Estate Planning Blog Articles

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Should I Create an LLC for Estate Planning?

If you want to transfer assets to your children, grandchildren or other family members but are worried about gift taxes or the weight of estate taxes your beneficiaries will owe upon your death, a LLC can help you control and protect assets during your lifetime, keep assets in the family and lessen taxes owed by you or your family members.

Investopedia’s article entitled “Using an LLC for Estate Planning” explains that a LLC is a legal entity in which its owners (called members) are protected from personal liability in case of debt, lawsuit, or other claims. This shields a member’s personal assets, like a home, automobile, personal bank account or investments.

Creating a family LLC with your children lets you effectively reduce the estate taxes your children would be required to pay on their inheritance. A LLC also lets you distribute that inheritance to your children during your lifetime, without as much in gift taxes. You can also have the ability to maintain control over your assets.

In a family LLC, the parents maintain management of the LLC, and the children or grandchildren hold shares in the LLC’s assets. However, they don’t have management or voting rights. This lets the parents purchase, sell, trade, or distribute the LLC’s assets, while the other members are restricted in their ability to sell their LLC shares, withdraw from the company, or transfer their membership in the company. Therefore, the parents keep control over the assets and can protect them from financial decisions made by younger members. Gifts of shares to younger members do come with gift taxes. However, there are significant tax benefits that let you give more, and lower the value of your estate.

As far as tax benefits, if you’re the manager of the LLC, and your children are non-managing members, the value of units transferred to them can be discounted quite steeply—frequently up to 40% of their market value—based on the fact that without management rights, LLC units become less marketable.

Your children can now get an advance on their inheritance, but at a lower tax burden than they otherwise would’ve had to pay on their personal income taxes. The overall value of your estate is reduced, which means that there is an eventual lower estate tax when you die. The ability to discount the value of units transferred to your children, also permits you to give them gifts of discounted LLC units. That lets you to gift beyond the current $15,000 gift limit, without having to pay a gift tax.

You can give significant gifts without gift taxes, and at the same time reduce the value of your estate and lower the eventual estate tax your heirs will face.

Speak to an experienced estate planning attorney about a family LLC, since estate planning is already complex. LLC planning can be even more complex and subject you to heightened IRS scrutiny. The regulations governing LLCs vary from state to state and evolve over time. In short, a family LLC is certainly not for everyone and it appropriately should be vetted thoroughly before creating one.

Reference: Investopedia (Oct. 25, 2019) “Using an LLC for Estate Planning”

Your Estate Plan Needs to Be Customized

The only thing worse than having no estate plan, is an estate plan created from a ‘fill-in-the-blank’ form, according to the recent article “Don’t settle for a generic estate plan” from The News-Enterprise. Compare having an estate plan created to buying a home. Before you start packing, you think about the kind of house you want and how much you can spend. You also talk with real estate agents and mortgage brokers to get ready.

Even when you find a house you love, you don’t write a check right away. You hire an engineer to inspect the property. You might even bring in contractors for repair estimates. At some point, you contact an insurance agent to learn how much it will cost to protect the house. You rely on professionals, because buying a home is an expensive proposition and you want to be sure it will suit your needs and be a sound investment.

The same process goes for your estate plan. You need the advice of a skilled professional–the estate planning lawyer. Sometimes you want input from trusted family members or friends. There other times when you need the estate planning lawyer to help you get past the emotions that can tangle up an estate plan and anticipate any family dynamics that could become a problem in the future.

An estate planning attorney will also help you to avoid problems you may not anticipate. If the family includes a special needs individual, leaving money to that person could result in their losing government benefits. Giving property to an adult child to try to avoid nursing home costs could backfire, making you ineligible for Medicaid coverage and cause your offspring to have an unexpected tax bill.

Your estate planning lawyer should work with your team of professional advisors, including your financial advisor, accountant and, if you own a business, your business advisor. Think of it this way—you wouldn’t ask your real estate agent to do a termite inspection or repair a faulty chimney. Your estate plan needs to be created and updated by a skilled professional: the estate planning lawyer.

Once your estate plan is completed, it’s not done yet. Make sure that the people who need to have original documents—like a power of attorney—have original documents or tell them where they can be found when needed. Keep in mind that many financial institutions will only accept their own power of attorney forms, so you may need to include those in your estate plan.

Medical documents, like advance directives and healthcare powers of attorney, should be given to the people you selected to make decisions on your behalf. Make a list of the documents in your estate plan and where they can be found.

Preparing an estate plan is not just signing a series of fill-in-the-blank forms. It is a means of protecting and passing down the estate that you have devoted a lifetime to creating, no matter its size.

Reference: The News-Enterprise (June 23, 2020) “Don’t settle for a generic estate plan”

Baseball Champion Sues Daughter-In-Law, denies having Dementia

Eighty-two-year-old Giants great Orlando Cepeda filed a lawsuit against his daughter-in-law Camille Cepeda alleging elder financial abuse, fraud and infliction of emotional distress, as reported in the article “Giants great Orlando Cepeda denies having dementia, sues daughter-in-law for fraud” from the San Francisco Chronicle. He also accused her of negligence in handling his finances, after giving her power of attorney in 2018.

Cepeda accuses Camille of spending his money on personal expenses, including lease payments on a $62,000 Lexus, a Louis Vuitton handbag, expensive wine and taking out at least $24,000 in cash from his accounts. It also claims that she has placed all of his baseball memorabilia in a storage locker and will not give him the key or the location of the locker. That includes his National League Most Valuable Player trophy, which he wants back.

This is the latest news from a dispute that began after the Hall of Famer married his second wife, Nydia. They had two of Cepeda’s four sons, including Ali Cepeda, who is married to Camille. The parents are now not speaking to their son, and some of the brothers, four in total, have taken sides and are not speaking to each other.

Cepeda granted his daughter-in-law power of attorney in April 2018, two months after he suffered a heart attack and irreversible brain damage caused by oxygen deprivation. She was to have access to his accounts and pay his bills. Before the heart attack, she had handled his financial and business affairs.

On May 29, Camille filed a petition with the court seeking conservatorship of Cepeda, stating that he has dementia and cannot make his own financial decisions. Two of Cepeda’s sons, including Camille’s husband Ali, filed papers supporting her petition.

In Cepeda’s response, he cited two neuropsychological reports, including one done in May, that declared that he was fit to make his own medical decisions and understands all but the most complex financial issues. Cepeda says that his daughter-in-law filed for conservatorship to cover up the fraud that he is alleging in the lawsuit. He says that he does not need a conservator, and if anyone should have that role, it would be his wife Nydia.

The lawsuit filed by Cepeda offers a glimpse into why he believes she wants conservatorship, saying he doesn’t have the capacity to understand the nature and consequences of his remarriage, nor his decision to remove Camille as power of attorney and grant it to Nydia.

The suit alleges that Camille was opposed to the marriage from the start and even suggested they stage a fake ceremony that would not be legally sanctioned.

Cepeda’s lawsuit seeks damages, legal fees and demands that Camille return his memorabilia and all financial records she has allegedly refused to provide to account for how she handed his money. The suit also cites a $62,000 withdrawal to pay Cepeda’s tax bill, which was not actually paid. The filing says she was negotiating with the IRS, but she will not provide the documentation that he needs to settle with the government. Nor did she pay a medical bill for $6,800, although she did cash a check from the insurance company that was sent to pay for it.

Cepeda remains hopeful that the entire matter may be settled, before the case returns to court.

“It’s very painful,” Cepeda told a reporter. “I love my family. I love my kids. But this is life. You have to do what you have to do.”

Reference: San Francisco Chronicle (June 26, 2020) “Giants great Orlando Cepeda denies having dementia, sues daughter-in-law for fraud”

Picasso’s Sole Heir Continues to Sell Artwork

The great artist was also known for the many women he was involved with, but he only married two of them, says a recent article that asks “Who are Picasso’s heirs? Auction at Sotheby’s reignites dispute,” appearing in The Wealth Advisor. Officially, there is only one legitimate heir to Picasso’s vast estate, but that wasn’t settled until after his death.

Picasso’s first child was Paulo, born to Olga Khokhlova, a famous Russian dancer. They wed in 1918, during World War I. Paulo would have been an heir, but he died in 1975. Picasso fathered other children outside of wedlock, including Paloma in 1940, Claude in 1947, and Maya in 1935. Only after their father’s death and legal battles, were Picasso’s grandchildren recognized as rightful heirs to part of his inheritance.

Long-standing disputes between Picasso’s second wife, Jaqueline Roque, and the children from his previous lovers went from slow simmer to boil after his death in 1973. Picasso had married Roque in 1961, after Khokhlova had died. He was 80 and had never divided his estate or did any estate planning. He left an enormous empire—villas, artwork and other possessions—with no plan and no will.

After his death, a famous Parisian auctioneer was commissioned to log all of his artwork, creating a list for the French government. The task took from 1974 to 1981.

The entire estate was estimated to be worth 3.75 billion francs, including $1.3 million in gold, $45 million in cash and a personal art collection valued at 1.4 billion francs. The collection included many pieces created by friends like Matisse, Miro and Cezanne.

One of the many problems he left for his heirs: an inheritance tax of several million francs on his property. To pay his taxes, 3,800 artworks became state property and instead of belonging to his heirs, they are now in the Picasso Museum in Paris. The museum has the largest collection of Picasso’s work. However, that might not have been his or his heirs’ intention.

Picasso’s granddaughter, the daughter of his eldest son Paolo and the only surviving relative by marriage, Marina Ruiz-Picasso, said that the state took a large selection of artwork, and the rest was raffled off to the individual heirs like a lottery.

She wrote a book about being his granddaughter, and it was not flattering. She said that his father’s work “demanded human sacrifices.” Needless to say, she had a difficult relationship with her famous grandfather. For many years, she left his artwork untouched in storage. However, in recent years, she has auctioned off many paintings and drawings, earning millions from the sales.

An online auction of more than 200 pieces, including drawings, paintings and gold medallions, took place in mid-June at Sotheby’s. Marina Ruiz-Picasso is one of the wealthiest women in Switzerland and lives in a villa on Lake Geneva.

Reference: The Wealth Advisor (June 16, 2020) “Who are Picasso’s heirs? Auction at Sotheby’s reignites dispute”

Elder Financial Abuse Risk Increasing for Seniors Isolated by Pandemic

The extended isolation and loneliness during the coronavirus pandemic is creating the perfect storm for financial exploitation of seniors, who are unable to visit with family members and friends, reports Fredericksburg Today in the article “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation.” The unprecedented need to forgo socializing makes seniors who are already at risk, even more vulnerable.

In the past, scammers would deliberately strike during a health crisis or after the death of a loved one. By gathering data from obituaries and social media, even establishing relationships with support and social groups, scammers can work their way into seniors’ lives.

Social distancing and the isolation necessary to protect against the spread of the coronavirus has left many seniors vulnerable to people posing as their new friends. The perpetrators may not just be strangers: family members are often the ones who exploit the elderly. The pandemic has also led to changes in procedures in care facilities, which can lead to increased confusion and dependence for the elderly, who do not always do well with changes.

Here are a few key markers for senior financial abuse:

  • A new friend or caregiver who is overly protective and has gotten the person to surrender control of various aspects of their life, including but not limited to finances.
  • Fear or a sudden change in how they feel towards family members and/or friends.
  • A reluctance to discuss financial matters, especially if they say the new friend told them not to talk about their money with others.
  • Sudden changes in spending habits, or unexplained changes to wills, new trustees, or changes to beneficiary designations.
  • Large checks made out to cash, or the disappearance of assets.
  • Signatures on checks or estate planning documents that appear different than past signatures.

Not being able to visit in person makes it harder for family members to discern what is happening.  However, there are a few steps that can be taken by concerned family members. Stay in touch with the family member, by phone, video calls, texts or any means possible. Remind loved ones that scammers are always looking for an opportunity and may try to exploit them during the pandemic.

Every community has resources that can help, if elder financial abuse is a concern. An elder law estate planning attorney will be able to direct concerned family members or friends to local resources to protect their loved ones.

Reference: Fredericksburg Today (June 20, 2020) “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation”

Save Your Family Stress and Plan Your Funeral

Making your way through the process of the death of a family member is an extremely personal journey, as well as a very big business that can put a financial strain on the surviving family.

Rate.com’s recent article entitled “Plan Your Own Funeral, Cheaply, and Leave Behind a Happier Family”  notes that on an individual basis, it can be a significant cost for a family dealing with grief. The National Funeral Directors Association found that the median cost for a traditional funeral, with a basic casket that also includes a vault (the casket liner most cemeteries require) can cost more than $9,000. With the cost of a (single) plot and the services of the cemetery to take care of the burial and ongoing maintenance and other expenses,  it can total more than $15,000.

Instead, if you opt for cremation and a simple service, it will run only $2,000 or less. That would save your estate or your family $13,000. Think of the amount of legacy that can grow from your last wishes.

If you want to research it further, it can be difficult. Without your directions, your grieving family is an easy mark for a death care industry that’s run for profit. Even with federal disclosure rules, most states make it impossible to easily comparison shop among funeral service providers, and online price lists aren’t required. However, you can do the legwork to make it easier on your family, when you pass.

Funeral homes also aren’t usually forthright about costs that are required rather than optional. The median embalming cost is $750.However, there’s no regulation requiring embalming. Likewise, a body need not be placed in a casket for cremation. The median cost for a cremation casket is $1,200 but an alternative “container” might cost less than $200.

The best thing you can do for your family is to write it down your wishes and plans and make it immediately discoverable.

It can be a great relief to tell your family everything you want (and don’t want). However, if that’s not feasible with your family dynamics, be certain that you detail of all your wishes in writing. You should also make sure that the document can be easily located by your executor.

Here’s a simple option: Write everything out, place your instructions in a sealed envelope and let your children and the executor know the location of the letter.

This elementary step can be the start to helping their decision-making when you pass away, and potentially provide some extra money to help them reach their goals.

Reference: rate.com (June 21, 2020) “Plan Your Own Funeral, Cheaply, and Leave Behind a Happier Family”

Why Did Spain’s King Renounce His Inheritance from His Father?

In addition to saying no to his father’s money, King Felipe VI of Spain has also renounced his right to any shares, investments, or financial vehicles that “may be inconsistent with the law or the standards of honesty and integrity which govern his institutional and private activities and should inform the activities of the crown,” according to a statement from the royal household.

CNN’s article entitled “Spain’s King Felipe VI renounces his inheritance from his father” explains that Juan Carlos abdicated in 2014 amid scandal. Felipe pledged to improve transparency around the royal family, with the country becoming more frustrated by its expense to the public during a financial crisis.

The statement is an attempt by Felipe to distance himself, and the institution, from media reports that the royal family had benefited from two financial funds linked to Juan Carlos. The former monarch will also no longer receive an annual grant payment from the royal family budget.

King Juan Carlos ended his 39-year reign under suspicious circumstances. There were accusations of corruption and excess plaguing the royal family. That was a great fall from when Spaniards held him in high regard for leading the country into democracy, after the death of the dictator Francisco Franco.

However, Juan Carlos’ popularity took a blow in 2012 over a controversial elephant-hunting trip to Africa, while the nation was in the middle of a deep economic crisis. He resigned from public life in June 2019, as several scandals were made public.

Some Spaniards have called for the monarchy to be scrapped for the establishment of a republic. Resentment in Spain has grown over the cost of the royal family to the public, despite the monarchy’s relatively austere reputation compared with other European royals.

Of the 10 main royal families in Europe, nine still get public funding for carrying out their duties. The one exception is the Princely House of Liechtenstein, which doesn’t get any taxpayer money to cover its expenses.

Spain’s royal family has the third-smallest budget of the group.

Taxpayers pay the royal family $9 million a year—much less than the $107 million given to the British monarchy or the $54 million spent on the royal family in Monaco.

Reference: CNN (March 17, 2020) “Spain’s King Felipe VI renounces his inheritance from his father”

Can Bad Thoughts Bring on Dementia?

There is recent research that has shown a link between repeated patterns of repetitive negative thinking (RNT) and signs of dementia. This study suggests a link between the key signs of dementia, the buildup of proteins in the brain and cognitive decline, and RNT.

Medical News Today reported in its recent article entitled “Link between dementia and repetitive negative thinking identified” that this study was published in the journal Alzheimer’s & Dementia. The study set forth the foundation for future research to consider how the link may function, and if psychological therapies that treat RNT can inhibit Alzheimer’s and other dementias.

The CDC explains that dementia is a term that represents a variety of diseases characterized by cognitive decline, which includes trouble remembering, thinking or making decisions that adversely affect a person’s everyday life.

The most common type of dementia is Alzheimer’s disease. This is a degenerative disease, which means it worsens over time. It’s not yet known exactly what causes Alzheimer’s disease. The CDC says that there are likely several factors involved. There is currently no cure for Alzheimer’s.

Prior research has suggested that psychological factors, like depression and anxiety, may also have a connection to Alzheimer’s. This has led researchers to develop the concept of cognitive debt as a risk factor for Alzheimer’s disease, which they believe is acquired by RNT. A large part of RNT are processes of rumination — repeatedly thinking about the past — and worry, being concerned about the future.

The research examined the participants’ RNT, depression, anxiety and cognitive decline levels for up to four years. They also measured the levels of tau and amyloid proteins in the brains of 113 of the participants. Scientists think that the buildup of these structures is key to the development of Alzheimer’s.

The authors of the new research discovered that the higher a person’s RNT, the faster their cognitive decline. They also found these people were more likely to have significant deposits of tau and amyloid proteins. However, although the research found a link between depression and anxiety and cognitive decline, they did not find a connection between depression and anxiety and the buildup of tau and amyloid proteins.

According to the lead author of the study Dr. Natalie Marchant of University College, London, United Kingdom, “[d]epression and anxiety in mid-life and old age are already known to be risk factors for dementia. Here, we found that certain thinking patterns implicated in depression and anxiety could be an underlying reason why people with those disorders are more likely to develop dementia.

“Taken alongside other studies that link depression and anxiety with dementia risk, we expect that chronic negative thinking patterns over a long period of time could increase the risk of dementia. We do not think the evidence suggests that short-term setbacks would increase one’s risk of dementia.

“We hope that our findings could be used to develop strategies to lower people’s risk of dementia, by helping them to reduce their negative thinking patterns.”

The study’s authors say that it’s probable that RNT contributes to Alzheimer’s in some way, possibly elevating an individual’s stress levels. However, they couldn’t discount the possibility that early signs of Alzheimer’s could lead to RNT.

Reference:  Medical News Today (June 11, 2020) “Link between dementia and repetitive negative thinking identified”

Should Nursing Homes Plan for Future Pandemics?

Roughly 6,000 nursing home residents have died during the pandemic in New York State.

The coronavirus pandemic has exposed vulnerabilities for one of the country’s most high-risk populations: our senior citizens.

Spectrum News reports in the article “Nursing Homes Could Be Required to Have Pandemic Plan” reports that a proposed bill in that state would require nursing homes to have plans for future pandemics, make those plans readily available on websites, provide regular updates on the status of patients and establish protection plans for staff and residents.

In addition, communication via videoconferencing must be made available for residents.

The bill would also mandate that a pandemic plan preserve a resident’s place in a nursing home after hospitalization is through. It would also include provisions for the facilities to have a minimum two-month supply of personal protective equipment (PPE).

The New York State Department of Health will be required to audit facilities annually for compliance.

“The nature of COVID19 exposed a tragic vulnerability among one of our most high-risk populations: our elderly,” said Assemblyman Joe Lentol, a Brooklyn Democrat. “The rapid spread of the virus in nursing homes exposed a fatal flaw in pandemic planning and it is clear that more has to be done to protect nursing home residents and its healthcare workers.”

New York’s response to nursing homes during the crisis has come under some scrutiny. Part of that has been a March 25 order that required the facilities to take in COVID-positive patients.

New York Governor Andrew Cuomo has partially reversed that directive, by banning hospitals from discharging people to nursing homes who are still positive for the virus.

Cuomo has also placed some of the blame on the CDC guidelines for permitting nursing homes to take COVID residents. However, he didn’t raise the issue in a recent meeting with President Trump.

Twice weekly testing of nursing home and adult care facility staff is now underway. The testing capacity and supply has increased in New York over the past month.

The bill must still be considered by Governor Cuomo for approval.

Reference: Spectrum News (May 28, 2020) “Nursing Homes Could Be Required to Have Pandemic Plan”

Suggested Key Terms: Elder Law Attorney, Elder Care, Caregiving, Legislation

Why was Widow of Henry Ford II in a Fight over the Estate?

Henry Ford II’s heirs say that his attorney, Frank Chopin, tried to control their access to Ford’s 80-year-old widow, Kathleen DuRoss Ford.

Her daughters, Kimberly DuRoss and Deborah DuRoss Guibord, alleged that Chopin abused her, by “[forcing] pills down her throat.”

The Wealth Advisor article entitled “Ford Heirs Lose Battle to Oust Mother’s Allegedly Abusive Caregiver” explains that Chopin has power of attorney over the widow’s affair and denies the allegations.

A Palm Beach, Florida judge denied their request to have Chopin removed as her caregiver. It was a decision that left her daughters, grandchildren and even her 82-year-old sister, Sharon, distraught.

Tara DuRoss, a 23-year-old granddaughter of Ford’s, said that Chopin had restricted her time with her relatives. They were forced to scheduled conference calls and meetings away from her home. However, the calls then stopped.

“I used to call her every day. We just want to be able … to see her.”

Chopin said that it is untrue that Tara spoke to Kathleen daily. He called her an “idiot child,” and said the family was “estranged,” unless “they wanted something.”

Kathleen DuRoss Ford passed away on May 9.

Henry Ford II was also known as “HF2” or “Hank the Deuce.” He was the eldest son of Edsel Ford and eldest grandson of Henry Ford of the leading family in the American automotive industry.

After his death from pneumonia in 1987, DuRoss Ford was involved in a public fight over the fate of the estate, which was then thought to be at least $350 million. The legal battle eventually settled, and she received an annual allowance that was worth millions of dollars.

Reference: Wealth Advisor (March 31, 2020). “Ford Heirs Lose Battle to Oust Mother’s Allegedly Abusive Caregiver”