Bielski Law Office, Ltd.

Undue Influence Can Turn Out to Be Costly

If undue influence over an elderly person can be proven there may be a price to pay.

Sometimes undue influence can turn out to be costly as the Milwaukee-Wisconsin Journal Sentinel reports in "Ex-Derzon Coins operator ordered to pay estate $1.2 million."

David Derzon, who owned Derzon Coins in Milwaukee, passed away from brain cancer in 2007 leaving his wife Rebecca Derzon as the sole owner of the store.

She only survived her husband by eight months before dying from an overdose and that is when the fight over control of the store through her estate began. Those eight months turned out to be just long enough for Rebecca Derzon to become the victim of financial elder abuse.

Rebecca's half-sister, Lori Laatsch, had been estranged from Rebecca for a long time. However, Laatsch got into contact with Rebecca when her husband was ill and caused Rebecca to rewrite her will. Instead of the estate being distributed between several other family members under the old will, the new will left 75% of the estate to Laatsch with the remainder going to one of Laatsch's friends.

In 2012, a court threw out the new will after finding that Laatsch had used undue influence to get Rebecca to change her will. Laatsch was ordered to pay back $725,000 she had taken from the estate.

Recently, a court ordered Laatsch to pay an additional $1.2 million to the estate to reimburse it for the costs incurred in litigation over her fraudulent actions.

Reference: Milwaukee-Wisconsin Journal Sentinel (May 22, 2016) "Ex-Derzon Coins operator ordered to pay estate $1.2 million."

Estates with Valuable Art Works Can Face Problems with IRS

Artwork valued over $50,000 can create an unexpected estate tax bill.

Because appraisals on expensive artwork can vary estates can face some difficult issues with the IRS as Barron's discusses in "How Art Can Blow Apart Your Estate," causing problems that include unexpected estate tax bills.

The IRS has a special division that assesses the value of any piece of art initially valued over $50,000. If the estate submits a value lower than what the IRS eventually decides the art is worth, the estate can receive an unexpectedly large estate tax bill, which will include fees and penalties.

Individuals who donate art to charity can also be assessed fees and penalties if they over value the art they donate and take a charitable deduction on their taxes. In recent years the IRS has adjusted the value of approximately 40% of the art pieces it has considered.

Consequently, people who have art collections need to take extra precautions. They should get more than one appraisal of the art so they can get a better estimate of the value. Estate plans should also contain some contingencies in case the IRS values a piece of art differently than previous appraisals.

It is best to be cautious and assume that the estate will need some extra liquid assets to pay greater than expected estate taxes or that the art will have to be sold to pay the taxes.

Contact an estate planning attorney for advice if artwork might be an issue.

Reference: Barron's (June 18, 2016) "How Art Can Blow Apart Your Estate"

Sudden Wealth Can Be a Problem

If you don't have the knowledge to handle wealth you can lose it suddenly.

Many people who find themselves suddenly wealthy often find they face an unexpected problem of losing that wealth suddenly. The biggest problem is that people who become suddenly wealthy do not always have the knowledge to handle their finances in a way that ensures there is always enough money coming in to cover obligations.

As Private Wealth points out in "The Downside Of Sudden Wealth," the syndrome is not just due to quickly becoming wealthy. The syndrome refers to the common problem of people who become rich suddenly ending up with less wealth than they previously had.

There are several reasons for this phenomenon. For example, they might overextend on credit card or mortgage debt and not have the resources to service the debts when they have spent all of the money they received.

If you are planning to leave a large inheritance to someone who has never before been wealthy you might considering contacting an estate planning attorney who can give you guidance on handling the issue.

Reference: Private Wealth (June 16, 2016) "The Downside Of Sudden Wealth"

Estate Planning for Younger Adults

People in their 20s and 30s might not think that they need estate plans, but they do and it is not necessarily a big hassle for them to put plans in place.

A typical line of thinking for younger adults is this: because they have relatively few assets, then they do not need to plan for their estates. For many it is too big of a hassle to bother with, especially since they do not anticipate passing away anytime soon. However, creating a basic estate plan framework when you do not have many assets is the best time to do it. Why? Because it does not take as much effort to set everything up.

Forbes recently offered some advice on how to go about setting up a basic estate plan in "Here's How To Financially Prepare For Your Death While You're Still Young And Unmarried."

The advice includes:

• Account Beneficiaries – Make sure you have designated beneficiaries on any financial accounts you have, such as retirement accounts and bank accounts.
• Avoid Probate – Have an estate planning attorney create a probate avoidance scheme for you, such as a trust. It does not matter if you do not have much to put in the trust right now. As you acquire more assets you can put them in the already created trust. By putting beneficiaries on your accounts, you are also keeping that money out of probate.
• Basic Will – Get a simple will to cover any property you do have but cannot put in trust or for which you cannot designate a beneficiary.
• Student Loans – If someone has cosigned your student loans and you still owe on them, you can get life insurance that covers the debt so the cosigner does not have to pay it if something happens to you.

Reference: Forbes (May 31, 2016) "Here's How To Financially Prepare For Your Death While You're Still Young And Unmarried."

State Sues Life Insurance Companies

Lawsuits from the Minnesota Attorney General should serve as an important reminder to anyone who has a life insurance policy as part of their estate plan.

Life insurance policies play a pivotal role in many estate plans. They are often used to provide needed cash to family members to bridge the gap between when the policy holder passes away and when the estate is settled. They can also be used to help equalize estate distributions between heirs when other assets are difficult to divide.

What if the life insurance company does not pay beneficiaries? In that case the goals of the estate plan are not met. It happens more than most people think.

In fact, this happens so often that the state of Minnesota has sued several life insurance companies and recovered approximately $200 million as CBS Minnesota reports in "State Suing Life Insurance Companies For Not Paying Beneficiaries."

The biggest source of the problem? Beneficiaries of the life insurance policies do not know that they are life insurance beneficiaries. As a result, they do not file a claim.

Even if the companies know that the policy holder has passed away, they do not seek out the beneficiary and pay on the policy. In most cases they are not legally required to do so. They can keep the money and use it for their own purposes until a claim is filed.

The lesson to be learned from this is that when life insurance is a part of your estate plan, then you need to ensure that the beneficiaries are aware of the policy and know to file a claim when you pass away. You do not have to tell them before you pass away, but someone reliable should know at least where to find your policy documents at the appropriate time.

Reference: CBS Minnesota (May 18, 2016) "State Suing Life Insurance Companies For Not Paying Beneficiaries."