Her father, she claimed, was supposed to repay a loan which she made to him years before, and he planned to fund the repayment by purchasing life insurance with Whitney Houston as the designated beneficiary. This manner of repayment would also have worked to the singer's advantage, in that such life insurance proceeds do not constitute taxable income to the recipient if properly set up. Before his death, however, her father married a 40-year-old woman, accused by some of breaking up his marriage to Whitney Houston's mother.
]]> The step-mother took Whitney Houston to court to try to obtain the life insurance proceeds to pay off the outstanding mortgage loan on the couple's home. The attempt to resolve this lawsuit and Whitney Houston's countersuit, consumed much of the precious last years of the singer's life. She finally won an Pyrrhic victory only recently, dying herself weeks later.Avoiding income tax and estate tax on life insurance proceeds is somewhat complex, since the rules governing both taxes are different. Competent legal assistance is a necessity in making sue it is done right. Whether Whitney Houston herself, or her advisors, learned the lessons taught by her own battle over her father's estate, life insurance proceeds remain to be seen until more details are revealed about what assets she had at the time of her death, and what provisions she made for them.
Source: Forbes, "Whitney Houston's Death and Taxes," Robert Wood, Feb. 13, 2012
]]>In Arizona there are also some additional methods by which you can avoid probate and make things easier for your loved ones. A relatively new provision in Arizona law allows for the transfer of a decedent's vehicle without going through probate.
]]> Beginning in the middle of last year a car or truck owner in Arizona is now able to attach a beneficiary designation to their vehicle title. This allows the recipient to receive the vehicle while avoiding probate. This had already been available for many other assets. But the vehicle beneficiary designation works slightly differently than some of the options for other assets.While real estate beneficiary deeds must be recorded with the county in which the property is located, vehicle beneficiary designations are not. It is important to ensure that the person to whom you plan to transfer the vehicle either already has the forms or is able to obtain them when they are needed.
Trusts are an effective tool for asset protection and to avoid the complications of probate. There are a variety of different types of trusts that can be catered to your needs. Together with a will, and in some cases these beneficiary designations, these are effective tools in transferring your assets to the next generation.
Source: The Arizona Republic, "Law allows probate-free transfer of cars, trucks," Russ Wiles, Feb. 11, 2012
]]>One important consideration, of course, is naming a trustee to guide and direct the trust and its use of assets. While the general tendency for many people is to name their spouse as the initial trustee of their trust, typically to be succeeded by their son or daughter, the possibility of naming financial professionals, such as a bank with a trust department or a trust company should not be ignored.
]]> A trustee must be relied on to administer the trust in good faith, to attempt to achieve your stated objectives in the most efficient manner under prevailing conditions, and to serve the best interests of the named beneficiaries.It is important that the trustee not show favoritism towards one beneficiary at the expense of others, and also that there not be a conflict of interest between the trustee and any beneficiary. Sometimes, however, if a family member is named as a trustee, there may be personal issues which arise that could cause them to favor one beneficiary over another, like a son or daughter named as a trustee favoring one of their siblings over another. The family member named as trustee may also have a conflict of interest with a number of beneficiaries if he or she is also a beneficiary themselves.
Skill in managing investments in the trust is required, and it is possible that financial professionals are better equipped to decide what investments are prudent to make.
Source: The Missourian, "Estate Planning," Walter Murray, Jan 31, 2012
]]>The first factor is that people are simply living longer. According to the Census Bureau, in the past three decades the number of people living to age 90 has tripled, and is expected to continue to grow at a significant rate. At the same time the number of people with dementia by age 85 is at an all time high. These two factors alone make for increased risk as there are simply more vulnerable older adults than there ever have been before.
]]> In addition to the increasing number of vulnerable adults, the economy is making the situation for these adults more difficult. As assets dwindle and finds become tighter for everyone, more seniors needing care are living with their families that may be poorly equipped to care for them as well as being financially strapped themselves. This can lead to a situation where financial abuse of the elderly can go unnoticed.In situations where an elderly family member is going to live with another family member it can be useful to make certain that all of the correct paperwork is in place regarding guardianship or a conservatorship. This not only protects the potentially vulnerable adult, but also the caretaker by ensure that all financial actions taken on behalf of the senior are transparent, thus reducing potential concern or suspicion.
A new solution for some families in which a loved one has suffered elder abuse are shelters that cater specifically to victims of elder abuse. While these types of facilities are not yet widely available if the current trends continue they could play a useful role in protecting vulnerable adults.
Source: USA Today, "As USA grays, elder abuse risk and need for shelters grow," Haya El Nasser, Jan, 10. 2012
]]>But late onset dementia is not the only time when a conservatorship may be useful. There may be other reasons, including injuries and cognitive issues, that a person is no longer able to manage their own affairs. A famous singer of a different era, Brittney Spears, currently has a conservator. Though her father recently indicated that he would ask that the medical and other non-financial aspects of the conservatorship be lifted to allow Spears to get married without restriction.
]]> Finally, the incidents related to a famous author highlights the importance of having an estate plan in place even before you think it may be needed. The "Girl With the Dragon Tattoo" series of books took the world by storm over the last few years. In addition to the books the recently released Hollywood version of the movie has already grossed over $140 million. But as you may know, the author of these books did not live to see this vast success. He passed away at the age of 50 after suffering a heart attack. He did not have a will and his estate is valued at $40 million.There is still an ongoing dispute between his girlfriend of 32 years and his father and brother. While the estate has been so far awarded to the brother and father, the girlfriend apparently retains possession of a laptop containing a manuscript for a fourth book in the series.
While none of us are likely to have estates or assets in the same scope as these celebrities, the challenges that they face related to the management of their assets is universal.
Source: Forbes, "Etta James, Others Remind of Need for Estate Planning in 2012," Danielle and Andy Mayoras, Jan. 24, 2012
]]>The recent passing of legendary singer Etta James came after a year of controversy among her family. In the last few years she was reported to have suffered from dementia, and may not have been capable of making decisions for herself. At the time of her death she had been married for 42 years, but also had two adult sons from prior relationships. She had assigned one of her sons the power of attorney in 2008, but her husband alleged that she was already incompetent at that point and did not have the capacity to make such a decision.
]]> This disagreement went to court as they fought over who should be in control of her assets. Fortunately the sons and the husband reached an agreement several weeks before her death which gave authority to act as her conservator, but capped the amount that he could use for her medical treatment.In our next post we will look at another scenario in which a conservatorship has been utilized to safely manage the affairs of a famous singer. We will share examples highlighting the importance of having a will and keeping it updated.
Source: Forbes, "Etta James, Others Remind of Need for Estate Planning in 2012," Danielle and Andy Mayoras, Jan. 24, 2012
]]>As many as 55 percent of Americans have not created a will. Estate planning does not have to be a complicated process. Many people feel that they do not have the time for it or are not prepared to handle the planning process. Failure to have a solid will and a plan in action in regards to handling your estate, and your children or other family members could be left to fight for your assets in court.
]]> If you do not have a large number of assets, you can name a single beneficiary to your estate, or you can name beneficiaries for certain assets or items that you possess. This includes not only physical assets and monies you have, but also life insurance and retirement plans.Your will is not set in stone. You can always change the guardian of your child, should you pass, and you can always change your beneficiary. If your financial status changes significantly, it is important to make sure that you have an up-to-date will created so as to cover the change in assets.
Forbes, "A Common Sense Approach to Estate Planning," Nancy Anderson, Jan. 19, 2012
]]>But some seniors also reach a point when the scope of assistance they might require may be different. There comes a time when they need not only advice to become better informed, but also because their judgment in reference to financial matters may not be all that it used to be. If they do not have the advantage of assistance once they need it there is a risk that they may become the victim of financial exploitation, or just that something may be overlooked.
]]> The AARP recently completed a study in which they surveyed the practices that financial advisors have in place to determine it may no longer be wise for a person to continue making their own financial decision even if the firm is providing investment recommendations. Some financial advisors said if they began to have concerns about a person's capacity to make their own decision they would stop providing advice, others said they would first seek out clarification of the situation before executing any transactions on behalf of the client.One option that can help many seniors facing this situation is a durable power of attorney. A Durable power of attorney gives someone else the authority to make certain decisions on your behalf. There are a variety of types of powers of attorney for different purposes. An experienced estate planning attorney can help you find the one that best suits your needs.
Source: AARP, "Do You Need Help Making Financial Decisions?" Jane Bryant Quinn, Jan. 11, 2012
]]>A recent news article highlighting the case of a 93-year old Pearl Harbor survivor demonstrates goes to show just how vulnerable the elderly really can be. The victim, after losing his wife, was no longer able to care for himself and sought the services of an in-home caretaker to live with him. The caretaker was later charged with a number of counts of fraud, and may face charges in the death of the elderly man.
]]> Police were tipped off to trouble when the man's bank contacted authorities as there had been no financial transaction on the man's account. The police investigated and later arrested the man's caretaker. The caretaker was found with cash and checks fraudulently written from the man's account. The veteran was also living in extremely poor conditions that were unsanitary and dangerous. The man was taken to a nursing home for veterans, where he later passed away from pneumonia. Authorities think that the pneumonia was a result of his ill treatment at the hands of his caretaker.The district attorney responsible for investigating this incident is considering whether or not to file charges on the female caretaker for murder of the veteran.
Washington Times, "Our nation's veterans not immune from elder abuse," Laurie Edwards-Tate, Jan. 16, 2012
]]>A good way to think of an estate plan is like the trusty set of hand tools. It can last a lifetime but it must be properly updated and maintained. The estate plan that you may have created 25 years ago may still be serviceable but to be effective and useful it should receive some occasional attention, just like the tools must occasionally be oiled and sharpened.
]]> There are many reasons to review and occasionally update your estate plan, but they generally fall into two main categories. The first is the changing nature of our financial and familial lives. It is likely that both the amount and type of assets that you won now are quite a bit different than those you owned a decade or two ago. The purchase or sale of real estate and change in financial accounts requires that your estate pan be updated to reflect those changes. Our families also change, and with them your estate planning goals may need to be revisited to ensure that they are still relevant.The other category is the changing legal and statutory landscape, particularly in regard to protecting your assets from unnecessary tax expenses. You have likely heard about the changes in the gift and estate tax exemption amounts. Depending on your situation there may be opportunities to reduce the amount of your estate that will go to the IRS. Because of the flux in these laws it is important to review your plan to ensure you are protecting your assets as well as possible.
Source: Forbes, "Tax Pros Tweak Advice About Big Gifts To Family," Deborah Jacobs, Jan. 10, 2012
]]>Depending on your unique financial and situation and goals in the estate planning process there may be ways to reduce or eliminate estate taxes through the combination of estate tax exemptions and charitable deductions. Navigating charitable giving to best protect your assets can initially appear confusing, tax laws are complex. But the government regularly encourages charitable gifts following someone's passing.
]]> Because there are no limitations, charitable deductions usually are not capped. Family members and charities can receive large estates while mitigating any potential tax liability by making strategic use of the charitable deduction combined with estate tax exemptions.There are a number of methods and strategies that can be used to address your specific goals. One often useful tool is a charitable remainder trust is created. From this, the creators generally receive an income tax deduction immediately, assets are sheltered from capital gains, and they will receive an income for the remainder of their lives. Following the creator's death, the trust's balance is given to charity.
This type of trust, though, is irrevocable, meaning it cannot be changed or amended, and there are no heirs. This trust does have benefit though. It allows the creators to build an estate outside of the trust from the additional income generated. The option to purchase additional insurance is also available. Because an increased income flow is available through these types of irrevocable trusts, a lifetime of giving is possible.
Source: Farm Press, "Charitable giving should be part of estate plan," Hembree Brandon, Jan. 6, 2012
]]>As we move forward through our lives, ideally we accumulate more and more assets, our family grows and our estate planning needs become obvious and more intricate. While it is a good idea to have an estate plan at every point in your adult life, often the first real motivator for a person or couple is when they have their first child. It suddenly becomes a question of not just what will happen to your car and savings account, but who will take care of the welfare of my child, and how will the child be provided for.
]]> Buying a house or starting a business are often the next events that remind us of the importance of a comprehensive estate plan. Once you've built some equity in a home or business you will likely want to give more careful thought and consideration to how that equity will be passed on to future generations. As we move forward in our careers, retirement accounts, pensions, and insurance policies also increase the value of having a well thought out estate plan.Source: The Huffington Post, "Estate Planning And Other Existential Agitations," Debra Ollivier, Jan. 5, 2011
]]>The Elder Justice Act only utilizes authorized funds. In order for elders to be properly protected, Congress must pass a second bill to put the law into action. Just before Congress adjourned for the holidays, it passed a spending bill that covers the rest of the fiscal year. This spending bill did not provide funding for the Elder Justice Act. This is the second year in a row that the President asked for funds for the Elder Justice Act, and the second year that Congress ignored the President's request. This year, he asked for $21.5 million in startup funds for the Act.
]]> According to a spokesperson for the National Coordinator of the Elder Justice Coalition, older voters represented 23 percent of 2010's voting population. The spokesperson stated that older voters respond to actions, not promises, and are more concerned about their safety and financial security, including the future of Social Security and Medicare.Even after one famous person, who was the subject of elder abuse, testified before Congress regarding his experience as a victim, Congress still ignored the problems of elder abuse and the need for funding the Elder Justice Act, and continues to ignore the subject and funding for the Elder Abuse Act.
Source: The Huffington Post, "The Shame of Elder Abuse and the Silence of Washington," Albert Blancato, Dec. 29, 2011
]]>At the end of 2010 when the unlimited exemption was set to expire, had the federal government done nothing, The prior law, which allowed for only a $1 million exemption would have gone effect. Looking forward into this year we have a similar situation, if Congress fails to pass a new exemption we will return to the $1 million exemption limit.
]]> It seems unlikely, though possible, that the exemption limit would be allowed to revert all the way back to the former $1 million. They could extend the current $5 million exemption, or possibly lower it somewhat to $3.5 million. TO try to get a handle on this uncertainty and protect as much of your assets as possible for your loved ones, it is important to carefully consider your estate planning options and consult with a knowledgeable professional.One option that some people may want to consider before any potential changes take effect in 2013 is to take advantage of the current gift tax exemption. By wisely using this exemption now you may be able to reduce the amount of your estate to fit within a potentially reduced exemption. But of course, every person's unique situation requires individual attention and careful planning with someone experienced in protecting assets as part of a comprehensive estate plan.
Source: MySa "2012 Estate Tax and Gift Tax Exemption is Temporary," Paul Premack, Jan. 12, 2012
]]>Many people might think that what is known as an "I Love You" will is sufficient for any family at any time. While this is a very general form of a living will, even the slightest wrinkle to a traditional family dynamic could throw a wrench in the agreement.
]]> An "I Love You" will is a straight forward arrangement that says if a husband dies, his wife will receive all the assets and vice-versa if the wife is the first to pass. When both parents pass away, the money is split equally among all children with the eldest child being named executor of the estate. In a perfect world, this might seem to be a sufficient route, but this arrangement does not account for many things like a widow or widower re-marrying.Many times, a remarriage can be a sensitive emotional issue, and introducing a family's finances into the situation does not exactly help matters. If a widower marries another woman, it could potentially put that woman, or the woman's children, in line for the man's money. This could create hostility. Luckily, estate planning options are highly flexible. With tools like a pre-nuptial agreement and a separate trust, assets can be designated to certain parties so that they reach their intended recipients. The last living person in a relationship does not have to automatically inherit all the assets.
Individuals should explore all their options to design an estate plan that meets their unique situation best.
Source: Phillyburbs.com "Estate planning and matters of the heart," Joe Masiuk, Dec. 21, 2011
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