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Aretha Franklin Didn’t Have An Estate Plan…

Aretha Franklin Didn’t Have An Estate Plan…

ARETHA FRANKLIN DIDN’T HAVE AN ESTATE PLAN

               Legendary singer Aretha Franklin died on August 16, 2018.  She was 76 years old and apparently died without an estate plan.

As an estate plan lawyer O’Fallon, I am surprised that Franklin, worth an estimated $80 million at her death, did not have her affairs in order.  Federal estate taxes will likely be incurred and the IRS will likely audit the estate because of the value.

The estates of celebrities can often result in years long court battles in the state where they died, among family members and non-family members alike.  I previously wrote about this type of mess with the estate of Prince, who passed away in April 2016.   His $200 million estate, over two years later, is still not settled and has been described simply as “a mess”.

https://www.legacylawmissouri.com/update-estate-prince-two-years-later/

Franklin died intestate (without a will) in Michigan, so the laws of that state will control.  She was survived by four sons, all between the ages of 48 and 63.  Under Michigan law, each of her sons should received a ¼ interest in her estate, or about $20 million.  However, these figures are subject to reduction as creditors come out of the woodwork to make claims against her estate.  Whether these claims are legitimate have to be resolved by the probate court and probate attorneys near me.  This can result in attorney fees growing and growing, as well as the basis costs of litigating these claims eating up the value of the estate.

Apparently Franklin had been advised many times by her lawyers to create an estate plan, but never did so.  “She never told me “No, I don’t want to do one.  She understood the need.  It just didn’t seem to be something she got around to” said Don Wilson, a Franklin lawyer for almost three decades.

This lack of follow through with creating a will is not uncommon.  As a will trust lawyer St. Peters, I often meet with people who state that they knew that they needed to get their affairs in order, but can’t explain what took so long.

My opinion has always been that because it’s not pleasant to think about, many people put off getting an estate plan together as long as possible.  Others are the exact opposite.  I’ve found that younger people, particularly new parents are very proactive about creating powers of attorney, naming guardians in their wills, a trust for young children and other documents to protect their family.

The other phenomenon I see though is that people learn from the mistakes of their own family.  The loss of a parent or a sibling and the mess that ensued with their estate can be a huge influence in someone getting their affairs together to avoid the same headache for their children.

 

Common Estate Planning Terms in Wills and Trusts….

Common Estate Planning Terms in Wills and Trusts….

Common Estate Planning Terms in Wills and Trusts

Estate planning is an area of the law with plenty of legalese. The placement of certain in documents like Missouri wills and especially special needs trusts attorney St.Common Estate Planning Terms in Wills and Trusts
Estate planning is an area of the law with plenty of legalese. The placement of certain in documents like Missouri wills and especially special needs trusts attorney St. Peters, Missouri can make a huge difference in the document.

Here are some commonly used estate planning terms in wills and trusts.

Wills

Testator / Testatrix: The person creating the will. Formally, a male creating a will is a testator, whereas a female is referred to as a testatrix.

Executor: The person or persons named in a will who will administer the estate when the testator dies. The person in charge. In Missouri and other states, an executor is called a personal representative.

Beneficiary: The person(s) named in a will that the testator wants to inherit their property. In a trust, this person is also referred to as a beneficiary.

Heir: The persons who will receive your property if you do not have a will in place when you die. Dying without a will is called “dying intestate” and each state, including Missouri has a list of heirs that receive your property when you die intestate and in what order. For example, in Missouri, many people don’t know that if a spouse passes away and does not have a will, all non-joint property owned by the deceased spouse goes partially to the children, if any, and partly to the surviving spouse. All receiving property are referred to as heirs.

Bequest: A specific item listed in a will, other than real estate, to be distributed at death as a gift. Example: “I give all of my silver coins to Joe.” The bequest is only the silver coins, not any others and Joe is the beneficiary of the item.

Devise: Real estate given at death, received by a devisee. Example: “I give my 10 acre farm to Joe.” The testator has devised the farm to Joe, the devisee.

Bequeath: Means that the testator is giving property to someone other than a person. Example: “I give my book collection to the St. Charles County Library.”

Bond: A policy that requires the executor to insure the estate, usually for the value of the estate. The idea is that if the executor runs off with the money, the heirs / beneficiaries are protected by the bond in place. A testator can state that no bond is required in their will.

Real Property: Land of any acreage and/or a home. Also includes anything affixed to the property. Example: Joe has a 10 acre farm, which includes his home. He also has a pole barn which is attached to the land. All are examples of real property.

Tangible Personal Property: Any property that you can actually touch. Example: Loose cash is personal property. Cash in a bank account is not personal property.

Intangible Property: Any property that you cannot touch. Example: Mutual funds that you hold in an account are intangible property.

Titled Property: Property that may or may not be tangible that has a registration. Example: A bank account. It is titled in your name, has an account and you get statements every month in the mail. Also an insurance policy because it has a policy number, a named insured and beneficiary.

Revocable Trusts

Grantor: The person creating the trust. Also referred to as a Settlor or Trustor.

Trustee: An individual or individuals listed in the trust to administer the trust for the grantor. The grantor and trustee are often the same person.

Beneficiary: Same as with a will, a person listed to receive assets in a trust.

Estate Tax: A tax levied either by the federal government and some states when a person passes away. The estate tax is much less of an issue because the estate tax exemptions are much higher than they used to be.

Estate Tax Exemption: An amount of money that a person is allowed to have when they pass away that does not result in federal estate tax being levied. In 2018, for a person this amount is approximately $11 million dollars. Any amount above that, without proper planning in place, is subject to taxation.

No-Contest Clause: A provision in a trust (or a will) that states that if a beneficiary to the trust contests their inheritance, they risk losing that inheritance if they file a lawsuit. These provisions vary greatly, but are enforced by courts and are a good way to ensure that beneficiaries don’t litigate your estate when you pass away.

These are just some of the terms that you would come across in a will or trust lawyer O’Fallon, MO. Creating documents with an estate planning lawyer is just part of the process. The real important part is understanding how they work and what the terms mean. Don’t get discouraged, we are all masters of our own knowledge and what’s natural to you would be unnatural to your attorney!

 

Probate Shortcuts: The Spousal Refusal of Letters…

Probate Shortcuts: The Spousal Refusal of Letters…

Missouri Probate Shortcuts: The Spousal Refusal of Letters…

Missouri law offers several probate shortcuts, depending on the circumstances of the client.  One of the most common and indeed, one of the best shortcuts is the spousal refusal of letters.  

Missouri law offers a probate shortcut for a person who has lost a spouse and discovers that titled property was in only the named of their deceased spouse.  As a recent example, I had a client whose husband sadly passed away.  She found out after he passed that he had a small bank account in his name alone and there was no beneficiary named on the account.  The value of the account was approximately $4,500.00.  

Because this client had no minor children, we were able to utilize a streamlined probate process in Missouri called an Application for Refusal of Letters By Surviving Spouse.  This application is authorized under Missouri Statute Section 473.0090.   

The advantage to this process is the simplicity, how quick it is and the lower costs both to have an attorney handle this for you and to file.

In the above example, our firm obtained the approximate balance on the bank account, the account number, and the details of the surviving spouse, including her full name, address and contact information.  We also obtained the Death Certificate of the husband.  With this information available, we completed the Application for Refusal of Letters by Surviving Spouse on behalf of the widow and received an order awarding the proceeds of the account to the widow within about a week.  The client then took the order to the bank, who cut her a check for the account balance and closed out the account.  

The filing fee was approximately $53.  Our firm’s fee is a flat rate of $375 or 10% of the value of the asset that needs to be probated, whichever is higher.  If the amount is especially small, we will often work out a special price for the client given the circumstances.

This statute was created for the accidental property left only in the name of a later passing spouse, so that the surviving spouse does not have to open a full blown probate, which requires at least six months to open and close, published notice to creditors and an inventory to be filed, along with other filed documents.

One important detail:  Under the operating statute, Section 473.0090, the limit to the amount that can be awarded to the surviving spouse under the spousal refusal of letters process cannot be more than the cost of one year of maintenance of that spouse.  Every county treats this amount differently and has different procedures for proving whether an amount does or does not exceed one year of maintenance.  This is just another reason why it’s best to consult with an experienced probate attorney to have this task completed for you.   St. Charles County has a limit of money that can be passed via this process.  Other counties do not.   My experience has been that smaller counties are more lax about the limit than larger counties.  

The bottomline, however, is that the spousal refusal of letters is one terrific shortcut to an ordinary, time consuming and much more expensive probate in Missouri.  

 

Prince Has Died: What About His Estate?

Prince Has Died: What About His Estate?

Purple Rain

PRINCE HAS DIED:  WHAT ABOUT HIS ESTATE?

As we all know by now, legendary musician Prince unexpectedly passed away recently at 58.  While the circumstances of his death are unclear, what is also unclear is who will get his estate, whether he had a will or a trust set up and the particulars of who will be in charge of what has been estimated to be a $300 million estate.

Most celebrities are surrounded by a team of professionals looking out for their best interests.  In the case of legal matters, Prince undoubtedly had a trusted lawyer to assist him with legal matters.  Part of the advice I would have given Prince some time ago would be to get his affairs in order, to get an estate plan.  That would have been an easy recommendation considering his age, wealth and the fact that he was not married.

Since he died living in Minnesota, the laws of that state will largely govern the administration of his estate.  If he died without a will, that could be a big deal, because the intestacy laws of the state would control and Minnesota allows half-relatives to inherit.  He was married and divorced but, as in most states, ex-spouses do not inherit in a situation where there is a will and only inherit if a will specifically states that they do.

Most people close to Prince knew him as a smart man who was very aware of his circumstances and that weighs in favor of him having created an estate plan.

If Prince created a trust, then the trust would name a trustee in charge of all the assets held by it.  It would also name beneficiaries to receive property and that could be right away or over time.   Prince was also known to be a philanthropic person, so it’s possible he left funds for the creation of a foundation or several foundations for issues close to his heart.  When people create a will they can also leave money directly to a charity or to a church either as a specific bequest (the “Little Red Corvette” for example) or as a general bequest (a set amount of money).

If Prince did create a trust or several trusts, were they funded with his assets?  This is yet another issue.  Funding a trust requires that titled assets like accounts, homes, vehicles, stocks and life insurance be set up so that the trust either becomes the owner right away or becomes the owner at death through payable on death and transfer on death beneficiary designations.

Another issue for his estate would be estate taxes.   Unfortunately, Minnesota (unlike Missouri – hooray!) has an estate tax which appears to kick in after an asset exemption of nearly $2 million dollars at a top rate of 16%.  Since I am not a Minnesota licensed attorney, I can’t talk too much about that, but needless to say, the state will likely pick up a large check from Prince’s estate.

On a federal level, the estate tax exclusion for an individual dying in 2016 is $5.45 million (up $20,000 over 2015).  The tax owed will depend on what estate tax planning if any he put in place, but the estate tax rate is 40% based on the expected size of his estate.  That means 40% over the exempt amount of $5.45 million could go to Uncle Sam.  Wow.

Don’t feel too bad for Prince’s heirs and beneficiaries.  That still leaves several hundred million dollars for their benefit.  That amount doesn’t include the future value of his music which potentially could double or even triple the value of his estate.   How the federal government and the state of Minnesota value these assets for estate and inheritance tax purposes might be the subject of litigation and more complexity.

As an estate planning practitioner (and admitted fan of Prince’s early work) it should be interesting to see what happens on this subject in the next several months.  Hopefully, Prince, like anyone reading this, planned ahead.

Serving As Trustee of A Trust? Not As Easy As It Looks!

Serving As Trustee of A Trust? Not As Easy As It Looks!

SERVING AS A TRUSTEE OF A TRUST:  NOT AS EASY AS IT LOOKS

One of the services provided by Legacy Law Center is trust administration.  When a person passes away with a living trust (or other type of trust) in place, the assets in the trust must be administered, i.e. managed and/or distributed according to the terms of the trust document.

Serving as a trustee sounds like a glamorous position.  You’re in charge of money and you have a lot of power over that money, right?  Well, it’s not that simple.  For starters, a trustee is a fiduciary.  A fiduciary is a person who has the power and duty to act on behalf of another person (usually referred to as a “beneficiary”) under circumstances that require total trust, good faith and honesty.   A fiduciary must avoid self-dealing (buying trust property themselves at a discount for example) and must avoid conflict on interests.

Here’s where things get tough for most trustees.  They are in charge of a trust in which they are likely a beneficiary and other family members are beneficiaries as well.  Even in the best of families, one person in charge of significant assets is going to create circumstances in which the trustee’s moves and motives are questioned at every turn.

“Why was Mom and Dad’s home sold and not kept?”

“That accountant the trustee hired is too expensive, they should have used my accountant. “

“The trustee is using trust assets for himself.”

“What happened to Uncle Dave’s fabulous gun collection?  Everything just disappeared.”

Rest assured, in most family trusts, once the assets are in control of the trustee, the worst assumptions and second guessing will begin.  In some families it starts on the day of the funeral.  If the trustee lets things fester, trust litigation can develop.

I’ve seen circumstances where the trustee could not take the emotional toll that the role put on them.  They were desperate for my firm to help.   Hiring a trust attorney to assist in the administration of the trust can create a firewall between the trustee and beneficiary while ensuring the trustee carries out their duties effectively.  For example, in the situation where the beneficiaries are already doubting the moves of the trustee even before they have the assets in their control, the trust attorney can send out a letter stating that the beneficiaries are welcome to contact the firm for updates but that updates will come via letter once they are necessary.  A letter from the attorney outlining the timeline for resolution of the trust is often a good way to set expectations.  When that letter comes from the trustee, second guessing can only worsen.

Our firm does not draft trusts without a no-contest provision which states that any beneficiary who files a lawsuit contesting the trust potentially loses their inheritance for doing so.  Now, there are exceptions to these provisions, but courts will uphold them on the belief that if the grantor of the trust (the creator of it) wanted that provision, they meant for it to be enforced.

Remember this as well:  The trustee in most trust situations does not have to rush through the process of identifying assets and distributing them.  That’s a competing problem for a trustee because working too fast can lead to mistakes and a fiduciary that makes mistakes can be personally liable. 

Ultimately, the best move a trustee can often make is to utilize the provision in the trust allowing them to hire professionals to handle the investing of trust assets (financial advisor), to account for them (CPA) and to deal with the legal issues of the trust (attorney).  Once these professionals are hired, a trustee will often find that the mob puts down their pitchforks, that a path with an end in sight develops and that they handle their duties more effectively and efficiently.

One more thing:  We always remind our trustees that they were chosen for a reason and their crazy brother and angry sister were passed over as trustee for a reason.   You were the one chosen because you were the most dependable.