Bielski Law Office, Ltd.

What You Can Do With a QPRT

Qualified personal residence trusts are not as popular of an estate planning tool as they used to be but in some circumstances they can still be used beneficially.

Due to relatively high estate tax exemptions and relatively low interest rates, qualified personal residence trusts have dropped out of favor in estate planning. They just are not as useful for as many people as they used to be.

However, people who expect to have estates with values over the estate tax exemption or who have homes that could rapidly rise in value can still benefit from a QPRT as long as everyone in the family is on the same page about what should happen to the home.

Recently, Barron's discussed some of the benefits and drawbacks of QPRTs in "Holding Vacation Homes in Trust."

A QPRT is an irrevocable term-limited trust that can help to stretch your gift tax exemption. When a residence is put into the trust the value of the residence is locked in for tax purposes.

The owner can still live in the home and is responsible for it. The residence can even be sold as long as another residence is then put in the trust.

When the term of the trust ends the trust beneficiaries become the new owners of the residence. However, if the current owner passes away before the term of the trust is over, the purpose of the trust is defeated and the home becomes part of the estate.

Major drawbacks of a QPRT?

Once the trust is ended the current owners can only continue to live in the home if they pay fair market rent and the trust beneficiaries who are the new owners are responsible for upkeep. Thus, if the beneficiaries are not financially independent and able to pay for upkeep, a QPRT is normally not a good option.

If the beneficiaries wish to sell the residence, they might have to pay more in taxes than if they had inherited the home through other means.

Consequently, a QPRT is only a good idea when the beneficiaries would like to keep the home.

Reference: Barron's (Nov. 4, 2016) "Holding Vacation Homes in Trust."

Singing Wills

More than ever before people are planning for their end-of-life circumstances. Some even plan for what music they want played while on their death beds.

Many people today make plans for their end-of-life care. Some of those plans have legal effect, such as living wills, general durable powers of attorney and health care powers of attorney. Other plans are more aspirational.

While some people might prefer to pass away at home instead of in a hospital or hospice, those “plans” can be thwarted by medical necessity. Another somewhat aspirational plan is a “singing will,” as described by New York Times columnist Mark Vanhoenacker in "My Deathbed Playlist (and Yours)."

The idea is to create a list of the music you want to be played when you are at the end of life. It is a playlist of songs that meant something to you during your life – the hearing of which will make the experience of passing away more meaningful.

At least, that is what the people who create them believe.

Of course, a singing will has no legal effect and the circumstances of someone passing away might preclude the playing of specific music.

Regardless, you should plan for your own end-of-life care.

Everyone should have the basic legal documents of a living will, a general durable power of attorney and a health care power of attorney created long before they anticipate needing them.

Creating a singing will might not be for everyone, but for those interested creating one cannot hurt anything.

Reference: New York Times (Nov. 5, 2016) "My Deathbed Playlist (and Yours)."

Redstone Puts Own Competency in Question

After successfully defending multiple cases that questioned his mental competency, Sumner Redstone has filed a lawsuit claiming he is mentally incapacitated.

Within the last year 93-year-old media mogul Sumner Redstone has faced lawsuits brought by an ex-girlfriend, a granddaughter and the former CEO of his company Viacom. The lawsuits share one claim in common: due to his advanced age Redstone was too mentally incapacitated to handle his own affairs and was being manipulated by his daughter.

In each of these cases Redstone claimed he was competent. In fact, he won the case brought by the ex-girlfriend and settled the other two favorably.

Investors in his companies were hoping that was the end of the saga.

However, now there is a new case that centers on Redstone's mental capacity. This time the case was filed by Redstone himself. He has sued two of his ex-girlfriends claiming they took advantage of his diminished mental capacity to enrich themselves in what amounts to elder abuse. Redstone is asking that $150 million be returned to him.

Bloomberg reported this story in "Sumner Redstone Sues Two Ex-Girlfriends on Elder Abuse Claims."

It is not clear how Redstone's attorneys plan to explain his testimony in one of the other cases. After all, he previously established that he was at full mental capacity.

It is clear this case will make his investors nervous again.

Reference: Bloomberg (Oct. 25, 2016) "Sumner Redstone Sues Two Ex-Girlfriends on Elder Abuse Claims."

Maurice Sendak's Book Collection

A probate court in Connecticut has reached a ruling determining whether some of Maurice Sendak's book collection will remain in a Philadelphia museum or be returned to his estate.

The Rosenbach Museum and Library in Philadelphia had housed many original drawings and books owned by Maurice Sendak the author of Where the Wild Things Are. Most people believed the collection would stay at the museum. However, his will contained provisions that his estate should create a foundation and a museum in Connecticut to make the items available for public viewing.

In 2014, Sendak's estate took the items back from the museum. The museum filed a lawsuit in Connecticut probate court because Sendak's will also included a provision that "rare edition" books should be given to the Rosenbach.

In short, the court had to determine whether 340 books could be considered rare editions, including illuminated volumes of William Blake's poetry that could be worth millions.

The court recently ruled that 88 of the books should remain with the Philadelphia museum but the rest should go to the estate.

This legal intrigue was reported by the New York Times in "Maurice Sendak's Estate Is Awarded Most of a Book Collection."

The lesson to be learned here?

It is important to be as precise as possible when creating an estate plan. While to some experts it might seem obvious whether or not a particular book edition is rare, the term leaves room for disagreement as this lawsuit illustrates.

Sendak could have been specific about exactly which titles he wished to remain at the museum in Philadelphia and which he wanted to belong in a new museum in Connecticut.

Reference: New York Times (Nov. 1, 2016) "Maurice Sendak's Estate Is Awarded Most of a Book Collection."