Estate Planning Blog Articles

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estate planning

How Do I Make Sure My Wife Gets the House?

Nj.com’s article “Will my wife get my house when I die?” explains that many of life’s transitions and big events, such as marriage, divorce, new job, birth or adoption of a child and others, are the triggers to address in your estate and financial plan.

It’s not uncommon for a person’s decisions made before marriage as a bachelor, not to match up with a future with a new spouse.

As far as making certain that a house with a sister on the deed passes to the spouse, depends on how the house was titled at purchase. The titling of an asset can affect the way in which it would be transferred at death.

With real estate, most frequently, a person would have titled it either as Tenancy in Common (TIC) or Joint Tenancy with Rights of Survivorship (JTWROS).

If a person elects to go with JTWROS, then at his death, the house will avoid probate and pass entirely to the sister.

The law stipulates that the sister would be the full owner of the house, in which the man and his new wife had been living.

If you select to title as TIC, upon the man’s death, his half of the house would go to his estate. This doesn’t avoid probate. Therefore, the rights of the estate will be determined according to the decedent’s will.

However, neither scenario is too great for the wife. This potentially leaves her in a stressful situation upon her husband’s death.

A wise approach is for the man to begin a dialog with the sister and an experienced estate planning attorney, who can help draft an agreement or help to change the titling of the house.

His will and beneficiaries should also be updated at the same time.

Another recommendation is to consider life insurance to provide for the wife after his death.

Reference: nj.com (June 18, 2020) “Will my wife get my house when I die?”

real estate investments

Can I Add Real Estate Investments in My Will?

Motley Fool’s recent article entitled “How to Include Real Estate Investments in Your Will” details some options that might make sense for you and your intended beneficiaries.

A living trust. A revocable living trust allows you to transfer any deeds into the trust’s name. While you’re still living, you’d be the trustee and be able to change the trust in whatever way you wanted. Trusts are a little more costly and time consuming to set up than wills, so you’ll need to hire an experienced estate planning attorney to help. Once it’s done, the trust will let your trustee transfer any trust assets quickly and easily, while avoiding the probate process.

A beneficiary deed. This is also known as a “transfer-on-death deed.” It’s a process that involves getting a second deed to each property that you own. The beneficiary deed won’t impact your ownership of the property while you’re alive, but it will let you to make a specific beneficiary designation for each property in your portfolio. After your death, the individual executing your estate plan will be able to transfer ownership of each asset to its designated beneficiary. However, not all states allow for this method of transferring ownership. Talk to an experienced estate planning attorney about the laws in your state.

Co-ownership. You can also pass along real estate assets without probate, if you co-own the property with your designated beneficiary. You’d change the title for the property to list your beneficiary as a joint tenant with right of survivorship. The property will then automatically by law pass directly to your beneficiary when you die. Note that any intended beneficiaries will have an ownership interest in the property from the day you put them on the deed. This means that you’ll have to consult with them, if you want to sell the property.

Wills and estate plans can feel like a ghoulish topic that requires considerable effort. However, it is worth doing the work now to avoid having your estate go through the probate process once you die. The probate process can be expensive and lengthy. It’s even more so, when real estate is involved.

Reference: Motley Fool (June 22, 2020) “How to Include Real Estate Investments in Your Will”

estate planning

Did ‘The Gambler’ Have Estate Planning?

An article from Wealth Advisor entitled “What Kenny Rogers Leaves Behind After Four Divorces And Restaurant Armageddon,” says that he was a hit machine, racking up an estimated $250 million through extensive touring, TV appearances, and constant radio play.

Rogers was a singer, songwriter, actor, record producer and entrepreneur.

He was elected to the Country Music Hall of Fame in 2013 and charted more than 120 hit singles.  He topped the country and pop album charts for more than 200 individual weeks in the U.S. alone. He sold more than 100 million records worldwide during his lifetime, making him one of the best-selling music artists of all time.

However, Rogers may not have left a lot of that money behind. He built a 425-restaurant chain in the 1990s that should have been his retirement plan. However, those restaurants closed everywhere, except in Asia. He had no licensing fees for use of the name, so there’s no revenue for his heirs.

The issue is whether Rogers accumulated sufficient wealth in life to support the lifestyles of his family. He left a wife (his fifth) and five adult kids behind. Kenny paid out $60 million to settle his fourth divorce in 1993, which was half his fortune.

While it was a while after his commercial peak, he started working on a smaller scale and married again, raising his two youngest kids. Kenny continued to tour and record, but his health became an issue. He decided the 2017 tour would be his last— and he was forced to cancel that one as well.

Kenny most likely only had whatever cash he set aside in conventional investment accounts, working real estate and other retirement assets. It’s unclear how much that was, but it’s probably enough to keep his widow comfortable for the rest of her life. That’s another challenge with late marriages. Roger died at 81, and wife No. 5 is just 57.

So, in theory, she needs those assets to last another 40 years to maintain her lifestyle.

Reference: Wealth Advisor (March 23, 2020) “What Kenny Rogers Leaves Behind After Four Divorces And Restaurant Armageddon”

llc for estate planning

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”

renounce an inheritance

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”

henry ford estate

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”

will a house

Should I Give My Kid the House Now or Leave It to Him in My Will?

Transferring your house to your children while you’re alive may avoid probate, the court process that otherwise follows death. However, gifting a home also can result in a big, unnecessary tax burden and put your house at risk, if your children are sued or file for bankruptcy.

Further, you also could be making a big mistake, if you hope it will help keep the house from being used for your nursing home bills.

MarketWatch’s recent article entitled “Why you shouldn’t give your house to your adult children” advises that there are better ways to transfer a house to your children, as well as a little-known potential fix that may help even if the giver has since passed away.

If you bequeath a house to your children so that they get it after your death, they get a “step-up in tax basis.” All the appreciation that occurred while the parent owned the house is never taxed. However, when a parent gives an adult child a house, it can be a tax nightmare for the recipient. For example, if the mother paid $16,000 for her home in 1976, and the current market value is $200,000, none of that gain would be taxable, if the son inherited the house.

Families who see this mistake in time can undo the damage, by gifting the house back to the parent.

Sometimes people transfer a home to try to qualify for Medicaid, the government program that pays health care and nursing home bills for the poor. However, any gifts or transfers made within five years of applying for the program can result in a penalty period, when seniors are disqualified from receiving benefits.

In addition, giving your home to someone else also can expose you to their financial problems. Their creditors could file liens on your home and, depending on state law, get some or most of its value. In a divorce, the house could become an asset that must be sold and divided in a property settlement.

However, Tax Code says that if the parent retains a “life interest” or “life estate” in the property, which includes the right to continue living there, the home would remain in her estate rather than be considered a completed gift.

There are specific rules for what qualifies as a life interest, including the power to determine what happens to the property and liability for its bills. To make certain, a child, as executor of his mother’s estate, could file a gift tax return on her behalf to show that he was given a “remainder interest,” or the right to inherit when his mother’s life interest expired at her death.

There are smarter ways to transfer a house. There are other ways around probate. Many states and DC permit “transfer on death” deeds that let people leave their homes to beneficiaries without having to go through probate. Another option is a living trust.

Reference: MarketWatch (April 16, 2020) “Why you shouldn’t give your house to your adult children”

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”