The Latest on the Denver Broncos and Late Owner Pat Bowlen’s Trust

The Denver Post’s recent article entitled “Broncos ask Denver County District Court to confirm right-of-first-refusal is terminated” says that the battle over the Denver Broncos football team is far from over, and what Pat Bowlen intended in his trust may not come to pass.

After Pat Bowlen died in 2019 at age 75 after a long battle with Alzheimer’s, his two oldest daughters placed themselves at risk of being disinherited by challenging their father’s trust. The trust is tasked with choosing the next controlling owner of the Denver Broncos, a pro football franchise valued at more than $2.5 billion.

“This lawsuit is a proactive, necessary step to ensure an efficient transition of ownership, whether the team remains in the Bowlen family or is sold,” long-time Bowlen attorney Dan Reilly said in a statement. “We are confident that the court will find the right of first refusal is no longer enforceable, consistent with Colorado law and the intentions of Pat Bowlen and Edgar Kaiser in their written agreement more than 36 years ago.”

So, if the Broncos’ next controlling owner is Pat’s daughter Brittany, the preferred choice of the trustees, or if the team is sold to an outside buyer, they should be able to move forward without interference from Kaiser’s camp. Kaiser died in January 2012.

Even if this lawsuit drags on, it will not cause a delay in the Arapahoe County District Court battle between Bowlen’s daughters Beth Bowlen Wallace and Amie Klemmer and the trustees who want to invalidate the 2009 trust on the grounds that Pat did not have the capacity to sign his estate-planning documents.

This part of the Broncos ownership soap opera began in May 2020, when an attorney sent the Broncos counsel a letter stating that his client be sent “notice,” if the team named a new controlling owner or was sold. When Kaiser sold 60.8% of the Broncos to Bowlen in 1984, a right of first refusal was included in the agreement. A year later, Bowlen bought the other 39.2% from John Adams and Tim Borden for $20 million.

In 1998, Bowlen offered retired quarterback John Elway the chance to buy 10% of the team for $15 million. However, Kaiser opposed, saying Bowlen had to offer any piece of the Broncos to him before he offered it to another party. The courts ruled in Bowlen’s favor, even though Elway didn’t take him up on the offer. The court said the right of first refusal only applied to the 60.8% ownership interest that Pat purchased from Kaiser. However, Pat’s win didn’t totally eliminate the right of first refusal, which gave Kaiser 14 days to decide whether to buy the team if Bowlen found a buyer.

Reference: Denver Post (Jan. 26, 2021) “Broncos ask Denver County District Court to confirm right-of-first-refusal is terminated”

Sound Like a Broken Record in Estate Planning?

After a year like the last, estate planning attorneys may sound like a broken record, repeating their message over and over again: No matter your age, wealth, or familial structure, you should have a last will and testament, powers of attorney and a health care proxy.

Everyone needs these documents, to protect wealth, children, spouses, family and yourself.

Wealth Advisor’s recent article entitled “2020 Concludes With Intestate Celebrity Estates” says that the execution of legal documents does have a financial cost. This can keep some people from talking to an experienced estate planning attorney. Others say they are simply too busy to take care of the matter, so they delay. There are other people don’t want to talk about issues of sickness and mortality because they just can’t bring themselves to think about these important estate planning documents.

It doesn’t matter who you are, these types of issues are seen with all kinds of people. Recently, we’ve learned that several celebrities died intestate or without a last will and testament. For example, Argentinian soccer great Diego Armando Maradona died in November at the age of 60. He had a fortune including real estate, financial assets and jewelry, but his life was filled with drama. Diego fathered eight children from six different partners but signed no last will and testament. Fighting among his many heirs is expected, especially with his large estate. Diego said publicly that he wanted to donate his entire estate and not leave his children anything. However, he died of a heart attack before putting this plan in place. Therefore his next-of-kin, not the charities, received his assets.

Another notable person who died intestate recently is former Zappos CEO Tony Hsieh, who died at age 46. His estate is valued at $840 million. Hsieh was survived by his two brothers and his parents. He recently purchased eight houses in Park City, Utah, so this purchase of real estate across state lines will make the administration of his estate even more complicated without a last will and testament or a trust.

Finally, actor Chadwick Boseman died intestate at age 43, after a long battle with colon cancer. His wife, Simone Ledward, petitioned the California courts to be named the administrator of his estate. The couple married in early 2020. As a result, she was qualified to administer and receive from his estate. He had no children, so under California probate law, she gets the entire estate.

These recent deaths of three celebrities, none of whom were elderly, show the need for individuals of all ages, backgrounds and wealth to address their estate plans and not put it off.

Reference: Wealth Advisor (Jan. 19, 2020) “2020 Concludes With Intestate Celebrity Estates”

If I Move to a New State, Do I Need to Update My Estate Plan?

The U.S. Constitution requires states to give “full faith and credit” to the laws of other states. As a result, your will, trust, power of attorney, and health care proxy executed in one state should be honored in every other state.

Although that’s the way it should work, the practical realities are different and depend on the document, says Wealth Advisor’s recent article entitled “Moving to a New State? Be Sure to Update Your Estate Plan.”

Your last will should still be legally valid in the new state. However, the new state may have different probate laws that make certain provisions of the will invalid. This can also happen with revocable trusts.

However, it’s not as common with powers of attorney and health care directives. These estate planning documents should be honored from state to state, but sometimes banks, medical professionals, and financial and health care institutions will refuse to accept the documents and forms. They may have their own, as is the case frequently with banks.

You should also know that the execution requirements of your estate planning documents may be different, depending on the state.

For example, there are some states that require witnesses on durable powers of attorney, and others that do not. A state that requires witnesses may not allow a power of attorney without witnesses to be used to convey real estate, even though the document is perfectly valid in the state where it was drafted and signed.

With health care proxies, other states may use different terms for the document, such as “durable power of attorney for health care” or “advance directive.”

When you move to a different state, it’s also a smart move to consult with an experienced estate planning attorney to make certain that your estate plan in general is up to date. There are also other changes in circumstances—like a change in income or marital status—that can also have an impact on your estate plan. Moreover, there may be practical changes you may want to make. For example, you may want to change your trustee or agent under a power of attorney based on which family members will be closer in proximity.

For all these reasons, when you move out of state it’s wise to have an experienced estate planning attorney in your new home state review your estate planning documents.

Reference: Wealth Advisor (Jan. 26, 2021) “Moving to a New State? Be Sure to Update Your Estate Plan”

Would Life Estate Have an Impact Taxes on an Inherited Home?

Nj.com’s recent article entitled “My mom added us to her deed and then died. Do we owe taxes?” explains that assuming mom retained an interest in the house or lived in the house after putting her children’s names on the deed, the IRS considers the property to be part of the taxable estate of the mother.

That is a critical point, when it comes to the amount of tax the children may have to pay.

She most likely kept a “life estate” in the home. This is where a person owns the property only through the duration of their lifetime. It is called “a tenant for life” or a “life tenant.”

A life estate is a restriction on the property because it prevents the beneficiary (usually the children) from selling the property that produces the income before the beneficiary’s death.

When the mom passes away, the life estate automatically stops and the children now have all of the rights associated with the property. As to income tax, when the parent dies, the property receives a “step up” in basis to the date of death value.

If the mom in our example had a life estate, the children would receive a “step up” in basis to the fair market value of the property on the date of death.

That means that the capital gain that would be taxed to the children would be the difference between the fair market value of the property when their mother died and the net proceeds of the sale.

Retaining the life estate can help a child avoid the capital gains tax more effectively than a simple transfer of the property outright to the child.

Talk to an experienced estate planning attorney about life estates and taxes, when you inherit a home.

Reference: nj.com (Feb. 18, 2021) “My mom added us to her deed and then died. Do we owe taxes?”

What are the Scariest Statistics for Retirement?

Think Advisor’s recent article entitled “11 Scariest Retirement Statistics: 2020” says that there is a lack of preparation, savings difficulty and general uncertainty that American retirees are facing. Here are those scary stats:

Just a quarter of Americans are on a trajectory to maintain their lifestyles in retirement. The other 75% will need to work longer, move to lower-cost housing and cut spending to maintain their standard of living, largely due to the coronavirus downturn.
The Social Security trust funds would be empty by 2023, without the payroll tax. While President Trump let employers temporarily defer the employee portion of payroll taxes, he said the deferred taxes could later be forgiven, or the cut made permanent. When he signed the order, he vowed to “terminate the tax,” if reelected. Republican lawmakers subsequently debuted a plan to fund any shortfalls from the Treasury.
Social Security benefits will be decreased by 21% if the trust fund runs out. Congress will have to intercede, or it could happen 10 years from now, if not sooner.
Those born in 1960 will have a big problem because of the complicated formula the Social Security Administration uses to calculate benefits. Pre-retirees born in 1960 will see a nearly 15% cut to their lifetime benefits from Social Security when it’s time to collect. If the pandemic suppresses the economy into 2022, those cuts will impact more pre-retirees. The impact to their Social Security benefits will also be permanent.
The 2021 Social Security cost of living adjustment, or COLA, will be just 1.3%. Retirees should note that rising health care costs and a potential 6% increase in Medicare Part B premiums may absorb that benefit increase.
More than 50% of Americans think the economy is worse now than in 2008, with 51% of Americans seeing the COVID slowdown as worse than the 2008 recession. A survey from Edelman Financial Engines also found that 26% had withdrawn money from retirement or savings for living expenses.
About 60% of retirement savers have fallen behind, according to a TIAA study. Among these, 30% said it was directly due to the pandemic.
Internet searches for “move out of the U.S.” have increased 16 times. International Living magazine says it had seen the jump in search traffic around the phrase since May. A total of 20% of respondents in a survey it conducted also said they wanted to move due to the pandemic. However, just 45% cited a desire to save money.
Approximately 42% of investors sold stock, and most of them (88%) of them regretted it. In response to the drop in stocks in mid-March last year, 42% of investors in a survey by MagnifyMoney sold at least one stock and 24% sold all their holdings. About 69% of those who sold stock at the start of the pandemic greatly regretted it, and 19% said they were somewhat regretful.
Roughly 80% of older Americans don’t understand retirement planning and don’t know the basics of how to successfully plan for a financially secure retirement, according to a study by The American College of Financial Services. The survey also found only 30% of respondents had a plan in place to fund long-term care needs, and just one in four actually had long-term care insurance.
About 3 million workers may have been driven into early retirement due to the pandemic. From March to August of 2020, 2.8 million older workers might have been pushed out of their jobs prematurely, with economic turmoil and poor health making it hard for them to resume their careers elsewhere, according to by the Schwartz Center for Economic Policy Analysis at the New School. The report found that 38% of unemployed older adults stopped looking for work and left the workforce, and an additional 1.1 million were expected to do likewise.

Reference: Think Advisor (Oct. 30, 2020) “11 Scariest Retirement Statistics: 2020”

Should I Sell My Life Insurance Policy?

It is quite common to buy life insurance. It may have been to protect your family financially or as a vehicle to provide liquidity for estate taxes. As we grow older and laws change, it is critical to determine if your policy has outlived its intended purpose. The traditional strategy of “buy and hold” no longer applies to the ever-changing world. Today, it may be a good idea to consider selling your policy.

Forbes’ recent article entitled “What You Should Know Before Selling Your Old Life Insurance Policy” explains that a lesser-known alternative to abandoning or surrendering a policy is known as a life settlement. This gives the policy owners the chance to get a much bigger cash lump sum, than what is provided by the life insurance carrier’s cash surrender value.

Life settlements are not new. Third-party institutional buyers have now started to acquire ownership of policies, in exchange for paying the owner a lump sum of cash. As a consequence, the policy owner no longer needs to make future premium payments.

The policy buyer then owns the life insurance policy and takes on the responsibility of future premium payments. They also get the full death benefit payable from the life insurance carrier when the insured dies.

Research shows that, on average, the most successful life settlement deals are with policies where the insured is age 65 or older. Those who are younger than 65 usually require a health impairment to receive a life settlement offer.

Knowing what your life insurance policy is worth is important, and its value is based on two primary factors: (i) the future projected premiums of the policy; and (ii) the insured’s current health condition.

Many policy owners don’t have the required experience with technical life expectancies, actuarial tables and medical knowledge to properly evaluate their life settlement value policies. This knowledge gap makes for an imbalance, since inexperienced policy owners may try to negotiate against experienced and sophisticated policy buyers trying to acquire the policy at the lowest possible cost.

To address this imbalance, the policy owner should seek help from an experienced estate planning attorney to help them with the process to sell the policy for the highest possible price.

If you have an old life insurance policy that’s collecting dust, ask an experienced estate planning attorney to review the policy’s importance and purpose in your portfolio. This may be the right time to turn that unneeded life insurance policy into cash.

Reference: Forbes (Jan. 26, 2021) “What You Should Know Before Selling Your Old Life Insurance Policy”

What are My Taxes on a House I Inherited?

Say your mom transferred the deed of the house over to you in November 2014 with a life estate for her. She dies in 2016. Mom paid about $18,000 for the home in 1960. This is the son’s primary and only residence. He wants to put the house on the market for $375,000. Will he have to pay capital gains tax?

The son probably won’t owe any tax on the sale of the house. Nj.com’s recent article entitled “Will sale of inherited home cause a tax liability?” explains that the profit can be calculated, by subtracting the cost basis from the sales price. That cost basis is the original purchase price plus any capital improvements.

As far as the son’s repairs, he should look at capital improvements, which is somewhat nebulous. The IRS definition is “add to the value of your home, prolong its useful life, or adapt it to new uses.” Any improvements must be evident when you sell. If you replace a few shingles on your roof, it is a repair. However, if you replace the whole roof, that’s a capital improvement. If you don’t have receipts for the capital improvements, you can use reasonable estimates. However, the IRS may not accept them, if you’re audited.

Inherited property receives a “step up” in cost basis to the fair market value as of the date of death. This means that the original purchase price of the property and any capital improvements prior to the date of death are no longer relevant.

If a property is sold after it is inherited, the profit is calculated by deducting the date of death value from the sales price with an adjustment for any capital improvements made to the property after the date of death.

As far as the mom’s life estate in the home, this is a special type of real estate ownership, where the owner retains the exclusive right to live in the property for as long as she’s alive. However, a remainder interest is given to someone else, like a child. This “remainderman” automatically becomes the owner of the property upon the death of the life tenant.

Even with the life estate, the home receives a full step-up in cost basis upon the death of the life estate owner. The first $250,000 of profit on the sale of a primary residence is also exempt from tax, as long as the seller owned the home and lived in the home for two out of the last five years.

As such, the basis of the home will be the fair market value of the home in 2016, when the son inherited it as the remainderman of the life estate deed, plus any capital improvements he made since then.

In this situation, because the son has owned and lived in the house for two out of the last five years, he can exclude up to $250,000 of profit. With estimated sale price of $375,000, he shouldn’t owe any capital gains tax.

Reference: nj.com (Dec. 31, 2020) “Will sale of inherited home cause a tax liability?”

How Do I Cancel a Loved One’s Credit Cards and Manage Their Points, After They Die?

First, you should get legal advice before you start delving into the deceased person’s estate. Contact an experienced estate planning attorney. Typically, the executor of the deceased’s estate will be in charge of these tasks.

Insider’s recent article entitled “How to cancel a loved one’s credit cards and manage their points after they die” provides some general tips on the steps to take to cancel credit cards and manage loyalty points, after a family member or close friend passes away.

Review the situation and gather documents. After a death, there’s a lot to do. Once you receive a death certificate, the executor must begin managing the deceased’s finances.

First, you want the credit bureaus to note the death in the deceased’s credit report and to get a list of all credit cards they owned. You can contact one of the three nationwide credit bureaus (Equifax, Experian, or TransUnion) to tell them about the death and get a copy of their credit report. The Social Security Administration usually notifies the credit bureaus of the death. However, personally contacting them will make certain that a death notice is entered in their credit report. This will decrease the risk of identity theft. When noted, lenders will see that the individual is dead and won’t issue credit. You only need to contact one bureau because they will automatically notify the others.

How to close the deceased’s credit cards. After you get the credit report, identify all open credit cards and contact each one to notify them of the death. Each issuer will have a different procedure for closing the card, but most will ask you to send a copy of the death certificate. Lenders may also automatically close cards when they see the death notice on the credit bureau report.

Paying off credit card debt after death. The CARD Act of 2009 set the rules for credit card debt after death. Once the lender is notified, it will close the credit card and provide a final bill to the estate within 30 days. While the estate is being settled, they can’t impose additional late fees, annual fees, or over-limit fees. However, the interest on the debt continues to accrue. Note that if the estate pays the debt within 30 days of receiving the final bill, there’s no additional interest charged.

Credit card rewards after death. Every credit card has its own rules for managing points after death. For instance, American Express Membership Rewards has a process to take ownership of an account, and Chase Ultimate Rewards terms state that “If we’re notified of your death, your points will be automatically redeemed for cash in the form of an account statement credit.” The miles and points earned with an airline or hotel are subject to the terms of that program. Review the rules of each credit card, airline and hotel loyalty program to understand how points will be managed.

How to simplify life for your family. You can make things easier for your loved ones, if you make a plan to handle your points, miles and credit card rewards. Similar to other assets, you should explain how you want your points to be used in your will. Ask an experienced estate planning attorney to help you.

Reference: Insider (Feb. 1, 2021) “How to cancel a loved one’s credit cards and manage their points after they die”

Am I Named in a Will? How Would I Know?

Imagine a scenario where three brothers’ biological father passed away a decade ago. The father wasn’t married to the brothers’ mother, plus, he had another family with three children, grandchildren, and great grandchildren. The father never publicly acknowledged that the three boys were his children. They’ve now heard rumors that he left them something in his will—which may or may not exist. The father’s wife has also passed away.

Nj.com’s recent article entitled “How can we find out if our father left us something in his will?” explains that a parent isn’t required to leave his or her adult children an inheritance.

If a person doesn’t leave a will when they die, the intestacy laws of the state in which he or she dies will dictate how the decedent’s property is divided.

For example, if you die without a will in Kansas, your assets will go to your closest relatives. If there were children but no spouse, the children inherit everything. If there is a spouse and descendants, the spouse inherits one-half of your intestate property, and your descendants inherit the other one-half of your intestate property.

In Illinois, if you’re married and you pass away without a will, the portion given to your spouse is based upon whether you have living descendants, such as children and grandchildren.

In New Jersey, if the decedent is survived by a spouse and children—this includes any children who are not children of the surviving spouse—the surviving spouse gets the first 25% of the intestate estate, but not less than $50,000 nor more than $200,000, plus one-half of the balance of the intestate estate. In that state, the descendants of the decedent would receive the remainder.

Note that an intestate estate doesn’t include property that’s in the joint name of the decedent and another person with rights of survivorship or payable upon death to another beneficiary. In our problem above, the issue would be whether the three boys would’ve been entitled to a percentage of the property permitted under the state intestacy statute, or under a will if you could prove there was one.

However, the time for the three boys to make a claim against their father’s estate would have been at his death. A 10-year delay is a problem. It may prevent a recovery because there are time limitations for bringing legal actions. However, they may have other claims, and there may be reasons you are not too late.

Litigation is very fact-specific, and the rules are state-specific. The boys should talk to an estate litigation attorney, if they think there are enough assets to make at it worth their while.

Reference: nj.com (Dec. 29, 2020) “How can we find out if our father left us something in his will?”

Do I Assume My Parents’ Timeshare when They Die?

Ridding yourself of a timeshare can be difficult. Frequently, heirs of a timeshare owner don’t want to take on the liability and the responsibility.

Nj.com’s recent article entitled “Can I leave a timeshare to the timeshare company in my will?” explains that as a general rule, unless it’s in an attempt to defraud creditors, a beneficiary may always renounce or disclaim a bequest made to him or her in a will.

However, if you write a provision in your will, it doesn’t mean that it’s legal, needs to be followed, or can be carried out.

As an example, a beneficiary designation on a bank account or certificate of deposit (CD) to your brother Dirk would take precedence over a specific bequest in your will that the same account or CD goes to your brother Chris. In that instant, the bank will pay the bank account or CD to your brother Dirk—no matter what your will says.

Likewise, with shares in a closely held business. If there is a contract between the shareholders dictating what happens to shares of the business if someone dies, that agreement will also override a provision in your will.

A timeshare is a contract. That means the terms of that contract control what happens. Your will doesn’t.

If the will doesn’t contradict the contract, like bequeathing the timeshare to a third-party who will continue to pay the contract obligations, both documents can co-exist.

A timeshare owner can’t avoid contractual obligations by just giving back the unit back to the corporation, unless that’s permitted in the contract.

The timeshare corporation isn’t required to take back a timeshare unit whether it is returned by the terms of the will or by the executor in administrating the estate, unless the signed timeshare agreement provides for this, or terms of the return are negotiated.

Reference: nj.com (Dec. 24, 2020) “Can I leave a timeshare to the timeshare company in my will?”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

The Latest on the Denver Broncos and Late Owner Pat Bowlen’s Trust

Sound Like a Broken Record in Estate Planning?

If I Move to a New State, Do I Need to Update My Estate Plan?

Would Life Estate Have an Impact Taxes on an Inherited Home?

Should I Sell My Life Insurance Policy?

What are My Taxes on a House I Inherited?

How Do I Cancel a Loved One’s Credit Cards and Manage Their Points, After They Die?

Am I Named in a Will? How Would I Know?

Do I Assume My Parents’ Timeshare when They Die?

Join Our eNewsletter

Recent Posts

The Latest on the Denver Broncos and Late Owner Pat Bowlen’s Trust

Sound Like a Broken Record in Estate Planning?

If I Move to a New State, Do I Need to Update My Estate Plan?

Would Life Estate Have an Impact Taxes on an Inherited Home?

Should I Sell My Life Insurance Policy?

What are My Taxes on a House I Inherited?

How Do I Cancel a Loved One’s Credit Cards and Manage Their Points, After They Die?

Am I Named in a Will? How Would I Know?

Do I Assume My Parents’ Timeshare when They Die?

Categories

Email/Social Media

Quick Links