All posts by James London

Hudson News family in court over patriarch’s final will

Heirs & Beneficiaries

Anyone in El Paso who has done much traveling has probably come across a Hudson News stand on his or her journeys. With stands across the country, the man behind Hudson News was worth over $805 million when he died five years ago. It was after his death, however, that things started to unravel for the family members of the late Robert Cohen.

According to Cohen’s final will, his son was to inherit $600 million, the bulk of the estate. Cohen’s granddaughter, however, the only child of his only daughter, received only a small inheritance. She is now accusing her uncle of using undue influence on her grandfather to get a larger slice of the estate.

There is more to making a will than just spelling out who will get what. Whenever someone in Texas wishes to make a will, he or she must have the capacity to do so. This means that the individual is of sound mind and that no one has been pressuring him or her into making certain bequests. If an estate litigation can prove that the will was created without the necessary capacity or that there was undue influence, the court may throw the will out, greatly changing some inheritances.

While Cohen’s granddaughter is arguing that her uncle was using undue influence to increase his inheritance, the uncle has argued that there was nothing improper about Cohen’s changes to his will. In fact, a judge had previously determined that Cohen was indeed competent when his will and, thus, the will should stand as it is.

This estate litigation has already lasted five years and it is expected that the trial could go through next month.

Source:The Bergen Record, “Pretrial motions heard in billionaire Perelman-Cohen family feud,” Kibret Markos, Sept. 18, 2013

Proper estate planning should also include technology

Estate Planning

It is something that many people in west Texas haven’t thought about, but what happens to online banking, email or Facebook after someone dies? If the individual didn’t leave the login information, the data and sometimes the value of the digital property may be lost forever, but not if the individual had a thorough estate plan in place.

So, should someone leave all of his or her usernames and passwords in a will? No. Because wills can be made public, any login information should be written out in a separate letter and the letter can be inherited by a family member or friend.

But what about the pieces of digital media that rely on a license?

If something has a license, it cannot be inherited. This means that if someone wants to not only give access, but allow something online to continue, the license may need to be put into a trust. This would allow the license to continue on, even after the original owner had died. Many states, including Texas, do not have laws on the books that protect digital property. If Texas does go down this route, it may wish to give a fiduciary the right to distribute an individual’s online property.

Even though someone may not think about who should inherit online assets, there are more and more people asking about what will happen to their social media or digital assets after they die. Through traditional estate planning, individuals may have reliable ways to preserve their property and pass it on after death.

Source: TheWall Street Journal, “Make Sure You Know Who Will Inherit Your Twitter Account,” Arden Dale, Sept. 18, 2013

Update wills after major life events to keep estate plan current

Heirs & Beneficiaries

Earlier in the week we talked about how estate planning is a continuous process and that it is important to reexamine the various vehicles that make up your estate plan. In the same vein, making a will once may not be sufficient to clearly communicate your wishes. Say, for example, you made a will right after you graduated from college, leaving half of your estate to a sibling and half to a girl- or boyfriend. If you don’t touch that will again it will be the controlling will at the time of your death. Imagine if half of your estate went to a man or woman you haven’t dated since you were in your 20s while your spouse and children were left with little to nothing.

After major life events, like entering a long-term relationship, marriage or having children, it is important that people in Odessa take a look at estate planning documents. Since no one knows when he or she will die, it is crucial that updating a will doesn’t get put off until it is too late.

Unfortunately for one man, he never took the time to update his will, which means that when he died earlier this year, his will from 1990 controlled how his estate was divided. This would have been fine, except it disinherited his partner with whom he had been living since 1995. While this happened in Washington, D.C., there are many same-sex couples in Texas who could be in similar situations if they don’t update their wills.

The man’s siblings received his $819,000 estate while it appears that his partner has received nothing.

Source:ABA Journal. “Gay man asks DC court to declare him common-law husband of deceased partner,” Mark Hansen, Aug. 20, 2013

Estate planning is a continuous process

Estate Planning

One of the most important things El Paso County residents can do is create an estate plan. Regardless of age, an estate plan is the only way to ensure that an individual’s wishes are carried out after his or her death. Creating the estate plan, however, is only the first step, as estate planning should be a continual process. Things change, how people want their estates dealt with change and the benefits of one estate planning vehicle may change over time, too.

Take, for example, trusts. There are numerous tax advantages associated with trusts, but some of those advantages may no longer be as important as they once were. One of the biggest benefits to a trust is that it avoids federal estate taxes, but since the individual exemption for estate taxes is now $5.25 million and $10.5 million for couples, estate taxes really only apply to very wealthy people. Perhaps it would be worthwhile to talk with an estate planning lawyer and end a trust and explore other vehicles.

It is an estate planning attorney’s job to track changes in federal and state laws that affect existing estate plans. If a plan no longer works or is no longer the best option for an individual, he or she will want to modify his or her estate plan with an attorney’s help.

Instead of relying on trusts to avoid estate taxes, many people are using intrafamily loans to avoid high income taxes. This certainly doesn’t make sense for everyone, but it is an important option that many people in El Paso County will want to take into consideration.

Source:Wall Street Journal, “Estate Plans Shift Focus to Income Tax,” Arden Dale, Sept. 6, 2013

Being appointed as a guardian is a complex process

Guardianships

There are many people in Andrews who know people who are unable to care for themselves. Whether they are old, have cognitive disabilities, or are otherwise unable to make financial or medical decisions, guardianship is an important tool to make sure their rights are protected. Much of the time, the individual needing assistance, also called a ward, did not plan on needing a guardian and so someone must be appointed as a guardian by a Texas court.

It sounds easy enough, all a relative or friend must do is go to the court and ask to become a ward’s guardian, right? Wrong. The process requires considerable proof that the ward actually needs a guardian and a court needs to agree that the prospective guardian is appropriate.

The whole process will likely require a prospective guardian to consult a guardianship lawyer. Even after the individual has been appointed as a guardian, he or she will need to comply with strict reporting requirements or risk being accused of inappropriately spending a ward’s money. Working with a lawyer can also help to determine what is a qualified cost and what would draw the court’s suspicion.

After several rounds of reporting, some judges may discontinue future updates, but there is no guarantee that reporting will stop.

Granted, being appointed as a guardian is not the only way to become one. If a future-ward may suspect that he or she will need a guardian at some point, he or she can create an estate plan that includes who should be appointed guardian in the event that the ward cannot make his or her own decisions.

Source:Fox, “What You Should Know About Guardianships,” Andrea Murad, Aug. 30, 2013

Michael Jackson’s estate faces long battle in tax court

Estate Administration

It has been several years since Michael Jakson’s death, yet his estate continues to have trouble. Anyone in El Paso who has been following the story knows that the Jackson estate has been battling with the Internal Revenue Service over just how much the estate owes in estate taxes. An important part of estate administration is determining how much the estate is worth and then paying the relevant estate taxes. Jackson’s estate is arguing that it did that, but the IRS has accused it of undervaluing the estate and, thus, failing to pay the correct amount of estate taxes.

The IRS has just filed an answer to the estate’s petition, saying the estate should have paid $700 million more in estate taxes than it already has.

So where does this gap come from? Apparently the Jackson estate claimed that his estate was only worth $9 million after all debts had been settled and the estate tax exemption was subtracted from his gross estate, but the IRS believed his taxable estate to be well over $400 million. At a tax rate of 45 percent, that would create quite a substantial estate tax burden.

While not many people in El Paso are having to deal with $700 million in estate taxes, there is an important lesson here: estate administration does not end within a few months after death. For some estates the problem may be heirs questioning a will, for others it will be a matter of settling debts and paying estate taxes. Regardless, having a lawyer in charge of estate administration will likely help to simplify some of the problems awaiting an estate after its owner’s death.

Source:Forbes, “IRS to Michael Jackson’s Estate: Who’s Bad?” Kelly Phillips Erb, Aug. 26, 2013

Baby boomers may wish to include charitable gifts in estate plans

Estate Planning

A new study has found that baby boomers are nearly twice as likely to make charitable gifts as the next most likely generation. Since boomers are responsible for 43 percent of charitable giving, it is safe to say that there are likely many people between the ages 49 and 67 in Socorro who are interested in giving to charities and nonprofits. Unfortunately, not everyone in that age group, or really any age group, can afford to give.

So, instead of giving now, many people in Texas have turned to estate planning as a way to have enough money while still alive, but be able to give to important organizations after they are dead. By either leaving a nonprofit or charity money in a will or creating a trust that can give to organizations on an individual’s behalf, estate planning is an important charitable giving tool for any generation.

Many people in younger generations may not think they need a will or an estate plan, believing that it will be quite a while before they die or that their estate is so minimal that there is no point. This kind of thinking, however, means many younger people die without ever creating a plan for how they’d like their estate divided. Fortunately, baby boomers are getting older and recognizing the need to carefully plan for the ends of their lives.

Many people in Texas recognize the importance of charitable giving and want to do what they can for the organizations that are closest to them. At the same time, they may not be able to give right now, preferring to give through a will or trust. 

Source:Forbes, “Charitable Giving: Baby Boomers Donate More, Study Shows,” Deborah Jacobs, Aug. 8, 2013

On-shore trust option for asset protection gaining popularity

Estate Planning

The term estate planning itself tends to lean towards the idea that these plans only matter after we are gone. It is true that a large part of the focus is placed on how our assets will be distibuted after death, but let us not forget that these tools provide significant benefit during life as well.

For instance, one type of trust is gaining popularity and replacing the use of a popular alternative for asset protection. Whether it is a surgeon who has a high risk for a malpractice lawsuit, a business owner facing environmental or other regulatory issues or even a parent worried that their child may get a divorce, tools that prevent creditors from laying claim to them are important.

Offshore accounts were once, and still are, a popular option for shielding assets from creditors. However, the Internal Revenue Service has tightened the reporting restrictions on these accounts, and the agency is coming down harder on those taxpayers who fail to report or pay the associated liability.

As a solution, many financial and estate planners are directing their clients towards another, on-shore option. A domestic asset protection trust is a way to proactively protect these financial interests. The irrevocable trust also provides this benefit to any claims made against the estate.

Although these trusts can only be created in 15 states, they are still available to those that live in a jurisdiction where this type of trust cannot be established.

An estate planning attorney in Texas not only provides a client with available options in the state, but will also advise on all options. The attorney can also work with any third-party professional necessary to create a complete plan.

Source:The Wall Street Journal, “Creditor-Proof Trusts Replacing Offshore Accounts,” Arden Dale, Aug. 8, 2013

Same-sex spouse inherits after Defense of Marriage Act falls

Heirs & Beneficiaries

There are likely mixed emotions in El Paso about the Supreme Court of the United States’s decision earlier this summer to strike down a clause in the federal Defense of Marriage Act that denied federal recognition of same-sex marriage. Regardless of how you feel about it, it has had a serious impact in the field of estate planning and estate litigation. Today’s story is just one such example of the changes that may be coming to Texas.

After a same-sex couple married in Canada in 2006, they returned to the United States, but one of the spouses learned that she had cancer. Four years later in 2010, the woman died, starting a long battle for her law firm’s profit-sharing plan. The woman’s wife and her parents both claimed the $49,000, but a judge eventually ruled that the money belonged to the woman’s wife after part of the Defense of Marriage Act was struck down.

While this story did not happen in Texas, employee benefits that fall under the Employee Retirement Income Security Act (as this woman’s did) are governed by federal law. This means that same-sex spouses in Texas that were married in a jurisdiction that recognizes same-sex marriage will be the automatic beneficiaries of these kinds of benefits. Granted, any benefits controlled by state law will continue to operate under the premise that same-sex spouses are not married.

The judge deciding the case cited the Supreme Court case that ultimately brought down the Defense of Marriage Act, saying that it was clear the women were married in the eyes of the federal government.

Source:Philadelphia Post-Inquirer, “Judge awards late lawyer’s benefits to lesbian spouse,” Joseph A. Slobodzian, July 31, 2013

Proper estate planning includes discussion of taxes

Estate Administration

This blog has frequently mentioned estate taxes, but we cannot stress enough how important it is to talk to an estate planning lawyer about these taxes when making important end-of-life decisions. Although any estate planning attorney in Culberson County can help you make a will, only an experienced one will fully brief you on estate taxes and how they may effect your loved ones. As one individual in the will and estate field says, “There’s nothing worse than being in your worst grieving moments and having to deal with financial chaos.”

One of the problems that many Texans don’t consider is that different vehicles are taxed differently. Imagine someone leaving roughly the same amount to his or her two children, but in vastly different forms. One may be subject to various taxes, while the other is not, leaving one child with far less than his or her sibling. Though the intent was to leave both children the same amount, a shoddy will or an inattentive estate planning attorney may not catch what will surely be a disappointing result.

Another big problem is the fact that many people die after having failed to pay their taxes for a few years. When you are older, ill, hospitalized or living in a nursing home, you may not think about taxes or even filing for an extension. While the Internal Revenue Service may not catch you right away, when your estate is distributed to your beneficaries, it certainly will take unpaid taxes out. To have to deal with the IRS and taxes while coming to terms with the loss of a loved one can be too much to bear.

Wise estate planning, however, will do a better job of addressing these tax issues up front and incorporating them into the will and estate plan.

Source:Chicago Tribune, “Plan now to avoid inheriting a tax mess,” Amy Feldman, Aug. 8, 2013