This was really interesting. I just hit some of the highlights but you will find the full pictorial article included in the link at the bottom.
Marlon Brando
Angela Borlaza, actor girlfriend, claimed Brando gave her the house she lived in. She settled with the executors of his estate for $125,000. She also claimed Brando promised her continued employment with a company he owned, and settled that claim out of court.
Leona Helmsley
When she died in 2007, Helmsley will left most of her $5 billion estate to charity, created a $12 million trust for her dog, Trouble, and completely cut out two of her four grandchildren. The two grandkids sued her estate, claiming she wasn't mentally fit to create her will and trust. The case settled, with Trouble getting $2 million, and the two grandkids sharing $6 million.
Brooke Astor (you know this story if you have been following my blog).
In October 2009, socialite Brooke Astor's son Anthony Marshall was convicted of fraud and grand larceny relating to his handling of his late mother's estate. The 14 counts of which a New York jury found Marshall guilty included misusing his power of attorney over her financial affairs by giving himself a retroactive $1 million raise for managing her finances.
Ted Williams
In his will, baseball's Ted Williams said he wished to be cremated. But his two children from a second marriage produced a grease-stained note saying he wished to be put in biostasis after his death, and they froze his body after his death in 2002. His eldest daughter fought to have his body unfrozen and cremated, but gave up the fight when she ran out of money.
Heath Ledger
When actor Heath Ledger died at age 28 in 2008, he had a will, but it was written three years before he died, prior to his relationship with Michelle Williams and the birth of their daughter, Matilda Rose. The will left everything to his parents and sister. When Ledger's uncles raised fears that his father wouldn't properly care for Matilda Rose, Ledger's father said he would.
Princess Di
At her death in 1997, Princess Diana left a detailed will, naming her sister and mother as executors. She also wrote a separate "letter of wishes" asking her executors, at their discretion, to divide her belongings among her sons and her 17 godchildren. But instead of getting stuff worth an estimated 100,000 pounds, each godchild got only a small personal item.
Chief Justice of the Supreme Court Warren Burger
Mr. Burger died in 1995 with a $1.8 million estate and a will he typed up himself. His family paid $450,000 in estate taxes, something that could have been avoided. His executors had to pay to go to court to get approval to complete administrative acts, such as selling real estate, that typically a well-drafted will would have allowed without court approval.
Jimi Hendrix
Mr. Hendrix died at age 27 in 1970 without a will. Under state law, his dad, Al, got everything, leaving his close brother Leon with nothing. Al built Hendrix's musical legacy into an $80 million venture, but in his own will cut out Leon and his family, in favor of his adopted daughter through a later marriage.
Doris Duke
Tobacco heiress Doris Duke, who died in 1993 with a fortune estimated at $1.3 billion, named her butler as executor and as trustee for a huge charitable foundation. After the butler's lifestyle and spending habits were called into question, he was removed from his duties by a probate judge, then reinstated by New York's highest court. A settlement agreement created a board of trustees to manage the foundation.
Full article can be found at:
http://www.forbes.com/2009/11/24/princess-di-heath-ledger-brando-personal-finance-investment-guide-2-09-celebrity-estate-mistakes_slide_2.html
Wednesday, November 25, 2009
Thursday, November 19, 2009
Roth Conversions
All of a sudden my mailbag is full of articles about Roth Conversions. While this may be a good idea, be careful, it certainly isn't for every client. Let me start with some background.
The benefit of Roth is you can withdraw earnings tax-free AND you do not have to take minimum withdrawals upon reaching 70 1/2. Traditional IRAs did not have this benefit, and to be frank, I have been assuming all along they were going to take this gift horse away.
Beginning next year higher-net-worth individuals who earn $100,000 or more in a year will be eligible to convert their traditional IRA to a Roth IRA. Previously, it was only those under this limit AND married couples filing jointly. No more in 2010.
Now, higher net earning individuals and business owners that do not want to withdraw the money and would like to be able to pass it along to their children or grandchildren income tax-free will get their wish. Everyone on board? Not so fast.
A Roth conversion is expensive. There's a big up-front cost. Converting $20,000 some taxpayers could owe $5,000 to $7,000 in taxes for the 2010 return, depending on their income tax bracket. You could convert all the money in your IRAs or part of it, depending on your tax situation.
A high net worth person who converts $100,000 from a regular IRA to a Roth IRA could owe $35,000 in taxes based on the highest tax bracket for 2010. Plus, if that person is younger than age 59 1/2 , they're likely looking at a 10% penalty of they take the money out of a regular IRA specifically to pay the tax. Next year, only, you can pay the tax over two years BUT based on your tax rates for each year. If Congress takes no action, current federal income tax rates could jump to 39.6%, up from 35% in 2011.
Therefore, to decide whether it is worth the conversation, you need someone that can run the numbers based upon your reasonable expectations. You are looking to see if it is cost efficient to pay the tax now to save on taxes later. If you may need the money within 15 years and you expect your income tax rate to be lower in retirement, conversion may not be such a great idea.
My best,
Jim
The benefit of Roth is you can withdraw earnings tax-free AND you do not have to take minimum withdrawals upon reaching 70 1/2. Traditional IRAs did not have this benefit, and to be frank, I have been assuming all along they were going to take this gift horse away.
Beginning next year higher-net-worth individuals who earn $100,000 or more in a year will be eligible to convert their traditional IRA to a Roth IRA. Previously, it was only those under this limit AND married couples filing jointly. No more in 2010.
Now, higher net earning individuals and business owners that do not want to withdraw the money and would like to be able to pass it along to their children or grandchildren income tax-free will get their wish. Everyone on board? Not so fast.
A Roth conversion is expensive. There's a big up-front cost. Converting $20,000 some taxpayers could owe $5,000 to $7,000 in taxes for the 2010 return, depending on their income tax bracket. You could convert all the money in your IRAs or part of it, depending on your tax situation.
A high net worth person who converts $100,000 from a regular IRA to a Roth IRA could owe $35,000 in taxes based on the highest tax bracket for 2010. Plus, if that person is younger than age 59 1/2 , they're likely looking at a 10% penalty of they take the money out of a regular IRA specifically to pay the tax. Next year, only, you can pay the tax over two years BUT based on your tax rates for each year. If Congress takes no action, current federal income tax rates could jump to 39.6%, up from 35% in 2011.
Therefore, to decide whether it is worth the conversation, you need someone that can run the numbers based upon your reasonable expectations. You are looking to see if it is cost efficient to pay the tax now to save on taxes later. If you may need the money within 15 years and you expect your income tax rate to be lower in retirement, conversion may not be such a great idea.
My best,
Jim
Monday, October 26, 2009
Astor Case
As you may recall, I have been following the case of Astor Brooke, and her son Anthony who has been on trial for awhile. When the guilty verdict came in, I didn't blog on this since it was found all over the wire services. Russ Wiles, a reporter for the Arizona Republic, had a great column last week on the lessons to be learned from this case. See "Astor Case Has Lessons For All of Us", October 18, 2009. The fact that the jury found Anthony guilty of theft from his incapacitated mother, his use of "her" power of attorney to steal from her entered center stage. Mr. Wiles points out that this is a wake-up call for people that use powers of attorney.
Our office prepares financial and health care powers of attorneys for almost all our clients. Great tools that enable the person you trust to take care of your affairs when you are no longer able to. Companioned with a trust, the power of attorney is an ideal way to avoid conservatorships. In my opinion, these documents are almost always an essential part of the estate plan. But as the article points out, there are pitfalls.
These documents have a lot of power. If it is a general durable power of attorney, there may be multiple pages and provisions authorizing the agent you selected to act in almost any financial transaction. The article goes on to say that the Astor case illustrates that the person selected must be responsible, diligent and reasonably astute.
The article went on to discuss certain changes being considered in the law. Currently in Arizona, there are civil and criminal penalties against those that abuse the power of the documents. Some feel more is needed. It has been my experience that most families or loved ones fail to oversee the actions of the agent and by the time abuse is discovered, the funds are spent with no ability to extract restitution from the wrongdoer.
The Uniform Law Commission, which is a group of scholars that promote exactly what their name implies, wants to make additional changes: 1. Provide third-party reviews when a spouse, heir, or someone else has reason to believe the designated agent isn't acting properly. Currently, our only options are to file with the court, which costs money, or seek help from the agencies, i.e. the attorney generals' office, Adult Protective Services, etc. 2. Unrelated to the abuse issue, the Commission is dealing with another problem. Sometimes we have a problem getting banks and financial institutions to accept a power of attorney, even if valid and well created. Often the institution will say they want their power of attorney form used or they want a more recent power of attorney. If the person is already incapacitated, this is an impossible request. The Commission is trying to get implemented into law the requirement that the power of attorney presented to the bank, brokerage firm or title company must be accepted. There is a right however for these institutions to seek a review if a reason of concern arises. There are other changes being proposed that may be beneficial.
Mr. Wiles then states that as the population ages with issue of incapacity rising, these powers of attorney will become more prevalent. This will be a great help to this segment of the population but as the Astor case shows, consideration and caution will also have to be part of the process.
My best,
Jim
Our office prepares financial and health care powers of attorneys for almost all our clients. Great tools that enable the person you trust to take care of your affairs when you are no longer able to. Companioned with a trust, the power of attorney is an ideal way to avoid conservatorships. In my opinion, these documents are almost always an essential part of the estate plan. But as the article points out, there are pitfalls.
These documents have a lot of power. If it is a general durable power of attorney, there may be multiple pages and provisions authorizing the agent you selected to act in almost any financial transaction. The article goes on to say that the Astor case illustrates that the person selected must be responsible, diligent and reasonably astute.
The article went on to discuss certain changes being considered in the law. Currently in Arizona, there are civil and criminal penalties against those that abuse the power of the documents. Some feel more is needed. It has been my experience that most families or loved ones fail to oversee the actions of the agent and by the time abuse is discovered, the funds are spent with no ability to extract restitution from the wrongdoer.
The Uniform Law Commission, which is a group of scholars that promote exactly what their name implies, wants to make additional changes: 1. Provide third-party reviews when a spouse, heir, or someone else has reason to believe the designated agent isn't acting properly. Currently, our only options are to file with the court, which costs money, or seek help from the agencies, i.e. the attorney generals' office, Adult Protective Services, etc. 2. Unrelated to the abuse issue, the Commission is dealing with another problem. Sometimes we have a problem getting banks and financial institutions to accept a power of attorney, even if valid and well created. Often the institution will say they want their power of attorney form used or they want a more recent power of attorney. If the person is already incapacitated, this is an impossible request. The Commission is trying to get implemented into law the requirement that the power of attorney presented to the bank, brokerage firm or title company must be accepted. There is a right however for these institutions to seek a review if a reason of concern arises. There are other changes being proposed that may be beneficial.
Mr. Wiles then states that as the population ages with issue of incapacity rising, these powers of attorney will become more prevalent. This will be a great help to this segment of the population but as the Astor case shows, consideration and caution will also have to be part of the process.
My best,
Jim
Monday, October 19, 2009
Question and Answer
Q: I executed my trust 15 years ago and haven't looked at it since. Should I ask an attorney to review it to see if any changes need to be made? If not, when should a trust be reviewed by an attorney?
A: Unfortunately there isn't a perfect rule of thumb here but I will try to give a good one. Have an attorney review your trust, or will, if there are any changes in your family situation such as divorce, marriage, death, or a concern over a beneficiary/heir. Otherwise, once every 3-5 years is a good idea. Of course if you hear about any changes in the estate tax code or local trust law, and think the changes may apply to you, call.
This raises the next question, won't the attorney contact me? Good practice says yes they will but they are not legally obligated to notice you. Most estate plans are a one-time only project. You hire an attorney for a specific job, upon completion, your relationship is over. Most firms will even say this in the final letter from their office. This of course protects the law firm but it does place the burden on the clients to stay on top of changes in their family and the laws. If you schedule period reviews of your estate plan every 3-5 years, then your chances of any changes getting incorporated in your plan are much higher.
A: Unfortunately there isn't a perfect rule of thumb here but I will try to give a good one. Have an attorney review your trust, or will, if there are any changes in your family situation such as divorce, marriage, death, or a concern over a beneficiary/heir. Otherwise, once every 3-5 years is a good idea. Of course if you hear about any changes in the estate tax code or local trust law, and think the changes may apply to you, call.
This raises the next question, won't the attorney contact me? Good practice says yes they will but they are not legally obligated to notice you. Most estate plans are a one-time only project. You hire an attorney for a specific job, upon completion, your relationship is over. Most firms will even say this in the final letter from their office. This of course protects the law firm but it does place the burden on the clients to stay on top of changes in their family and the laws. If you schedule period reviews of your estate plan every 3-5 years, then your chances of any changes getting incorporated in your plan are much higher.
Tuesday, October 6, 2009
Managing Finances After Death of a Spouse
From the October 4, 2009, Chicago Tribune.com, Janet Kidd Stewart reports in the Article How to manage finances after death of spouse that one key is "Organization".
She reports while it is hard to discuss while both partners are alive, you need to do so. Firstly, get organized. She mentions gathering legal and financial documents, including any death certificates you may need, select a funeral home, find a marriage certificate, spousal birth certificates, Social Security cards, insurance policies, military discharge papers, wills and trust documents and all retirement and investment account records.
I cannot agree more. Having all these documents handy in order to avoid the search when the emotional disability caused by death is immeasurable. It isn't long before the phone calls need to be made to the funeral home, social security, brokerage houses, retirement funds and life insurance companies. Most, if not all, will require one or more of these documents in order to start the process.
She next reported on something I see in my practice with mostly older clients. Sometimes the the surviving spouse was not the one that originally handled the financial planning. Now the survivor will need to start thinking about managing money. It can be as basic as never having learned to manage the bank account to what investments are suitable for the survivor. One advice she cites in the article I really like. She cites the advice to let a family member or close friend help to screen calls to avoid scams while the survivor is vulnerable. I'm sorry to say but people scan the obituaries to find their next prey. The article next states the sound advice that "you have to recognize you're still in shock. Don't run out and do something you can't reverse," said Alexandra Armstrong, a financial planner and co-author of "On Your Own: A Widow's Passage to Emotional and Financial Well-Being. "I've spoken to widow after widow who couldn't remember any conversations they had the first month after their spouse died." This is absolutely the case. Yet, you need to take action as soon as you are able. Figure out your budget and seek a trusted advisor to assist with your investments. Our office, or a close and trust family member or friend, can give a referral. You will need to make some lifestyle changes, very often this includes financial changes as well.
I could not have agree with this article more. While this seems to be covering financial planning, this almost always dovetails into good estate planning.
Very best,
Jim
She reports while it is hard to discuss while both partners are alive, you need to do so. Firstly, get organized. She mentions gathering legal and financial documents, including any death certificates you may need, select a funeral home, find a marriage certificate, spousal birth certificates, Social Security cards, insurance policies, military discharge papers, wills and trust documents and all retirement and investment account records.
I cannot agree more. Having all these documents handy in order to avoid the search when the emotional disability caused by death is immeasurable. It isn't long before the phone calls need to be made to the funeral home, social security, brokerage houses, retirement funds and life insurance companies. Most, if not all, will require one or more of these documents in order to start the process.
She next reported on something I see in my practice with mostly older clients. Sometimes the the surviving spouse was not the one that originally handled the financial planning. Now the survivor will need to start thinking about managing money. It can be as basic as never having learned to manage the bank account to what investments are suitable for the survivor. One advice she cites in the article I really like. She cites the advice to let a family member or close friend help to screen calls to avoid scams while the survivor is vulnerable. I'm sorry to say but people scan the obituaries to find their next prey. The article next states the sound advice that "you have to recognize you're still in shock. Don't run out and do something you can't reverse," said Alexandra Armstrong, a financial planner and co-author of "On Your Own: A Widow's Passage to Emotional and Financial Well-Being. "I've spoken to widow after widow who couldn't remember any conversations they had the first month after their spouse died." This is absolutely the case. Yet, you need to take action as soon as you are able. Figure out your budget and seek a trusted advisor to assist with your investments. Our office, or a close and trust family member or friend, can give a referral. You will need to make some lifestyle changes, very often this includes financial changes as well.
I could not have agree with this article more. While this seems to be covering financial planning, this almost always dovetails into good estate planning.
Very best,
Jim
Monday, September 28, 2009
Answer to an Email Question re: Restated Trusts
Q: Is a restatement of trust different than a normal run-of-the-mill trust?
A: A revocable living trust is specifically designed to meet estate planning needs. Like all good estate plans, it is designed to anticipate changes and to accommodate many of the most common ones. However, no matter how thorough an estate plan may be, it simply can't address all the changes in circumstances we encounter in our lives. This is why most estate plans can be amended or revoked.
In most revocable living trusts, the grantor reserves the right to revoke or amend the trust in whole or in part. It's not uncommon for a person to add or delete a beneficiary or adjust the percentage or amount the beneficiary will receive or change a trustee.
Because it is so easy to amend a trust, some people do it on a fairly regular basis. I've seen trusts with eight or nine amendments -- although effective multiple amendments can make a trust difficult to read and follow. At some point, it simply becomes necessary to replace the trust in whole. In some circumstances, the trust document is outdated or fails to provide adequate provisions.
The problem with creating a new trust is that all of the assets titled in the name of the first trust must be transferred into the new one. A fully funded trust agreement takes some work and likely a person does not want to re-title assets. The thought of doing it all over again is probably a bit daunting.
This is where a restatement comes in. A restatement is simply a complete and total amendment of the original trust which replaces it in its entirety. In other words, the restatement reflects the terms of the new trust agreement and replaces both the original agreement and any amendments that may have been made to it.
The great thing about restating a trust is that it refers back to the original trust agreement and its creation. In effect, you have created a new trust agreement but you don't have to re-title the assets into the name of the new trust. Because it simply replaces the original trust agreement, it's already funded.
It's really not that unusual to come across a restated trust. As frequently as people change their minds, it's a wonder that you don't see more of them.
A: A revocable living trust is specifically designed to meet estate planning needs. Like all good estate plans, it is designed to anticipate changes and to accommodate many of the most common ones. However, no matter how thorough an estate plan may be, it simply can't address all the changes in circumstances we encounter in our lives. This is why most estate plans can be amended or revoked.
In most revocable living trusts, the grantor reserves the right to revoke or amend the trust in whole or in part. It's not uncommon for a person to add or delete a beneficiary or adjust the percentage or amount the beneficiary will receive or change a trustee.
Because it is so easy to amend a trust, some people do it on a fairly regular basis. I've seen trusts with eight or nine amendments -- although effective multiple amendments can make a trust difficult to read and follow. At some point, it simply becomes necessary to replace the trust in whole. In some circumstances, the trust document is outdated or fails to provide adequate provisions.
The problem with creating a new trust is that all of the assets titled in the name of the first trust must be transferred into the new one. A fully funded trust agreement takes some work and likely a person does not want to re-title assets. The thought of doing it all over again is probably a bit daunting.
This is where a restatement comes in. A restatement is simply a complete and total amendment of the original trust which replaces it in its entirety. In other words, the restatement reflects the terms of the new trust agreement and replaces both the original agreement and any amendments that may have been made to it.
The great thing about restating a trust is that it refers back to the original trust agreement and its creation. In effect, you have created a new trust agreement but you don't have to re-title the assets into the name of the new trust. Because it simply replaces the original trust agreement, it's already funded.
It's really not that unusual to come across a restated trust. As frequently as people change their minds, it's a wonder that you don't see more of them.
Wednesday, September 16, 2009
Where Are We On The Estate Tax?
According to to The Hill, if I may quote the title, the "Debate over estate tax likely to wait til 2010" by Walter Alarkon, 9/15/09. This isn't surprising since it is what many of us suspected. The writer states that between the split among Democrats and a very full Fall agenda, it won't happen this year. Some experts and congressional aides have been saying that to buy time, Congress will likely pass a one-year extension in order to deal with the expiring estate tax next year.
Even though the Senate Fiance Committee Chairman Max Baucus considers the estate tax a "must-do" items, it isn't on the committee's schedule, with most of the meetings revolving around the healthcare reform bill.
So where were we while we wait? Both the President and Committee Chairman Baucus want to make permanent the 2009 rate (45% and 3.5M exemption) and indexing for inflation for future years. One strong contender is our own Arizona Senator Jon Kyle, who has joined with a more centrist Democrat Sen. Blance Lincoln, on a 35% rate and increase the exemption to $5 million.
We'll have to see what happens in 2009 but my guess is we will be waiting until next year for final word.
My Best,
Jim
Even though the Senate Fiance Committee Chairman Max Baucus considers the estate tax a "must-do" items, it isn't on the committee's schedule, with most of the meetings revolving around the healthcare reform bill.
So where were we while we wait? Both the President and Committee Chairman Baucus want to make permanent the 2009 rate (45% and 3.5M exemption) and indexing for inflation for future years. One strong contender is our own Arizona Senator Jon Kyle, who has joined with a more centrist Democrat Sen. Blance Lincoln, on a 35% rate and increase the exemption to $5 million.
We'll have to see what happens in 2009 but my guess is we will be waiting until next year for final word.
My Best,
Jim
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