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There Are Better Living Will Options

I am not sure if this photo is legitimate,but it seems that a man had his living will and organ donation wishes tattooed on his arm.  That should remove any ambiguity about his wishes, although a standard living will on paper with verbal instructions to his relatives, and checking the organ donation box on a drivers license would be far less intrusive.  Those documents would also preserve skin space for tattooing his girl friend’s name and current favorite band.

Annual Gift Tax Exclusion Increase for 2014

File this under news you can use.   The annual gift tax exclusion will increase to $14,000 next year from the current $13,000.  The gift tax exclusion is the amount of money someone may give away each year without paying gift tax (or more realistically without reducing the amount of money he may leave tax free at death).  When giving away this larger amount, do not forget the blogger who shared this news.    He would even settle for the incremental amount.

Estate Planning Myths

Forbes discusses 10 common estate planning myths, all of which I have heard.  The most egregious myths are that without a will the state will inherit one’s estate and that having a will allows one to avoid probate.  Of course, neither is true which is why they are myths.

Personally, the myth I am most vested in is that people need an attorney to draft a will. For reasons stated previously on this page, the cost of retaining an attorney far outweighs the downside of an error or not addressing an issue.  Just ask the illegitimate child who inadvertently inherited a share of an estate or the children from the first marriage who were disinherited entirely in favor of the second, late in life spouse.

Tell Family Members About a Will?

1.  Obtain the consent of executor, trustee, and guardian to serve.  Do not surprise them with their responsibilities at death.
2.  Inform the executor of the location of the documents, but do not necessarily provide a copy if they contain provisions that will upset family harmony if known.
3.  For adult children who will inherit a significant sum of money, do not inform them of the amount but suggest to them that they seek financial advice and work with the family financial advisor.
4.  Related to No. 2, by all means if a child is being disinherited, or if assets are being left to charity instead of to nieces and nephews, do not inform anyone.  If they find out, the disinherited heirs could make the client’s life miserable and make the client wish for a hastened death.

Will Preparation tips

USA Today has a nice article on points to consider when preparing a will.  The most salient is that beneficiary designations over-ride  will provisions.  If a parent’s will divides all assets equally between 3 children, but an account is owned jointly with  one child, that child will inherit the entire account negating the parent’s wishes.
Personally, the other key point is that people are discouraged from preparing their own wills. My children’s school seconds that advice.

Planning for College Age Children

This post is a month late.  Before kids departed for college, parents should have had their children execute a simple set of health care directives so that parents can receive medical information about, and make medical decisions for, their college age children.  This is especially important for children from divorced families where it is unclear which parent is the decision maker.
The recommended documents are a health care power of attorney (to make the medical decisions) and a HIPAA disclosure so a parent can receive information about their child’s health status after a bad Ecstasy trip or injury while car surfing.

Smart Rider

The late Dennis Hopper made several wise estate planning moves late in his life. First, he had a pre-nuptial agreement when he married his fifth wife. Second, when he was dying and was in the midst of an acrimonious divorce with her, he created a trust for their then 7 year old daughter to which he left nearly $3 million. The then estranged spouse/now widow has no control over the trust assets.
Two points. When a couple is divorced with minor children, I always advise my client to create a trust to hold assets for the children upon the death of the client. Otherwise, the former spouse will control the assets until the child turns 18 and may benefit from the assets. Second, when marrying for the 5th time, I am glad to see that Mr. Hopper had learned enough from his 4 previous failed marriages to execute a pre-nup. Old dogs can learn new tricks.

There Is Gold in the Walls!

After an unmarried Nevada man died, authorities discovered $7 million of gold bars and coins stashed in his house.  The man had lived alone since his mother’s death in 1992.  He was apparently dead for a month before neighbors reported a smell emanating from the house.  His left no will so his first cousin, whose phone had been disconnected, will inherit the estate as his closest relative.
I am uncertain about what lessons can be learned from this story but I will suggest a few.
1.  It is always best to leave a will instead of relying on the intestacy statute to determine where assets where go after death.
2.  People should check on their “crazy neighbors” because they, instead of cousins with disconnected phones, might inherit assets at death.
3.  Living isolated and alone without visiting doctors can lead to a premature death.
4.  Gold has been an incredible investment the past several years.

Beneficiary Designations and Asset Titling

The best estate plan will not work if beneficiary designations and asset titling are not coordinated with the provisions of the will and trust. Common mistakes includeadding a child’s name to a house deed, adding one child as the transfer on death beneficiary of a financial account to the exclusion of the other children, or not avoiding the probate process by transferring the asset to a trust or adding a transfer on death designation.

I always provide my clients with a list of how to address beneficiary designations and asset titling issues. If the issues are not handled properly, one child can inadvertently inherit most of the estate to the chagrin, and lasting contempt and hostility, of the other children.

Digital Assets (Heavy Sigh Version)

At the risk of beating the dead horse about digital assets, some articles need to be mocked.  This recent WSJ article deserves derision for making a simple topic – how to access on-line accounts of a deceased person – stupidly complex.

Suggestions include the creation of a social media will with a review of each web site’s policies, the nomination of a digital or social media executor, and creation of digital asset trust to avoid those assets going through the probate process.  My responses to these ideas, in order are:  a standard will suffices, the executor should be able to address on-line issues and if he can not he should not be the executor dealing with assets with a monetary value, and only an idiot would list a digital account as a probate asset to be disposed of.  I suspect that some people think that there is money to be made from that idiot by selling him a trust that he does not need.

My advice remains creating a list of passwords accessible at death by the executor.  Simple is better and often times less expensive.

Choice of Trustee

Who should serve as trustee of a trust?  Choices are usually family members or a corporate trustee from a bank or investment company.

I usually advise clients to look at their family members first, then use a corporate trustee if there is no one suitable.  However, I always try to dissuade my clients from naming one child as trustee of another child’s trust as a means of preserving family relationships post-death.  Grandparents can serve as trustee for the short term.  However, if the parents or grandparents are Michael and Dina Lohan, I always advise that the client use a corporate trustee.

Closing On-Line Accounts

Returning to post-death digital assets.  The web site Deceased Account assists families with closing on-line accounts of deceased family members.   The site summarizes the procedures of most major (and many minor or unheard of) on-line services.

If a surviving spouse discovers that the deceased spouse belonged to eHarmony, the account can be closed by a family member by simply stopping payment. Thankfully.  And indignantly.

Bruce Willis vs. iTunes

Continuing the recent unintended theme of celebrity posts while dovetailing with last week’s post about iTunes.  Bruce Willis is rumored to be contemplating a lawsuit against Apple over his desire to leave his iTunes account to his children upon his death.  As mentioned last week, he (nor anyone) currently does not have that right under Apple’s end user license agreement.
Presumably he does have the right to leave his children his rights to “Return of Bruno.”   There is no word on whether they actually want it though.

Who Inherits an iTunes Account?

An issue that seems more problematic in theory than practice is who inherits digital assets at death. Technically, the purchaser of digital content has acquired the “non-transferable” right to use the items.  Theoretically, there is no right to leave these assets to heirs and it is very difficult to distribute parts of these assets among various heirs (i.e. R.E.M. collection to daughter, Eminem songs to son).

The simple solution is to share the password so that the collection can continue to be accessed post-death on whatever devices the decedent used (i.e. Kindle, iPod).  Logistically, integrating an iTunes library into another library is very technically challenging and merits a visit to www.ilounge.com.

However, from a practical perspective, do children want their parent’s digital media and vice versa?  Growing up, my parents never had an album that interested me.  Looking back, I still see no need for a Ray Coniff Singers or Mitch Miller album in my collection.  Will others be worse off because they can not access a loved one’s Lady Gaga, Lil’ Wayne, or Black Eyed Peas collection?  Will family members want to watch Cars 2, Transformers, and any Pirates of the Caribbean movie in the future, not to mention episodes of Keeping Up With the Kardashians and Two and a Half Men?  I doubt it.  If I am right, perhaps Apple and Amazon are doing people a favor by not easing access to the digital content of deceased family members.

Credit Card Debt of a Decedent

What happens to credit card debt at death? The general rule is that when a cardholder dies, the debt is paid from his own assets and a spouse is not liable for the bill. In Ohio, the credit card company has six months to file a claim against the estate. Otherwise the debt is not valid. If there are insufficient non-joint assets, the debt will go unpaid. This applies even if a spouse was an authorized user on the account (but does not use the account after death).

Beware of smooth talking debt collectors who will try to convince surviving family members that they should pay the debt of the deceased for moral reasons or to maintain the good name of the deceased. There is no legal reason to do so. Also, there is little moral in a business with 18% interest rates and punitive late fees.

“Zombie” Bank Accounts

I suspect we will see more of this as banks consolidate further and more transactions become electronic. A bank account was closed after the owner died, but the bank reopened the account as a “zombie account” when scheduled electronic withdrawals were made. Bank of America apparently did not have a procedure for keeping closed accounts closed when electronic transactions were attempted to be made post account closing. Nor did it have a policy for dealing with worthless mortgages, but that is a different subject.

The best bet for the estate executor would be to close the account and open the estate account at a different institution.

Will Formalities (Adam Yauch version)

More on Adam Yauch of the Beastie Boys.  His will is also receiving publicity for having a handwritten clause forbidding the use of his  music or artistic property for advertising purposes.  One legal question is whether he can ban the use of all Beastie Boys songs in ads because he did not own all of the rights to a song or songs.  Not knowing how the group worked and created music, I have no insight on that issue.

What intrigues me is the handwriting.  If it was added after the will was signed and witnessed, the clause is invalid because it was not witnessed by two people.  If it was added at the signing meeting, it should have been initialed by him and the witnesses to clarify that it was intended to be part of the will.  To properly revise a will, a client should execute a new will or a codicil.  To prevent clients from writing on wills, I offer to retain the originals in my vaults.

Also intriguing is the anti-commercial nature of the clause which stems from the pre-digital music era belief that to use music in commercials is “selling out.”  Now, of course, bands use commercials as a means of getting their music heard and making money.  You have to fight for your right to make a living. 

Designating a Guardian

The will of Adam Yauch of the Beastie Boys illustrates how not to designate a guardian for minor children.  Apparently, he and his wife could not agree on the guardian for their then 3 year old daughter, Tenzin Losel, when they executed their wills in 2001.  They compromised and designated his parents if he died in an even numbered year and designated her parents if he died in an odd numbered year.

Several points.  Unless the parents of my clients are very young, I do not recommend that the clients designate parents as guardians. Second, clients should re-visit their guardian designation regularly and adjust it accordingly based on life changes, especially if a client has a terminal illness.  Third,  unless the child is a Sherpa, I am not sure that Tenzin is a good name.

Controlling From the Grave?

The WSJ has an article at the intersection of 2012 gifting opportunities and unique trust provisions.  I will repeat that the $5 million gift tax exemption for 2012 affords some people tremendous planning opportunities.  Whether they want to make those gifts with unique strings attached i.e. attending the donor’s alma mater, spelling the family name a certain way, or marrying within the faith, is possible (and too controlling – at least in these examples).
However, I include a clause in trusts for all of my clients that suspends distributions if a beneficiary has a drinking, drug, or gambling problem.  n.b. fantasy football and a bottle of wine with dinner do not rise to that level.

Movin’ On Up? Not Quite.

The late Sherman Hemsley, who played George Jefferson on “The Jefferson’s” remains unburied six weeks after his death while his manager/partner and alleged brother engage in a will contest over his $50,000 estate.  The alleged brother is contesting the validity of a will executed a month before Hemsley’s death from cancer.

I am somewhat perplexed about how a will contest affects the burial.  However, this problem could have been avoided if burial instructions were left in writing.  Generally, leaving the funeral instructions in a will is not advisable because the funeral has already occurred by the time the will is read.

The small nature of the estate compared to the legal fees to contest the will is the one factor that could quickly resolve this dispute and allow Mr. Hemsley to start “movin’ on down.”  My apologies for that, but I could not resist.

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All Posts By Jay Brinker

I am an attorney located in Cincinnati, Ohio who practices in the areas of estate planning, probate, asset protection, and small business advice. I make a difficult and bewildering process as simple as possible. Most importantly, I provide "more for less" for my clients.