Thomas Kinkade - Painter of Light, Writer of Illegible Will

My horrible prognostication abilities continue.  If my prediction of a Romney landslide and a 9 game losing streak to end the fantasy football season were not enough, my earlier prediction of years of litigation to settle the dispute over Thomas Kinkades's estate was also wrong.  His estranged wife and his girlfriend of 6 months (although she preferred the term "soul mate"), settled their differences this week.  No details were revealed.  

The primary issue was the validity of 2 illegible handwritten wills made by Kinkade.  Far be it from me to cast stones about one's handwriting, but if someone is going to leave a handwritten will, it should at least be legible.

There Is Gold in the Walls! Part II

Following up on an earlier post.  A woman will officially inherit her reclusive first cousin's $7.4 million estate after a court ruled that she is his only heir.  After the man died, the estate auctioneer found $7.4 million of gold coins in his house.

Several points:

1.   When someone dies without a will, the estate does not escheat to the state.  Statutes set forth how the estate will be distributed which is generally along the lines of closest living relative.

2.  Only one first cousin?  That is a narrow family tree.

3.  Gold was a great investment for him (his cousin, really).  Apple stock would have been better. 

Delayed Parenthood and Estate Planning

With no fiscal cliff resolution imminent, it has been slow in the estate planning news world (but slammed in the estate planning practice).  The New Republic had a great article on delayed parenting and the possibility of developmental issues for the children.

Viewing the article through the estate planning prism, I noted the following potential issues:

1.  Parents need wills and trusts immediately.  The risk of sudden death or terminal illness is greater for a 40+ year old than someone in their late 20s.

2.  The trusts might need special needs provisions to protect the children's governmental benefits.

2.  Selection of a guardian to handle a child with even minor developmental disabilities is tremendously important.

4.  Because the children are younger when the parents are older, parents need to rely on siblings and friends to handle their affairs until their children become old enough to assist the parents with their affairs.  

Of course, estate planning assumes a certain level of personal responsibility and rational thought.  I am not sure than anyone desiring children in their 60s and 70s is being responsible or acting rationally with respect to their children.   

All About Domicile

This is complicated.  Marilyn Monroe died in 1962 in California after she was fired from the film 'Something's Got To Give."  For then estate tax reasons, her executors claimed she was a NY resident.  The rights to make money from her estate and likeness have been passed down to her estate heirs (and their heirs) over the past 50 years.  

Several years ago, her estate sued a photographer for using her likeness for commercial purposes.  A court ruled in favor of the photographer and said that there was no right to publicity at the time of her death.  The State of California quickly passed a law authorizing a right of publicity and deeming it retroactive and transferable to heirs.  The estate returned to court to have the previous verdict overturned.  The court acknowledged the new law, but said that it was available only to residents of California.  Because the estate had said that Ms. Monroe was a NY resident at the time of her death, the law did not benefit her estate.  

In summary,the estate could  not have it both ways - taxed as a NY estate, but utilize California laws for protection.   Something had to give. 

Illegal Eagles

Now for something complicated and fun (at least within the parameters of estate planning).  An art collector died owning an art work which contained a stuffed eagle.  The art was on display at the MoMA under an agreement after the federal wildlife service tried to confiscate it in the 80s.  

Because the sale of dead eagles is prohibited by federal law, the estate appraisers valued the art at $0 because there is no market for it.  The IRS said it was worth $15 million.  When the estate rejected that valuation, the IRS  played hardball and said it was worth $60 million and levied penalties for undervaluing it plus interest.   The estate tax alone on this art would have been $27 million.  The estate and IRS finally settled the matter when the estate donated the piece to MoMA and the IRS dropped the estate tax issue.  

Couple of points:

1.  The family had not benefited from this art for 20 years due to the previous agreement to keep it on display.

2.  I do not agree with the assessment that art with no market is worth $15 million.   Assets are worth what a willing buyer and willing seller agree upon.  If there are no buyers, there is no value.  

3.  The collector's estate had paid $470 million in estate taxes already and had sold $600 million of art to do so.

4.  The author is wrong about the charitable deduction.  The estate did receive a charitable deduction for the value of the art work which is why ultimately there was no tax on it.

5.  Never pick up an eagle feather.  It is illegal to do so and subject to a $25,000 fine.  Unless you are a Native American or a member of the Screaming Eagle division of the US Army.     

WVXU Broadcast

Forgive the self-promotion.  I will be on Chris Desimio's "On the Money" program on WVXU tomorrow morning discussing changes to estate tax laws.  The segment will be here soon thereafter.  

Thank you to Chris for having me on the air.  It is always fun. 

Even Rappers Need Wills

Rapper Nate Dogg's $200,000 estate moved one step closer to being settled after his wife (step-mother to his children) and his mother ceded control of the estate to a neutral 3rd party at the request of his children.  Mr. Dogg died in March 2011 without a will at the age of 41, leaving a wife and 6 children whose ages are unascertainable in a cursory web search.  His wife and mother had sought to be appointed co-executors, but his children believed they were only motivated by financial gain and did not have the best interest of the children at heart.

Lessons to be learned:

1.  Everyone, even rappers, need a will.  The issue of executors would not have arisen because the will would have appointed someone to serve in that role.

2.  A funded trust would have been better because this entire dispute, or at least the financial end of it, might have remained shielded from the public.

3.  $200K estate for a rapper?  The music business is tough for everyone this century.  However, 6 children, a socially appropriate level of bling, and no solo releases for 9 years could drain assets quickly.   

New Web Page

My revamped web page is up and running.  Feel free to stop by and kick around.  Content will change once we have some Congressional direction on estate tax laws.

Thanks to Justin at Kesil Consulting for the clean look, quick work, and the web feedback.  www.kesilconsulting.com.

Death Better than Divorce?

Schmuck of the year finalist.  An NY man and woman were married for 30 years.  8 years prior to his death, man obtained an uncontested divorce on grounds that his wife abandoned him.  Man continued to live with woman for duration of his life.  Wife did not discover divorce documents until cleaning up his finances post-death.  Wife claimed that they had been happy.  She was aware that he had tried to sell a house previously without informing her. 

As a widow, she was entitled to his pension and perhaps other benefits.  As an ex-wife, she was not entitled to those and he could leave them to his children (or mistress).  She was able to successfully overturn the divorce and fend off the claims of his children from a prior marriage.

Lessons to be learned:

1.  If a spouse is ill, it behooves the other spouse to stay married because a widow is generally better positioned financially than an ex-wife of the husband/ex-husband.  

2.  If a spouse tries to sell a house without telling the other spouse, the trust level in the marriage should become zero.

3.  One woman's apparently happy marriage can be another man's misery.    

As God as My Witness, I Thought Turkeys Could Fly

Happy Thanksgiving. 

Dahling, It's the Fiduciary that Matters

Zsa Zsa Gabor's daughter recently convinced the LA county probate court to invalidate the power of attorney held by Zsa Zsa's husband because  he was abusing it.  Her financial affairs are now subject to probate court supervision. 

To avoid the rigors of a guardianship and probate court supervision, an individual should have a financial power of attorney and health care power of attorney.  However, selecting the person to manage those responsibilities is important.  

What we can learn from Zsa Zsa's situation is that a husband is not always the best choice to serve as fiduciary  especially if he if he wants the 94 year old to have a baby, has adopted several adult men, and has claimed to father Anna Nicole Smith's daughter.      

Will Rogers on Death and Taxes

With all estate planning stories focused on the looming  fiscal cliff, and President Obama wanting to gouge the wealthy for the sake of gouging the wealthy, this Will Rogers quote seems appropriate:

"The only difference between death and taxes is that death doesn't get worse every time Congress meets."

Will Trivia

Among fun facts about wills (yes, there are some) are that the longest will ever probated was over 1,000 pages long, the shortest wills were 3 words, and among famous Americans who died without a will were Sonny Bono, John Denver, and Chris Farley.  I find the last fact interesting because all sexagenarians should have a will (much less sexagenarians who ski alone in trees) as should anyone engaged in high risk activities like flying experimental aircraft or heavy cocaine usage while being overweight.  Perhaps lapses of judgments with respect to mortality cross over into lapses of judgment about tending to personal affairs.      

Planning for Pets Redux

Some good and some silly advice for dealing with pets after death.  The good is to think about a pet trust to provide financially for a pet after death.  The silly is to name the pet in a will, which I have never done in 25 years of drafting wills.  The sillier is to carry a "pet card" in a wallet so if one is struck by a car or has a heart attack, authorities will know that there is a pet at home that needs care.  No word on whether one should leave the Best Buy Rewards Zone card, Staples Rewards card, or airline frequent flyer card out of the wallet to make room for the "pet card."  

Six Weeks and Counting Down

For those who did not jump off a cliff after Tuesday's election results, they have an opportunity over the next six weeks to take advantage of the current estate and gift tax laws before the U.S. is pushed over the fiscal cliff. I am afraid that I agree with the following: " "The estate tax environment is going to change dramatically. You have six weeks to get this done. The estate taxes will not be this favorable for the rest of our natural lives. So for clients in that bracket, this is a pretty critical six weeks."

For wealthy individuals, gifting assets to children or a trust for children is a great strategy. Also, for individuals with older parents, whether wealthy or not, this is the time to gift.

Still Not Moving On Up

A quick Sherman Hemsley update.  If you remember, the body of the Jefferson's star has been in an El Paso funeral home while his girlfriend and a man alleging to be his brother argue over the disposition of it.  A DNA test revealed the man to be his brother, but that fact does not give the man control of the body and has been excluded from evidence.  A trial to determine who has the authority  to bury the body is set for tomorrow.  It is a toss up on whether this case or the Florida election results will be resolved first.

Sell Before the Empire Strikes Back

George Lucas' sale of Lucasfilms to Disney is being touted as an estate planning move because his heirs no longer have to be concerned about running the company after his death.  It can also be considered an income tax move because he is taking advantage of the 15% capital gains tax rate before it is increased to 20% on January 1.  I think it is a creative move because the Star Wars franchise has to rebound from the nadir of Jar Jar Binks and the 3 most recent episodes.      

Kids Do Not Have to Be Treated Equally

There are good reasons for not treating children equally in a will.  Among them are :

1.   A child may be wealthier than his siblings

2.   A child may be a poor money manager

3.  A child may have a failed or poor marriage

4.  A child may have a disability

Generally, instead of disinheriting a child, or leaving one less money, a client can incorporate a trust into her estate planning.  A trust can hold money for the child who can not manage money, who faces an ex-spouse, or who has a disability and can not own money if she were to qualify for government assistance.  Similarly, a generation skipping trust can own funds for a wealthy child so the child is not taxed on the inherited funds at his death. 

Trusts are like beer, chocolate, and coffee in that there is not anything they can not do.    

Caution With Organ Donation

A 19 year old woman in Denmark was declared brain dead and her family was advised to remove her respirator.  The family agreed to donate her organs.  When the respirator was removed, she did not die and instead recovered, causing a small national controversy.

The primary lesson is that one's health care proxy should be someone who exercises caution and does not make impetuous decisions, especially for younger individuals.  Secondarily, I am surprised that the victim was not a U.S. tourist.  After having spent $9 on a Starbucks latte and $22 for a hamburger in Copenhagen this summer, I found their cost of living to be breathtaking if not nearly coma inducing due to shock.            

Probate in Perpetuity?

For those who fear the probate process and think that it takes years, the below case will not quell their fears.  A trust subject to probate administration in Cincinnati is being terminated after 160 years.  Most probate matters are concluded in 1/160th of that time.    

10 Celebrity Estate Planning Mistakes

To finish Estate Planning Awareness Week, Forbes has linked an oft repeated story of celebrity estate planning mistakes of varying degrees.  There are some lessons to be gleaned, but I take exception to the Chief Justice Burger inclusion.   Every version of this link I have seen repeats ad nauseam that he made a mistake by drafting his own will and not creating a trust.  What no one explains is that the Chief Justice drafted his will after his wife had died.  Once she was gone, a trust would not have provided any estate tax benefits.  Just as one  should not rely on the "fact checkers" during this election season, one should not trust writers who endlessly cycle the same point of view on a story without objectively thinking about it.  They might be as credible as Candy Crawley.

To Tell or Not to Tell?

Quick disclaimers.  I am late to the news that Chuck Klosterman was designated the Ethicist for the NYT in June.  Also, this post is only tangential to estate planning.  However, in the interest of posting every day during Estate Planning Awareness Week, and in showing some love for Klosterman (one of my favorite contemporary writers), I thought I would mention one of his columns.

The question he addressed is whether a family should tell their mom whose greatest fear is suffering from Alzheimer's that she has the disease.  Her doctor has only told her she has mild dementia but has told the family the true diagnosis.  Klosterman answered yes so that she can have final meaningful conversations with family members before the disease advances,  the same as she would if she were dying from cancer.  I concur with Klosterman.  

In a piece of irony, in a recent Grantland column, he wrote that he  certainly would not be comfortable in a world where his worldview dictated reality.  Now, with his current position, he has the opportunity to make his worldview reality (and presumably increase his level of discomfort).         

Gilded Age Fortune Will Dispute

I mentioned this last year.  Huguette Clark was the reclusive Gilded Age heiress who lived the last 20 years of her life in a hospital under a fake name even though she owned various houses and apartments worth $150 million.  She also owned personal property (i.e. jewelry, art, furnishings) worth $75 million.  The story is noteworthy because at the age of 98, she finally executed a will which left most of her fortune to her distant relatives who she referred to as her heirs.  Once on a will signing roll, she executed another will six weeks later which left most of her fortune to charity. The distant relatives, who did not know where she lived, are contesting the second will.       

Several points:

1.  The most recent will is presumed to be the valid will.

2.  The will can be challenged on the grounds of undue influence or her lack of mental capacity.  The mental capacity argument is probably a losing argument   If she were incompetent when she signed the second will, one would think that she was incompetent six weeks prior, too.  

3.  A funded trust would have provided her privacy and kept Cincinnati estate planning attorneys/bloggers and the general public from knowing that she was worth $300 million.

4.  When a distant relative is a Gilded Age heiress, a Christmas card and occasional phone call provide a great return on investment.         

Who Controls End of Life Decisions?

Sad case that I intended to link last week.  A young woman was diagnosed with terminal brain cancer and eventually received a breathing tube. When she requested that the tube be removed so she could die, her parents sought guardianship of her.  A court found her competent to make her own decision and denied her parents' request. In an odd turn of events, she changed her mind and kept the tube in place to preserve peace with her parents.

A few points:

1.  The case was correctly decided.  The parents had no right to interfere in the decisions of their adult child.

2.  If she had not been found competent, she would have been best served by having a health care power of attorney which designated someone who shared her beliefs to make her decisions. 

3.  We all should have conversations with our family members so they know our wishes and how we wish they would respond to specific medical situations.  As tempting as it might be to get all potentially controversial topics on the table at once, save the conversation about differing views on religion, political candidates, and gay marriage for a different time

Six Things to Do Before Dying

It is Estate Planning Awareness Week although every week is estate planning awareness week on this blog.  As part of that week, Forbes listed 6 things everyone should do before she dies.

1.  Make a will and/or trust.

2.  Make a living will and power of attorney.

3.  Review beneficiary designations for insurance policies and retirement plans.

4.  Make a bucket list,

5.  Find something good in every day.

6.  Tell friends and family you love them.

Of course, from my professional point of view, 1 and 2 are the most important.  When clients do that, my  list in 4 becomes attainable and 5 and 6 become easier.      

Shades of Gray

No, not the book.  The Monkees song.

After Davy Jones of the Monkees died in February, the probate court agreed with his executrix to make his will unavailable as a public document.  For most estates, though, wills are public records and can be viewed by anyone. The speculation about the privacy request centers around Jones' marriage to a woman half his age which occurred 5 years after he made the will and possible financial problems he was suffering.  The widow has already filed a claim against the estate asking for the statutory share allowed for surviving spouses.

I doubt that his estate is proceeding as Jones would have wanted.  We can learn four lessons from Jones' errors.  

1.  The use of a funded trust avoids the probate process and provides privacy in administering estates abnegating the need to seal the will.

2.  When marrying for the second (or especially third time), a pre-nuptial agreement is essential so that spouses know what to expect and do not file claims against the estate.  It is hard to believe that Dennis Hopper got this, but Davy Jones did not.  

3.  Estate planning documents should always be updated after marriage.

4.  As appealing as it sounds, it is never a good idea to marry someone younger than your children.      

Mike, the smart Monkee, is probably aware of all of this.  

There Are Better Living Will Options

I am not sure if this photo is legitimate,but it seems that a man had his living will and organ donation wishes tattooed on his arm.  That should remove any ambiguity about his wishes, although a standard living will on paper with verbal instructions to his relatives, and checking the organ donation box on a drivers license would be far less intrusive.  Those documents would also preserve skin space for tattooing his girl friend's name and current favorite band.      

Annual Gift Tax Exclusion Increase for 2014

File this under news you can use.   The annual gift tax exclusion will increase to $14,000 next year from the current $13,000.  The gift tax exclusion is the amount of money someone may give away each year without paying gift tax (or more realistically without reducing the amount of money he may leave tax free at death).  When giving away this larger amount, do not forget the blogger who shared this news.    He would even settle for the incremental amount.  

Estate Planning Myths

Forbes discusses 10 common estate planning myths, all of which I have heard.  The most egregious myths are that without a will the state will inherit one's estate and that having a will allows one to avoid probate.  Of course, neither is true which is why they are myths. 

Personally, the myth I am most vested in is that people need an attorney to draft a will. For reasons stated previously on this page, the cost of retaining an attorney far outweighs the downside of an error or not addressing an issue.  Just ask the illegitimate child who inadvertently inherited a share of an estate or the children from the first marriage who were disinherited entirely in favor of the second, late in life spouse.   

Tell Family Members About a Will?

Telling family members about estate plans is a delicate matter.  I recommend the following approach.

1.  Obtain the consent of executor, trustee, and guardian to serve.  Do not surprise them with their responsibilities at death.

2.  Inform the executor of the location of the documents, but do not necessarily provide a copy if they contain provisions that will upset family harmony if known.

3.  For adult children who will inherit a significant sum of money, do not inform them of the amount but suggest to them that they seek financial advice and work with the family financial advisor. 

4.  Related to No. 2, by all means if a child is being disinherited, or if assets are being left to charity instead of to nieces and nephews, do not inform anyone.  If they find out, the disinherited heirs could make the client's life miserable and make the client wish for a hastened death.  

Will Preparation tips

USA Today has a nice article on points to consider when preparing a will.  The most salient is that beneficiary designations over-ride  will provisions.  If a parent's will divides all assets equally between 3 children, but an account is owned jointly with  one child, that child will inherit the entire account negating the parent's wishes.

Personally, the other key point is that people are discouraged from preparing their own wills. My children's school seconds that advice.

Planning for College Age Children

This post is a month late.  Before kids departed for college, parents should have had their children execute a simple set of health care directives so that parents can receive medical information about, and make medical decisions for, their college age children.  This is especially important for children from divorced families where it is unclear which parent is the decision maker.  

The recommended documents are a health care power of attorney (to make the medical decisions) and a HIPAA disclosure so a parent can receive information about their child's health status after a bad Ecstasy trip or injury while car surfing.       

Smart Rider

The late Dennis Hopper made several wise estate planning moves late in his life. First, he had a pre-nuptial agreement when he married his fifth wife. Second, when he was dying and was in the midst of an acrimonious divorce with her, he created a trust for their then 7 year old daughter to which he left nearly $3 million. The then estranged spouse/now widow has no control over the trust assets.  

Two points. When a couple is divorced with minor children, I always advise my client to create a trust to hold assets for the children upon the death of the client. Otherwise, the former spouse will control the assets until the child turns 18 and may benefit from the assets. Second, when marrying for the 5th time, I am glad to see that Mr. Hopper had learned enough from his 4 previous failed marriages to execute a pre-nup. Old dogs can learn new tricks.   

There Is Gold in the Walls!

After an unmarried Nevada man died, authorities discovered $7 million of gold bars and coins stashed in his house.  The man had lived alone since his mother's death in 1992.  He was apparently dead for a month before neighbors reported a smell emanating from the house.  His left no will so his first cousin, whose phone had been disconnected, will inherit the estate as his closest relative.

I am uncertain about what lessons can be learned from this story but I will suggest a few.

1.  It is always best to leave a will instead of relying on the intestacy statute to determine where assets where go after death.

2.  People should check on their "crazy neighbors" because they, instead of cousins with disconnected phones, might inherit assets at death.

3.  Living isolated and alone without visiting doctors can lead to a premature death.

4.  Gold has been an incredible investment the past several years.        

Beneficiary Designations and Asset Titling

The best estate plan will not work if beneficiary designations and asset titling are not coordinated with the provisions of the will and trust. Common mistakes include adding a child's name to a house deed, adding one child as the transfer on death beneficiary of a financial account to the exclusion of the other children, or not avoiding the probate process by transferring the asset to a trust or adding a transfer on death designation.

I always provide my clients with a list of how to address beneficiary designations and asset titling issues. If the issues are not handled properly, one child can inadvertently inherit most of the estate to the chagrin, and lasting contempt and hostility, of the other children.

Digital Assets (Heavy Sigh Version)

At the risk of beating the dead horse about digital assets, some articles need to be mocked.  This recent WSJ article deserves derision for making a simple topic - how to access on-line accounts of a deceased person - stupidly complex. 

Suggestions include the creation of a social media will with a review of each web site's policies, the nomination of a digital or social media executor, and creation of digital asset trust to avoid those assets going through the probate process.  My responses to these ideas, in order are:  a standard will suffices, the executor should be able to address on-line issues and if he can not he should not be the executor dealing with assets with a monetary value, and only an idiot would list a digital account as a probate asset to be disposed of.  I suspect that some people think that there is money to be made from that idiot by selling him a trust that he does not need. 

My advice remains creating a list of passwords accessible at death by the executor.  Simple is better and often times less expensive.

Choice of Trustee

Who should serve as trustee of a trust?  Choices are usually family members or a corporate trustee from a bank or investment company. 

I usually advise clients to look at their family members first, then use a corporate trustee if there is no one suitable.  However, I always try to dissuade my clients from naming one child as trustee of another child's trust as a means of preserving family relationships post-death.  Grandparents can serve as trustee for the short term.  However, if the parents or grandparents are Michael and Dina Lohan, I always advise that the client use a corporate trustee.      

Closing On-Line Accounts

Returning to post-death digital assets.  The web site Deceased Account assists families with closing on-line accounts of deceased family members.   The site summarizes the procedures of most major (and many minor or unheard of) on-line services.

If a surviving spouse discovers that the deceased spouse belonged to eHarmony, the account can be closed by a family member by simply stopping payment. Thankfully.  And indignantly.      

Bruce Willis vs. iTunes

Continuing the recent unintended theme of celebrity posts while dovetailing with last week's post about iTunes.  Bruce Willis is rumored to be contemplating a lawsuit against Apple over his desire to leave his iTunes account to his children upon his death.  As mentioned last week, he (nor anyone) currently does not have that right under Apple's end user license agreement. 

Presumably he does have the right to leave his children his rights to "Return of Bruno."   There is no word on whether they actually want it though.        

Movin' On Up? Not Quite.

The late Sherman Hemsley, who played George Jefferson on "The Jefferson's" remains unburied six weeks after his death while his manager/partner and alleged brother engage in a will contest over his $50,000 estate.  The alleged brother is contesting the validity of a will executed a month before Hemsley's death from cancer.

I am somewhat perplexed about how a will contest affects the burial.  However, this problem could have been avoided if burial instructions were left in writing.  Generally, leaving the funeral instructions in a will is not advisable because the funeral has already occurred by the time the will is read.

The small nature of the estate compared to the legal fees to contest the will is the one factor that could quickly resolve this dispute and allow Mr. Hemsley to start "movin' on down."  My apologies for that, but I could not resist.        

Who Inherits an iTunes Account?

An issue that seems more problematic in theory than practice is who inherits digital assets at death. Technically, the purchaser of digital content has acquired the "non-transferable" right to use the items.  Theoretically, there is no right to leave these assets to heirs and it is very difficult to distribute parts of these assets among various heirs (i.e. R.E.M. collection to daughter, Eminem songs to son).

The simple solution is to share the password so that the collection can continue to be accessed post-death on whatever devices the decedent used (i.e. Kindle, iPod).  Logistically, integrating an iTunes library into another library is very technically challenging and merits a visit to www.ilounge.com.

However, from a practical perspective, do children want their parent's digital media and vice versa?  Growing up, my parents never had an album that interested me.  Looking back, I still see no need for a Ray Coniff Singers or Mitch Miller album in my collection.  Will others be worse off because they can not access a loved one's Lady Gaga, Lil' Wayne, or Black Eyed Peas collection?  Will family members want to watch Cars 2, Transformers, and any Pirates of the Caribbean movie in the future, not to mention episodes of Keeping Up With the Kardashians and Two and a Half Men?  I doubt it.  If I am right, perhaps Apple and Amazon are doing people a favor by not easing access to the digital content of deceased family members.  

Credit Card Debt of a Decedent

What happens to credit card debt at death? The general rule is that when a cardholder dies, the debt is paid from his own assets and a spouse is not liable for the bill. In Ohio, the credit card company has six months to file a claim against the estate. Otherwise the debt is not valid. If there are insufficient non-joint assets, the debt will go unpaid. This applies even if a spouse was an authorized user on the account (but does not use the account after death).

Beware of smooth talking debt collectors who will try to convince surviving family members that they should pay the debt of the deceased for moral reasons or to maintain the good name of the deceased. There is no legal reason to do so. Also, there is little moral in a business with 18% interest rates and punitive late fees.

"Zombie" Bank Accounts

I suspect we will see more of this as banks consolidate further and more transactions become electronic. A bank account was closed after the owner died, but the bank reopened the account as a "zombie account" when scheduled electronic withdrawals were made. Bank of America apparently did not have a procedure for keeping closed accounts closed when electronic transactions were attempted to be made post account closing. Nor did it have a policy for dealing with worthless mortgages, but that is a different subject.

The best bet for the estate executor would be to close the account and open the estate account at a different institution.

Will Formalities (Adam Yauch version)

More on Adam Yauch of the Beastie Boys.  His will is also receiving publicity for having a handwritten clause forbidding the use of his  music or artistic property for advertising purposes.  One legal question is whether he can ban the use of all Beastie Boys songs in ads because he did not own all of the rights to a song or songs.  Not knowing how the group worked and created music, I have no insight on that issue.

What intrigues me is the handwriting.  If it was added after the will was signed and witnessed, the clause is invalid because it was not witnessed by two people.  If it was added at the signing meeting, it should have been initialed by him and the witnesses to clarify that it was intended to be part of the will.  To properly revise a will, a client should execute a new will or a codicil.  To prevent clients from writing on wills, I offer to retain the originals in my vaults.

Also intriguing is the anti-commercial nature of the clause which stems from the pre-digital music era belief that to use music in commercials is "selling out."  Now, of course, bands use commercials as a means of getting their music heard and making money.  You have to fight for your right to make a living. 

Designating a Guardian

The will of Adam Yauch of the Beastie Boys illustrates how not to designate a guardian for minor children.  Apparently, he and his wife could not agree on the guardian for their then 3 year old daughter, Tenzin Losel, when they executed their wills in 2001.  They compromised and designated his parents if he died in an even numbered year and designated her parents if he died in an odd numbered year.

Several points.  Unless the parents of my clients are very young, I do not recommend that the clients designate parents as guardians. Second, clients should re-visit their guardian designation regularly and adjust it accordingly based on life changes, especially if a client has a terminal illness.  Third,  unless the child is a Sherpa, I am not sure that Tenzin is a good name.  

Controlling From the Grave?

The WSJ has an article at the intersection of 2012 gifting opportunities and unique trust provisions.  I will repeat that the $5 million gift tax exemption for 2012 affords some people tremendous planning opportunities.  Whether they want to make those gifts with unique strings attached i.e. attending the donor's alma mater, spelling the family name a certain way, or marrying within the faith, is possible (and too controlling - at least in these examples).  

However, I include a clause in trusts for all of my clients that suspends distributions if a beneficiary has a drinking, drug, or gambling problem.  n.b. fantasy football and a bottle of wine with dinner do not rise to that level.

DIY Wills

Consumer Reports reviewed 3 on-line will preparation services.  Their conclusion?

"Unless your needs are simple—say, you want to leave your entire estate to your spouse—none of the will-writing products is likely to entirely meet your needs. And in some cases, the other documents aren’t specific enough or contain language that could lead to an unintended result."

When a client has an attorney prepare a set of estate planning documents, the client is paying for more than an attorney to correctly insert the names in the document. He is also receiving the attorney's years of wisdom and experience in administering estates, knowledge of state specific laws, and general knowledge of human interactions through the estate process.

My conclusion? The difference between the attorney's fee and the cost of a DIY package is small in comparison to the cost of a mistake or overlooking an issue in a self-prepared will.

The Very Rare Estate

I am back after a few weeks of slow estate planning news and 14+ days in Europe.

The story about the family who found a collection of pristine, old baseball cards valued at $3 million in their aunt's attic is interesting for reasons other than the discovery of unknown  valuable assets.  First, it is very rare that an individual's personal items are worth more than a few cents on the dollar.  Even more rare is the family that is drawn closer together when dividing personal items.

My experience is that distributing personal property, no matter how small the value, can lead to acrimony and hostile feelings between heirs.  To prevent acrimony, individuals should specify which heir is to receive specific items in a memorandum.  Any hostile feelings can then be directed to the deceased and relations among siblings can be preserved. Hopefully.        

Ohio Intestacy Statute

When contemplating the big questions in life, did you ever wonder what would happen to your estate in the absence of a will?  Probably not.  But if you are morbidly curious, this calculator will tell you.

Note that this does not apply to insurance proceeds or retirement benefits unless the estate is designated as the beneficiary.  Note also that the State only receives assets if there are no relatives under any branch of the family tree.      

How Not to Revise a Will - Thomas Kinkade Edition

At the intersection of estate planing, celebrity, and public voyeurism, is the Thomas Kinkade estate litigation.  At the time of his death, Mr. Kinkade was separated from his wife for 2 years and had been living with a girl friend for 18 months.  His girl friend has offered 2 barely legible wills which leave her various sums.  The illegibility is allegedly due to his inebriation while writing.  Generally, a handwritten will is valid as is a will made while drunk (see the full article for some of the conditions and exceptions).   This matter will take years to resolve.

What advice can we glean from Mr. Kinkade's handling (or non-handling) of his affairs:

1.  Once separated from a spouse, change the estate planning documents immediately.

2.  If changing the documents, hire an estate planning attorney rather than DIY.

3.  If eschewing an estate planning attorney in favor of DIY, write the will while sober, not highly inebriated.  

Still unresolved is the effect of his death on the value of his art.  I am betting downward.    

Planning For Re-Marriage

Back after a slow 4th of July news week.   A checklist of items to address when getting re-married:

1.  Consider a pre-nuptial agreement.
2.  Revise will.
3.  Change beneficiaries on retirement plans and insurance policies.
4.  Take an inventory of assets (could be useful in lieu of a pre-nup).
5.  Consider a pre-nuptial agreement.  Repeated for effect.  The other items will take care of themselves in the context of creating a pre-nuptial agreement.    

Planning At Different Life Stages

Individuals need different estate planning instruments at different times of their lives, essentially building on what they had earlier.

1.  An 18 year old should have a health care power of attorney and HIPPA disclosure form so parents can assist with medical decisions.

2.  Unmarried and recently married couples need wills and health care documents to take care of each other during sickness and after death.

3.  Couples with young children need wills and trusts to designate a guardian and to provide for their children.

4.  Divorcing couples need to revise documents to remove the soon to be ex-spouse from them.

5.  Re-marrying couples need a pre-nuptial agreement and perhaps a trust to provide for the new spouse, but ultimately distribute assets to children from a prior marriage.

In summary, for the recent high school grad, the soon to be betrothed, or soon to be re-married, the ideal present is a gift card for legal services.      

Nora Ephron's Lists

"When Harry Met Sally" remains one of my favorite films.   Nora Ephron, its screenwriter died yesterday.  In her last book, Ms. Ephron mentioned a humorous list of items she will not miss and items she will miss after death.  

The not missed list is dry skin, Clarence Thomas, the sound of the vacuum cleaner, and panels on “Women in Film."

The missed list is her kids, Nick (her husband), taking a bath, coming over the bridge to Manhattan, and pie.

Update 6/27:  After today's Obamacare decision, apparently Chief Justice Roberts will now be on the missed list.  Unfortunately.  

RIP.

Health Care Power of Attorney

As part of an estate plan, an individual should have a health care power of attorney to make medical decisions in the event of incapacity.  Key factors/characteristics of a decision maker are:

1.  Level head.
2.  Question raiser.
3.  Lives near the individual.

Under these criteria, I doubt the Lohan family would designate Lindsay to make their decisions.  

Wills, Privacy and Joe Paterno

Wills are public records.  Any assets distributed by the will are also public.  In Hamilton County this info is all accessible  on-line.  

Joe Paterno's family recently was criticized because they asked for, and received, permission to keep his will under seal. After a bit of an outcry, they agreed to remove the seal.

A few thoughts on this issue:

1.  The will is vanilla - all of his assets will go to his trust agreement.  I see no reason to keep this info private other than general public figure hubris which thinks that laws and policies for everyone else do not apply to public figures.  c.f. Geithner, Tim and Rangel, Charles among others.

2.  By asking for an exception to the privacy rules, the family and its attorneys made this a public matter.  Now, they have attorneys in Cincinnati opining on the will and their privacy request when it would most likely have remained under the radar for everyone except those in State College.    

3.  The interesting info that the family would like to keep private is the net worth of JoePa.  This info could have been remained private if the trust were funded during JoePa's life, or if the financial assets had transfer on death designations.

I do not know if the assets were re-titled in his trust, but there is no excuse for not doing so.  Anyone who is  85 years old should make sure that his estate plan is current and assets are titled properly.  An 85 year old with an aggressive form of cancer should make sure to review his estate plan and asset titling as of yesterday.      

The Worst Estate Planning?

Fifteen years ago, a friend mentioned to me that divorce is the worst kind of estate planning.  Those words ring true not only for estate planning, but also financial planning.  Accordingly, here are 10 things a divorce lawyer will not tell you.

n.b.  It is purely coincidental that today is my 19th wedding anniversary.

Advice for Executors

In these 7 tips for executors, I think the two key tips are:

1.  Seek professional advice.
2.  Do not rush the process.  I advise my clients that the probate process is a marathon, not a sprint.  Of course, if the executor follows tip one, he would know this.  

You Have a Will, Now What?

Once you have a will, you should do the following to make the executor's eventual task easier:

1.  Inform your executor where the will is located.
2.  Place a list of your financial assets, including life insurance policies, with the will.
3.  Place a list of on-line passwords with the the will.
4.  Place a list of instructions about various items of personal property with the will.

Do not place the will in a safe deposit box - it will be inaccessible.

Living Wills - Making Them More Effective

Living wills are great conceptually, but can be vague when actually needed.  Some advisors propose making them more detailed and walking people through a lengthy series of questions about specific situations.  Because this topic makes clients squeamish on a good day, and because clients' wishes about death change as it becomes more imminent, people either would not complete a living will or it would not reflect their current wishes.  The proposed solution is no solution.

Instead, I recommend executing a health care power of attorney in addition to the living will.  The health care power of attorney allows  a family member to make decisions for the incapacitated client.  After executing the health care power of attorney, it is imperative to discuss wishes with the designee. Of course, with Obamacare's "death panels," perhaps this will all be moot.      

Avoiding Rogue Trustees

Choosing a trustee to manage funds for your children is second in  importance only to choosing a guardian for them.  I advise separating the trustee and guardian duties.   Unlike the author, if there is no perfect candidate, I recommend a bank or trust company rather than two "B" candidates.   After all two Bs, still average a B.  If there is not a suitable family member, go for the "A" of professional investments and management provided by a trust department.  

Telling Your Children About Your Estate Planning

What should you tell your children about your estate plan?

1.  Which child is in charge of the estate.
2.  Which child is in charge of the medical decisions and what your wishes are.
3.  Where the documents are located.

Do not tell them which child you love the most/least.

No Contest Clauses

A quick primer on "no contest" clauses which are permitted in Ohio.  They work best when the beneficiary has something to lose by challenging the will.  Leaving someone the proverbial $1 is ineffective.  It is best to leave $50,000 or so which is the amount that could be spent in defending a lawsuit from a disgruntled heir.

Social Security and Posthumous In Vitro Babies

The Supreme Court unanimously ruled that in vitro babies conceived after the death of the father are not automatically entitled to Social Security Benefits. State law has to permit them to qualify as heirs at law for intestacy purposes. I can only hope that the forthcoming decision on Obamacare will also be unanimous.

Planning for Second Marriages

Couples in a second marriage face issues different than couples in their first marriage.

1.  How to balance the  financial needs of the new spouse with the expectations of children from the first marriage.
2.  When the second spouse is close in age to the children, how to provide for the spouse without making the children wait their entire lives for an inheritance.
3.  Who/what to designate as the beneficiary of retirement assets and insurance policies.

Of course, like many topics on this blog, these issues can be addressed through the use of a trust in an estate plan. A prenuptial agreement is also important when there are children from a prior marriage.        

Expecting Couples

Advice for new parents:

1.  Increase life insurance to at least 10x salary, or 15x if affordable.  
2.  Prepare a will which designates a guardian for your child.
3.  Consider a trust to avoid child receiving inheritance at 18..
4.  Jay is a good name for boys.

Minimizing Estate Taxes

Simple strategies to minimize estate taxes:

1. Do not procrastinate. It is tough to plan to avoid taxes when you never get to it before death.

2. Transfer large insurance policies to an irrevocable trust so they pass estate tax free to spouse and children.

3. Give assets away during life rather than waiting until death. Due to the difference in the calculation of gift tax and estate tax, paying gift tax is better than the estate tax.

The article mentions 2 more strategies of limited applicability to most people so I will not summarize them in the interest of brevity.

Facebook IPO Gift and Estate Tax

Everyone else seems to be writing about the Facebook IPO so I will reluctantly follow the herd, but from an estate tax perspective.

Zuckerberg and other FB founders have the ability to avoid future gift and estate taxes on their FB stock by creating a GRAT.  That trust allows them to annually receive income generated by the stock, but ultimately transfer it to their heirs at the current  value discounted for the time value of money.  This strategy also works for people who are not only founders of social media behemoths.

Long Term Care Insurance?

A professor of health and economics debates a nursing home reform advocate about the pros and cons of buying long term care insurance.  My conclusion is that the people with minimal savings do not need it nor do those without children.  If people can afford it, they should buy it.  Annual premiums cost $3,500 which is less than a month in a nursing home.  I am inclined to spend $3,500 to save $80,000 - $100,00 per year.  However, I do understand the hesitation to write a $3,500 check.      

Pet Planning

Once again, with federal estate taxes not being much of a concern to most people, the smaller estate planning issues have become more prominent.  Planning for pets has taken on greater importance in recent years with the advent of pet trusts and other arrangements after the death of the owner.

My favorite anecdote in the article is the couple who has designated a guardian for their children, but would not trust them with their pet.  I think that they might wish to revisit the guardian selection.

Controversial Wills

Many people have criticized the wills of Chief Justice Burger and Howard Hughes as being poor examples of estate planning.  A recent article defends the Burger will as being adequate and raises the point that Hughes' hand written "Mormon  will" might have been legitimate after all and actually accomplished his estate planning goals.  Of course, if Hughes had hired an attorney to prepare the will, the questions about its authenticity would have dissipated.

Aging Parent(s)?

When and how do children offer to assist their parents with the management of  their financial affairs?  A few signs that assistance is needed are:

1.  a large volume of phone and mail solicitations for money,
2.  checkbook errors,
3.  unpaid bills, and
4.  disorder where there used to be order.

Children should offer to assist with bill paying and financial management.  Additionally, the parent should make sure that he has a will, financial power of attorney, health care power of attorney and perhaps a trust in place to enable the child to assist the parent.    

Unified Credit Per Obama Proposed Budget

For those looking for some clarity on the future of estate taxes, the Obama Administration has proposed a unified credit of $3.5 million and an estate tax rate of 45%.  Though this has the same likelihood of passing as the Paycheck Fairness Act and the Buffett Rule (re: nil) and would require the Senate to pass a budget for the first time in 1,000 days, it is illuminating for two reasons.

First, it indicates that unified credit will not revert to $1 million as currently slated.

Second, it amplifies the exigency of making a large gift this year for those who can afford to give away $5 million.  

Digital Data (Again)

When estate taxes do not apply to most people, the hot topic in estate planning apparently becomes accessing post-mortem digital data. I have revised my wills to authorize executors to access on-line accounts.  A corollary is to have a note with the will which lists the passwords and desired disposition of the account and data.    

nb.  The recommended language in the article is the type of drafting that people pejoratively refer to as "legalese."

Facebook Organ Donation Campaign

As if getting members to share the details or their lives and otherwise sell their souls is not enough, Facebook now wants members' body parts.  Actually, Facebook is encouraging its members to sign up to become organ donors.  However, in keeping with its minimal belief in personal privacy, the status would be shown on the member's page.      

Divorce and Insurance

People getting divorced need to change the beneficiary of their insurance policies.  Most states provide that a former spouse will be considered deceased for beneficiary purposes, but bad results can still happen especially if the former spouses own insurance on each other.

Also, for new marriages a trust could serve as a vehicle for receiving insurance proceeds to benefit a new spouse, but have the proceeds pass to the children from a prior marriage.  

Faith and Estate Planning

Using estate planning documents to instill religious values in heirs can be difficult.  Although the Illinois Supreme Court has upheld a trust which disinherited grandchildren who did not marry within their faith, the better strategy for ensuring religious adherence is to discuss faith based issues with heirs over time and to live life accordingly.  Related, clients with a strong faith need to be careful when executing living wills and health care powers of attorney top ensure compliance with their beliefs.   

Sports Blog Post II

Paul Daugherty of the Cincinnati Enquirer was gracious enough to allow me to guest blog again for him today.  Check out my ruminations on sports, OTR tours, and music, among other topics.

Estate Planning Mistakes

Forbes addresses 7 common estate planning mistakes. To me the highlights are:

1. Not having a plan. This is self explanatory.

2. Using an on-line or DIY service instead of a professional. Estate planning lawyers of years of experience to guide clients and help them make wise choices.

3. Not reviewing beneficiary designations to ensure that they meet current wishes and plans.

4. Leaving assets outright to adult children who might not handle them responsibly or who might not need them.

Planning Issues for Women

Because women live longer than men, they have differing financial and estate planning needs. Specifically, they should address the following issues:

1. They need to save more money for their longer lifespans.
2. If married, their spouse should use the joint life option for pension benefits.
3. They should consider the purchase of long term care insurance to pay for nursing home expenses.

This Can Not Be True

This sounds like either a late April Fool's joke or a solution for estate planners declining revenues.  After several UK residents had difficulty accessing the on-line accounts of a deceased relative, people have started including account passwords in their wills.  Because wills are public record, this solution seems worse than the problem.  Of course, attorneys would remain very busy if they revised wills every time someone changed a password.

The better practice is to empower the executor to access the accounts.  Additionally, a list of the passwords should be kept somewhere accessible after death.  

Inherited IRAs

Inherited IRAs survived a Congressional proposal to limit their duration to 5 years rather than the life expectancy of the beneficiary.

There are several issues that arise for the beneficiary:

1.  The rules for trusts receiving the benefits must be strictly complied with.  The advisor in the article has a more negative take on trusts as beneficiaries than I do.   The benefits of trusts as beneficiaries can be great and the compliance is not that difficult.

2.  Inherited IRAs should be re-titled after death to read:  "William Smith, Deceased (date of death) IRA F/B/O James Smith, Beneficiary.

Children With Drug Problems?

The Foxbusiness expert whiffed on advising a couple with children with drug problems. Sure, showing them a revised will that excludes them might make them stop using drugs, but the distant inheritance is most likely not an immediate incentive and eventually they will be disinherited and still have a drug problem. 

I prefer using a trust to hold their inheritance with the stipulation that it can not be disbursed until they are clean. I also would provide that their share can be used to pay for treatment programs. This type of provision is too complicated to administer solely through a will.

I prefer using a trust to hold their inheritance with the stipulation that it can not be disbursed until they are clean. I also would provide that their share can be used to pay for treatment programs. This type of provision is too complicated to administer solely through a will.

Long Term Care Insurance

Long term care insurance can be worthwhile to protect against high nursing home costs.  The insurance itself can be expensive.  Premiums have risen dramatically in recent years with several companies pulling out of the market.

For an individual, the key policy factors to consider are:

1.  Daily benefit.  $250/day should cover most costs.  
2.  Length of care.  3 years is the average stay.
3.  Protection against inflation.  5% increase is the most common policy provision, but also the most expensive.    

A policy provision that should be included is one paying for alternative care such as an in-home assistant.