Texas Estate Planning

Latest on the Queen of Soul’s Estate

The IRS said that Aretha Franklin’s estate owed more than $7.8 million in unpaid income taxes, interest and penalties from 2010 to 2017.
The Detroit Free Press’ recent article entitled “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt” reports a big breakthrough. It seems that Franklin’s four sons and the IRS have reached a settlement that would expedite the payment of the remaining tax burden and allow her sons access to some of the money from their late mother’s fortune.
Aretha’s heirs have not yet inherited anything from the estate because of the IRS situation.
In a petition filed February 19 in Oakland County Probate Court, the estate said the proposed arrangement includes an immediate $800,000 payment to the IRS. This is despite the fact that the estate continues to question the total tax bill owed.
Since her death, Franklin’s estate has been steadily paying on the tax debt, as well as the constantly growing interest, as it appeals the IRS’s claimed total. As of December 2020, the balance was $4.75 million.
The new petition says the final IRS bill will be determined “by agreement or litigation.”
The agreement between the estate and the IRS details the way in which Aretha’s posthumous revenue will be distributed, until the tax debt is resolved. Backdated to January 1 of this year, it includes new income from song royalties, licensing agreements and other money streams. This agreement states that 45% of quarterly revenue will go toward the existing IRS balance. 40% would also be earmarked for an escrow account to deal with the taxes due on the newly generated income. The other 15% of revenue would be used for managing the estate.
The agreement also provides an immediate $50,000 payment to each of Franklin’s four sons and approves quarterly cash payouts to them. This proposed deal, authorized by 10 attorneys representing the sons, was submitted to the court by attorney Reginald Turner. The Detroit lawyer and incoming American Bar Association president was appointed last year as temporary personal representative of the Franklin estate. The agreement has to be approved by Judge Jennifer Callaghan to be executable.
Franklin died in August 2018, after a long battle with cancer.
Reference: Detroit Free Press (March 1, 2021) “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt”

Should Britney Spears Sign a Prenup?

“Britney Spears, the 39-year-old singer who's in the midst of a conservatorship battle, announced that she was getting married on social media. She received plenty of congratulations, but also got some advice on prenuptial agreements—some which came from Academy Award-winning actress Octavia Spencer.
Yahoo Entertainment’s recent article entitled “Britney Spears's fans urge her to 'get a prenup' — and fiancé Sam Asghari responds” says that many people are urging her to sign the agreement. This document states what happens to property in the event of a divorce. The outcry for a prenup led Asghari to acknowledge the pleas. The 27-year-old actor, model and fitness pro is the one entering the marriage with less wealth than the international pop star. In addition, Britney has allegedly seen her fortune — now worth $60 million — dissipated under the conservatorship run by her father.
"Thank you to everyone who is concerned about the prenup," Asghari wrote on Monday. "Of course, we're getting [an] iron-clad prenup to protect my Jeep and shoe collection in case she dumps me one day."
He also acknowledged the supportive comments. In another post, the actor said, "My phone exploded today! Thank you for the overwhelming love and congratulations! We both love [every] single one of you."
Britney began seeing Asghari after they met in 2016 on the set of her "Slumber Party" video. The 27-year-old actor has been supportive, as she's battled for control of the conservatorship she's living under since 2008.
In her June testimony, in which she claimed conservatorship abuse, she told the court: "I'm not able to get married or have a baby" under the conservatorship. "I have a IUD inside of myself right now, so I don't get pregnant. I wanted to take the IUD out so I could start trying to have another baby. But this so called team won't let me go to the doctor to take it out because they don't want me to have any more children."
Britney recently thanked Sam for being "with me through the hardest years of my life."
Britney has been married twice. She eloped with childhood friend Jason Alexander in 2004 after a weekend bender. There was no prenup. The same year, she married Kevin Federline, with whom she shares two sons Sean Preston and Jayden James. They divorced in 2007.
In 2010, she was engaged to her agent, Jason Trawick, from 2011 to 2012. However, he has denied that they secretly married.
Reference: Yahoo Entertainment (Sep. 13, 2021) “Britney Spears's fans urge her to 'get a prenup' — and fiancé Sam Asghari responds”

Where Do You Score on Estate Planning Checklist?

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It’s even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.
Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:
Moving to Another State. Note that if you’ve recently moved to a new state, the estate laws vary in different states. Therefore, it’s wise to review your estate plan to make sure it complies with local laws and regulations.
Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it’s been impacted by changes to any state or federal laws.
Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated. It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.
A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.
Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.
Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.
Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.
Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

What are the Worst Things to Leave in My Estate?

Kiplinger’s recent article entitled “5 of the Worst Assets to Inherit” says that if you’re planning to leave an inheritance to others, you should take care in what you leave them. Some assets can cause problems. However, you can prevent problems with thoughtful estate planning and the help of an experienced estate planning attorney.
Let’s look at five of the worst assets to inherit and what you can do to help manage them before you pass away:
Timeshares. A timeshare is a long-term agreement where you get to use a vacation property. These contracts are notoriously difficult to end. If you pass away, and your children inherit the timeshare, they may be responsible for the ongoing contract costs. Allow your children to decide at your death whether they want to take over the contract. They can refuse to accept it then—even if your will left them the timeshare—by making a formal disclaimer of the asset.
Potentially Valuable Collectibles. This may be a coin collection, rare stamps, or a piece of artwork. Note that the capital gains tax rate on collectibles goes up to 28%, much higher than the maximum 20% long-term gains rate on other investments. When you die, your heirs receive a step-up-in-basis, meaning when they sell they receive tax-free what the collectible was worth on the day you die. Even so, there are some substantial risks to leaving valuable collectibles as an inheritance. One problem with collectibles is that thy may be difficult to value. If you have any valuable collectibles, tell your heirs where they’re located, their estimated value and the dealers they should work with after you’re gone, so they don’t run into trouble.
Guns. Firearms can also get complicated as an inheritance because of the amount of regulation. They aren’t the type of asset that you can simply hand over to a person without the proper registration or permit. There are a number of state and federal rules, depending on your state of residence and the type of gun.
Vacation Properties. Inherited vacation properties can be a potential financial and emotional problem, especially if you’re leaving one to multiple family members. Disagreements can arise over how often each can use the property, who owes what for the repairs, whether they should sell and whether they should buy one of them out and at what value, especially if one heirs is living far away and doesn’t want their share. Even if the siblings are on good terms, a vacation property has expenses, like maintenance, property taxes, insurance and any remaining mortgage. These costs could outweigh the value of the vacation property to your heirs. If you have a vacation home, begin these discussions early with your heirs and determine if they even want the property and, if so, can you get them to agree on the terms.
Any Physical Property (Especially with Sentimental Value). Disagreements among heirs can happen over any type of physical property, like a favorite chair or Mom’s silverware. These sentimental items can be tough to divide. Moreover, it’s harder to tell what some of these items are worth. Avoid these issues and start planning the distribution of your physical property ahead of time. It is important to be clear on who will receive what to prevent arguments.
Reference: Kiplinger (Sep. 14, 2021) “5 of the Worst Assets to Inherit”

No Kids? What Happens to My Estate?

Just because you don’t have children or heirs doesn’t mean you should not write a will. If you decide to have children later on, a will can help protect their financial future. However, even if you die with no children, a will can help you ensure that your assets will go to the people, institutions, or organizations of your own choosing. As a result, estate planning is necessary for everyone.
Claremont Portside’s recent article entitled “What Happens to Your Estate If You Die With No Children” says that your estate will go to your spouse or common-law partner, unless stated otherwise in your will. If you don’t have any children or a spouse or common-law partner, your estate will go to your living parents. Typically, your estate will be divided equally between them. If you don’t have children, a spouse, or living parents, your estate will go to your siblings. If there are any deceased siblings, their share will go to their children.
The best way to make certain your estate goes to the right people, and that your loved ones can divide your assets as easily as possible, is to write a will. Ask an experienced estate planning attorney to help you. As part of this process, you must name an executor. This is a person you appoint who will have the responsibility of administering your estate after you die.
It’s not uncommon for people to appoint one of their children as the executor of their will. But if you don’t have children, you can appoint another family member or a friend. Select someone who’s trustworthy, responsible, impartial and has the mental and emotional resources to take on this responsibility while mourning your death.
You should also be sure to update your will after every major event in your life, like a marriage, the death of one of your intended beneficiaries and divorce. In addition, specifically designating beneficiaries and indicating what they will receive from your estate will help prevent any disputes or contests after your death. If you have no children, you might leave a part (or your entire) estate to friends, and you can also name charities and other organizations as beneficiaries.
It’s important to name who should receive items of sentimental value, such as family heirlooms, and it’s a good idea to discuss this with your loved ones, in case there are any disputes in the future.
Even without children, estate planning can be complicated, so plan your estate well in advance. That way, when something happens to you, your assets will pass to the right people and your last wishes will be carried out. Ask an experienced estate planning attorney for assistance in creating a comprehensive estate plan.
Reference: Claremont Portside “What Happens to Your Estate If You Die with No Children”

What’s an Enhanced Life Estate?

First Coast News’ recent article entitled “Deed named for former first lady could be key to planning your estate” explains that a strategy that’s available in Florida and a few other states is called an enhanced life estate or a “Lady Bird” deed, named after former First Lady, Lady Bird Johnson.
This deed states that when I die, you get the property, but until then, I reserve all rights to do whatever I want with it. That contrasts with a traditional life estate where a property owner can plan for one or more others to inherit their house.
Typically, the person with a life estate has a lot less control over what happens in the future, including potentially being thwarted by the very person you’re tapping to receive your property at your death, in case you decide you no longer want the house while you’re still alive.
The problem is, now you want to sell the property, but since they are a co-owner, they can refuse. And there’s nothing you can do about it.
Enhanced life estates are also about protecting property and its eventual recipient from creditors after the death of the owner. That’s the benefit of avoiding probate. Medicaid or any other creditor may become a creditor in probate.
A Lady Bird deed supersedes a will.
But there are downsides to the Lady Bird deed. A big drawback is if you change your mind. You have to now record another deed in the public record to remove that, and every deed that you record creates one thing that could go wrong.
However, this can be true of any change made in hope of overriding an earlier estate decision, and Lady Bird deeds are fairly straightforward.
Ask an experienced estate planning attorney if this type of arrangement is available in your state.
Reference: First Coast News (July 19, 2021) “Deed named for former first lady could be key to planning your estate”

What Should I Know about Cryptocurrency and Estate Planning?

Cryptocurrency is a digital currency that can be used to buy online goods and services, explains Forbes’ recent article entitled “Cryptocurrency And Estate Planning: What Digital Investors Should Know.” Part of cryptocurrency’s appeal is the technology that backs it. Blockchain is a decentralized system that records and manages transactions across many computers and is very secure.
As of June 24, the total value of all cryptocurrencies was $1.35 trillion, according to CoinMarketCap. There are many available cryptocurrencies. However, the most popular ones include Bitcoin, Ethereum, Binance Coin and Dogecoin. Many believe cryptocurrency will be a main currency in the future, and they’re opting to buy it now. They also like the fact that central banks are not involved in the process, so they can’t interfere with its value.
In addition, NFTs or non-fungible tokens, are also gaining in popularity. Each token is one of a kind and they’re also supported by blockchain technology. They can be anything digital, such as artwork or music files. NFTs are currently being used primarily as a way to buy and sell digital art. An artist could sell their original digital artwork to a buyer. The buyer is the owner of the exclusive original, but the artist might retain proprietary rights to feature the artwork or make copies of it. The popularity of NFTs is centered around the social value of fine art collecting in the digital space.
Here are three reasons to have an estate plan, if you buy bitcoin:
No probate. Even if your loved ones knew you had cryptocurrency, and even if they knew where you stored your password, that wouldn’t be enough for them to get access to it. Without a proper estate plan, your digital assets may be put through a lengthy and expensive probate process.
Blockchain technology. You must have a private key to access each of your assets. It’s usually a long passcode. A comprehensive estate plan that includes this can help you have peace of mind knowing that your investments can be passed on to loved ones’ if anything were to happen to you unexpectedly.
Decentralization. Again, central banks don’t play any part in the process, and it’s secure because its processing and recording are spread across many different computers. However, there’s no governing body overseeing the affairs of cryptocurrency.
Reference: Forbes (July 21, 2021) “Cryptocurrency And Estate Planning: What Digital Investors Should Know”

Should I agree to Be an Executor of an Estate?

If you are asked to be an executor, you should understand some of the duties it entails before saying yes. An executor is the person named to distribute a deceased person’s property that passes under his or her last will and arranges for the payment of debts and expenses.

WMUR’s article entitled “Settling an estate” explains that if the executor isn’t willing or able to perform the role, there’s usually an alternative person named as executor in the will. If there isn’t, then a judge will name an executor for the estate.

Depending on the size and complexity of the estate, settling the affairs may be a difficult and time-consuming task. In some cases, the deceased may have left a letter of instruction or letter of last instruction to help make the process run more smoothly. This letter may set out a list of documents and their locations, contact info for attorneys and accountants, a list of creditors, login information for important websites and final burial wishes.

One of these documents is usually a last will. The executor will need to obtain the original and talk to an estate planning attorney to determine what type of probating is necessary. Probate is the process of getting a court to approve the validity of the last will. The executor will take inventory of the assets of the deceased. This may be required by the probate court. Some assets may also need to be appraised. Once the probate process is finished, assets then may be sold or gifted according to the decedent’s wishes.

An executor must also protect these assets. This could include changing the locks on properties. The executor may also be required to pay mortgages, utility bills and maintenance costs on property. Final expenses also need to be paid. The funeral home or coroner will provide death certificates that will be needed for things, such as filing life insurance claims. Other debts and taxes will require payment. Medical bills, credit card debt and taxes should be paid out of the estate.

If the deceased was collecting benefits, such as Social Security, this will need to be stopped. The executor is responsible for filing a final federal and state tax return for the deceased. An estate and gift tax return may also be necessary.

An executor has many duties. He or she must be honest, impartial and financially responsible. Estate assets need to be managed properly, and the executor has what is called a “fiduciary duty."

All of this can be made easier with the help an experienced estate planning attorney.

What Should Same-Sex Couples Know about Estate Planning?

Proper estate planning can help ensure that your wishes are carried out exactly as intended in the event of a death or a serious illness, says Insurance Net News’ recent article entitled “What Same-Sex Partners Need to Know About Estate Planning.” Having a clearly stated plan in place can give clear instructions and potentially avoid any fights that otherwise might occur. For same-sex couples, this may be even more crucial.

Your estate plan should include a will or trust, beneficiary forms, powers of attorney, a living will and a letter of intent. It’s also smart to include a secure document with a list of your accounts, debts, assets and contact info for any key people involved in those accounts. This list should contain passwords for locked accounts and any other relevant information.

A will is a central component of an estate plan which ensures that your wishes are followed after you pass away. This alleviates your family from the responsibility of determining how to divide your property and takes the guessing and stress out of how to pass along belongings. A will or trust might also state the way in which to transfer your financial assets to your children. You should also make sure your beneficiary forms are up to date with your spouse for life insurance policies, bank accounts and retirement accounts.

For same-sex couples, it is particularly important to create a clear medical power of attorney and create a living will that states your medical directives, if you aren’t able to make those decisions on your own. If you aren’t married, this will give your partner the legal protection he or she needs to make those decisions. It is important for you to take time to have those conversations with your partner, so the plans and directives are clear. You can also draft a letter of intent, which is a written, personal note that can be included to help detail your wishes and provide reasoning for the decisions.

Protecting Your Minor Children. Name a legal guardian for them in your will, in the event both parents die. Same-sex couples must make sure that both parents have equal rights, especially in a case where one parent is the biological parent. If the surviving spouse or partner isn’t the biological parent and hasn’t legally adopted the children, don’t assume they’ll automatically be named guardian.  These laws vary from state to state.

Dissolve Old Unions. There could be challenges, if you entered into a civil union or domestic partnership before your marriage was legalized. Prior to the 2015 marriage equality ruling, some same-sex couples married in states where it was legal but resided in states where the marriage wasn’t recognized. If you and your partner broke up, but didn’t legally dissolve the union, it may still be legally binding. Moreover, some states converted civil unions and domestic partnerships to legal marriages, so you and a former partner could be legally married without knowing it. If a former union wasn’t with your current partner, make certain that you legally unbind yourself to avoid any future disputes on your estate.

Review Your Real Estate Documents. Check your real estate documents to confirm that both partners are listed and have equal rights to home ownership, especially if the home was purchased prior to the legalization of same-sex marriage or if you aren’t married. There are a few ways to split ownership of their property. This includes tenants in common, where both partners share ownership of the property, but allows each individual to leave their shares to another person in their will. There’s also joint tenants with rights to survivorship. This is when both partners are property owners but if one dies, the remaining partner retains sole ownership.

Estate planning can be a complex process, and same-sex couples may have more stress to make certain that they have a legally binding plan. Talk to an experienced estate planning attorney about the estate planning process to put a solid plan to help provide peace of mind knowing your family is protected.

Reference: Insurance Net News (June 30, 2021) “What Same-Sex Partners Need to Know About Estate Planning”

What Exactly Is a Trust?

MSN Money’s recent article entitled “What is a trust?” explains that many people create trusts to minimize issues and costs for their families or to create a legacy of charitable giving. Trusts can be used in conjunction with a last will to instruct where your assets should go after you die. However, trusts offer several great estate planning benefits that you don’t get in a last will, like letting your heirs to see a relatively speedy conclusion to settling your estate.
Working with an experienced estate planning attorney, you can create a trust to minimize taxes, protect assets and spare your family from going through the lengthy probate process to divide up your assets after you pass away. A trust can also let you control to whom your assets will be disbursed, as well as how the money will be paid out. That’s a major point if the beneficiary is a child or a family member who doesn’t have the ability to handle money wisely. You can name a trustee to execute your wishes stated in the trust document. When you draft a trust, you can:
Say where your assets go and when your beneficiaries have access to them
Save your beneficiaries from paying estate taxes and court fees
Shield your assets from your beneficiaries’ creditors or from loss through divorce settlements
Instruct where your remaining assets should go if a beneficiary dies, which can be helpful in a family that includes second marriages and stepchildren; and
Avoid a long probate court process.
One of the most common trusts is called a living or revocable trust, which lets you put assets in a trust while you’re alive. The control of the trust is transferred after you die to beneficiaries that you named. You might want to ask an experienced estate planning attorney about creating a living trust for several reasons, such as:
If you’d like someone else to take on the management responsibilities for some or all of your property
If you have a business and want to be certain that it operates smoothly with no interruption of income flow, if you die or become disabled
If you want to shield assets from the incompetency or incapacity of yourself or your beneficiaries; or
If you want to decrease the chances that your will may be contested.
A living trust can be a smart move for those with even relatively modest estates. The downside is that while a revocable trust will usually keep your assets out of probate if you were to die, there still will be estate taxes if you hit the threshold.
By contrast, an irrevocable trust can’t be changed once it’s been created. You also relinquish control of the assets you put into the trust. However, an irrevocable trust has a key advantage in that it can protect beneficiaries from probate and estate taxes.
In addition, there are many types of specialty trusts you can create. Each is structured to accomplish different goals. Ask an experienced estate planning attorney about these.
Reference: MSN Money (July 9, 2021) “What is a trust?”

Why Did Texas Siblings Come to Blows Over Inheritance?

A lawsuit in Texas alleges that Michael Mowrey hit his sister Stacy Alley, shoved her and choked her. He was criminally charged with felony assault and accepted a plea deal.
However, these criminal proceedings do not result in repayment to the victim.
San Angelo Live’s recent article entitled “Sibling Choked Over Inheritance” reports that the reason for the incident wasn’t stated by the plaintiff in the court documents. However, court documents do reveal that their father's inheritance was an object of contention.
Alley originally brought the lawsuit against her brother for monetary damages for medical bills, legal fees, lost wages and the emotional effects of the life-threatening attack.
Instead of going to trial, the brother and sister agreed to submit to mediation.
The results of the mediation were recently released. The outcome is binding.
They agree to partition or split the 446-acre cotton farm owned by their deceased father Gene Mowrey. In the agreement, Alley gets 306 acres and Mowrey gets 140 acres.
Mowrey must convey his one-half interest in the estate’s Oklahoma minerals to Stacey Hamilton (another sibling), along with his one-half interest in the escrowed mineral production attributable to the Oklahoma minerals.
The two sisters (Hamilton and Alley) are required under the deal to execute a deed that conveys all of their rights, title and interest in their father’s home to Michael. As a result, he will own 100% of that home.
The reason for the violent incident appears to have been a fight over their inheritance.
It was not clear if Michael Mowrey suffered any real losses as a result of the outburst.
While he lost a majority of the rights to the family cotton farm, and his share of the family’s mineral rights, he gained the home.
Reference: San Angelo Live (June 27, 2021) “Sibling Choked Over Inheritance”