Inheritance

Why Did the Hawaii Attorney General Oppose a Change to the Trust of a Hawaiian Princess?

Attorney General Russell Suzuki claimed in a court filing that 92-year-old Native Hawaiian princess Abigail Kawananakoa’s amendment to her trust is too complex and invalid based on a prior court ruling, according to The Honolulu Star-Advertiser.

The Clay Center Dispatch reports in the recent article, “Attorney general opposes Hawaiian princess’ trust amendment,” that Judge Robert Browning ruled last fall that Kawananakoa doesn’t have the mental capacity to manage her $215 million trust, after she suffered a stroke in 2017. The judge appointed First Hawaiian Bank to serve as trustee and removed Jim Wright, her longtime attorney who stepped in as trustee following her stroke.

Kawananakoa has indicated that she is feeling okay. She fired attorney Wright and then married Veronica Gail Worth—her girlfriend of 20 years.

Kawananakoa is considered a princess, because she is a descendant of the family that ruled the islands before the overthrow of the Hawaiian Kingdom in 1893.

The princess inherited her wealth as the great-granddaughter of James Campbell, an Irish businessman who made his fortune as a sugar plantation owner and one of the state’s largest landowners.

The Hawaiian princess says she also wants to create a foundation to benefit Hawaiians and exclude board members appointed by Wright. She previously created a foundation to benefit Native Hawaiian causes.

“I will not contribute any further assets to that foundation because I do not want those individuals having anything to do with my trust, my estate and any charitable gifts I make during my lifetime or at my passing,” she said in the amended trust.

Her current foundation has requested a judge to appoint a guardian for Kawananakoa.

In his filing, Attorney General Suzuki wrote that the proposed changes will substantially alter the estate plan Kawananakoa executed before her mental capacity came into question.

In this case, the state represents the public interest in the protection of the trust’s charitable assets, Suzuki said.

A court hearing on the trust amendment is scheduled for next month.

Reference: The Clay Center Dispatch (January 3, 2019) “Attorney general opposes Hawaiian princess’ trust amendment”

What is a pour-over will

A Will is an Essential Component of Estate Planning

Drafting a will is a fundamental and essential component of estate planning.

Drafting a will with an experienced estate planning attorney helps avoid unnecessary work and perhaps some stress, when a family member passes away. A will permits the heirs to act with the decedent’s wishes in mind and can make certain that assets and possessions are passed to the correct individuals or organizations.

The Delaware County Daily Times’ recent article, “Senior Life: Things people should know about creating wills,” says that estate planning can be complicated. That’s the reason why many people use an experienced attorney to get the job done right. Attorneys who specialize in estate planning will typically discuss the following topics with their clients.

  • Assets: Create a list of known assets and determine which of those are covered by the will and which have to be passed on according to other estate laws, such as through joint tenancy or a beneficiary designation, like life insurance policies or retirement plan proceeds. A will also can dispose of other assets, such as photographs, mementos and jewelry.
  • Guardianship: Parents with minor children should include a clause regarding whom they want to become the guardians for their underage children or dependents. (For more about this, download Mastry Law’s FREE report A Parent’s Guide to Protecting Your Children Through Estate Planning.
  • Pets: Some people use their will to instruct the guardianship of pets and to leave assets for their care. However, remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in a will.
  • Funeral instructions: Finalizing probate won’t occur until after the funeral, so wishes may go unheeded.
  • Executor: This individual is a trusted person who will carry out the terms of the will. She should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This results in the estate being settled based upon the laws where that person lived. A court-appointed administrator will serve in the capacity to transfer property. This administrator will be bound by the laws of the state and may make decisions that go against the decedent’s wishes.

To avoid this, a will and other estate planning documents are critical. Talk to an estate planning attorney or download a FREE copy of our estate planning book, Failing to Plan is Planning to Fail.

Reference: The Delaware County Daily Times (January 7, 2019) “Senior Life: Things people should know about creating wills”

What’s the Difference Between Per Capita And Per Stirpes Beneficiary Designations?

A will covers the distribution of most assets upon your death. However, any assets that require beneficiary designations, like 401(k), IRAs, annuities, or life insurance policies, are distributed according to the designation for that account. A beneficiary designation takes precedence over the instructions in a will or trust.

Benzinga’s recent article addresses this question: “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?” Have you changed the beneficiary designations, since the account or policy was first started? If you need to update your beneficiary designation, talk to the company responsible for maintaining the account. They’ll send you a form to complete, sign and return. Keep a copy for your own records.

You should also name a contingent beneficiary to receive the account, in case the primary beneficiary passes away before you can update the beneficiary list. Without a listed contingency, your account designation goes to a default, based on the original agreement you signed and the state law.

With per capita distribution, all members of a particular group receive an equal share of the distribution. Within a will or trust, that group can be your children, all your combined descendants, or named individuals. Under per capita, the share of any beneficiary that precedes you in death is shared equally among the remaining beneficiaries. Within a beneficiary designation, per capita typically means an equal distribution among your children.

Per stirpes distribution uses a generational approach. If a named beneficiary precedes you in death, then the benefits would pass on to that person’s children in equal parts. Spouses are generally not part of a per stirpes distribution.

Assume that you had two children. With per stirpes, if one child were to precede you in death, the other child would receive half, and the children of the deceased child would get the other half.

Create a list of all your accounts that have beneficiary designations and keep it with your will. If you don’t have a copy of the latest beneficiary designation form, write down the primary beneficiary, contingent beneficiary, and the date the beneficiary designation was last updated for each one.

Remember, it’s important to keep both your will and all beneficiary designations up to date.

Reference: Benzinga (December 26, 2018) “Estate Planning: What Are Per Capita And Per Stirpes Beneficiary Designations?”

Here’s More Insight into Why Estate Planning is Critical

Fox 5 NY says in the article “Why estate planning is important regardless of your age or wealth” that this is great time to begin talking to your loved ones about estate planning, especially older relatives and parents.

The key to a successful discussion depends upon the right approach.

Try to always make suggestions, rather than demands. One great way to start the conversation with family members, is to mention what you’re doing. You might say something like, “I just took care of my own estate planning. Have you done anything? Maybe we should talk about it.” That might get the conversation rolling.

Many people believe that, as they get older, they need a will. However, that’s just one piece of the puzzle: core estate planning includes a will, power of attorney, health care surrogate and asset protection.

For most of us, the asset we most want to protect is our home. One of the best ways to do that is through a trust. Depending upon the type of trust you use, it may also have tax advantages, could protect your home during a healthcare crisis and protect your home from your children’s creditors.

You also need to find people you trust to help with finances and health care. A power of attorney is a legal document in which you grant a person the authority to handle finances on your behalf.

Similarly, a healthcare surrogate is an individual who makes healthcare decisions, if you get sick or are in an accident and can’t make decisions for yourself.

You can use one person to do both or separate individuals for each role. You can opt for a family member or a trusted friend. However, either way it should probably be a younger person, who won’t be dealing with the same aging issues as you.

You should also note that your will doesn’t cover everything. Make certain that any beneficiaries designated in your retirement plans or life insurance and any additional names on joint bank accounts are current. The beneficiaries you appointed by a designation form will get the money in those accounts, no matter what it says in your will.

If all of this sounds a bit complex, don’t worry because an experienced estate planning or elder law attorney can help you with all of the forms and all of your questions. Just understand these three things before you visit an elder law firm: your assets, whose names are on the accounts and your wishes.

Reference: Fox 5 NY (December 12, 2018) “Why estate planning is important regardless of your age or wealth”

How Do I Calculate Estate Taxes?

Handling the affairs of a loved one’s estate can be stressful and difficult. However, to receive the full benefit of the gift a loved one leaves you, it’s critical to be prepared for the taxes that gift may incur. This is the advice in Investopedia’s article, “Estate Taxes: How to Calculate Them.” The article explains the potential tax liability, upon transfer of an estate after death.

The high rate of the federal estate tax (40%) motivates most people to calculate their potential estate tax beforehand. It’s a good idea to figure the amount you might owe in estate tax before something happens, instead of leaving your family to deal with the consequences afterwards.

Estate tax is calculated on the federal and state level. Florida does not have an estate tax, however, there are now still several states that have their own estate tax: Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, as well as the District of Columbia.

The federal estate tax starts when the fair market value of your assets hits $11.18 million per individual. Each state that has an estate tax has its own minimum on when the estate tax kicks in, ranging from $675,000 to $1 million. As a result, you can be eligible to pay the state estate tax, the federal, or both. Because the estate tax is determined based on the current market value of your assets instead of what you paid for them, calculating that number can be more complex.

There’s no need to include any property you intend to leave your spouse or an eligible charitable organization. Initially, you’ll need to calculate the value of the gross estate. Debt, administrative fees, and assets that will be left to charities or a surviving spouse will then be deducted from the total market value of those assets.

Next, add any gifts, including gifts that fall above the gift tax exemption. The $11.18 million exemption includes gifts (it’s a way of keeping people from giving away their fortune before their death to avoid estate taxes).

If the loss of a loved one is imminent, preparing for the tax burden of estate transference ahead of time, can make the grieving process a little easier and can be a comforting distraction.

You can also prepare for taxes on your own estate to lessen the burden of the friends and family you leave behind. If you have questions, speak to an experienced estate planning attorney.

Reference: Investopedia “Estate Taxes: How to Calculate Them”

How Do I Make a Gift of Estate Planning to an Adult Child?

One thing driving Baby Boomers crazy is their kids’ estate planning–or lack thereof. Boomers have been building legacies from the day they were born.

As Forbes explains in its recent article “The Estate Planning Gift To Give Your Millennial Children In 2019,” Boomers entering their 60s and 70s are more focused than ever before on managing their family legacies. The 2018 U.S. Trust Insights on Wealth and Worth Study found that 67% of those over 50 want to use their wealth to invest in their children and grandchildren. Boomers who’ve managed their finances successfully, want to be sure their hard work doesn’t go to waste.

The challenge, however, is that Boomers can’t control all aspects of their financial lives. One complaint they have to their estate planning attorneys, is that their kids aren’t doing the things that they ask. Gen Xers and Millennials may see estate planning as a very low priority. Most are burdened by heavy debt and trying to get their day to day financial lives on the right track. Nagging parents might make them resist this type of advice.

There is one thing that Baby Boomers can do to make certain their children do the right thing, when it comes to estate planning—they can make a gift of estate planning to their adult children.

However, before Boomers do this, they should think about several issues to put their family on the path to success. Family dynamics can be challenging, and family patterns are often hard to break.

Parents who want to offer to pay for an adult child’s estate plan, should consider how best to broach the issue. A wrong start could torpedo the wrong situation and end in a family drama. Timing is crucial for these discussions. The assistance of your estate planning attorney can smooth the way for a successful approach. He can outline the process for everyone to feel that they have a voice. This can be done with a family meeting.

The advice for Boomers making this type of gift is quite simple: these conversations need to be more intentional in the why and the how. Boomers must also respect boundaries, once the estate plan is completed. They may have paid for the estate plan, but that does not mean they’re entitled to see the child’s documents. The burden of enforcing this parameter falls to the estate attorney.

The best gift a parent can give their children for 2019, is to help them organize and manage their affairs. If they offer to pay for an estate plan, Baby Boomers can take the right actions to be sure their legacies will continue after they are gone.

Reference: Forbes (December 12, 2018) “The Estate Planning Gift To Give Your Millennial Children In 2019”

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