These Celebrities Didn’t have Wills…But You Should

Rapper Coolio died at age 59 after being found unresponsive on the floor at a friend’s house. His real name was Artis Leon Ivey Jr., and his former manager, Jared Posey, recently filed a probate case to appraise the value of his estate, according to a recent article “What Coolio, Prince and Picasso didn’t have that you should” from MarketWatch.

The filing names Coolio’s seven adult children, who are reported to wear his ashes in necklaces, as his next of kin and likely beneficiaries of his estate. There are also three other children who are under legal age.

The estimated value of the estate is more than $300,000, including personal property, demand deposit accounts, financial accounts, insurance policies and royalties.

Coolio is far from alone in failing to have a will. A 2021 Gallup poll revealed that fewer than half adults in the U.S. have a will outlining how they want their estate to be handed upon their death. It’s a recipe for disaster for their families.

Dying without a will—known as dying intestate—means a local probate court has to decide how to distribute property according to state law, which can take months or even years. What finally occurs may not be what you intended. However, it will be too late.

A will is only one of many tools in the estate planning toolbox. You also need an updated Medical Power of Attorney, a Financial Power of Attorney and to have beneficiary designations on all of your accounts. The beneficiary designations override your will, which is often news to loved ones.

If you have a beneficiary listed on your 401(k) plan, the person listed will receive the assets in the 401(k), regardless of what is in your will. You want to make sure beneficiaries and secondary beneficiaries are all up to date on all of your accounts.

Another important consideration: if a spouse is cut out of a will who would normally receive an inheritance, they have legal standing to challenge the will in court.

For a complete estate plan, you need a Durable Power of Attorney, which states who can make financial decisions on your behalf if you are incapacitated. A Medical Power of Attorney names a person to make medical decisions for you if you are unable to make them yourself, and guardianship designations if you have minor children.

Every few years or after any big life changes, these documents, including beneficiary designations, need to be reviewed and updated with your estate planning attorney.

Other accounts, like brokerage accounts or bank accounts, may have “Pay on Death” or “Transfer on Death” designations which would immediately put the assets into the named person’s hands upon your death.

Another item to consider is a letter of intent, in which you describe for the executor of your estate your final wishes regarding burial or funeral. This document is not legally binding but can be used to share your wishes. The will may not be reviewed until after the funeral, so final directions for funerals, cremations, memorial services, etc., should not be in the will.

You can create a list to be appended to your will listing who will receive certain tangible items, like the family silver or your mother’s pearls. One good thing about having such a list is that it gives you an opportunity to update beneficiaries of your tangible personal property without needing to update your will itself. Be sure the list doesn’t contradict anything in your will and describe the items with great detail. You might also want to include contact information, so your executor can easily locate the person and make sure the items find their desired home.

Better yet—give the items away before you die. You won’t have to worry if they won’t get to the right person, and you’ll get to share the person’s enjoyment when they receive the gifts.

Reference: MarketWatch (Dec. 31, 2022) “What Coolio, Prince and Picasso didn’t have that you should”

How Do You Stop a Sibling from Stealing an Inheritance?

If the parent does not have a will, there may be questions about which sibling should inherit what. This gets complicated fast. State law can define siblings’ rights after parents’ deaths, explains a recent article from yahoo!, “Can a Sibling Take Your Inheritance?”

An estate planning attorney can be a valuable resource, regardless of the size of the estate.

When a parent dies and there are multiple siblings, what they can inherit depends on a few factors:

  • Did the parent leave behind a will or were trusts created?
  • Is there a surviving spouse who can inherit?
  • What are the state’s inheritance laws?

For the most part, state inheritance laws give precedence to a surviving spouse ahead of any children. Some states grant children the legal right to inherit from a parent’s estate, even if they were not included in the will. However, most states allow parents to exclude children from their will, which can block them from inheriting anything.

How does a will determine siblings’ rights after the death of a parent? The will lets the person making the will specify how they want their assets to be distributed upon their death. The will, once deemed valid by the court, serves as the basis for dividing the estate.

If both parents died at the same time their estate would be divided among siblings according to the terms of the will. There are a few different ways this is done.

  • One child inherits the house and the contents, while the other siblings divide any remaining assets in the estate.
  • The executor sells the home and contents then splits the proceeds of the sale among siblings.
  • Each sibling receives specific property or assets from the estate
  • One child receives the entire contents of the estate, to the exclusion of others.

Estate planning becomes more complex when there are children from multiple marriages with different parents. Whether or not half-siblings receive the same inheritance as full siblings depends on state law.

If there is no will, state inheritance laws generally rely on a kinship order. In New York State, the first $50,000 in assets plus half of the remaining assets go to the surviving spouse first. The remainder is then distributed among any bloodline children.

Are siblings entitled to see the contents of wills or trusts? If they are beneficiaries, most states will permit a viewing of the will or trust documents. However, if someone is not listed in the will or a trust as a beneficiary, they don’t have an automatic right to review these documents.

If a sibling doesn’t agree with the terms of a will, or the distribution of assets, they could challenge a will in probate court. They can also petition the court to ask for a larger share of the estate. For instance, if one sibling was the primary caregiver for many years, providing financial and health care support, they would ask the court to take this into consideration.

An estate battle based on the distribution of property by a deceased parent can be avoided by having good communication between parents and siblings about the parent’s estate plan and their wishes. An experienced estate planning attorney creates plans for families to address their unique issues, and this can preclude sibling rivalry, which can sometimes get worse, not better, as the years go by.

Reference: yahoo! (November 30, 2022) “Can a Sibling Take Your Inheritance?”

Why Professionals and High Net Worth Families Need Estate Planning

Even those whose daily tasks bring them close to death on a daily basis can be reluctant to consider having an estate plan done. However, any high-income earner needs to plan their estate to protect assets and prepare for incapacity. Estate planning also makes matters easier for loved ones, explains a recent article titled “Physician estate planning guide” from Medical Economics. An estate plan gets your wishes honored, minimizes court expenses and maintains family harmony.

Having an estate plan is needed by anyone, at any age or stage of life. A younger professional may be less inclined to consider estate planning. However, it’s a mistake to put it off.

Start by meeting with an experienced estate planning attorney in your home state. Have a power of attorney drafted to give a trusted person the ability to make decisions on your behalf should you become incapacitated. Not having this legal relationship leads to big problems. Your family will need to go to court to have a conservatorship or guardianship established to do something as simple as make a mortgage payment. Having a POA is a far better solution.

Next, talk with your estate planning attorney about a last will and testament and any trusts you might need. A will is a simpler method. However, if you have substantial assets, you may benefit from the protection a trust affords.

A will names your executor and expresses your wishes for property distribution. The will doesn’t become effective until after death when it’s reviewed by the court and verified during probate. The executor named in the will is then appointed to act on the directions in the will.

Most states don’t require an executor to be notified in advance. However, people should discuss this role with the person who they want to appoint. It’s not always a welcome surprise, and there’s no requirement for the named person to serve.

A trust is created to own property outside of the estate. It’s created and becomes effective while the person is still living and is often described as “kinder” to beneficiaries, especially if the grantor owns their practice and has complex business arrangements.

Trusts are useful for people who own assets in more than one state. In some cases, deeds to properties can be added into one trust, streamlining and consolidating assets and making it simpler to redirect after death.

Irrevocable trusts are especially useful to any doctor concerned about being sued for malpractice. An irrevocable trust helps protect assets from creditors seeking to recover assets.

Not being prepared with an estate plan addressing incapacity and death leads to a huge burden for loved ones. Once the plan is created, it should be updated every three to five years. Updating the plan is far easier than the initial creation and reflects changes in one’s life and in the law.

Reference: Medical Economics (Nov. 30, 2022) “Physician estate planning guide”

Do I Need a Trust, or a Last Will and Testament?

Whether to have a will or a trust or both is often discussed when embarking on the estate planning process. Arriving at the answer, as discussed in a recent article, “Personal needs, preferences drive estate planning,” from The News-Enterprise, requires a closer look at each individual’s situation.

The last will and testament doesn’t take effect until two events occur: the person who created the will, the testator, has died, and the will has been filed with the local court. The will is used to distribute assets owned solely by the testator. Jointly owned property, property with a named beneficiary and trust-owned property passes to new owners outside of the will.

After the probate case is opened in the court, the will becomes a public record and is accessible in person and online. Other documents from the estate, which might include inventories of assets and information about property values, is also available to the public.

If it’s unsettling to think about strangers and scammers looking at these documents after you die, remember your estate planning attorney can explain your options, including trusts and beneficiary designations.

The executor is the person named in the will to distribute the estate. There are certain time restrictions to be aware of, depending on your state. All the necessary tasks, from distributing assets to selling a home and whatever instructions are in the will, need to be accomplished by a certain time. An estate planning attorney will help you map out a timeline.

A revocable will is not a purely testamentary document. It takes effect once it is established. A revocable trust can be thought of as in-between a will and a power of attorney. Trusts are not filed with the court, during life or after death, so their contents remain private.

The trustee—the person named to manage the trust—follows the directions in the trust documents to manage the property. If the trust directs that property be distributed immediately after death, the trustee does not have to wait for the will to be probated. The beneficiaries receive their inheritance as per the terms of the trust.

A grantor who is leaving property to children may find the advantages of a trust make it a better tool than a will. Funds can be allocated solely for college expenses or distributed only when certain milestones are reached. Note, however, that an inheritance trust can be created under a will, too. It is known as a “testamentary trust” in that case.

Estate planning is not a one-size-fits-all process. The best approach for one person may be completely wrong for another. An experienced estate planning attorney walks clients through the process, so they are able to make informed decisions and create an estate plan to work best for themselves and their loved ones.

Reference: The News-Enterprise (Nov. 12, 2022) “Personal needs, preferences drive estate planning”

Why You Need an Estate Plan

Did you think you had to be rich to have an estate? Think again! From a legal perspective, your estate includes everything you own, from tangible property like a car, house, furniture, as well as intangible assets like insurance policies, bank accounts, retirement and investment accounts. You don’t have to be rich to have an estate, says the recent article “How to Plan Your Estate” from The Military Wallet. However, you do need to have an estate plan, and the best time to start planning is right now.

An estate plan is more than simply passing your property along to heirs. It is also how you prepare for the unpleasantries of life, including becoming incapacitated or being unable to make decisions on your own.

Your estate plan protects you and your beneficiaries. Without a will, the court will determine who will get your assets subject to probate, following the laws of your state. With a will, you determine who should receive your probated property, from family members to charities.

Your estate plan protects your children. Your will nominates a guardian who will care for your children if you die before they turn age 18, or, if you have a disabled child with special needs, who will care for them for the rest of their life. Without a will nominating a guardian, the court will make these decisions.

Your estate plan protects your family by preventing conflict. Your wishes are made clear in a will and in other estate planning documents. The more details, the better. No one can say they knew what you really wanted, because what you really wanted is documented and memorialized in your estate plan.

Getting ready to meet with an estate planning attorney will be easier if you take it step by step.

Make an inventory of all assets, including

  • House, land and any real estate property
  • Cars, boats and any other vehicles
  • Bank, investment and retirement accounts
  • Life insurance policies
  • Health savings accounts
  • Jewelry, valuables and collectibles
  • Digital assets, including website URL, username and password
  • Cryptocurrency, including all information for an executor to be able to access accounts

Create a plan for the different scenarios in your life. Who would you want to raise your children if you and your spouse die while children are minors or are unable to care for them because of illness or injury? How will your spouse pay the mortgage if you die unexpectedly?

Make a list of all accounts with designated beneficiaries. This typically includes life insurance, retirement plans and annuities. Any time you have a major life event like marriage, divorce, birth or death, these designations should be reviewed.

You’re now ready to meet with an estate planning attorney. Your estate plan should include a last will and testament, outlining who should receive your property, who will distribute your estate (your executor) and who should raise your children if you die while they are under legal age.

A Health Care Proxy is used to name a person who can make decisions about your healthcare if you cannot. A Living Will outlines the details for medical treatment you want or don’t want when you are near death.

Power of Attorney is a document giving someone else the power to take care of your finances at any point, if you can’t because of illness or incapacity. This avoids your family members having to go to court to obtain a guardianship, which takes time and is a costly proceeding.

Reference: The Military Wallet (Aug. 25, 2022) “How to Plan Your Estate”

Can You Inherit a House with a Mortgage?

Inheriting a home with a mortgage adds another layer of complexity to settling the estate, as explained in a recent article from Investopedia titled “Inheriting a House With a Mortgage.” The lender needs to be notified right away of the owner’s passing and the estate must continue to make regular payments on the existing mortgage. Depending on how the estate was set up, it may be a struggle to make monthly payments, especially if the estate must first go through probate.

Probate is the process where the court reviews the will to ensure that it is valid and establish the executor as the person empowered to manage the estate. The executor will need to provide the mortgage holder with a copy of the death certificate and a document affirming their role as executor to be able to speak with the lending company on behalf of the estate.

If multiple people have inherited a portion of the house, some tough decisions will need to be made. The simplest solution is often to sell the home, pay off the mortgage and split the proceeds evenly.

If some of the heirs wish to keep the home as a residence or a rental property, those who wish to keep the home need to buy out the interest of those who don’t want the house. When the house has a mortgage, the math can get complicated. An estate planning attorney will be able to map out a way forward to keep the sale of the shares from getting tangled up in the emotions of grieving family members.

If one heir has invested time and resources into the property and others have not, it gets even more complex. Family members may take the position that the person who invested so much in the property was also living there rent free, and things can get ugly. The involvement of an estate planning attorney can keep the transfer focused as a business transaction.

What if the house has a reverse mortgage? In this case, the reverse mortgage company needs to be notified. You’ll need to find out the existing balance due on the reverse mortgage. If the estate does not have the funds to pay the balance, there is the option of refinancing the property to pay off the balance due, if the wish is to keep the house. If there’s not enough equity or the heirs can’t refinance, they typically sell the house to pay off the reverse mortgage.

Can heirs take over the existing loan? Your estate planning attorney will be able to advise the family of their rights, which are different than rights of homeowners. Lenders in some circumstances may allow heirs to be added to the existing mortgage without going through a full loan application and verifying credit history, income, etc. However, if you chose to refinance or take out a home equity loan, you’ll have to go through the usual process.

Inheriting a house with a mortgage or a reverse mortgage can be a stressful process during an already difficult time. An experienced estate planning attorney will be able to guide the family through their options and help with the rest of the estate.

Reference: Investopedia (April 12, 2022) “Inheriting a House With a Mortgage”

Can I Protect My Inheritance from Divorce?

Even if divorce is the last thing on your mind, when an inheritance is received, it’s wise to treat it differently from your joint assets, advises a recent article “Revocable Inheritance Trust: Inexpensive Divorce Protection” from Forbes. After all, most people don’t expect to be divorced. However, the numbers have to be considered—many do divorce, even those who least expect it.

Maintaining separate property is the most important step to take. If you deposit a spouse’s paycheck into the account with your inheritance, even if it was by accident, you’ve now commingled the funds.

You might get lucky and have a forensic accountant who can dissect that amount and make the argument it was a mistake, as long as it only happened once, but the Court might not agree.

Long before the Court gets to consider this point, if your ex-spouse’s attorney is aggressively pursuing this one act of commingling as enough to make the property jointly owned, you could lose half of your inheritance in a divorce.

You might also try to mount a defense of the particular account or asset being separate property, by identifying the means of transfer. Was there a deed for real estate gifted to you from a parent or a wire transfer for securities? This information will need to be carefully identified and safeguarded as soon as the inheritance comes to you, in case of any future upheavals.

To spare yourself any of this grief, there are steps to be taken now to avoid commingling. Document the source of wealth involved as a gift or inheritance, maintain the property in a wholly separate account and consider keeping it in a different financial institution than any other accounts to avoid commingling.

Another way to safeguard gifts and inherited property against a 50% divorce rate is to use a revocable trust. Creating a revocable trust to own this separate property allows you to make changes to it any time but maintains its separate nature, by serving as a wholly separate accounting entity. The trust will own the property, while you as grantor (creator of the trust) and trustee (responsible for managing the trust) maintain control.

For a turbo-charged version of this concept, you could go with a self-settled domestic asset protection trust. This is a more complex trust and may not be necessary. Your estate planning attorney will be able to explain the difference between this trust and a revocable trust.

One clear warning: if you have already created a revocable trust to protect your estate and it is not funded, you may feel like it would be most convenient to use this already-existing trust for your inheritance. That would not be wise. You should have a completely different trust created for the inherited property, and this would also be a wise time to remember to fund the existing trust.

Using a revocable trust this way will also require customized language in your Last Will, as you’ll want standard language in the Last Will to reflect the trust being separate from your other marital property.

Reference: Forbes (April 13, 2022) “Revocable Inheritance Trust: Inexpensive Divorce Protection”

What Estate Planning Documents Should Everyone Have?

This is the time of year when people start thinking about getting piles or files of paperwork in order in preparing for a new year and for taxes. A recent article “How to Prepare, Organize and Store Estate-Planning Documents” from The Street gives useful tips on how to do this.

First, the most important documents:

Estate Planning documents, including your Will, Power of Attorney (POA), Healthcare Proxy, Living Will (often called an Advance Care Directive). The will is for asset distribution after death, but other documents are needed to protect you while you’re alive.

The POA is used to name someone to act on your behalf, if you cannot. A POA can be created to be specific, for example, to have someone else pay your bills, or it can be general, letting someone do everything from paying bills to managing the sale of your home. Be cautious about using standard POA documents, since they don’t reflect every situation.

A Healthcare Proxy empowers someone you trust to make medical decisions on your behalf. The Living Will or Advance Care Directive outlines the type of care you do (or don’t) want when at the end of your life. This alleviates a terrible burden on your loved ones, who may not otherwise know what you would have wanted.

Add a Digital POA so someone will be able to access and manage your online accounts (subject to the terms and conditions of each digital platform).

Your Last Will and Testament conveys how you want your estate—that is, everything you own that does not have a surviving joint owner or a designated beneficiary—to be distributed after death. Your will is also used to name a guardian for minor children. It is also used to name an executor, the person who will be in charge of carrying out the instructions in the will.

A list of all of your assets, including bank accounts, retirement accounts, investments, savings and checking accounts, will make it easier for your executor to identify and distribute assets. Don’t forget to check to see which accounts allow you to name a beneficiary and make sure those names are correct.

Both wills and trusts are used to convey assets to beneficiaries, but unlike a will, “funded” trusts don’t go through the probate process. An experienced estate planning attorney can create a trust to distribute almost any kind of property and follow your specific directions. Do you want your children to gain access to the trust after they have reached a certain age? Or when they have married and had children of their own? A trust allows for greater control of your assets.

Finally, talk with your family members about your estate plan, your wishes for end-of-life medical care and what you want to happen after you die. Write a letter of intent if it’s too hard to have a face-to-face conversation about these topics, but find a way to let them know. Your estate planning attorney has worked with many families and will be able to provide you with suggestions and guidance.

Reference: The Street (Dec. 20, 2021) “How to Prepare, Organize and Store Estate-Planning Documents”

Can You Remove Someone from a Life Estate?

Parents often use life estates to leave the family home to children, while remaining in the house for the rest of their lives. However, sometimes things don’t work out as intended. If and how changes may be made to a life estate is the focus of a recent article “How to Remove Someone from a Life Estate” from Yahoo! Finance. For the life estate to be flexible, certain provisions must be in the document when it is first created. An experienced estate planning attorney is needed to do this right.

A life estate allows two or more people to jointly own real estate property. One person, referred to as the “life tenant” has ownership of the property for as long as they live. The other person, called the “remainderman,” takes possession only after the life tenant’s death. Multiple people can be named as life tenant and remainderman. However, the more people involved, the more complicated this arrangement becomes.

The remainderman has an unusual position. They don’t have full possession of the property until the life tenant dies, yet they have an interest in the property. The life tenant is not allowed to do certain things, like take out a mortgage or sell the property, without the consent of the remainderman.

The remainderman must agree to any changes in any person or persons named as other remainderman. If there’s more than one, which happens when there’s more than one adult child, for instance, all of the remaindermen must agree, before any names on the life estate can be removed or changed.

If one of the remainderman becomes heavily indebted, has a contentious divorce, or is sued for a considerable sum, their share of the property could be lost to creditors, ex-spouses, or adversaries. In that case, removing the problematic remainderman could protect the value of the home.

Most life estates are irrevocable, and the laws concerning life estates vary by state.

One way to work around the need for remainderman approval, is to use a Testamentary Power of Appointment, a clause in a will permitting the life tenant to change the person to whom the property will be left upon death. Invoking the Power of Appointment doesn’t make the life estate invalid, so the tenant is still constrained from selling the property or taking any other actions without permission from the remaindermen.

The testamentary power of appointment does give the life tenant some negotiating muscle but must be built into the documents from the start.

Another trust used in this situation is the Nominee Realty Trust. This is a revocable trust holding legal title to real estate. A property owner files a new deed transferring ownership to the nominee realty trust. The trust specifies who receives the property after the owner’s death. The grantor of the nominee trust can direct the actions of the trustee, so the life tenant has the legal ability to tell the trustee to change the names of the remaindermen. This flexibility may be desirable when the children are problematic. This has to be set up when the life estate is first established.

There are occasions when the remainderman wants to terminate the interest of the life tenant. This is actually easier than removing or changing the remainderman but requires the life tenant to do something particularly egregious or illegal. The life tenant has certain rights: to rent out the property, to change or improve the property—as long as the property is being improved. The life tenant is responsible for paying taxes, maintaining the property and avoiding any liens being placed on the property.

If the life tenant does not fulfill their responsibilities or allows the property to lose value, it may be possible for the remainderman to have the life tenant’s interest terminated. However, that depends upon the provisions in the life estate. This option should be discussed and planned for when the life estate is created.

Reference: Yahoo! Finance (Dec. 16, 2021) “How to Remove Someone from a Life Estate”

Why Is an Estate Plan Important?

There are a number of legal steps necessary to prepare your estate and your family for the future, including the use of a living trust. What is a living trust, and what kind of protection does it offer? The article “An important part of protecting your assets and those you love” from The Times explains how this estate planning tool works.

A living trust is a legal entity created to make it easier to transfer assets like real estate property and other assets after death. Assets held within trusts pass directly to beneficiaries according to the terms of the trust. They do not go through probate. Once a trust is created, it must be funded, which places assets within the protection of the trust. These can include bank accounts, investments, real estate, vehicles, jewelry and other personal property of value.

A living trust is managed by a designated trustee. You can be the trustee of your trust while you are living, and your spouse or partner may be a co-trustee. Every trust should also have a successor trustee to serve as your representative. This person will manage the trust and distribute assets after you die.

Living trusts are useful in real estate ownership, regardless of the size or number of properties owned. Any real estate property is subject to probate upon death if it is not placed inside a trust or other arrangements not taken if available under state law (e.g., transfer-on-death deeds). Dealing with real estate after death is challenging for heirs and executors.

Probate can take a long time. During that time, a building needs to be maintained, property taxes must be paid and insurance coverage needs to continue. Making changes to the property or even renting it out during probate may require permission from the court. If an expensive repair needs to be made, like a heating system or a new roof, and the estate is still in probate, someone has to make sure the repairs are done and pay for them.

Certain assets pass directly to beneficiaries. These include life insurance proceeds, Pay on Death (POD) bank accounts and retirement accounts, like IRAs and 401(k)s. Others, like the family home and personal property, could be bound up in probate for months, or years.

A living trust does more than bypass probate. It allows you to declare how you want your assets to be distributed and when. If you don’t want your children to receive a lot of money in one lump sum at a young age, it can break out the distribution over decades. A trust can also set life goals, like graduating from college, before funds are released.

A living trust and last will and testament are different legal documents and achieve different ends. The living trust is in effect, even when the grantor (person who creates the trust) is living. The will goes into effect only when the grantor dies.

Only assets subject to probate are controlled by a will, while assets in a trust skip probate. Trusts are private documents, while the will becomes part of the public record once it is filed with the court. Anyone can see the entire document, which may not be what you intended.

Assets without a surviving joint owner pass through probate. If you fail to designate a beneficiary to receive an asset, then it also will be subject to probate.

Just as every person is different, every person’s estate plan is different. Talk with an estate planning attorney to learn what options are available and what is best for your family.

Reference: The Times (Oct. 29, 2021) “An important part of protecting your assets and those you love”