Inheritance Tax

Home / Archive by category "Inheritance Tax"
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”.

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.


Gift Taxes 101

Gift Taxes 101


Federal gift taxes are extremely confusing.  While it may seem odd to most people that even giving away your property can result in tax consequences, as we all know, with the IRS, rules are rules and they must be followed (or else).

As a wills and trust attorney O’Fallon, MO I often discuss gift taxes with my clients during our meetings to discuss estate planning.  Taxpayers have two exclusions or exemptions available to them, either on an annual basis or spread out over their lifetime.

The first is the annual gift tax exclusion.  This is a set amount of money you can give away tax free to an unlimited number of people.  A series of gifts made to the same person in a calendar year are not subject to gift if they don’t exceed the annual gift tax exclusion.  For 2017, this number was $14,000.  For 2018, there’s a bump to $15,000.

Here’s an example:  Say in January 2018, you give your son $5,000, then another $5,000 in April 2018 and then a final $5,000 in December 2018.  You’ve reached the cap for your son in 2018, but in January 2019 you could give them another $5,000, subject to the 2019 annual gift tax exclusion (not currently known).

Gifts can also be in kind.  You can give stock, jewelry, or artwork for example tax-free as long as they don’t exceed $15,000.

If you’re married, you and your spouse each get an annual gift tax exclusion, so in the example above, your son could receive $30,000 in 2018.

The lifetime gift tax exemption is the total amount you can give away over your lifetime.  These gifts are also free from tax.  However, the total amount gifted over your lifetime will reduce the amount of exemption to protect your estate from estate tax at your death.

The good news is the estate tax exemption has been indexed to inflation as of 2013, which means it increases each year.  Additionally, the Tax Cuts and Jobs Act, passed at the end of 2017, raises the exemption per spouse to $11.18 million in 2018.  This is indeed a good problem to have.

Gifting is part of the estate planning process for certain individuals who are either concerned about taxes on their estate or want to help family members financially without incurring tax.  Provisions in a living trust and powers of attorney often discuss taxes and the ability of trustees and/or powers of attorney to reduce taxes owed.

If you’re interested in gifting always remember that these opportunities require compliance with IRS regulations, including special filings.  You should always obtain professional advice from a CPA or a tax attorney before considering gifting.

Prince Has Died: What About His Estate?

Prince Has Died: What About His Estate?

Purple Rain


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.

Do you need a Living Trust?

Do you need a Living Trust?

Estate Planning Analysis

Do You Need A Living Trust?

A common question for many people coming into my office to discuss estate planning is “Do I need a living trust?”  My usual response is that it depends (a favorite response of most lawyers).  Well, in this case, it really does depend.  Here are a few factors?

#1  What is the value of your estate?  If your estate is worth more than $500,000 (assets – liabilities) you are a candidate for a living trust.  Why?  The more you have the more you can protect with a trust.  Oh, and when figuring your net worth, don’t forget to include any potential inheritances from your family.

#2  How many titled assets do you have?  Just as important as the value of your assets is the number of them.  Case in point:  I have had clients who have $500,000 spread between three cars, two homes, a boat, two trailers, six bank accounts, an online investing account, two retirement accounts and the certificated stock of five companies.  These are all titled assets and the more assets you have the more sense it makes to have a trust.

#3  Are you concerned about your beneficiaries blowing their inheritance?  If you pass away with or without a will, everything is going to pass relatively immediately to your beneficiaries through the probate process.  Is that what you want for your children?  Do you trust them to take the windfall of your legacy to them and invest it to improve their lives or are you afraid they will waste the money (and opportunity) your legacy provides.  Make no mistake, an inheritance is an opportunity.  With a trust, you can ensure that a trustee manages the inheritance of your beneficiary for as long as is necessary to provide you peace of mind.  One tip…do a life chapters distribution.  Give some of the principal at one age and so much of it a few years later.  This is the real value of a trust.  It protects beneficiaries from themselves.

#4  Are you concerned about estate taxes? Unless you are very rich at the moment, estate taxes are probably not a concern.  Notice I said “at the moment”…that’s because estate taxes change over time.  Until recently, the estate tax affected many more people.  You want the ability to adjust your trust to take advantage of and/or plan for the latest changes in the estate tax.

#5  Is privacy important to you?  A will is a public document filed in probate court of the county where the decedent was living when they passed away.  Open for public inspection at any time.  A trust, on the other hand, is a private document, and is not filed with the court.  You want privacy?  A trust is the only document that can give you that.

Just a few considerations.  There are many factors that go into whether or not you need a trust.  Our office can meet with you and make that determination pretty quick and explain why.  If you live in O’Fallon, Lake St. Louis, St. Peters or St. Charles, give us a call today.

Starting an estate plan…

Death and Taxes


Estate planning can be intimidating.  Most people don’t like to talk about death and taxes and studies show that about 55% of people die without a will or estate plan.  That number is entirely too high and I suspect that is because many people don’t have a good idea of how to start the estate planning process.

Here are a few tips:

1.  Don’t worry about talking about your death.  We’re gonna spend more time talking about your life.  And, unless you are really wealthy, you’ll be surprised at how little taxes will be discussed.

2.  Estate planning is sort of like grocery shopping.  There are some things you need, but many things that you don’t need.  That’s where I come in…I will help you figure out what you need.  I will help you make a grocery list.  Once we have that, the process is much easier.

3.   Identify your assets.  Write down what you have and the approximate value of each asset.  Don’t worry about getting exact values.  Use Kelly Blue Book for a vehicle and the latest share price for stocks. works just fine for estimating the value of your home and remember that the value of your home is the estimated sales prices minus the mortgage.

4.  Think about the people in your life that you would want to step into your place if you were to pass away.  Who would be the guardians of your children?  Who would make decisions for you if your spouse couldn’t?  Who would you want to be in charge of a trust for your kids if you were gone?  This step is crucial, especially if you are married.  You’ll want to know before you meet with an attorney that you are either in agreement with your spouse or you don’t have agreement and need the advice of your estate planner.

5.  Remember, the goal of estate planning is to not only protect your family but to get peace of mind.  To resolve that nagging worry that your affairs are not in order or that you don’t have your “ducks in a row”.  That’s the goal.