Articles Posted in Estate Planning

Small, family-owned businesses make up the crux of our nation’s economy. In 2011, there were 28.2 million small businesses in the United States and they make up 99.7% of U.S. employer firms. Many small business owners hope to create a legacy where their family will take over operations once they decide to retire, but it does not always happen. Business succession planning is crucial to determining whether your family should inherit the business or if you should look to other options when you decide that you no longer wish to run the company.

Early Planning is Important

The earlier that you begin succession planning for the next generation, the better off your business will be. To start, have a conversation with the next generation about whether they see themselves running the business when you are gone. It can take over a year to develop a succession plan and between three to five years to implement.

Many families purchase vacation homes that they and other generations in their family can all enjoy together. However, vacation homes can also lead to some serious family feuds when it comes to estate planning. One of the biggest mistakes in estate planning when a vacation home is involved is to leave the question of ownership, sharing, and other issues without a detailed succession plan. If a plan cannot be agreed upon with you and your loved ones, you may want to consider selling the home before any fights begin.

Selling the Vacation Home

Sometimes selling the vacation home makes more sense than leaving it to loved ones. Your children or grandchildren may not be able to afford the taxes, upkeep, maintenance, and travel to the home. In addition, the recovering real estate market means that your family could make some money selling the home that could be added to their inheritance. The money from the sale of the vacation home could also go to your long-term care or that of your spouse.

A lawsuit recently filed in the U.S. District Court in the Southern District of Texas has challenged the Internal Revenue Service’s (IRS) assessment that a family owes the government millions in taxes for artwork that they claim is actually owned by a company. The estate of Joe Allbritton and his widow, Barbara Allbritton, are disputing the $40.7 million tax assessment on an alleged distribution of around $140 million worth of company-owned art to the Allbritton family.

Facts of the Case

The complaint was filed by the Allbritton family on January 30, 2015 which states that the art in question is owned by Perpetual Corporation (the Company), a corporation that is owned by the Allbritton family that held their art, real estate, and other assets on behalf of the family. The Company has been investing on behalf of the Allbritton family for over fifty years and in 1999 it was the sole owner of 26 pieces of artwork. It also owned another six pieces with a 95% interest, the other five percent belongings to Joe Allbritton.

The responsibilities of being named as the executor of an estate can be overwhelming, especially when you are still grieving over the loss of a loved one. Becoming the executor of an estate comes with a multitude of administrative tasks, and getting something wrong could make you liable for damages. One software executive saw the need for some help and has designed online tools to make the executor’s role in estate planning easier.

Role as Executor

Executors are required to perform many tasks when settling the estate of someone that they know. The executor is in charge of paying the taxes on the estate in addition to any unpaid creditors. The executor must find and document all assets of the estate as well as settling all of the deceased’s affairs. Finally, executors must distribute assets and personal items to the heirs of the estate.

The common thought when estate planning is to split the inheritance equally among your children. The main goal of the distribution is to be fair to each child, but that is not always the case. Sometimes there are special considerations that need to be made for one or more children that result in unequal distribution of the estate.

Circumstances for Unequal Distribution

Splitting an estate equally amongst your children may seem like it makes the most sense, but sometimes circumstances arise that make the situation more complicated. Like many families, oftentimes one child does better financially than the others, or one may be struggling through difficult financial times. In addition, if one of your children has special needs it will require additional planning and resources from your estate to care for them for the rest of their life.

As adult children delay marriage and elderly parents are living longer, estate planning can sometimes get lost in the shuffle. A recent survey showed that only about 55% of all parents have an estate plan or even a simple will. In addition, almost 25% of people ages 65 years and older admitted that they do not know where their parents’ estate planning documents are kept, and 44% do not know what the contents of those documents say.

Importance of an Estate Plan

Horror stories abound of adult children unable to provide for their ailing parents because they do not have the proper documentation. Despite needing to make immediate decisions, children get stuck in court and money gets tied up because there is no estate plan. Even fewer parents have health care directives and it can have an immediate effect on their wellbeing if there is a medical emergency.

Long-term care insurance is one of the biggest topics of conversation among retirees and estate planners. The industry is going through a period of turmoil with many policyholders now cashing in on their long-term care needs and few new buyers signing up for long-term care insurance. As a result, companies that carry long-term care insurance are shifting the way that they approach these types of policies, and consumers should be looking for new trends in long-term care insurance.

Long-Term Care Insurance

There is good reason for shifting trends in the long-term care insurance industry. Sales for individual policies have plummeted over 75% in the last ten years, and only ten percent of long-term care insurance carriers are still in business. Those that remain continue to increase the premiums and tightly underwrite all of their policies. At this point, most long-term care insurance plans are only available for the wealthy and are unaffordable to the lower and middle class.

There are many couples at retirement age that have been together for years but have opted to not get married for personal, professional, or legal reasons. For these unmarried couples, estate planning is crucial if you want your partner to inherit from your estate. If the homeowner dies without a will in place, the other partner would be out on the street with little to no recourse. However, there are options to ensure that your partner is protected through your estate plan while simultaneously planning for the other loved ones in your life.

Estate Planning Options

For couples that want to protect their partner but still leave the home to their children, one of the more popular ways of dealing with this problem is to create a life estate for the surviving partner. If drafted correctly, the partner gets the right to live in the home until they move into a nursing home facility or pass away, at which point the real estate would revert to the children. If a couple decides to go with this option, it is smart to also leave money to the spouse specifically for the purpose of house maintenance and upkeep.

In the age of the internet, concern must be paid to the digital assets in addition to the physical assets of your estate when you pass away. While there have been considerable issues with this in the past, social media companies are finally instituting policies to handle the social media of a person who has died. Some companies like Twitter and LinkedIn will deactivate or remove your social media account when they have been notified of the death, but other social media companies like Facebook are taking digital asset protection one step further.

Facebook Legacy Contact

The Facebook legacy contact is the company’s newest way of dealing with a deceased account holder’s social media page when they pass away. You can appoint a person as your legacy contact, and it can be anyone who also has an account with Facebook. That person is notified upon your death of their legacy status and given access to your memorialized social media page.

Celebrity estate stories are rife with lessons about mistakes to avoid when creating an estate plan, such as problems with the estates of James Gandolfini, James Brown, and Anna Nicole Smith. Poor estate planning can lead to probate, taxes, and family disputes. Failing to create an estate plan or drafting a poorly written plan can lead to many issues for your loved ones after you pass away, but there are some mistakes that you can avoid in order to minimize the chances of problems in the estate planning process.

Mistake #1: Thinking You are Too Young or Possess Too Little

In 2012, a report from Texas Tech University revealed that only around 54% of all Americans possess an estate plan. Many do not create a will or other estate planning documents because they believe that they are too young or do not possess enough to warrant a will. However, a good estate plan does not just pass your assets to your loved ones when you die; it can also protect you while you are alive.