January 7, 2019May 10, 2024

Prince’s Estate Must Sell Property To Pay Estate Tax

laptop and glasses on a wood table Some of the mystery about what will happen to Prince’s property has begun to clear up as his estate has asked for permission to sell some of his real estate holdings.

It has been estimated that the total estate tax bill that Prince’s estate will have to pay will be in the neighborhood of $150 million. The bill is that high because Prince did not have an estate plan that accounted for either the federal estate tax or the Minnesota estate tax. Like Minnesota, Maryland estate tax is lower than the federal at $2 million. This estate tax threshold includes the entire value of your house, without regard to the the size of your mortage. With the high property values for housing in Maryland, life insurance and retirement accounts, many middle class Maryland families, who do not do Maryland estate planning, may force heirs to sell assets, just to make Maryland estate tax payments.

Since Prince died without an estate, there was alot of speculation that some of the musician’s estate would need to be liquidated to pay the tax, but what portions of his estate would be sold has not been known.

It now appears that some of what will be sold includes the musician’s real estate holdings, as TMZ reports in “Prince Everything Must Go…Estate Ready to Dump Properties.”

The special administrator for the estate has filed a motion with the court seeking permission to sell some of the real estate and says it will not accept an offer that is less than 90% of fair market value. The musician is known to have had real estate holdings in several different states, but which properties might be sold has been sealed.

Ultimately, the judge will have to approve of the plan to sell before the properties are listed.

If the judge approves the plan, it will likely not be the last things of the musician’s that will be sold. The estate tax bill is high enough that much more will likely need to be liquidated in the next few months so the estate can pay the taxes on time and avoid fines and penalties.

Reference: TMZ (Aug. 1, 2016) “Prince Everything Must Go…Estate Ready to Dump Properties.”

August 10, 2018October 30, 2023

Women Living Longer but Saving Less

“All working Americans need retirement savings, regardless of gender. However, the need is particularly strong for women, since they have a tendency to live longer than their male counterparts. Therefore, they’re also more likely to require paid care at some point—since a spouse may not be around to provide care.”

Women have a statistically longer lifespan than men. It’s unsettling to learn that women save about half as much as men for retirement. This disparity could put women in a very bad position, when they are most vulnerable late in their lives, says The Motley Fool in its article “Why Are Women Only Saving Half as Much as Men for Retirement?”

When queried about why they think it is so difficult for women to save for retirement, most woman honestly said they are living from one paycheck to the next, with little to spare for savings. They are also paying back student loans. Men say much the same thing, so why is the average female saver saving so much less for her future?

In a recent Student Loan Hero study, women admit that they don’t know a lot about investment and retirement planning. Women are also more likely to take breaks in their careers to be caregivers, raising children and taking care of aging parents. This reduces their earnings. While some wage equity has been achieved and even made into law, most women do not earn the same as their male counterparts. Therefore, women face special challenges to their retirement savings.

What can be done to address the gap?

Start by examining your budget and cutting unnecessary expenses.
Make sure to maximize your employer’s 401(k) match.
Fight for raises throughout your career. To gain more info on what your position is worth, use websites like Glassdoor’s “Know Your Worth” tool to compare salary data.
Consider changing your investment approach. If you have steered clear of stocks over conservative vehicles like bonds, they may be a good way to catch up.

Finally, don’t forget that retirement includes estate planning. Sit down with an experienced estate planning attorney, who can help you prepare the necessary documents to protect you and your family. Make planning for retirement a priority. Your future self will appreciate it!

Reference: The Motley Fool (June 3, 2018) “Why Are Women Only Saving Half as Much as Men for Retirement?”

August 2, 2018September 4, 2024

Want to Give Away All of Your Money?

“Even if you’re not a millionaire, you may have reached a stage where you think, It’s enough. It could even be a bit too much. A second car may sit mostly in your garage. A beloved vacation home may have transformed from a place to relax to a place to maintain.”

You don’t have to be a millionaire to feel like you’ve got enough. How many cars, vacations or houses does anyone really need? If you’ve reached that point, congratulations. Now, what do you do about it? How do you share your resources in a way that is carefully thought out and doesn’t create a battle among family members? An article from AARP, “How to Give Your Money Away,” provides some good points.

A grandchild needs a college education. Use a 529 college tuition plan to help your grandchild, by contributing to a plan created by the child’s parent. Financial aid formulas look at contributions from a grandparent’s plan but not a parent’s plan as student income. To allow your grandchild to be eligible for student aid or grants, make sure that the funds you contribute go to his or her parent’s 529. Many states permit you to switch ownership to the parent, if the beneficiary remains the same.

You want to be philanthropic, even if you’re not Warren Buffet. You can use what’s called a DAF—donor advised fund. They are like charitable savings accounts. The tax deduction for any cash or investments placed in the fund is immediate, so you can front-load two or three years’ worth of giving into one year. You can also claim a charitable deduction for a year, when you intend to itemize instead of taking the new standard deduction. You can direct grants from the fund to any non-profit organization you choose and whatever timeframe you like.

One child is a smashing success, the other is a starving artist. Sometimes the disparity of incomes between children, can be a result of choice or abilities. Nevertheless, you may not wish to leave the exact same amount to both kids. One of your children might have a disability and needs special planning. It’s your call and it’s also your call whether to share all the details with your kids. Logic prevails in some families and there’s no drama over these kinds of decisions. Less information about their inheritance is better for others. You could insert a no-contest clause in the will to forestall any litigation.

You have visions of generations enjoying your summer cottage. Sometime this works out. However, sometimes the kids have no interest in the property and just want to sell it. Have that conversation first. If no one wants it, sell it when the timing works for you. If one kid loves the house and the others don’t care, work out the numbers so the house stays in the family, but the child receives a smaller percentage of assets. If the family wants to keep the house, work with an estate planning attorney to create an LLC (Limited Liability Company) and give shares to the kids. You’ll need an operating agreement, including how the cost of maintaining the property will be handled and what happens, if someone wants to sell their share. Define the universe of eligible owners as lineal descendants and not spouses, to forestall an ownership battle in the case of a divorce.

Talk with an experienced estate planning attorney about how to give away your assets in a way that will make sense for your family and gain useful tax benefits for your estate.

Reference: AARP (May 1, 2018) “How to Give Your Money Away”

July 9, 2018September 15, 2022

Estate Planning for the Separated

Two recent celebrity deaths highlight a potential issue in estate planning. What happens when a couple does not get divorced but separates amicably?

The recent deaths of fashion designer Kate Spade and celebrity chef Anthony Bourdain have elicited an outpouring of grief. They both committed suicide, which came as a shock to friends, family and fans. However, they both also share something else in common.

At the time of their passing, they were both separated from their spouses. That highlights a peculiar issue in estate law as Forbes discusses in “Kate Spade, Anthony Bourdain And Estate Planning When You Are Separated.”

If Spade and Bourdain had gotten divorces, then their spouses would not be entitled to any portion of their estates. If the spouses were included in the estate plan, they would be constructively written out by a court. However, that does not happen when a couple is separated.

The spouse of the deceased retains full rights to the estate. That means if there is no estate plan, the spouse will normally receive the entire estate through the laws of intestate succession. If there is an estate plan, then the spouse receives anything the plan says he or she gets. If the spouse does not receive enough of the total assets of the estate, then the spouse can elect to take his or her spousal elective share (the amount of which varies between states).

Of course, both Spade and Bourdain might have been perfectly fine with their spouses receiving their assets. They did after all choose not to divorce, but instead to separate.

Reference: Forbes (June 12, 2018) “Kate Spade, Anthony Bourdain And Estate Planning When You Are Separated.”

June 15, 2018December 28, 2023

Planned Giving

One of the ways that you can leave a good legacy behind, is to provide money to charity in your estate plan.

Your worth is likely more than the sum total of your assets. You have worth that does not have any direct monetary value. Your capacity to like and love your friends and family cannot be given a monetary value, for example. However, in estate planning, it can often seem like the only thing you will have left at the time you pass away, are assets that have monetary value and need to be given to other people.

You cannot give away your capacity to love after death. However, that does not mean your other value has to be left out of your estate plan completely. You can use your estate plan for planned charitable giving, as the Nashua Telegraph discusses in “Planning to give and leaving a lasting legacy.”

Planned giving is simply making provisions in your estate plan that a certain amount of money or a percentage of your estate’s assets should be given to charity. It is a popular option for people. It is popular not only with the wealthy, but also with people of more modest means who want to leave something behind for good causes.

There are several different ways you can make charitable donations a part of your estate. Some are as simple as a few lines written into a will and others are for more complicated, including setting up special trusts for the purpose. An estate planning attorney can help you choose the best way to do so.

Reference: Nashua Telegraph (May 20, 2018) “Planning to give and leaving a lasting legacy.”

Estate Planning, Wills, Trusts

May 4, 2018April 27, 2024

Use a Trust to Avoid Disputes

If you know that your family is likely to fight over your estate, you can limit the fight greatly, by using a trust instead of a will.

Many family fights over estates are predictable. People know when their family members do not get along and are likely to fight over their inheritances. They know that “unequal” inheritances are more likely to trigger trouble, too.

When it comes to estate planning, it is important to understand that those fights quite often result in protracted court cases over the estate. This is especially true, if the main instrument used to distribute the estate is a will that has to go through probate by its very legal nature. Some of this mayhem may be avoided by using a trust instead as the Times Herald-Record discusses in “Trusts avoid inheritance disputes among family members.”

Since trusts do not go through probate, there is no open probate case for family members to easily file a claim. That in and of itself makes a trust much less likely to lead to litigation. It is also easier to use the trust document itself to create language making family fights less likely. Even if there are fights, an independent trustee can often referee those fights and thus avoid any litigation.

It is nearly impossible to completely guarantee that no family fight will ever occur over an estate. An estate planning attorney can help make those fights much less likely, by creating a good trust.

Reference: Times Herald-Record (April 5, 2018) “Trusts avoid inheritance disputes among family members.”

May 3, 2018December 4, 2023

Joint Tenancy Is a Bad Idea

Adding a child as the joint tenant of your home to avoid probate is always a very bad idea.

Some bad ideas in estate planning never seem to go away. No matter how many times estate planning attorneys try to tell people that the ideas are bad, people continue to make the same mistakes.

One common mistake is when people try to do their own estate planning to get around probate. For example, a widow may add an adult child as a joint tenant on the deed to her home. While it is true that if all goes according to plan, the child will inherit the house after his mother passes away without the need for probate. This approach can be a bad idea.

Why? Normally, the trouble comes because the child has a creditor who can attach the home to pay off the child’s debts. However, there are other potential issues, as was recently discussed in the Napa Valley Register in “Can new wife inherit home?”

In this case, a married couple added their daughter to the deed as a joint tenant. The wife passed away, which made the father and daughter co-owners of the home. The father then remarried to a much younger woman.

The daughter refused to give up ownership and allow for a new deed allowing the new wife to inherit the home. When the father passes away, the daughter will inherit the home and be free to throw the new wife out if she wants.

Instead of looking for ways to avoid probate on your own, go to an estate planning attorney for assistance. The attorney can give you better ways to accomplish your goals and help you avoid these types of problems.

Reference: Napa Valley Register (April 5, 2018) “Can new wife inherit home?”

April 9, 2018September 4, 2024

Make the Most of Tax Season

Don’t think of tax time as the worst time of year but as an opportunity to get a good estate plan.

There are two types of people who like tax season. One is accountants and the others are tax attorneys. For everyone else, it is the worst time of the year. Even accountants and tax attorneys are probably relieved when tax season is finally over, because no one likes doing their taxes.

Since you have to get all of your financial information for the year sorted out and digest it in the way the IRS requires, it, you will not have to do everything over again to create an estate plan, as Forbes points out in “Make A Better Plan This Tax Season.”

When doing your taxes, you are looking at many of the same accounts you would consider when creating your estate plan. That takes care of one step in the process. After that, you just need to gather information about all of your other assets that were not part of your taxes for the year.

For most people, the rest of the estate planning process is relatively simple. You just need to determine who you want to have your assets after you pass away.

To complete your estate plan, you should hire an experienced estate planning attorney. When the attorney has your financial information and knows who you want to receive what is in your plan, an estate planning attorney can help you determine the best way to write a plan to accomplish your specific objectives.

Reference: Forbes (March 19, 2018) “Make A Better Plan This Tax Season.”

April 5, 2018June 6, 2022

Who Really Needs an Estate Plan?

If you were to survey people about who most needs an estate plan, the most popular answer would likely be incorrect. People think that the wealthy need estate plans the most. However, that is not true. Parents with minor children need them more. Planning for young families is critical to protect loved ones.

One of the fascinating things about estate planning is how it is perceived by average Americans. When you talk to people about it, they often think of estate plans as a way for rich people to determine who gets their property when they pass away. That is a big part of it but it is not the only reason for estate planning. In fact, the wealthy benefit from planning more than other people, only if you think that money is the most important thing people have to protect and preserve.

Most people think protecting their children is more important than money. That is why parents with minor children have more reasons to plan their estates than wealthy single people, as Volume One points out in “When There’s a Will.”

When parents of minor children plan their estates, they accomplish two very important tasks. First, they figure out how their children’s expenses will be met. Parents who thoughtfully prepare their estate plans can decide who will handle their assets for the benefit of their children and how that will be done. Even more importantly, they can decide who will take care of their children, should they be orphaned.

An estate plan is the only means by which parents have a say regarding who should be appointed as the guardian of their minor children, if anything happens to the parents.

If you have minor children, talk to an estate planning attorney, so you can make sure they are taken care of if the worst happens.

Reference: Volume One (March 7, 2018 ) “When There’s a Will.”

April 2, 2018March 27, 2024

Cloning and Estate Planning

As far as anyone knows, there are not any clones of humans walking around yet. However, it might soon be possible. That could have some interesting effects on estate planning.

The idea of cloning humans has been a science fiction staple for a long time. The original premise was that an exact genetic match could be made with all of the knowledge, memories and personality of the original human reproduced in the clone.

The reproduction of things learned after birth is not likely anytime soon, so an almost identical genetic clone might be far off. America recently learned that Barbra Streisand had successfully cloned one of her dogs twice as The New York Times reported in “Barbra Streisand Cloned Her Dog. For $50,000 You Can Clone Yours.”

It is likely that some scientist somewhere will set aside ethical concerns and figure out how to clone humans. That could have a profound impact on estate planning. There is currently no legal status for clones.

Someday, the laws of intestate succession may need to determine whether clones have an equal or greater or lesser priority than children. It also might make a difference when and by whom the clone was made.

Science has never had a major impact on estate planning. The possibility of cloning and the possibility of “eternal life” that other researchers are working on could soon change things.

Reference: New York Times (Feb. 28, 2018) “Barbra Streisand Cloned Her Dog. For $50,000 You Can Clone Yours.”

Building Legacies that Last Estate Planning and Elder Law

Category: Maryland Estate Planning