Tag Archives: inheritance

Another actor did it wrong. Do you have your plans in place?

Julie Garber, in her weekly blog, wrote about another person who did it wrong.  When actor Paul Walker died in a terrible car crash on November 30th, 2013, he left an estate estimated to be worth at least $45 million.  However, he had done no estate planning and left no will.  He was only 40 years old and probably thought he had plenty of time to get his affairs in order.  His parents, ex-wife and girl friend of seven years are now fighting over who should inherit.

According to California intestate laws, the entire estate should be inherited by his daughter, Meadow.  Since she is only 15, someone needs to be responsible for managing to estate until she turns 18.  Her mother is her guardian but is not necessarily the one who will control the money on her behalf.  Since her parents believe they should manage the estate, the case will have to go to probate court.

And what about his long term girlfriend, Jasmine?  She won’t see a penny.

Have you done estate planning?  Is all of your paperwork in order?  Or are you, like Paul Walker, leaving a mess for  your loved ones?

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

Unclaimed property – Are you a beneficiary but you don’t know it?

Over the last five years or so, a study has been conducted to determine how insurance companies ensured that beneficiaries of life insurance policies were notified that a relative with a life insurance policy had died.

The study was initiated by California Comptroller John Chiang, who used a Connecticut auditing firm to examine the payment practices of 21 life insurance companies nationwide.  The Controller’s investigation “has revealed an industry-wide practice of companies both failing to pay death benefits to the beneficiaries of life insurance policies and ignoring their legal duty to turn the money over to the State for safe keeping.  Instead, companies would draw-down the policies’ cash reserves in order to continue collecting premium payments from the deceased.  Once the cash reserves were depleted, the company would cancel the policy.  Past audits also found that insurers did not routinely cross-check the owners of dormant accounts with government databases listing the deceased.  In other cases, companies had direct knowledge of the policy owner’s death, but still did not notify the beneficiaries.”

When questionable practices were uncovered, lawsuits ensued.  The premise of one of the latest was that insurers used the Social Security Death Master File to determine whether  those insured who had living benefit riders to annuities had died and, if so, they acted promptly to stop payments.  However, the Death Master File and other means weren’t used as often to ensure that beneficiaries of life insurance policies were promptly notified that a relative with a life insurance policy had died, and the funds from that policy paid out.

In the case of one recent lawsuit, the lead plaintiff claimed that he was notified only in 2010, four years after the death of the insured, and then only by the state of Illinois Treasurer’s Office…not by the insurance company.  He received only a small sum, and it wasn’t until June 2012 that a larger sum was paid, without a good explanation.

Earlier this month (June 2013), Mr. Chiang reached a settlement on behalf of the state of California and its residents with 11 insurance companies who had been found to have underpaid life insurance benefits.  The agreements he reached required the 11 companies to do the following:

  • Restore the full value of all impacted accounts dating back to 1995;
  • Fully comply with California’s unclaimed property laws and cooperate with the Controller’s efforts to reunite these death benefits, annuity contracts and retained asset accounts with their owners or, in many cases, the owners’ heirs;
  • Pay the policy beneficiaries 3% compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later.

If the benefits are not paid to the heirs within a specified period of time, the law requires businesses to send the list of abandoned property to the state.  In California, the period of time is three years; it varies by state.  In many states, this has become a large source of revenue.  However, the states’ first goal is to return the money to its rightful owners.

Many other states have followed California’s lead, filed suits against the major insurance companies, and will also benefit from California’s settlement with those 11 companies.

To learn more about beneficiaries and estate related topics, go to www.diesmart.com.

 

 

Do your frequent flier miles live on after you’re gone?

The New York Times recently did research to find out and the answer was far from consistent.

Only two airlines contacted have a specific, written policy that allows your miles to be transferred to a surviving family member – American and US Air. On the American Airlines site, in the section titled “Earning AAdvantage Miles”, they outline their specific policy. US Air states their policy under General Terms and Conditions.

One airline, JetBlue, said that they don’t have a specific policy but, after receiving a death certificate and other documentation, will transfer the miles to a beneficiary.

Southwest Airlines has a specific policy – it does not allow transfer of any miles after the death of a RapidRewards member.

Delta’s policy is to not transfer miles. However, upon request of a SkyMiles member’s surviving family member, they may make an exception and move the miles to their account.

United also said their policy is that miles are not transferable upon death. However, MileagePlus evidently has a form that can be completed to request transfer of miles from a deceased member’s account to that of a beneficiary. Along with the completed form, a copy of the death certificate and a $75 fee must be submitted.

If you have a lot of unused frequent flier miles, you might want to specifically bequeath them in your will. However, the airline holding them is still not legally required to give them to the beneficiary of it is against their company policy.

What’s the easiest thing to do? Make sure your frequent flier miles are on an airline that will allow your family to inherit them or start travelling more now, using up that bank of valuable miles while you can.

For more information about what happens to your assets when you’re no longer around, go to www.diesmart.com.

Don’t Pay an Inheritance Tax on Your Own Money!

If you live in Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania beware. These states tax your inheritance, no matter what the amount is.

Barry and Susan Brown of Philadelphia, PA learned this the hard way. Because they were getting older, they decided to add their son’s name to their bank accounts. They decided this would be the easiest way to enable him to access their funds in case of a health emergency.
Unfortunately, their son died before they did. Shortly thereafter, they received a tax bill for several thousand dollars. Why? Under Pennsylvania law, one third of the money in their accounts was considered to be their son’s. Since, according to the law, they had inherited it, they owed 4.5 percent as tax. Their son had none of his own money in the accounts, but that didn’t matter. They had to pay the tax.

This problem could have very easily been avoided. Instead of putting their son’s name on their bank accounts, they should have prepared a financial power of attorney document. In this document, they could have given their son the right to access their money and make financial decisions on their behalf when they were unable to do so. This method would have allowed them to keep all of their money instead of giving some of it away to the government needlessly.

For helpful information about how to plan for incapacity and death, go to www.diesmart.com.