What Kind of Estate Planning Mistakes Do People Make?

Estate planning for any sized estate is an important responsibility to loved ones. Done correctly, it can help families flourish over generations, control how legacies are distributed and convey values from parents to children to grandchildren. However, a failed estate plan, says a recent article from Tidewater’s Suffolk News-Herald titled “Estate planning mistakes to avoid,” can create bitter divisions between family members, become an expensive burden and even add unnecessary stress to a time of intense grief.

Here are some errors to avoid:

This is not the time for do-it-yourself estate planning.

An unexpected example comes from the late Chief Justice Warren Burger. Yes, even justices make mistakes with estate planning! He wrote a 176 word will, which cost his heirs more than $450,000 in estate taxes and fees. A properly prepared will could have saved the family a huge amount of money, time and anxiety.

Don’t neglect to update your will or trust.

Life happens and relationships change. When a new person enters your life, whether by birth, adoption, marriage or other event, your estate planning wishes may change. The same goes for people departing your life. Death, divorce and tax law changes should also trigger an estate plan review.

Don’t be coy with heirs about your estate plan.

Heirs don’t need to know down to the penny what you intend to leave them but be wise enough to convey your purpose and intentions. If you are leaving more money to one child than to another, it would be a great kindness to the children’s relationship, if you explained why you are doing so. If you want your family to remain a family, share your thinking and your goals.

If there are certain possessions you know your family members value, making a list those items and who should get what. This will avoid family squabbles during a difficult time. Often it is not the money, but the sentimental items that cause family fights after a parent dies.

Understand what happens if you are not married to your partner.

Unmarried partners do not receive many of the estate tax breaks or other benefits of the law enjoyed by married couples. Unless you have an estate plan and a valid will in place, your partner will not be protected. Owning property jointly is just one part of an estate plan. Sit down with an experienced estate planning attorney to protect each other. The same applies to planning for incapacity. You will want to have a HIPAA release form and Power of Attorney for Health Care, so you are able to speak with each other’s medical providers.

Don’t neglect to fund a trust once it is created.

It’s easy to create a trust and it’s equally easy to forget to fund the trust. That means retitling assets that have been placed in the trust or adding enough assets to a trust, so it may function as designed. Failing to retitle assets has left many people with estate plans that did not work.

Please don’t be naive about caregivers with designs on your assets or relatives, who appear after long periods of estrangement.

It is not pleasant to consider that people in your life may not be interested in your well-being, but in your finances. However, this must remain front and center during the estate planning process. Elder financial abuse and scams are extremely common. Family members and seemingly devoted caregivers have often been found to have ulterior motives. Be smart enough to recognize when this occurs in your life.

Reference: Suffolk News-Herald (Dec. 15, 2020) “Estate planning mistakes to avoid”

What’s the Latest on the Zappos’ Founder’s Estate?

Judge Gloria Sturman granted the ex parte motion filed by the attorney representing Zappos’ Founder Tony’s Hsieh’s father Richard Hsieh and brother Andrew Hsieh to serve as co-special administrators and legal representatives for the estate of Hsieh, who seems to have died intestate (dying without a will).

Court filings show that the Zappos’ founder’s family wasn’t aware of a will or other estate planning documents to direct how to handle his financial assets after his death. Because he died without a will, no one can be absolutely sure what he intended.

KTNV’s recent article entitled “Judge awards Tony Hsieh’s father, brother administrative duties over massive wealth, estate,” reports that Tony Hsieh’s wealth could be as much as $1 billion with a variety of assets including real estate and other business dealings. As a result, figuring out Hsieh’s finances will be a time-consuming and complicated process.

The Hsieh family released a statement, part of which says that the hope to “carry on Tony’s legacy by spreading the tenets he lived by – finding joy through meaningful life experience, inspiring and helping others, and most of all, delivering happiness.”

Hsieh was described by some as eccentric, unconventional and wasn’t known for fitting into normal business customs. He lived in a 250 square-foot travel trailer in downtown Las Vegas and had a pet alpaca named Marley and pet chickens. The billionaire internet mogul, during a 2015 interview, remarked that he owned just four pairs of shoes—despite running a company that sold millions of pairs.

In August, Hsieh abruptly left Zappos, the company he oversaw for more than 20 years. Reports say he bought millions in real estate in Park City, Utah around that time, which was seen as peculiar, even for Hsieh, who said he believed more in “experiences” than owning physical items or property.

There were signs of substance abuse.

The fire that caused his death is under investigation in New London, CT. Fire authorities there say they were called to a home at 3:30 a.m. on November 18. Initial reports were that a person was barricaded inside a shed on the property. Dispatch audio says that Hsieh was locked inside, and firefighters found him unconscious.

Reference: KTNV (Dec. 3, 2020) “Judge awards Tony Hsieh’s father, brother administrative duties over massive wealth, estate”

 

The New Orleans woman who fought the longest court battle in US history

In an 1850 pamphlet summarizing the ongoing estate litigation of a New Orleans woman, Myra Clark Gaines, journalist Alexander Walker wrote, “The wildest romance ever written, could not contain a greater variety of strange incidents, more affecting details, more strongly marked characters, a more constant succession of stirring events, and stronger exhibitions of folly, intrigue, deception and crime.” If we ever needed a reminder that it is best to keep your estate out of probate and the courts, a story from NOLA’s The New Orleans Collection in 2020 was it.

Walker’s report was published less than a third of the way through the marathon case, a 57-year estate battle involving hidden paternity, a destroyed will, and a multimillion-dollar fortune. The case touched all levels of the judicial system and appeared before the United States Supreme Court a total of 17 times. It remains the longest continuous litigation in the history of the country. The legal fight was covered extensively over the decades, granting Gaines a public platform that she used to advocate for women’s rights and suffrage.

The Gaines case is a real-life American equivalent of Jarndyce v Jarndyce, a fictional court case in Charles Dickens’ Bleak House (1852–53), which progressed at a wounded snail’s pace in the English Court of Chancery. The case is a central plot device in the novel and has become a byword for seemingly interminable legal proceedings.

Make it a New Year’s resolution to protect your family from “interminable legal proceedings” by updating your estate plan, and talk with an estate planning attorney about ways you can do just that, especially with a revocable living trust.

Happy 2020. And to read about the unfortunate, if ultimately successful Mrs. Gaines, check out the NOLA historical tale here:

https://www.hnoc.org/publications/first-draft/new-orleans-woman-who-fought-longest-court-battle-us-history?button&utm_source=wordfly&utm_medium=email&utm_campaign=FirstDraft2020EOYRound-Up&utm_content=version_A&promo=

Estate hassles start here

Prince’s Estate Hits the IRS with a Multi-Million Dollar Lawsuit

Filing probate documents was just the beginning of a process that still hasn’t ended the bad news from Prince’s estate. The megastar did not have a spouse or children, but Prince had half-brothers and half-sisters, says a recent article from Forbes titled “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value.” There were a number of claims against the estate, and claims by Prince’s estate as well, including a wrongful death action that was eventually dismissed. For Prince or anyone else who dies without a will, probate can be lengthy and expensive. Things also get complicated quickly, especially with an estate of this size.

One of Prince’s half-sisters, Tyka Nelson, sold a portion of her share of the estate to Primary Wave, a music publisher. So did another sibling. And then the tax troubles began. Cash poor or not, larger estates must pay a federal estate tax of 40%. A federal estate tax return needs to be filed, and while audits are rare, almost every estate of this magnitude is audited by the IRS. The estate reported a taxable value of $82 million, but the IRS isn’t satisfied.

Estate tax fights with the IRS can go on for a long time. Michael Jackson’s estate battle with the IRS is still going on—and he died in 2009.

Papers filed by Prince’s estate in the U.S. Tax Court show that the estate reported a taxable value of $82 million, but the IRS claims that the value is really $163 million and wants an additional $38.7 million. In every case, Prince’s estate has obtained appraisals to support its reported values, but the IRS has its own appraisers who disagree.

Even if Prince had a will, there still could have been problems. Heath Ledger had a will, but it was five years old when he died and there was no provision made for his daughter. James Gandolfini had a will, but his estate gave the IRS $30 million of his $70 million. These stories make estate planning attorneys cringe. Seymour Hoffman, Heath Ledger, and James Gandolfini’s estates all ended up with wills in probate, which is public, expensive, time-consuming and unnecessary. A will does have to go through the court process, but the use of a revocable trust could have disposed of their assets outside of probate. A simple pour-over will would have given everything to the revocable trust, simply, and privately in terms of the ultimate inheritance disposition.

Estate planning attorneys advise clients to update wills and trusts every time there is a birth, marriage, divorce, etc. It is good advice for both celebrities and regular people. Probate is complicated.

You can give an unlimited amount to your U.S. Citizen spouse during life or on death. Prince’s estate may face a 40% estate tax, but if he had been married and left his estate to his spouse, there would not have been any federal estate tax until the death of the spouse.

A lesson for the rest of us: have an estate plan, including a will and make sure that it includes tax planning.

Reference: Forbes (Oct. 7, 2020) “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value”

Richmond_Virginia's_Lawyer_Charles_Nance

What Does an Estate Planning Attorney Actually Do?

It’s critical to understand what will happen to your estate after your death. That’s where the help of an experienced estate planning attorney comes in, says VENTS Magazine’s recent article entitled “What Does an Estate Lawyer Do Exactly?”

(And this article is timely.  My wife asks me what estate planning lawyers do all day all the time; at least what this one does all day!)

An experienced estate planning attorney is a legal professional, upon whom you can rely to help protect your estate after your death or in the event that you become incapacitated.

He or she can make certain that your assets and property are handled correctly.

In addition to assisting you with your estate, an estate planning attorney can help handle any family members trying to get involved in your legal affairs.

It may be difficult to please everyone when creating your will. Having an estate planning attorney will help you make the best decisions, when it comes to distributing your wealth.

Estate planning is critical—especially if you’re older, experiencing chronic illness, or just want to be smart about protecting your assets.

As we grow older, we can accumulate a long list of stressful issues and responsibilities. You may worry that your estate will be gobbled up by creditors once you pass away, or that your children will fail to distribute your assets as you intended.

Much of this stress is eliminated with the guidance and counsel of an experienced estate planning attorney. Having an estate plan allows you to enjoy a better quality of life, once you’re older. You won’t have to live every day with worry or stress about the future after you’re gone.

An experienced estate planning attorney is a valuable resource for your family, in the event someone tries to contest the will after your death.

Estate planning attorneys also aid in distributing the wealth, protecting your property from creditors and lowering estate taxes.

Reference: VENTS Magazine (Sep. 28, 2020) “What Does an Estate Lawyer Do Exactly?”

Digital Property Protection

Does Your Estate Plan Include Digital Property Protection?

One of the challenges facing estate plans today is a new class of assets, known as digital property or digital assets. When a person dies, what happens to their digital lives? According to the article “Digital assets important part of modern estate planning” from the Cleveland Jewish News, digital assets need to be included in an estate plan, just like any other property.

What is a digital asset? There are many, but the basics include things like social media—Facebook, Instagram, SnapChat—as well as financial accounts, bank and investment accounts, blogs, photo sharing accounts, cloud storage, text messages, emails and more. If it has a username and a password and you access it on a digital device, consider it a digital asset.

Business and household files stored on a local computer or in the cloud should also be considered as digital assets. The same goes for any cryptocurrency; Bitcoin is the most well-known type, and there are many others.

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has been adopted by almost all states to provide legal guidance on rights to access digital assets for four (4) different types of fiduciaries: executors, trustees, agents under a financial power of attorney and guardians. Revised Uniform Fiduciary Access to Digital Assets Act. Virginia enacted the Act in 2017. The new law allows people the right to grant not only their digital assets, but the contents of their communications. It establishes a three-tier system for the user, the most important part being if the person expresses permission in an online platform for a specific asset, directly with the custodian of a digital platform, that is the controlling law. If they have not done so, they can provide for permission to be granted in their estate planning documents. They can also allow or forbid people to gain access to their digital assets.

If a person does not take either of these steps, the terms of service they agreed to with the platform custodian governs the rights to access or deny access to their digital assets.

It’s important to discuss this new asset class with your estate planning attorney to ensure that your estate plan addresses your digital assets. Having a list of digital assets is a first step, but it’s just the start. Leaving the family to fight with a tech giant to gain access to digital accounts is a stressful legacy to leave behind.

Reference: Cleveland Jewish News (Sep. 24, 2020) “Digital assets important part of modern estate planning”

 

Cat to Inherit

Cat Is Fighting for Her Inheritance?

A year later, and the estate of Chanel creative director Karl Lagerfeld is not yet finalized. However, some details have emerged that, while Lagerfeld’s cat Choupette is an heir, she isn’t the only one who will inherit a share of Lagerfeld’s grand fortune.

Let’s hope curiosity doesn’tkill the cat. Probate can drag on.

The seven beneficiaries are trying to access Lagerfeld’s assets that include real estate in Paris and Monaco, a bookstore and designer furniture.

Choupette is a blue-cream tortie Birman cat who was owned by German fashion designer Karl Lagerfeld from around December 2011 until Lagerfeld’s death in February 2019 at the age of 85.

The designer’s feline has her own agent and, according to The New York Times, at the height of her fame she had two minders, a bodyguard, a concierge veterinarian and a personal chef.

Wealth Advisor’s article entitled “Karl Lagerfeld’s cat is locked in inheritance battle” says that Lagerfeld’s “trusted” accountant for many decades, 87-year-old Lucien Frydlender has been named to manage the creative director’s finances. In addition, Frydlender is responsible for distributing the estate, according to Lagerfeld’s will.

However, an investigation by French publication Le Parisienfeatured in Voici magazine found that Frydlender hasn’t been taking calls from the beneficiaries. The magazine also says that “after closing his office in September 2019, the former collaborator of Karl Lagerfeld has simply disappeared from the radar,” raising questions for those involved.

Frydlender’s wife has defended her husband and assured the public that there’s nothing suspicious going on. She says he’s not “on an island paradise with a hidden treasure.” Instead, she tells reporters that he’s “very sick”.

When Choupette the cat will get her inheritance and what that will look like is unknown. It’s been more that a year since the death of her owner, Lagerfeld. Choupette fans have been concerned for the pet, but the cat isn’t scrounging in garbage cans: she made over $4 million in 2015.

“People came by the store and said how sad they were, and half of it was about Choupette,” Caroline Lebar, head of communications for the Karl Lagerfeld brand, admits. “They’d say, ‘If she’s alone, I’ll take her home.'”

However, Lebar promises Choupette is in safe hands, living in Paris with Lagerfeld’s former housekeeper Françoise Caçote. “She is in good shape, and is surrounded by love.”

Be aware that, in Virginia, you can leave funds to someone to take care of your pets who survive you, but you can’t leave money directly to your cat! Ask an experienced estate lawyer how to provide for your pets, such as in a pet trust.

Reference: Wealth Advisor (June 9, 2020) “Karl Lagerfeld’s cat is locked in inheritance battle”

 

fundamental estate planning

What Is So Important About Powers Of Attorney? (Especially Now?)

Powers of attorney can provide significant authority to another person, if you are unable to do so. These powers can include the right to access your bank accounts and to make decisions for you. Having the right power of attorney, right now, is more important than ever.

AARP’s article from last October entitled, “Powers of Attorney: Crucial Documents for Caregiving,” describes the different types of powers of attorney.

Just like it sounds, a specific power of attorney restricts your agent to taking care of only certain tasks, such as paying bills or selling a house. This power is typically only on a temporary basis.

A general power of attorney provides your agent with sweeping authority. The agent has the authority to step into your shoes and handle all of your legal and financial affairs.

The authority of these powers of attorney can stop at the time you become incapacitated. Durable powers of attorney may be specific or general. However, the “durable” part means your agent retains the authority, even if you become physically or mentally incapacitated. In effect, your family probably won’t need to petition a court to intervene, if you have a medical crisis or have severe cognitive decline like late stage dementia.

In some instances, medical decision-making is part of a durable power of attorney for health care. This can also be addressed in a separate document that is just for health care, like a health care surrogate designation.

Virginia is among the states that recognize “springing” durable powers of attorney. With these, the agent can begin using her authority, only after you become incapacitated. Other states don’t have these, which means your agent can use the document the day you sign the durable power of attorney.

A well-drafted power of attorney helps your agent help you, because she can keep the details of your life addressed, if you cannot. That can be things like applying for financial assistance or a public benefit, such as Medicaid, or verifying that your utilities stay on and your taxes get paid. Attempting to take care of any of these things without the proper document can be almost impossible.

A poorly drafted power of attorney, or one not tailored to your needs now, could make it difficult or impossible for a loved on to apply for important government health care benefits you could need down the road. (Or sooner!)

In the absence of proper incapacity legal planning, your loved ones will need to initiate a court procedure known as a guardianship or conservatorship. However, these hearings can be expensive, time-consuming and contested by family members who don’t agree with moving forward.

Don’t wait to do this. Every person who’s at least age 18 should have a power of attorney in place. If you do have a power of attorney, be sure that it’s up to date. Ask an experienced elder law or estate planning attorney to help you create these documents. And we have no-contact consultations available right now via phone or Zoom Meeting.  Call us now.

Reference: AARP (October 31, 2019) “Powers of Attorney: Crucial Documents for Caregiving”

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