not needed.

Now, some of the first generation to benefit from the ability to accumulate wealth are dying and it’s causing a huge problem with inheritance disputes that are taking up the time of the courts and causing rifts between family members.

We came across a story in USA Today that illustrated the problem and explained what the Chinese government is trying to do to fix it.

“When people die without a will their children scramble for their property, damaging family ties and having a negative effect on society,” the state-run Xinhua News Agency has warned.

“Only 1% of China’s 220 million seniors have drawn up inheritance plans, according to best estimates.  The reason is cultural: talking about death is taboo and writing a will is akin to putting a curse on yourself.”

“Consider the publicized case of Yan Jiying, a coal baron from the northern province of Shanxi.  He died in 2015 at the age of 71, leaving his estranged wife, long-term mistress and six children to fight over his assets.”

“The government is calling on local authorities around the country to establish free legal centers for those over 60. One charity doing that since 2013 is the China Will Registration Center, founded by Chen Kai, a young lawyer with a passion to protect seniors. “

“ The waiting list for appointments at his first Beijing center now stretches into September, proof that people will write a will if they can find support they trust, Chen said. “We want to teach old people that they are the masters of their fortune, that they have the right to decide what happens to their hard-earned money, ” he said.”

“On a recent morning around a dozen seniors were squeezed around a communal table at the center, diligently transcribing the final copy of their will. They begin by dictating their wishes to a lawyer, who types up a draft. The clients are then evaluated by a visiting psychiatrist to establish clarity of mind, they record video testimony of their wishes in the presence of two independent witnesses, and finally copy the final document by hand.”

“For many, the last step is the hardest. Most are over 70 and have shaky hands or poor eyesight. Transcribing a page of formal Chinese characters mistake-free is no easy task. But Chen is adamant that they do it this way, saying he has seen too many badly written wills challenged. He wants his clients to be sure their wishes will be respected even if some family members do not like them.”

Although the percentage of people in the United States having wills is much higher than 1%,  it’s still below 50%.  If you don’t have a will, you should consider preparing one so that your family won’t have to deal with issues related to your estate once you’re gone.  To find out more about preparing a will and other estate planning steps, check out our website http://www.diesmart.com.

You don’t think you’ve been treated fairly by a deceased relative?

judge-cartoonIf someone in your family has died and you don’t think you’ve been treated fairly, what’s the first thought that comes into your head?  Challenge the will.  But you might want to think a second time before doing this.  A will contest is very hard to win.  It’s difficult to prove that someone was incompetent after they’ve died and it’s equally as tough to prove that undue influence was exerted on the deceased.    Finally, some wills have a clause that will cause you to forfeit your inheritance if you challenge that will.  So it might be best to just accept whatever has been left to you and then to get on with your life.

We found a blog that gave a great example of what might happen if you challenge someone’s will.

Sam and Erica were married. It was Erica’s first marriage and Sam’s second, his first marriage ending in divorce. Sam had one child, Jason, from his first marriage. Erica did not have any children. They each had identical wills, leaving their entire estate to the other, and on the death of the survivor everything goes to Jason.

Their wills also contained a provision, requiring the surviving spouse to live at least six months after the first spouse’s death. If the survivor did not live that long, he or she would be treated as having predeceased the first spouse.

In March of 2015, Sam died. Erica filed a probate proceeding in May and submitted Sam’s will to the court. Because she filed just two months after Sam’s death, Jason objected. He argued that she had no authority to take over Sam’s estate because she had failed to survive him by six months.

Erica apparently became angry, and revoked her own will to make sure that Jason did not receive any share of her estate. Erica signed a new will a few months later (well after she had reached the six-month survivorship requirement). She left her entire estate to her sister and nothing to Jason. She died five months later.

Jason contested her new will, arguing that she had been subjected to undue influence by her sister in preparing her new will. The probate court dismissed his complaint and upheld Erica’s will. Not satisfied, Jason appealed.

The higher court affirmed the probate court finding and stated that it was clear that no one influenced her in her decision to revoke the earlier will or to do her new will. Once she revoked the earlier will, she was intestate — that is, she had no will at all — and since Jason was not her child, he would have no right to any share of her estate if she had died without a will.

Why would that make a difference? Because if she had no will prior to signing the new will, Jason had no standing to even challenge that will. According to the appellate court, there was no question that Erica had revoked her earlier will a few months prior to her executing a new will and thus Jason’s objections were dismissed.

What might Jason have done differently? Hindsight is always 20/20. Perhaps Jason should not have objected to his father’s estate when he did. If Erica had actually died in the four months after he raised his objection, he could probably have still made his legal point. In the meantime, he clearly offended her to the point that she changed her estate plan.”

Moral of the story: Think about what might happen if you challenge someone’s will.  It might be better to accept what’s been left to you than taking a chance that you might end up with nothing.

For more information about estate planning, check out www.diesmart.com
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Do I Really Need a Will?

last-willYes, you do.  A will is a legal document which ensures that your property is transferred according to your wishes after your death.

If you don’t have a will, here are five things that can happen.  We found this list at nerdwallet.com.

  • Spendthrift heirs – If you have heirs who aren’t equipped to handle a large sum of money, receiving it may cause damage.  Perhaps these heirs are bad at handling money or, maybe, they’re drug or alcohol addicts.
  • Unexpected or contested heirs –  There may be confusion about who the beneficiaries really are.  Sonny Bono, musician and politician, died without a will.  His ex-wife, Cher, and a man who said he was Bono’s son tried to claim part of his estate, which his wife, Mary, contested in court.  Prince’s estate is another classic example.  Many people came out of the woodwork claiming to be relatives, entitled to a piece of his assets.
  • Property (and probate) in multiple states – If you own property in more than one state, your estate will have to go thru the probate process more than one.  Probate is a costly and timely process, even if you just go through it once.  Image if you own property in four states and your heirs have to hire four attorneys and go through the whole process four times.
  • Fabricated wills – If you don’t have a real will in place, it’s possible for someone to create a fake one – especially if your estate is large.  A famous case involved the estate of tycoon Howard Hughes.  When he died, several supposed wills surfaced, and his estate spent millions of dollars defending against the false documents.
  • Beneficiaries don’t like the court appointed executor – If there’s no will, the probate court will appoint one.  It may likely be an experienced attorney but not necessarily one the family knows.  It may take a great deal of time for this person to take inventory, appraise assets and distribute the estate.  If you have a will and name a family member as executor, that person will usually do a much faster job, possibly because that person is also a beneficiary.

If you don’t have a will, you should prepare one now.  Otherwise, your assets may not be distributed the way you want them to and a lot of extra money will go to attorneys and the probate court and not to your heirs.

For more information about wills, trusts and other estate planning documents, go to www.diesmart.com.

My father left his home to his kids — my stepmother sold it for $1 million

moneyologistWe read this recent column from MarketWatch and found it interesting enough that we are repeating it in its entirety.  If you have step children or step parents, you should be aware of what might happen if proper planning isn’t done.

He made his wishes clear, but his second wife had other ideas

Dear Moneyologist,

My brothers and I are mentioned in our father’s will as what he “wishes to happen” with the house he purchased for his second wife. He put the house in her name, but stated that if he should die first, he would like the wife to live in the house till she dies, but wanted the house to be sold and the proceeds to be split among his children.

After he died, my stepmother has sold the house for $1 million. She bought a new house for $500,000 and kept the difference. She has not put all the children on the ownership of the new house. Also, she has children from her first marriage who might want a percentage of the estate, including the new house. The will was made in Taiwan. I live in Texas.

Where do I and my brothers stand in this situation?

Betrayed Daughter

Dear Daughter,

When it comes to family drama, stepmothers fare about as well as mothers-in-law. That is, they get a hard time. Sometimes, it’s deserved, other times I think they fall victim to negative stereotypes. In one case, the stepmother wanted to cut her husband’s children out of his life insurance policy. And another stepmother obsessed over her husband’s children and what might happen to his credit score should he die. It’s easy to come down hard on stepmothers, mostly because of Grimm Fairytales. This 2009 book “Stepmonster: A New Look at Why Real Stepmothers Think, Feel, and Act the Way We Do” tries to debunk that myth. On this occasion, the jury is out.

Your father can’t leave his children something that he no longer owns. That’s not how life or the law works.

Your stepmother has downsized and created a nice nest egg. That was her prerogative. Your father can’t leave his children something that he no longer owns. He put his house in your stepmother’s name and, judging by his will, it seems that he wanted her to give it back. That’s not how life or the law works. If you could prove undue influence, you might have a case. You would need to provide evidence that (a) your father was not of sound mind when he signed over the house and/or (b) your stepmother somehow did not have his best interests at heart and tricked him into signing over the home. That would be an expensive and difficult process.

It’s still unclear whether U.S. or Taiwanese law would apply here. According to Taiwanese law, “The making and effect of a will are governed by the national law of the testator [your father, in this case] at the time of the making of the will.” But that may prove fruitless. “If you can prove that the testator was the true owner, you can file a litigation against your father’s second wife,” says Ou Yang, Hung, managing attorney at Brain Trust International Law Firm in Taipei, Taiwan and adjunct assistant professor of law at Soochow University. “It will be very hard to prove that the testator was the true owner of the house.”

Put it in simpler terms: You may have to kiss that $1 million goodbye.

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