Total Counsel Law Group

How Do I Know If My Mom’s Estate Was Divided Properly?

“Try to work things out with the executor, before you take the next steps in a dispute over an estate.”

It’s not uncommon for a senior to let her adult children know about her life insurance policies. In many cases, it’s because that child or all of her children are the beneficiaries. It is also not unusual for one child to be named executor of the parent’s estate.

The trouble arises, if Mom took actions before she died and didn’t tell anyone, or if she only told one child. In this case, the mother kept important documents in a safety deposit box. A brother, who lived closer to the mother, told his sister that before their mother died, she made some big decisions: she cashed out the life insurance policies, emptied the safety deposit box, sold her car and signed a reverse mortgage on the house.

Therefore, how does the sister determine if whatever's left was evenly divided?

It will take some investigating. The good news is that there's always a paper trail.

nj.com’s recent article asks, “My mom died. How can I know I'm getting the right inheritance?” As the article explains, if the policies were cashed out by the parent, they no longer exist.

If you know the name of the insurance company and policy number, you can try to call the life insurance company’s home office to confirm this. However, they may not give out much information, if you weren’t the named beneficiary.

There are a few tips to help track down life insurance old policies.

If Mom had a reverse mortgage, then you know she owned a home. If the home wasn’t owned jointly, then it would be a probate asset.

One way to determine this, is to check with the county court where she died, to see if a will was probated or any estate administration application was filed. The home would need to be sold by the executor or administrator, so there would be some paperwork. If there was, you can contact the executor/administrator for more information.

With a parent’s safety deposit box, the executor/administrator, once appointed, would have the authority to empty the contents of the box. However, if Mom previously emptied the contents, there’d be nothing for the executor/administrator to retrieve. You should check with that individual.

If you don't believe the executor is being honest with you, you may need to work with your own attorney to make sure you’re getting what you're due from Mom’s estate.

Reference: nj.com (February 21, 2019) “My mom died. How can I know I'm getting the right Why is Estate Planning so Important for Cancer Patients?inheritance?”

How Can I Use Special Needs Planning with the New Tax Laws?

“The financial costs of caring for a loved one with special needs can be staggering.”

Of course, the precise expenses for an individual with special needs will vary, based upon the type of condition and level of care. A condition, such as autism, can require lifetime support costing upwards of $2.3 million, according to the advocacy and support organization Autism Speaks.

If you have a family member affected by a disability, what is your plan to pay for this care? This was the issue explored in a recent Financial Planning article, “A new special needs planning approach under the tax overhaul.”

Families usually want to plan for disabled relatives, but can be wary of losing access to savings, fearing that they may need the money themselves. A caretaker must also weigh the individual’s needs against the family’s other financial goals and obligations.

Planning for people with special needs, often involved irrevocable trust strategies in the past. Trusts can benefit the person with special needs, but other family members had limited access to the investments. The lifetime estate tax exemption is doubled under the tax overhaul, so most Americans do not face a federal estate tax. The change in the tax law and higher exemptions have made it possible for people to plan for the loved one’s care, while ensuring protection for the family.

1. Estimate the cost of caring for a family member with special needs. A good plan should preserve eligibility for government benefits, such as Medicaid and SSI. However, it is important to note that many expenses are not covered. This plan must also state who will care for the disabled person, if the primary caregiver dies or is incapacitated.
2. Decide how to fund the plan. Families frequently use a permanent life insurance policy to help cover any gaps left by limited government aid. The death benefit, which is generally income tax-free, provides money to help replace caregiver services, add to benefits provided under government programs and provide a liquidity source to help equalize the inheritance for other family members.

When the federal estate tax exemption was lower, a parent or caregiver usually would create an irrevocable third-party special needs trust during their lifetime. The trust assets would be used to purchase a life insurance policy, with the trust made owner and beneficiary. At the insured’s death, the death benefit received by the trust would be excluded from the grantor’s estate for estate taxes. The policy distributions would provide ongoing care for the relative, while allowing for access to government benefits.

However, the new higher exemptions have made it possible to plan for a loved one with special needs and also protect the entire family. This can be done by a caretaker personally owning a life insurance policy on his/her life, that names a special needs trust as the beneficiary.

3. Work with an estate planning attorney. Use an attorney who has experience with special needs planning, to determine the appropriate ownership structure, based on your personal situation.

Reference: Financial Planning (January 15, 2019) “A new special needs planning approach under the tax overhaul”

Is Your State Rolling Back Its Estate Tax Exemption Amount?

“The Trump tax cuts made federal estate taxes a thing of the past for most Americans. By doing so, they wreaked havoc in several states that tied their state estate taxes to federal law.”

Many states have had their estate taxes tied to the federal threshold. Therefore, the threshold when state estate taxes kick in, is now $11.18 million per person.

That made it easy to remember both taxes. However, Forbes’ recent article, “States Rebel, Won't Conform To Trump Estate Tax Cuts,” that with the recent tax reform, some states are realizing that they can’t afford to keep pace with the moves the feds are making.

States are instead rolling back their exemption amounts—this means that people in some states may be subject to state estate taxes. In some cases, the state estate taxes could be as high as 12%.

Connecticut, a state that used to have one of the toughest estate tax structures, may have the most generous exemption out of the states that still impose their own death taxes. There are 17 states and the District of Columbia that continue to impose either an estate tax or inheritance tax, with Maryland being the one state with both. Let’s look at what some specific states are doing:

The District of Columbia. The estate tax exemption in DC would have gone up from just $2 million to $11 million (indexed) in 2018. However, the city council dropped the exemption to $5.6 million in June, retroactive to January 1, 2018. This change is part of the budget being reviewed by the DC mayor and is expected to be approved. The exemption will be indexed beginning next year, using a special formula.

Hawaii. The Aloha State’s estate tax exemption for 2018 will be $5,490,000. That’s identical to what it was for 2017. However, the state legislature has amended Hawaii’s estate tax law, so the threshold amount matches federal law as it existed on December 21, 2017 (before the tax cuts). That’s $5 million, adjusted for inflation from 2011. The revision was signed into law by the governor this past summer.

Maryland. To keep this state’s estate tax exemption from rising from $4 million this year to $11 million (indexed) in 2019, state legislators agreed to a new fixed dollar amount for the Maryland estate tax exemption for 2019 and beyond of $5 million. The legislation does add portability, which allows a surviving spouse take advantage of their late spouse’s unused exemption. Their inheritance tax remains the same.

Maine. The state’s House and Senate recently voted on a compromise that will tie the Maine estate tax exemption to federal law, as of December 31, 2017 ($5.6 million for 2018). The governor allowed the tax bill to become law without his signature. He explained that he wouldn’t sign it, because it didn’t abolish the estate tax. Therefore, the Maine estate tax threshold is $5.6 million for 2018, with inflation adjustments starting in 2019.

Connecticut. In the fall of 2017, just before the Republican tax cuts, Connecticut modified its estate tax law to phase in its estate and gift tax exemption to match the federal exemption by 2020. The latest change—signed into law in June—lengthens the phase-in to 2023.

Check with your estate planning attorney to see if your state has state estate taxes and how they may impact your planning.

Reference: Forbes (August 31, 2018) “States Rebel, Won't Conform To Trump Estate Tax Cuts”

Commercial Vehicle Dealership Magnate’s Family Battle Over Fortune

“The May death of 79-year-old W. Marvin Rush II, the founder of what is today the largest commercial truck dealership chain in North America, has sparked a new feud—this one between one of his sons and his widow.”

 

1. Marvin Rush II’s son, W.M. “Rusty” Rush III, who is the chain’s chairman, CEO and president of the company—and Marvin’s third wife, Barbara Rush—have filed competing wills over the late Mr. Rush’s estate.

The San Antonio Express-News reports in its article, “Dueling wills filed over late truck dealer Marvin Rush’s estate,” that chief among the assets at stake is most of Marvin’s stock in Rush Enterprises. That’s the business he founded, grew, and later took public. There are now more than 100 Rush Truck Centers in 22 states, and shares in the company are worth about $74 million. The company posted $172 million in profit on $4.7 billion in revenue in 2017. It employs nearly 7,000 workers.

Rusty claims those shares belong to him, based on his father’s 2006 will. Barbara says her husband of 26 years revoked that will, when he made a new one in May 2013 and then another in November 2013. The 2013 wills don’t have any specific bequest of Marvin’s shares, so Barbara says they’re part of his residuary estate. She’s the sole beneficiary.

Rusty alleges that his dad suffered from dementia, when he signed the 2013 wills. Barbara disagrees.

Marvin’s obituary said that in “his last few years” he battled Lewy Body Dementia, which can have a range of symptoms. They include problems with thinking, memory, moving and changes in behaviors.

Rusty filed his opposition to probating either of the 2013 wills. He said that the onset of his father’s dementia was at least five to eight years prior to his death, “thus placing Mr. Rush’s mental capacity in doubt from May 2010 onward.”

Marvin completely disinherited Rusty in the 2013 wills. They will stated, “I do not wish to make any provision hereunder for my son William Maurice Rush, III, or any of his descendants.”

Barbara was named the executor of Marvin’s estate in the 2006 will and in each of the 2013 wills.

The two 2013 wills, which cut Rusty out of any inheritance, “represented a dramatic departure from (Marvin’s) long-standing estate plan of leaving his shares of Stock in Rush Enterprises to his son Rusty,” Rusty’s filing states.

“These wills were also executed shortly after Mr. Rush, apparently with the encouragement of his wife, Barbara, had formed an irrational belief that his son Rusty was somehow ‘at fault’ when the Board of Directors insisted that Mr. Rush step down as Chairman of the Board in May of 2013,” Rusty’s filing continues.

Barbara challenges Rusty’s argument, saying that the 2013 wills were prepared by a law firm and signed by two witnesses.

If Marvin lacked “capacity” or was susceptible to “undue influence” at the time the May 2013 will was made, Barbara asks how Rusty, as Rush Enterprises’ CEO and president, could have entered into a “Retirement and Transition Agreement” with his father just four days later.

A contentious battle is expected over Marvin’s estate.

Reference: San Antonio Express-News (August 24, 2018) “Dueling wills filed over late truck dealer Marvin Rush’s estate”

Lady Who Killed Husband Can’t Get His Pension, Court Says

“A woman who stabbed her husband while he slept but was later found not guilty by reason of insanity, isn’t entitled to receive surviving spouse pension benefits.”

A woman judged insane at the time she stabbed her husband is not entitled to pension benefits as his surviving spouse, the U.S. Court of Appeals for the Seventh Circuit recently held in Laborers’ Pension Fund v. Miscevic.

Bloomberg recently published an article, “Woman Who Stabbed Husband While He Slept Can’t Get His Pension.” The article noted that the Employee Retirement Income Security Act (ERISA) generally would require the pension plan to pay the benefits to the woman, because she was the surviving spouse.

However, Illinois has a “slayer statute” that bans a person from financially benefiting from the murder of another.

The federal court of appeals ruled that ERISA doesn’t preempt Illinois’ slayer statute. The Seventh Circuit agreed with the courts that have held that ERISA doesn’t preempt state slayer laws in North Dakota, New York, and Nevada. Most states have adopted these statutes, but the U.S. Supreme Court has chosen not to address the issue at least twice.

The Seventh Circuit noted that the notion that an individual who kills a plan participant can’t recover plan benefits, “is a well-established legal principle which predates ERISA.”

The Seventh Circuit also rejected the woman’s argument that the Illinois state law didn’t apply to her because she was found not guilty by reason of insanity.  However, based on a decision by an Illinois appeals court, the judges held that the Illinois slayer law does apply to bar recovery by individuals who commit a killing but are found not guilty of murder by reason of insanity.

What exactly did the woman do? She intentionally stabbed her husband in his sleep, then she intentionally hit him with a bat to keep him from calling the police, the judges said.

Although she was not able to understand the criminality of her conduct, she intended her actions, the Court of Appeals said.

Judge Joel M. Flaum issued the opinion, which was joined by Judges Michael S. Kanne, and Ilana Diamond Rovner.

Reference: Bloomberg (January 29, 2018) “Woman Who Stabbed Husband While He Slept Can’t Get His Pension”

Don’t Make a Big 401(k) Mistake!

“Balancing a retirement and college savings can be overwhelming.”

Far too many Americans undervalue their employer-sponsored retirement savings accounts, especially when their employer is willing to match some, or all, employee contributions. While most workers with 401(k) plans contribute more than enough to take full advantage of their employer's matching program, there are still about 20% of people who don't. That’s 20% too many!

USA Today recently ran an article, “1 in 5 Americans are making a terrible 401(k) mistake” that says this may be one of the worst retirement mistakes you can make. While it may not look like a lot of money to ignore right now, you’d be surprised at the difference it can make when you retire.

About three-quarters of companies offering 401(k) retirement plans have some type of matching program, usually based on an employee's contributions and capped at a percentage of their salary. For example, a 401(k)-matching policy may be "50% of employee contributions, up to 6% of total compensation."

Therefore, if you earn $50,000 a year and contribute $3,000 to your 401(k) or 6% of your salary, your employer will contribute an additional $1,500 into your account.

But again, there are 20% of the participants who don't contribute enough to take full advantage of their employer match. Apart from cashing out your 401(k) and spending the money, this may be the worst retirement savings mistake you can make.

Your employer match is vitally important. The maximum contribution level your employer is willing to match, should be the least you put into your 401(k). if you don’t do this, it’s like turning down free money.

This happens frequently with younger people just beginning their careers. They may feel that if you're starting your first job with an employer-sponsored retirement account, it’s difficult to effectively reduce each of your paychecks by 5% or more to contribute to a retirement account.

 However, many employers' 401(k) plans now have automatic enrollment for new hires, usually with a low contribution rate such as 2% or 3%.  However, many people simply forget to make a change to up their contributions.

Remember that your employer's matching contributions are really another part of your compensation that you give up, if you don't contribute enough into your retirement account.

Reference: USA Today (February 12, 2018) “1 in 5 Americans are making a terrible 401(k) mistake”

IKEA Founder Leaves Little to His Family

“Ingvar Kamprad was one of the richest men on the planet. But his heirs will only get a fraction of his billions.”

IKEA founder Ingvar Kamprad died late last month at age 91. He was one of the richest people on earth, thanks to the great success of his retail furniture empire. The notoriously frugal entrepreneur was ranked number eight on the Bloomberg Billionaires Index. His fortune was estimated to be about $73.8 billion.

However, Australian News reports in its article, “IKEA founder Ingvar Kamprad’s family won’t inherit much of his staggering fortune” that just a fraction of IKEA founder Ingvar Kamprad’s fortune will go to his heirs.

Most of the IKEA furniture stores are owned by the Stichting Ingka Foundation. The Dutch entity’s objective is to donate to charity and “supporting innovation” in design. The company was started by Kamprad in the ‘80s and is outside his family’s control.

The company is controlled by Liechtenstein-based Interogo Foundation, and its subsidiary, Inter IKEA, is the global IKEA franchisor.

In addition to philanthropy, the Foundation also allows for profits to be reinvested into the company. The foundation in effect owns itself. As such, Kamprad’s family can’t own any shares.

The reason for doing this was to ensure IKEA’s long-term survival. It’s now impossible for any individual person to take control of the company after Kamprad’s death — even a direct heir. Therefore, Kamprad’s family won’t have control over the IKEA company. But they will get modest sums from Ikano Group, a company that is worth billions of dollars in its own right.

That company is owned by the family and runs several businesses in the finance, real estate, manufacturing, and retail industries.

Per Heggenes, CEO of the IKEA Foundation said in 2012 that Kamprad was “not interested in money.”

Reference: Australian News (February 2, 2018) “IKEA founder Ingvar Kamprad’s family won’t inherit much of his staggering fortune”

Questions Abound with Audrey Hepburn’s Will

“Audrey Hepburn's will has been revealed for the first time in her son's battle against her children's charity over the Hollywood star's name and likeness.”

Sean Hepburn Ferrer sued the Audrey Hepburn Children's Fund last fall for infringing trademark and other rights belonging to him and Luca Dotti, his half-brother, according to The Daily Mail’s recent article, “Audrey Hepburn's Will Revealed!”

Court documents show that Ferrer has responded to the charity's attempt to have the suit dismissed and has provided excerpts of his mother's will in which both sons were named as principal heirs to her estate and intellectual property after she died in 1993. The will shows that the star left her most precious jewels to her closest family and friends, including the daughter of actor Yul Brynner. Hepburn's will lists French fashion designer Hubert de Givenchy as an executor of her estate.

Hepburn died of cancer at 63 years old and had been in a long-term relationship with Dutch actor Robert Wolders at the time of her death. She left him two silver candlesticks which were worth about $500 at the time. Brynner's daughter Victoria received $1,500 worth of tangible personal property, specifically a “Tiffany (Schlumberger) small flower, diamonds and platinum, brooch.”

Hepburn owned three properties in Switzerland. The home was later sold in 2000 for an undisclosed amount. In addition to her estate, the Hollywood icon left her son Sean, Bulgari gold and diamond earrings—a gift she received from his father, Mel Ferrer, on his birth. The brothers also inherited the film rights and royalties pursuant to Hepburn's film contracts, as well as her name and likeness rights and any other similar rights.

Ferrer and Dotti founded the children's charity in their mother's name the year she died and agreed to jointly own and manage her registered trademarks and moniker.  However, the charity experienced legal troubles after Ferrer stepped down as chairman in 2012. Ferrer said he resigned after becoming 'disillusioned' with the fund, but he and Dotti continued to approve of certain uses of Hepburn's likeness on a case-by-case basis. Issues arose when Ferrer ended the charity's license, which allowed them to use Hepburn's name. He claimed it has continued to use his mother's intellectual property for years without permission.

Ferrer's lawsuit, filed in October 2017, came some months after the charity sued him for “intentional interference with contractual relationships.” It claimed he’d become increasingly “hostile” to its use of Hepburn's IP that interfered with their fundraising.

Ferrer had also accused the fund of improperly retaining possession of his property, such as legal and financial records, contracts, samples of merchandise bearing Hepburn's name, image, and trademarks, scripts, and other documents.

Reference: Daily Mail (December 15, 204) “Audrey Hepburn's Will Revealed!”

Are You Ready for Retirement? Review This Checklist

“Retirement is coming quicker than you think. Take these eight essential steps to achieve success.”

How do know when you’ll be ready for retirement? The Center for Retirement Research at Boston College says that 20% of households are wrong in projecting when they’ll be ready to retire. The Street published an article recently, titled “8 Essential Steps to Achieve Retirement Success,” that offers a checklist to go through before you should consider yourself ready to retire.

Determine and Test Your Retirement Budget. Do a dry run of your future retirement lifestyle for six months before your intended retirement date. This will help you get a better understanding of how you can follow your retirement budget.

Get Rid of Debt and Downsize. If you begin your retirement with large amounts of debt, it can be trouble. Before you stop working, pay off any high interest debt to avoid having to make these payments in retirement. Consider where you’ll live in retirement and the money you can save by downsizing.

Look through Your Portfolio. You should balance growing investments, preserving capital and generating income. This prioritization will change over time, but your portfolio should be able to handle both your current and future financial needs.

Talk About Social Security with Your Spouse. To get the biggest payout of your Social Security benefits, you need to have a strategy in place. Your monthly benefit will differ significantly, based on the age you start receiving benefits. This will also impact the amount your surviving spouse may receive. Speak with your spouse about who will file for benefits and when. Don't be afraid to get a professional opinion, if this is overwhelming.

Review Your Estate Plan. Before you start your retirement, make sure that you have drafted your will and powers of attorney (POA). Talk to an experienced estate planning attorney.

Talk to Your Kids. If your adult children are still depending on you financially, begin a dialog to make them more independent. Even though it will be tough, it’s critical that they understand how your estate plan will affect them in the future.

Let Go of the Emotions. There can be mixed feelings about retirement. Therefore, it is very important that you and your spouse talk about how you’ll spend your free time and prepare for the changes in your routines.  You should also agree on the other aspects of preparing for retirement, like determining your budget and lifestyle choices.

Consult a Professional. There are a several steps in getting it right, but it’s helpful to meet with a professional who has worked with others to prepare for this next step in life and walk you through the process.

Reference: The Street (April 12, 2018) “8 Essential Steps to Achieve Retirement Success”

Survey Shows Gen X Americans Could Do More and Better Retirement Planning

 

“Here are three challenges that scare Gen Xers with advisors, a lot more than the ability to cover basic post-retirement expenses.”

Researchers at the Insured Retirement Institute (IRI) have found a possible Gen X knowledge gap in a recent online survey. The sample included 802 Gen Xers—Americans who are ages 36 to 55.

Think Advisor’s recent article, “These 3 Threats Scare Gen Xers More Than Basic Retirement Costs: IRI” explains that the survey aimed to find out how Gen Xers are handling retirement planning. The analysts who summarized Gen Xers’ approach to retirement planning said “They’re (mostly) doing it wrong.”

The results showed that only 20% of Gen Xers have talked to a financial advisor, that only one-third of Gen Xers have tried to figure out what they’d need to have saved to retire and that only 23% of the Gen Xers who have tried to save for retirement, have more than $250,000 in retirement savings. However, the research shows that roughly 58% of the Gen Xers are somewhat or very confident they will have enough cash to cover basic expenses in retirement.

The survey didn’t break down most of the results by income or asset level, but they did look at the use and lack of use of a financial professional. Participants with financial professionals might be the ones who have more overall financial flexibility, with 82% of the Gen Xers with financial advisors responding that they’d discussed retirement planning, and 61% said the advisors had discussed investing. Those discussions may have contributed to 87% of the Gen Xers with advisors saying they were confident about having enough income to cover their basic expenses in retirement. However, even the Gen Xers with advisors said they had grave doubts about their ability to handle other major financial challenges.

Here are some of the other findings:

1. Covering long-term care (LTC) costs. Just 63% of the Gen Xers with advisors said they were somewhat or very confident about having enough money to pay their long-term care expenses. It looks like advisors hadn’t done much to help Gen Xer clients with that concern. Only 9% had talked about planning for cognitive decline, like dementia or Alzheimer’s. Only 29% had talked to their clients about insurance.
2. Addressing parents’ LTC needs. A little over half of the Gen Xers with advisors said they were somewhat or very confident about being able to assist with their parents’ LTC bills. The survey didn’t ask Gen Xers how many had talked about that with their advisors.
3. Paying children’s college bills. Many experts in the field suggest that Gen Xers should prioritize their retirement planning and leave the children’s college bills second. However, Gen X parents say the money to put their children through college must come from somewhere. Only 51% of the Gen Xers with advisors said they were somewhat or very confident they’ll have enough money to defray their children’s higher education expenses.

Reference: Think Advisor (March 24, 2018) “These 3 Threats Scare Gen Xers More Than Basic Retirement Costs: IRI”