Total Counsel Law Group

Why is Estate Planning So Important to Black Americans?

“Black Americans are 50% less likely to have a living will in place, in comparison to other groups.”

End of life planning is something the black American community should tie into discussions with families.

Many famous black entertainers have failed to plan properly. For example, Prince (who passed away on April 16, 2016), Aretha Franklin (August 16, 2018), director John Singleton (April 29, 2019) and many others did not have an efficient estate plan in place, when they died.

Black Enterprise’s recent article, “Black America Must Understand the Importance of Estate Planning” explains that dying without a will or a current will in place turned the mourning of these celebrities into a hysteria of fighting families. The article notes that the lack of a will is a social imbalance that affects many black Americans, regardless of socioeconomic standing and/or level of fame.

The idea of these big stars dying without a will seems strange in light of the fact that, after their deaths, their artistry continues to generate great income. One exception is Michael Jackson. From the day he died (June 25, 2009) to June 25, 2010, his estate—including music royalties, merchandising, licensing and more—brought in a whopping $1 billion in revenue.

However, Michael had a will in place which instructed that his financial returns should go to his children with his mother, Katherine, as the executor of his estate. In that case, there wasn’t any risk of confusion or family members trying to gain access to an estate with a seemingly endless amount of funds.

However, John Singleton, the Oscar-nominated director of such movies as Boyz N’ the Hood, Poetic Justice, Higher Learning, and the recent FX series, Snowfall, is the latest example of a wealthy person not having the right estate planning in place. Singleton’s estimated $35 million fortune is still being contested in court by his seven children—six of whom weren’t included in the 1993 will he created when his eldest daughter, Justice was born. He never updated his estate plan. According to this outdated will, Justice is the sole beneficiary of her father’s fortune. However, John’s mother, Sheila Ward, the executor of his estate, filed his will in probate court and listed his assets at only $3.8 million. Therefore, an additional $31 million of Singleton’s estate is unaccounted for.

Singleton is thought to have created a trust with other assets, like movie rights and other royalties, that doesn’t have to go through probate court. Therefore, inheritance issues involving those assets can be settled more efficiently. Otherwise, the seven siblings are preparing for an intense court fight that could be lengthy and expensive. If Singleton’s will had been updated, preferably after each child was born, his kids would’ve been financially protected and able to mourn their father in peace.

The lesson is there for everyday people who aren’t Oscar-nominated and Grammy-winning celebrities. Proper estate planning is important for everyone.

Reference: Black Enterprise (July 28, 2019) “Black America Must Understand the Importance of Estate Planning”

How Did a Taxi Driver Inherit a Passenger’s Estate?

“A taxi driver who inherited a passenger’s entire estate has been slapped with a huge legal bill after the will was overturned following a bitter legal battle.”

A cabbie who inherited his passenger’s entire estate has been hit with a big legal bill, when the will was overturned after a contentious legal battle.

The New York Post’s recent article, “Cab driver slapped with massive legal fees after inheriting passenger’s estate,” explains that the bizarre story began years ago, when British taxi driver Dean Hughes agreed to transport 348-pound Gary Mendez to various pubs. Many other cabbies refused to take him because of his great size.

Over the years, the two men struck up a friendship. Then, in February 2016, Mendez allegedly phoned Hughes and told him he wanted to leave his entire estate to him in his will, including his home. The two met (where else?) at a pub to sign the legal documents. However, this disinherited Mendez’s long-term partner Hermes Rodrigues. The couple had been in a relationship since 2001. Gary had originally left everything to Rodrigues in an earlier will, that was drawn up in 2013. Rodrigues decided to contest the later will and won, after a judge ruled that Gary had been too affected by alcohol and ill health to fully understand his actions.

At Central London County Court, Judge Eaton Turner stated, “I have great doubts whether Gary had a proper understanding of the contents and effect of the 2016 will. In my judgment, Gary, by this time, no longer had a balanced view of the claims and, in particular, had lost sight of his previous promise to leave the house to Hermes.”

The judge declared the will invalid, so Rodrigues will now inherit the house.

Hughes was also been ordered to pay 85% of the court costs associated with the legal battle, estimated to be more than $63,000. The judge dismissed claims that the cab driver placed his customer under “undue pressure” to change the will. However, he found that Rodrigues “made a substantial contribution to Gary’s welfare over a significant period of his life.”

During the trial, Rodrigues said Mendez had promised to leave his home to him.

“He told me that it would always be my home whatever happened, even if our relationship broke down,” Rodrigues said.

Reference: New York Post (June 11, 2019) “Cab driver slapped with massive legal fees after inheriting passenger’s estate”

What Are Some Advantages of Making Lifetime Gifts?

“You probably give to others each year, such as for birthdays and Christmas gifts. Gifting can be done for other reasons, including during life or as bequests at death. The reasons for doing so could be to accomplish nontax or tax goals.”

There are several non-tax advantages of making lifetime gifts. One is that you’re able to see the recipient or “donee” enjoy your gift. It might give you satisfaction to help your children achieve financial independence or have fewer financial concerns.

WMUR’s recent article, “Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed, because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

At your death, your property may go through probate. Lifetime giving will help reduce probate and administration costs, since lifetime gifts are typically not included in your probate estate at death.  Unlike probate, lifetime gifts are private.

Let’s discuss some of the tax advantages. First, a properly structured gifting program can save income and estate taxes. A gift isn’t taxable income to the donee, but any income earned by the gift property or capital gain subsequent to the gift usually is taxable. The donor must pay state and/or federal transfer taxes on the gift. There may be state gift tax, state generation-skipping transfer tax, federal gift and estate taxes, as well as federal generation-skipping transfer (GST) tax.

A big reason for lifetime giving is to remove appreciating assets from your estate (i.e., one that’s expected to increase in value over time). If you give the asset away, any future appreciation in value is removed from your estate. The taxes today may be significantly less than what they would be in the future, after the asset’s value has increased. Note that lifetime giving results in the carryover of your basis in the property to the donee. If the asset is left to the donee at your death, it will usually receive a step-up in value to a new basis (usually the fair market value at the date of your death). Therefore, if the donee plans to sell the asset, she may have a smaller gain by inheriting it at your death, rather than as a gift during your life.

You can also give by paying tuition to an education institution or medical expenses to a medical care provider directly on behalf of the donee. These transfers are exempt from any federal gift and estate tax.

Remember that the federal annual gift tax exclusion lets you to give $15,000 (for the 2019 year) per donee to an unlimited number of donees, without any federal gift and estate tax or federal GST tax (it applies only to gifts of present interest).

Prior to making a gift, discuss your strategy with an estate planning attorney to be sure that it matches your estate plan goals.

Reference: WMUR (April 18, 2019) “Money Matters: Lifetime non-charitable giving”

Why is Musician Prince’s Estate Still Up in the Air?

“Sunday will mark the third anniversary of Prince’s death from an opioid overdose at the age of 57.  However, the ‘Purple Rain’ singer’s estate remains as unsettled as it was the day he died in his Paisley Park mansion outside Minneapolis.”

Prince’s estate, which includes master tapes of his recordings and a 10,000-square-foot Caribbean villa, has been estimated at $200 million.

However, even after all this time, it’s not clear what the Purple One’s estate will be worth after it’s been run through the ringer of battling heirs, lawyers and consultants, who are costing the estate a load of money.

Page Six reported in its article, “Fight over Prince’s $200M estate could go on for years,” that Prince’s heirs are entrenched in a fight to rein in the estate’s administrator. They’ve spent more than $45 million in administrative expenses, according to a probate-court petition filed by Prince’s designated heirs.

They’ve asked for “a transition plan” for a new administrator, which is scheduled for the end of June, according to court filings.

Prince didn’t have a will and his six heirs—all siblings—had to be selected by a probate judge. That’s because soon after Prince died in April 2016, more than 45 people came forward to claim they were his relatives, in order to get a piece of the purple pie.

Some said they were his wife, brother or sister, according to an Associated Press report. One Colorado inmate claimed to be Prince’s son, but a DNA test proved this not to be true. The list of Prince’s heirs has since been whittled down to his full sister, Tyka Nelson and half siblings Norrine Nelson, Sharon Nelson, John Nelson, Alfred Jackson and Omarr Baker.

These heirs had been in a bitter disagreement. However, they came to an agreement this year in their effort to challenge Comerica, the court-appointed Dallas bank that became the estate’s administrator, after St. Paul, Minn.-based Bremer Trust served temporarily in that capacity for nine months.

In a February petition, the heirs argued that Comerica is $31 million behind on estate taxes that “continue to accumulate interest.”

The heirs wrote that they “do not agree with Comerica’s cashflow projections, accounting or inventory of estate assets.” They also complained that Comerica was unresponsive to their questions.

“The heirs are understandably frustrated that, three years after their brother’s death, the estate is not ready to be closed,” Comerica said in court filings. However, Comerica insisted that it should not be fired.

Reference: Page Six (April 19, 2019) “Fight over Prince’s $200M estate could go on for years”

Who Can I Name as a New Executor of My Will?

“I want to name a new executor. Who could I name as a backup?”

MoneySense’s recent article, “Should the sole recipient of an estate be the executor too?” explains that naming someone as an executor is an extremely important duty. The task carries a lot of responsibility. With new rules that have been passed in the last year, the tax reporting and understanding of the assets in an estate is extremely important.

There are several factors to consider, when you think about whom you might name as an executor. First, is age. It’s smart to choose a person who’s younger than you. Although that doesn’t guarantee that person will outlive you, it certainly will up the odds. Ideally, you should try to find a person who is comfortable with the areas of money and tax and doesn’t easily get overwhelmed by paperwork. Since the role of estate executor can be an intense issue that takes a great amount of time, the person you choose ideally will be retired or have the bandwidth to dedicate the substantial time commitment required to do the job properly.

Based on the complexity of the assets in the estate—and the amount of planning the deceased has done to make the job a little bit easier—the winding up of an estate can take more than a year. If the assets must be probated, you’ll want the person you appoint to understand the process and liability that she’s accepting. There are multiple tax returns and filings that must be completed and filed at specific times.

There are banks that offer trust services, but these can be expensive and will take a chunk out of the estate in fees, until the last tax filing is completed. An attorney is also a good choice, but not many lawyers will take on the liability and have the time to act as an executor.

Many people ask a family member who’s either performed these duties in the past or is willing and knowledgeable enough to do things in a conscientious manner and follow through. Remember, the more estate planning that’s done in advance, the easier it makes it for an executor.

Another option is to have two or more adult children act as an executor. However, this can add some complexity to the process, because first they have to both be in agreement on every issue; second, they must both be available to make decisions and sign documents at the same time. These days you can have siblings living from Maine to Oregon, and people can travel all over the world at any time.

Make sure the person you’re considering is aware of not only your thoughts but also of the time commitment and process involved. An executor—unhappy with their role—can ask the court to remove them. However, this can result in the estate being tied up for a long time.

Reference: MoneySense (March 27, 2019) “Should the sole recipient of an estate be the executor too?”

Do My Debts Die with Me?

When you die, your debts do not. Your executor will be required to pay them using your assets. That means that any unpaid debt can reduce the wealth you’ve left behind for your heirs. In some cases, your family members could even need to pay your debt.

Reader’s Digest’s recent article, “This Is What Happens to Your Debt When You Die,” explains that not all debt is created equal. With secured debt, like a mortgage or car loans, your estate can either pay off your debts in full or continue making installment payments. Another option is to sell the property or turn it over to the lender to satisfy the debt.

However, any unsecured debt, such as credit cards, bills, or personal loans, is typically just paid from the estate. The estate is everything you own, such as assets, bank accounts, real estate and other property.

Note that student loans are the exception, but there are some caveats. Most federal student loans, along with private loans without a cosigner, are discharged with proof of death. Thus, your heirs won’t be responsible for those loans. However, if your private student loan was cosigned, that person will be required to pay it off. There are also some loans, like PLUS loans, that while technically forgiven, could leave the parent who took it out with higher taxes.

The way to protect both yourself and your family, is to speak with an experienced estate planning attorney to get your affairs in order.

Creating an action plan for your outstanding debt is a critical component of the estate planning process. You also need to ask about other end-of-life plans, like medical directives, wills and trusts to manage your assets, when you pass away.

You should also review your life insurance policy to make certain that it’s up-to-date, and don’t forget to review your named beneficiaries.

If your beneficiaries are assigned correctly, some of your assets may bypass probate and be protected from creditors. Therefore, anyone who’s listed on your policy won’t be forced to hand over their money to satisfy your debt.

Reference: Reader’s Digest “This Is What Happens to Your Debt When You Die”

Am I Cut Out to Be Your Power of Attorney?

“Not everyone is cut out to make key decisions when a loved one can't.”

Next Avenue’s article, “Saying ‘No’ to Power of Attorney Duty,” says that not everyone’s cut out to be a power of attorney (POA)., There are many reasons children and others may need to say no when asked. Becoming a power of attorney is a big job. This obligation shouldn’t be entered into without great consideration. With the POA legal instrument, a person named power of attorney is referred to as the “agent” or “attorney-in-fact,” and the person on whose behalf she’s acting is the “principal.”

While there are several combinations and varieties of power of attorney, there are two common ones. General durable power of attorney, also known as power of attorney for finances, allows the named agent to act on behalf of the principal to take care of that person’s finances like banking, paying bills, or selling a house. Health care or medical power of attorney allows the agent to make health care decisions, in the event the principal is incapacitated.

A common misconception about POAs, is that people think that if they’re named as an agent on a POA, they’ll wind up owing money for the principal’s unpaid medical bills. Not so. An agent is merely acting on behalf of another person, not making themselves personally liable. However, there are other reasons a person may want to decline being named power of attorney. Ask yourself these questions, when considering whether to commit to being someone’s power of attorney:

• Can you drop everything for weeks or months and make critical medical decisions?
• Do you have the emotional strength to make hard, life-and-death decisions?
• How is the family dynamic? Do you have a sibling who’s quick to anger or who could be suspicious of your motives, when it comes to medical or financial decisions?

If you’re not up to it, and the person who appointed or plans to name you as POA is still capable, it’s best to talk directly with that person about your concerns. Be honest and let them know how you feel.

The possibility of a POA not being able to serve is highly likely, and that’s why everyone should designate successor agents. These alternates in a POA can cover the inability, or inevitability, that someone may not be able to serve.

If you really don’t want to be power of attorney, be honest with your family member and tell her, “I’m worried enough about you to tell you, that I’m not the right person.”

Reference: Next Avenue (September 11, 2018) “Saying ‘No’ to Power of Attorney Duty”

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?”

What Do We Do with Mom’s House, When She Dies?

“The executor is responsible for finding a buyer and doing all that is necessary to get the best price possible.”

It’s not uncommon for the surviving parent to leave the family home to her children. At the parent’s death, questions often arise concerning how long the children have before they must sell it or change the deed. What if one sibling wants to live in the home for a while, before it is sold?

nj.com’s article on this subject asks, “Mom died and left us her home. What do we have to do next?” According to the article, the executor is tasked with gathering the assets, paying the debts and taxes (if any) and then distributing the assets, in accordance with the parent’s will.

If the home was in the parent’s name alone, it makes the property a probate asset that’s passed according to the will. In addition, if the will provides that under the residuary clause everything that’s left is to be distributed equally among the children, it will give the executor discretion to liquidate and then make the distributions.

There also may be a specific provision in the will covering the home.

There’s no specific timeline as to when the property has to be transferred. However, the executor is required to act prudently and in a reasonably timely manner.

In this situation, the home will most likely be sold. It is also the executor’s responsibility to pay the bills associated with the home, until a buyer is found.

If one child wants to live there, and it’s agreeable to everyone, make sure that she doesn’t refuse to leave, when it comes time to sell.

Note that landlord-tenant laws protect a tenant and may create an issue. The executor may want to talk with an attorney to determine what steps are necessary to protect against the tenant refusing to leave.

Reference: nj.com (April 1, 2019) “Mom died and left us her home. What do we have to do next?”

How Do I Do Estate Planning for My Coin Collection?

“People who bother about estate planning, often have a tendency to collect interesting and often valuable items, from art and antiques, watches to jewelry, to firearms and baseball cards to numismatic or bullion coins.”

Forbes’ recent article, “Astute Estate Planning For Art, Antiques And Valuable Collectibles,” says that personal property items, like a coin collection or artwork, can pose an added degree of estate planning complexity, for several reasons.

Tracking. Personal property items are easily “lost” or misplaced. Use inventory software or keep copious records. You should also retain receipts, appraisals and other imprimaturs and bona fides of provenance.

Assignment and Transfer. Since personal property can “walk off,” it’s smart to make certain that all applicable parties, such as heirs, are informed of inventory lists or other tracking methods, with clear instructions on who gets what. You can even add in your will an addendum “Exhibits A-Z,” to make sure that nothing gets lost. Photographs, serial numbers, and other identifying data can be added for more fungible items, like firearms.

Security and Insurance. Use precautions like safes, safety deposit boxes and alarm systems because transportable valuables present greater risks of theft and of fire/disaster. There can be different insurance rules based on the item. You may need separate deductibles, endorsements, riders and proofs of location and ownership to have proper insurance coverage.

Documentation. Particularly for art and important antiques, it is vital to have documentation that supports authenticity and records provenance. This can include certificates of authenticity, bills of sale, condition reports, artists’ notes and photographs, along with appraisals and insurance reports. A gap in documentation can result in challenges in establishing provenance and authenticity.

Valuation. Most personal property is in a very illiquid market, and the price is very much whatever the market will bear. Specialized knowledge may be needed to arrive at a fair price.

Estate Tax Issues. Retain accurate inventories to make certain that all value is properly accounted for, if an estate tax return is due. It’s not uncommon for these items to be “forgotten” at tax time since, unlike securities, bank accounts and real estate, the IRS can’t easily track estate ownership of the assets, whether or not they’re taken by members of the family.

Reference: Forbes (April 8, 2019) “Astute Estate Planning For Art, Antiques And Valuable Collectibles”