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” 

You Can Complete Your Estate Plan During the Coronavirus Quarantine

The coronavirus lockdown is happening in many states, following the lead of California, Illinois, Florida and New York. Kiplinger’srecent article entitled “How to Get Your Estate Plan Done While Under Coronavirus Quarantine”says that these isolation orders create unique issues with your ability to effectively establish or modify your estate plan.

The core documents for an estate plan are intended to oversee the management and distribution of your assets, after you pass or in the event you are incapacitated. Each document has requirements that must be met to be legally effective. Let’s look at some of these documents. Note that there’s proposed federal legislation that would permit remote online notarization, and Illinois and New York have passed orders to allow notarization utilizing audio visual technology.

Will. Every state has its own legal requirements for a will to be valid, and most require disinterested witnesses. Some states, like California, permit a will, otherwise requiring the signature of witnesses, to be valid with clear and convincing evidence of your intent for the will to be valid. An affidavit indicating that the will was signed as a result of the emergency conditions caused by the COVID-19 virus should satisfy this requirement.

Power of Attorney. This document designates an individual to make financial decisions regarding your assets and financial responsibilities, if you’re unable to do so. This can include issues regarding retirement benefits, life and medical insurance and the ability to continue payments to persons financially dependent on you. The durable general power of attorney is typically notarized.

Advance Health Care Directive. This document states whether you want your life extended by life support systems and if you want extraordinary measures to be taken. It may state that you wish to have a DNR (Do Not resuscitate) in place.

HIPAA Authorization. Some states have their own medical privacy laws with separate requirements, and most powers of attorney provide that the designated persons can act, if you’re unable to do so. Financial institutions typically require confirming letters from your doctor that you’re unable to act on your own behalf. To be certain that this agent can act on your behalf if needed, they should be given written access to see your medical information.

With the pandemic, these requirements can be fluid and may change quickly. Be sure to work with an experienced estate planning attorney.

Reference:Kiplinger (March 30, 2020) “How to Get Your Estate Plan Done While Under Coronavirus Quarantine”

How Long Do You Have to Settle an Estate?

The beneficiaries of an estate are recently eager to receive their inheritance. In a common scenario, a trust was left instead of an actual will. All the parties received their respective shares, except for the two brothers and a sister who is the executor. The trust instructed the brothers to divide the estate property in half for each of them. The sister was to get $15,000. 

However, one of the brothers lives in the home. 

As you may know, the administrator or executor of an estate has the job of collecting the decedent’s assets, paying debts, making distributions to the beneficiaries and finally closing the estate in an expeditious manner. 

nj.com’s recent article entitled “How long does it take to pay out a family trust?” tries to sort out what the siblings need to do to settle the estate. The key factor in this scenario is the wording of the trust. 

There are situations in which a trust is used as a substitute for a will. In that case, a person’s assets are placed in trust. The trustee pays all the liabilities and administers the assets in the trust in accordance with the instructions of the trust during the individual’s life and after her death. 

Even when trusts are used as will substitutes, they aren’t always designed to be closed with distribution to happen immediately after the debts are paid, as in the case of the estate. The terms of the trust dictate the trustee’s duties as to the distribution of trust assets. 

If you’re a beneficiary of a trust and think that the trustee is breaching his fiduciary duties, you should inform the trustee of the nature of the suspected breach. If nothing is done to remedy this, you may ask the court for help. 

One option is that you can request the court to order the trustee to take actions, which you state in your complaint filed with the probate court. Another option is to request that the court direct the trustee to stop taking specific actions that you detail in your complaint. 

A third choice is to ask the court to remove the trustee due to breach of fiduciary duties that you set forth in your complaint filed with the court. 

However, such court intervention can be expensive. Another thing to consider is that the trustee may petition the court to have his legal fees paid from the trust funds—which will deplete the money in the trust. Because of this, it is usually best to attempt and resolve these issues before getting the court involved. 

Reference: nj.com (Feb. 12, 2020) “How long does it take to pay out a family trust?” 

How Long Do You Have to Settle an Estate?

The beneficiaries of an estate are recently eager to receive their inheritance. In a common scenario, a trust was left instead of an actual will. All the parties received their respective shares, except for the two brothers and a sister who is the executor. The trust instructed the brothers to divide the estate property in half for each of them. The sister was to get $15,000. 

However, one of the brothers lives in the home. 

As you may know, the administrator or executor of an estate has the job of collecting the decedent’s assets, paying debts, making distributions to the beneficiaries and finally closing the estate in an expeditious manner. 

nj.com’s recent article entitled “How long does it take to pay out a family trust?” tries to sort out what the siblings need to do to settle the estate. The key factor in this scenario is the wording of the trust. 

There are situations in which a trust is used as a substitute for a will. In that case, a person’s assets are placed in trust. The trustee pays all the liabilities and administers the assets in the trust in accordance with the instructions of the trust during the individual’s life and after her death. 

Even when trusts are used as will substitutes, they aren’t always designed to be closed with distribution to happen immediately after the debts are paid, as in the case of the estate. The terms of the trust dictate the trustee’s duties as to the distribution of trust assets. 

If you’re a beneficiary of a trust and think that the trustee is breaching his fiduciary duties, you should inform the trustee of the nature of the suspected breach. If nothing is done to remedy this, you may ask the court for help. 

One option is that you can request the court to order the trustee to take actions, which you state in your complaint filed with the probate court. Another option is to request that the court direct the trustee to stop taking specific actions that you detail in your complaint. 

A third choice is to ask the court to remove the trustee due to breach of fiduciary duties that you set forth in your complaint filed with the court. 

However, such court intervention can be expensive. Another thing to consider is that the trustee may petition the court to have his legal fees paid from the trust funds—which will deplete the money in the trust. Because of this, it is usually best to attempt and resolve these issues before getting the court involved. 

Reference: nj.com (Feb. 12, 2020) “How long does it take to pay out a family trust?” 

What are Walt Disney’s Heirs Worth?

It's not known just how much the Disney family is worth. GOBankingRates estimated the company's net worth to be roughly $130 billion. Roy O.'s grandson, Roy P., said at one point that the family owns less than 3% of the company. Even so, that would put their fortune around $3.9 billion (not counting any investments in addition to Disney holdings). 

Wealth Advisor’s recent article entitled “Disney Family Feud As Heirs Battle For $400 Million Trust Fund” says that in 1925, Walt married Lillian Bounds, a studio inker. Eight years later, she gave birth to Diane, and the couple later adopted their daughter Sharon as a baby. 

Walt is said to have adored his 10 grandchildren. When he died in 1966 of lung cancer, he left numerous trusts and family foundations for his family. 

Walt's younger daughter, Sharon, adopted one child, Victoria, with her first husband, Robert Brown. She then had twins, Brad and Michelle, with her second husband, Bill Lund. She died from breast cancer in 1993 at age 56. Michelle has never had a job and owns three homes, spending a lot of time in Newport Beach, CA according to Gardner. 

Victoria reportedly lived an extravagant lifestyle that included $5,000-a-night suites at the Royal Palms in Las Vegas. One report notes that she once went on a Disney cruise ship and destroyed her suite to such a degree that Michael Eisner, then-CEO of the company, had to ask the trustees to pay for the damages. Her share of the family fortune was added to Brad's and Michelle's after she died in 2002 from health complications. However, Sharon's twins later became embattled in a years-long feud over their $400 million trust fund. That inheritance was supposed to be distributed in annual payments and lump sums at five-year intervals at ages 35, 40, and 45. However, the trustees dispersed the payments to Michelle and withheld Brad's. 

Michelle and the trustees argued that Brad wasn't able to take care of his share because of a "chronic cognitive disability" and that Bill, their father, was taking advantage of this to gain money, according to NBC News. 

Bill said that the trustees were manipulating his daughter Michelle. Bill was previously a trustee but resigned after an allegation that he used trust money to gain more than $3 million in kickbacks from a real-estate deal. He reportedly agreed to an annual settlement of $500,000. 

Reference: Wealth Advisor (Feb. 11, 2020) “Disney Family Feud As Heirs Battle For $400 Million Trust Fund”  

Dad’s Will and Trust at Odds?

A revocable trust, commonly called a living trust, is created during the lifetime of the grantor. This type of trust can be changed at any time, while the grantor is still alive. Because revocable trusts become operative before the will takes effect at death, the trust takes priority over the will, if there is any discrepancy between the two when it comes to assets titled in the name of the trust or that designate the trust as the beneficiary (e.g., life insurance).

A recent Investopedia article asks “What Happens When a Will and a Revocable Trust Conflict?” The article explains that a trust is a separate entity from an individual. When the grantor or creator of a revocable trust dies, the assets in the trust are not part of the decedent grantor's probate process.

Probate is designed to distribute the deceased individual's property pursuant to the instructions in his will. However, probate doesn’t apply to property held in a living trust, because those assets are not legally owned by the deceased person. They’re owned by the trust. As a result, the will has no authority over a trust's assets.

Let’s say that Bernie (who is the grandfather) has two children named Pat and Junior.  Bernie places the old family home into a living trust that says Pat and Junior are to inherit that house. Twelve years later, Bernie remarries. Right before his death, he executes a new will that says is the house is to go to his new wife, Andrea.

In this case, for the home to go to his new wife, Bernie would’ve had to amend the trust to make the house transfer to his wife effective. Thus, the home goes to the two children, Pat and Junior.

Sound confusing? It can be. Work with an experienced estate planning attorney, so that your intentions can be carried out without any issues. As mentioned, a revocable trust is a separate entity and doesn’t follow the terms of a person's will when they die.

Make sure everything is legally binding and the way you intend it with the advice of a trust and estate planning attorney.

It’s important to note that while a revocable trust supersedes a will, the trust only controls those assets that have been placed into it. Therefore, if a revocable trust is formed, but assets aren’t moved into it, the trust provisions have no effect on those assets at the time of the grantor's death.

Reference: Investopedia (Aug. 5, 2019) “What Happens When a Will and a Revocable Trust Conflict?”

Why Trusts Should Be Part of Your Estate Plan

Regular people have learned that they need to have an estate plan to protect themselves, while they are living and to distribute assets when they pass. Estate planning tools like a Power of Attorney and a Health Care Power of Attorney are basic documents anyone over 18 needs to have. Trusts, once the province of the wealthy, are now being used by people in many different economic levels, reports the Cleveland Jewish News in the article “Five reasons to incorporate trust into estate plan.”

Taxes. While it’s true that the exclusion for estates and prior taxable gifts is now $11.4 million per individual, most estates won’t be taxable at the federal level. However, don’t overlook state estate taxes. What if life insurance proceeds put your estate into a higher bracket? One way to keep the cap on your estate size, is with an irrevocable life insurance trust, also known as an ILIT. It will keep life insurance policy proceeds outside of a probatable estate and minimize the tax hit.

Asset Distribution. Your will controls who receives what assets, but not what happens to them after they are distributed. A trust can ensure that funds are used for specific purposes, such as higher education. It can also control how funds are distributed to an individual. If there are concerns about how an heir might mishandle an inheritance, perhaps because of an addiction or a lack of financial skills, a trust can be used for oversight into when funds are distributed and possibly under what circumstances. You can set benchmarks for trust distribution, like completing college or a rehabilitation program.

Privacy. Heirs are sometimes surprised when they, along with executors, start receiving solicitations after a loved one’s will is probated. That is because once a will goes through probate, the information is public record and available to anyone, including nosy neighbors, scammers or an estranged family member. A trust provides a layer of privacy. It can also do this while you are living. Certain information, like the ownership of a property, can be made less public, if the property is owned by a trust instead of an individual.

Making Estate Settlement More Efficient. Depending upon the jurisdiction, probate matters can take time. The court process does not always move quickly, and sometimes can be difficult to navigate. Probate can also become expensive. An executor or administrator of the estate is generally paid a percentage of the total value of the assets managed. But assets that are held in a trust do not go through the probate process and can be managed far more efficiently and quickly.

An experienced estate planning attorney will be able to determine what kind of trusts will be most appropriate and useful for your situation.

Reference: Cleveland Jewish News (September 16, 2019) “Five reasons to incorporate trust into estate plan”

What’s so Bad About Having a Will Probated?

The process of probating a will and why it matters, is reviewed by nwi.com in the article “Estate Planning: Do wills need to be probated?” When most people refer to probate, they typically mean that a court appoints or approves a personal representative and opens the estate. If that is what is being described, an estate plan can be established without opening a probate estate. Not all wills are probated.

Bear in mind that the only assets subject to probate, are those that are controlled by the will. Assets that the decedent owned in his or her name alone without beneficiary designations are probate assets. If the asset is owned in two people’s names or contains a beneficiary designation or is a POD—Payable on Death—or TOD—Transfer on Death—those assets are not probate assets.

One reason to probate an estate, is to determine who receives the property of the person who has passed. If the account is owned jointly in two people’s names, typically a husband and wife or parent and child, then the surviving joint owner becomes the full owner at the time of death. A bank or financial institution will probably want to see a death certificate to verify that the other person on the account has passed.

This is also true for a CD—Certificate of Deposit—if there are two names on it.  It also applies to any real estate that is held in two names. Ownership for these assets, properly titled in more than one name, are not a big deal, if the titles have been done properly.

Therefore, using joint ownership or naming beneficiaries for most or all of the assets, removes the need to probate much of the will. However, in some instances, some attorneys like to present the will for probate, but ask that a personal representative not be appointed, and no estate opened. This is called “spreading the will for record” and it preserves the will. Wills need to be presented for probate within the statutory deadline for your state. These timeframes can range from six months to within three years of the death of the decedent (your estate planning attorney will know your state’s laws on this matter). If this is not done, then the will may not be accepted by the court as valid. 

By spreading the will, the will is preserved in the outside chance that an asset is uncovered in the future, even after the statutory timeframe has expired. When the beneficiaries of the will are not the same as family members found under intestate statutes, like a pour-over will, where the trust receives all the property under the will, it makes this strategy especially valuable. Spreading the will further ensures that the trust estate plan will be carried out. Trusts are rarely presented to the court for probate. 

In some regions, probate is a quick and relatively painless process. Depending on the situation, there may be little gained by over-engineering the estate just to avoid probate. Speak with your estate planning attorney about probate and also determine how much of your estate will be probate assets. 

Reference: nwi.com (Jan. 20, 2019) “Estate Planning: Do wills need to be probated?”

The Right Documents for Estate Planning

Having a properly prepared estate plan, that includes all the important documents, including a will and power of attorney, is one of the most important ways to protect your family and yourself. Despite this fact, many adults still neglect to take care of this important task, reports Consumer Reports in its article “8 Essential Steps for Estate Planning.”

A survey from Caring.com showed that as many as 60% of adults don’t have estate planning documents. When they asked families with young children, fewer than one in ten have even designated a guardian to take care of their children, if both parents should die.

What happens when there’s no planning in place? Even the simplest things become more complicated, and complicated things become financial and legal nightmares. When there’s an emergency and decisions need to be made, the entire family is subjected to more stress and costs than would otherwise be necessary.

Here are the eight steps you need to take, right now, to protect your family:

1. Get the professional help you need. The change to the tax law may or may not impact your family and your estate plan, but you won’t know until you sit down with an estate planning attorney. Trying to do this online, may seem like a simpler way, but you will not have the same peace of mind as when you sit down with an experienced attorney—and one who knows your state’s laws.
2. Create a will. This is a legal document that explains how you want your assets to be distributed after you die. It names an executor to carry out your instructions. If you have minor children, this is an especially important document, since it is used to name their guardian. If you have no will when you die (called dying “intestate”), then the laws of your state determine how your assets are distributed and who rears your children. Depending on where you live, your spouse might not automatically inherit everything. 
3. Discuss whether you need a Revocable Living Trust. In most states, when you pass away, your estate goes through a process called “probate.” The courts basically review your estate plan and determine whether everything looks right. The problem is that your will becomes a public document—and so does information about your assets. Some people prefer to keep their lives private by transferring assets to a revocable living trust, which distributes assets according to your instructions at your death. Titles to the assets must be changed, so they are “owned” by the trust. This is known as “funding” the trust. You still retain complete control of your assets, since you are the trustee. However, if you fail to retitle assets, the estate goes through probate. You will also still need a will to protect your minor children.
4. Review your beneficiaries. Whether you remember it or not, when you open many different kinds of accounts—banking, investment—you assign a beneficiary to receive the assets upon your death. Your will does not override the beneficiary designation. Therefore, if you haven’t changed your life insurance beneficiary, for instance, and your ex-wife is still named on the document, she’ll get the entire proceeds of the life insurance policy when you die. This is a very important task. 
5. Have a Durable Power of Attorney (DPOA) created. This is something that protects you, while you are living. If you should become incapacitated, having a durable power of attorney in place will allow that person to manage your financial affairs. Make sure the institutions that have your accounts accept your attorneys’ POA form; you may need to get the one that the institution uses.
6. Don’t forget the Advance Directive. This is also known as a Living Will. It explains your wishes for medical procedures, if you are unable to communicate and explains what you want for end-of-life care. Make sure that your family members know that you have such a document and keep it accessible in case of an emergency.
7. Pick a Healthcare Proxy. The Healthcare Proxy, also known as the Durable Power of Attorney for Healthcare, names someone to convey your healthcare wishes. It should include a HIPAA release clause. This allows medical personnel to release your medical records and speak with the named person about your care.
8. Get it all organized. Think of this step as creating a user’s manual for yourself. All these plans won’t do any good, unless your loved ones know they exist and know where to locate them. Don’t put your estate planning documents and records in a bank safe deposit box, in case it is sealed on death. Your attorney will likely have an original, and you should have your original in a fire-proof safe in a secure location in your home. 

Reference: Consumer Reports (Oct. 24, 2018) “8 Essential Steps for Estate Planning”

Working on Your Bucket List? First, Finish Your Estate Plan

Seniors should be having some heart-to-heart discussions with their spouses and loved ones about their wishes concerning their assets and their final days, according to Intermountain Catholic in “Retirees Have Several Financial Issues to Consider.” After a loved one dies, family members are often left dealing with the expenses of their medical care and funeral. To be left to deal with these issues while grieving, adds another layer of heartbreak. It doesn’t have to be this way.

Many people put off making a will.  This means that their property won’t be distributed as they would want. If you don’t already have a will, contact an estate planning attorney and get started right away. Without a will, your estate will be distributed according to the laws of your state.

Ask your estate planning attorney if a “pour-over trust” is appropriate for your situation.  It puts the property that you own at the time of death into an already-prepared trust, so your trusted heir can succeed you as a trustee and then divide the estate, according to your wishes.

Don’t put your 401(k) or IRA savings accounts into trusts. The IRS will see that as a 100% withdrawal and you’ll be charged the taxes on it for the year the withdrawal was made. That one mistake could, and has, decimated lifetimes of savings.

You’ll want to grant a trusted family member or friend the power of attorney and medical power of attorney, so your affairs can be handled, if you should become unable to do so. If you do not want “heroic measures”—CPR and other medical procedures done to bring someone back to life, if they are unresponsive—then you’ll want a Do Not Resuscitate (DNR) form. That form will need to be with you and you should tell others about it, so they can instruct medical personnel accordingly. Otherwise, EMTs and doctors are required by law to take whatever measures they deem necessary to keep you alive.

If you haven’t already applied for Social Security, you may wish to go to your local Social Security office to discuss what benefits are available to you and how to collect them.

Most seniors qualify for Medicare, but there are many different plans. It is also likely that you’ll need supplemental plans to cover costs, including prescriptions. 

Your best bet: sit down with an experienced estate planning attorney who can help you create an estate plan that is best for you and your family.  You should also have conversations with your family members about tough topics, so when the time comes for them to act on your behalf, they’ll be ready.

Reference: Intermountain Catholic “Retirees Have Several Financial Issues to Consider”