Intestacy

Why Do I Need Estate Planning If I’m Not Rich?

Most people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t the most enjoyable activity, without it, you don’t get to direct who gets the things you’ve worked so hard for after you pass away.

Estate Planning isn't only for the rich
An Estate Plan will protect your assets and your loved ones

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets and a guardian for your minor children. Without an estate plan, the courts will decide who will receive your property and raise your kids.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will with a guardianship clause, a judge will decide this important issue, and the results may not be what you would have wanted.

Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax that beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe he or she deserves more than another. This type of fighting happens all the time, and it can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you’re unable to manage your own assets or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Theft Reported in Aretha Franklin’s Estate

Careful estate planning can prevent heirs from stealing assets from your estate. Aretha Franklin’s estate is a sad example.

Careful Estate Planning
Aretha Franklin’s estate woes highlight the need for careful estate planning.,

Detroit area police told the Free Press that an active theft investigation was ongoing, involving Aretha Franklin’s suburban mansion. However, the investigation began prior to her death.

The 76-year-old Queen of Soul passed away from pancreatic cancer in August in her Detroit riverfront apartment. When she died, she still owned her 4,100-square-foot Colonial-style home in Bloomfield Township, Michigan, which is in the sights of the IRS.

Wealth Advisor says in its article, “Police investigate theft from Aretha Franklin’s estate,” that the theft investigation was first reported by The Blast, a celebrity news website claiming Franklin’s estate is fighting with Franklin’s 61-year-old son, Edward, who was born when Aretha was only 14.

Her son Edward has been attempting to get a court order to force the estate to provide monthly financial documents to his mother’s heirs. However, the estate won’t turn over the information because it contends such information could negatively impact the criminal investigation involving stolen estate property.

Late last year, the IRS filed a claim in the County Probate Court, alleging that the Franklin estate owed millions in back taxes and penalties. An attorney for the estate stated that it had repaid more than $3 million in back taxes, since Franklin’s death. It’s believed that Franklin owed more than $6.3 million in back taxes from 2012 to 2018 and $1.5 million in penalties.

The Oakland County court documents did not state the exact value of her estate, which is believed to be in the tens of millions.

Immediately after her death, Franklin’s mansion, which is part of a gated community, was listed for sale at $800,000. However, it was then taken off the market. The custom-built home features six bedrooms, seven bathrooms, white marble floors and floor-to-ceiling windows overlooking two small ponds and a lap pool. The mansion also sports a sauna, a three-car garage and a jetted tub.

Franklin is said to have purchased the mansion for $1.2 million in 1997, according to The Detroit News. The home was built in 1990 and remodeled in 2002.

You can read more about asset protection on our website.

Reference: Wealth Advisor (January 11, 2019) “Police investigate theft from Aretha Franklin’s estate”

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”

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”

Can You Calculate Your Own Estate Taxes?

Here’s a complex area that people tend to ignore, until it’s too late to do anything about it. Better solution: speak with an estate planning attorney while changes can still be made.

Even if you are not one of the top wealthiest people in the world, you still may find yourself grappling with estate taxes. If you know that you will be the recipient of an estate, you may need to have a candid conversation about the taxes that may result, and how to minimize them, if possible, beforehand. There’s more to be learned about the potential tax liability when an estate is transferred from the article “Estate Taxes: How to Calculate Them” from Investopedia.

MP900385209The 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 dealing with the consequences afterwards.

Estate tax is calculated on the federal and state level. 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 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 is 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 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.

Don’t neglect to prepare for any taxes that may be incurred by your own estate. Think of it as a kindness you do for your loved ones, so they are not left with unexpected costs. An experienced estate planning attorney can help ensure that your estate tax planning is done correctly.

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

One Dozen Must-Have Documents

To make sure that your wishes are carried out, you’ll have to do your homework. Make sure that you cover these most important documents.

The last thing you want to do, is leave a bureaucratic mess for your loved ones when you die. Not only will it cause the family stress during a difficult time, it could change how your family thinks of you. That should be more than enough reason to get this done in advance!

MP900398819US News & World Report’s recent article, “12 Documents to Prepare Now for Your Heirs,” says that when people don't have their paperwork ready, it can be a huge headache for the family. A family can be left with all kinds of paperwork to sort out while dealing with grief. Even worse, heirs may forfeit life insurance proceeds and tax deductions or overlook accounts they don't know exist. That's why it's critical to have important documents ready for loved ones. Here are the documents you should start preparing right away:

A will. This is a legal document in which you name an executor to carry out your wishes, heirs to receive your assets and a guardian if you have minor children.

A letter of explanation. Your will stipulates how assets are to be divided. However, a letter of explanation can provide the reasons for these decisions. This can be helpful, if the estate is to be divided unevenly between children.

List of financial accounts and beneficiaries. Keep a list of all your finances, such as bank and retirement accounts and brokerage funds. Each may have a designated beneficiary or transfer on death provision, known as a TOD. A person who’s named as a beneficiary or TOD designee automatically will receive ownership of the asset after you die. Make sure you keep these beneficiary designations up-to-date.

Personal inventory. Most wills distribute personal property in vague terms, like designating jewelry to one person and household goods to another. To be certain that nothing significant is overlooked, create an inventory of personal items. This inventory can also list items that may be stored in another location, unbeknownst to your family.

Power of attorney. This form is an important document for your family, if you become incapacitated because of an illness or accident. A power of attorney allows a designated person to make decisions on your behalf. One form is for financial decisions, and another is for health care.

Life insurance policies. Your family can miss significant life insurance benefits, if they don't know you have a policy, or it’s been lost or misplaced. Keep records of your life insurance plans and place it with your financial records.

Real estate records. Add deeds, assessments, mortgage statements and property tax information to the documents you've prepared for your heirs. Collecting the records for them in advance will make their lives easier.

Tax returns. List the name of your CPA or tax preparer, if you have your taxes professionally done. He or she can help your family with filing final tax returns for your estate. If you file your own returns, print a copy for your files and record any login information for online tax preparation services.

Logins for accounts. Create a list of your usernames and passwords for financial accounts, email, and social media and keep it where heirs can access the information.

A digital estate plan. Some states recognize digital estate plans as legally binding. However, even if it isn’t, it can be a great resource for your family. A digital estate plan states what will happen to your digital assets, like your social media accounts, websites, digital photos, intellectual property and other files and documents. Within your plan, you can name a digital executor and list those you've named as legacy contacts on specific platforms, such as Facebook and Twitter.

An ethical will. This letter describes what you'd like remembered as your legacy, such as passing down values. An ethical will can be used to share memories or to impart wisdom.

Your final wishes. If you've made prearrangements for your funeral or cremation, place that information with your will and other end-of-life documents. Your final wishes should also include information about organ donation, pet care and who should be notified of your passing.

Distilling a lifetime into a dozen documents is not an easy task, but it is necessary. Your loved ones will appreciate your doing the heavy lifting, and it will give them the room they need to grieve their loss.

Reference: US News & World Report (October 4, 2018) “12 Documents to Prepare Now for Your Heirs”

The Executor is Making a Mess of the Estate: What Now?

Estate litigation is never pleasant, but heirs have rights, and, in some situations, they have to fight back, when an executor is not acting in the best interest of the beneficiaries.

When siblings are able to work together to settle their parent’s estate, it may take a little time and there may be some negotiating.  However, the details are worked out. Sometimes the family bonds become even stronger. There are also ugly stories where families are fractured.

MP900400332This occurs when the executor acts with some (or a great deal of) self-interest, especially when it’s one of the siblings. That daughter may feel entitled to more than an equal share, because of the care she’s given the parent or because she resents her siblings’ successes, or any of a number of reasons.

What if the eldest sister gets her siblings to sign away their rights to everything? Perhaps some do, but when one sibling says no, this evil executor gets the will probated anyways. Subsequently, the lone hold-out finds out there was a testamentary trust created because she didn't sign away her rights, and—you guessed it—the eldest sister is the trustee. That’s dirty pool!

When the hold-out beneficiary requested an accounting of the trust, the evil executor/trustee refused. When an executor or trustee tries to keep the deceased parent’s estate and trust a secret, it’s not appropriate or acceptable, and she’s breaching her fiduciary duty.

nj.com’s recent article, “Your rights when family fights over a will,” explains that executors and trustees serve in a fiduciary capacity.  It means they have a legal obligation to act for another (the beneficiaries) in a fair, honest, and transparent manner. While executors and trustees have the legal authority to manage the affairs of an estate or trust, she’s accountable to the beneficiaries and must inform them of what she’s doing.

When a person dies, the executor must notify, in writing, all beneficiaries named in the will (and all heirs at law, like those entitled to inherit by intestacy) that a will has been probated. This must be done within a specific number of days of the will being probated. The executor must also provide a copy of the will upon request. After receiving the notice of probate, individuals may contest the will within a specific timeframe.

When the will is reviewed, beneficiaries can see that a testamentary trust was created. Once appointed, an executor must settle and distribute the estate as quickly and efficiently as possible. Both executors and trustees have a duty to collect and preserve assets, deal impartially with beneficiaries and act at all times with the best interests of the estate and trust in mindto be certain that the estate and trust are distributed, according to the decedent's wishes.

A fiduciary also has a duty to account to the beneficiaries.  Therefore, in the event a beneficiary has questions about how an estate or trust is being handled, he can request an accounting and copies of supporting documents. Likewise, a trustee is required to keep beneficiaries reasonably informed about the administration of the trust and information necessary for the beneficiaries to protect their interests. The trustee must promptly respond to the beneficiary's request for info on the administration of a trust. If a fiduciary willfully neglects or refuses to render an accounting or breaches her fiduciary duties, you can ask the court to remove her as the executor or trustee.

In this particular scenario, the older sister is legally bound to provide an accounting of the estate. If that shows that anything was done wrongfully, she may be personally liable for misconduct. She may even be liable to pay the legal fees incurred by other family members.

This can get messy, and it can be a tough time for everyone in the family. If it sounds all too familiar, you’ll want to speak with an attorney with experience in estate litigation.

Reference: nj.com (September 28, 2018) “Your rights when family fights over a will”

What are Pastors Doing about Estate Planning?

You might think that pastors, who lead congregations in occasions of birth and death, would be a little more aware than the rest of us of the events of life, and by extension, the need for an estate plan. However, a recent survey shows otherwise.

A survey of Southern Baptist pastors conducted for the Southern Baptist Foundation has revealed that more than half of them don’t have the estate basics, including a will, trust, living will, electronic will, legacy story or durable power of attorney with health care directives.”

MP900390083 (1)In its recent article on the survey, TheBaptist Pressreports, “Young or old, many pastors lack a will, survey finds,”that 74% of the pastors surveyed think estate planning should be considered part of a person's complete financial stewardship.

However, executives at LifeWay Research say the survey shows a lack of awareness about estate planning and the laws which may be factors in pastors not having a plan in place. Procrastinating is common, but failing to have an estate plan in place can have a devastating impact on an estate.

Of course, basic estate planning saves a lot of trouble for family and loved ones. However, in addition, taxes can be minimized and assets protected.

According to the survey, pastors age 18-44 are the least likely to have a will (31%) or a durable power of attorney with health care directives (14%). Only about half of those pastors closest to retirement (age 55-64 and 65-plus) have a will (54% for both groups). Likewise, few of those closest to retirement (age 55-64 and 65-plus) have a health care durable power of attorney (25% for both groups).

It’s a bit of a surprise that so many pastors don’t have a plan for their families and property after their death, especially those that should be most likely to be thinking about this issue—the ones with young families. They seem to be the least prepared.

About 64% of the clergy surveyed, agree with a statement that the court decides who will care for a child, if the last parent dies without a will; 16% percent disagree, with 21% saying they didn’t know. When asked about assets, the survey showed that 48% of pastors said that if someone dies without a will, their family decides what happens with the assets of the deceased; 33% disagree, and 19% "don't know."

However, both with property and children, it’s the court that decides what happens to them, if there’s no will.

The survey reflects the data from more than 1,100 completed surveys that were conducted, both by mail and online, this past spring.

Reference: Baptist Press (August 31, 2018) “Young or old, many pastors lack a will, survey finds”

A Whole Lot of Soul, But No Estate Plan

The Queen of Soul’s four sons have filed a document that lists themselves as “interested parties” in her estate…

The big buzz about Aretha Franklin is the gold-plated casket, the Christian Louboutin patent leather shoes and the fact that she died without a will.

Aretha 2018The Queen of Soul’s four sons have filed a document that lists themselves as “interested parties” in her estate, according to an article from cbs.com titled “Report: Aretha Franklin left no will.”

A document that was said to have been filed with the Oakland County Probate Court in Michigan and signed by her son Kecalf and her estate attorney David Bennett noted the absence of a will.

"The decedent died intestate and after exercising reasonable diligence, I am unaware of any unrevoked testamentary instrument relating to property located in this state as defined" under the law, the document said, according to the Detroit Free Press.

Because she died intestate or without a will, Franklin's finances will become public. Her niece, Sabrina Owens, has asked Judge Jennifer Callaghan to be the personal representative of the estate.

Don Wilson, Aretha's entertainment lawyer, commented to the Detroit Free Press that he repeatedly suggested that she create a trust.

"I was after her for a number of years to do a trust," he said. "It would have expedited things and kept them out of probate and kept things private."

The attorney said he would’ve helped Aretha manage her holdings in music publishing and copyright issues for estate planning. Wilson added that at this point, it's impossible to estimate the value on her song catalog. However, he also said that she retained ownership of her original compositions.

In her home state of Michigan, the assets of a deceased person who was unmarried are divided equally among children. However, creditors or extended family members could contest the estate.

Aretha Franklin died at her home in Detroit after a long battle with cancer. Fans went to the Charles H. Wright Museum of African American History for a public visitation, where they paid their respects, while her gospel music recordings were played.

Reference: CBS.com (August 22, 2018) “Report: Aretha Franklin left no will”

Not Wealthy? You Still Need an Estate Plan!

If you die without a will, you won’t have the opportunity to designate the guardian you want to care for your minor children. Instead, a judge will decide this.

There’s a saying about people who don’t have an estate plan created. They have a will, it’s just not the one that they want. Decisions are made by the state, and that includes who raises their kids.

Bigstock-Extended-Family-Outside-Modern-13915094If you’ve got young children under the age 18, says CNBC in a recent article, “You don’t have to be wealthy to put this estate plan into place,” you really need to make sure that you have a will. That’s where you can convey your wishes as to who should raise your children, in case tragedy hits and both you and your spouse are not able to.

If you die without a will, you won’t have the opportunity to designate the guardian you want to care for your minor children. Instead, a judge will decide this. It may be someone you really never considered for that essential responsibility.

That’s why a will is so critical for families with young children. You can also avoid or at least lessen conflicts between relatives by adding a guardianship clause in your will.

Without a will, the state’s intestacy laws will dictates how your cash and assets will be distributed when you die. Typically, the intestacy laws say that your estate will pass to your closest living relative—your spouse, your kids, your parents and your siblings.

These laws also stipulate how assets are divided among your family members. For example, in New York, your surviving spouse gets 50% of the balance, and your children get everything else.

But what if that's not what you want? Then you better have a will.

It’s also important to know that your will won't override your beneficiary designations for your retirement accounts and life insurance.

While you’re at it, a couple of other documents you'll need to get your basic estate plan together, are your financial power of attorney and medical directives. Power of attorney grants a person that you name to oversee your finances, if you're incapacitated. Medical directives allow you to state how you want to receive health care, if you’re unable to communicate your wishes.

An estate planning attorney can help you create the documents you need, to ensure that your children and you and your spouse are protected, before and after death. It’s an important part of your responsibility and will also provide you with peace of mind.

Reference: CNBC (August 8, 2018)“You don’t have to be wealthy to put this estate plan into place”

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