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”

Exactly Why Do I Need a Will?

Some people mistakenly think not having a will allows their assets to bypass the time and expense of probate. That’s not true–if you die without a will, your property still must go through probate, says Fed Week’s recent article entitled “The Importance of Having a Will.”

If probate avoidance is an issue, you can create a revocable trust to keep control over the trust assets while you’re alive.

Assets placed in trust during your lifetime can be distributed at your death, under the terms of the trust, without going through probate.

There are many types of trusts, and they all establish a financial arrangement between three parties:

• The Trustor
• The Trustee; and
• The Beneficiaries.

The person creating the trust is known as the trustor or grantor. The trustee manages the trust and disperses income or principal from the trust according to specific terms.

When you draft a will, you shouldn’t forget about it. Any births, deaths, marriages or divorces all may create a need to revisit your so-called “last wishes.”

After each change, make sure your current will is both safe and accessible. You can leave your will with your executor. If you decide to keep your will somewhere else, your executor and other family members should know its location. The estate planning attorney who prepared your will should have a copy, as well as a memo revealing the location of the original.

Regardless of where you put your will, have another document for your funeral and burial instructions. Wills generally aren’t read until days or weeks after death, so that won’t help your family make prompt decisions about a funeral or a memorial service.

As a result, a separate letter should be used to specify your final wishes and your executor should know where these instructions can be found.

Ask an experienced estate planning attorney to help you write your will.

Reference: Fed Week (Nov. 2, 2022) “The Importance of Having a Will”

What Is a Living Will?

During a medical crisis, family members frequently are called upon to make decisions quickly on whether to withhold or provide life-sustaining treatments. You may already have a durable power of attorney for health care—a legal document that allows your designated agent or proxy to make medical decisions for you, if you become incapacitated. However, the instructions in a living will can be used only when the person named in the living will has no prospect of recovery or cure.

Forbes recent article entitled “How Does A Living Will Work?” says that adding a living will to your estate plan can mean the difference between your family having questions later or knowing they made the right decision for you, when you were unable to make end-of-life medical decisions for yourself.

A living will is a legal document that states your wishes on receiving or declining medical care or life-sustaining treatments in the event you become terminally ill or injured and unable to communicate those decisions for yourself. The person named in the living will is known as the principal or declarant. The individual named to carry out the wishes of the principal on the living will may be called the attorney-in-fact or health care proxy.

The living will gives limited authority to the attorney-in-fact on behalf of the principal who’s no longer able to communicate their preferences to withhold or withdraw artificial means of life support or life-sustaining treatments. The document  should include your wishes for receiving or going without treatment when your condition isn’t expected to improve and treatment would extend your life for only a limited time.

The living will is designed to apply only in very limited situations when the principal is so terminally ill that the principal will likely die within a short period of time. Life-sustaining treatments discussed in a living will may include:

• Artificial nutrition (via feeding tube)
• Artificial hydration (via feeding tube or IV)
• Heart-lung machines
• Dialysis
• Ventilators
• Cardio-pulmonary resuscitation (CPR); or
• Other extraordinary measures.

Living wills can also detail issues like pain management and palliative care and can even include provisions like “I would prefer to die at home.”

Reference: Forbes (Aug. 18, 2022) “How Does A Living Will Work?”

What Did George Harrison Leave to His Sister in His Estate Plan?

Ex-Beatle George Harrison promised to take care of his sister, Louise, for the rest of her life. She thinks he’d be horrified to know that she no longer gets a pension. Even so, she says she’s not upset about it. She did share the one regret she had, though.

MSN’s recent article entitled “George Harrison’s Sister Said He Would Have Been ‘Horrified’ to Learn She Was Cut Off by His Estate” says that in the 1990s, Harrison and Louise had a fight over a bed-and-breakfast. She converted her Illinois home into a bed-and-breakfast called “A Hard Day’s Night.” Louise didn’t own the establishment but used her name and connection to George to promote it. He didn’t appreciate this, and the siblings lost contact.

Before his death, though, the two siblings reconnected. Louise drove to New York to visit him in the hospital, where he was getting treatment for cancer.

“We were able to look into each other’s eyes again with love,” she told the Liverpool Echo in 2001. “It was a very, very positive and loving meeting. I felt very much at peace as I drove home after seeing him. I hated seeing him in that shape when he had been such a vital, wonderful man. But he still had his humor. It was distressing, but also I knew that he was on his way, back to where he belonged.”

In 1980, Harrison set up a pension for Louise and paid her $2,000 every month. He told her that he wanted to take care of her.

“My second husband was an alcoholic. Both of my husbands were alcoholics,” Louise told the Daily Mail in 2016. “I had been beaten up a few times. George said to me, ‘Don’t go get married again. You don’t seem to choose the right people very well. Let me fix you something to live on.’ It was supposed to be a lifelong pension. It was a small amount. That was fine. That was okay.”

A year after Harrison’s death, however, his estate unexpectedly cut her off. Louise says she never knew why. While she thought her brother would have been upset, she said that she tried not to be.

“George would’ve been horrified knowing I was cut off,” she said. “It was such a small amount. And I think he left something like $300 million. Let’s put it this way, some people were more into money than I was. Money is not the most important. I learned that from George.”

“I live modestly, I don’t hold anyone responsible for me and I’m happy to live like that,” she said.

Reference: MSN (Sep. 23, 2022) “George Harrison’s Sister Said He Would Have Been ‘Horrified’ to Learn She Was Cut Off by His Estate”

What Is an Estate Plan?

An estate plan is a collection of legal documents that gives you control over what happens to you, your assets and any dependents you may have if you become disabled or when you die. The plan can include a will, power of attorney forms, trusts and more.

KRDO’s recent article entitled “An estate plan is the best way to plan for the worst. Here’s how to create one” says that having an estate plan is like carrying the umbrella for the inevitable rainy day.

A will. This is a written statement of who should get a deceased person’s assets. A will can also name who will assume guardianship of minor children. The requirements for a will to be deemed valid vary state to state. You should consult with an experienced estate planning attorney to make certain that yours is legally binding. Without a will, state intestacy laws govern who receives your assets.

Power of attorney. A health care power of attorney form grants permission for someone else to make decisions on your behalf if you are unable to do so. The financial power of attorney names a person to manage your finances should you be unable to yourself.

Trusts. A trust is an agreement to hold assets for the benefit of another person. Parents create trusts to ensure their assets are properly allocated to their children. Without a trust, the children might inherit all the money at once.

Life events — like turning 18 and going to college, getting married, changing careers, or moving states — often trigger estate planning. Pregnancy is also a good time to begin the process. Work with an experienced estate planning attorney to ensure that your documents are legally correct. In addition to updating an estate plan after a major life change, you should review your plan very few years.

An estate plan can take little time to draft, perhaps a week or two with an attorney, who will work with you every step of the way. Don’t put this important task off.

Reference: KRDO (Sep. 16, 2022) “An estate plan is the best way to plan for the worst. Here’s how to create one”

Who will Receive Naomi Judd’s Estate?

Country music legend Naomi Judd, who died in April, named her husband Larry Strickland as executor of her estate. She was married to Strickland for 33 years. According to court documents, he’ll have “full authority and discretion” over her estate and won’t need to the “approval of any court” or permission from any beneficiary.

The Los Angeles Times’ recent article entitled “Naomi Judd reportedly left daughters Wynonna and Ashley out of her final will” says that the 76-year-old Judd prepared the will on Nov. 20, 2017.

The will also provides that Strickland is entitled to receive compensation for his executor duties and that he would be reimbursed for legal fees, disbursements and other “reasonable expenses” in the administration of Judd’s estate. Judd‘s brother-in-law, Reginald Strickland, and Wiatr & Associates President Daniel Kris Wiatr will serve as the estate’s co-executors.

Reports say that Wynonna isn’t happy with her mother’s will and “believes she was a major force behind her mother’s success.”

Naomi died from suicide on April 30^— a day before she and her daughter Wynonna, known as “The Judds,” were to be inducted into the Country Music Hall of Fame.

The daughters teamed up in their grief to tearfully accept the Hall of Fame honor for their late mother.

Wynonna later decided to tour despite her mother’s death. She enlisted some major stars to join her on the road.

In May, Ashley revealed that her mother had used a firearm and said she found her mother’s body when she was visiting her mom’s Tennessee home.

“Our mother couldn’t hang on to be recognized by her peers. That is the level of catastrophe of what was going on inside of her,” she told ABC’s Diane Sawyer. “Because the barrier between the regard in which they held her couldn’t penetrate into her heart and the lie the disease told her was so convincing.”

The Judds were known for songs including “Why Not Me,” “Love Can Build a Bridge” and “Mama He’s Crazy.”

Reference: Los Angeles Times (Aug. 1, 2022) “Naomi Judd reportedly left daughters Wynonna and Ashley out of her final will”

When Should I Update My Will?

CNBC’s recent article entitled “When it comes to a will or estate plan, don’t just set it and forget it” says that your will should be updated when your personal circumstances change,  could happen at any time. Some frequent triggers include:

• Changes in health, including that of executors and guardians
• Changes in laws, which may impact tax and legal strategies; and
• Changes in state residence, which can also impact planning.

Every state has different laws as to the administration of a will. They will vary regarding the required residence of an executor, inheritance tax laws and whether a child can be disinherited by omission.

It’s wise to review your will every few years with an estate planning attorney, who likely will say that documents should also be reviewed when these events happen:

• A substantial change in your financial status
• A change of parental status, like the birth of a child
• A change of guardians
• Changes in designations of fiduciaries, such as the executor of the will, successor trustee of a revocable trust, attorney-in-fact, or health-care agent; and
• Changes in a family member’s situation, such as if a child develops special needs and will need appropriate planning.

The article says that an overlooked trigger to updating your will is consolidation in the banking industry. If you named a bank as the executor of your estate and the bank has been bought or sold recently, you may now have a new executor.

Make certain that you know who that person or institution is – and that you trust its judgment.

It’s also important to revisit your beneficiaries after marriage or divorce.

Reference: CNBC (March 1, 2022) “When it comes to a will or estate plan, don’t just set it and forget it”

 

 

 

What are My Responsibilities if I’m Named an Executor?

An executor is the person who helps finalize the finances and assets for a deceased person. As executor of an estate, you will need to get copies of the death certificate, notify authorities, such as Social Security, to stop benefits and may be involved in arranging the funeral.

You will also need to follow the instructions in the will to administer the estate.

You will organize the assets, pay off any debts, close accounts like utilities and cable or phone plans and distribute money and possessions to beneficiaries.

US News’ recent article entitled “How to Prepare to Be an Executor of an Estate” takes a look at the responsibilities of an executor.

If are asked and accept the position, start by finding the important documents, like the will. As executor, you are acting in a fiduciary capacity, and your efforts are directed toward the interests of the beneficiaries of the decedent’s the estate.

The time required to be an executor can be extensive. If you are asked to be the executor before the person passes away, ask to locate the original will. Read it and make certain that you understand it.

There are also requirements that must be met to be an executor of an estate. Anyone convicted of a felony is not allowed to be an executor, even if they are named in the decedent’s will. The exact rules vary, depending on the state, so ask an estate planning attorney.

After the death, it typically takes at least six months or more to carry out all the administrative work related to the estate. Therefore, if you do not have the time, do not agree to serve as executor.

Finally, executors may be compensated for their work. Some states have commission schedules listed in their statutes that the executor can collect, while other states require that you keep track of your time and the judge will authorize “reasonable” compensation for your actual efforts.

Ask for help if tasks seem overwhelming or you do not understand certain instructions on accounts or the will. An experienced estate planning attorney can assist.

Reference: US News (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

Should I Use a Corporate Trustee?

When you work with an experienced estate planning attorney to create a revocable living trust, you will usually name yourself as trustee and manage your financial assets as you have previously. However, it’s necessary to name a successor trustee. This person or entity can act, if you’re incapacitated or pass away.

Selecting the right trustee is one of the most important decisions you’ll make.

The Quad Cities Times’ recent article entitled “Benefits of a corporate trustee” warns that care should be taken when selecting someone to serve in this role. Family members may not have the experience, ability and time required to perform the duties of a trustee. Those with personal relationships with beneficiaries may cause conflicts within the family. You can name almost any adult, including family members or friends, but think about a corporate or professional trustee as the possible answer.

Experience and Dedication. Corporate trustees can devote their full attention to the trust assets and possess experience, resources, access to tax, legal, and investment knowledge that may be hard for the average person to duplicate. A corporate trustee can be hired as the administrative trustee—letting them concentrate on the operation of the trust. You can also hire a registered investment advisor to manage the investment assets. A corporate trustee can also be engaged as both administrative trustee and investment manager.

Regulation and Protection. Corporate trustees provide safety and security of your assets and are regulated by both state and federal law. Corporate trustees and registered investment advisors are both held to the fiduciary standard of acting solely in the best interests of trust beneficiaries.

Successor Trustee. If you choose to name personal trustees, you may provide in your trust documents for a corporate trustee as a successor, in case none of the personal trustees is available, capable, or willing to serve. Corporate trustees are institutions that don’t become incapacitated or die. You should consider the type of assets you own including investment securities, farmland and commercial real estate and then choose the most qualified corporate trustee to manage them.

In sum, many estate owners can benefit from the advantages of a corporate trustee.

Ask an experienced estate planning attorney when creating or amending a revocable living trust, about naming the appropriate corporate trustee, and the advisability of including terms for your registered investment advisor to manage assets for your trust.

Reference: Quad Cities Times (Nov. 28, 2021) “Benefits of a corporate trustee”

What Does the Role of Estate Executor Entail?

Being named as the executor of a will is an honor and an obligation. However, depending on the size of the estate and your relationship to the deceased, performing the duties of an executor can feel like a second job, says Kiplinger’s recent article entitled “What to Do When You’re the Executor.”
This can be a real challenge for adult children who are responsible for executing the estate of the last surviving parent. These executors are often required to distribute assets among several beneficiaries, sell the family home and look over all the family belongings. If the family is a bit dysfunctional, if it’s a big estate, or if their parents’ estate planning was poor (or nonexistent), it’s even more time-consuming. Let’s look at some basic steps most executors should follow:
Get a dozen copies of the death certificate and file the will. Copies of the death certificate are usually available from the funeral home. You must then file the will and death certificate with the county probate court. If probate is required, you must get a letter from the court, known as a letter of testamentary. This gives you legal authority over the estate.
Assemble your pro team. In most instances, you’ll need an experienced estate planning attorney to help you navigate the probate court. The attorney who helped the decedent draw up his or her will is a good choice, as he or she is most likely familiar with the estate.
Create an inventory of assets. If the deceased didn’t keep good records of bank and brokerage accounts, insurance policies, tax returns, and other documents, you may need to track down some of these accounts.
Protect personal property. If the estate includes a home, the executor is responsible for maintaining the property and paying the mortgage, taxes and insurance until it’s sold.
Set up a separate bank account. An executor will need to pay bills and make deposits on behalf of the estate, so set up a bank account in the name of the decedent’s estate. This will also provide you a record of transactions that will prove useful if anyone challenges your administration of the estate.
Pay the decedent’s debts. This is a crucial action. If the decedent’s unpaid bills and other debts aren’t paid before the estate is distributed to heirs, creditors could sue. The executor is also responsible for filing a state and federal tax return to pay any taxes owed (or claim a refund).
Communicate with the beneficiaries on a regular basis. Don’t leave the heirs in the dark.
Distribute the assets. Finally, you can distribute the assets after all debts are paid, which may first require court approval.
If this sounds like more than you can handle, you can decline to act as an executor. Sometimes that’s the right choice.
Reference: Kiplinger (Oct. 29, 2021) “What to Do When You’re the Executor”

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”