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”

Why Is Billionaire Estee Lauder Heir Kicking Baby Mama Out of Mansion

New York socialite Taylor Stein is the mother of a love child with the Estee Lauder heir, William Lauder. They met at a party at Lauder's Aspen Colorado mansion in 2000, when he was married to his wife Karen, who is the mother of two of his daughters.
Celebrity Net Worth’s recent article entitled “Estee Lauder Heir Embroiled In Legal Drama With Baby Mama” says that Lauder and Stein's affair began a year later and in 2005, she got pregnant.
Lauder reportedly asked Stein to terminate the pregnancy because he was in the middle of a contentious divorce from Karen. Their marriage ultimately ended in 2009, but Stein got pregnant again in 2006 and their daughter was born in May 2007. Lauder moved Stein and his baby daughter to Aspen to keep his personal life out of the limelight.
Lauder is the grandson of Estee Lauder and is the executive chairman of Estee Lauder.
Taylor Stein is the daughter of the late Howard Stein, who was a New York City nightclub impresario behind 80s hot spots Au Bar and Xenon. Her grandfather Ruby Stein was a loan shark who was murdered. His headless body was found floating in Jamaica Bay in 1977.
Stein and Lauder have had a difficult relationship for years. In November 2012, Stein was arrested after she allegedly punched Lauder in the face during a fight they had on a street in Los Angeles. She pled guilty to a domestic assault charge and was sentenced to 19 days of community service.
Stein reportedly signed an agreement with Lauder in 2007 that would give her one million dollars every year provided she didn't publicly disclose who the father of her child was and that she stayed at least 100 yards away from any member of the Lauder family in New York, Aspen and Palm Beach.
Their battle was recently reignited in late 2020, when their 13-year-old daughter put a post on social media saying her parents were divorced. Lauder saw this as a violation of the 2007 agreement. Stein is now accusing Lauder of backing out of their arrangement to support them. She also allegedly accused Lauder of a campaign of harassment against her, including hiring private detectives to watch her.
In 2018, she filed a complaint that Lauder was refusing to honor their agreement and was trying to evict her, their teenaged daughter and the 10-year-old son Stein adopted from their 6,000-square-foot, six-bedroom, five-bathroom home.
Stein and Lauder appeared to have reached a settlement in the fall of 2020, until the social media post irked Lauder and sent him fuming again.
Reference: Celebrity Net Worth (March 30, 2021) “Estee Lauder Heir Embroiled In Legal Drama With Baby Mama”

How to Avoid Basic Estate Planning Miscues

WMUR’s recent article entitled “Common estate planning mistakes” gives us a few of the most common and potentially costly mistakes, along with help on how to avoid them.
Failing to plan. You delay and you delay. Most Americans don’t have a will and no estate plan. If you die without a will, your assets will be divided according to the intestacy laws of your state. There is no guarantee this would be consistent with your wishes. Whether an estate plan involves a basic will or perhaps a trust, having a plan can help reduce estate taxes, save on estate administrative costs, preserve privacy and speed up disbursement to beneficiaries. An estate plan can help direct how your assets are to be distributed. You can also designate a guardian for your minor children in your will.
Failing to maximize your marital estate exemption. Portability is an estate planning provision that can help with potential estates. Each person gets an $11.7 million federal estate tax exemption in 2021. If one spouse dies without using up his or her $11.7 million, the unused portion may be transferred to the other spouse for use at the survivor’s death. However, portability doesn’t address the appreciation of assets from the first spouse’s estate. It also doesn’t offer creditor protection. There are other documents in a comprehensive estate plan that can address these goals. Discuss the issues with an experienced estate planning attorney.
Failing to consider state estate taxes. You may live in one of the states that has state estate taxes. Twelve states and DC impose estate taxes. These include Hawaii, Washington, Massachusetts, Oregon, New York, Minnesota, Illinois, Vermont, Maine, Rhode Island, Connecticut and Maryland. Keep this in mind when reviewing your strategy and make certain to discuss how portability is elected with your estate planning attorney.
Taking advice from family or friends. Make sure the person you discuss your estate plans with is knowledgeable about the process. Look for an experienced estate planning attorney who knows estate tax law, trust and probate issues. You may also ask this attorney, if they practice in elder law.
You should have your estate documents in place to give you peace of mind that things are going to happen as you wished upon your death.
Reference: WMUR (May 6, 2021) “Common estate planning mistakes”

How Do I Address Digital Assets in Estate Planning?

Many states consider the digital accounts you have and access online to be no different from the tangible personal property you own, like cars, real estate and jewelry.
Los Altos (CA) Online’s recent article entitled “Creating an estate plan for your digital assets” says that you can control what happens to these digital assets after you die. However, you need to take specific actions to ensure that your wishes are followed. Let’s look at how to do it:
1. Create an inventory. With everything you have online these days, you should categorize your digital assets. They might include online data storage accounts; emails, texts and contacts; social media accounts; and shopping accounts. You should identify all your financial accounts – bank, brokerage and retirement and bank credit card. However, those should be addressed through your estate planning documents in the traditional manner.
2. Determine who you want to receive your digital assets after you are gone. Think through who gets what, just like your tangible property.
3. Designate a fiduciary. This is a trusted agent named in your will or trust with the authority to access your digital assets. It can be the same individual for all of them but need not be. You should also include in an addendum your wishes for the disposition of each asset. Work with an experienced estate attorney to make certain that your estate documents accurately reflect your intentions.
4. Determine the fiduciary’s ability to access your digital assets. Social media terms of service agreements (TOSAs) usually state that all posted content becomes the property of the custodian (the service provider), and nearly all TOSAs prohibit third-party access to digital assets after the user dies. However, if your will or trust explicitly grants a fiduciary access, the TOSA will no longer prevail. The custodian will be required to allow access to the digital assets by the fiduciary. The custodian has the right, however, to require evidence of the fiduciary’s authority, and could make the process difficult.
Another option is to leave the fiduciary a list of login IDs and passwords for the sites and/or the data – assuming, of course, that you strongly trust the person you’ve appointed as fiduciary. You can make a list on paper or use password-generator application which requires a master password. You should also be certain to include instructions for any two-factor authentication you may have set up.
Don’t list any user IDs and passwords in your will because they would become visible as a public record after death.
Reference: Los Altos (CA) Online (May 5, 2021) “Creating an estate plan for your digital assets”

Will a QTIP Trust Work for a Blended Family?

Many people have so-called “blended” families, where one or both spouses have children from a previous marriage.
Estate planning can be hard for a spouse in a blended family who wants to provide for a surviving spouse and for children from an ex-spouse.
Fed Week’s recent article entitled “‘Blended’ Families Raise Special Estate Planning Considerations” suggests that one option may be a qualified terminable interest property or “QTIP” trust.
This kind of irrevocable trust is frequently used by those with children from another marriage.
A QTIP trust allows the grantor or maker of the trust to provide for a surviving spouse and maintain control of how the trust's assets are distributed, once the surviving spouse dies.
Income (and sometimes the principal) generated from the trust is given to the surviving spouse to ensure that the spouse is cared for during the rest of his or her life. Therefore, with a QTIP:
At the death of the first spouse, the assets pass to a trust for the survivor. No one else can receive distributions from the trust; then
At the death of the second spouse, any assets left in the QTIP trust are passed to beneficiaries named by the first spouse to die. This is usually the children of the first spouse to die.
With a QTIP, estate tax is not imposed when the first spouse's dies. Rather, estate tax is determined after the second spouse has died.
Moreover, the property within the QTIP providing funds to a surviving spouse qualifies for marital deductions. As such, the value of the trust isn’t taxable after the first spouse’s death.
While this arrangement may appear to address the needs of both sides, in many remarriages the surviving spouse is much younger than the one who died.
In many cases, the surviving spouse may be close to the age of the children of the spouse who died. As a consequence, those children may have to wait a number of years for their inheritance.
To avoid this, a better approach would be to provide for biological children as well as for a surviving spouse at the first death. Assets can be divided at that time.
If an asset division is impractical, the proceeds of a life insurance policy may help to provide some inheritance for all parties.
Reference: Fed Week (May 7, 2021) “‘Blended’ Families Raise Special Estate Planning Considerations”

What Is a POD Account?

Also called a “POD” account, a payable on death account can be created at a bank or credit union and is transferrable without probate at your death to the person you name.
Sports Grind Entertainment’s recent article entitled “Payable on Death (POD) Accounts” explains that there are different reasons for including a payable on death account in your estate plan. You should know how they work, when deciding whether to create one. Talk to an experienced estate planning attorney who can help you coordinate your investment goals with your end-of-life wishes.
The difference between a traditional bank account and a POD account is that a POD account has a designated beneficiary. This person is someone you want to receive any assets held in the account when you die. A POD account is really any bank account that has a named beneficiary.
There are several benefits with POD accounts to transfer assets. Assets that are passed to someone else through a POD account are not subject to probate. This is an advantage if you want to make certain your beneficiary can access cash quickly after you die. Even if you have a will and a life insurance policy in place, those do not necessarily guarantee a quick payout to handle things like burial or funeral expenses or any outstanding debts that need to be paid. A POD account could help with these expenses.
Know that POD account beneficiaries cannot access any of the money in the account while you are alive. That could be an issue if you become incapacitated, and your loved ones need money to help pay for medical care. In that situation, having assets in a trust or a jointly owned bank account could be an advantage. You should also ask your estate planning attorney about a financial power of attorney, which would allow you to designate an agent to pay bills and the like in your place.
If you are interested in creating a payable on death account, the first step is to talk to your bank to see if it is possible to add a beneficiary designation to any existing accounts you have, or if you need to create a new account. Next, decide who you want to add as a beneficiary.
Reference: Sports Grind Entertainment (May 2, 2021) “Payable on Death (POD) Accounts”

Did Pop Entertainer Pink Change Estate Plan because of COVID-19?

Pink and her four-year-old son, Jameson, tested positive for the virus in March 2020, but her husband, Carey Hart, and daughter, 9-year-old Willow, did not contract the coronavirus.
MSN’s recent article entitled “Pink Reveals She Rewrote Her Will Because She Thought 'It Was Over' Amid COVID-19 Battle” reports that the entertainer did change her will.
"It was really, really bad, and I rewrote my will," she said. "... At the point where I thought it was over for us, I called my best friend and I said, 'I just need you to tell Willow how much I loved her.' It was really, really scary and really bad. "
The experience inspired her single, "All I Know So Far.” Pink described the song as "a letter to my daughter." The single was released May 7, and a documentary and album of the same name will follow on May 21.
"As a parent, you think about, 'What am I leaving for my kid? What am I teaching them? Are they going to make it in this world, this crazy world that we live in now? What do I need to tell them if this is the last time that I get to tell them anything?'" she said. "So, that was kind of the song."
Pink first announced that she and Jameson were fighting the coronavirus in April 2020. That same month, she described "the scariest thing" she has ever been through on The Ellen DeGeneres Show, sharing that her son was the first one to get sick.
"[It] started with a fever for him and it would come and go, and he would have stomach pains and diarrhea and chest pains and then a headache, sore throat," she said. "It sort of was just all over the place. Every day was just some new symptom. His fever stayed it did not go. It just started going up and up and up and up and then at one point it was at 103."
As for herself, Pink said, "I woke up in the middle of the night and couldn't breathe and I needed to get to a nebulizer for the first time in 30 years. I have this inhaler that I use, this rescue inhaler, and I couldn't function without it, and that's when I started to get really scared."
In a December 2020 Instagram post, Pink, whose real name is Alecia Beth Moore, called 2020 a "poop sandwich of a year." She also had a staph infection and a broken ankle.
See your estate planning attorney about changing your will based on current events.
Reference: MSN (May 4, 2021) “Pink Reveals She Rewrote Her Will Because She Thought 'It Was Over' Amid COVID-19 Battle”

Must I have ‘Prince’-like Riches to Need a Will?

The Tribune-Democrat asked in a recent article, entitled “You Don’t Need a Prince-ly Fortune to Need a Will,” the following question: “Why would an artist who was so careful and controlling of his image and work not plan ahead to protect it?”
Alas, it is likely Prince was like the rest of us.
He was not very keen on considering a future beyond his own lifetime.
But this isn’t the only reason folks avoid estate planning. In addition to busy lives and plain-old procrastination, another common notion of more than 50% of all Americans who do not have a will is that they don’t need one. Most of us do not have millions of dollars or complex business interests like Prince, so we think estate planning is a bit much for our comparatively simple financial situations.
That is not smart thinking.
If you’re married, have children, or own property, a will drafted by an experienced estate planning attorney lets you decide how your assets will be distributed in the future.
If we’ve learned anything from the uncertainty of the past year, it’s that you can’t predict the future. But you can prepare for it.
Proper estate planning ensures that people and charities you support now will be supported even after you are gone, in the most tax-efficient way, while avoiding family strife.
Planning ahead can also address any number of possibilities that need careful consideration, like custody of your minor children and whether you would like to remain on life support.
If you die without a will or “intestate,” state law and the probate court determine how any of your assets subject to probate will be distributed.
Estate planning may take some effort and some time, but when you’re done, you’re going to feel so good that you’ll want to party like it’s 1999!
Reference: The (Johnstown, PA) Tribune-Democrat (April 17, 2021) “You Don’t Need a Prince-ly Fortune to Need a Will”

How Digital Assets Figure into Estate Planning

Yahoo Finance’s recent article entitled “Who inherits your selfies when you die?” laments that the internet ruins everything, and a simple death is no exception.
If asked to close out a family member’s estate, it now includes social media accounts, cloud storage and frequent flyer miles.
Digital assets are files created electronically. They exist as data held on a digital storage drive or computer hard drive.
However, items made by hand can become a digital asset, such as a painting or handwritten notes become digital assets, if they’re scanned and uploaded to a computer.
It can also be images, photos, videos, files containing text, spreadsheets, or slide decks.
The first time anyone has to deal with the laws and rules about incapacity and death, is when a loved one becomes ill or has passed away. It’s an emotionally tough time, and they’re likely to be grieving when trying to make important decisions on a project they know nothing about.
Know that we no longer solely have a paper trail to our lives. Think about the number of digital accounts you log into to manage your household and personal finances.
It’s significant, and an executor's role is now dependent on knowing and finding both our physical and digital lives.
Your executor won’t know what you have, unless you tell them in advance.
Your home office is paperless and behind a locked screen. We all have wishes and preferences about those assets, and these wishes and preferences need to be documented and shared.
Today’s home office is a digital home office. We will soon have the same spectrum of choices in estate planning for our digital assets, as we have for our physical ones.
However, right now, there aren’t a lot of pre-planning options.
You should create a list of your digital assets and passwords, so others you trust will know where to find them. Back up data should be stored in the cloud to a local computer or storage device.
Ask an experienced estate planning attorney about how to organize and address your digital assets in your estate plan.
Reference: Yahoo Finance (April 16, 2021) “Who inherits your selfies when you die?”

Prince Philip’s Death and the Importance of End-of-Life Planning

Since his recent death, Prince Philip has been remembered around the world as a model of service and a loyal and loving husband.
His more than seven decades in the public eye as a member of the Royal Family has many feeling that a beloved member of their own family has passed.
Forbes’ recent article entitled “What Prince Philip’s Death Shows Us About The Importance Of End-Of-Life Planning” says that in his case, as an important state figure, it was a requirement. In many ways, the ritualistic nature of that plan is letting everyone remember the Prince and all he achieved.
While this type of planning might only seem appropriate for royalty, it is actually something that all of us can do with our estate planning. Specifically, our health care directives can help us with end-of-life planning and funeral planning.
Even with the importance of these documents, The Palliative and Advanced Illness Research Center at Penn Medicine found in a 2017 study that only 33% of all Americans have such a document for end-of-life care.
Directive for Final Wishes. A health care directive is a legal document that lets you designate a person to make medical decisions for you, if you’re incapacitated. At death, it also gives the agent the ability to manage the decisions regarding the body.
Most of us think of health care directives in terms of pain relief and interventions. However, Prince Philip’s passing serves as an example of additional features that can be added to a health care directive. Prince Philip was able to die at home in Windsor Castle. In the last two months of his life, he spent a lot of time in the hospital. After his death, it was revealed that his final wish was to die at home, and that wish was fulfilled. You can do the same thing with your health care directive.
Creation of A Funeral Plan. A health care directive can help design a funeral plan, and these directions can include a variety of instructions, like the type of religious service, hymns and speakers at the funeral. No matter what the wishes, having these detailed plans can help the family grieve and honor the deceased’s last wishes. They can also alleviate potential family tensions about what the plans should be.
Creating a health care directive is a straightforward process. Every state has some a form for residents to fill out to state their wishes for end-of-life planning.
Reference: Forbes (April 13, 2021) “What Prince Philip’s Death Shows Us About The Importance Of End-Of-Life Planning”

How to Avoid Probate

Avoiding probate and minimizing estate taxes are sound estate planning goals, but they shouldn’t be the only focus of an estate plan.
Nj.com’s recent article entitled “How can we avoid probate and avoid taxes for our children?” says that proper estate planning is a much broader discussion you should have with a qualified estate attorney. However, the article offers some topics to discuss with an attorney, who can review all the specifics of your situation.
Probate is the legal process for settling the debts, taxes and last expenses of a deceased person and distributing the remaining assets to his or her heirs. The costs and time needed to settle an estate can be burdensome in some states. However, steps can be taken to significantly limit probate.
Without any special planning, there are a few types of assets that can be transferred outside of probate. Items owned jointly with rights of survivorship (JTWROS) automatically become the sole property of the survivor at the first joint owner’s death. This property doesn’t go through probate.
Accounts with beneficiary designations, like retirement accounts, annuities, and life insurance policies also pass outside probate. There is a payable on death (POD) feature that provides for a beneficiary designation on non-retirement accounts (like a bank account), so POD accounts can also be transferred outside of probate.
You can also create a living trust and transfer assets into the trust during your lifetime to avoid probate. Since the trust document dictates the way in which assets are distributed upon the death of the grantor rather than the will, probate is not needed here either.
In addition, ancillary probate is a second, simultaneous process that is needed when real estate is owned in a state outside the decedent’s state of residence.
Placing out-of-state real estate in a living trust is a useful way to avoid ancillary probate. You can also place the out-of-state real estate in a Limited Liability Company (LLC), so the estate owns an interest in an LLC rather than real property. That way, the entire probate process can be handled in the decedent’s state of residence. However, talk to an experienced estate planning attorney to review which of these options — or perhaps another option — would be best for your unique situation and goals.
Other types of trusts, whether created during your lifetime or at your death, can provide creditor protection and ensure that an inheritance stays in the family, as well as help minimize estate taxes.
Under current law, federal estate tax is only due if your estate is worth more than $11.7 million (double that if you are married). A few states also have an estate tax. Other states also have an inheritance tax, but in many instances it does not apply to amounts left to the decedent’s closest relatives, including their children.
Reference: nj.com (March 24, 2021) “How can we avoid probate and avoid taxes for our children?”