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Estate Planning Blog

Serving Clients Throughout North Central Missouri

What You Need to Know about Probate

We often read about celebrities who die without an estate and how everything they own must go through probate. The article titled “What to know about probate” from wmur.com explains what that means, and what you need to understand about wills, probate and estate planning.

Probate is a process used to prove that a person’s will is valid and to supervise how their estate is handled. It involves a court that focuses on this area. Much about the process depends upon the state in which it’s taking place, since these laws vary from state to state.

When someone dies without a will, they have failed to provide instructions for the distribution of their property. Their assets will still be distributed, but the laws of the state will determine what happens next. The state follows intestacy laws, which outline pre-set patterns of distributing property. In one state, property will go to the spouse and children. In others, the spouse may get everything.

Other decisions are made for your family when there is no will. If you have not named an executor, the court will appoint someone to oversee your estate. The court will also appoint a person to raise your children, if no guardian has been named for minor children. A family member may be chosen, but it may not be the family member you wanted to raise your kids, or it may be a stranger in a foster home.

Another reason to have a will is that probate can take a few months, or, depending on where you live, a few years, to complete. If there is litigation, and not having a will makes that more likely, it would take longer and will undoubtedly cost more. While this is going on, assets may lose value and heirs may suffer from not having access to assets.

Probate is also costly. There are legal notices to be published, court fees, executor fees and bond premiums, appraisal fees and attorney expenses.

Having an estate plan also means tax planning. While the federal estate tax as of this writing is $11.7 million per individual, it will not be that high forever. If the proposals to lower the federal estate tax to $3.5 million per person come to pass, will your estate escape estate taxes? What about your state’s estate or inheritance taxes?

Probate is also a very public process. Once a will is admitted as valid by the court, it becomes a public document. Anyone and everyone can view it and learn about your net worth and who got what.

With all these drawbacks, are there good reasons to allow your estate to go through probate? In some cases, yes. If multiple wills have been found, probate will be needed to establish which will is the correct one. If the will is confusing or complex, probate could provide the clarity needed to settle the estate. If beneficiaries are litigious, probate may be the voice of authority to quell some (but not all) disputes. And if the estate has no money and a lot of debt, it may be the probate court that sorts out the situation.

Every estate is different. Therefore, it is important to speak with an estate planning attorney to have a will, power of attorney and any health care directives created and properly executed. Every few years, these documents should be reviewed and revised to keep up with changes in the law and in your personal life.

Reference: wmur.com (July 29, 2021) “What to know about probate”

 

estate planning

Couple’s Charitable Remainder Trust Helps University Students

Florida resident Robert Larson of Leesburg recently donated $1.4 million to the Minnesota State University, Mankato in honor of his late wife, Virginia, the Minnesota State University, Mankato recently announced.

A story entitled “Minnesota State Mankato Receives $1.4 Million Gift to Support Education, Music, ROTC Scholarships” said that Larson’s gift will support scholarships for students studying elementary education (75%) and music (20%), and the remaining 5% is earmarked to establish Minnesota State Mankato’s first Reserve Officer Training Corps endowment. At least 14 students annually will receive scholarships as a result of the gift.

“This gift is especially meaningful because of the many years that Robert and Virginia Larson spent planning for it,” said Minnesota State University, Mankato President Edward Inch.“ Students will benefit from this gift for many generations to come.”

The Larson’s originally planned their gift by creating the university’s first-ever charitable remainder trust in 1987. The trust was set up to benefit University students after both Robert and Virginia died.

A charitable remainder trust (CRT) is a gift of cash or other property to an irrevocable trust. The donor gets to keep an income stream from the trust for a term of years or for life. The charity then gets the remaining trust assets at the conclusion of the trust term. The donor receives an immediate income tax charitable deduction when the CRT is funded, based on the present value of the assets that will eventually go to the named charity.

Mr. Larson later decided he wanted to give a larger sum to the university to be able to have an effect on students while he was still living. Therefore, he decided to forego the annual payments he received and terminated the charitable remainder trust early.

His wife Virginia graduated from Minnesota State Mankato in 1961 with a bachelor’s degree in elementary education. She began teaching fourth grade in Lakeville, Minnesota. She then taught third grade in Poway, California, and finally taught fourth grade and English as a second language in Chula Vista, California. She died in 2020.

“Virginia really enjoyed her time as a student at Minnesota State Mankato, and we started planning for this gift out of a desire to help students,” said Robert Larson.

Reference: Minnesota State University, Mankato (August 12, 2021) “Minnesota State Mankato Receives $1.4 Million Gift to Support Education, Music, ROTC Scholarships”

 

estate planning newsletter

Court Upholds Kelly Clarkson’s Prenup

News outlet TMZ reported that Kelly Clarkson was on the set of her TV show, The Voice, when she heard the news and “let out a scream” of joy, with fellow coaches Blake Shelton and Ariana Grande about her prenup.

The Daily Mail’s recent article entitled “Kelly Clarkson’s prenup UPHELD by judge in divorce battle” says that while Clarkson was filming the singing competition, she received an email from her lawyers informing her of the good news that her prenup had been kept in place. As a result, she’ll keep the bulk of her assets and income.

In July, Clarkson, who is estimated to be worth $45 million, was ordered to temporarily pay ex-husband Brandon Blackstock about $200,000/month in spousal and child support. Court documents also showed some details of Clarkson’s finances: she personally earns $1,583,617 a month. With the court’s decision, Clarkson will keep most of their assets, including the Montana ranch where her ex-husband is currently living.

Blackstock had been contesting the prenup and wanted to split their properties 50/50, as well as the money she earned throughout their marriage, but a judge denied this request.

A judge found for Clarkson that the signed prenup had to be taken into account. The pop star now has the right to sell the Montana ranch because she’s the one who bought it.

The parties’ divorce has been bifurcated—which means that the end of the marriage has officially been declared. Clarkson has been awarded primary custody of their minor children – River and Remington.

It was previously reported that Clarkson would pay 70% of her children’s school fees and expenses. However, she had refused to pay for the Montana ranch. The judge ordered that Blackstock carry the financial burden of his Montana ranch that costs around $81,000 a month to run in expenses. Now it looks as though Clarkson will sell it.

Blackstock is currently living at the ranch and is using it as his primary residence. He’s earning around $10k a month. In comparison, Clarkson was bringing home around $1.5M a month.

Court documents confirm that Kelly will continue to pay her ex $150,000 per month while the divorce case continues, as well as $45,000 in child support. Clarkson has sold a staggering 25 million albums and 45 million singles worldwide in her career, and currently has her own hit talk-show. She started dating Blackstock, a country music manager, in 2011. They married in 2013.

Reference: Daily Mail (Aug. 13, 2021) “Kelly Clarkson’s prenup UPHELD by judge in divorce battle”

 

Near Retirement Planning

What Not to Do when Creating an Estate Plan

Having a good estate plan is critical to ensure that your family is well taken care of after you are gone. Working with an experienced estate planning attorney remains the best way to be sure that your assets are distributed as you want and in the most tax-efficient way possible. A recent article titled “Estate Planning mistakes to avoid” from Urology Times looks at the fine points.

An out-of-date estate plan. Life is all about change. Your estate plan needs to reflect those changes. Just as you prepare taxes every year, your estate plan should be reviewed every year. Here are trigger events that should also spur a review:

  • Parents die and can no longer be beneficiaries or guardians of minor children.
  • Children marry or divorce or have children of their own.
  • Your own remarriage or divorce.
  • A significant change in your asset levels, good or bad.
  • Buying or selling real estate or other large transactions.

Neglecting to update an estate plan correctly. Scratching out a provision in a will and initialing it does not make the change valid. This never works, no matter what your know-it-all brother-in-law says. If you want to make a change, visit an estate planning attorney.

Relying on joint tenancy to avoid probate. When you bought your home, someone probably advised you to title the home using joint tenancy to avoid probate. That only works when the first spouse dies. When the surviving spouse dies, they own the home entirely. The home goes through probate.

Failing to coordinate your will and trusts. All your wills and trusts and any other estate planning documents need to be reviewed to be sure they work together. If you create a trust and transfer assets to it, but your will states that the asset now held in the trust should be gifted to a nephew, then you’ve opened the door to delays, family dissent and possibly litigation.

Not titling assets correctly. How assets are titled reflects their ownership. If your home, bank accounts, investment accounts, retirement accounts, vehicles and other properties are titled properly, you’ve done your homework. Next, check on beneficiary designations for any asset. Beneficiary designations allow assets to pass directly to the beneficiary. Review these designations annually. If your will says one thing and the beneficiary designation says another, the beneficiary designation wins.

Not naming successor or contingent beneficiaries. If you’ve named a beneficiary on an account—such as your life insurance—and the beneficiary dies, the proceeds could go to your estate and become taxable. Naming an alternate and successor for all the key roles in your estate plan, including beneficiaries, trustees and guardians, offers another layer of certainty to your estate plan.

Neglecting to address health care directives. It may be easier to decide who gets the family vacation home than who will decide to keep you on or take you off life-support systems. However, this is necessary to protect your wishes and prevent family disasters. Health care proxy, advance care directive and end-of-life planning documents tell your loved ones what your wishes are. Without them, the family may be left guessing what to do.

Forgetting to update Power of Attorney. Review this critical document to be sure of two things: the person you named to manage your affairs is still the person you want, and the documents are relatively recent. Some financial institutions balk at older POA forms, and others will outright refuse to accept them. Some states, like New York, have changed POA rules to make it harder for POAs to be denied, but in other states there still can be problems, if the POA is old.

Reference: Urology Times (July 29, 2021) “Estate Planning mistakes to avoid”

 

healthcare

What to Do with Estate Plan when Loved One Dies

There are a few things a family needs to address immediately after a death, says Cleveland Jewish News’ recent article entitled “Funeral arrangements, estate planning take education.”

It is important that the decedent have a last will and testament to say to how their assets will be distributed. In addition, a trust in combination with a will can give the creator more control over how, when and where the assets go. A fully-funded revocable living trust does not go through probate, like a testamentary trust created under a will to administer the inheritance. A trust can help to avoid probate.

As for funeral arrangements, this can be challenging, if families have not started the planning process quickly. Trying to make decisions on a cemetery, a casket, a funeral home and a service can be daunting. There are a number of decisions to be made in a short amount of time.

As far as reviewing the documents and assets the decedent left behind, do this one at a time and organize as you go to avoid some stress. A family that is grieving can be overwhelmed very quickly.

When a family and loved ones have too much on their plates, nothing will get done because it is too much. Instead, look at one asset at a time, go through it and see how it is titled and if they think the beneficiary designation is appropriate.

Review each asset and make sure you have covered each one, especially if your goal is to avoid probate.

While still living, a person should make a list of where everything is located, details on their accounts and the account numbers and their estate planning attorney. This will ease the family’s burden when going through your assets and other documents, after you pass away.

Although it is not necessary that a parent disclose everything about his or her finances, a parent should have that information available somewhere. That way children will know where all the assets and important documents are located when needed.

Reference: Cleveland Jewish News (June 22, 2021) “Funeral arrangements, estate planning take education”

 

Extended-Family

How Do You Split Estate in a Blended Family?

When it comes to blended families and estate planning, there are no guarantees, especially concerning estate planning. However, there are some classic mistakes to avoid, reports this recent article from AARP titled “Remarried With Children? 5 Estate Planning Mistakes to Avoid.”

Most people mean well. They want to protect their spouses and hope that their heirs will share in any proceeds when the second spouse dies. They want all the children to be happy. They also hope that the step siblings will still regard each other as “siblings” after the parents are passed. However, there are situations where children get shut out of their inheritance or an ex-spouse inherits it all, even if that wasn’t the plan. Here are five mistakes to avoid:

#1: Not changing named beneficiaries. People neglect to update their wills and beneficiary designations. This is something to do immediately, before or after the wedding. By changing the name of the beneficiary on your 401(k), for instance, it passes directly to the surviving spouse without probate. All financial accounts should be checked, as should life insurance beneficiaries. You can designate children as secondary beneficiaries, so they receive assets, in the event that both parents die.

While you’re doing that, update legal directives: including the medical power of attorney and the power of attorney. That is, unless you’d like your ex to make medical and financial decisions for you!

#2 Not updating your will. Most assets pass through the will, unless you have planned otherwise. In many second marriages, estate planning is done hoping the spouse inherits all the assets and upon their death, the remaining assets are divided among all of the children. There is nothing stopping a surviving spouse from re-writing their will and for the late spouses’ children to be left without anything from their biological parent. An estate planning attorney can explore different options to avoid this from occurring.

#3 Treating all heirs equally. Yes, this is a mistake. If one person came to the marriage with significantly more assets than another, care must be taken if the goal is to have those assets remain in the bloodline. If one person owned the house, for instance, and a second spouse and children moved into the house, the wish might be to have only the original homeowner’s children inherit the proceeds of the sale of the house. The same goes for pension and retirement accounts.

#4 Waiting to give until you’ve passed. If you are able to, it may be worth gifting to your heirs while you are still living, rather than gifting through a will. You may give up to $15,000 per person or $30,000 to a couple without having to pay a federal gift tax. Recipients don’t pay tax on most gifts. Let’s say you and your spouse have four children and they are all married. You may give each child and their spouse $30,000, without triggering any taxes for you or for them. It gets better: your spouse can also make the same size gift. Therefore, you and your spouse can give $60,000 to each couple, a total of $240,000 per year for all eight people and no taxes need be paid by anyone. This takes assets out of your estate and is not considered income to the recipients.

#5 Doing it yourself. If you’re older with a second marriage, ex-spouses, blended families and comingled assets, your estate planning will be complicated. Add a child with special needs or an aging parent and it becomes even more complex. Trying to create your own estate plan without a current and thorough knowledge of the law (including tax law) is looking for trouble, which is what you will leave to your children. The services of an estate planning attorney are a worthwhile investment, especially for blended families.

Reference: AARP (July 9, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

 

estate planning for singles

How Do I Stop Heirs from Foolishly Wasting Inheritance?

This is a problem solved by a trust—a “spendthrift” trust. With a spendthrift provision in a testamentary trust created under a will or an inheritance trust created under a revocable living trust, the trustee makes all decisions about distributions. This can be an effective means of controlling the flow of money.

A spendthrift trust, according to the article “Possible to spendthrift-proof a trust” from Record Courier, is created for the benefit and protection of a financially irresponsible person.

For a spendthrift trust, it may be better not to choose a family member or trusted friend to serve as the trustee. Such person might not live long enough or have the capacity to serve as trustee for as long as required, especially if the heir is a young adult. Conflicts among family members are common, when money is involved. An independent and well-established trust company or bank may be a better choice as a trustee. Large estates often go this route, since their services can be expensive. However, some retail banks do have a private wealth division. All options need to be explored.

Another benefit to a spendthrift trust—funds are protected against current or future creditors of the beneficiary. Let’s say a parent wants to leave money to a child, but knows the child has credit card debt already. Unless they are co-signers, the parent and their estate do not have a duty to pay an adult child’s debts. The spendthrift trust will not be accessible to the credit card company.

It is difficult to set up a spendthrift trust to protect one’s own money from creditors. This is something that must be approached only with an experienced estate planning attorney. This is because the rules are complex and there are significant limitations. If you wanted to create a spendthrift trust for yourself, you would have to completely give over control of assets to the trustee. There is no way to predict whether a court will consider the person to have relinquished enough control to make the trust valid.

This type of spendthrift trust may not be created with an intent to defraud, delay or hinder creditors. Doing so may make the trust invalid and any possible protection will be lost.

A spendthrift provision in a will is a clause used to protect a beneficiary from a creditor attaching prior debts against the beneficiary’s future inheritance. This means that the creditor may not force an heir or the estate’s executor to pay the beneficiary’s inheritance to the creditor, instead of the beneficiary. It also prevents the beneficiary from procuring a debt based on a future inheritance.

It is important to be aware that a spendthrift provision in a will or a spendthrift trust has limitations. The assets are only protected when they are in the trust or in the estate. Once a distribution is received, creditors can seek payment from the assets owned by the beneficiary.

Another qualifying factor: the spendthrift provision in the will must prevent both the voluntary and involuntary transfer of a beneficiary’s interest. The beneficiary may not transfer their interest to someone else.

The spendthrift trust and clause are mainly intended to protect a beneficiary’s interests from present and future creditors. They are not valid if their intent is to defraud others and may not be created to avoid paying any IRS debts.

Reference: Record Courier (July 10, 2021) “Possible to spendthrift-proof a trust”

 

Is Estate Planning for Everyone?

Do I Need Long-Term Care Insurance?

Women face some unique challenges as they get older. The Population Reference Bureau, a Washington based think tank, says women live about seven years longer than men. This living longer means planning for a longer retirement. While that may sound nice, a longer retirement increases the chances of needing long-term care.

Kiplinger’s recent article entitled “A Woman’s Guide to Long-Term Care” explains that living longer also increases the chances of going it alone and outliving your spouse. According to the Joint Center for Housing Studies of Harvard University, in 2018 women made up nearly three-quarters (74%) of solo households age 80 and over. Thus, women should consider how to plan for long-term care.

Ability to pay. Long-term care is costly. For example, the average private room at a long-term care facility is more than $13,000/month in Connecticut and about $11,000/month in Naples, Florida. There are some ways to keep the cost down, such as paying for care at home. Home health care is about $5,000/month in Naples, Florida. Multiply these numbers by 1.44 years, which is the average duration of care for women. These numbers can get big fast.

Medicare and Medicaid. Medicare may cover some long-term care expenses, but only for the first 100 days. Medicare does not pay for custodial care (at home long-term care). Medicaid pays for long-term care, but you have to qualify financially. Spending down an estate to qualify for Medicaid is one way to pay for long-term care but ask an experienced Medicaid Attorney about how to do this.

Make Some Retirement Projections. First, consider an ideal scenario where perhaps both spouses live long happy lives, and no long-term care is needed. Then, ask yourself “what-if” questions, such as What if my husband passes early and how does that affect retirement? What if a single woman needs long-term care for dementia?

Planning for Long-Term Care. If a female client has a modest degree of retirement success, she may want to decrease current expenses to save more for the future. Moreover, she may want to look into long-term care insurance.

Waiting to Take Social Security. Women can also consider waiting to claim Social Security until age 70. If women live longer, the extra benefits accrued by waiting can help with long-term care. Women with a higher-earning husband may want to encourage the higher-earning spouse to delay until age 70, if that makes sense. When the higher-earning spouse dies, the surviving spouse can step into the higher benefit. The average break-even age is generally around age 77-83 for Social Security. If an individual can live longer than 83, the more dollars and sense it makes to delay claiming benefits until age 70.

Estate Planning. Having the right estate documents is a must. Both women and men should have a power of attorney (POA). This legal document gives a trusted person the authority to write checks and send money to pay for long-term care.

Reference: Kiplinger (July 11, 2021) “A Woman’s Guide to Long-Term Care”

 

estate planning

What’s the Latest on Country Star Charley Pride’s Estate?

Grammy-winning country star Charley Pride died from COVID-19 in December, and an article from 5 NBC DFW entitled “Charley Pride’s ‘Secret’ Son Contests Will” reports that his son Tyler has revealed the family “secret.” His story started with an affair between his mother, a flight attendant, and his father, country music’s first Black superstar.

At the time of their relationship, Charley was already married to his wife of many years, Rozene, and the couple had three children. A paternity test later confirmed that Tyler was also Charley’s son.

“We made it through and had the best relationship that we could, per the circumstances,” said Tyler. “We still got to talk on the phone a lot and get to know each other that way, but it was difficult because of his situation and having to keep peace at home, as he put it over and over.”

Tyler said his father visited when he was able, and even after he turned 18 and Charley’s obligation to financially support him ended, Tyler said his father stayed involved in his life. However, when Charley died of COVID-19, Tyler said the family did not even tell him that his father was sick. In fact, Tyler’s name was not included in the obituary, and he said he was not allowed to attend the funeral.

Tyler also wasn’t named in Charley’s will, which Tyler has filed a lawsuit to contest. He says there was undue influence by Rozene over her husband, who’d publicly acknowledged mental health struggles.

“I don’t think he could imagine that this is going on right now and I don’t think it’s what he wanted. Because he always said he wanted his kids taken care of equally. Up until his death, that’s what I was told every time we talked,” said Tyler.

Rozene’s statement said, “Tyler does not have a valid claim, so he has resorted to a hurtful smear campaign. His attack on Charley hurts me and his other children deeply, but we all know that Charley was doing great physically and mentally and making his own decisions, until he was taken down by COVID. Much of what Tyler is saying about Charley and me is a lie that Tyler hopes reporters will spread to grab headlines.”

However, Tyler says this isn’t a financial fight. It’s instead about honoring his father’s wishes and finally being recognized as his son.

“He is my dad and I’m proud to be able to tell that part of the story because I am part of his story,” said Tyler.

Reference: 5 NBC DFW (June 11, 2021) “Charley Pride’s ‘Secret’ Son Contests Will”