All posts by James London

Contradicting wills could lead to lengthy court battle

Will Execution

In a previous post we discussed charitable giving as one way to avoid conflict among friends and family over an estate plan. This is just one idea among many options to make gifts in an estate plan a gift and not a source of strife. The key to any successful estate plan is being complete and making sure there are no contradictions.

A lesson on this issue comes to us from a copper mining heiress whose two conflicting wills have set off a court battle over her substantial estate.

The problem is that the heiress, Huguette Clark, properly executed two different wills within six months, both completed at the age of 98. One leaves here entire estate to distant relatives, the same people who would each recieve a portion of the fortune if there was no will or if both wills are declared invalid. Ms. Clark apparently had never met many of them and did not list all of the potenital heirs by name.

The second will is more specific and leaves her fortune to a long time caretaker as well as establishing a charity. There is also an art collection and a valuable doll collection involved.

The problem is that the second will did not properly revoke the first will, so technically it should be invalid. However, if Ms. Clark was not in an appropriately coherent mental state at the time she executed the first will, that one may not be valid. As you may imagine, these issues are very difficult to determine after someone has already passed away.

Now, each of the parties who stands to gain from either version of the will is battling it out in court, which means that signficant portions of the estate will go to lawyers fees and court costs.

The lesson from this is very simple – be clear about your itentions and complete in your paperwork.

Source:The New York Times, “How to Avoid an Estate Battle After You Die,” Paul Sullivan, June 14, 2013

Trusting your children with an inheritance

Heirs & Beneficiaries

Many parents who know that they will have money or property to hand down to their children struggle with the question of when to do so. Often the concern lies in whether an inheritance or the promise of one will lead to a lack of motivation by children to seek financial independence and success in their own right. For older generations who built businesses attained high levels of professional success, the thought of handing over cash to a young person who has not put in the time or effort can be quite unappealing.

However, while the stereotypes suggest that millenials will take the money and run off to a lavish vacation or quit their job, new data suggests the opposite.

Coming of age in the shadow of the recession, millennials as a group are more concerned about retirement than their parents or grandparents were. They are also more risk averse and show better saving habits than older generations. A loss of trust in the financial markets and big banks has also resulted in a more conservative investment strategy.

Many also consider whether they will be financially stable enough to help support their parents during retirement, according to a financial adviser.

So what does all of this mean for Texas families? Well, it means that now could be a good time to discuss these issues and consider when to tell children about a potential inheritance and whether to make that gift during life or leave it to be handled through a will or a trust.

Source: CNBC, “Millennials Make Most of Massive Inheritance: Study,” Paul O’Donnell, May 31, 2013.

Upcoming ruling will impact estate plans for same-sex couples

Estate Planning

A ruling from the United States Supreme Court that is anticipated this month will have a major impact on estate planning and tax planning for same-sex couples. The case involves a woman who was legally married to her spouse in the state where they lived when her spouse passed away, leaving behind a substantial estate. For opposite-sex couples, marriage means that a surviving spouse can inherit without tax liability. In this case, the woman paid a substantial estate tax because of a federal law that does not provide that tax benefit to legally married same-sex couples.

The woman challenged the Defense of Marriage Act, saying that the federal government deprived her of her property without due process of the law. If she is successful and the court rules in her favor, same-sex couples who are legally married in one of the 12 states that permits it will have access to tax benefits, which will likely have a big impact on their estate plans.

As the ruling approaches many couples are hoping that a favorable ruling will help untangle some of the mass of legal documents and property arrangements that they have needed to share property and other assets.

As it stands, even legally married couples must execute air tight wills and trust documents to insure that their spouse inherits instead of children, siblings, or other family members. Since the tax liability still exists, it is often advisable to take advantage of gift tax exemptions and structure the estate in a way that maximizes those opportunities. All of this can be done with the help of an experienced estate planning attorney.

Source:Wall Street Journal, “Advisers Bolster Same-Sex Estate, Tax Planning,” Arden Dale, May 30, 2013.

Can charitable giving help avoid conflict for your heirs?

Estate Administration

As we’ve discussed in the past, one of the important parts of estate planning is helping family to avoid conflict after you pass away. It is a difficult time for any family, and a good estate plan can offer guidance and make the process of settling unresolved affairs much easier.

If avoiding conflict and finding a meaningful way to create a legacy is the goal, then Texas residents may want to consider a plan that involves giving assets to charity. This is one way to establish realistic expectations about the future and set a good example for future generations.

Focusing on philanthropy is the approach of many notable individuals from Bill Gates to Warren Buffet. The two businessmen have repeatedly publicised their plans to give away a majority of their wealth to charity while encouraging their family to work hard and make their own contributions. In fact, many help give younger generations a sense of purpose and importance by establishing a family foundation where everyone works together to help the community.

There is certainly no one-size fits all approach to estate planning, but making a proactive plan to avoid conflict is advisable in many situations. Setting up trusts during life and allocating funds to different causes using a will is one way to make sure that everyone in the family understands what they are getting without concern about dividing it up themselves. The important thing, as always, is to have a detailed plan and properly executed documents to avoid confusion or a prolonged probate process.

Source:CNBC, “Smartest Decision Ever Made by Bill Gates, Warren Buffett,” Constance Gustke, June 3, 2013

Including important details in your estate plan

Estate Administration

At the most basic level, estate planning is about having the power to decide what happens to assets after you pass away. There are many people for whom this is not a major concern, perhaps because they have a small family with good relationships or perhaps because they don’t believe that they have enough wealth to justify creating an estate plan. However, when you take a closer look it is easy to see that even people in these types of situations have reasons to create an estate plan, one of which is to make life easier for friends and family.

Beyond worrying about whether children will be happy with what they are given by a will or a trust, when these documents are properly executed they create certainty. Estate planning documents also provide helpful information that friends and family may not know about finances, such as what sorts of debts you hold and whether or not there is still a mortgage on your home.

Leaving behind information about debts and obligations is equally as important as leaving behind firm plans for how to deal with assets. For example, family members who are not aware of a second mortgage or a car loan may not be able to find the correct information in time to stop a repossession or foreclosure, therefore unnecessarily forfeiting an asset or at least losing time and money to the legal process to retain it. Creating a detailed plan so that necessary information is available is relevant for people in many different financial situations.

Source:New York Times, “The Talk You Didn’t Have With Your Parents Could Cost You,” Tara Seigel Bernard, May 24, 2013.

Digital estate planning: Does anyone know your passwords?

Estate Planning

In a past post we discussed the challenges of dealing with our digital property like music, photos, and emails in our estate plans. Figuring out what to do with correspondence and other digital belongings is one element of estate planning that is changing with new technology, but it isn’t the only one. In addition to thinking about those issues, Texas residents should also take time to think about another issue: access.

Access to our digital lives is much more difficult to pass along than a pair of keys to a home or the code to safe. This is because we store our information in dozens of different accounts with various passwords and usernames that may or may not be written down anywhere. And while it is a relatively simple process to shut down a loved one’s Facebook account without password access (the site itself can help with that), it is quite another issue altogether to gain access to things like online banking or automatic bill paying.

While many of us have migrated our financial affairs to online platforms rather than paper statements, a recent study showed that 45 percent of high net-worth people who were polled had no organization system for passwords or online account information. This is a problem not only for access purposes, but for finding all of the assets that someone has after they pass away. Many people do not realize that after they pass away, family members, the probate system, and their named executor will all go on a hunt to make sure that there are no secret accounts or properties, or unknown children who are not listed in the a will. Without a paper trail to follow and no account login information to tell them where to look, executors are often at a loss to notify banks or portfolio managers that someone has passed away.

Readers: Do you have your digital life organized as a part of your will

Source:New York Times, “Leaving Behind the Ditigal Keys to Financial Lives,” Paul Sullivan, May 24, 2013.

Consider life insurance beneficiaries carefully

Heirs & Beneficiaries

Many Texas residents have a life insurance policy, whether it is through their employer or a policy that they have taken out on their own, life insurance is an important way to make sure that our loved ones have some financial security after we are gone.

Regardless of the sum involved in a life insurance policy, it is important to make sure all your ducks are in a row when you choose a beneficiary. There are a lot of ways that the ultimate goals of taking out the life insurance policy can be properly served, and just as many ways in which the final outcome might not go as planned.

For example, many people may name their spouse as a beneficiary on a life insurance policy but later change their mind and want to name their children or they may divorce and want to name their new spouse. A lot of people think you can do this through a will that leaves everything to that newly chosen beneficiary, however, a will does not control what happens to life insurance proceeds so the payment will still be made to whoever is named on the policy itself, even if there is a contrary provision in the will.

Similiarly, sometimes people will name what is called a “class” on their life insurance policy, such as “all my children” or “my neices and nephews”. This means that when the policy is to be paid out, the insurance company will conduct a length and costly search to make sure that all living children are given a portion of the policy. And since some Texas residents may have children that they are unaware of or who they are no longer in contact with, this may create some confusion about the true intent of the gift. Instead, it is best to list specific individuals along with identifying information such as addresses, birth dates, and social security numbers.

Source:Fox Business, “Naming Life Insurance Beneficiaries: 10 Ways to Screw up,” Barbara Marquand, May 22, 2013

When estate planning meets family law

Estate Planning

When Texas couples take their marriage vows, they promise to love and honor each other until death. When we get married, we are focused largely on the here and now and the exiting future for the family, but at some point it is also important to start thinking about what will happen if or when one spouse passes away before the other. This is a very sad thing to think about and plan for, but since it will be a reality for many people, it must be considered.

In addition to having the important conversations with a spouse about who will inherit what and how it should be passed down to friends or family members, spouses should also think about their individual estate plans. A lot of couples choose to execute the same or corresponding wills with the same attorney. This approach can have advantages and disadvantages, so it’s helpful to consider seeking individual counsel during the estate planning process as well.

There are both practical and ethical considerations to doing coordinated but separate estate plans with a spouse. For example, one spouse may have valuables or other assets that their partner does not know about that they would like to leave to a friend or relative instead of including in the entire joint estate. Or, a couple could choose to write their wills together using the attorney they work with on other issues, but that could give rise to a conflict of interest in the event of a disagreement between the spouses. In these sorts of situations, having an independent and unbaised advocate for each spouse can be helpful.

Source:Forbes, “Ethics in Estate Planning for a Married Couple,” Stephen J. Dunn, April 26, 2013.

Estate planning with your spouse

Estate Planning

When Texas couples take their marriage vows, they promise to love and honor each other until death. When we get married, we are focused largely on the here and now and the exiting future for the family, but at some point it is also important to start thinking about what will happen if or when one spouse passes away before the other. This is a very sad thing to think about and plan for, but since it will be a reality for many people, it must be considered.

In addition to having the important conversations with a spouse about who will inherit what and how it should be passed down to friends or family members, spouses should also think about their individual estate plans. A lot of couples choose to execute the same or corresponding wills with the same attorney. This approach can have advantages and disadvantages, so it’s helpful to consider seeking individual counsel during the estate planning process as well.

There are both practical and ethical considerations to doing coordinated but separate estate plans with a spouse. For example, one spouse may have valuables or other assets that their partner does not know about that they would like to leave to a friend or relative instead of including in the entire joint estate. Or, a couple could choose to write their wills together using the attorney they work with on other issues, but that could give rise to a conflict of interest in the event of a disagreement between the spouses. In these sorts of situations, having an independent and unbaised advocate for each spouse can be helpful.

Source:Forbes, “Ethics in Estate Planning for a Married Couple,” Stephen J. Dunn, April 26, 2013.

Inheriting collectibles

Estate Planning

Many Texas families have collections of some kind, like antique holiday decorations or specialty cocktail glasses. While these collections often hold a special place in our hearts and within our families, they may not hold a lot of monetary value. This is just one reason why considering this type of issue during the estate planning process is so important.

As with other sentimental items, family members often struggle to know what to do with collections after a loved one is gone. It is important to honor the memory and respect the person’s wishes, but with larger masses of items it can be difficult to strike the right balance. To save some of this emotional difficulty and possibly financial struggle, Texas residents should include some basic instructions on how to handle a large collection, including alternatives for when families want to either keep or not keep the items.

For example, perhaps the ideal situation would be for younger generations to keep the antique tea sets, but they are not interested at the moment. In the event that they are unwilling or unable to maintain the collection, consider whether a friend or fellow enthusiast might be a worthwhile recipient of the items.

For invaluable collections, the challenge is often finding a creative way to keep the sentimental value of the items while still dealing with the physical mass that can accompany large collections. As we’ve discussed in a previous post, smaller homes and more modest lifestyles brought on by the recession makes it more difficult for younger generations to hold onto heirlooms the way that they used to.

Source: New York Times, “The 700-Doll Question,” Jo Maeder, May 8, 2013.