Planner's Thoughts

On the Estate Planning "Conversation"

noreply@blogger.com (Larry D. Stratton) — Thu, 17 Jun 2010 04:09:00 +0000

I have seen a wide range of attitudes among clients. Without getting into too much detail, I have seen everything from gratitude to suspicion. I realize that many clients are sometimes pulled into an estate planning meeting unwillingly -- by spouses, or (perhaps more often) due to their own feeling that they "have to do" something about their estate plans.

It IS, after all, an inherently uncomfortable subject. Without a doubt, I am sure that many clients would rather go out to a nice dinner, or throw a party, than meet with and then hire a lawyer to prepare estate planning documents.

I'm sure that some of my clients would even prefer a meeting with their dentist.

A recent New York Times article addresses this difficulty of opening up "The Conversation" with a family member. Here is the opening excerpt of an article addressing this even touchier family dynamic:

For many people, estate planning is both a private matter and a morbid topic — not something that parents and their adult children want to discuss. While having these conversations takes a lot of courage, they can help avoid surprises, lead to better financial planning and promote family harmony.

Julie Busch, a vocational consultant in Seattle, asked her father, Russell, about his estate plan last summer after learning he had brain cancer. She was surprised to find that Mr. Busch, a lawyer specializing in American Indian rights, did not even have a will.

Take heart. These are difficult issues (and I know this from personal experience), from my own life. For me, it was no easier than it is for my clients.

The Return of the Estate Tax, Redux

noreply@blogger.com (Larry D. Stratton) — Tue, 15 Jun 2010 04:01:00 +0000

In my last post I addressed the return of the estate tax. A recent Forbes article also addresses what will be an unhappy event for many. The article starts with this story:

Like many couples in their 30s, Sara and Joshua Mancell didn't even have wills before they became parents. But early this year, a few months before their son Eli's first birthday, the Minneapolis couple finally tackled this essential task. As a first priority, should the unthinkable happen, they needed to pick a guardian for Eli and a trustee to manage the money left to him. But with a net worth nearing $1.4 million, Sara, a Westinghouse engineer, and Joshua, an Ameriprise investment advisor, also had to take steps to reduce potential state and federal estate taxes that could cut into the resources left for Eli.

The federal estate tax lapsed on Jan. 1, 2010. But under current law, it will rise from the ashes on Jan. 1, 2011, and at that point--unless Congress intervenes--only $1 million per estate will be exempt from a stiff 55% tax. That compares with a $3.5 million exemption and a 45% rate in 2009.

The Billionaire Estate that Got Away

noreply@blogger.com (Larry D. Stratton) — Mon, 14 Jun 2010 17:06:00 +0000

There are not many of us who think about estate taxes anymore. With the 2001 tax reform act, the Economic Growth and Tax Relief Reconciliation Act of 2001, the exclusion against estate tax increased from $675,000 in 2001, to $2 Million in 2006, to $3.5 Million in 2009 – with a few other increases in between. This year, the tax is completely repealed, even though the rules relating to basis have changed (a complexity which is way, way beyond the scope of this post). Next year, the estate tax returns with an increased tax rate, and the exclusion only shields a relatively, paltry, $1 Million -- subjecting many more estate to the tax and a higher tax rate.

Doesn’t it seem like a million years since the 2001 tax reductions?

In any event, most of us have been able to comfortably ignore this tax because it has not been relevant – even though financial and estate planners were assuming that Congress would not allow the complete repeal of the estate tax to stand. Most estate planners assumed that our representatives would at least attempt to clarify the law by December 31st of last year. But, that did not happen…

Now, Congress’ inaction has lead to a significant loss to the federal treasury, with the death of Dan Duncan, an oil pipeline tycoon whose net worth is estimated at $9 Billion. Had Dan Duncan died 3 months earlier, before December 31, 2009 (when there was still an estate tax), his estate would have been subject to a 45% estate tax after the $3.5 Million exclusion. Had he died in 2011 – a few months later – his estate (again, after the lower, $1 Million exclusion) would have been subject to a 55% tax rate.

The New York Times recently had an article discussing this “quirk” in the law, and what it means to a federal treasury hungry for dollars:

The one-year lapse in the estate tax was signed into law by President George W. Bush in 2001, an accounting quirk in his package of tax cuts. Although Democrats pledged to close that gap and reinstate a tax for 2010 when they took control of Congress, they failed to reach an agreement last December. The Senate Finance Committee is now trying to forge a compromise that would reinstate the tax, but even if that effort succeeds, it is unclear whether any changes might be retroactive and applied to those who have died so far in 2010.

Many lawyers say Mr. Duncan’s heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax.

Most of us have not had to worry about the estate tax . But with a lower exclusion amount and a ballooning deficit, again reducing the chance of any tax relief, more of us will have to start to worry about it.

The World Financial Catastrophe Explained

noreply@blogger.com (Larry D. Stratton) — Sun, 06 Jun 2010 05:26:00 +0000

I came across this YouTube explanation of the world economic collapse off of a Facebook posting from a colleague, John Thompson of ThompsonSpiteri. It's humorous, in a "gallows humor" sense:

Thoughts on the Lakewood Police murders

noreply@blogger.com (Larry D. Stratton) — Wed, 02 Dec 2009 18:25:00 +0000

Perhaps like many of you, I was stunned and angered by the brutality of the murder of four Lakewood, Washington police officers last Sunday evening. The fact that each of these police officers were parents and family members makes this especially difficult to absorb. Brian Wurts, President of the Lakewood Police Independent Guild, made an extensive blog entry on the Guild website regarding this senseless act; here is a short excerpt:

We lost our brothers and sister yesterday. We have not slept and to be honest I do not know what more I am able to do. I do not want to sleep; we want this criminal brought to justice. Like my members with attest I will sit at my computer and write to them when I need to put it out there. Tonight I will write to them and anyone else who will listen about our four heroes. I will not get into why this suspect was out on the streets in this writing but that time will come. Instead I would like to share a couple comments about our friends who were taken away from us and their loved ones. I have never cried like I have over the past 16 hours and I hope sharing a couple things about these individuals will bring those citizens we are truly proud to serve closer to us.

Since Mr. Wurt wrote that entry the suspect was in fact killed by an officer of the Seattle Police Department. For those who are interested in making a benevolence gift to the families of the slain officers, here is the LPIG website. Also, the LPIG address is: P.O. Box 99579 Lakewood, WA 98499.

A belated "Happy Thanksgiving"

noreply@blogger.com (Larry D. Stratton) — Sat, 28 Nov 2009 01:29:00 +0000

I did not post a Happy Thanksgiving! note yesterday -- but I have to now, especially after my last post. Here is a fun one I found...

A suicide in Chicago has lasting effects on witnesses

noreply@blogger.com (Larry D. Stratton) — Sat, 28 Nov 2009 01:02:00 +0000

An article recently appeared in the Chicago Tribune on the effects of an anonymous suicide witnessed by simple passers-by...not even family members. These bystanders witnessed Cameron Watson leap from 17 stories in downtown Chicago in September, 2009.

These bystanders -- who came from around the country -- watched the local building maintenance worker die by his own decision, and it had a significant effect. It is frequently argued that suicide is a "victimless" crime (when it is even thought of as a crime). but however the event is characterized, it is not "victimless,"as noted in the article:

The raindrop hits the water, and the wave ripples out.

In Missouri, a hospital volunteer takes a deep breath when a patient snaps at her. You never know what someone might be going through, she tells herself. In the Detroit airport, a traveling businessman sees a soldier coming home from Iraq, wonders if he might need someone to listen, and offers to buy him a drink.

"You get back in your regular life, but there are definitely times where I think of him," said Jennifer Wirth, 41, a teacher in Milwaukee. "I have family members who deal with depression, and I just kind of keep that in my head, to remember to always reach out."

(Hat tip to Prof. Beyer for bringing this to my attention. He hosts the Wills, Trusts and Estates Prof. Blog)

Where should you keep your estate planning documents?

noreply@blogger.com (Larry D. Stratton) — Thu, 19 Nov 2009 15:07:00 +0000

Clients always ask where they should keep their will and important estate documents. As attorneys habitually do, I usually respond: “It depends.” Is your family emotionally supportive and close, or is there contention? Are you ill? Are you healthy; or under hospice care? There are many variables, and the best method of storage is almost completely based upon common sense. However, here are some general guidelines:

In a Safe Deposit Box: These are good places for wills and trust documents– as long as your family knows about the box and has access to it. If the box is jointly held, your joint holder should be told that the will is in it. However, if only you have a key, then the executor of your will should be informed (1) that the will is in the box, and (2) is told where the key is. An executor may be able to force access to the box after being appointed by the court, but it will require additional effort and expense. When it is possible, planning ahead is better.

With Your Important Papers: Placing the will and trust documents with your important papers is a good option – unless you are concerned about fire, theft or destruction. If you have a contentious family situation (or suspect there may be one), this is probably not a good idea if the person who may contest your estate plan has initial access to these documents. Again, use common sense in making this decision.

In California, if estate planning documents cannot be located, it is presumed that they were destroyed with the intent to revoke. They may be revoked through numerous means – including outright destruction – at any time before death. The assumption that the “lost” will was revoked can be overcome through litigation, but advance planning can avoid the problem. But this should give you no comfort – think about it: You are dead. Yet, the court must decide your actions. How can it be proved that you did not destroy the will with the intent to revoke? This is a difficult, avoidable issue.

This also emphasizes the importance of taking a cold, hard, and honest look at your family situation. You would be amazed at what people are capable of when money is involved. But I believe that most people really, truly know the character of their family members. You really do know what those close to you (or not so close to you, as the case may be) are capable of. Act on your “gut” instincts in deciding how to maintain these records.

With your Attorney: I generally do not retain the originals of estate planning documents (even though I do not discount the possibility that I might make arrangements, in an appropriate, emergency circumstance). If appropriate, this is another possibility – as long as your executor knows where to find the document. As always, the important element is that the important person has knowledge and access to these records.

A Funny Look at Not-So-Funny Greed

noreply@blogger.com (Larry D. Stratton) — Tue, 17 Nov 2009 05:28:00 +0000

In my law school class on wills and trusts, the professor called them the "grubby group" -- greedy claimants not always having a legitimate claim against an estate. Even if the 911 call in this video is staged, its a humorous look at a subject we estate planners are all too familiar with...

(Hat tip to Prof. Beyer, Wills, Trusts and Estates Prof Blog)

Advance Healthcare Directives -- like a free toy?

noreply@blogger.com (Larry D. Stratton) — Sat, 19 Sep 2009 23:45:00 +0000

Recently I have completed a great number of advance healthcare directives (also called "Living Wills" in some states) for clients. I once read an article which suggested that a Directive was something on the periphery of an estate plan -- it even indicated that a directive should be just given by the attorney "for free" -- as if it were incidental to the "real" estate plan. I guess a "real" estate plan to this author would only be the money left behind to a client's heirs, and that the client's own health and comfort is of less importance.

Now, I am certainly not advocating overcharging clients, but I object to the idea that an end-of-life Healthcare Directive is something like a free toy in a cereal box. A Directive is simply not an inconsequential part of an estate plan. Sometimes, its the only and the most important part.

Very recently I prepared an estate plan for a middle age client who had little money, and no family. She only had a small handful of concerned friends. Her only remaining asset, her health, had been taken by cancer. In that case, the directive was the only aspect of her personal "estate."

When we think of an "estate," we understandably think of money. However, our "estate" is in fact everything -- and the most important part involves our health, and our dignity.

A happy and sad and heroic blog post

noreply@blogger.com (Larry D. Stratton) — Sun, 13 Sep 2009 00:11:00 +0000

Planning and estates is not just about the money (even though, unfortunately, to many it might seem that it comes down to just that). Planning, actually, is something that has to do with life: How we live; what is important; making sure that our loved ones are provided for.

I came across a blog post written by Chicago Sun-Times writer Lacy Banks, entitled "I'm Not Afraid to Die. What About You?"

I will not even summarize it. It speaks for itself.

What Evian water does to very small children...

noreply@blogger.com (Larry D. Stratton) — Sat, 11 Jul 2009 20:18:00 +0000

This has nothing to do with estate planning...perhaps a little concerning guardianships of children, and the type of activities which might provoke court scrutiny.

Actually, its a hoot...

(Courtesy: Tax Prof Blog)

Where There's an Inheritance: Stories from Inside the World of Two Wills Lawyers

noreply@blogger.com (Larry D. Stratton) — Mon, 15 Jun 2009 04:54:00 +0000

I have not personally read the book Where There's an Inheritance: Stories from Inside the World of Two Wills Lawyers by Barry Fish and Les Kotzer, but it looks worthwhile. I located a review in Deseret News. Here is one of the funny stories outlined in the review:

He was a widower with no children, but he was blessed with money, many nieces and nephews — and a unique plan for deciding who should benefit from his generosity.

By the time he was in his mid-80s, his nieces and nephews believed the impression he gave that he had trouble hearing. They gathered often for holidays and family events, and they talked about how much they liked — or disliked — their uncle.

At his 90th birthday party, he stood to say a few words of thanks. "I've been waiting to say these words for the last few years: I can hear perfectly. I have always had perfect hearing, and I have heard everything you have ever said to me and about me."

As a stunned silence swept the room, he proceeded to tell them what he had heard — and later used that information as he prepared his will.

And also a touching story – something in the hustle and bustle of life, I can certainly learn from:

Les says one that touched him personally was the story of a woman named Rachel. She called Les and asked him to help her write a will, but said she had not been out of the hospital for more than a year and likely would die soon. Rachel agreed to find someone to drive her to his office for the appointment — and probably her last trip outside.

The day of the appointment was windy, cold and rainy. Les was swamped with work, got caught in an accident over his lunch hour and was not having a good day. When Rachel arrived, he went out to the van she traveled in and saw her looking out the window, beaming, as she watched the rain.

"Then she turns to me and says to me, 'Mr. Kotzer, isn't it a beautiful day?' Here I was hating that day, and here's a woman who's dying telling me, 'Isn't it a beautiful day?' I thought, if people hear a story like that, it may change their lives, and help them appreciate the days that they have," Les says.

Pet Trusts for the Non-Rich

noreply@blogger.com (Larry D. Stratton) — Wed, 10 Jun 2009 15:17:00 +0000

It’s true that my Depression-era grandparents would not have thought much of a pet trust (“Such a waste,” they would almost certainly have said). Yet, pets have become important to the well-being of young and old. As such, it is only natural that owners want to ensure that their furry loved ones are cared for once they pass away.

There has been a lot of media attention over Leona Helmsley’s $12 million pet trust for her dog, Trouble. In a circular argument, one legal writer recently suggested that the $12 million gift was worth “the Trouble” (sorry…I couldn’t resist) because all of the press attention has created a bevy of death and dog-napping threats. Frances Carlisle wrote:

After the publicity, it was reported that more than 40 death and dognapping threats were received, and that the dog was in such danger that she was taken out of her Connecticut home and flown under an assumed name to a secret location. Round-the-clock security is needed for the dog, which costs between $100,000 and $200,000 a year, and that amount is much more than any other expense for the care of the dog. Since security costs are so high, $2 million is a reasonable amount to fund the trust for Trouble.

Maybe I am overthinking this, but he seems to be arguing in a circle: That a pet trust for $2 million is justified, because Leona Helmsley made a $12 million trust?

Well, there are pet trusts for Trouble – and there are pet trusts for the rest of us. Most of us don’t have $2 million (let alone $12 million) to put into a pet trust. Still, we worry about our little friends when we are gone. Here are some things to think about if you are considering such a trust:

Make it worth the “Trouble” for the trustee (sorry again): If you go to the expense of a pet trust, don’t “go cheap” on your trustee. You obviously want the trustee to take care of your pet, so give the trustee enough of a trustee fee – but not too much or too little. If you give your trustee too little, he or she would have an incentive to get rid of the pet; too much, and the pet might be kept alive longer is good for the pet’s comfort and well being.

Consider a trust protector. Pets are obviously very helpless. Generally, they will not have the wherewithal to file a petition in court to replace the trustee in case of abuse. Have a family member oversee the trustee. Under the new pet trust statute in California, (under Probate Code Section 15212) any person having an interest in the animal, or a charitable organization having as its principal activity the care of animals may enforce the trust.

Don’t give the trustee a large remainder interest in the trust. Again, you don’t want the trustee to have an incentive to “off” your pet to collect what is left in the trust. Giving a small gift after your pet dies is fine, but give the rest to the local ASPCA, or someone else not associated with your trustee.

Actually place the pet in the trust as a part of trust property. Animals are considered property. By placing the pet in the trust as part of the trust's property, you are requiring the trustee to use his or her fiduciary obligation of care, in caring for your pet. Of course, there are no guarantees. However, you should line up your legal "ducks in order."

These are just a few rules to consider. If you have an interest in a pet trust, you should contact your local estate planning attorney for assistance.

"No Contest" Trends in California

noreply@blogger.com (Larry D. Stratton) — Tue, 24 Mar 2009 15:09:00 +0000

There are two interrelated concepts flowing in Trusts and Estates law in California. First, there is an interesting article in Smart Money discussing the new trend toward litigation in the estates and trusts area, and how the cooperative, family approach is going "by the wayside" in favor of litigation. Here is the first paragraph:

It's rare that an inheritance passes from one generation to the next without leaving some scars. But smooth transitions are becoming even rarer thanks to the growing influence of a new player: the second spouse. As Americans live longer, they're more likely to move into second marriages, and legal experts and financial planners say the resulting friction with the kids is steadily mounting. In more cases grown children are going to court against their parents even while they're still alive, only to run up against a legal framework that leaves them with surprisingly few rights compared with their parents' new spouses. The once-sleepy field of trust and estates law is now brimming with hardened litigators. In Texas, personal-injury lawyers in search of big paydays have begun taking on will contests. And just as court squabbles are on the rise, so are prenups and sophisticated trusts that are designed to forestall them.

The second trend? With the advent of passage of Senate Bill 1264, California's "no contest" law has been significantly weakened. This weakening affects wills and trusts executed 2001 and later. "No contest" clauses traditionally penalize parties who attempt to attack a will or a trust. Now, it will be significantly easier to attack a will or a trust.

Welcome the lawyers...

The Stress of Not Having an Estate Plan

noreply@blogger.com (Larry D. Stratton) — Tue, 24 Mar 2009 05:35:00 +0000

The Arizona Daily Star published an article on March 23, 2009 entitled, You'll Want To Read this Before You Die, discussing the stress inherent in not having an estate plan in place. The article focuses upon the experience of businesswoman Belinda Mossor, whose father died in 1998, with no estate plan. The article goes on:

It took three years for Mossor and her mother to sort out Harry Mossor's finances, insurance and other assets. Eleven years later, Marjorie Mossor is still learning new things about her late husband's finances. Recently, she received a letter from an insurance company informing her of dividends from a policy that belonged to him.

The article also has a sidebar with a number of interesting statistics, none of which are surprising:

A 2007 survey of adult residents of the United States found:

55% don't have a will

52% of Anglos have wills, compared with 32 percent of blacks and 26 percent of Hispanics

41% of people have living wills — 10 percent more than in 2004

38% have designated someone as their health-care power of attorney, compared with 27 percent in 2004

10% say they haven't created an estate plan because they don't want to think about dying or becoming incapacitated, while 9 percent say it's because they don't know whom to talk to about estate planning, and 24 percent say they don't have the assets to warrant it.

Professor Pamela Champine

noreply@blogger.com (Larry D. Stratton) — Mon, 16 Mar 2009 01:48:00 +0000

I did not know her, but the tax/estate planning blogs I track the closest both report the recent death of Professor Pamela Champine of New York Law School, at the age of 44. Those reports are on the TaxProf Blog and the Wills, Trusts and Estates Prof Blog.

New York Law School has published a press release regarding this sad event:

Pamela R. Champine, Professor of Law, died on March 8, 2009 at her home in Greenwich Village. She was 44 years old. A member of the New York Law School faculty since 2000, Professor Champine taught Property; Wills, Trusts, & Future Interests; Federal Income Taxation of Trusts and Estates; and Problems of Timing, and was Director of the Core Curriculum in the Law School’s Graduate Tax Program. Before joining New York Law School, she was an associate in the trusts and estates department of Hughes Hubbard, was law secretary to New York County Surrogate Eve Preminger, and also served as Principal Court Attorney in the New York County Surrogate’s Court. Active in both the New York City Bar and the New York State Bar Association, Professor Champine was elected an Academic Fellow of the American College of Trust and Estate Counsel in 2007.

Although Professor Champine’s first scholarly contributions dealt with taxation and trusts and estates, her focus soon shifted to the highly important and surprisingly understudied questions surrounding capacity and donative transfers. Her final publication as a co-author of Competence in the Law: From Legal Theory to Clinical Application is an outstanding summary of the state of the law and a sad reminder of how much has been lost through her death.

In a moving tribute announcing the news of Professor Champine’s death to the faculty, Professor William P. LaPiana, her close friend and colleague, talked about the great joy she found in teaching. “Pam saw every day of her life as a law professor as a gift,” he said. “She counted it a privilege to teach, read, think, and write, and next to her family, it was what gave her life meaning.” Professor LaPiana added that Professor Champine was “as inspiring as she was effective as she led her students to a thorough understanding of the subjects to which she devoted her efforts. She brought innovative techniques to the classroom and showed her students that what they might have once thought was dry and uninteresting was full of life.”

“I know the entire New York Law School community joins me in our shared grief over Pam's passing,” said Dean and President Richard A. Matasar. “She was one of the most courageous people I have ever known. Through her illness, she showed a continuous love for her profession, her students, and the law. We all have missed her, and the void she leaves will never be filled.”

Professor Champine is survived by her husband David Simonetti and their daughter Isabella.

I note from my own research that Professor Champine recently co-authored Competence in the Law (March 2008).

Blessings to her family and co-workers.

R.I.P.

A High Rent Murder

noreply@blogger.com (Larry D. Stratton) — Wed, 11 Feb 2009 06:30:00 +0000

It's hard to believe, but even in death murder victim Alice Ortiz is being held to her lease contract by her landlord...to the tune of $2,821.23.

I recall reading this sad news story late last year: Alice Ortiz and her family were massacred on Christmas Eve last year in their Covina, California apartment. Covina is a suburb in the Los Angeles area.

While Alice is well beyond the worries of this world, her landlord still "wants the green." An article in the Daily Bulletin goes on:

Now the landlord, Broadstone Foothill Apartment Homes, wants its money, $2,821.23 in all, according to documents obtained Wednesday.

A Jan. 29, itemized invoice to Ortiz's survivors claims the dead woman's estate owes $1,655 to the apartment complex on North Central Avenue for "insufficient notice to vacate."

The company also billed Ortiz for 12 days' rent and other fees accrued in January, weeks after she died.

The family's attorney, Scott Nord, said, "this is just low."

I agree.

Thank you for Prof. Beyer bringing this to my attention, through the Wills, Trusts and Estates Prof. Blog

Unintended Consequences 101: The effect of the waiver of RMD in 2009 upon so-called "conduit trusts"

noreply@blogger.com (Larry D. Stratton) — Sun, 18 Jan 2009 22:34:00 +0000

Previously I mentioned the fact that Congress has waived the Required Minimum Distribution (RMD) requirement for IRAs for this 2009 tax year, However, there are always unintended consequences. Here, certain trusts may not be sufficiently flexible to take this tax law change into account. According to a recent article in the Redland Daily Facts:

The new tax law could present problems for trusts that are set up to control post-death distributions to beneficiaries. Many trusts did not take suspension of the RMD into account. If the trust was set up as a conduit trust (or a "trusteed IRA"), where all RMDs (and only RMDs) would be paid out from the inherited IRA to the trust, and then from the trust to the trust beneficiaries, then the trust beneficiaries will receive nothing in 2009, since there are no RMDs for 2009. Chances are this is not at all what the IRA owner would have wanted. I would guess there are going to be some very unhappy trust beneficiaries that will not like this kind of tax relief. IRA expert Natalie Choate suggests if you are considering such a trust for your beneficiaries, consider giving the trustee more flexibility - for example, directing the trustee to distribute to the trust beneficiary each year the minimum required distribution "and such additional amounts, if any, as the trustee deems advisable for the beneficiary's health, education, and support," or to distribute "the greater of the RMD or the income of the IRA each year".

A chance to perhaps help someone else...

noreply@blogger.com (Larry D. Stratton) — Wed, 14 Jan 2009 22:35:00 +0000

I received the following e-mail solicitation from Katherine, which I promised to pass along. It is self explanatory, and relates to a cable television program currently in production:

"WHAT IS YOUR WILL EXPERIENCE?" Have you ever had a will of a loved one read in your family? Were you surprised by the outcome? How did it make you feel? How did it affect your family and their personal relationships with each other?

Most people don't realize upon the death of a loved one how a will, with its web of legal complexities, can generate unexpected tensions that challenge the stability of family relationships. When shocking secrets or unexpected conditions evolve, families often react in ways they could not have predicted. People fight for financial gain or perhaps for physical possessions that may seem like greedy actions to an outsider, but in fact they are often struggling expressions of deep sadness and grief.

We are looking for people who are willing to share their "will" inheritance stories with us. Your testimonies will be invaluable in raising awareness to the difficult issues so many families experience surrounding wills and how they can be avoided in the future. Your participation in our series will help viewers gain a deeper, personal understanding of the complex world of wills.

If you're interested in helping others reach closure on their feelings concerning a past will, or want to make sense of your own experience with a will, I would be very interested to hear your story. Thank you very much for generously sharing your story with me. My name is Katherine and I can be reached at: storiesthewill@gmail.com.

Thank you again - I look forward to hearing from you soon.

Planning Interrelationships: Some Random Thoughts for 2009

noreply@blogger.com (Larry D. Stratton) — Tue, 06 Jan 2009 16:38:00 +0000

Have you ever considered the interrelationship between different types of planning? One aspect of planning affects the other. Here are some examples:

Estate Planning vs. Financial Planning. With estate planning you plan your estates for the benefit of your heirs. But, if your financial plan goes awry (more debt, less income, and/or less savings) it could easily affect your strategy. For example, if your estate plan includes charitable giving as a part of your strategy (if you have a charitable remainder trust, as an example) a decrease in the amount of your available assets could affect the amount you can practically give. In other words, with the recent market turmoil, you might now be “giving beyond your means.”

Also, if your financial and investment plan is hugely successful, you may have estate or inheritance tax issues which you might not otherwise have.

College Planning vs. Retirement Planning. As Deborah Fox recently wrote in the January 2009 issue of Financial Planning, “college planning is retirement planning.” Every cent plus future never-realized appreciation which you spend on college is taken away from retirement. Thus, if you sink $100,000 into college for your children the future value of that amount in 25 years, even at a modest 4% rate of return, would be well over $260,000. Of course this is highly simplistic, because college funds do not (poof!) appear out of the air, but are saved over a substantial period of time. That means that there is a potential for even more never-realized income.

So, what do you do? Here are just a few suggestions:

● Get a financial planner. Many don’t do this, but consider getting professional assistance.

● Get an estate planner. So many people decide to “save a buck” and do their own estate planning. Often this is with less than desirable results. It’s hard to integrate your strategies when there is no strategy.

● Integrate saving and borrowing into your college planning. I will admit: There are many disputes on this score between planners on this issue. Many planners find borrowing an anathema, while others embrace it. Consider this, however: Your children (or, potential children) have a much greater number of earnings years than you do as parents.

Also, consider this analogy: the logic behind a city borrowing to pay for a public improvement is that the resurfaced street, for instance, is to be used for many years by many taxpayers and motorists. It would not be fair to saddle the present taxpayer with all of the cost, but to spread it out over time. The same could be said for college borrowing.

I suggest postponing borrowing as long as possible by using savings, but recognize that borrowing (especially through the federal student loan program) is a perfectly appropriate way to go.

These are just a few suggestions, and each of them could be discussed in a separate article or blog entry. There are more, which I will discuss at a later time. However, the first step in moving forward is...taking the first step.

A Slightly Different Take...

noreply@blogger.com (Larry D. Stratton) — Fri, 26 Dec 2008 16:59:00 +0000

I came across this article by the Tax Prof Blog, edited by Professor Beyer. It relates to Nancy Silverton, who previously sold her restaruant in Los Angeles, La Brea Bakery, for $5 million. But she then lost all of it after she gave it to Bernard Madoff for investment. Madoff is alleged to have swindled investors to the tune to the total of $50 billion.

Of course, the primary lesson here is that she should have diversified her investments instead of simply giving it all to him. She didn't do this, and lost all of her retirement funds and also her childrens' college funds.

The secondary lesson here (for me) is her attitude. At the age of 54, she might be tempted to curl up into a ball and to give up. But here are her comments:

"I was silly and I learned a lot," said Silverton, 54, who is an owner of Pizzeria Mozza and its neighboring Osteria Mozza in Hollywood. "I will never not diversify."

Here is some more...an even more interesting reaction:

"I need to reinvent my life," said Silverton, who co-founded the landmark Campanile restaurant and La Brea Bakery with her ex-husband, Mark Peel, and another partner. "To think you have a chunk of money is very comforting. Now, I'm just like 99% of the world. If I had to retire tomorrow, I could not."

She also needs to "build something" again for her three children, ages 15, 23 and 26. "They don't have any of that savings."

I love (and could learn a lot from) her attitude. I'll bet that she does "build something" else.

Treasury to Seniors with IRAs: Drop Dead

noreply@blogger.com (Larry D. Stratton) — Wed, 24 Dec 2008 00:08:00 +0000

In an earlier post, I noted that Congress has passed relief from the Required Minimum Distribution (RMD) requirement for Traditional IRAs for the 2009 tax year.

But I have a close relative who is howling, because he is now required to take RMDs for 2008 with his portfolio at firesale prices. His stock and fund holdings are (like almost everyone else) in the proverbial toilet -- so he's taking a bath. Unfortunately for him, and all other Traditional IRA owners over 70 1/2 years of age, the Treasury Department will not give relief for this tax year. Relief will only occur next year.

In a letter to the House Education and Labor Committee, the Treasury Department reasons:

The Treasury Department and the Internal Revenue Service have determined that any further change to the required minimum distribution rules should not be undertaken. The scope of Treasury's ability to make administrative changes has constraints. Thus, any steps Treasury could take would be substantially more limited than the relief enacted by Congress and could not be made available uniformly to all individuals subject to required minimum distributions. In addition, implementation of such changes would be complicated and confusing for individuals and plan sponsors. Thus, all individuals who are subject to required minimum distributions for 2008 should take their distribution under the existing rules and, as a result of relief provided by Congress, they will be entitled to a complete waiver of the requirement to take any distributions for 2009.

Ever Wonder What Can Happen When You Don't Update Your Estate Plan?

noreply@blogger.com (Larry D. Stratton) — Tue, 23 Dec 2008 15:31:00 +0000

This is a somewhat odd story because it is extreme. Still, the consequences are not that unusual.

Martin Sowell is a 43 year old Ohio man who tried to kill his adoptive parents when he was 17. He tried to poison his father and then tried to shoot him as he fled (three shots, all missed). However, he successfully pumped three bullets into his mother's back. Somehow, both survived.

One aspect of the story is the fact he received only a year in juvenile hall for attempted murder, and that he was released at 18. But that is a different story, for a different day.

Another aspect is that even though his parents attempted to effectively disinherit him by giving him only $50 of their substantial estate, they also failed to update their wills. As a result of failing to name a contingent heir, Sowell now stands to inherit $500,000 after his last surviving parent, his father, passed away.

As stated in the Coshocton Tribune story:

According to the almost identical wills, both the Sowells named each other as their sole heir, with no mention of secondary heirs after they both died.
"It's a mess, a classic example of what happens when you don't update your will," said John Polito, chief magistrate and administrator in Probate Court. "The way it was written, it was as if they had no wills."

(Hat tip to the Ohio Trust and Estate Blog for this interesting but unfortunate story)

To Hell and Back...

noreply@blogger.com (Larry D. Stratton) — Fri, 19 Dec 2008 06:57:00 +0000

Whoa.

I recall hearing in the media a few years ago of a "kinder, gentler" IRS. I guess even it were possible for perhaps the largest and most aggressive collection agency in the world to be "kinder" and "gentler". . . this probably isn't the best case to point that out.

A few days ago the U.S. Tax Court reported Nicholas v. Commissioner, T.C. Summ. Op. 2008-155 (Dec. 15, 2008), where the IRS chased a religious couple literally to hell and back for a delinquency of $712.

As they did every year, the couple donated almost half of their income to charity; in 2005, they donated $43,637 of total income of $89,092. However, in 2005 their accountant made a mistake, listing all contributions as "cash" contributions, even though $4,906 was noncash. Discovering the error, the couple filed an amended return, filing a Form 8283 for the $4,906 noncash contribution.

The IRS apparently flagged the return, and disallowed the $4,906, claiming a delinquency of $712.

Fortunately, the Tax Court was less than impressed with the IRS, and allowed the full deduction. Here is a portion of the decision:

For the 2005 tax year Mrs. Nicholas maintained notes on envelopes and on other documents recording the types of asset,names of charitable recipients, costs, and estimated values of petitioners’ noncash contributions. In substantially all instances petitioners had a receipt and/or letter from the charitable recipient. As is typical with contributions of assets valued under $500, the charitable organization left it to the donor to fill out the items and values, which Mrs. Nicholas did. Although Mrs. Nicholas did not have receipts to substantiate the original cost of each item, she had been the purchaser and had recollection of the amounts. More critically, Mrs. Nicholas frequented garage sales and flea markets and had a keen sense of the value of her contributed items. The items contributed included books, CDs, used furniture and lamps, and similar types of items. Petitioners were avid readers and accumulated large volumes of books which they stored in their home. Many of the books concerned religious topics, and some were children’s books that petitioners regularly purchased for their children. On regular occasions, as books and other items accumulated, Mrs. Nicholas would make a trip to the Salvation Army or some other charitable organization and make a donation.

(Hat tip to Professor Caron's Tax Prof Blog for pointing this case out)