Texas Estate Planning

Aretha Franklin’s Niece Resign as Executor

Sabrina Owens, the niece of soul singer Aretha Franklin, recently announced her resignation as executor in court filings, stating: “Given my aunt’s love of family and desire for privacy, this is not what she would have wanted for us, nor is it what I want … I hope that my departure will allow the business of the estate to continue, calm the rift in my family and allow me to return to my personal life.” 

Rolling Stone’s recent article entitled “Aretha Franklin’s Niece Resigns as Estate Executor” reminds us that Franklin died in August of 2018, and, because she reportedly was intestate, Michigan law states that her assets are to be distributed equally among her four sons. Her sons agreed upon Owens as executor, but new family politics came up last May after three wills allegedly authored by Franklin were discovered in a notebook under some couch cushions. 

“That is when relationships began to deteriorate with the heirs,” Owens wrote of the discovery of the wills. She added that she accepted the executor role on the condition that “no fractured relationships develop within the family” and that the family “did not end up in court disputes over disagreements with the Estate.” Both, Owens wrote, have happened. 

Owens’ resignation, however, will not become effective immediately. Instead, she will keep serving as executor for the immediate future. It’s also unknown who will be appointed executor after she does leave. 

Franklin’s youngest son, Kecalf, has attempted to gain control, since one of the documents from 2014 appears to state that Franklin wanted him to take on that role (in August, a probate judge approved Kecalf’s request to have a handwriting expert analyze the documents that were found). 

Although Kecalf has the support of his brother Edward, his plan is opposed by Franklin’s third son, Ted White, as well as the guardian for her eldest son, Clarence, who has special needs. 

A hearing on the future of the estate is scheduled for early this spring. 

The ongoing battles surrounding Franklin’s estate continue, as it gets ready for two significant posthumous projects: one is a biopic movie starring Jennifer Hudson, “Respect.” The other is an installment in the biographical anthology series, “Genius,” with Cynthia Erivo playing Franklin (both are currently in production). 

In the last year, Owens, as executor, oversaw the release of the documentary, ‘Amazing Grace,” while at the same time managing the estate’s complicated finances, including $6.3 million owed to the IRS in back taxes. 

Reference: Rolling Stone (Feb. 3, 2020) “Aretha Franklin’s Niece Resigns as Estate Executor” 

Ozzy Osbourne and Sharon Osbourne Have an Estate Plan

Heavy metal rock star Ozzy Osbourne and his talk show host wife, Sharon Osbourne say that they have a plan to pass the lion’s share of their estate to their children. 

Ozzy rose to fame during the 1970s as the lead vocalist of the heavy metal band Black Sabbath, and Sharon became a household name more recently, thanks to her role in the MTV reality show “The Osbournes” and her job as a daytime talk show host. 

Sharon explained the couple's plan on The Talk, while reacting to news that the late Kirk Douglas bequeathed most of his $80 million fortune to charity when he died in February 2020 at age 103, reports I Heart Radio’s recent article entitled “Ozzy, Sharon Osbourne's Children Will Determine The Fate Of Their Fortune.” 

"Everybody is different," Sharon said. "And I just know that my husband's body of work, that he's written, and kept us all in the lifestyle that we love, goes to my children." 

The children will also be entrusted with determining what will happen to Ozzy's image and likeness, Sharon also said. 

"I don't want someone that never met my husband owning his name and likeness and selling T-shirts everywhere and whatever. No, it stays in the Osbourne family." 

Ozzy's latest solo album, Ordinary Man—which is his 12th overall—already ranks as his highest-charting solo debut ever in the United Kingdom. 

Between Ozzy's equity in Black Sabbath, the solo recordings that he and Sharon have worked so hard to control and the hours of television in which the two have starred, it's not hard to see the fruits of the couple's labor benefitting several future generations of Osbournes. 

Estate planning is important in every field and for everyone. However, it’s particularly important in the entertainment business, where will contests and questions about inheritances frequently are publicized in the press. To that end, the estates of celebrated artists like Frank Zappa, Kurt Cobain, Prince, Tom Petty, Chris Cornell and many others have been the subject of public battles in recent years. 

Even if you are not about to release your latest solo album, you still need to work with an experienced estate planning attorney to make certain that your plans for your assets and property are carried out after your death. 

Reference: I Heart Radio (March 2, 2020) “Ozzy, Sharon Osbourne's Children Will Determine The Fate Of Their Fortune” 

Estate Taxes Have Not Come to an End

What should I do about state estate taxes? 

The good news is that most states don’t have their own death taxes. Those that do typically have a higher exemption amount than in the past. 

Kiplinger’s recent article entitled “State Estate Taxes Not Dead Yet” advises you not to hold your breath waiting for your state’s estate tax to be repealed. Instead, you might be able to avoid the tax with the help of an experienced estate planning attorney. 

In 2000, every state and DC had an estate tax on the books. With the federal estate tax law permitting a dollar-for-dollar credit for up to 16% of state estate and inheritance taxes paid, it seemed like a good idea. This let states impose their own estate taxes, without adding to the tax burden of their residents. 

However, this changed in 2001 when a new law gradually eliminated the federal credit (and completely repealed it in 2005). Consequently, if a state wanted to impose an estate tax, it meant “extra” taxes on its resident estates, in addition to the federal estate tax they were required to pay. Even so, more than 20 states decided to eliminate their own taxes out of fear that wealthy residents would flee because of the added tax burden. This resulted in a wave of estate tax repeal measures in many states. 

Now, there are only 12 states and DC that still impose the tax. There is some positive news for those people in that estate-tax exemption amounts are rising in 2020 in half the states with the tax. 

Even if you escape state estate taxes, your heirs still might be subject to state inheritance taxes. Estate taxes are paid by the estate and are based on the estate’s overall value, in contrast, inheritance taxes are paid by an individual heir on whatever property they are given. 

Six states currently have an inheritance tax—Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. 

Even if there’s an inheritance tax on the books in your state, some of your relatives who inherit your property still might not have to pay it. Typically, your closest relatives will be exempt from the tax when you pass away, but your more distant family members probably won’t have that perk. For example, in Iowa, a decedent’s spouse, parents, children, and grandchildren are exempt from paying the state’s inheritance tax. However, other heirs, like nieces, nephews, uncles, aunts, and non-relatives, are required to pay. In addition, state inheritance tax rates can also be higher for distant relatives or for more valuable property. Take Nebraska, for instance, where the inheritance tax on heirs who are immediate relatives is only 1% and doesn’t apply to property that’s worth less than $40,000. However, remote relatives must pay a tax rate of 13%. Their exemption amount is only $15,000. For all other heirs, the tax is imposed at an 18% rate on property worth $10,000 or more. 

Does Artwork Belong in a Charitable Remainder Trust?

A charitable remainder trust is a tax-exempt irrevocable trust that is created to decrease taxable income of people, by initially giving income to the beneficiaries of the trust for a set period of time and then donating the rest of the trust funds to a designated charity.

Financial Advisor’s recent article entitled “Putting Art Into Charitable Remainder Trusts”says that people who have valuable artwork or other collectibles that are hard to divide or that their kids don’t want, can investigate a charitable remainder trust with an estate planning attorney as an option.

A Charitable Remainder Trust is designed to save asset owners taxes that they would have to pay, if they sold their artworks on the open market. CRTs are also designed so that when they expire, they allow philanthropically inclined individuals help their favorite charitable organizations.

Many people with higher net worth hold about a tenth of their wealth in art and collectibles. Due to the nature of the assets, the value may be hard to split up among their heirs, or no one heir may want that specific piece of art. A charitable remainder trust gives the art or collectible owner a solution to that issue. The trust will reduce her taxable income, by first dispersing income to the trust beneficiaries for a certain period of time and then the remainder is donated to a charity.

It’s important to note that art markets are quirky, and a CRT protects an owner from forcing her into a fire sale, when she or a trustee is trying to divide the estate.

For example, say the parents purchased a number of pieces of artwork on a European vacation and shipped them back to the United States. They have three children, but there’s one piece of art that’s more valuable than the others. As a result, there was no way to equitably divide the pieces. If they sold the pieces outright, there would be a 28% tax imposed.

However, the parents could instead place the artwork in a charitable remainder trust, get a tax deduction for part of the value, get income from the trust and then give a sum to a selected charity.

The asset can be held in the trust until one owner dies, until both parents pass, or for up to a certain number of years, based on how the trust is set up. Contact an estate planning attorney experienced in charitable planning strategies.

Reference: Financial Advisor (Feb. 21, 2020) “Putting Art Into Charitable Remainder Trusts”

What are Some Good Estate Planning Ideas in the Pandemic?

With the COVID-19 pandemic, many people are looking to execute estate plans they’ve delayed in finalizing and signing. Others are ready to get going on their estate plans that they should’ve started years ago.

Forbes’recent article entitled “Eight Estate Planning Strategies In A COVID-19 World”lists some things you should know.

Most estate planning can be done at home.While you may be restricted from physically seeing your attorney, you can still create, update, or finalize your estate plan. Attorneys are working remotely and are available via email, telephone and video conferencing to help you.

Get your estate planning in order.The odds are you now have some time to consider the issues you’ve placed on the back burner for a long time. Leverage this time to address your estate planning.

New options for signing document. Many attorneys are approaching estate plan document signings on a case-by-case basis. You may be able to sign in the attorney’s office or at your home, while practicing social distancing and wearing gloves and masks. Some law firm are even offering drive-up will signings.

Some states now permit online notarization of certain types of documents.

These new laws allow for remote online notarization (RON), a process by which notarization is conducted via video conferencing. In this process, the signing party (the “principal”) must undergo an identity-proofing process that differs by state.

In most states, the principals are required to answer several personal questions. They also must show valid ID, which in many states, must be examined and verified by a third-party security service. Once the principal’s identity is confirmed, she signs the document with a digital signature. The remote online notary witnesses the document, by affixing an electronic seal as they stream the live, audio-visual conference. 

Talk to an experienced estate planning attorney about how you should proceed with your estate planning, in light of this new (and hopefully temporary) reality.

At least, you can get all your documents organized and ready to sign when it is safe to venture outside.

Reference:Forbes (March 23, 2020) “Eight Estate Planning Strategies In A COVID-19 World”

Am I Making One of the Five Common Estate Planning Mistakes?

You don’t have to be super-wealthy to see the benefits from a well-prepared estate plan. However, you must make sure the plan is updated regularly, so these kinds of mistakes don’t occur and hurt the people you love most, reports Kiplinger in its article entitled “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes.”

An estate plan contains legal documents that will provide clarity about how you’d like your wishes executed, both during your life and after you die. There are three key documents:

• A will
• A durable power of attorney for financial matters
• A health care power of attorney or similar document

In the last two of these documents, you appoint someone you trust to help make decisions involving your finances or health, in case you can’t while you’re still living. Let’s look at five common mistakes in estate planning:

# 1: No Estate Plan Whatsoever. A will has specific information about who will receive your money, property and other property. It’s important for people, even with minimal assets. If you don’t have a will, state law will determine who will receive your assets. Dying without a will (or “intestate”) entails your family going through a time-consuming and expensive process that can be avoided by simply having a will.

A will can also include several other important pieces of information that can have a significant impact on your heirs, such as naming a guardian for your minor children and an executor to carry out the business of closing your estate and distributing your assets. Without a will, these decisions will be made by a probate court.

# 2: Forgetting to Name or Naming the Wrong Beneficiaries.Some of your assets, like retirement accounts and life insurance policies, aren’t normally controlled by your will. They pass directly without probate to the beneficiaries you designate. To ensure that the intended person inherits these assets, a specific person or trust must be designated as the beneficiary for each account.

# 3: Wrong Joint Title. Married couples can own assets jointly, but they may not know that there are different types of joint ownership, such as the following:

• Joint Tenants with Rights of Survivorship (JTWROS) means that, if one joint owner passes away, then the surviving joint owners (their spouse or partner) automatically inherits the deceased owner’s part of the asset. This transfer of ownership bypasses a will entirely.
• Tenancy in Common (TIC) means that each joint owner has a separately transferrable share of the asset. Each owner’s will says who gets the share at their death.

# 4: Not Funding a Revocable Living Trust. A living trust lets you put assets in a trust with the ability to freely move assets in and out of it, while you’re alive. At death, assets continue to be held in trust or are distributed to beneficiaries, which is set by the terms of the trust. The most common error made with a revocable living trust is failure to retitle or transfer ownership of assets to the trust. This critical task is often overlooked after the effort of drafting the trust document is done. A trust is of no use if it doesn’t own any assets.

# 5: The Right Time to Name a Trust as a Beneficiary of an IRA. The new SECURE Act, which went into effect on January 1, 2020 gets rid of what’s known as the stretch IRA. This allowed non-spouses who inherited retirement accounts to stretch out disbursements over their lifetimes. It let assets in retirement accounts continue their tax-deferred growth over many years. However, the new Act requires a full payout from the inherited IRA within 10 years of the death of the original account holder, in most cases, when a non-spouse individual is the beneficiary.

Therefore, it may not be a good idea to name a trust as the beneficiary of a retirement account. It’s possible that either distributions from the IRA may not be allowed when a beneficiary would like to take one, or distributions will be forced to take place at a bad time and the beneficiary will be hit with unnecessary taxes. Talk to an experienced estate planning attorney and review your estate plans to make certain that the new SECURE Act provisions don’t create unintended consequences.

Reference:Kiplinger (Feb. 20, 2020) “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes”

What Does Recent Legislation Mean for the Generation-Skipping Transfer Tax (GSTT) Exemption?

Congress has made some significant changes through the planned sunset of the Tax Cuts and Jobs Act (TCJA) increased exemptions and through the recent changes to retirement planning in the Secure Act.

Think Advisor’srecent article entitled, “Estate Planning Tips and Updates,”looks at some of the most notable of these.

1. Increased Estate Tax Exemption Amounts. The current applicable exemption amount of $11.58 million each (or $23.16 million for a married couple) lets many people totally avoid transfer taxes. However, the applicable exclusion amount reverts to its prior inflation adjusted amount in 2026. Therefore, if you have a gross estate of $11 million and previously made, say, $7 million of gifts, the rules eliminate any claw back of those gifts, if death occurs in 2026. However, you have no applicable exclusion amount remaining, says the IRS. As a result, after the sunset, you have a gross estate of $4 million and no remaining exemption. With this example, you’d be wise to consider implementing one or more strategies, including gifts and sales to grantor trusts, before the end of 2025 to be certain you fully use the disappearing exemption.
2. The Increased Generation-Skipping Transfer Tax (GSTT) Exemption.The TCJA also upped the GSTT exemption to $11.58 million each. This allows many people to exempt transfers for several generations, if not in perpetuity, under the laws of certain states. However, they must intentionally draft trusts to establish legal situs in states like Nevada to leverage longer perpetuities periods. This will result in avoiding additional estate, gift and GSTT taxes for longer periods, normally a net positive.
3. Annual Exclusion Gifts.Regardless of the increased exemption amounts, continued annual exclusion gifts (currently $15,000) are still going to be a crucial component of most estate tax reduction planning, removing the amount of the gift and its future appreciation. The tax-exclusive nature of the gift tax makes gifts more tax-efficient.
4. Basis Harvesting. The increased exemption amounts often will result in some people with previous trust planning no longer having estate tax issues. These people could look at reforming, amending, or decanting an existing trust to add older generations in a manner to cause inclusion in their estates. This inclusion triggers the basis step-up rules in the code and may dramatically reduce taxes upon a liquidity event, like the sale of a business interest previously gifted or sold over to the trust.
5. Secure Act Age Changes. For those born after July 1, 1949, the Act raises the beginning age for minimum distributions (RMDs) to 72.
6. Employer Inducements.The Act increases the current $500 credit for setting up a retirement plan to $5,000 in some situations and provides a $500 credit for three years to encourage the use of auto-enrollment.
7. Inherited IRAs.The Act substantially restricts the use of “stretch” IRAs. For deaths after December 31, 2019, a recipient of an IRA from the deceased must generally take distributions from the IRA over no more than a 10-year period. However, the new rules exempt accounts inherited by a spouse, a minor child, a disabled or chronically ill person, or anyone less than 10 years younger than the deceased account owner.
8. Annuities.The “stretch” IRA provisions also apply to annuities with one important exception. Annuities making payments before January 1, 2020, may still pay out over two lives. The new law encourages greater investment in annuities through 401(k) plans, and especially plans offered by smaller businesses, by decreasing the risk associated with offering annuities. As a result, employers offering annuities as investments won’t have fiduciary duties as to those potential annuity investments, assuming they choose an issuer in good standing with the applicable state insurance commission. The Secure Act also offers portability for annuities, if you change jobs. This is a direct transfer between retirement plans.

Reference:Think Advisor (March 25, 2020) “Estate Planning Tips and Updates”

Why Is Walt Disney’s Grandson Unable to Claim his $200 Million Inheritance?

Los Angeles County Superior Court Judge David J. Cowan recently claimed that Walt Disney’s grandson Bradford D. Lund had Down Syndrome—despite being presented with DNA evidence proving the opposite. The judge also ruled Lund to be “unfit” to receive his $200 million inheritance from Walt Disney and appointed him a temporary guardian to make all his legal decisions. This was all ordered without a hearing. Lund’s legal team is now trying to contest the rulings.

Inside the Magic’srecent article entitled “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance”says that in the complaint, Lund’s attorney Lanny Davis alleges that the probate court’s action is “all too reminiscent of a perspective where facts do not matter but alternative facts do, where the constitution does not matter…”

The alternative facts Davis spoke of are from a 2016 court decision by Superior Court Judge Robert Oberbillig from a 10-day trial brought on by “disgruntled relatives” against Lund. The trial came after seven years of litigation questioning whether Lund was required to have a limited guardianship. In that trial, Lund was examined by two court-appointed physicians, one court-appointed expert and by Judge Oberbillig himself in open court.

From the investigation, Judge Oberbillig rejected the family’s claims that Lund needed guardianship and ruled that Lund was “not incapacitated.” However, Judge Cowan ignored Oberbillig’s ruling and the DNA evidence that showed Lund doesn’t have Down Syndrome. Instead, Cowan stated from the bench: “Do I want to give 200 million dollars, effectively, to someone who may suffer, on some level, from Down syndrome? The answer is no.”

From this statement, Lund’s legal team brought an additional cause of action that claims Judge Cowan and the Los Angeles Court violated an anti-discrimination law, when Judge Cowan made this “indisputably false” statement and “perception.” They claim this resulted in discrimination against Lund and his loss of freedom regarding the right to counsel and property rights without due process of law.

On Feb. 27, 2020, Lund’s counsel also filed a federal civil rights case in the U.S. District Court for the Central District of California against Judge Cowan for alleged violation of Lund's constitutional due process rights in the appointment of a limited guardian ad lit em.

Lund was supposed to have received his portion of his mother’s trust fund when he was 35, which was 15 years ago. He is now 50 years old.

Reference:  Inside the Magic(March 25, 2020) “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance”

Coronavirus News Should Make You Think about Estate Planning

The global Coronavirus (COVID-19) outbreak has many of us thinking about what could happen, if the disease spreads more fully across the general population. We all need to plan for what could possibly happen. To protect yourself and your family, it’s smart to be certain that you have the following these documents prepared and updated, says Motley Fool’srecent article entitled“The Coronavirus Should Have You Thinking About These 4 Things.”

1. A will or revocable trust. Be sure that your assets will pass to those who you want to receive them after your death. This is critical during crisis times. You don't want to make things any harder than they need to be. Create an estate plan to avoid potentially expensive and time-consuming processes like probate, which will have greater importance, if your family is confined to their homes in a quarantine situation.

A simple will can cover what happens to your assets at death. This typically works well, especially for modest estates. State laws differ on how complicated a probate process would be with a basic will. Some people opt to use a fully funded revocable trust that doesn't require probate. For either a will or a revocable trust, make sure that it’s up to date and reflects your current preferences and family circumstances.

2. Updated beneficiary designations. If you have an IRA, 401(k) account, or life insurance policy, those you name as beneficiaries of that account will receive the proceeds, despite a totally different from arrangement in your will or trust. Many of us also don’t designate any beneficiary for these accounts, which means added complications in the event of death.
3. Healthcare power of attorney. When we’re in the midst of this Coronavirus, it’s even more urgent that you'll be able to get the healthcare you need, if you're hit with this illness. A durable power of attorney for healthcare will give the individuals you choose the ability to make whatever medical decisions you specify on your behalf. An estate planning attorney can help you draft documents that match your specific wishes.
4. Financial power of attorney. You can designate an agent to help take care of your finances, if you become incapacitated or otherwise unable to handle your financial affairs. A general durable power of attorney for financial matters is another document that lets you delegate responsibility and authority to make financial transactions to the person you name.

Estate planning may not be the highlight of your week, but the Coronavirus outbreak has more people thinking about what they need to do. Make sure your family will have what they need even if something happens to you.

Reference:Motley Fool (March 8, 2020) “The Coronavirus Should Have You Thinking About These 4 Things”

Why Is Estate Planning So Important?

If you are new to the concept of estate planning, you can get swamped with issues fairly easily. You should still soldier on. Start with the basics, says Forbes’ recent article entitled “The Importance Of Estate Planning.” 

An estate plan is a collection of legal documents that details the way in which you want your assets distributed after you die, along with how you want people you select to handle health and financial decisions, if you’re unable to do so for yourself while you’re alive. 

A comprehensive estate plan written by an experienced estate planning attorney can help you feel more confident about the future because you’ll know your loved ones will be cared for and that the legacy you leave behind is the one you planned. Well thought-out planning now can help decrease any taxes and probate fees and make certain that your loved ones will have less to worry about and less stress when you are gone. However, if you don’t make plans for your estate, it can result in unintended complications for your family.  

Let’s look at some of the essential estate planning documents: 

• Will: This is the standard document in your estate plans. Your will designates an executor (or personal representative) to administer the distribution of your assets as you want. In your will, you can also appoint guardians of minor children who will care for them. 
• Durable Power of Attorney: This document names a trusted family member, friend, or advisor to serve as your agent to act on your behalf in your financial and legal matters.  
• Healthcare Proxy: It will name a trusted individual to make medical decisions for you when you are unable, and permits access to your medical records (some institutions may require more documentation for full access to medical records).  
• Living Will: This is where you can state your end-of-life care wishes. Living wills can cover pain relief and whether you would want a ventilator, feeding tube or resuscitation.  

You also need to regularly review and update your estate plan. There may be changes in probate and tax laws, as well as life changes, such as marriage, divorce, or the birth, adoption, or death of a family member that require a revision of your plan. 

Reference: Forbes (March 2, 2020) “The Importance Of Estate Planning”