Building Legacies that Last Estate Planning and Elder Law

Under Pressure: David Bowie’s Estate Plan

Download-1“Under Pressure.” These two words were said by the iconic David Bowie along with Queen singer, Freddie Mercury. Sadly, Bowie died back on January 20, 2016 from liver cancer at the age of 69 in Manhattan, New York City. Many celebrities, including Kanye West and Madonna, reacted with deep sorrow because they had lost the “Chameleon of Rock.” Bowie’s legacy still lives on through his children, Lexi and Duncan, along with his wife and now widow, Iman.

Bowie, initially, left the rest of his residuary estate and the remainder of Iman’s trust to Duncan and Lexi. Lexi was also subjected to her own separate trust until the age of 25. After the age of 25, she would be able to possess all the trusts assets. In the case of Iman’s trust, it did qualify for a full marital deduction, which created Bowie’s estate taxes that were to be managed by the children’s shares of the residuary estate.

Even though Bowie was iconic, his estate plan did suffer some consequences. With the $100 million value of his estate, Bowie did not create lifetime trusts that would have benefited his children. If he had created that trust, his children would have been protected from creditors for either his or her lifetime. It would have also given Bowie the power to use his full GST exemption. Since he did not achieve this step, both Lexi and Duncan did not have a special power of appointment over the trust.

One other mistake that David Bowie made in his estate plan was that he did not institute the decanting procedure, which an authorized trustee, not the grantor, transfers assets from one trust into another trust which contains the necessary changes that will achieve the intended purpose. Since he did not use this process, Iman’s trust could not be transferred from one to another.

When creating an estate plan, make sure to use the decanting process. The decanting process can be a powerful tool for post- mortem estate planning and should always be considered whenever testamentary trusts are created. Don’t be under pressure! Create your estate plan today!

Michelle Profit is an estate planning attorney serving Maryland and the District of Columbia. A Harvard Law School graduate, she has worked in the financial services industry for over 20 years. A dedicated advocate for all of her clients, Michelle Q. Profit personally handles each client case from start to finish to meet the client’s needs and objectives. Michelle listens in the consultation sessions and works with any other client accountants or financial planners to create a comprehensive estate plan.

Parents of High School Graduates

If you are the parent of a recent high school graduate, then you should consider getting your child an estate plan.
When our children are young and growing up, we try to teach them how they should act later in life. Every parent knows that the lessons they give to their growing children, can have a tremendous impact on how their children will behave in the decades to come.
It is a heavy burden that most parents take on.
Parents must teach their children how to behave toward others.
Parents have to teach their children about how they should handle money. Parents also have to teach their children about the value of hard work.
It is tempting for some parents to breathe a sigh of relief and think their work is done when their child graduates from high school and becomes an adult. However, there is at least one last thing parents should do as Iris recently discussed in "Estate Planning for Your High School Graduate: That's Right, Your Babies are Adults Now!"
Now that your high school graduate is an adult, he or she needs to have an estate plan.
There are many financial reasons for you to help your child get one now. The most significant is that it will teach your child the importance of estate planning and make them more likely to continue to do it as their lives advance.
However, there is a more immediate practical reason for estate planning.
Once your child is an adult, you are no longer automatically able to make decisions for him or her, should there be a medical emergency.
If your child has an accident while away at college and has a medical emergency, doctors do not have to ask your opinion about what kind of treatment your child should receive. To get around that, you need your child to have an estate plan that includes an advanced medical directive giving you that legal authority.
Reference: Iris (June 27, 2017) "Estate Planning for Your High School Graduate: That's Right, Your Babies are Adults Now!"

In Vitro Fertilization and Posthumous Children

Bigstock-Doctor-with-female-patient-21258332[1]Advancements in technology often require that legal rules be put in place to account for the advancements. When it comes to in vitro fertilization, the law is still adapting, as a case from Spain illustrates.

Before undergoing cancer treatment that could render him infertile, a Spanish man decided to freeze his sperm for possible later use by his partner. After the treatment, the couple started the process of in vitro fertilization but did not complete it, since his condition got worse and he passed away.

The day before he passed away the pair were married.

After his death, the Spanish woman unsuccessfully attempted in vitro fertilization four times. The clinic refused her a fifth attempt without a court order.

It seems that Spanish law only allows genetic material to be used for 12 months after a person has passed away, according to FOX News in "Judge allows woman to undergo in vitro fertilization with dead husband's sperm."

The interesting aspect of this case is that the government chose not to argue in court on legal grounds that the woman should not be able use the sperm. Instead, the government argued on the moral grounds that it was impossible to know whether the man would still want the child or even if he would still want to be married to the woman, if he were still alive.

The government took the position that the man could not consent to having a child, but the judge was not persuaded and ruled in favor of the woman.

Similar cases are expected to appear with greater frequency and present a challenge to current estate law.

It is not clear how estates that are already settled, will be able to handle a child born years after the deceased passed away.

Reference: FOX News (March 23, 2017) "Judge allows woman to undergo in vitro fertilization with dead husband's sperm."


An Estate Battle over Support for Donald Trump

Bigstock-Elder-Couple-With-Bills-3557267[1]In an extremely unusual case, the children of Phyllis Schlafly are involved in a bitter dispute over her estate that appears to have started, when Schlafly decided to support Donald Trump for President.

Throughout the late 20th century, Phyllis Schlafly was a well-known and powerful force in Republican politics. She is often credited with personally defeating the Equal Rights Amendment, when it appeared to be on the verge of passing.

Although she had faded away from the public eye in recent years, Schlafly remained an important figure in Republican circles until she passed away in 2016. When she endorsed Donald Trump for President during the 2016 primaries, it might not have mattered to the general public, but it did matter in the Republican operative world.

It also appears to have mattered to her children and her estate, as the Daily Mail reports in "Children of late conservative icon Phyllis Schlafly at war over their inheritance and have been fighting since she threw her support behind Donald Trump."

Schlafly's endorsement of Trump created a rift between her sons, who supported the decision, and her daughter, who opposed it. The daughter claims that the decision was influenced by Republican political operative Ed Martin.

Since Schlafly passed away, Martin has been creating political action committees in her name to support Trump and the daughter has attempted to stop him. She also claims that Martin and her brothers unduly influenced their mother to change her will in their favor and to make it more difficult for the daughter to challenge the will.

This is disputed by the sons.

Reference: Daily Mail (March 23, 2017) "Children of late conservative icon Phyllis Schlafly at war over their inheritance and have been fighting since she threw her support behind Donald Trump."


Tennessee’s Cowan Rule

MP900202201[1]In most states, to completely disinherit a child in a will, parents have to mention the child and specifically disinherit him or her. Otherwise, it is presumed that the child was left out by mistake. Tennessee has an exception to the rule.  Likewise, in Maryland, a parent must explicitly state an intent to disinherit a child to do so and should proceed with the advice of a Maryland estate planning attorney.

  1. Don Brock, the late CEO of Astec Industries, wrote many wills over the years. He executed new wills in 1994, 1998, 2006, 2012 and 2013. His first three wills all did different things with regard to his five adopted children.

They were given various amounts of money or cut out from receiving anything in the different wills. The last two wills did not mention the adopted children at all. They claim that was done by their stepmother, in order to preserve the assets of Astec Industries for herself.

The children filed a lawsuit against the estate, but lost in the lower courts. The Supreme Court of Tennessee has now agreed to hear their case, according to the Times Free Press in "Tennessee Supreme Court agrees to hear J. Don Brock estate challenge."

The main issue in this case is a 110-year-old decision by the Supreme Court of Tennessee that created what is known as the Cowan Rule. It limits the ability of potential heirs to challenge a will, if they were not mentioned in the previous will.

The adopted children lost in the lower courts because they were not mentioned in the 2012 will. The rule makes some sense.


Merely having the 2013 will ruled invalid would not create an inheritance for the children,  since it would just validate the 2012 will, unless it is also successfully challenged.

However, this is not how other states handle disinherited children.

In other states, it is presumed that if a child is not mentioned in a will at all, it was a mistake and the child can challenge the estate, regardless of what an older will might state. In Maryland and DC, the will should explicitly disinherit.  Contact a Maryland estate planning attorney or DC estate planning attorney in order to successfully disinherit a child.

Reference: Times Free Press (March 21, 2017) "Tennessee Supreme Court agrees to hear J. Don Brock estate challenge."


Signing an Inheritance Away. It Happens.

MP900202201[1]It is every parent's worst fear. A child will agree to give away their inheritance for far less than it is worth for quick money.

Recently, MarketWatch published an advice column with the following question as its title: "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"

The title is an almost complete description of what happened. A reader wrote in with a story about his friend who inherited $800,000 from his father's will. The friend was addicted to drugs and agreed to sign his rights to the inheritance away to his own brother for only $10,000.

Now, that the friend is sober, the reader wonders whether there is any way to get the inheritance back.

The column writer suggests that the friend hire an attorney and sue the brother for fraud based on the premise that he knowingly took advantage of someone who was mentally incapacitated. That might work in some cases.

But not so fast.

There are some states and courts that are not quick to undo agreements that drug addicts voluntarily enter into, especially if it cannot be proven they were high at the time of making the agreement.

This is the type of scenario about which many parents have nightmares, when it comes to their addicted children. Leaving the child an inheritance outright can quickly be lost.

Fortunately, there are ways to avoid the problem altogether without disinheriting the drug-addicted child. A trust can be used to protect the inheritance with a trustee who is granted the discretion to only distribute money when the child is able to handle it.

Reference: MarketWatch (Jan. 24, 2017) "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"


Depression Era Trusts May Expire Soon

Bigstock-Extended-Family-Outside-Modern-13915094[1]Many family dynasty trusts created during the Great Depression to avoid rising taxation, will automatically terminate soon. Trustees and beneficiaries need to be prepared.

One of the lasting legacies of the Great Depression will soon come to an end. In response to that crisis, the government greatly increased the gift and estate tax rates. Wealthy families responded, in turn, by creating dynastic trusts to hold their wealth and preserve it for future generations.

Most of the trusts created at that time have mandatory termination dates at which time the trust assets must be distributed to the residual beneficiaries.

Successfully carrying out that process will require some planning as the Wills, Trusts & Estates Prof Blog explained in “Preparing for Trust Termination.”

The first challenge for many trusts and trustees will be determining the residual beneficiaries. In many cases, they could be distant relations of the original trust settlors and not the same people who currently receive regular distributions from the trusts.

Once the beneficiaries are determined, they will need to plan for how receiving the trust assets, will  impact their lives and financial futures. Depending on the amount of money received, the beneficiaries’ tax and estate plans could change dramatically.

Those who do not plan appropriately, could face negative consequences that could have been avoided.

If you are a residual beneficiary of a depression era trust, you should seek independent legal advice. It might not be a good idea to rely on the advice offered by the trustees and their legal advisors.  Profit Law Firm, LLC can provide an independent consultation.

You need an attorney who will be acting only in your interests.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 5, 2016) “Preparing for Trust Termination.”