Bielski Law Office, Ltd.

Single Estate Planning

People who have never been married often face more difficult estate planning decisions than people with families.

For married people, the basics of who gets what after they pass away is usually fairly obvious. Most married people want the bulk of their estates to go to their spouses, children and grandchildren.

Similarly, most married people will grant a spouse or child the authority to act as a medical power of attorney and a general durable power of attorney. However, as the New York Times points out in “Estate Planning for the Never-Married” these decisions are not as obvious for people who have never been married and who have never had children, especially if they live far away from their closest relatives.

Deciding who gets what property after a single person passes away is a matter of understanding the laws of intestacy. If a single person passes away without an estate plan, then those laws dictate that the closest surviving relatives will inherit.

Normally, that means parents and siblings will receive the estate, but if none of them is still alive then the law can get complicated. For this reason single people will want to have estate plans so they can choose who gets what after they pass away.

Granting someone power of attorney in the event of incapacitation can be more difficult. Most people would prefer to appoint family members. However, if no family lives nearby, then often a trusted friend or partner might need to be appointed.

As our friends and partners often change over time single people usually need to change their choices every few years.

If you have never been married, visit with an estate planning attorney about getting the right kind of estate plan for you.

Reference: New York Times (Nov. 11, 2015) “Estate Planning for the Never-Married”

Have a Favorite Charity? Consider an Endowment

It is not easy for nonprofit organizations to secure new funding sources every year. When a regular donor passes away, the organization is often left with a desperate need to replace the funding. If you want to avoid this happening to your favorite charity, you can leave an endowment in your estate plan for a lot less money than you probably think.

Charities are always grateful and pleased to receive large one-time donations, or even small one-time donations. However, what really keeps most charities solvent are the annual donations they receive from regular donors.

It is these donations that allow a charity to plan ahead and budget.

When those regular donors pass away the charity has to replace them, which is not always easy to do quickly. One way to avoid this problem for charities that you support is to leave an endowment for them in your estate plan.

As the Statesman Journal points out in “Today’s nonprofits need forever friends,” you do not need to leave millions in an endowment to make a difference.

If you annually contribute $100 to a nonprofit organization, then leaving $2,000 in an endowment is enough for that level of annual giving to continue in perpetuity. That ratio holds up no matter how much you give annually. An endowment of 20 times an annual gift should allow for the same contribution annually long after you pass away.

Many nonprofits have endowment funds to which you can contribute. For those that do not, you will want experienced help to create one.

Consult with an estate planning attorney if you would like to consider leaving a charitable endowment.

Reference: Statesman Journal (Nov. 13, 2015) “Today’s nonprofits need forever friends”

Declaring Lord Lucan Completely Dead

In the United Kingdom Lord Lucan was officially declared dead by High Court order in 1999. However, that does not mean that he is considered legally dead for all purposes.

In 1974 a nanny in the employ of the 7^th Earl of Lucan was found murdered at the Earl's home. His wife was found severely beaten as well. The Lord's car was found bloodstained and abandoned.

The Lord has never been found. He was convicted of the murder and has been a fugitive ever since.

Over the years there have been numerous reported sightings. In 1999 the High Court declared Lord Lucan officially dead. However, reminiscent of the famous scene in The Princess Bride that ruling only makes Lord Lucan mostly dead.

The court's declaration allowed property to go to heirs and let his family get on with their lives.

However, it did not allow for Lord Lucan's son to inherit the title and become the 8^th Earl of Lucan.

The Mirror reports in "Lord Lucan death certificate bid faces last minute legal challenge from son of murdered nanny" that the son has submitted an application to have his father declared "presumed dead," which would allow him to inherit the title of nobility.

As the headline suggests the nanny's son is asking that Lord Lucan not be declared presumed dead.

In the United States, we do not have to deal with titles of inheritance and the estate headaches that they can bring. On the other hand, we do sometimes have to deal with missing persons and when they can be declared deceased for other estate purposes.

If you have a relative who has been missing for a long time, you might want to speak to an attorney to see when you can and should apply to have him or her declared deceased.

Reference: Mirror (Nov. 7, 2015) "Lord Lucan death certificate bid faces last minute legal challenge from son of murdered nanny"

Preventing Long Term Care Policy Lapses

Long term care in a nursing home is extremely expensive. One way to mitigate that expense is to purchase a long term care insurance policy. Unfortunately, many of the people most in need of long term care insurance let their policies lapse before they need them.

Planning for end-of-life medical care often goes hand-in-hand with estate planning. An estate plan is useless if nursing home costs eat up all of your savings as there will be no assets left for your heirs to inherit through the estate plan.

For this reason it is important to decide how you will pay for nursing home care should you ever need it.

Long term care insurance policies are a popular and effective solution. However, more than a third of the people who purchase long term care policies let them lapse before they need them to pay for nursing home expenses.

Most of the time people do not intentionally let the policies lapse. Instead, they simply forget to pay the premiums.

This may not happen out of ordinary forgetfulness but may happen because as we age we often start to suffer from cognitive impairments.

Unfortunately, the people who suffer from the cognitive impairments that would make them forget to pay the insurance premiums are the very same people who are most likely to need long term care in a nursing home.

Next Avenue reported on this problem in "How Long-Term Care Insurance Policies Backfire."

The article does point out a potential solution to this problem. It is possible to have the insurance policy statements sent to a trusted third party who can make sure that the premiums are paid.

However, if this is going to work as an anti-lapse strategy, it needs to be done when the policy is first purchased rather than risking forgetfulness later in life.

Reference: Next Avenue (Nov. 6, 2015) "How Long-Term Care Insurance Policies Backfire."

Leaving an Intellectual Inheritance

Most people who amass wealth do not do it so that their heirs can squander it. However, that is what happens in most cases. One way to help prevent this from happening to your wealth is to leave your family with an intellectual inheritance.

In "Preparing for Inheritance: How to Avoid Losing It All," Barron's points out that 70% of a family's wealth is lost in the second generation and 90% of the wealth is lost in the third generation after an initial inheritance.

What typically happens is that the first generation works hard to amass wealth and the second generation lives off the wealth instead of working hard to make more. The third generation continues where the second left off until nothing is left of the original fortune.

Of course, this is not true for all families.

Some wealthy families continue to amass wealth generation after generation. The article points out how this occurs: the families that continue to thrive leave an "intellectual inheritance" for heirs.

Consequently, they educate their heirs about the family's legacy and values. They have conversations with their heirs about how the wealth was generated and why it is so important that it be maintained through continued hard work.

Think about this when you are creating your own estate plan.

It is not enough to have an airtight estate plan drawn up by a professional. If you really want that estate plan to be a legacy for future generations of your family, then educate your heirs and also leave them an intellectual inheritance.

Reference: Barron's (Nov. 7, 2015) "Preparing for Inheritance: How to Avoid Losing It All"

What Did the Scaife Trustees Know?

The contentious battle over the trust of the late Richard Mellon Scaife has taken an interesting turn as new court filings make it appear that at least one of the three trustees may have suspected the trust was being mismanaged.

Richard Mellon Scaife's mother created a multi-million dollar trust for his benefit. When he passed away, the remainder of the trust was then supposed to pass to his children. However, instead of receiving a windfall the children received nothing because when Scaife passed away there was nothing left in the trust.

Scaife had apparently drained the trust of all of its assets to prop up his failing newspaper. His children are suing the trustees on the basis that they should not have allowed Scaife to drain the trust for that unintended purpose.

As the Pittsburgh Post-Gazette reports in "Scaife children say they were kept in dark about trust as it was drained," it appears that one of the trustees, PNC Bank, was aware that there was a potential issue with the way the trust was being administered.

It further appears that, in conversations with its legal advisors, PNC was wondering if Scaife's requests were proper and, if not proper, how the bank could protect itself from potential liability for accommodating them. The children claim that they were never informed.

While this case is still in its infancy, these revelations do not bode well for the trustees. If they knew that the trust was not supposed to be completely emptied by Scaife, then the trustees had a duty to say "no" to his requests. If they failed in that duty, then they can be held liable for that failure.

Reference: Pittsburgh Post-Gazette (Nov. 6, 2015) "Scaife children say they were kept in dark about trust as it was drained"

How Probate Can Get Expensive

There are many reasons to want to avoid probate for your estate. One of them is that probate can get very expensive. One doctor's bill in a case in New Hampshire illustrates just how expensive.

The story of Geraldine Webber's estate has been followed closely on estate planning blogs. The basics are that Webber was an elderly woman who met an on-duty police officer named Aaron Goodwin. Although Goodwin had a wife and children and was much younger than Webber, it appears that she became enamored with him.

She rewrote her will to leave Goodwin a $2 million inheritance.

The will was challenged by a group of Webber's friends, two hospitals, a city and a school on the basis that Goodwin had unduly influenced and taken advantage of her. The challengers won the case.

However, as Seacoast Online reports in "Doc charged $70K for losing testimony in cop's inheritance case," testimony from one witness came at a steep cost for the estate.

A doctor, who was hired by the estate to serve as an expert witness, concluded that Webber was competent and not suffering from dementia at the time she signed the will.

The doctor, who reached his conclusion by reviewing medical records and visiting Webber's home, had never met her. For his services to the losing case he is asking to be paid $70,120 by the estate. A judge will have to approve the amount.

That is how probate can get so expensive.

The testimony of one expert witness for the losing side can cost $70,000. Imagine if there had been other expert witnesses and not just the one.

Of course, while the judge may not approve the bill for the amount asked, the doctor will certainly receive a substantial amount from the estate.

Reference: Seacoast Online (Nov. 4, 2015) "Doc charged $70K for losing testimony in cop's inheritance case,"

Easy to Explain Estate Taxes? Not Exactly

Seems like the subject of estate taxes becomes part of every politician's election promises, and today's election environment is no different. Even though we are not really expecting significant changes in that area, estate taxes have changed dramatically, and some folks may still be uncertain about how those changes relate to them. First of all, remember that there are two kinds of estate taxes and each can be significantly different from the other in certain ways. What gets taxed? Essentially everything you own (even the face value of life insurance policies where you are listed as owner). The amount of each person's estate that can be excluded from federal estate taxes stands at a whopping $5 million. That means the federal estate tax of roughly 35% would be exacted on any estate valued over $5 million. Another relatively new provision is that married persons, each of whom has the $5 million exclusion, can pass any unused portion of their $5 million to their spouse. This is called "portability."

The article, "Estate taxes explained," from nj.com explains that state estate taxes are entirely different animal: many are not very easy to understand and state laws can differ drastically from state to state. For example, married persons have the flexibility of knowing that they don't have to pay either federal or state estate taxes in New Jersey when one of them dies. This is called the unlimited marital deduction.

But things can get pretty tricky quickly when you own real estate in a state or states that are not your state of residence. When you die, those other states may seek to tax your estate with their own very different state estate tax. A smart way to avoid this issue is to establish a trust to hold that property. The surest way to avoid estate taxes is to give assets away. However, that's a serious step when you might need those assets to provide for you and your family during your lifetime.

Another way would be to create an irrevocable life insurance trust. In that situation, the trust, and not you, "owns" the life insurance, and if life insurance is purchased directly into the trust, there is no waiting period. But if existing life insurance is transferred into the trust, there's a three-year wait before the life insurance is considered out of your estate.

Another way to remove assets from your estate is to establish a 529 Education Savings account with a named beneficiary. With a 529 plan, even though you're the stated "owner" of the account, it's not considered part of your estate.

Keep in mind there are only a few ways to accomplish this, so work with an experienced estate planning attorney.

Reference: nj.com (October 18, 2015) "Estate taxes explained"

Don't Let a Perfect Storm Ruin Your Plans for the Family Farm

In February of 1959, rock and roll musicians Buddy Holly, Ritchie Valens and J.P. "The Big Bopper" Richardson were killed when a plane Holly chartered at the last minute crashed near Clear Lake, Iowa. The event later became known as "the day the music died." Richardson had the flu and talked Waylon Jennings into giving up his seat on the plane. Valens won a coin toss with Tommy Allsup for the last seat. The timing of these two fateful actions altered the course of history for these men and their families. My first memory of playing musical chairs was in kindergarten. Our elementary music teacher taught us not only about music but also unknowingly about competition. When the music stopped, the goal of the game was to be in a position to grab the chair and not be left standing, alone and out of the game. We were taught the "Golden Rule" — to be nice to classmates — but at the same time, the game instilled a conflicting desire to grab that last open chair from a fellow 6-year-old who may not have been quite as quick on the draw. There is a perfect storm brewing in agriculture — specifically regarding transition of assets from one generation to the next. The timing of this perfect storm could be catastrophic for a family farm.

Factors included in this perfect storm include the quantity of farms owned by the older age group, as well as the psychological and emotional issues involved with trying to keep a family institution thriving and in the family. Couple these issues with the amount of capital investment required to continue the farm and the uncertainty of when things will happen, and your farm operation could be in trouble. You need a complete plan, says an article in the Iowa Farmer Today, "Discuss farm estate and succession plans now so no heir is 'left standing.'"

The article advises every farm family to create and review an estate plan and a farm succession plan. These two plans may overlap, but they are two different programs. The estate plan includes documents such as a will or trust, powers of attorney, farm continuation language, executors, trustees, distribution plans, and the age of distribution for minor beneficiaries, as well as contingency plans in the event a beneficiary has predeceased or is disabled at the time of your death. The estate plan includes the coordination of beneficiary designations of retirement plans and life insurance. An important point is to maintain liquidity to pay debts, taxes, or administration costs. This may not be accomplished by simply naming your children as beneficiaries, as many do.

A farm succession plan typically includes the business operating agreements, terms of future purchase, the terms for lease if not purchased, and limitations on ownership. Which of the parts of an estate and farm succession plan will be most important to your family will depend on the timing and what stops the music in the estate.

A key part of any estate plan is identifying ownership and an updated fair market value of the estate assets.

Many folks think that an estate plan just deals with the distribution of assets at death. But an estate plan should identify and discuss strategies for the distribution of any assets that could or should be distributed prior to your death, in addition to those distributed when you pass away.

A good estate plan not only identifies assets but sets out a timeline to distribute those assets with a process that is tax efficient, while keeping in mind the general goals of the estate.

Sharing plans for your estate and business succession is critical for the effective and efficient transfer of the operation. You can avoid some hurt feelings and selfishness down the road if you explain your goals and transparently deal with the heirs whose ideas of distributing your estate may not be the same as yours.

A critical aspect of a succession plan is to identify the method of pricing the assets that adequately represents not only the structure of the business but also the goals of the owner. Another important component of a complete plan is a source of funding when the transition occurs, such as a loan or insurance if the buyout would occur at death. Cash flow is essential for any viable business.

Business succession and estate planning is more of an art than a science. Although there are parts of each plan that are consistent, the real value of an estate and a business succession plan is recognizing the unique issues of each individual situation. There's no "boiler-plate" plan that will work and should be automatically used for every family business. You need to find a way to create plans that fit your distinctive goals.

Sometimes being involved in a farm business without a concrete estate and farm succession plan can be a little bit like playing the game of musical chairs: when the music stops in your estate, don't let your farm heir be the one left standing with uncertainty and confusion—and ultimately find themselves out of the game.

Reference: Iowa Farmer Today (October 16, 2015) "Discuss farm estate and succession plans now so no heir is 'left standing'"

Former NBA Star Could have Future Ex-Wife Making Medical Decisions

Lamar Odom and Khloe Kardashian may appear to be split on reality TV, but on paper, their divorce is not final. That could leave the former NBA player's estranged wife with the role of making medical decisions for him. Odom, who has an address in Henderson, and Kardashian both signed off on their divorce in July, but the case has not even been assigned to a judge in the backlogged Los Angeles court system. A court spokeswoman said that a final resolution can take months. The judgment packet has been received and awaits a review by a judicial officer, and there are no hearings scheduled at this time, said Mary Eckhardt Hearn, director of public information for Los Angeles Superior Court. Former L.A. Lakers forward Odom was found unconscious at a brothel in Nye County. He remains at Sunrise Hospital and Medical Center in Las Vegas, according to several people who have visited him and spoken to the media afterward. But officially, Odom was not registered as a patient at Sunrise — a status that was his right through federal laws designed to shield patient information from the public. Anyone who called asking about Odom was told his information did not appear on the hospital registry, the same answer someone would get if he wasn't a patient there at all. "Only information that comes from a hospital spokesperson is considered legitimate information," said Stacy Acquista, a marketing executive with the Far West Division of HCA, the company that owns Sunrise.

A story in the Las Vegas Review-Journal, "With open divorce case, Khloe Kardashian could be making Lamar Odom's medical decisions,"explains just who is allowed to make medical decisions.

Nevada law spells out who will make medical decisions for patients who become incapacitated, which are sometimes called substituted judgment statutes. In the Silver State, spouses or registered domestic partners are first in line. If Odom does not have advanced directives, legal documents stating his health care choices, Khloe would be the one to make these decisions.

There are several types of advanced directives, including living wills and medical powers of attorney. These estate planning documents let individuals make their wishes known to family, friends, and health care professionals to avoid confusion in cases like Odom's.

Odom may have an advanced directive which would apply. By signing an advanced directive, you select the individual you want making your decisions for you.

The Nye County Sheriff's Office stated that Odom had been using cocaine and sexual performance enhancers in the days prior to being discovered unconscious at Love Ranch brothel in Crystal, about 90 minutes outside of Las Vegas. (Nevada is the only state with legalized prostitution, and county regulations say that business licenses can be revoked if brothels have drug issues).

In addition to his 2009 and 2010 NBA Championships with the LA Lakers, Odom is known for being part of the Kardashian family. Khloe filed for divorce in 2013 after four years of marriage.

Reference: Las Vegas Review-Journal (October 18, 2015) "With open divorce case, Khloe Kardashian could be making Lamar Odom's medical decisions"