Personal Representative

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, “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: (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”

For Better or Worse, Why You Need to Update Your Estate Plan

These are the top four reasons to update your estate plan:

Major life events are reasons to update your estate plan, whether they are celebrations or sad events.

MP900422990These are the top four reasons to update your estate plan: birth, death, marriage and divorce. However, there are other reasons, including bankruptcy or receiving a surprise windfall.

The FDL Reporter recently published an article, “Best reasons to update estate plans include marriage, divorce, move, birth”that discusses life events that can impact your estate planning.

Marital Status. A change in your marital status definitely requires significant changes to your estate plan. If you've recently married, state law on marital property will now apply to the division and distribution of your estate upon your death.  If you've recently divorced, your estate plan should be updated to see that your ex is removed as a beneficiary and fiduciary, as well as any of his or her relatives.

Financial Status. If you're fortunate enough to have won the lottery or received an inheritance, you need to look at your existing estate plan to see that it still satisfies the needs of your now larger estate. If the opposite has occurred and your estate has declined in value, you also need an estate plan review.

Birth or Death of a Beneficiary or Fiduciary. You need to remove the individual's name.  However, if a spouse has died, your plan may need a complete overhaul. If you or a beneficiary have adopted or had a child, you need to add that child.

A Move to a New State.This is one of the most overlooked reasons to update your estate plan. Every state has different probate, tax, and estate laws.

You Don’t Remember the Last Time You Updated Your Estate Plan. The passage of time brings change to others, even if your life has not changed. Are the people you had named as fiduciaries still able to carry out those duties? Is the person you selected to be your executor, still the best candidate? Review your estate plan with your attorney to make sure that it still reflects your wishes and your life.

Reference: FDL Reporter (April 24, 2018) “Best reasons to update estate plans include marriage, divorce, move, birth”

Selecting an Executor: Not Always Easy

If there are no family members or friends with the necessary skills, your best option may be…

Don’t delay finalizing your estate plan, because determining who to name as you executor is difficult. Here’s some help to figure out how to make this important decision.

Th (2)If there are no family members or friends with the necessary skills, your best option may be to name your attorney as the third-party executor of your will. A useful article from, “Who should be executor of your will?”explains how this works.

An executor is a person you name in your will or who is appointed by the court and is given the legal responsibility to address a deceased person's remaining financial obligations. An executor is responsible for paying debts and creditors, filing tax returns, paying taxes, and distributing the estate's assets, pursuant to the deceased person's wishes as stated in the will.

The individual named as an executor in a will can refuse to accept this task. A person who originally accepted the role as executor may resign at any point in time. Therefore, it’s a good idea to name alternative executors. If you don’t, a judge will appoint a replacement executor, if your original selection says no for any reason.

Most executors typically perform their duties without payment, but they are entitled to some renumeration. The reason that most executors don't ask for compensation, is because most executors are close family members and perform their duties out of respect for their deceased loved one. The amount an executor gets paid, is usually set by state law and what a probate court decides is reasonable under the circumstances.

For larger estates, it may be wise to select a professional, such as an attorney, who is familiar with the duties and obligations of serving as an executor. This can be extremely useful, when the deceased was the owner of a business and the estate may be complicated.

Executors will frequently engage attorneys to assist them. For example, in New Jersey, an attorney may serve and get paid as an executor and may be paid an additional fee for legal work performed by that attorney.

New Jersey law says that executors can receive 5% on the first $200,000 of the trust principal, 3.5% on the excess over $200,000 up to $1 million, and 2% on the excess over $1 million.

The executor is also entitled to receive six percent on all income received by the executor. While family members often waive their rights to take statutory commissions, they are within their rights to do so.

Reference: 16, 2018) “Who should be executor of your will?”

Tom Benson Excludes Daughter and Grandchildren from his Will

The last will of multi-millionaire Tom Benson, who owned several professional sports teams and other businesses, did not include his daughter and her children

Before he died, the owner of the New Orleans Saints and Pelicans gave millions of dollars of property to his daughter and her children, but they were not included in his last will and testament.

Tom-BensonThe last will of multi-millionaire Tom Benson, who owned several professional sports teams and other businesses, did not include his daughter and her children, according to an article from KPVI,“Though excluded from his will, Tom Benson's daughter and grandchildren received much from family patriarch.”

Following Benson's death, court records indicate that his third wife Gayle became the sole beneficiary of an estate controlling New Orleans' NFL and NBA franchises, as well as the Dixie Brewing Co. There were other valuable businesses or properties in the estate: three car dealerships, the site of Benson Tower and Champions Square, a $3.6 million Uptown mansion, a racing stable and a parking lot used by fans attending Saints or Pelicans games.

As the will reads, daughter Renee Benson, granddaughter Rita LeBlanc, and grandson Ryan LeBlanc received nothing further. They were parties in a complex, two-year court battle that began in 2015 after a falling out with Benson. The three were left with control of three car dealerships, bank branches and a hunting ranch in and around San Antonio.

Louisiana law allows relatives up to five years to decide whether they want to challenge the validity of a will. The allegations are typically that the deceased was either mentally incapacitated or subject to undue influence in making the will.

 However, the estate planning attorney who helped Benson prepare his will, Paul Cordes Jr., said he’s confident the document would survive a challenge. Benson’s will was drafted only a few weeks after a New Orleans judge found Benson was mentally fit enough to handle his own affairs, which Renee and her children had denied in a lawsuit filed in 2015.

Although Gayle is the sole beneficiary of her late husband's estate, Saints and Pelicans President Dennis Lauscha is the administrator. All of Benson's property was placed in a trust, the governing terms of which haven't been made public.

When Gayle passes away—she’s now 71—it is likely that there will be trust rules that will direct the line of succession. Gayle has no children of her own. But we won’t know what those rules are unless very specific circumstances occur. Sounds like Benson did some good estate planning.

Reference: KPVI (March 19, 2018) “Though excluded from his will, Tom Benson's daughter and grandchildren received much from family patriarch”

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