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”

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”

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”

Should a Trust Be Part of My Estate Plan?

A revocable trust can be a wise choice for managing your assets, says nj.com’s recent article entitled “What are the advantages of putting assets into a trust?”
A revocable trust is a type of trust that can be changed once it is executed by the creator of the trust, known as the grantor. During the life of the trust, income earned is distributed to the grantor. After his or her death, the trust assets transfer to the beneficiaries of the trust.
A revocable trust can be advantageous because it has flexibility and provides this income stream and full access to the trust principal by the living grantor (also known as the trustor).
If you are the grantor, you can act as trustee, by yourself or with another as co-trustee.
When you no longer want to manage, or when you’re unable to manage your affairs, the co-trustee or a successor trustee can take over all of the duties.
If you didn’t put your assets in a revocable trust, you’d need to appoint an agent under a durable power of attorney to handle your financial affairs, if you become incapacitated.
However, some financial institutions would rather do business with a trustee instead of an agent under a power of attorney.
At your death, if all of your assets are in trust, your family can avoid the probate process. The trustee continues to manage the trust assets pursuant to the terms of the trust document. Those instructions do not need to be recorded any court in most jurisdictions.
Unlike a will, which is recorded with the government once it is probated, a trust is not a public document in most jurisdictions. Therefore, privacy is another advantage of a trust.
Finally, in states where an inheritance tax return is required, a revocable trust also avoids the need to obtain tax waivers, which are issued by the state to release any tax liens, upon death.
However, there are some downsides to putting assets into a trust.
First, the expense of creating a trust will be more than a simple will, and you would still need a will in the event you did not place everything in the trust during your lifetime or upon your death by a beneficiary designation.
Sometimes, having all of your assets in trust can also be more costly or cumbersome. For instance, insurance may be more expensive when an asset is in the trust.
Reference: nj.com (March 17, 2021) “What are the advantages of putting assets into a trust?”

What Is Prince Harry’s Inheritance from His Mum, Princess Diana?

“I have what my mum left me and without that we wouldn’t have been able to do this,” he said of his and Meghan Markle’s move to the United States.
The Independent’s recent article entitled “Meghan and Harry: How much did Diana leave in inheritance for Harry?” reports that Harry’s comment in the recent interview with his wife Meghan had many viewers who tuned in wondering how much Harry’s mother had left him, after her tragic death at the age of 36.
“It’s like she saw it coming and she’s been with us through this whole process,” Harry said
Diana left an estate of roughly $30 million, but at least a third of that was paid in inheritance tax, leaving nearly $18 million, according to reports. The sum was split equally between William and younger brother Harry. They were 15 and 12, when Diana died in a Paris car crash in 1997.
It is said that the funds were invested by royal advisers, which saw its value go up to around $28 million by the time her sons reached the age when they were able to access it. Upon reaching 25, William and Harry were entitled to all of the income of their share. However, prior to this, the income could be paid at the trustees’ discretion.
The trustees of Princess Diana’s estate had the authority to pay out the assets to William and Harry at any time, but when they each turned 30, they were able to request their full share of the capital, rather than only receiving the interest on that sum.
Diana’s estate was comprised of stocks and shares, jewelry, her multi-million-pound divorce settlement from the boys’ father, Prince Charles, as well as her clothing and personal items. In addition, William and Harry’s great-grandmother, the Queen Mother, also reportedly left them approximately $20 million to divide between them.
Meghan has been said to enter her marriage with around $5 million in earnings from her acting career, which included starring in the USA Network drama, “Suits.”
In September 2020, news was announced that the couple had signed a reported multi-million-dollar deal with Netflix to produce exclusive content, such as documentaries, docuseries, feature films, scripted shows and children’s programming.
More recently, Harry and Meghan agreed to a deal with Spotify to create podcast content.
Reference: The Independent (March 9, 2021) “Meghan and Harry: How much did Diana leave in inheritance for Harry?”

Sound Like a Broken Record in Estate Planning?

After a year like the last, estate planning attorneys may sound like a broken record, repeating their message over and over again: No matter your age, wealth, or familial structure, you should have a last will and testament, powers of attorney and a health care proxy.
Everyone needs these documents, to protect wealth, children, spouses, family and yourself.
Wealth Advisor’s recent article entitled “2020 Concludes With Intestate Celebrity Estates” says that the execution of legal documents does have a financial cost. This can keep some people from talking to an experienced estate planning attorney. Others say they are simply too busy to take care of the matter, so they delay. There are other people don’t want to talk about issues of sickness and mortality because they just can’t bring themselves to think about these important estate planning documents.
It doesn’t matter who you are, these types of issues are seen with all kinds of people. Recently, we’ve learned that several celebrities died intestate or without a last will and testament. For example, Argentinian soccer great Diego Armando Maradona died in November at the age of 60. He had a fortune including real estate, financial assets and jewelry, but his life was filled with drama. Diego fathered eight children from six different partners but signed no last will and testament. Fighting among his many heirs is expected, especially with his large estate. Diego said publicly that he wanted to donate his entire estate and not leave his children anything. However, he died of a heart attack before putting this plan in place. Therefore his next-of-kin, not the charities, received his assets.
Another notable person who died intestate recently is former Zappos CEO Tony Hsieh, who died at age 46. His estate is valued at $840 million. Hsieh was survived by his two brothers and his parents. He recently purchased eight houses in Park City, Utah, so this purchase of real estate across state lines will make the administration of his estate even more complicated without a last will and testament or a trust.
Finally, actor Chadwick Boseman died intestate at age 43, after a long battle with colon cancer. His wife, Simone Ledward, petitioned the California courts to be named the administrator of his estate. The couple married in early 2020. As a result, she was qualified to administer and receive from his estate. He had no children, so under California probate law, she gets the entire estate.
These recent deaths of three celebrities, none of whom were elderly, show the need for individuals of all ages, backgrounds and wealth to address their estate plans and not put it off.
Reference: Wealth Advisor (Jan. 19, 2020) “2020 Concludes With Intestate Celebrity Estates”

What Is Status of Larry King’s Handwritten Will?

Larry King's widow Shawn is set to go to court over a recently discovered hand-written will that cuts her out of a share of his fortune.
Fox News reports in the article entitled “Larry King's widow Shawn King plans to contest star's will in court” after King's handwritten will was discovered. The will is said to say that his $2 million estate would be divided among his five children.
The document is said to have been drafted on October 17, 2019—just two months after Larry filed for divorce from Shawn. The new will doesn’t mention her at all and also lists his now-deceased children Chaia and Andy as beneficiaries. This will was written a few months before the loss of 65-year-old Andy and 51-year-old Chaia, who died within weeks of each other.
Larry’s three remaining children -- Larry King, Jr., 59, Cannon, 20, and Chance, 21 -- were also named. Cannon and Chance are King’s children with Shawn. However, Shawn contends that there was already a plan in place between she and King that wasn’t reflected in the alleged document.
"We had a very watertight family estate plan," she told Page Six of a plan she and her husband drew up "as a couple" in 2015.
"It still exists, and it is the legitimate will. Period," she remarked. "And I fully believe it will hold up, and my attorneys are going to be filing a response, probably by the end of the day."
The handwritten will is complicated by the deaths of his children in 2020; in addition, Larry also told Page Six before his death that he and Shawn had once again become close. However, it is not known if the divorce was still moving forward.
Shawn also said that she and her husband spoke daily and claimed she was never made aware of an amendment to his will.
"It beats me!" she said when asked why she thinks Larry drafted the new document.
Their two sons were also "shocked" to hear about the change, she said, and claimed they "are not happy about this."
Shawn also said she thinks someone exerted influence over the broadcast legend to have him write the new will, although offered no additional evidence of this contention.
"Based on the timeline, it just doesn’t make sense," she said, noting that she doesn't believe he would have cut her out due to the filing of divorce papers.
According to People magazine, Larry King allegedly wrote in the document, "This is my Last Will & Testament. It should replace all previous writings. In the event of my death, any day after the above date, I want 100% of my funds to be divided equally among my children Andy, Chaia, Larry Jr., Chance & Cannon."
It looks like under the current will, Shawn would likely get around $300,000 after the $2 million estate was divided among King's sons and presumably the survivors of his late children. However, she says it’s the principle.
Larry King's attorney said that while the firm has no comment on Shawn's position, they feel that "the will, which we will be asking the court to admit to probate on March 25th, reflects Larry’s intent to divide his estate equally among his children."

Marilyn Monroe’s Estate Makes Money 50 Years after Her Death

Screen siren Marilyn Monroe starred in 23 films in her career. She created the first female-owned production studio. Marilyn Monroe Productions first film produced was The Prince and the Showgirl with Laurence Olivier.
Cheat Sheet’s recent article entitled “Marilyn Monroe’s Estate Is Still Making Millions but Not Because of Her Movies” says that as she became more famous, she saw bigger paydays.
Monroe died at the age of 36 in 1962, at the peak of her fame. However, Marilyn’s star would only continue to rise. More than 58 years after her fatal overdose, she’s still one of the most famous women in history. Her face and name are instantly recognizable, and public perception around her acting abilities have only improved in the years since her death.
According to Forbes, Monroe’s estate earned $8 million this year, making her the 13th highest-paid dead celebrity, and also the only woman on the list. Marilyn Monroe’s likeness makes her millions. Even today, Monroe is still the world’s biggest sex symbol.
Forbes reported that Monroe’s likeness is used by nearly 100 brands around the world, including high-end fashion houses like Dolce & Gabbana. Her famous face is still her biggest money-maker, but her films still bring in cash to her estate. Some Like It Hot made her estate $4.5 million in 1999 alone.
Monroe never had children and she was not married at the time of her death, so she left most of her money to her acting coach, Lee Strasberg. Marilyn also left money for her mother, half-sister, and close friends. Strasberg’s second wife, Anna, inherited the estate when Lee died in 1982. It was Anna who signed the deal with CMG Worldwide to license official Marilyn Monroe products, which contributed greatly to her estate.
While Monroe wanted her personal items to be left with friends, items like the dress she wore to sing “Happy Birthday” to President Kennedy and her beloved white baby grand piano were sold by the estate. The dress was sold for $4.8 million in 2016, and singer Mariah Carey bought the piano for more than $600,000.
Reference: Cheat Sheet (Dec. 21, 2020) “Marilyn Monroe’s Estate Is Still Making Millions but Not Because of Her Movies”

What are Options for Powers of Attorney?

Power of attorney (POA) documents are an important component of an estate plan. There are four types. You should review each carefully to see which one will work best for you in your situation. What is required for a power of attorney, depends upon what power you want to authorize, says Carmel’s Hamlet Hub in a recent article titled “4 Types of Power of Attorney.”
Limited Power of Attorney. If you need someone to act on your behalf for a limited purpose, use a limited power of attorney. This will specify the date/time after which the power no longer is in effect.
General Power of Attorney. This is an all-encompassing power of attorney, in which you assign every power and right you possess as an individual to a certain party. It’s typically used where the principal is incapacitated. It is also used with those who don’t have the time, skills, knowledge, or energy to handle all of their financial matters. The power you assign is in effect for your lifetime, or until you are incapacitated (unless it is also “durable”). However, you can elect to rescind it before then.
Durable Power of Attorney. The key distinction with a durable power of attorney is that it stays in effect, even after you’ve become incapacitated. Therefore, you want to sign a durable power of attorney if: (i) you want to give the designated agent authority ONLY if you’re unable to act for yourself; or (ii) you want to give the agent immediate authority that continues after you’re unable to act for yourself.
Note that a limited or general power of attorney ends when you become incapacitated. At that point, a court will appoint a guardian or conservator to handle your matters. You can rescind a durable power of attorney at any time prior to becoming incapacitated.
Springing Power of Attorney. This document serves the same purpose as a durable power of attorney, but it’s effective only upon your becoming incapacitated. When drafting this, your experienced estate planning attorney will help you make clear your definition of “incapacitated.”
Remember that you’ll need to state in your power of attorney document which powers and duties you are assigning to the attorney-in-fact.
Regardless of the type of power of attorney you implement, the attorney-in-fact has the power to do only what your POA indicates.
Reference: Carmel’s Hamlet Hub (Dec. 16, 2020) “4 Types of Power of Attorney”

Should I Create Estate Plan Myself?

US News & World Report’s recent article entitled “Do-It-Yourself Estate Planning Mistakes” provides some issues that do-it-yourself estate planners might encounter and why it is best to consult an experienced estate planning attorney.
What are the Right Questions to Ask? Completing a simple and straightforward form—like a beneficiary designation for your IRA— is one thing, but what about tax consequences, probate law, new legislation and court procedures? Are you ready to take these on? The trick is that you may not know what you don’t know. That’s why it’s money well-spent to employ the services of an experienced estate planning attorney.
Is My Situation Complex? Likewise, you may have property and assets all over the country (or world) that require expert advice. You must be certain that your planning, tax planning and financial planning all work together because they’re all interrelated. If you only work on one of these areas at a time, you may create complications in another area and unintentionally increase your expenses or taxes. It can also create headaches and expense for your heirs. If you have a child with special needs, a blended family, or want to control how and where a beneficiary spends your money, a cookie cutter approach won’t do. Instead, you should see an experienced estate planning attorney.
What are the Probate Laws in My State? Estate planning laws and taxes are different in each state. Your state will have different rules and legal procedures for creating and administering an estate. There are many different state laws that govern inheritance taxes. There are 17 states plus DC that tax your estate, inheritance or both, and the tax laws can affect your situation when planning. Eleven states plus DC have only an inheritance tax. One state taxes both inheritances and estates.
If you mess up your estate planning documents, if could cause significant problems for your family. You best bet is to work with an experienced estate planning attorney in your state.
Reference: US News & World Report (Dec. 18, 2020) “Do-It-Yourself Estate Planning Mistakes”

Do I Need More Than a Will?

If you die without a will (i.e., intestate), a court will determine who inherits your assets and who would care for any surviving children as a guardian.
CNBC’s recent article entitled “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need” explains that some assets pass outside of the will, including retirement accounts and life insurance.
Start your estate planning with a will, which is just one piece of an “estate plan.” Creating a plan for your assets helps make certain that your wishes will be carried out upon your death and that family grumbling doesn’t escalate into destroyed relationships. Here are some additional things about estate planning you should know.
What passes via your will. A will is a document that allows you to say who gets what when you die. However, there are some assets that pass outside of the will, such as retirement accounts like 401(k) plans and individual retirement accounts (IRAs), and life insurance policies. As a result, the person named as a beneficiary on those accounts will get the money, no matter what your will says. Regular bank accounts also can have beneficiaries listed on a payable-on-death form, also known as a POD. If you own a home, check how it’s titled to ensure it ends up passing as you wish upon your death.
Executor. As part of the will-making process, you’ll need to name an executor of your will (sometimes called a personal representative). This entails making sure that assets are liquidated, the assets go to the proper beneficiaries, paying any debts not discharged and selling your home.
To prepare a will, you can hire an estate planning attorney in your local area, who knows state law. If use an online option, note that not all of the web-based alternatives will necessarily reflect the specifics of your state’s law. Online forms or software may not be compliant with your local law.
Living Will. An estate plan will typically include a few other legal documents, such as an advance health-care directive, also known as a living will. This document states your wishes, if you become incapacitated due to illness or injury, like whether you want to be kept on life support if there’s no hope of recovery.
Powers of Attorney. If you become incapacitated, your designated attorney-at-fact or agent will handle your medical and financial affairs. Similar to selecting an executor, be certain that he or she is trustworthy and smart, with the ability, skill set, time and desire to make such decisions and do these tasks.
Make a list of critical documents. Create an organized list of information your executor will need to settle your estate and include passwords, so your online accounts can be accessed.
Look at a trust. If you want your children or loved ones to receive money but don’t want to give a young adult or someone with poor money management free access to a lot of cash, you can create a trust for your beneficiaries. A trust holds assets on behalf of your beneficiaries, so they can only receive money according to how (or when) you’ve stated in the trust documents.
Reference: CNBC (July 27, 2020) “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need”