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.