Personal Representative

Why Do I Need A Will?

You might ask yourself, “Why do I need a will?” After all, writing a will isn’t exactly one of life’s most pleasant tasks. Maybe that is why only 36% of American adults with children under 18 have estate plans in place.

Why do I Need a Will?
Asking yourself “Why do I need a will” is the first step to protecting your assets and your family.

The Boston Globe’s recent article, “The end may not be near, but you still need a will,” says that estate planning is essential, because dying without a will means that certain property is subject to intestate succession laws. That’s where the state distributes your assets to your heirs according to state laws, instead of your wishes.

Assets for which you’ve assigned a beneficiary, like your 401(k) or life insurance, won’t meet the same end, because these are outside of probate. However, non-beneficiary accounts, like checking accounts or property, could. Even if you’re not wealthy, it’s important to plan ahead. Consider these thoughts:

  • A will. If you have assets that you want to leave to another person, you need a will. It’s your instructions on what should happen upon your death. You’ll also name an executor or a personal representative who’s responsible for tending to your assets, when you pass away. And a will is the only way you can name a guardian to raise your children is you’re unable to.
  • Beneficiary designations. Some assets don’t pass through a will, like life insurance and retirement plans. For these, you must name a beneficiary.
  • Health care proxies and powers of attorney. An estate planning attorney will help you with healthcare directives, HIPAA forms and durable power of attorney. The power of attorney lets someone else handle your legal and financial matters. The healthcare directive lets a trusted person make decisions about your medical care, when you’re unable to speak for yourself.
  • Guardian for minor children. Select a person who shares your values and parenting style, regardless of their financial background.
  • A living will. A living will is a type of advanced healthcare directive. It states your wishes concerning not wanting life-prolonging medical intervention and allowing you to pass away naturally.

Finally, discuss your plans with your family and make certain that your will and other documents are safely stored and easily accessible. You should also be sure that you’ve given your power of attorney and health care agent copies. Your physicians should also have a copy of your health care proxy and living will, and your attorney should keep a copy on file.

Read more about getting your will and other estate planning documents taken care of and becoming a client of Mastry Law here.

Reference: Boston Globe (February 25, 2019) “The end may not be near, but you still need a will”

Get These Three Estate Planning Documents In 2019

These may not be the first things you are thinking about as we launch into a brand-new year, but the idea is not to wait until you’re not thinking clearly or when it’s too late and you don’t have what you need to protect yourself, your family and your property. The details, from the Fox Business news article, “3 financial documents everyone needs,” are straightforward. Put this on your to-do list today.

A Will. The essential function of a will is to ensure that your wishes are carried out, when you are no longer alive. It’s not just for rich people. Everyone should have a will. It can include everything from your financial assets to life insurance, family heirlooms, artwork and any real estate property.

A will can also be used to protect your business, provide for charities and ensure lifelong care for your pets.

If you have children, a will is especially important. Your will is used to name a guardian for your minor children. Otherwise, the state will decide who should raise your children.

Your will is also used to name your executor (referred to as the Personal Representative in Florida). That is the person who has the legal responsibility for making sure your financial obligations are honored and your assets are distributed according to your wishes. Without an executor, the state will appoint a person to handle those tasks.

An Advanced Medical Directive. What would happen if you became ill or injured and could not make medical decisions for yourself? An advanced medical directive and health care proxy are the documents you need to assign the people you want to make decisions on your behalf. The advanced medical directive, also called a living will, explains your wishes for care, including end-of-life care. The healthcare proxy appoints a person to make healthcare decisions for you. As long as you have legal capacity, these documents aren’t used, but once they are needed, you and your family will be glad they are in place.

A Durable Power of Attorney. This document is used to name someone who will make financial decisions if you are not able to do so. Be careful to name a person you trust implicitly to make good decisions on your behalf. That may be a family member, an adult child or an attorney.

Once you’ve had these documents prepared as part of your estate plan they documents should be reviewed and updated every now and then. Life changes, laws change and what was a great tax strategy at one point may not be effective, if there’s a change to the law. Your estate planning attorney will help create and update your estate plan.

Reference: Fox Business (Dec. 19, 2018) “3 financial documents everyone needs”

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”

New Estate Tax Law Enacted in Maryland Not Tied to Federal Tax Rate

The state legislature of Maryland has passed a law following the new tax reform that will limit the state’s estate tax exclusion amount.

The ability of the state to set laws regarding estate taxes has been exercised by Maryland, which has put its own estate law in place, separate and apart from the IRS.

TaxThe state legislature of Maryland has passed a law following the new tax reform that will limit the state’s estate tax exclusion amount to $5 million. Recently passed legislation permits portability between spouses of the deceased spouse’s unused exclusion amounts. This lets the personal representative or executor of the deceased spouse make an election on the decedent’s estate tax return to port the deceased spouse’s unused exclusion amount to the surviving spouse.

LegiScannotes in “MD HB308” that Maryland's estate tax exclusion amount has been "de-coupled" from the federal estate tax applicable exclusion amount (known as the "estate tax exemption") since 2004. However, a law enacted in 2014 provided for the eventual re-coupling of the Maryland Estate Tax Exclusion Amount to the Federal Applicable Exclusion Amount. This was phased in from 2014 through 2019. Full re-coupling was to be effective for decedents dying on or after January 1, 2019.

In effect, the 2014 Maryland law provided that for decedents dying on or after January 1, 2019, the Maryland estate tax exclusion amount would equal the amount that could be excluded under the federal estate tax. Prior to the passage of the Tax Cuts and Jobs Act in December 2017, the indexed federal exclusion amount was scheduled to be $5.7 million in January of 2019.

 However, with the new tax reform, the federal exclusion amount was upped to $10 million per person, indexed for inflation, for decedents dying on January 1, 2018 or later, through December 31, 2025. After indexing for inflation, the per person exclusion amount will be roughly $11.18 million in 2018.

Starting on January 1, 2026, the $10 million per person federal exclusion amount will sunset and return to the prior exclusion amount of $5 million per person, indexed for inflation.

The maximum Maryland estate tax rate of 16% is not altered with the new legislation .

In addition, the state’s inheritance tax is also unchanged. That rate is based on how closely related the decedent was to the people who inherit from him or her, rather than on the size of the estate. The inheritance tax doesn’t apply to surviving spouses and the children of a decedent.

The prior 2014 law still applies to decedents who passed in 2018, so the exclusion amount remains at $4 million for them. Note that the 2014 amount is not indexed for inflation and portability between spouses is not permitted.

Every state has its own estate tax laws, so it is best to meet with an estate planning attorney in your state to map out your family’s plan.

Reference: LegiScan (April 5, 2018) “MD HB308”

A Partial Checklist for Your Will

Having a will prepared is a gift of kindness to your loved ones. They will appreciate the effort to care for them, after you’ve passed on.

Having a will prepared is a gift of kindness to your loved ones. They will appreciate the effort to care for them, after you’ve passed on.

Th (2)If you need another reason to have a will prepared, consider the potential for conflict among loved ones who will have to guess about what your wishes were during a very difficult time. You can spare them that distress, by preparing your will and estate plan in advance.

US News & World Report’s article, “10 Steps to Writing a Will,”says that if you've been procrastinating on completing the task, here's your opportunity to cross it off your list. You can get going with these simple steps.

  1. Do-it-yourself? You can use online software to help you write your will.However, there are many horror stories of people who wrote their own wills with devastating consequences. Consider the late Supreme Court Justice Warren Burger. Wouldn’t you think he, of all people, could write a will? Nope. His will was just 450 words and had a ton of errors. His family spent a fortune in legal fees and had to pay more than $450,000 in taxes to collect their assets. Work with an experienced estate planning attorney. He or she will know how to help you efficiently and effectively.
  2. Beneficiaries.When you pass away, your beneficiaries will receive your assets. Be sure that this list is up-to-date.
  3. Executor. In Florida the Executor is referred to as the Personal Representative.This individual will make sure the wishes in your will are carried out. The key here is making sure you select a person who’s responsible. (They’ll be working with a probate attorney, so they don’t need any special knowledge of the law).
  4. Guardian.If you have minor children, you need to designate a friend or family member as a guardian. Check out Mastry Law’s free Parent’s Guide for lots more information on this topic.
  5. Be specific.Don’t be vague in your will and think everyone will know what you want. If you leave your will open to interpretation, it may end up in court.
  6. Be realistic.Even if you want to distribute your assets fairly, it still isn't easy. It’s best to talk to your heirs about your assets. Tell them that if they have their eye on anything other than house and cars, to let you know so you can write that down and make sure they get it when you die. This gives them some input.
  7. Witnesses.Be sure you have the witnesses required to sign your will. They can't be people who stand to inherit anything in the will. Witnesses also need to be at least 18 years old, and ideally, they'll be people who are likely to be around after you’re gone. That’s because if something’s amiss, and your will is contested in court, the judge may want to call a witness to testify.
  8. Keep your will safe.Be sure that someone you trust knows the location of your will, as well as any other important papers and passwords to financial institutions. Keep the original copy somewhere secure.
  9. Keep your will up to date.Major events, like the birth of a child, death, divorce, remarriage, moving to a new state, are all reasons to update your will. This year’s new tax laws may present opportunities that you don’t want to miss out on.

Reference: US News & World Report (June 19, 2018) “10 Steps to Writing a Will”

Have It Your Way, With a Will

Without a will, decisions about your life, property and children will be made by someone who does not know you or your family.

Without a will, decisions about your life, property and children will be made by someone who does not know you or your family. With a will, you have the ability to express your wishes. You need a will!

MP900430490Having a will is not just for wealthy folks, who need to pass large amounts of money across generations. It is a legal document that protects you while you are living, protects minor children if you die and also distributes property after you pass. Less than half of all adults in America have an estate plan, according to a 2017 survey by Caring.com, and what’s worse, only 36% with children under the age of 18 have a will.

Inside Indiana Business’ recent article,“With a Will, It's Done Your Way,”explained that if you die without a will (i.e., intestate), the law of the state where you reside determines how your property will be distributed. For example, in Indiana, here’s what happens:

  • If you’re married, your spouse gets half of your assets and your children/grandchildren get the other half.
  • If you’re married without children, your spouse gets three-quarters of your assets, and your parents will receive one-quarter.
  • If you’re single, 100% of your assets go to your children.
  • If you’re single without children, your parents get one-quarter of your property and your siblings, nieces, and nephews will receive the rest.

The court will also appoint some individual to take care of your children. That’s known as a guardian, and it’s usually a family member. While that may sound OK, a judge’s criteria may not be the same as yours. It’s better if you decide which family member or perhaps skip your family altogether and choose a friend to serve as guardian. Without a will, you give up your right to choose.

Talk to an experienced estate attorney who can prepare your will to be certain that your wishes are clearly articulated and minimize the potential for others to contest the terms.

An executor(also known as a personal representative) is the individual you name to carry out the wishes detailed in your will. He or she also is responsible for settling all your affairs. Consider carefully the person you select for this responsibility. You should also name a successor executor, in case your first choice is unable to act. An executor's job includes the following:

  • Determining your assets;
  • Contacting those you've named to receive property and distributing it to them;
  • Notifying the credit agencies of your death;
  • Canceling your credit cards;
  • Opening a bank account for your estate;
  • Ensuring debt payments, utilities, taxes and other outstanding expenses are paid, while your estate is open;
  • Paying debts;
  • Closing social media accounts;
  • Filing the will in the right probate court; and
  • Filing a final tax return and possibly an estate tax return.

Certain assets are distributed outside of the will, including property that is owned with another person (joint with rights of survivorship), life insurance policies, annuities, retirement accounts and other accounts with a named beneficiary. Be aware that anything with a beneficiary designation passes outside of the will, meaning that directions in the will about these types of assets will not matter: the beneficiary designation overrides the will.

Reference: Inside Indiana Business (June 11, 2018)“With a Will, It's Done Your Way”

Estate Plan Basics You and Your Heirs Cannot Do Without

To really serve its purpose, an estate plan must have the legal documents that will protect you and your heirs.

To really serve its purpose, an estate plan must have the legal documents that will protect you and your heirs, if you should become incapacitated. It’s not a pleasant thought, but it does happen.

MP900400665It’s true that an estate plan starts with a properly prepared will, and often includes a trust, but that is just the starting point for a complete estate plan. Even transferring assets upon your death, is only one part of an estate plan. Surprised? Many people are, but better to be surprised now then to have your heirs surprised later!

Investopedia’srecent article, “6 Estate Planning Must-Haves,”provides a list of items that every estate plan should have. This includes a will (and perhaps a trust), a durable power of attorney, up-to-date beneficiary designations, a letter of intent, a healthcare power of attorney, and guardianship designations.

Let's take a look at each item on the list to see if you’ve left any decisions to chance.

Wills and Trusts. This should be one of the main elements of every estate plan—even if you don't have substantial assets. Wills are documents that make certain property is distributed according to your wishes (if drafted pursuant to state laws). Some trusts also help limit estate taxes or legal issues. But this isn’t enough. The wording of these documents is extremely critical: a will or trust should be written in a way that’s consistent with the way you've bequeathed the assets that pass outside of the will.

Durable Power Of Attorney. A durable POA authorizes an agent of your own choosing to act on your behalf when you’re unable to do so for yourself. Without a power of attorney, a judge may have to decide what happens to your assets, if you’re found to be mentally incompetent. That ruling may not be what you wanted. A POA can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions in your stead (as if he or she were you). This POA is revocable by the principal at a time of his or her choosing, typically at a time when the principal is deemed to be physically able, mentally competent or upon death.

Beneficiary Designations. Some assets can pass directly to your heirs without being dictated in the will (like a 401(k) plan).  Therefore, it’s important to have an up-to-date beneficiary, as well as a contingent beneficiary, on these types of accounts. If you fail to designate a beneficiary, or if the beneficiary has passed away or is unable to serve, a judge may decide what to do with your funds. This again may not be what you wanted.

Letter of Intent. This is a document left to your executor or a beneficiary, that defines what you want done with a particular asset, after your death or incapacitation. It can also provide funeral details or other special requests. It’s not a legal document, but it helps inform a probate judge of your intentions and may help in the distribution of your assets, if the will is deemed invalid.

Healthcare Power of Attorney. This appoints another individual (usually a spouse or family member) to make important healthcare decisions on your behalf, in the event of incapacity. If you’re thinking about creating such a document, you should select someone you trust, who shares your views, and who would likely recommend a course of action with which you’d agree. A backup agent should also be named, if your initial pick is unavailable or unable to act at the time needed.

Guardianship Designations. If you have minor children or are considering having kids, choosing a guardian is very important and many times is overlooked. Be sure the individual or couple you choose shares your views, is financially sound and is willing to rear your children. You should also add a contingent guardian as well. Without these designations, a judge could rule that your kids should live with a family member you wouldn't have wanted, and in some cases, the court could require that your children become wards of the state.

It takes all of these documents to make up an estate plan, that protects you and your loved ones in the event of many different situations.

Reference: Investopedia (April 18, 2018)“6 Estate Planning Must-Haves”

Do I Have to Pay Taxes on an Inherited Annuity?

If it seems like everything is subject to an inheritance tax, well, that is often true.

Yes, there are taxes due on inherited annuities. The amount depends upon your relationship to the deceased and the value of the annuity.

TaxIf it seems like everything is subject to an inheritance tax, well, that is often true. In a recent article from nj.com, “Who pays inheritance tax on an annuity?” a beneficiary asks what happens when a Class D beneficiary inherits a qualified annuity.

In this case, which occurred in New Jersey, transfers for less than $500, life insurance proceeds, and certain state and federal pension payments are exempt. However, everything else is subject to the inheritance tax. This includes items controlled by beneficiary designations, instead of a will, like an IRA, 401(k) or annuity.

If it’s an annuity at issue, the date of death valuation must be listed on the New Jersey Inheritance Tax form (IT-R), which is for assets left to Class D beneficiaries. The personal representative (or executor or administrator) of the estate has a fiduciary duty to file the inheritance tax return (Form IT-R). The tax return, along with payment for any taxes owed, is due eight months from the date of death in that state.

The person responsible for paying the tax, depends on the deceased's will. For example, the will could state that all estate or inheritance taxes are paid out of the deceased's residuary estate, which is the part of a deceased's estate that remains after all debts have been paid and specific bequests have been distributed.

If the estate has sufficient funds to pay the tax, the beneficiaries won't owe anything.  However, the will could state that all estate/inheritance taxes are paid proportionately by the recipient, even for assets not controlled by the will. That’s the default in New Jersey, when the will doesn’t say how death taxes get apportioned or the deceased died intestate (without a will).

There can be an issue when the beneficiary refuses to pay his or her share. In that case, the executor is still obligated to pay the tax with other estate funds, if any, which will negatively affect the inheritance of other beneficiaries under the will.

In that case, the executor can sue to recover the funds from non-paying beneficiary. If the executor can't pay the tax because there aren’t enough funds in the estate, the state of New Jersey will bring a delinquency claim directly against the non-paying beneficiary.

The best course of action is simply for the beneficiary to pay their share. An executor with an uncooperative beneficiary, should speak with an estate planning attorney to explore their options and protect the estate and the executor.

Reference: nj.com (May 14, 2018)“Who pays inheritance tax on an annuity?”

Law Firm Comes Under Fire in $300 Million Estate Battle

Victor Posner amassed an extraordinary amount of wealth as a corporate raider, but his estate is as messy now as his business affairs were while he was alive.

Victor Posner amassed an extraordinary amount of wealth as a corporate raider, but his estate is as messy now as his business affairs were while he was alive.

GavelA lawsuit has been filed against a prominent Miami law firm by Brenda Nestor, the business associate and former girlfriend of businessman Victor Posner. Nestor was the primary beneficiary of Posner’s $321 million estate. The lawsuit charges Akerman LLP with civil conspiracy, breach of fiduciary duty and legal malpractice. Posner died sixteen years ago, but the battle over his estate is far from over.

Wealth Advisor’s article, “$300M Miami Estate Fight Gets Ugly, 16 Years Later,” reports that, according to the complaint filed in Miami-Dade Circuit Court last month, Brenda Nestor alleges that she suffered damages as a result of “negligent and reckless” legal advice the Akerman law firm provided to her court-appointed successor of Posner’s estate.

In 2015, Judge Celeste Hardee Muir removed Nestor, after she allegedly disregarded court orders for her failure to provide a full accounting of her actions as the Posner estate’s personal representative. The judge replaced Nestor with lawyer Philip von Kahle.

Nestor accused von Kahle—who is not named as a defendant in her lawsuit—of making her a scapegoat for the Posner estate’s dire finances. Her lawsuit states that the attorney is exercising his newly-developed 20-20 hindsight of the Great Recession that occurred in the late 2000s to early 2010s and that von Kahle started to second guess thousands of transactions she made, while acting as personal representative. She said that von Kahle was trying to “Monday-morning quarterback” her actions during her 13-year appointment as personal representative—many of which were approved by the probate court.

Nestor claims that von Kahle hired the Akerman law firm, which provided him with improper advice, such as recommending he file a lawsuit in 2016 against Fidelity to claim a $23.1 million bond she posted back in 2002 that allowed her to operate Posner’s real estate business through his estate. This lawsuit claims that Nestor caused the Posner estate to lose $375 million in value to negative $50 million during her tenure as personal representative. Her successor also accused Nestor of pouring “tens of millions of dollars into worthless businesses that were insolvent and had no value to the estate.”

Nestor accuses the law firm of breaching its fiduciary duty, by failing to advise the court of conflict of interests on Kahle regarding the sale of assets by self-dealing. She said the law firm knew this was happening, but did not tell the court about it. Nestor is being accused by von Kahle of using estate funds improperly, distributing money to herself personally and to companies that she had invested in.

Reference: Wealth Advisor (May 21, 2018)“$300M Miami Estate Fight Gets Ugly, 16 Years Later”

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