Daily Finance has an interesting article for estate planning that should be addressed in your 30s. Estate planning is often equated with older people; however, there can be some estate planning moves that you can make as you are younger that might make sense. In addition to having a will, a revocable living trust, a healthcare directive, and a power of attorney, the article also talks about planning for retirement.
The article is 6 Estate Planning Moves You Should Make in Your 30s.
Marketwatch has an interesting article on how you can use a 529 College Savings Account as part of your estate planning process. Estate planning is all encompassing so it is important to use a variety of tools to give gifts, minimize taxes, and make your wishes known.
The article discusses the importance of using a 529 College Savings Account for grandparents to grandchildren and how this can minimize the size of an estate for estate tax purposes along with providing gifts to your grandchildren. Of course, the same reasoning can be applied to children.
The article is Using a 529 college savings accounts for estate planning.
A death in the family can bring out many emotions, and when wishes are unclear in an estate plan, some of those emotions can boil over among family members even when determining burial and funeral arrangements. After only five days that famous actor Mickey Rooney had died, his family was in Los Angeles County Superior Court to determine where he would be buried; however, they reached a settlement prior to the hearing.
Mickey Rooney’s estate plan was not your typical estate plan because he had disinherited his nine children, all grandchildren, and his current wife. Also, his net worth was only estimated to be about $18,000, and his estate most likely will not receive any royalties from his 80+ year career because many of the older Hollywood contracts did not provide for royalties. Perhaps his largest asset (if you could call it that) was a judgment against his step son for $2.86 million stemming from an elder abuse lawsuit. Rooney claimed his stepson lived a lavish style while draining all of Rooney’s finances. However, his stepson claims he does not have the money, so the judgment may never be recoverable.
This same stepson and his current estranged wife went to Los Angeles Superior Court to demand that the Court require Mickey Rooney’s body be buried in a family plot next to his estranged wife when she dies. This estranged wife’s other son, who is also the executor of Mickey Rooney’s estate, opposed such a demand. Although they settled the matter, Rooney’s estranged wife is still fighting that the will is invalid claiming it was written with “undue influence” and that Mickey Rooney lacked capacity.
This case is prime example of how estate planning disputes are not just over money, and sometimes can be fought even when there is no money. Particularly in light of the elder abuse claim against one stepson, Mickey Rooney’s estate plan should have addressed such issues as burial.
In a recent decision, a California court found that an arbitration provision in a living trust could not be enforced when the beneficiaries were disputing the validity of the trust document. McArthur v. McArthur was a case of first impression in California and is important for all those with a trust to understand that an arbitration provision may not be valid.
In 2001, Frances McArthur created the Frances E. McArthur 2001 Living Trust providing that her estate would be divided equally among her three daughters. In 2011, the trust was amended giving one daughter a larger share of Frances’ estate, named that same daughter as co-trustee, and added a “Christian Dispute Resolution” clause requiring mediation and arbitration for any dispute arising out of the trust.
Soon after the amendments were made, Frances died. One daughter who received a smaller share of her mother’s estate filed a lawsuit claiming elder abuse against the daughter receiving the larger share. A motion to compel arbitration was filed, and the trial court denied the motion because an arbitration clause that requires arbitration for a dispute requires consent among all parties, such as in a binding agreement.
On appeal, the Court found that arbitration clauses generally require the consent of all parties involved. Although an arbitration clause has been found valid in a CC&R of a HOA even though the homeowner did not actually consent to the CC&R, the Court found that ultimately the homeowner consented to purchasing a property with a CC&R and should have known about the arbitration provision.
The Court found that a beneficiary of a trust did not consent to the arbitration provision found in the trust. Although a trust can be interpreted similar to a contract; however, California law generally finds a contractual relationship between the settlor and trustee not with the beneficiaries.
Thus the Court found that a beneficiary alleging a trust was not valid was not compelled to submit to arbitration but could continue the dispute in court. This case has an important effect on beneficiaries disputing the validity of the trust; however, it is also limited because an arbitration clause may still be enforceable for other disputes.
Celebrity deaths are often followed by a very public battle between heirs over the celebrity’s assets, fame, and residual income. This CNBC article entitled “Here’s Why Philip Seymour Hoffman’s Will is a ‘Mess’” helps others not make the same mistakes.
Mistake Number 1
Hoffman’s will is over a decade old. Wills should be changing documents because life changes. After major life changes, a will and your entire estate plan, should be reviewed to determine if any changes are necessary. Hoffman’s will left his estate to his long time girlfriend and mother of his children, Marianne O’Donnell.
Hoffman’s will may only mention his one daughter that was born at the time. After he wrote his will, he had two additional children. In California, a child born after a parent’s will is executed is entitled to the child’s intestate share; however, there are exceptions and this statutory provision should not be relied upon to allow all your children to inherit your estate.
This was probably the biggest mistake in Hoffman’s estate planning because it will create uncertainty and could create a battle between siblings for their shares of Hoffman’s estate.
Mistake Number 2
Hoffman’s estate plan did not take into account estate and other taxes. Because he left the bulk of his estate to his girlfriend, she will still need to pay estate taxes. If the couple were married, she could have inherited his estate tax free. The number is huge . . . O’Donnell may need to pay up to $11.9 million of a $35 million estate, nearly 1/3 of the estate!
There could have been a few ways to avoid the large estate tax bill, including creating trusts for his girlfriend or purchasing a life insurance policy to help pay for the estate tax bill. However, perhaps the best way to avoid the large estate tax bill would have been for the couple to have been married.
Mistake Number 3
Hoffman created a trust for his one child (the one born before he wrote his will). The trust gives all assets to the child when the child turns 30. Because of the size of Hoffman’s estate, it may have been better to keep the trust and not provide an outright gift of all assets at a certain age because upon 30, Hoffman’s estate to his child will not be protected from creditors, liens, judgments, or ex-spouses. It is important to note that are ways to create trusts for beneficiaries in order for them to be protected from creditors or reckless spending.
Although Hoffman had an estate plan unlike some other famous celebrities who have recently died, the fact that it had not been updated in ten years makes it problematic for several reasons along with the huge estate tax bill that will now be owed.
Forbes recently had an interesting article entitled Five Estate Planning Lessons from the Paul Walker Estate. It provides an interesting insight into the estate plan of the late actor that was valued at 25 million dollars. His untimely death at 40 years old also shows that estate planning can never be done too early. His first will was signed when he was 28 years old.
Paul Walker had a revocable living trust, which is highly recommended for most people who would come to visit me for a consultation. His will left all his assets to his revocable living trust. In addition to avoiding the publicity and costs of probate, his revocable living trust greatly assists in passing assets to his fifteen year old child in a controlled fashion. Although we don’t know exactly what his revocable living trust says on giving assets to his child, a good estate plan for someone with significant assets will distribute assets to children in a controlled fashion and not simply give all assets to them when they turn 18.
As discussed in previous posts, having a revocable living trust is only the start. The revocable living trust must be funded with your property meaning that deeds for real estate must be transferred to the revocable living trust and personal property such as bank accounts, brokerage accounts, and individual stocks must be transferred to the name of the trust.
In addition to having the revocable living trust, you will also need a will. For individuals and couples with minor children, a will is the only method to name a guardian after your death. In Paul Walker’s case, he named his mother as the guardian for his daughter. Although a grandmother will not take custody rights over a parent, it is smart estate planning to name a back up if the need would arise.
Estate planning is not just for celebrities and those with significant assets. The issues raised by Paul Walker’s estate could arise in the average middle class family’s estate particularly when young children are involved.
Please contact Attorney Anthony Marinaccio at (818) 839-5220 to set up a free initial consultation to discuss your estate plan or amending your estate plan.
This article from Forbes Magazine, entitled What Could Happen If You Write Your Own Living Trust provides an interesting glimpse into the challenges faced by heirs or by someone still alive when attempting to draft their own estate plan. Hiring an attorney upfront to draft an estate plan can often be a more cost effective process than if you do nothing and allow your heirs fight it out.
In addition, particular when dealing with real estate as the article discusses, there can be mistakes that can cause unneeded time and money to be spent to correct the mistakes. Even if you have drafted your own estate plan, you could bring it to an attorney to review to ensure that it will properly fulfill your wishes.
Everyone has a different estate plan, so it is difficult to get a one size fits all estate plan that you can purchase or draft yourself from a form. At a minimum you should discuss your estate plan with an attorney and then decide to hire an attorney to draft or do it yourself.
Attorney Anthony Marinaccio offers a free initial consultation to discuss your estate plan. Please contact him at (818) 839-5220 to set up an appointment.
This article from bankrate.com provides an interesting glimpse into how estate planning changes through the different stages of your life. As I have discussed in previous blog entries, estate planning is not a one time event that you do and never think about again. Estate planning documents, such as your will, living trust, health care directive, and power of attorney, may need to change as events occur in your life.
The article provides some insight as to the things you should be thinking about when making an estate plan for the different stages in your life. In particular, the first few chapters of your life prior to marriage are important to consider. If you do not have an estate plan such as a will or living trust, any assets will go to your closest living relatives decided by the State, known as intestacy. This will be a costly procedure as it requires court approval.
If you have a partner or close friends that you are more interested in giving any of your possessions to, it is important to consider an estate plan because generally unmarried persons and non-relatives will have no rights to any of your possessions after your death. A small estate plan, consisting of will, a living trust, a healthcare directive, and a power of attorney is not an expensive venture when you are young. In addition, there may be valid reasons why a trust is not required and that you would have a will with a healthcare directive and power of attorney.
Attorney Anthony Marinaccio is available to discuss your estate planning needs and provide guidance on these issues. I am available for free initial consultations at my office or at your location in Los Angeles County. Please give me a call at (818) 839-5220 or contact me through my website atwww.marinacciolaw.com.