Who Is the Best Person for Executor?

Several critical estate planning documents give another person—known as an agent or personal representative—the legal right to act on another person’s behalf. They include wills, trusts, powers of attorney and advance health care directives, as described in a recent article titled “The nomination of trustees, executors and agents” from Lake County Record-Bee.

Your will is only activated after you die. The will and executor then have to be approved by the court. Many people think being named as an executor confers instant authority, but this is not true. Only when the will has been deemed valid by the court, does the executor have the power to act on behalf of the decedent.

After death, the court is petitioned for a court order appointing the executor and then letters testamentary are signed by the appointed executor. An executor then becomes active as an officer of the court with a fiduciary duty to act as personal representative of the decedent’s estate.

If the named person declines to serve, the will should have a secondary person named as executor, who can then request the appointment be validated by the court. Others can petition the court to be appointed. However, it is best to name two people of your choice in your will.

A trust is a separate legal entity with a trustee who is in charge of the trust and its assets. If a revocable will is created, the trustee is usually the same person who has the trust created, also known as the grantor. For an irrevocable trust, the trustee is someone other than the grantor. The appointment does not become official until the appointment is accepted, usually through signing a document or by the successor trustee taking action on behalf of the trust.

Just as an executor might not accept their role, a trustee can decide not to accept the nomination. However, once they do, they have a fiduciary duty to put the well-being of the trust first and manage it properly. You can’t accept the role and then walk away without serious consequences.

Powers of attorney are used while a person is living. The power of attorney’s effective date depends upon what kind of POA it is. A durable power of attorney is effective the moment it is signed. A springing POA sets forth terms upon which the POA becomes active, usually incapacity. The challenge with a Springing POA is that approval by the court may be required, usually with proof from a treating physician concerning the person’s condition.

Similarly, the health care power of attorney appoints a person who acts on behalf of another as their agent for health issues. They can decline the position. However, once they agree to take on the position, they are responsible for their actions.

If the POAs decline to serve and there is no secondary person named, or if all named POAs decline to serve, the family will need to apply for a conservatorship (also known as guardianship). This is a lengthy and expensive process requiring a thorough investigation of the situation and the person who needs representation. It can be contested if the person does not want to give up their independence, or by family members who feel it is not needed.

These are commonly used terms in estate planning. However, they are not always understood clearly. Your estate planning attorney will be able to address specific responsibilities and requirements, since every state has laws and appointments vary by state.

Reference: Lake Country Record-Bee (July 30, 2022) “The nomination of trustees, executors and agents”

What’s the Latest with the Queen of Soul’s Estate?

Clearing the Queen of Soul’s tax debts could clear the way for her four sons to finally take over her post-death affairs and fully benefit from revenues flowing into her estate — which could be millions of dollars.

The Detroit Free Press reports in its recent article entitled “Aretha Franklin estate says $7.8 million IRS bill is paid; could spell windfall for sons” reports that Franklin’s tax burden had been an immovable hurdle as her heirs sorted out other estate matters — sometimes combatively — in Oakland County Probate Court following her 2018 death.

The IRS debt prevented the sons from receiving money, even while the late star’s music and movie projects generated big revenue in her name. The remaining tax liability was paid off in June with delivery of a cashier’s check to the IRS.

The IRS said that the singer’s estate had nearly $8 million in unpaid taxes, penalties and interest that had piled up during the previous seven years. The estate at last struck a deal with the IRS in April 2021 with an accelerated payoff schedule that also set up limited but regular payments to Franklin’s sons.

The IRS deal earmarked 45% of incoming Aretha Franklin revenue to pay down the standing tax balance. Another 40% was directed to an escrow account to handle taxes on newly generated income.

With the tax debt now purportedly off its back, the estate contends that most of the incoming cash should get distributed equally among the four sons each month. From that point, income tax obligations would be on each individual. Oakland County (MI) Probate Judge Jennifer Callaghan would have to approve the request.

In the meantime, there’s still the issue of multiple wills that were apparently signed by Franklin. That includes three handwritten documents discovered in her home in 2019.

A fourth will draft suddenly was discovered last year — a typed document prepared by a Troy law firm in 2017 but left unsigned by the star.

The documents contain conflicting instructions about Franklin’s wishes for her estate, including which heirs were to get what, and their emergence exacerbated tensions among sons Clarence, Edward, Teddy and Kecalf.

A trial to clear up the situation was planned for 2020 but was delayed due to the pandemic.

Reference: Detroit Free Press (July 11, 2022) “Aretha Franklin estate says $7.8 million IRS bill is paid; could spell windfall for sons”

Some States Have Tough Estate and Inheritance Taxes

For now, most people don’t have to be scared of federal estate taxes. In 2022, only estates valued at $12.06 million or more for an individual ($24.12 million or more for a married couple) need to pay federal estate taxes. Even better for the very wealthy, there’s no federal inheritance tax for heirs who reside in such lofty economic brackets, notes the recent article titled “States with Scary Death Taxes” from Kiplinger.

By definition, estate taxes are paid by the estate and based on the estate’s overall value, while inheritance taxes are paid by the individual who inherits property, assets, or anything else of value. This isn’t to say “regular people” don’t need to worry about death taxes. We do, because states have their own estate taxes, and a few still have inheritance taxes.

A number of states eliminated estate taxes in the last ten years or so, in an effort to keep retirees from leaving and heading to places like Florida, where there’s no estate tax. However, a dozen states and the District of Columbia still have estate taxes, six states have an inheritance tax and one has both an estate and inheritance tax: Maryland.

Here’s how some state taxes look in 2022:

Connecticut has an estate tax, with an exemption level at $7.1 million. However, there is no inheritance tax. The Nutmeg state is the only state with a gift tax on assets gifted during one’s life.

The District of Columbia has an estate tax, with an exemption level of $4 million.

Hawaii’s estate tax exemption level is $5.49 million., one of the higher state estate tax exclusions, and is not adjusted for inflation.

Illinois’s estate tax is $4 million, but there’s no inheritance tax. It’s known as one of the least taxpayer friendly states in the country for retirees.

Iowa is phasing out inheritance taxes, but this doesn’t take effect until 2025. In the meantime, there’s no estate tax, and if the estate is valued at less than $25,000, there’s no inheritance tax. No taxes are due on property inherited by a lineal ascendent or descendent, but for other family members, the taxes range from 8%—12%.

There’s no estate tax in Kentucky. However, depending upon your relationship to the person who died and the value of the property, the inheritance tax is 4% to 16%.

Maine has an estate tax exemption of $5.87 million, but no inheritance tax.

Maryland’s has both an estate tax exemption of $5 million and a flat 10% inheritance tax.

Massachusetts has no inheritance tax and a $1 million estate tax exemption.

Minnesota has a low estate tax exemption of $3 million. Any taxable gifts made three years prior to death are included.

New York, New Jersey, Rhode Island, Oregon, Vermont and Washington have no inheritance taxes, while Pennsylvania has no estate tax but does have an inheritance tax.

It’s not necessary to move purely to avoid estate or inheritance taxes. An experienced estate planning attorney uses strategic tax planning as part of an estate plan, minimizing tax liability and preserving assets.

Reference: Kiplinger (July 29, 2022) “States with Scary Death Taxes”

How Much Money Can a Well Spouse Keep If Medicaid is Needed?

Despite the intent of the law, allowing one spouse to remain in the family home and having enough income to live on when the other spouse needs Medicaid to pay for nursing home care does not happen automatically. According to the article “What a ‘Community’ spouse can keep” from The Bristol Press, protecting the community spouse is necessary if they are to maintain their prior standard of living.

The community spouse is entitled to have a minimum monthly maintenance needs allowance (MMNA), which changes every year. If the MMNA is $2,288.00, and the healthy spouse has an income of $1,000.00, Medicaid allows a diversion of the sick spouse’s income of the difference, or $1,288.00 per month to the healthy spouse. In most situations, this is not enough to maintain a home, pay bills and enjoy a well-deserved retirement.

An elder law lawyer can help protect assets for the community spouse. The family home is exempt, if it is in the name of the healthy spouse, although most states have a limit to the allowed value. If the sick spouse is approved for Medicaid, the healthy spouse may choose to sell the home and keep the proceeds or downsize to a smaller home.

The community spouse may keep up to $137,400.00 in investment assets in 2022. That’s considered one half of the couple’s total “countable” assets. If the couple’s investment exceeds this amount, there are a number of strategies used to protect the life savings, as long as they stay within the “spend down” rules. Money may be spent on house expenses or improvements. A new car could replace an old model.

Another method is the use of a Single Premium Immediate Annuity, sometimes referred to as a Medicaid Annuity Trust. The well spouse can purchase this and protect their life savings. However, if the well spouse dies before the sick spouse, the balance of the annuity will need to be paid to Medicaid to reimburse it for expenses paid for the care of the sick spouse.

One positive note: personal property is not considered a countable asset. Things like home furnishings, decorations, jewelry, etc., and any personal property will not be counted. Embarking on a spending spree with an eye to reselling personal property to raise cash is not a good idea, since few items maintain their value after the initial purchase.

Planning should be done in advance, when both spouses are well and healthy, because Medicaid strictly enforces the five-year look back rule. Any assets transferred within five years of a Medicaid application will make the sick spouse ineligible for Medicaid coverage, and healthcare expenses will have to be paid out of pocket.

Reference: The Bristol Press (July 29, 2022) “What a ‘Community’ spouse can keep”

What Happens If Couple Divorce and Own Business?

High-profile divorce cases like the Bezos or the Gates should cause many people to consider how their business and marital assets are tied together. You need to have plans in place from the beginning. No one thinks their partnership will end. However, it’s necessary to have a plan in place, just in case.

The Dallas Business Journal’s recent article entitled “Does your business need a prenup?” explains that there are three typical outcomes when married couples working as business partners decide to end their relationship:

  • One individual buys out the other partner’s shares and continues running the business;
  • The partners sell the business and divide the proceeds; or
  • The couple continues working as partners after the divorce.

Safeguards can be put in place on the first day of the relationship to protect your personal and business assets in the event of a divorce. A way to do this is through a prenuptial agreement, which states what will happen if a split happens. A pre-nup should:

  • Establish the value of the business as of the date of marriage or the date the agreement is signed;
  • Detail a course of action with the appreciation or depreciation of the business from the date of the marriage;
  • Say how business value will be measured; and
  • Specify the allocation of business interests to be awarded to each spouse in the event of a divorce.

In addition to a prenuptial agreement, any privately held company should have a shareholder agreement (or “operating agreement” for non-corporations). The shareholder agreement is one of the most important documents owners of a closely held business will ever sign.

It controls the transfer of ownership when certain events occur, like divorce and states the following:

  • Which party will buy out the other’s shares of the company if a buyout occurs; or
  • If either party has the right to sell, how the ownership interest will be valued and the terms and conditions concerning the acquisition.

Because there are some tax implications involved in a buyout, it’s best to bring in experienced estate planning attorney for this process. In addition, life events like divorce or changes in a business partnership are an appropriate time to update your will, estate plans and any necessary insurance policies.

Reference: Dallas Business Journal (Aug. 1, 2022) “Does your business need a prenup?”

What’s Going on with Marvel Comics Creator Stan Lee’s Estate?

According to a court document filed recently, comic book icon Stan Lee’s estate moved to dismiss claims against Lee’s former business manager, Jerardo “Jerry” Olivarez. Terms of the deal weren’t disclosed. The settlement doesn’t include claims against Lee’s former attorney, Uvi Litvak.

The Hollywood Reporter’s recent article entitled “Stan Lee’s Estate Settles Elder Abuse Suit Against Ex-Business Manager” explains that the four-year legal saga, sparked by The Hollywood Reporter‘s investigation detailing accusations of elder abuse, centers on a fight over Lee’s estate. The battle includes his daughter, J.C., and people who allegedly manipulated her in efforts to exploit her famous father. Lee accused J.C., his only child and heir to his estate, of verbally abusing him.

J.C.’s outbursts turned physical at some points in conflicts over money, reports say.

The executive vice president and publisher of Marvel Comics, Stan Lee sued Olivarez and Litvak in 2018, calling them “unscrupulous businessmen, sycophants and opportunists” seeking to take advantage of him following the death of his wife, Joan Lee. Olivarez joined Stan’s inner circle as a consultant to J.C. and Joan’s various business endeavors before ending up with power of attorney over Lee after Joan’s death. He was given the title of “senior adviser,” handling caregiving duties for Lee.

“Jerry Olivarez and JC Lee, Stan and Joan Lee’s only daughter and Trustee of the Lee Family Trust, are happy to announce the resolution of their Court dispute,” said Olivarez’s attorney Donald Randolph in a statement. “The genesis of this dispute was the unfortunate manipulation of Stan Lee and his family undertaken by certain individuals — not named in the lawsuit — which was intended to unfairly malign Jerry Olivarez. These individuals exerted undue influence on the Lee family to accuse Jerry Olivarez of harmful acts which he did not do.”

According to the complaint, Olivarez fired Stan Lee’s banker of 26 years along with his lawyers and transferred roughly $4.6 million out of his bank account without authorization. After convincing Lee to sign a power of attorney to give him authority, Olivarez allegedly appointed his own lawyer, Livtak, as Lee’s lawyer without disclosing the conflict of interest.

Prior to his death, Lee alleged fraud, financial abuse of an elder and misappropriation of name and likeness, among other claims.

“Olivarez abused his relationship of trust with Lee and JC Lee, knowledge of Lee’s and JC Lee’s confidential business and estate planning operations, and ability to mislead Lee due to his advanced age all in a covert and intentional effort to dupe Lee into a host of schemes and financial missteps that benefited Olivarez and disenfranchised Lee,” reads the complaint.

Reference: The Hollywood Reporter (July 27, 2022) “Stan Lee’s Estate Settles Elder Abuse Suit Against Ex-Business Manager”

What Happens to Digital Assets After Death?

What is a digital asset? This is the question asked in a recent article “Estate Planning for Digital Assets” from Westchester & Fairfield County Business Journals. Any type of electronic data you have the right to access is considered a digital asset, although they come in a variety of forms.

A digital asset now includes email accounts, social media, online banking, online subscriptions, e-commerce, photo stream, cell phone apps, gaming accounts and everything having to do with cryptocurrency. Don’t leave out airline miles or other loyalty program points.

When so much of our lives is online, we need to address estate planning for this new class of assets.

They are as important, and some might argue, even more important than traditional assets. They may have financial or sentimental value. If neglected, they are an easy entryway for hackers prying into financial accounts.

Consider your family photos. Most of us have these stored on the cloud, hoping they never disappear. However, when they do, they can be gone forever. The same could easily happen for accounts of gamers who are spending traditional money on games and building up online assets with monetary value.

Can you protect and organize digital assets?

Yes, absolutely. Start with a list of all digital accounts including URLs, usernames and passwords. You should also note whether access requires third-party authentication—a verification code from a phone number or an email address to log in.

Create some kind of list, whether on a spreadsheet (encrypted for security), using an online password manager or a digital asset app. Paper also works, as long as it’s kept in a secure location.

How do digital assets get incorporated into my estate plan?

In most states, your executor can be given the right to access online accounts through your will, or you can include digital asset access in a Power of Attorney. However, it’s not that simple. Certain digital platforms only allow the original user access, even with passwords and authentication codes. Each has a Terms of Service Agreement to protect your privacy and the platform.

Some platforms offer the ability to name a legacy contact who can gain access to your account and either delete it or memorialize it after you die. However, not all do. You’ll need to go through all of your digital accounts to determine which ones permit a legacy contact and the limitations given to the legacy contact.

To support any litigation arising from a platform refusing to allow access, leave specific instructions in for your executor or agent instructing them as to what you want done with your digital assets. This directive may give your executor or agent the support they need to go up against big data. Your estate planning attorney will know the laws in your state and help create a plan.

Reference: Westchester & Fairfield County Business Journals (July 18, 2022) “Estate Planning for Digital Assets”

What’s the Most Important Step in Farm Succession?

There are countless horror stories about grandchildren in tears, as they watch the family farmland auctioned off because their grandparents had to liquidate assets to satisfy the taxes.  Farm Succession planning is crucial.

Another tale is siblings who were once in business together and now don’t talk to each other after one felt slighted because they didn’t receive the family’s antique tractor.

Ag Web’s recent article entitled “Who Gets What? Take This Important Estate Planning Step” says that no matter where you are in the process, you can always take another step.

First, decide what you’re going to do with your assets. Each farmer operating today needs to be considering what happens, if he or she passes away tonight. Think about what would happen to your spouse or your children, and who will manage the operation.

The asset part is important because you can assign heirs to each or a plan to sell them. From a management perspective, farmers should then reflect on the wishes of your potential heirs.

Children who grew up on the farm will no longer have an interest in it. That’s because they’re successful in business in the city or they just don’t have an interest or the management ability to continue the operation.

After a farmer takes an honest assessment, he or she can look at several options, such as renting out the farmland or enlisting the service of a farmland management company.

Just remember to work out that first decision: What happens to the farm if I’m dead?

Once you work with an experienced estate planning attorney to create this basic framework for your Farm Succession planning, make a habit of reviewing it regularly.

You should, at a minimum, review the plan every two to three years and make changes based on tax or circumstance changes.

Reference: Ag Web (August 1, 2022) “Who Gets What? Take This Important Estate Planning Step”

Is it Important to have an Estate Plan?

Everyone needs to have an estate plan to ensure that their family can take part in medical care, assets will pass to the heirs they want and to protect minor children, as explained in a recent article titled “Estate Planning Considerations That Apply to Nearly Everyone” from mondaq.com. An estate plan does all this, and more. Having an estate plan can also protects privacy; any assets moved into a trust do not become part of the public record.

Here are the documents making up the foundation of an estate plan.

Last Will and Testament. This is used to direct the disposition of assets and appoints an executor to handle final affairs after your death. If there is no will, the state law controls how your estate is distributed.

Revocable Trust. Trusts permit more control of the management and disposition of assets in a more private and tax-efficient way during your lifetime and after death.

General Durable Power of Attorney. This document usually names a spouse, adult child or trusted individual who can take over your legal and financial affairs, especially if you should become incapacitated.

Health Care Power of Attorney. Everyone over age 18 should have this document. This nominates a person you choose to make health care decisions. Without it, parents of teenagers and young adults may not be involved in their care. Treating physicians will not be able to discuss your loved one’s care, or you may need to petition the court for guardianship.

Living Will. This document allows you to express your wishes with regard to end-of-life care and medical treatment decisions. It alleviates the emotional burden of guessing what you would have wanted by family members.

HIPAA Authorization. Your medical and health insurance records are protected from being released to third parties without the patient’s consent. While this is helpful for patients seeking to maintain their privacy, it also means parents or loved ones will not have any access to medical records and healthcare providers will not discuss the patient’s medical condition with family members. Fines and penalties for professionals and facilities are strict.

Asset and Beneficiary Designations. Part of an estate plan includes ensuring that assets are in alignment with your wishes. Your will does not control how assets with a beneficiary designation or those with joint ownership titles will be inherited. For your estate to achieve the outcome you want, you’ll need to dig deep into your records and ensure that all assets are properly titled, including insurance policies, investment accounts, retirement accounts, property and any other assets.

If you have an estate plan in place and have not updated it in recent years, or failed to get one or more of the above-mentioned documents, there is no time like the present to do so. Unexpected events are always around the corner and being prepared in advance helps ensure your wishes will be achieved and your family will be protected.

Reference: mondaq.com (July 29, 2022) “Estate Planning Considerations That Apply to Nearly Everyone”

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 have 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 30a 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”