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”

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”

What Jackie Kennedy Knew about CLATs and Estate Planning

What most people don’t know about Jackie Kennedy was her role as an innovative steward of her family’s wealth and philanthropic legacy, reports a recent article from Forbes titled “Elevating Your Estate And Legacy: A Lesson From Jackie Kennedy.” After her husband’s assassination, she was in charge of a $44 million plus estate and her actions spoke volumes about her values and view for the future.

Jackie Kennedy initiated a Charitable Lead Annuity Trust (CLAT), which today many refer to as the Jackie Onassis Trust.

She created a CLAT receptacle through her will, so her children could elect to transfer some or all of their inherited assets in exchange for significant charitable, tax and non-tax benefits. They were not required to do this. However, it was an option for assets including stock, real estate and other capital. The CLAT offered her children three possible benefits: avoiding federal estate tax on all and any assets transferred to the CLAT, tax-efficient philanthropic giving for a limited number of years and continued investment of CLAT assets, which could be ultimately returned to the child or gifted to future generations at the end of the CLAT’s charitable period.

In addition, during the charitable term, the annual payments required to be distributed via the CLAT to charities would have created income tax deductions against the CLAT’s taxable income.

Despite their mother’s recommendations, the first lady’s children opted against funding the CLAT.

According to an article from The New York Times in 1996, if the Jackie Onassis Trust was worth $100 million and if the beneficiaries had executed the CLAT, the family would have inherited approximately $98 million tax-free in 2018, with charities receiving $192 million.

Instead, the children paid $23 million in estate taxes, leaving the estate with $18 million.

Besides the clear adage of “Mother knows best,” this is an example of the potential power of a CLAT to satisfy the charitable and family wealth transfer of the trust creator and individual beneficiaries. Since the 1960s, more sophisticated trust variants have been created to improve on the original CLAT.

One of these is the Optimized CLAT, a tax-planning trust which accomplishes four goals. It generates a dollar-for-dollar tax deduction in the year of funding, returns an expected 1x-5x of the initial contribution back to the contributor, immediately exempts contributed assets from the 40% federal gift and estate tax and exempts the transferred assets from the contributor’s personal creditors.

These complex estate planning strategies will become increasingly popular as federal estate taxes return to lower levels in near future. Your estate planning attorney will guide you as to which type of trust works best for you and your family, for now and for generations to follow.

Reference: Forbes (Aug. 19, 2022) “Elevating Your Estate And Legacy: A Lesson From Jackie Kennedy”

Some Key Documents Should Be Considered Before Sending Your Child Off to College

In the United States, as soon as a minor turns 18, they’re typically considered a legal adult.

As a result, parents no longer have any authority to make decisions for their child, including financial and health care decisions.

Yahoo’s recent article entitled “Don’t Let Your Child Leave for College Without Signing Three Critical Documents” asks what if your adult child becomes sick or is in an accident and ends up hospitalized?

Because of privacy laws, known as Health Insurance Portability and Accountability Act (HIPAA), you wouldn’t have any rights to get any information from the hospital regarding your child’s condition. Yes, we know you’re her mother. However, that’s the law!

You also wouldn’t have the ability to access his or her medical records or intercede on your child’s behalf regarding medical treatment and care.

If your child’s unable to communicate with doctors, you’d also have to ask a judge to appoint you as your child’s guardian before being able to be told of his or her condition and to make any healthcare decisions for them.

While this is hard when your child is still living at home, it’s a huge headache if your child is attending college away from home.

However, there’s a relatively easy fix to address this issue:

Ask an experienced estate planning attorney about drafting three legal documents for your child to sign:

A Durable Power of Attorney (DPOA) for Health Care. This document designates the parent as your child’s patient advocate.
A HIPAA Authorization gives you access to your child’s medical records and lets you to discuss his or her health condition with doctors.
A DPOA for Financial Matters, designates the parent as your child’s agent, so that you can manage your child’s financial affairs, including things like banking and bill paying, in case your child becomes sick or injured, or is unable to act for any reason.

Reference: Yahoo (Aug. 2, 2022) “Don’t Let Your Child Leave for College Without Signing Three Critical Documents”

Who Inherited from the Estate of ‘the Man in Black’?

Johnny Cash spent a few years in the Air Force, where he and his friends created their first band. He then met his first wife, Vivian, and they married in 1954. Their first daughter, Rosanne, was born in 1955, followed by Kathleen, Cindy, and Tara. Johnny and Vivian divorced in 1966.

MSN’s recent article entitled “Here’s Who Inherited Johnny Cash’s Wealth After He Died” reports that June Carter Cash helped Johnny Cash turn his life around, after he became addicted to drugs and alcohol. They married in 1968 and welcomed their son John Carter Cash a few years later. June also had two kids, Rosie and Carlene, from her first marriage.

After a long and prolific music career, Cash left behind plenty of cash for his son, but little for his daughters according to his will. He’d amassed a $60 million to $100 million fortune. The Nashville Ledger reported that just before his death, he finalized his estate details. Since then, the money continued to grow, reaching as much as $300 million.

The family fight has to do with one song in particular, Ring of Fire. June Carter Cash, Johnny Cash and Merle Kilgore wrote the song together which was released in 1963, five years before June and Johnny got married. Decades later, it’s caused a heated debate among the Cash children. Since June and Johnny only had one biological child together, John Carter Cash, it meant that all their other children were excluded from getting royalties from the song. The four kids that Cash had with his first wife — Rosanne, Cindy, Tara, and Kathleen — didn’t get any of the royalties from the song.

Johnny gave each of his four daughters $1 million in his will. However, that’s nothing compared to the steady stream of royalties generated by the hit country song. Moreover, after Cash died, fans began playing the song again, raking in millions more in royalties.

There are conflicting stories about the origins of Ring of Fire. According to the Irish Examiner, Johnny told Vivian that he gave June “half credit” on the tune—but only because he felt bad that June was low on funds. The New York Daily News reported that Cash and Merle Kilgore wrote the song while on a fishing trip. However, since Johnny was going through his divorce with Vivian at the time, he added June as a writer so the tune wouldn’t be tied entirely to him. Regardless of the actual origins of the song, Johnny, Merle Kilgore and June are the officially credited writers of the song.

However, Johnny’s daughters eventually sued their brother, John Carter Cash. They also wanted to earn royalties from the song. However, they lost their case in 2007. As a consequence, John Carter Cash is the publishing rights owner for at least some of his dad’s extensive musical legacy.

Reference: MSN (July 19, 2022) “Here’s Who Inherited Johnny Cash’s Wealth After He Died”

Pay Attention to Income Tax when Creating Estate Plans

While estate taxes may only be of concern for mega-rich Americans now, in a relatively short time, the federal exemption rate is scheduled to drop precipitously. Estate planning underway now should include consideration of income tax issues, especially basis, according to a recent article titled “Be Mindful of Income Tax in Estate Planning, Particularly Basis” from National Law Journal.

Because of these upcoming changes, plans and trusts put into effect under current law may no longer efficiently work for income tax and tax basis issues.

Planning to avoid taxes has become less critical in recent years, when the federal estate tax exemption is $10 million per taxpayer indexed to inflation. However, the new tax laws have changed the focus from estate tax planning to coming tax planning and more specifically, to “basis” planning. Ignore this at your peril—or your heirs may inherit a tax disaster.

“Basis” is an oft-misunderstood concept used to determine the amount of taxable income resulting when an asset is sold. The amount of taxable income realized is equal to the difference between the value you received at the sale of the asset minus your basis in the asset.

There are three key rules for how basis is determined:

Purchased assets: the buyer’s basis is the investment in the asset—the amount paid at the time of purchase. Here’s where the term “cost basis” comes from

Gifts: The recipient’s basis in the gift property is generally equal to the donor’s basis in the property. The giver’s basis is viewed as carrying over to the recipient. This is where the term “carry over basis” comes from, when referring to the basis of an asset received by gift.

Inherited Assets: The basis in inherited property is usually set to the fair market value of the asset on the date of the decedent’s death. Any gains or losses after this date are not realized. The heir could conceivably sell the asset immediately and not pay income taxes on the sale.

The adjustment to basis for inherited assets is usually called “stepped up basis.”

Basis planning requires you to review each asset on its own, to consider the expected future appreciation of the asset and anticipated timeline for disposing the asset. Tax rates imposed on income realized when an asset is sold vary based on the type of asset. There is an easy one-size-fits-all rule when it comes to basis planning.

Estate planning requires adjustments over time, especially in light of tax law changes. Speak with your estate planning attorney, if your estate plan was created more than five years ago. Many of those strategies and tools may or may not work in light of the current and near-future tax environment.

Reference: National Law Review (July 22, 2022) “Be Mindful of Income Tax in Estate Planning, Particularly Basis”

Did COVID Spark More Estate Planning?

Those who have had a serious bout with the coronavirus (COVID-19) are 66% more likely to have created a will than those who did not get as sick, according to Caring.com’s 2022 Wills and Estate Planning Study.

COVID has accounted for more than one million deaths in the United States thus far.

MSN’s recent article entitled “More Young Adults Are Making This Surprising and Smart Money Move” says that it may be even more surprising that the number of adults in the 18-to-34 age range who now have estate planning documents has jumped 50% in the pandemic era.

Nonetheless, many people of all ages continue to put off the process of creating this key estate planning document.

Two-thirds of Americans still don’t have a will.

Caring.com found that among those who don’t have a will, a third say they think they don’t have enough wealth to warrant one.

However, even if you don’t have an expensive home, a large IRA and other valuable assets to pass on, you can still benefit from creating a will.

There’s no minimum level of wealth needed to have an estate plan, and every adult should have a basic plan in place to care for their own needs and the needs of their family.

The Caring.com survey of more than 2,600 adults found that—you guessed it—good old-fashioned procrastination is the primary reason people don’t create a will. About 40% admit to this factor.

Not surprisingly, the survey also found that those with higher incomes are more likely to put off getting a will due to procrastination.

Those people with lower incomes don’t prioritize a will because they don’t feel they have the assets to justify this important legal document.

Reference: MSN (July 24, 2022) “More Young Adults Are Making This Surprising and Smart Money Move”

When Should I Hire an Estate Planning Attorney?

Kiplinger’s recent article entitled “Should I Hire an Estate Planning Attorney Now That I Am a Widow?” describes some situations where an experienced estate planning attorney is really required:

Estates with many types of complicated assets. Hiring an experienced estate planning attorney is a must for more complicated estates. These are estates with multiple investments, numerous assets, cryptocurrency, hedge funds, private equity, or a business. Some estates also include significant real estate, including vacation homes, commercial properties and timeshares. Managing, appraising and selling a business, real estate and complex investments are all jobs that require some expertise and experience. In addition, valuing private equity investments and certain hedge funds is also not straightforward and can require the services of an expert.

The estate might owe federal or state estate tax. In some estates, there are time-sensitive decisions that require somewhat immediate attention. Even if all assets were held jointly and court involvement is unnecessary, hiring a knowledgeable trust and estate lawyer may have real tax benefits. There are many planning strategies from which testators and their heirs can benefit. For example, the will or an estate tax return may need to be filed to transfer the deceased spouse’s unused Federal Estate Unified Tax Credit to the surviving spouse. The decision whether to transfer to an unused unified tax credit to the surviving spouse is not obvious and requires guidance from an experienced estate planning attorney.

Many states also impose their own estate taxes, and many of these states impose taxes on an estate valued at $1 million or more. Therefore, when you add the value of a home, investments and life insurance proceeds, many Americans will find themselves on the wrong side of the state exemption and owe estate taxes.

The family is fighting. Family disputes often emerge after the death of a parent. It’s stressful, and emotions run high. No one is really operating at their best. If unhappy family members want to contest the will or are threatening a lawsuit, you’ll also need guidance from an experienced estate planning attorney. These fights can result in time-intensive and costly lawsuits. The sooner you get legal advice from a probate attorney, the better chance you have of avoiding this.

Complicated beneficiary plans. Some wills have tricky beneficiary designations that leave assets to one child but nothing to another. Others could include charitable bequests or leave assets to many beneficiaries.

Talk to an experienced attorney, whose primary focus is estate and trust law.

Reference: Kiplinger (July 5, 2022) “Should I Hire an Estate Planning Attorney Now That I Am a Widow?”

Did Former NFL Tackle and Fox Sports Commentator Tony Siragusa have an Estate Plan?

In June 2022, former NFL tackle and Fox Sports commentator Tony “The Goose” Siragusa died at the age of 55. The death of the popular athlete was confirmed to TMZ Sports by Siragusa’s former teammate Jamal Lewis. Lewis also played on the Baltimore Ravens Super Bowl winning team in 2001.

MSN’s recent article entitled “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?” says that no cause of death was included with the announcement of Siragusa’s passing.

Siragusa was first drafted by Indianapolis and played a dozen years in the NFL before working more than 10 years on the sidelines for Fox Sports.

In a 2012 interview with Howard Stern, he revealed that his father died young from a heart attack at the age of 48, and that heart disease runs in the Siragusa family.

As a success both before and after his playing career, Tony left behind a sizable net worth when he died.

At the time that Siragusa died in 2022 his net worth was $6 million, according to Celebrity Net Worth. He also earned a $500,000 annual salary for his on-camera work with “Fox on Sunday.”

In addition to the money Siragusa made through football both in the game and on the sidelines, he was also an actor. Siragusa had a role in the hit HBO TV series “The Sopranos,” as well as other parts. Siragusa also hosted “Man Caves” on the DIY Network, as well as other TV appearances.

As news of Siragusa’s death spread, Indianapolis Colts owner Jim Irsay tweeted that Siragusa was the strongest player he’d ever seen in Irsay’s’ half-century in football. Siragusa was drafted by Indianapolis in 1990.

“I’m heartbroken as is all of Colts Nation,” Irsay also tweeted.

Siragusa is survived by his wife, Kathy Siragusa, and their three children.

Referring to the death of his former teammate, Jamal Lewis said, “It’s a sad day to be a Raven.”

Reference: MSN (June 22, 2022) “What Was NFL Legend Tony Siragusa’s Net Worth When He Died?”

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