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”

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”

Why Did Texas Siblings Come to Blows Over Inheritance?

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

Can I Be Certain My Estate Plan Is Successful?

Forbes’ recent article entitled“7 Steps to Ensure a Successful Estate Plan” listed seven actions to take for a good estate plan:
1. Educate and communicate. A big reason estate plans aren’t successful, is that the next generation isn’t ready and they waste or mismanage the assets. You can reduce those risks and put your estate in a trust to allows children limited access. In addition, you can ensure that the children have a basic knowledge of and are comfortable with wealth. Children also benefit from understanding their parents’ philosophy about managing, accumulating, spending and giving money.
2. Anticipate family conflicts. Family conflicts can come to a head when one or both parents pass, and frequently the details of the estate plan itself cause or exacerbate family conflicts or resentments. Many people just think that “the kids will work it out,” or they create conflicts by committing classic mistakes, like having siblings with different personalities or philosophies jointly inherit property or a business.
3. Plan before making gifts. In many cases, gift giving is a primary component of an estate plan, and gifts can be a good way for the next generation to become comfortable handling wealth. Rather than just automatically writing checks, the older generation should develop a strategy that will maximize the impact of their gifts. Cash gifts can be spent quickly, but property gifts are more apt to be kept and held for the future.
4. Understand the basics of the plan. Few people understand the basics of their estate plans, so ask questions and get comfortable with what your estate planning attorney is saying and recommending.
5. Organize, simplify, and prepare. A major reason it takes a lot of time and expense in settling an estate, is that the owner didn’t make it easy for the executor. The owner may have failed to make information easy to locate. An executor must understand the details of the estate.
6. Have a business succession plan. Most business owners don’t have a real succession plan. This is the primary reason why few businesses survive the second generation of owners. The value of a small business rapidly declines, when the owner leaves with no succession plan in place. A succession plan designates the individual who’ll run the business and who will own it, as well as when the transitions will happen. If no one in your family wants to run the business, the succession plan should provide that the company is to be sold when you retire or die. A business must be managed and structured, so it’s ready for a sale or inheritance, which frequently entails improving accounting and other information systems.
7. Fund living trusts. A frequent estate planning error is the failure to fund a revocable living trust. The trust is created to avoid probate and establish a process under which trust assets will be managed. However, a living trust has no impact, unless it’s given legal title to assets. Be sure to transfer legal ownership of assets to the trust.
Reference: Forbes (May 21, 2021) “7 Steps to Ensure a Successful Estate Plan”

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?”