Bielski Law Office, Ltd.

Are Smaller Inheritances a New Trend?

As the baby boomer generation ages, they are increasingly spending a lot of their retirement funds on their children. This might have implications for their estates.

Due to demographic changes and changing economic fortunes, older Americans increasingly have to transfer money to their adult children to help support those children. Barron's, in a recent article titled "Boomers Spend Their Kids' Inheritance -- On Supporting Them," reports that interfamily transfers have increased significantly in the last few years.

The article is a good read for anyone interested in retirement and demographic trends.

For estate planning purposes, this trend could create some issues. For starters, if the money is being spent now, then it obviously cannot be part of the estate later and children might receive smaller inheritances than they are expecting.

What if one child receives more support from the parents while they were alive than another child? This could lead to bitterness and even fighting over the estate. This is likely to happen if the estate plan divides what is left between the children equally, even though one or more children received money along the way.

Parents who are helping to support their adult children now should speak with an experienced estate planning attorney about what that means for their estate plan.

No parent wants to leave a fighting family behind as their legacy.

Reference: Barron's (June 26, 2015) "Boomers Spend Their Kids' Inheritance -- On Supporting Them."

 

No Estate Plan for Many Rich People

Recently a survey was conducted of millionaires, the results of which show that a staggering one-third of them do not have any sort of estate plan.

While it is advisable that everyone have an estate plan of some sort, the truth is that some people can afford not to have one. People who have very few assets and who are comfortable with those assets being passed on to their closest living relatives may also not need to create a detailed estate plan.

Although their estates would be much easier to manage with a plan, and they would be doing their families a big favor by creating an estate plan, their estates can normally be handled successfully without one.

On the other hand, all that changes when people have a lot of assets.

If the wealthy pass away without an estate plan, chaos is often the result. The courts have to decide who gets what. Families are likely to argue when there are a lot of assets involved.

The probate case can drag on for years before it is finally settled.

Despite this, Financial Advisor IQ reports that many millionaires do not have an estate plan in a recent article, "One-Third of Millionaires Have No Estate Plan."

There is no good excuse for a millionaire not to always have an up-to-date estate plan.

If you are one of those who do not have one, you should schedule an appointment with an experienced estate planning attorney as soon as possible.

The time that you take to create the estate plan now is time that you will save your heirs later.

Reference: Financial Advisor IQ (July 2, 2015) "One-Third of Millionaires Have No Estate Plan."

Desmond Tutu Peace Trust Shut Down

One of the trusts created by retired Archbishop Desmond Tutu was quietly dissolved earlier this year in the wake of a family feud.

Desmond Tutu won the Nobel Peace Prize for his efforts to end racism and corruption in South Africa. He is generally regarded as an international moral authority.

Unfortunately, his family life has been anything but peaceful.

Previously, Tutu filed criminal charges against his granddaughter for allegedly smashing up property in his home. Now, one of his trusts has been dissolved.

Some board members claim the trust was dissolved to spare Tutu embarrassment over his daughter Mpho Tutu’s attempt to "hijack" the trust. She claims that the trust was attempting to raise money for a peace center and that proved impossible, so the trust was dissolved amicably.

The Telegraph reported the family squabble in an article titled "Desmond Tutu's daughter 'tried to hijack one of his trusts'."

There are two lessons to be learned from this story. First, no matter the reputation of someone creating a trust or an estate plan, there is no guarantee that heirs will behave in the same way. Second, a trust should be drafted so if there are problems and board members cannot get along, the trust can be dissolved or board members can be replaced. This appears to have been the case with this trust.

It is important to make sure that a trust has contingency options for these types of situations.

An experienced estate planning attorney can help you anticipate such potential issues.

Reference: The Telegraph (May 31, 2015) "Desmond Tutu's daughter 'tried to hijack one of his trusts'."

The Estate of Elliot Ness Is Open Again

Elliot Ness is best known as a Prohibition era lawman who fought the mob. After that, however, he served as the CEO of Diebold. A recent find of a stock certificate in that company has caused Ness' heirs to reopen his estate.

Despite a book and two movies being made about his battles against Al Capone, Elliot Ness passed away with a meager estate. He believed that a book based on his story would be unsuccessful, so he gave away all rights to the story.

His wife inherited very little from him.

A recent discovery in Florida could change all of that. At least for his heirs.

The find was at the residence of the former secretary of the famed lawman.

Contained in a box, along with some of his memorabilia, was a stock certificate in Diebold. Thanks to splits and dividends, that stock is now worth $1.1 million.

The current heirs of Elliot Ness are the cousins of his third wife, and they have reopened his estate and filed a lawsuit against Diebold to force the company to pay up.

For its part, Diebold denies having any record that Ness ever owned stock in the company and is fighting the lawsuit.

The Guardian has more on this story in a recent article titled "Heirs of famed Prohibition agent find lost stock certificate that could net $1m."

The lesson here is that anytime a deceased person's lost property is found, it is necessary to reopen the estate so that the property can be properly distributed.

Whether the heirs will receive the money from the stock, however, is a question that is not likely to be answered for a while. The parties have been ordered to mediation.

If they are unable to settle the dispute, a trial is scheduled for next year.

When it comes to your own estate planning, an experienced attorney will help you identify your assets so your heirs will not have to scramble later on, especially not generations later on.

Reference: The Guardian (July 3, 2015) "Heirs of famed Prohibition agent find lost stock certificate that could net $1m."

The Downside of the Giving Pledge

The Giving Pledge, created by Bill Gates and Warren Buffet, has received a tremendous amount of positive coverage as it encourages the wealthy to donate to charity. However, some argue that it also has a hidden cost that potentially harms the general public.

More and more billionaires are taking the Giving Pledge and thereby promising to give away more than half of their wealth to charitable causes either through their estate plans or by gifts during their own lives. Many of these charitable donations go to worthy causes.

However, it is possible that many of the donations go to closely-controlled family foundations that have more questionable charitable intent.

Either way, the giver or his estate receives a tax deduction. When all of the donations are added up, it amounts to a massive amount of money that the federal treasury is not collecting through the estate tax.

A recent post on the Oxford University Press Blog entitled "The continuing benefits (and costs) of the Giving Pledge" argues that new laws should be created that tax some of this money going to charity.

In the absence of such a law, the author encourages the billionaires taking the pledge to voluntarily give some of the money to the federal treasury. Of course, since many people do not believe that estates should be taxed at all, not everyone will agree with the author's position.

Nevertheless, it is an interesting question to think about.

Should billionaires who are giving their money away to private charities also feel an obligation to give something to the federal government?

Reference: Oxford University Press Blog (July 6, 2015) "The continuing benefits (and costs) of the Giving Pledge"

Should You Be a Trustee?

It is fairly easy to find online advice about who to appoint to be a trustee. However, there is comparatively little advice for those chosen concerning whether or not they should accept the position. Some things to consider are below.

If a friend or family member asks you to serve as the trustee of his or her trust, you should feel flattered. If the asker did his or her homework, then you are being asked because you are considered trustworthy and responsible.

Flattery aside, it is important that you do not let that feeling cloud your judgment.

You need to know what you are getting into before you say yes.

Morningstar recently published an article titled "6 Tips for Family Trustees."

While you will want to read the original article, here is an overview of those six tips:

1. Professional Help - A trustee has a lot of responsibilities, including interpreting trust documents, investing trust assets, distributing income and filing tax returns. If you are not an expert, you might need help from one.
2. Impartiality - A trustee must be impartial in any disputes between beneficiaries. If you cannot do that, then being a trustee might not be for you.
3. Investing is Difficult - You cannot necessarily invest trust assets as you would invest your own. Trust assets need to be invested with the interests of beneficiaries in mind.
4. Personal Liability - If you mismanage a trust, you can be sued and potentially be held personally liable.
5. No Fun - Managing a trust is hard work and often tedious. Do not expect to enjoy it.
6. Escape Hatch - Before saying yes, make sure the trust is drafted in such a way that you can easily resign as trustee should you need or want to.

Consult an experienced estate planning attorney to help you understand the implications of agreeing to serve as a trustee.

Even if you say “yes,” make sure the trust authorizes you to hire outside experts to assist with the administration details like tax returns and investing.

Reference: Morningstar (June 28, 2015) "6 Tips for Family Trustees"

Tips for Passing Down Wealth

While you may have been fortunate and knowledgeable enough to amass wealth, that does not necessarily mean that you know the best way to pass it down to future generations.

Estate planning can seem a bit overwhelming for the wealthy. The more assets that you have, the more considerations you have to take into account when deciding how you want to distribute them in your estate.

Most people do not know where to begin making their plans.

The obvious and best answer is to begin by hiring an experienced estate planning attorney.

It is often a good idea to go into a first meeting with an attorney with some idea about your options and what you might want the attorney to help you accomplish.

Recently, Forbes published an article titled "5 Tips For Handing Down Your Wealth."

Here is a snapshot of that advice:

1. Consider using a charitable remainder trust if you plan on leaving money to charity. These trusts allow you to receive lifetime income from current assets and get a tax break. Whatever is left in the trust after you pass away will go to charity.
2. A life insurance trust might be a good tool to keep a business in the family while providing needed cash for your family members in the form of life insurance while they are waiting for the estate to wrap up and distribute assets.
3. You might want to set limits on how your heirs can use their inheritances to make sure that your wealth is not squandered.
4. If you have a lot of assets, a professional trust manager might be a better option than naming a family member as a trustee.
5. Make sure that beneficiary designations are up to date.

In the end, the experienced assistance of an estate planning attorney who has been there and done that will make the process much easier for all concerned.

Reference: Forbes (June 5, 2015) "5 Tips For Handing Down Your Wealth"

Bernie Sanders Proposes Estate Tax Hike

The Presidential election season is officially underway even though a primary election will not be held for another half a year. As in all recent election seasons, we can expect the candidates to come out with a position on the estate tax. Bernie Sanders announced his position recently.

Most political observers do not think that Bernie Sanders has much of a chance of beating out Hilary Clinton for the Democratic nomination for President. However, Sanders is expected to make some waves in the primaries.

Recently, in an effort to drum up some support, he proposed an increase to the federal estate tax.

Sanders would lower the exemption for a single person from the current $5 million (indexed for inflation) to $3.5 million. He would also increase the estate tax rate to 45% for some. He includes tiers that would have billion dollar estates paying 65% estate tax rates.

As part of this proposal, Sanders would also lower the gift tax exemption and close some loopholes that currently allow people to shelter assets from the estate tax.

Forbes reported this proposal in a recent article titled "Bernie Sanders Calls for 65% Top Estate Tax Rate."

With Republican congressional efforts currently focused on eliminating the estate tax entirely, it is extremely unlikely that Sanders' proposal will pass anytime soon.

Nevertheless, it is important to note that not everyone in Washington is in favor of repealing or reducing the estate tax. Consequently, efforts to do so face an uphill battle.

Those interested in the estate tax - particularly owners of family businesses, farms and ranches - will want to monitor the election to see what other candidates propose concerning the estate tax.

Reference: Forbes (June 25, 2015) "Bernie Sanders Calls for 65% Top Estate Tax Rate."

ID Theft and the Deceased

Everyone has heard horror stories about identity theft and millions of Americans take steps to protect themselves by regularly checking their credit reports. However, the deceased cannot check their own credit reports. This gives thieves an opportunity.

13WMAZ reported, in a recent article titled "Protecting the dead against ID theft," that every year 800,000 deceased people are targeted for identity theft and 1.6 million credit applications are made on the behalf of the deceased.

While this does not create any problems for the deceased, it can cause their families grief.

Survivors will not have to pay any money, however, they are often the victims of harassing collections calls. The problem is that the deceased cannot monitor their credit reports and thieves gamble that no one else is.

If no one checks the credit reports, then the credit bureaus do not learn that the person has passed away and they cannot pass that information on to potential creditors.

Fortunately, there is a relatively easy solution to this problem.

The executor of the estate can and should send an original copy of a death certificate to all three major credit bureaus. It is also a good idea to send an original death certificate to the deceased's known creditors and any financial institutions with which he or she had business.

When that is all done, the credit bureaus will mark credit reports appropriately and creditors that thieves try to apply to will be on notice that the application is a scam.

Reference: 13WMAZ (June 25, 2015) "Protecting the dead against ID theft."

Audrey Hepburn's Storage Locker

Nearly 22 years after the legendary actress Audrey Hepburn passed away her two sons are still arguing over the contents of a storage locker that she left to them.

When Audrey Hepburn passed away she owned a storage locker that contained many of the pieces of memorabilia she had collected over the years during her acting career. She instructed that her two sons, each by different fathers, should split the contents of the locker equally between them.

That was over two decades ago and the personal items still sit in the same storage locker awaiting division by the sons because they cannot agree who gets what.

The New York Post reported this story in a recent article titled "Audrey Hepburn's kids still fighting over her stuff."

A couple of different issues might be in play here.

First, because the sons have different fathers and have an age difference of 10 years, there might be very little love lost between them. It is not unusual in blended families for step-siblings to argue over a parent's estate.

Another issue might be that Hepburn's personal effects are likely to have value to collectors. Each brother could be insisting that he should get the items that are perceived to have more value on the market.

Whenever blended families are involved it is important that estate plans are as detailed as possible. As this case shows it is not always a safe assumption that the children will be able to agree about dividing the estate in the absence of clear instructions.

Contact an experienced estate planning attorney to make sure you address all blended family issues.

Reference: New York Post (May 27, 2015) "Audrey Hepburn's kids still fighting over her stuff."