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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.

 

Keep Your Original Will In A Safe Place…

Keep Your Original Will In A Safe Place…

Keep Your Original Will In A Safe Place…

I recently had a case where the aunt of a client had passed away but we could only find a copy of her will.  With some research, we were able to discover that the original will, drafted in 1985, was kept by the Nevada attorney after it was drafted and signed by the aunt.  That was apparently his office policy and some attorneys do have this policy (my firm does not).  When the Nevada attorney retired a few years ago, he apparently sent the original will to the decedent aunt by mail, with a note explaining he was retiring and to keep the original will in a safe place.

However, the original will was either never received by the aunt, or, more likely, at some point, got thrown out.   In the copy of the will, my client was listed as the alternate beneficiary and alternate executor after her uncle and her mother, who had both predeceased the aunt.  Accordingly, when aunt died my client was to be the executor and to receive everything in the estate.  Luckily, most everything in the estate had been placed into a trust and my client was named the alternate trustee of that trust.

The only asset left out of the trust, and thus part of the probate estate was a pesky bank account, having a value of just under $15,000.

Since the probate court requires an original will and we could not locate it, we had to file an affidavit from the client explaining the circumstances of when and how the original will was lost, what steps were taken to try to locate the original, who else assisted in this process and the circumstances of the Nevada attorney sending the will and it never being found.

We also filed a Petition to Admit a Copy of a Will in St. Charles County Probate Division and had to set the matter for hearing.  It’s a somewhat uncommon issue, so there was a little confusion between the court staff about what needed to be filed.  We ultimately filed everything that was needed and were able to secure a hearing date after a few months.

There was a bit of pressure on both my client and myself.  If the will was not admitted, then the aunt would have been deemed to have died intestate (without a will).  Under Missouri law, my client and each of her many cousins would be entitled to an equal share of the bank account.

At the hearing, my client was put on the stand and had to give testimony related to the lost will, including the facts related to the last few months of her aunt’s life, when she had moved to and lived in St. Charles County.  My client was very close to her aunt and this was upsetting for her having to recite these things in open court, including the care she took of her aunt around the time of her passing.

Happily, based on our filings and my client’s testimony, the court correctly found there was sufficient evidence to admit the copy of the will as the original and the proceeds of the account were, pursuant to the terms of the will, distributed solely to my client.

Now that this matter is behind us, I figured this story would make for a good example of the importance of keeping your original will, and all of your original estate planning documents, in a safe place.

Missouri Probate Steps: Inventory Filing…

Missouri Probate Steps: Inventory Filing…

MISSOURI PROBATE STEPS:  INVENTORY FILING

This blog article discusses the the Missouri probate step of filing an inventory.

So a person has passed away and either they had a will or did not have a will.  Either way, a probate may need to be opened in the county where the decedent died to determine who is entitled to the assets of the decedent.  This process is called probate.

The first step in probate is someone or several people file an Application for Probate and for Letters Testamentary (if there is a valid will) or for Letters of Administration (if there is no will).  It is these Letters that allow the person to act as the Personal Representative (same as executor) or the Administrator (same as executor but only in situation where there is no will) and to deal with the assets of the probate estate.

The next step is filing an Inventory within 30 days of the Letters being issued.  This process can be tedious because it is here that you are tracking down what the decedent had but what it’s approximately worth.  It’s a complicated process.  Hopefully you have an attorney helping you through it.  As a quick aside, in Missouri you can have a Supervised estate or an Unsupervised estate.  The Unsupervised estate, in the right situation, is the easiest way to get through probate because the court does not directly monitor all of the transactions of the estate.  The catch is you need to hire an attorney in order to be allowed to open an Unsupervised estate.   My advice?  Hire an attorney.

Back to the Inventory process.  This can vary widely by county.  In St. Louis County, the Inventory is checked over by an auditing department and that is primarily due there is much more probate fraud in St. Louis County than just about anywhere in the state.  St. Charles County has a terrific probate department and they are very helpful.  They take more of a hands off approach to Inventories that are filed and will usually call if something is missing or incorrectly filed.  Probate courts in Warren County, Lincoln County and Franklin County tend to have less estates filed and often do not have their own forms.  In such a case, it is usually okay to use the forms found on the St. Louis County website, although it is always best to call ahead.

Before you can even file a document called an Inventory, however, you have to know what is included in the estate.  A bank account in the decedent’s name only with no beneficiary named will be part of the estate and must be included in the inventory.  With the letters in hand, the executor can find out the account numbers and the value.  They should also be receiving account statements by mail or online by this time as well.  If an account has the decedent’s name and someone else’s name, it avoids probate and is owned by the surviving account holder.  If there are beneficiaries named on the account, it will also avoid probate.

This is pretty much the same as with all accounts, including IRAs, 401K, non-qualified investment accounts (i.e. a Scottrade or Edward Jones account) and life insurance.  Missouri allows decedents to transfer property after death to TOD beneficiaries.  Check the title of all vehicles, including cars, boats, motors and trailers.

What about a home?  If a house is titled in the decedent’s name alone then you need to see if a beneficiary deed was recorded prior to their death.  If so, the house will avoid probate and go to the beneficiaries named on the beneficiary deed document.  If not, the house will be part of the probate inventory and an appraisal may be necessary.  Some counties allow the tax assessment figure to suffice.

Finally, personal property, unless of some value and/or titled property does not usually need to be accounted for in the Inventory.  However, and this is a big however, it should ALWAYS be inventoried by the executor to avoid a fight among the beneficiaries / heirs.

In conclusion, the Inventory notifies the court what is included in the estate and notifies the beneficiaries or heirs of the estate as well since they are to receive a copy of the filed Inventory document.  Once the Inventory is filed, the next step is to deal with creditors and the debts of the decedent.  I will discuss this step in a future blog post.

 

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.

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.