Articles Posted in Estate Planning

A little more than a year ago, the United States Supreme Court struck down Section Three of the Defense of Marriage Act. In doing so, the federal government gave same sex couples access to the same federal rights as heterosexual couples. Many of these rights involve taxes, housing, Social Security, and estate planning issues. However, more than one year after the decision, many same sex couples are still struggling with understanding the new benefits available to them.

LGBT Benefits Study

In a study released by Wells Fargo, after one year of access to new federal benefits LGBT investors are struggling to make sense of the new legal landscape. In total, 83% of participants surveyed who were LGBT stated that they do not fully understand how new state and federal laws apply to them in the estate planning sector. Of those people, 67% were in legal same sex marriages. However, most troubling is that around forty percent of LGBT investors surveyed believed that the federal government would treat a state sanctioned civil union or domestic partnership just like a marriage, which is not the case.

After nineteen years of battling from probate court all of the way to the United States Supreme Court twice a recent court ruling seems to have ended the battle between the estates of Anna Nicole Smith and Pierce Marshall, for now. Called “The Grand-Daddy of all Estate Battles” these two estates have been battling over the $1.6 billion fortune left by Ms. Smith’s husband and Mr. Marshall’s father, J. Howard Marshall, for almost two decades.

History of the Feud

Federal court proceedings began regarding this estate in 1996 when Anna Nicole Smith filed for bankruptcy in California. The bankruptcy led to a $475 million judgment against Pierce Marshall, but only temporarily. The judgment was reduced to $88 million on appeal, and then appealed again, making to the United States Supreme Court on two separate occasions. After the second trip to the Supreme Court, where the judges rejected Anna Nicole Smith’s claims, it had appeared then, too, that the battle was over.

It is important to consider two different scenarios when planning for retirement and drafting an estate plan. The first thing is to consider what will happen to your estate after you die. However, the second is to consider what will happen to your estate if you live a long life but are not in the best of health and require permanent assistance from others. Creating a comprehensive estate plan can help prepare for both of these scenarios by protecting assets that can either be passed down to heirs or used if you become disabled and need long-term support.

The Need to Plan for Long-Term Care

Most seniors drafting an estate plan today ignore the biggest risk to their estate – needing money for long-term health care. According to the U.S. Department of Health, over 70% of our country’s population over the age of 65 will need some type of long-term care, and more than forty percent will need nursing home care for some period of time.

Some assets are fantastic to hold onto in estate planning but others can be bad for you and your heirs. One of the key objectives when planning your estate is to keep the tax bill as low as possible for your heirs when they are bequeathed portions of your estate. The following is a ranking of the good, the bad, and the ugly of retirement assets that you should leave for your heirs.

The Good

Depleted partnerships: The best asset to keep in an estate plan is also a bit of a head-scratcher. While the taxation of partnerships is complex and at time counterintuitive, there are two important things to keep in mind.

Many people believe that estate planning is only for the elderly or those at retirement age. However, there are some documents and tools within estate planning that should be considered at a much earlier age. If you have a child that is about to leave for college or go on a gap-year trip there is one last thing that you should do as you prepare for the separation: ask your child to sign a durable power of attorney and health care proxy forms.

Why These Forms are Important

Estate planning forms like a durable power of attorney and health care proxy forms are important for a number of reasons. Without them, most states will not allow a parent of an adult child to make health care decisions or manage money for their kids. This applies even if the parent is paying for college, claiming the child as a dependent on tax returns, and still covers their kid for health insurance. Without these estate planning forms if your child is in an accident and becomes disabled, even temporarily, you would need a court order to make decisions on their behalf.

A new show premiered on the Reelz Channel this week called Celebrity Legacies, a documentary series highlighting the estates of famous deceased celebrities. The show explores a different celebrity’s estate plan every week, discussing their legacy, estate, and problems that arose after the celebrity’s death. It also explains how a celebrity’s estate can continue to increase after their death and why some deceased celebrities still make the “highest paid” lists years after they are gone.

Premiere Episode: James Gandolfini

The premiere episode of the series focused on the estate of James Gandolfini, and subsequent episodes include famous names like Anna Nicole Smith and Jim Morrison. Gandolfini died unexpectedly of a heart attack at age fifty-one in 2013 while on vacation in Italy with his son. The actor, known primarily for his work on the television show The Soproanos, left behind two children from two different marriages and a messy, largely unfinished estate plan.

In the first part of this article the importance of planning for pets in the estate planning process, common reasons why pet planning often fails, and the documents needed for proper pet planning were discussed. However, there are other issues that must also be reviewed when including a pet in the estate planning process.

Issues to Consider When Planning for a Pet

Regardless of the document(s) you choose to develop your estate plan for your pet, the following issues also need to be considered for their wellbeing and needs. By clearly detailing every one of the following aspects you can be sure that your pet will be properly cared for in your estate plan.

Legally, pets are considered personal property of their owners, but for many people their pets mean so much more than any piece of furniture or inanimate object. They can be a person’s best friend, companion, and family. When a person begins the estate planning process the pets need to be addressed, as well.

For many people, the wellbeing of their pets is not a concern in the estate planning process, and unfortunately it can lead to the abandonment or euthanizing of the animal once the owner is gone. The only way to protect pets after the death of the owner is through legally binding estate planning documents. Allergies, conflicts with other pets, and exclusion of pets in rental agreements are the most common reasons why informal promises made by friends and family members to take care of a pet often fail.

The idea of legally enforceable documents that ensure a pet’s wellbeing in estate planning is a relatively new concept. Mockery in the press is also another reason why people do not seriously consider providing for pets in an estate plan, even if the remainder of the funds is set to go to an animal charity or other worthy endeavor. The most well-known example of this was Leona Helmsley, who left millions for her dog, Trouble, in a pet trust. Sadly, she was ill-advised when creating the trust, and her wishes were never fulfilled.

When many business owners talk about business strategy they often refer to financing, expansion, partnerships, marketing, and the like. However, many business owners fail to take into consideration the question of continuity and business succession. According to the U.S. Small Business Administration, over 70% of all small business owners do not have a business succession plan integrated into their other estate planning documents.

Why You Should Create A Plan Now

Many small businesses are family owned, and as a result they do not feel the need to be so formal with a succession plan. However, this can be a huge mistake and many businesses have crumbled after an owner dies or leaves because of the lack of a plan.

A trust, in particular an incentive trust, can be a very useful tool for someone who wants to provide for his heirs but is not sure that the heirs can use the inheritance constructively. A trust can encourage personal responsibility and accomplishment for the beneficiaries; however, it can also cause resentment on the part of the beneficiary towards the trustee. This usually occurs because the beneficiary is limited in the amount of funds that he can access, and the third-party trustee is making determinations about whether a distribution should be made.

The best way to minimize friction between the trustee and beneficiary is to make the terms of the trust as explicit as possible, but there will always be some level of interpretation on the part of the trustee. Another way to lessen issues between a beneficiary and a trustee when there is a dispute is to use a trust protector.

Trust Protectors