Articles Posted in Estate Planning

It is important to consider two different scenarios when planning for retirement and drafting an estate plan. The first thing is to consider what will happen to your estate after you die. However, the second is to consider what will happen to your estate if you live a long life but are not in the best of health and require permanent assistance from others. Creating a comprehensive estate plan can help prepare for both of these scenarios by protecting assets that can either be passed down to heirs or used if you become disabled and need long-term support.

The Need to Plan for Long-Term Care

Most seniors drafting an estate plan today ignore the biggest risk to their estate – needing money for long-term health care. According to the U.S. Department of Health, over 70% of our country’s population over the age of 65 will need some type of long-term care, and more than forty percent will need nursing home care for some period of time.

Many people believe that estate planning is only for the elderly or those at retirement age. However, there are some documents and tools within estate planning that should be considered at a much earlier age. If you have a child that is about to leave for college or go on a gap-year trip there is one last thing that you should do as you prepare for the separation: ask your child to sign a durable power of attorney and health care proxy forms.

Why These Forms are Important

Estate planning forms like a durable power of attorney and health care proxy forms are important for a number of reasons. Without them, most states will not allow a parent of an adult child to make health care decisions or manage money for their kids. This applies even if the parent is paying for college, claiming the child as a dependent on tax returns, and still covers their kid for health insurance. Without these estate planning forms if your child is in an accident and becomes disabled, even temporarily, you would need a court order to make decisions on their behalf.

A new show premiered on the Reelz Channel this week called Celebrity Legacies, a documentary series highlighting the estates of famous deceased celebrities. The show explores a different celebrity’s estate plan every week, discussing their legacy, estate, and problems that arose after the celebrity’s death. It also explains how a celebrity’s estate can continue to increase after their death and why some deceased celebrities still make the “highest paid” lists years after they are gone.

Premiere Episode: James Gandolfini

The premiere episode of the series focused on the estate of James Gandolfini, and subsequent episodes include famous names like Anna Nicole Smith and Jim Morrison. Gandolfini died unexpectedly of a heart attack at age fifty-one in 2013 while on vacation in Italy with his son. The actor, known primarily for his work on the television show The Soproanos, left behind two children from two different marriages and a messy, largely unfinished estate plan.

In the first part of this article the importance of planning for pets in the estate planning process, common reasons why pet planning often fails, and the documents needed for proper pet planning were discussed. However, there are other issues that must also be reviewed when including a pet in the estate planning process.

Issues to Consider When Planning for a Pet

Regardless of the document(s) you choose to develop your estate plan for your pet, the following issues also need to be considered for their wellbeing and needs. By clearly detailing every one of the following aspects you can be sure that your pet will be properly cared for in your estate plan.

Legally, pets are considered personal property of their owners, but for many people their pets mean so much more than any piece of furniture or inanimate object. They can be a person’s best friend, companion, and family. When a person begins the estate planning process the pets need to be addressed, as well.

For many people, the wellbeing of their pets is not a concern in the estate planning process, and unfortunately it can lead to the abandonment or euthanizing of the animal once the owner is gone. The only way to protect pets after the death of the owner is through legally binding estate planning documents. Allergies, conflicts with other pets, and exclusion of pets in rental agreements are the most common reasons why informal promises made by friends and family members to take care of a pet often fail.

The idea of legally enforceable documents that ensure a pet’s wellbeing in estate planning is a relatively new concept. Mockery in the press is also another reason why people do not seriously consider providing for pets in an estate plan, even if the remainder of the funds is set to go to an animal charity or other worthy endeavor. The most well-known example of this was Leona Helmsley, who left millions for her dog, Trouble, in a pet trust. Sadly, she was ill-advised when creating the trust, and her wishes were never fulfilled.

When many business owners talk about business strategy they often refer to financing, expansion, partnerships, marketing, and the like. However, many business owners fail to take into consideration the question of continuity and business succession. According to the U.S. Small Business Administration, over 70% of all small business owners do not have a business succession plan integrated into their other estate planning documents.

Why You Should Create A Plan Now

Many small businesses are family owned, and as a result they do not feel the need to be so formal with a succession plan. However, this can be a huge mistake and many businesses have crumbled after an owner dies or leaves because of the lack of a plan.

In an oral ruling last week a probate court judge ruled in favor of Shelly Sterling selling the Los Angeles Clippers against Donald Sterling’s objections. Judge Michael Levanas ruled in a probate Los Angeles Superior Court case that Shelley has the authority to sell the professional basketball team to businessman Steve Ballmer, who has agreed to purchase the team for $2 billion.

Appellate Proof Ruling

The judge’s ruling took the extraordinary step of granting Shelley’s request for an order under section 1310(b) of the California Probate Code. It states that the trial court can direct the powers of a fiduciary to exercise powers as though no appeal was pending. Under this provision, the sale of the Clippers could be completed regardless of an appellate court intervention on the part of Donald Sterling.

Recent studies have shown that talking about inheritance is still a taboo subject for many families, and the avoidance of the subject could lead to many issues down the road. An estimated $40 trillion of wealth will be passed down to heirs as the Baby Boomer generation passes away. According to a survey of thousands of clients done by financial managing giant UBS, over forty-six percent of people who plan on passing down their estate through inheritance have not discussed inheritance plans with their children and other family members.

Reasons for Avoiding the Talk

The reasons why people had not discussed these plans varied. Thirty-two percent of survey takers said that they hadn’t discussed it because they did not want their children counting on the inheritance. Over a quarter, twenty-seven percent, said that they did not want their children thinking that they were entitled to wealth, and around thirty-one percent of people simply did not see the inheritance talk as a pressing issue.

In the recent Tax Court case of Estate of Marie P. Frappolli v. Director, Division of Taxation, a domestic partnership lost estate tax benefits because they did not register as a couple with the state. As an alternative to marriage equality, New Jersey had introduced the option to register as a domestic partnership. Ms. Frappolli and her partner, Ms. Dorothea Angelou, qualified under the requirements for a domestic partnership in New Jersey, but they never filed with the state to make it official.

Marie Frappolli passed away, leaving her estate to Ms. Angelou. In addition, the couple lived in Ms. Frappolli’s home that was transferred to a joint tenancy with the right of survivorship in 1993. The tax division argued that because the couple never registered with the state the entire estate could be taxed. Furthermore, the value of the home could be added to the total value of the estate when determining tax liability. As a result, Ms. Angelou was hit with a transfer tax bill by the state for $178,845.57.

Legal Arguments Over the Estate

It was recently reported that prior to his death, Philip Seymour Hoffman rejected the advice of both his attorneys and accountant when planning his estate. Instead of leaving his estate to his children, Hoffman left his entire $34 million estate to his long-term girlfriend and mother of his kids. He told his accountant that the reason behind this was that he did not want to have “trust fund kids” or the stigma that goes along with it. Sadly, his poor estate planning decisions leave his estate open to a massive tax bill and other potential problems in later years.

Additionally, Sting also made news in the estate planning world recently when he announced that he did not want his six children to have trust funds, either. He told a reporter that he felt like a trust fund would be “an albatross around their necks.” Sting said that if they needed financial help he would give it to them, but he wanted them to have their own work ethic.

While both Hoffman and Sting had good intentions regarding their wealth and children, both superstars perpetrated common myths held about trust funds that simply are not true. There are many different types of trusts, each with their own rules and standards that you can set for them. Here are some of the most common misconceptions that people have about trust funds and estate planning: