Estate Planning Blog Articles

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How Not to Build a Family Football Dynasty

Pat Bowlen did everything right when planning for his NFL team to be transferred to new owners. He created a succession plan and filed it with the NFL, as required by the organization’s bylaws. He notified heirs of developments as they occurred. Despite this, for years before and after Bowlen died in 2019, the battle over his estate and ownership of the team was fiercer than any on the playing field, according to a recent article from Variety, “Broncos’ Fumbled Handoff Reveals Perils of NFL Estate Planning.”

With an average age of 72, National Football League owners are facing inheritance and estate planning challenges familiar to any family embarked upon planning for distribution of their possessions. However, it is on a gigantic scale. The average NFL franchise is worth around $4.14 billion, and ownership transfers must address not only taxes and estate law, but rules and restrictions of the NFL.

Trust and estate attorneys believe the NFL teams are ripe for succession problems. The value of the team, plus the scarcity—there are a limited number of teams, after all—is expected to lead to property disputes that can’t be easily resolved simply by selling the property and splitting the proceeds.

This past spring, a group led by Rob Walton, 77-year-old steward of the Walmart fortune and father of three, purchased the Broncos for $4.65 billion. The deal marked the conclusion of several years of high- profile legal battles where Bowlen family members went at it in court and in the media and underscores the unpredictable nature of succession planning.

What happened to the Bowlen family?

As Bowlen started to experience Alzheimer’s disease in the late 2000s, he started planning. In 2009, he revoked one trust to create a new one to be overseen by three trustees, who were each either a team executive or attorneys he’d known for many years. None was a member of the family.

The trust was created to manage a complex structure of the team’s ownership. The team was owned by PDB Sports, a limited partnership owned itself by Bowlen Sports Inc., which was owned by Patrick Bowlen and his brother John Bowlen. The trust would also operate other family-owned team properties, including Stadium Management Company, which operated Denver’s famous Mile High Stadium.

If the structure of the business wasn’t complex enough, the family’s internal relations were equally complicated. Seven children from two marriages, along with three siblings had been co-owners at various points in time and all had children of their own. No one agreed about the future of the team. They also disagreed about the competency and objectivity of the trustees.

Bowlen was the scion of a wealthy Canadian oil man. He and two brothers and one sister bought most of the Broncos in 1984 and the remainder of the team two years later. Each sibling owned about 25% of the team in 1986. The set up wasn’t sustainable because the NFL requires each team to identify one controlling owner. Over time, Pat Bowlen purchased equity from his siblings and gained control of the franchise. At the time of his death, he owned 76% of the team, and his brother John owned the other 24%.

Bowlen wanted the family to own the team just like the Rooney family, owners of the Pittsburgh Steelers. Selling the team was never part of his plan. However, his wishes were not expressed in his estate planning documents or trusts. The trustees declined a different succession plan from two daughters from his first marriage. When his second wife learned one of the daughters from the first marriage had attended an owner’s meeting in 2021, things got hotter. The second wife threatened to fire a trustee if the daughter from the first marriage began ascending as a controlling owner and the battles continued. The following years were filled with lawsuits and accusations.

There were many factors in this epic estate battle. However, it’s pretty likely having so many families embroiled in a high stakes battle would have undone any estate plan. A complex ownership structure, multiple families and a big price tag all contributed to the sale of the team, undermining Bowlen’s wishes to create a football family dynasty.

For most families, the stakes are not as high. However, the emotions can be just as intense. An estate plan created by an experienced estate planning attorney plus a plan for communication between all family members more often than not will achieve the desired goals.

Reference: Variety (Sep. 10, 2022) “Broncos’ Fumbled Handoff Reveals Perils of NFL Estate Planning”

Problems Created When No Will Is Available

Ask any estate planning attorney how much material they have for a book, or a movie based on the drama they see from family squabbles when someone dies without a will. There’s plenty—but a legal requirement of confidentiality and professionalism keeps those stories from circulating as widely as they might. This may be why more people aren’t as aware as they should be of how badly things go for loved ones when there’s no will, or the will is improperly drafted.

Disputes range from one parent favoring one child or children engaged in fierce fighting over personal possessions when there’s no will specifying who should get what, or providing a system for distribution, according to a recent article titled “Estate planning: 68% of Americans lack a will” from New Orleans City Business.

People don’t consider estate planning as an urgent matter. The pace of life has become so hectic as to push estate planning appointments to the next week, and the next. They also don’t believe their estates have enough value to need to have a will, but without a will, a modest estate could evaporate far faster than if an estate plan were in place.

The number of people having a will has actually decreased in the last twenty years. A few sources report the number keeps dipping from 50% in 2005, 44% in 2016 and 32% in 2022. In 2020, more Americans searched the term “online will” than in any other time since 2011.

Younger people seem to be making changes. Before the pandemic, only 16% of Americans ages 18-34 had a will. Today caring.com reports 24% of these young adults have a will. Maybe they know something their elders don’t!

One thing to be considered when having a will drafted is the “no contest clause.” Anyone who challenges the will is immediately cut out of the will. While this may not deter the person who is bound and determined to fight, it presents a reason to think twice before engaging in litigation.

Many people don’t know they can include trust provisions in their wills to manage family inheritances. Trusts are not just for super wealthy families but are good planning tools used to protect assets. They are used to control distributions, including setting terms and conditions for when heirs receive bequests.

Today’s will must also address digital assets. The transfer and administration of digital assets includes emails, electronic access to bank accounts, retirement accounts, credit cards, cryptocurrency, reward program accounts, streaming services and more. Even if the executor has access to log-in information, they may be precluded from accessing digital accounts because of federal or state laws. Wills are evolving to address these concerns and plan for the practicalities of digital assets.

Reference: New Orleans City Business (Sep. 8, 2022) “Estate planning: 68% of Americans lack a will”

Why are Trusts a Good Idea?

Estate planning attorneys know trusts are the Swiss Army knife of estate planning. Whatever the challenge is to be overcome, there is a trust to solve the problem. This includes everything from protecting assets from creditors to ensuring the right people inherit assets. There’s no hype about trusts, despite the title of this article, “Trusts—What Is The Hype?” from mondaq. Rather, there’s a world of benefits provided by trusts.

A trust protects assets from creditors. If the person who had the trust created, known as the “grantor,” is also the owner of the trust, it is best for the trust to be irrevocable. This means that it is not easily changed by the grantor. The trust also can’t be modified or terminated once it’s been set up.

This is the direct opposite of a revocable or living trust. With a revocable trust, the grantor has complete control of the trust, which comes with some downsides.

Once assets are transferred into an irrevocable trust, the grantor no longer has any ownership of the assets or the trust. Because the grantor is no longer in control of the asset, it’s generally not available to satisfy any claims by creditors.

However, this does not mean the grantor is free of any debts or claims in place before the trust was funded. Depending upon your state, there may be a significant look-back period. If this is the case, and if this is the reason for the trust to be created, it may void the trust and negate the protection otherwise provided by the trust.

Most people use trusts to protect assets for future generations, for a variety of reasons.

The “spendthrift” trust is created to protect heirs who may not be good at managing money or judging the character of the people they associate with. The spendthrift trust will protect against creditors, as well as protecting loved ones from losing assets in a divorce. The spouse may not be able to make a claim for a share of the trust property in a divorce settlement.

There are a few different trusts to be used in creating a spendthrift trust. However, the one thing they have in common is a “spendthrift clause.” This restricts the beneficiary’s ability to assign or transfer their interests in the trust and restricts the rights of creditors to reach the trust assets. However, the spendthrift clause will not avoid creditor claims, unless any interest in the trust assets is relinquished completely.

Greater protection against creditor claims may come from giving trustees more discretion over trust distribution. For instance, a trust may require a trustee to make distributions for a beneficiary’s support. Once those distributions are made, they are vulnerable to creditor claims. The court may also allow a creditor to reach the trust assets to satisfy support-related debts. Giving the trustee full and complete discretion over whether and when to make distributions will allow them to provide increased protection.

A trust requires the balance of having access to assets and preventing access from others. Your estate planning attorney will help determine which is best for your unique situation.

Reference: mondaq (Aug. 9, 2022) “Trusts—What Is The Hype?”

How to Manage Aging Parent’s Finances

A day will come when age begins to catch up with your parents and they will need help with their finances. Even if your parents don’t want to feel dependent, when you think they need your assistance, you can approach the issue with sensitivity and extend your support for the management of their finances, says Real Daily’s recent article entitled “5 Tips to Manage an Aging Parent’s Finances.” Here are some tips:

  1. Start the conversation early. Your parents may not need your help with the handling of their financial matters right away. However, it is smart to begin the conversation early. Approach the issue of who will manage the financial responsibilities when they’re no longer able to do it. Parents should select a trusted family member by providing their advance written consent. This will let you to talk about your parents’ financial issues with financial advisors, doctors and Medicare representatives and carry out timely financial planning.
  2. Create a list of all pertinent legal and financial documents. Prepare a list of your parents’ important contacts, bank account details and locations of any stored documents, like wills, property deeds, insurance policies and birth certificates. Make certain all information and documentation is accurate and up to date. If information needs to be modified because of a change of circumstances, this is time to apprise them of it and help them do what’s needed.
  3. Consider executing a power of attorney. A competent adult can sign a power of attorney to authorize another person to make decisions on their behalf. A power of attorney for a specific purpose may cover medical, financial, or other decisions, and it may be designed to give limited or more sweeping powers. When your parents sign a power of attorney with you named as their attorney in fact, it will legally empower you to make key decisions when they can’t. An elder law attorney can help you draft an appropriate power of attorney according to your situation.
  4. Document your actions and keep others in the know. Transparent communication will help you avoid misunderstandings or controversy within your family. Keep your parents, siblings and any other loved ones involved with your family informed about your actions. No matter how noble your intentions may be, if others are kept in the dark, it can raise questions about your motives. Managing the finances of aging parents is a lot of work, and you can ask for the support of family members or at least keep the lines of communication open.
  5. Don’ comingle your finances with your parents’ plans. While it may look to be a convenient or cost-effective thing to do, it’s never a good idea to combine your parents’ finances with your own. Keep them separate. Using your parents’ money for your purposes or your own money to help them out is usually a slippery slope that should be avoided. Don’t forget about your own financial goals and retirement savings while you focus on helping your parents.

Reference: Real Daily (Sep. 9, 2022) “5 Tips to Manage an Aging Parent’s Finances”

Can My Teeth Tell Me about My Health?

AARP’s recent article entitled “8 Surprising Things Your Teeth Can Tell You About Your Health” gives us some signs that our teeth can say about out health.

  1. Damaged tooth enamel can be a sign of eating disorders. While bulimia and anorexia are most common in young women, studies show that 13% of American women over 50 have signs of eating disorders. Bulimia is an illness characterized by a cycle of binge eating and self-induced vomiting, often leads to tooth damage. Acid created in the stomach by vomiting erodes the inner enamel or thin outer coating of the teeth. Anorexia is also a serious illness characterized by weight loss, difficulty maintaining an appropriate body weight, and distorted body image. Many people with bulimia are also anorexic, so those with anorexia may also have damage to their tooth enamel.
  2. Pale gums can be a sign of anemia. Anemia is a condition that develops when not enough rich, healthy red blood cells are produced in the body. This makes a person feel weak and tired. It can also cause shortness of breath, dizziness, headaches, and an irregular heartbeat. About 10% of the 35 million people in the U.S. over 65 are considered anemic.
  3. Osteoporosis can put people at risk for tooth loss. This is a bone disease that develops when bone density, mass, and structure in the body changes and can result in loss of bone strength and risk of bone fractures. About 54 million Americans have osteoporosis and low bone mass.
  4. Complications of kidney disease can lead to tooth loss. When the blood can’t be filtered properly, the result is kidney disease. Those with kidney disease often have compromised immune systems and chronic inflammation. A compromised immune system is susceptible to the overgrowth of bacteria or fungus in the body, which can lead to periodontal disease. This is a common bacteria-induced inflammatory disease that causes bleeding gums, wobbly teeth, and tooth loss.
  5. Oral thrush can be a sign of HIV. This is a fungal infection caused by a fungus called candida, which is normally present in low numbers in the mouths of many people. The problem happens when there’s an overgrowth of candida. This can be caused by several factors, including a compromised immune system.
  6. Acid reflux can cause damage to tooth enamel. Acid reflux happens when the contents of your stomach or stomach acid regurgitates into the esophagus. A dentist should easily be able to detect tooth damage by erosion from acid reflux.
  7. Poor dental hygiene is associated with cognitive decline. This can be a sign of cognitive decline, especially in those who have previously taken good care of their teeth. As brushing, flossing and dental visits become harder, the ability to maintain the health of the teeth lessens. Research has also connected tooth loss to a higher risk of dementia. When a senior who’s previously taken good care of his or her teeth has food debris in the mouth, the lack of self-care could indicate decline. Caregiver support may be needed.
  8. Teeth grinding can be a sign of sleep apnea. Sleep apnea causes breathing to stop or become very shallow during sleep. The National Sleep Foundation has found that 1 in 4 people with sleep apnea also grind their teeth at night. Untreated sleep apnea is associated with serious health problems like high blood pressure, type 2 diabetes, liver problems, and even dementia.

Reference: AARP (July 22, 2022) “8 Surprising Things Your Teeth Can Tell You About Your Health”

What Is a QTIP Trust?

A Qualified Terminable Interest Property Trust, or QTIP, is a trust allowing the person who makes the trust (the grantor) to provide for a surviving spouse while maintaining control of how the trust’s assets are distributed once the surviving spouse passes, as explained in the article “QTIP Trusts” from Investopedia.

QTIPs are irrevocable trusts, commonly used by people who have children from prior marriages. The QTIP allows the grantor to take care of their spouse and ensure assets in the trust are eventually passed to beneficiaries of their own choosing. Beneficiaries could be the grantor’s offspring from a prior marriage, grandchildren, other family members or friends.

In addition to providing the surviving spouse with income, the QTIP also limits applicable estate and gift taxes. The property within the QTIP trust provides income to the surviving spouse and qualifies as a marital deduction, meaning the value of the trust is not taxable after the death of the first spouse. Rather, the property in the QTIP trust will be included in the estate of the surviving spouse and subject to estate taxes depending on the value of their own assets and the estate tax exemption in effect at the time of death.

The QTIP can also assert control over how assets are handled when the surviving spouse dies, as the spouse never assumes the power of appointment over the principal. This is especially important when there is more than one marriage and children from more than one family. This prevents those assets from being transferred to the living spouse’s new spouse if they should re-marry.

A minimum of one trustee must be appointed to manage the trust, although there may be multiple trustees named. The trustee is responsible for controlling the trust and has full authority over assets under management. The surviving spouse, a financial institution, an estate planning attorney or other family member or friend may serve as a trustee.

The surviving spouse named in a QTIP trust usually receives income from the trust based on the trust’s income, similar to stock dividends. Payments may only be made from the principal if the grantor allows it when the trust was created, so it must be created to suit the couple’s needs.

Payments are made to the spouse as long as they live. Upon their death, the payments end, and they are not transferable to another person. The assets in the trust then become the property of the listed beneficiaries.

The marital trust is similar to the QTIP, but the is a difference in how the assets are controlled. A QTIP allows the grantor to dictate how assets within the trust are distributed and requires at least annual distributions. A marital trust allows the surviving spouse to dictate how assets are distributed, regular distributions are not required, and new beneficiaries can be added. The marital trust is more flexible and, accordingly, more common in first marriages and not in blended families.

Your estate planning attorney will explain further how else these two trusts are different and which one is best for your situation. There are other ways to create trusts to control how assets are distributed, how taxes are minimized and to set conditions on benefits. Each person’s situation is different, and there are trusts and strategies to meet almost every need imaginable.

Reference: Investopedia (Aug. 14, 2022) “QTIP Trusts”

What’s a ‘Pot Trust’?

A pot trust is a type of trust that names the children as beneficiaries and the trustee is given discretion to decide how the trust assets should be spent. This trust lets the grantor create a single pool of assets to be used for the benefit of multiple children. A pot trust can offer more flexibility as to how trust assets are used if you plan to leave your entire estate to your children, says Yahoo Finance’s recent article entitled “How Does a Pot Trust Work?”

If you create a family pot trust for your three children and one of them experiences a medical emergency, the trustee would be able to authorize the use of trust funds or assets to cover those costs.

Flexibility is a key element of family pot trusts. Assets are distributed based on the children’s needs, rather than setting specific distribution rules as to who gets what. You might consider this type of trust over other types of trusts if:

  • You have two or more children;
  • At least one of those children is a minor; and
  • You plan to leave your entire estate to your children when you pass away.

Pot trusts can be created for children when you plan to leave all of your assets to them. Generally, a pot trust ends when the youngest included as a beneficiary reaches a certain age. As long as the trust is in place, the trustee can use his or her discretion to determine the way in which trust assets may be used to provide for the beneficiaries’ well-being. The aim is to satisfy the financial needs of individual children as they arise.

However, pot trusts don’t ensure an equal distribution of assets among multiple children. And a family pot trust can also put an increased burden on the trustee. In effect, the trustee has to take on a parental role for financial decision-making. That’s instead of adhering to predetermined directions from the trust grantor. And children may also not like at having to wait until the youngest child comes of age for the trust to terminate and assets to be distributed.

Setting up a pot trust isn’t that different from setting up any other type of trust. Ask an experienced estate planning attorney to help you.

Reference: Yahoo Finance (Aug. 30, 2021) “How Does a Pot Trust Work?”

How Can I Minimize My Probate Estate?

Having a properly prepared estate plan is especially important if you have minor children who would need a guardian, are part of a blended family, are unmarried in a committed relationship or have complicated family dynamics—especially those with drama. There are things you can do to protect yourself and your loved ones, as described in the article “Try these steps to minimize your probate estate” from the Indianapolis Business Journal.

Probate is the process through which debts are paid and assets are divided after a person passes away. There will be probate of an estate whether or not a will and estate plan was done, but with no careful planning, there will be added emotional strain, costs and challenges left to your family.

Dying with no will, known as “intestacy,” means the state’s laws will determine who inherits your possessions subject to probate. Depending on where you live, your spouse could inherit everything, or half of everything, with the rest equally divided among your children. If you have no children and no spouse, your parents may inherit everything. If you have no children, spouse or living parents, the next of kin might be your heir. An estate planning attorney can make sure your will directs the distribution of your property.

Probate is the process giving someone you designate in your will—the executor—the authority to inventory your assets, pay debts and taxes and eventually transfer assets to heirs. In an estate, there are two types of assets—probate and non-probate. Only assets subject to the probate process need go through probate. All other assets pass directly to new owners, without involvement of the court or becoming part of the public record.

Many people embark on estate planning to avoid having their assets pass through probate. This may be because they don’t want anyone to know what they own, they don’t want creditors or estranged family members to know what they own, or they simply want to enhance their privacy. An estate plan is used to take assets out of the estate and place them under ownership to retain privacy.

Some of the ways to remove assets from the probate process are:

Living trusts. Assets are moved into the trust, which means the title of ownership must change. There are pros and cons to using a living trust, which your estate planning attorney can review with you.

Beneficiary designations. Retirement accounts, investment accounts and insurance policies are among the assets with a named beneficiary. These assets can go directly to beneficiaries upon your death. Make sure your named beneficiaries are current.

Payable on Death (POD) or Transferable on Death (TOD) accounts. It sounds like a simple solution to own many accounts and assets jointly. However, it has its own challenges. If you wished any of the assets in a POD or TOD account to go to anyone else but the co-owner, there’s no way to enforce your wishes.

An experienced, local estate planning attorney will be the best resource to prepare your estate for probate. If there is no estate plan, an administrator may be appointed by the court and the entire distribution of your assets will be done under court supervision. This takes longer and will include higher court costs.

Reference: Indianapolis Business Journal (Aug. 26,2022) “Try these steps to minimize your probate estate”

Why Is a Will So Important?

A 2020 Gallup poll found that less than half of Americans have a will or have made plans regarding how they would like their money and estate handled in the case of their death. The poll also showed that Americans ages 65 and up are the most likely to have a will.

Yahoo News’ recent article entitled “How To Write A Will: The Importance Of A Will And Living Will” says that no matter your age, it’s important to have a will to be in control of what happens with your own assets. A will is a legal document that establishes a person’s wishes regarding the distribution of their assets — money, real estate, etc. — and the care of any minor children.

Without a will, state law may control who gets your “probate” assets and when. Having a will can save an enormous amount of time and money in estate administration and the process of having a guardian appointed for your minor children, if needed.

There’s a big difference between a will and a living will. A living will is a document that lets you state in advance how you want to be treated under certain medical situations, if you’re unable to make those decisions for yourself at a later time.

These differ by state law. However, they generally cover end-of-life decision-making and treatment options. General medical decisions unrelated to end of life care are typically covered in a health care power of attorney. Some states combine these two documents into one directive.

Unlike a living will, which specifically provides instructions for medical care during your lifetime, a will lets you to decide in advance who you want to receive your assets upon your death, and who you want to be in charge of handling the administration of your estate. If you have minor children, a will also allows you to nominate a guardian for them.

When creating a will, think about the “what,” the “who” and the “how.” To do so, ask yourself the following questions:

  • What assets do you have?
  • To whom do you want to leave them?
  • Who do you want to be in charge of making sure that happens?
  • Who do you want to be responsible for your minor children?
  • How do you want the assets transferred?

Reference: Yahoo News (Aug. 17, 2022) “How To Write A Will: The Importance Of A Will And Living Will”

Can I Retire in a Bear Market?

Money Talks News’ recent article entitled “Retiring in a Bear Market? 7 Things to Do Now” says that research has shown that this scenario — known as sequence-of-return risk — can permanently reduce the amount of money you will have to live on during retirement. However, savvy retirees can avoid most or all of this damage. If you’re planning to retire right into the teeth of a bear market, consider the following:

Meet with a money pro. If you make the wrong decisions here, it can have life-altering effects. This is the perfect moment to speak with a financial adviser. The right pro can help you develop a plan.

Tighten your spending. A bear market may mean  you must downsize your grand visions. The more money you keep in your wallet when the market is down, the better off you’re likely to be when the bull market returns. When the market recovers, you can pick up your dreams where you left them.

Use your savings. A great way to avoid permanently ruining your finances in retirement is to have cash savings to use when stocks collapse. Living off your liquid savings keeps you from having to cash in stocks when their value is depressed, which allows your portfolio time to recover.

Consider your Social Security options. When retiring into a bear market, you either have to take Social Security now, so you can leave your investments alone and give them more time to recover; or wait to claim Social Security, hoping that there will be bigger checks later in retirement that will help cushion the blow, if your other finances do not recover robustly. There’s no simple answer, and many factors can help you determine which strategy is best. These include your health, your risk tolerance, your marital status and many other considerations.

Review your asset allocation. Bear markets are the ultimate test of your tolerance for risk. With stocks down at least 20% — the definition of a “bear market” — consider your feelings. This can help you determine if your asset allocation is too risky, too conservative, or just right. Making certain that your allocation matches your risk tolerance will put you in a better position for the next bear market.

Going back to working. Bear markets rarely last long, often disappearing in less than a year. A part-time job or freelance work can give you a bit of extra income to ride out the storm, possibly even allowing you to leave all of your savings untouched. When the market recovers, you can return to your full-time retirement.

Stay calm. The tendency is to panic. Resist the urge.

Reference: Money Talks News (July 25, 2022) “Retiring in a Bear Market? 7 Things to Do Now”