Inheritance

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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.

 

Disinheriting A Child From Your Will…

Disinheriting A Child From Your Will…

DISINHERITING A CHILD FROM YOUR WILL

               A common misconception in estate planning is that you cannot disinherit a child from your will.  This is not true.  Unlike a spouse, who must receive at least part of your estate absent a prenuptial agreement, a child has not such protection.

There are many reasons why children are disinherited including estrangement, fear of waste, alcohol / gambling / drug addiction, lack of support from the child, abuse by the child, criminal history and prior financial support.  I once had a client disinherit their son because he robbed him.

If you are thinking about disinheriting a child from your will, there are a few considerations to think about.

The Disinheritance Must Be Clear In Your Last Will and Testament

The inheritance attorney Wentzville, Missouri will draft the document so it makes it clear at the beginning that you list your children by name, including the disinherited child.  Then in the estate distribution language portion of the document, it must be made clear that you wish to disinherit the child by name.

Make Sure Your Beneficiary Designations Are Also Changed

Often people will have a transfer on death beneficiary designation on an asset like a car.  Remember that if you left, for example, a car equally to your son and daughter, then decided to disinherit the daughter, the car is controlled by the beneficiary designation, i.e. you’d also have to remove daughter from the beneficiary designation for the car.  The simple fact that you changed the will is not sufficient.

Consider Using A Trust Instead

Often people wish to disinherit a child because they are a spendthrift and it’s assumed that any money left in a will would end up being wasted by the problem child if they were to inherit.  In such a case, a trust should be considered because you can leave money to the problem child in the trust, to be managed by another party after you pass away.  A spendthrift trust attorney St. Peters, Missouri can provide further details, but the trust can be set up so that the problem child only receives money if they avoid drug and alcohol problems, graduate from college or stay out of trouble.  This “stick and carrot” approach can be win-win for your wishes and the child and should be considered in such circumstances.

Disinheritance Is Sometimes A Practical Reality

In cases where a person has a child that they never had a relationship with, it’s important that the child be mentioned in the person’s will and still disinherited, especially in the case where the person has a new family with children that he does have a relationship with and who he or she really wants to inherit from them.

Disinheriting a child from your will is a difficult thing to do, but often necessary.  You do have options.  Consider alternative options and remember…it’s your money.

You Don’t Need To Cite The Reason For Disinheritance

In most cases I recommend that a client not explain in the document why a child is being disinherited.  I have had clients insist that the information be included, but again I believe the best practice is to not do so.

Estate Planning Disasters: The Form Beneficiary Deed

Estate Planning Disasters: The Form Beneficiary Deed

ESTATE PLANNING DISASTERS:  THE FORM BENEFICIARY DEED

Whether people fail to create an estate plan or sometimes even when they do, there a host of reasons why the plan or lack thereof can be a disaster.  This article will provide an example of an actual estate planning disaster.  As a beneficiary deed lawyer St. Peters, Missouri, I have seen plenty of them.

STORY

Aunt has a piece of property in a historic part of St. Charles County.  She has no children and is a widow.  She does however have a grown niece and a grown nephew and she loves both of them.  Aunt and their mother were super close as sisters and Aunt especially doted on niece and nephew as they were growing up.

In 2002, Aunt finds a form beneficiary deed at an office supply store.  The form automatically includes the language per stirpes typed in after the people listed to inherit the property after her death.  She writes in that she wants her nephew and niece to inherit the property equally when she dies and, as listed on the deed already, per stirpes.  The deed is correctly recorded.

In 2012, niece passes away.  Aunt is now in her late 80’s and unable to create a new beneficiary deed because she is not competent.  In the intervening ten years, niece’s son, her only child has grown from a well adjusted ten year old to a 20 year old with an awful drug addiction and several arrests for theft and burglary.

Aunt passes away in 2015.  Nephew is referred to my office for help, since he lives on the West Coast.  He wants to know how to put the property just in his name since his sister passed away.  After review of the 2002 beneficiary deed, I have to tell nephew that he is only entitled to one-half of the property and, unfortunately, has to share the property with niece’s son (his nephew).  Nephew immediately tells me that his Aunt said many times that she only wanted niece or nephew to inherit the property because she knew they would take care of it.  However, her intent as indicated by nephew is not displayed on the form beneficiary deed.

Meanwhile, soon after Aunt’s death, niece’s son, has already broken into the house and taken almost everything of value, including rare jewelry and antiques.  He has also stripped all of the copper and apparently looking for hidden items, tore up the flooring throughout the first floor and the vents in the basement.

I was able to put the property in nephew and son of niece’s name, but I had to refer nephew to a civil litigation attorney to pursue damages against the son of niece.  Nephew received a judgment for thousands of dollars and eventually the share of the house belonging to niece’s son was used to collect on that judgment, but the actual damages to the house and the costs of filing suit severely reduced the value of the inheritance.

So how could all of this been avoided?

Hindsight is of course 20/20 but a consultation with an estate planning attorney would have allowed Aunt to be informed that her true intent, to give the property 50/50 to nephew and niece, per capita, would have resulted in the property passing only to nephew at Aunt’s death because niece had predeceased in 2012.

Bottomline:  Two Latin words, per stirpes, meant all the difference in this case. 

Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form…

Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form…

Inheritance Nightmares: The Unchanged Life Insurance Beneficiary Form

                  Whether people fail to create an estate plan or sometimes even when they do, there a host of reasons why the plan or lack thereof can be a disaster.  This article will provide an example of an actual estate planning disaster.

Early in my career as an inheritance lawyer O’Fallon, Missouri, I worked at a small law firm in New Jersey.  Our office did a lot of divorce law.  A prior divorce client was able to obtain full custody of her young daughter and escape a pretty abusive marriage.

When the divorce was finalized, our office would always send a form letter explaining it was wise to change any estate planning and also things like life insurance beneficiaries.  The idea was that most people may not recognize that if they had their ex-spouse listed on a life insurance policy, the ex-spouse would still receive the proceeds of the policy if the client were to pass away.

This particular client had a very good job as an actuary and one of her benefits was a standard life insurance that she could pay extra to add term life insurance.  She made that election and at the time of her divorce the policy coverage was $1.5 million.

A year or so after her divorce, the client discovered that she had aggressive brain cancer.  She took a leave of absence from her work and within six months or so she passed away.

Her family was understandably worried about an inheritance for their granddaughter and contacted our law firm about a life insurance policy which the client had said before she got sick.  Prior to her death, she said she had changed the beneficiary to her parents, to hold the money for daughter’s needs.  When I looked into the policy there was a huge problem:  Ex-husband was still the beneficiary on the policy.  The change of beneficiary had never occurred.

As we later found out, about a year after the divorce, client had filled out paperwork to change the beneficiary to her parents.  However, her company’s policy was that the change had to be submitted through her HR Department.  Apparently the form got lost, the beneficiary was never changed and the ex-husband was still listed as the beneficiary.

A life insurance policy is a contract.  You could list your worst enemy as a beneficiary and when you pass your worst enemy will receive the proceeds, regardless of what you intended or what your estate plan says.

Eventually, our firm was hired to file suit on the basis that client’s intent was clearly to not have ex-husband to be the beneficiary.  We had some emails and the beneficiary change form to support our argument, but we knew it would be an uphill battle.

After two years of litigation (I had left the firm in the middle of the case), the two sides were able to settle on $1,000,000 for the husband, $500,000 for the young daughter.

Bottomline:  Who you want to inherit your things can change over time for a variety of reasons.  Divorce is clearly one of them.  Changing beneficiary forms is very important if they do not meet your wishes for inheritance provided to the right people.   It’s important to remember that when you are changing beneficiaries that you see it through.  That may not have mattered in this case because the HR Department screwed up, but on the other hand, it could have made all the difference for the young daughter.