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.

Princess Diana’s Estate Plan

9aa3f79b8231f3c510cf05d1b718abbf“Family is the most important thing in the world.” Diana, Princess of Wales, was the most beloved soul that left the world too soon. When Princess Diana died on August 31, 1997, the whole world mourned because their queen was gone and her legacy of social work was cut way too short thanks to the paparazzi. Unfortunately, Lady Diana Spencer’s failure to have a proper estate plan came into play 17 years after her death.

Along with creating a will, Diana had created a Letter of Wishes. That letter contained the fact that ¾  of her jewelry and prize possessions were to be given to her sons, Prince William and Prince Harry and the ¼ would be given to her 17 godchildren. Unfortunately, this letter was not recognized and her godchildren only received one item of Diana’s estate. This letter went undisclosed for several years until it was revealed due to the outrage of the parents of the godchildren who were supposed to receive the ¼ of Diana’s estate.

According to the executors of her estate, they had filed a “variance” after her death which was supposed to distribute the money to her sons until they turned 30 which of course did not occur.

In Diana’s case, Personal Property that is valuable and important should be directly in a will or trust. Not a letter. If Diana had done this in her estate plan, there would be no questions about what the deceased individual wanted. Also, there would have been no variances. Even though Diana was the beloved princess of the world, by making the mistakes and causing much havoc in her family, her estate plan ended up in turmoil.

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.

 

 

 

How Michael Jackson’s Estate Plan Was A Success

Michael Jackson, the King of Pop culture, not only left behind a legacy; he also left behind a great estate plan. He made the sensible choice unlike Prince, Aretha Franklin, and Whitney Houston. With the help of his chief executor of his estate both his entertainment attorney John Branca and his music executive John McClain, he left an estimated over $500 million value of assets to his heirs. By having this money, his heirs, under Jackson’s will, will be protected.

In order for him to create this smart and sensible estate plan, he had to follow the steps which include: Creating A Living Trust, Naming A Guardian, and Assembling A Good Estate Plan. By Creating A Living Trust, it spared his heirs the ongoing and prolonged legal process of transferring assets through probate court. By Naming A Guardian, he chose who would care for his minor children. By Assembling A Good Estate Plan, he was able to make sure his heirs got what they wanted.

According to a close correspondent to the King of Pop, “He put two people in charge of the will and trust who he felt were sage, mature, and had a great deal of expertise in how to handle what are probably considerable assets. He couldn’t have put his estate in a better position.” With these steps, you will be able to achieve what Michael Jackson did, which is a “Good Estate Plan.” Overall, the bottom line is that Estate Planning is important and you should have one in place, just like Michael Jackson did. It will serve you well in the future and protect your future heirs.

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.

Delaware Trusts in Doubt

Wills-trusts-and-estates-covered[1]For decades, Delaware trusts were considered the gold standard for asset protection. A recent case has called that into doubt and many people now prefer Nevada trusts.

When people set up dynasty trusts, one of their goals is to keep assets in the family. That is the primary reason for the trusts. People would rather have their assets go to their children and grandchildren, instead of an ex-spouse of one of the children getting the assets, for example.

For a long time, the preferred way of accomplishing this was to create a Delaware dynasty trust. It was believed that Delaware offered the best asset protection.

A 2014 court decision, however, has led many people to question whether Delaware is still the best option, according to Kiplinger in "Delaware Trust? You May Want to Consider Nevada Instead."

The case is truly only remarkable because the decision came as a surprise.

The facts themselves are simple.

A man created a Delaware dynasty trust for the benefit of his son, his son's spouse and his grandchildren. Over the years, the trust assets grew to hundreds of millions of dollars. The son and his wife got divorced.

The court ruled that the now ex-spouse was entitled to a portion of the dynasty trust, so the assets were not kept in the family as desired.

This decision has caused many to look for other states in which to create trusts that better preserve assets in the family. Nevada is the most popular choice,  since it allows trusts to be created that shield assets from ex-spouses, even for child support purposes.

Reference: Kiplinger (March 2017) "Delaware Trust? You May Want to Consider Nevada Instead."

 

 

Trump’s Choice for Secretary Nominee Has a Dynasty Trust

Bigstock-Vintage-brass-telescope-on-ant-44347372[1]President Trump's choice for Treasury Secretary has created some controversy as ethics disclosures have revealed that he has placed assets into a dynasty trust.

 President Obama has repeatedly asked Congress to address dynasty trusts. These are trusts designed to keep wealth in one family for many generations. Properly designed and administered, these trusts can help to legally avoid paying estate taxes for generation after generation, while continuing to generate wealth.

Some lawmakers view this as taking advantage of tax loopholes,  while others believe that allowing dynastic wealth for generation after generation is bad in itself.

For his part, President Trump would make such trusts a thing of the past. He has said that he would eliminate the estate tax entirely, which makes dynasty trusts unnecessary.

His choice for Treasury Secretary Steven Mnuchin, however, has brought the issue to the forefront,  since it has been revealed that Mnuchin created a dynasty trust for his family.

This is reported by Financial Advisor in "Trump's Treasury Pick May Have Used Tax Loophole Obama Attacked."

It is actually true that dynasty trusts exist because of something of a loophole.

Congress never intended for them to be created. For centuries, the English common law inherited by the U.S. prohibited trusts that violated the rule against perpetuities. This rule is extremely complicated and limits the duration of trusts.

When Congress last worked out the basic structure of the federal estate tax, it assumed the rule would be in place. At the time, the rule was the law in every state.

Over the years, however, several estates have repealed the rule against perpetuities in an effort to entice trust business into their states.

That made dynasty trusts possible.

Reference: Financial Advisor (Jan. 12, 2017) "Trump's Treasury Pick May Have Used Tax Loophole Obama Attacked."

 

 

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."