April 1, 2019January 27, 2022

Under Pressure: David Bowie’s Estate Plan

“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.

March 25, 2019April 2, 2023

Princess Diana’s Estate Plan

“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.

June 13, 2018

Your Executor Is Important

One of the simplest things that you can do to help prevent your estate from facing difficulties, is to make the right choice about who your executor should be.

People who get wills, normally put a lot of thought into how they would like their property to be distributed after they pass away. It is very important to them, that their wishes are carried out and everything goes to the appropriate heirs. However, often relatively little thought is put into who should make sure it all happens.

The person in charge is the executor. Instead of thinking about whether the person they are choosing is the right person, many people just pick a close friend or relative. This can be a very big mistake, if the person does not know what they are doing, as Forbes points out in "Choosing an Executor for Your Estate."

The executor of your estate will have a lot of work to do. There are often important tax decisions that need to be made quickly. The executor needs to determine what assets you have at the time you pass away. However, they cannot just give those assets to the people you want to have them.

First, they need to go to probate court and be officially appointed to administer the estate. They will then need to determine, if you had any debt when you passed away. That debt normally needs to be paid out of your assets, before any property can be distributed.

Your executor needs to be someone who not only has the time to serve in the capacity, but also can handle administrative and financial tasks well. Put some thought into this important decision.

Reference: Forbes (May 16, 2018) "Choosing an Executor for Your Estate."

July 10, 2017

Model’s Estate Sues Chiropractor

The estate of a former Playboy model is suing a chiropractor for wrongful death.

One of the many tasks that the executor of an estate has, is to assess whether anyone owes the estate any money or could be determined to owe the estate money, if sued. If the answer to either question is yes, then the executor has a duty to act accordingly and try to collect on behalf of the estate for the benefit of the heirs.

A recent example of this comes from the estate of Katie May, a former Playboy model. May apparently suffered injuries during a photo shoot and went to a chiropractor for treatment.

The chiropractor worked on her neck. She later died.

The coroner determined the treatment injured her artery and cut off blood flow to her brain, as TMZ reported in "Playboy Model Katie May Estate Sues Chiropractor…Your Treatment Killed Her."

May's executor and the father of her child is suing the chiropractor for wrongful death on behalf of the estate. Even if he did not personally believe the coroner's report that the chiropractor was responsible for May's death, he would likely have an obligation to sue.

While this is an unusual case in that it features a Playboy model and an apparent death at the hands of a chiropractor, it illustrates something important. Executors have duties to the estate and some of those duties can be challenging.

It is for this reason that executors are advised to get the assistance of estate attorneys to help carry out their duties.

Reference: TMZ (June 14, 2017) "Playboy Model Katie May Estate Sues Chiropractor…Your Treatment Killed Her."

November 10, 2016

Executor Loses Fees

Estate executors have a right to be paid reasonable fees for their services, but if they are not careful they can miss out and not get paid for the full value of what they do.

Being the executor of an estate can be a difficult and time-consuming work, especially if the estate will have to pay estate taxes to the IRS. Because of this it is important that executors be allowed to collect reasonable fees from the estate to encourage people to take the time to serve as executors.

If an executor is not careful he or she can lose out and may not be able to collect any fees.

The Wills, Trusts & Estates Prof Blog discussed a recent example of that in "Section 6166 Lien Causes Executor to Miss Out on Fees."

In this case the executor took a Section 6166 election which allowed estate taxes to be deferred and an estate tax lien to be put on the property.

In such instances, when the property is sold, the proceeds are used to pay the estate tax.

This executor, however, had not yet collected his full fees and the property declined in value to a point below what was owed to the IRS.

The executor argued in court that his fee claim should take priority over the IRS' tax claim. However, the court ultimately disagreed and the executor will not be paid.

Executors should take notice of this case and make sure they work with estate attorneys and arrange to be paid their fees before taking Section 6166 elections.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 18, 2016) "Section 6166 Lien Causes Executor to Miss Out on Fees."

October 19, 2016October 25, 2023

Post Death Termination Fees

Families and estate executors have enough to worry about after someone passes away. Should they also have to worry about termination fees for canceling a contract with a utility? One state says no.

If you have ever wanted to move to a different cell phone provider, you are likely to have come across a problem. As long as you signed a contract with your current provider, you either have to continue to pay the contract or pay a termination fee.

Depending on where you live, you might have come across other termination fees for things such as cable, electricity and garbage service. These fees are normally seen as reasonable as long as the person who signed the contract is alive. However, some people have discovered that some companies refuse to waive the fees even if the person who signed the contract has passed away.

These post-death termination fees can put a real strain on many small estates. If the deceased had few assets, even a fee of a couple of hundred dollars can be difficult for the estate to pay.

The state of New York has decided to address this problem and recently passed a law that prohibits utility companies from charging termination fees after the contract holder has passed away.

Fox 5 reported on this new law in “NY: Utilities can’t charge termination fees after death.”

This small law could provide big relief to families who are going through the difficult process of grieving for a deceased loved one. In turn, the new law should not create an undue burden on the companies. It remains to be seen if other states will follow suit.

Reference: Fox 5 (Sept. 28, 2016) “NY: Utilities can’t charge termination fees after death.”

Building Legacies that Last Estate Planning and Elder Law

Category: Executor