Thursday April 28, 2011
A frequent conversation that I have as an estate planning attorney goes something like this:
"I have at least one of my children on all of my bank accounts and I've added all of my children to the deed for my house, so I don't need a will or a trust, right?"
While you may be surprised, this is really a loaded question. This type of estate "planning" is what I like to refer to as the "quick and dirty estate plan" - adding children or other beneficiaries as direct owners of bank accounts, stocks, bonds and real estate. This may very well avoid probate, which is usually one of the main reasons people do this, and it may also give the children direct access to cash to pay the bills of a parent who becomes mentally incapacitated, but, aside from the gift tax consequences this type of "planning" can cause, it can also lead to a variety of problems:
- Your assets may be taken by a child's creditor or divorcing spouse. If your child gets sued or fails to pay his or her bills, then a judgment creditor may try to take all or part of your money and property to pay off your child's debts. There's also the possibility that your child's divorcing spouse will come after your money and property as part of the divorce settlement.
- Your children can wipe out your bank and investment accounts. As a joint owner of your bank and investment accounts, a child can withdraw all of your money, take it to Vegas and lose it, and never look back.
- Your children won't be able to sell your real estate. Even if you've added your children's names to the deeds for your real estate, they won't be able to sell any of the property without getting your signature on the deeds. While this may appear to be a good thing - they can't sell your house out from under you - it can become a problem if you were to become mentally incapacitated and some or all of your real estate would need to be sold to pay for your care but legally you would be unable to sign the deeds.
- You could cause an unequal distribution of your estate. If you have more than one child and you have not added each and every child's name to each and every account and each and every deed for your real estate, then your estate will be distributed unequally after you die. This will be true even if you have a Last Will and Testament that states that everything goes equally to the children. And even if your children agree to divide everything equally, they'll need to be aware of the gift tax consequences of divvying things up.
The bottom line - in the end, your simple estate plan may very well end up being a time-consuming and costly court case. Only a qualified estate planning attorney can help you decide if your simple estate plan will really work the way you want it to work.
Tuesday April 26, 2011
According to an article by Paul Sullivan for The New York Times, hundreds of millions of dollars in life insurance is currently sitting with insurance companies or the unclaimed funds offices of each of the states. For example, since 2000, the state of New York has received over $400 million in unclaimed life insurance, and the state of Florida currently holds about $1 billion in unclaimed funds, $355 million of which is life insurance.
Depending on state law, the insurance can sit anywhere from a few years to over ten years and if the beneficiaries can't be found, then the funds will revert to the state where the deceased person lived at the time of their death. In New York one unclaimed life insurance policy has been sitting in the state's coffers since 2004 and is valued at a whopping $1.7 million. One reason the problem is so prevalent is because with some types of insurance the policy will continue to retain a death benefit even if the policy owner quits paying the premiums. And contrary to popular belief, there isn't a national "life insurance claims hotline" that one can call to inquire about any insurance proceeds that may be due and payable.
If you think that a deceased loved one may have named you as a beneficiary of a life insurance policy but you can't find the policy, then check with the unclaimed funds office of the state where your loved one lived at the time of death.
Monday April 25, 2011
Although there has been a great deal of speculation about who will inherit Elizabeth Taylor's estate, no one really knows for sure what she planned except for her family, close friends and legal team since "Dame Elizabeth" opted to do things privately by using a revocable living trust as the governing document of her estate plan. Nonetheless, aside from her ex-husband, Larry Fortensky, spilling the beans yesterday about his $800,000 bequest, another piece of Ms. Taylor's plan has been made public - in a deal dating back to 2006, the actress contracted with Christie's auction house to sell her jewelry, clothes and art after her death. The auctions are apparently set to take place late this year or early next, and while as mentioned above the contents of Ms. Taylor's estate plan have not been made public, many are speculating that the money generated by the auctions will, at least in part, be used to benefit amfAR, an aids research organization co-founded by Ms. Taylor in 1985.
Among the jewels in Ms. Taylor's collection - a 33-carat Krupp diamond ring; an antique diamond tiara; a Duchess of Windsor diamond brooch; a 69-carat pear-shaped diamond; and the Grand Duchess of Russia's emeralds. Sources have reported that the last time the jewelry collection was appraised - about 15 years ago - it was estimated to be worth $30 - $40 million, but it's surely even more valuable today given that a famous death tends to cause the celebrity's things to skyrocket in value.
Among the art to be sold is an 1889 Vincent van Gogh landscape that the actress's father bought for her in 1963. Years later she had to clear title to the painting when the heirs of a Jewish art collector sued Ms. Taylor, claiming that the painting was theirs because it had been sold only under extreme duress and should be returned to the family. The lawsuit was dismissed at the district court level and the U.S Supreme Court denied hearing the appeal.
So now I know what my husband can get me for my birthday this year - any piece of Ms. Taylor's jewelry will be just fine indeed.
Sunday April 24, 2011
While it has become apparent that Elizabeth Taylor wanted to keep the details of her final wishes private by using a revocable living trust as the governing document of her estate plan, that hasn't kept one of her beneficiaries from spilling the beans publicly about what he is going to receive from the late actress's estate. Today in an interview with London's The Mail, Taylor's eighth and final husband, Larry Fortensky, revealed that he recently received a letter from the late actress's attorneys informing him that she had bequeathed him over $800,000.
Taylor and Fortensky, a construction worker, married in 1991 after meeting while both were in rehab at the Betty Ford Center (her for pills, him for booze). The couple divorced in 1996, but according to Fortensky his ex-wife was paying him $1,000 a month at the time of her death because she thought he "could use a little help." Fortensky admitted that while he accepted the money, he never asked for it. Instead, several years ago Fortensky's sister, Donna, told Ms. Taylor that her ex-husband was suffering from severe financial woes and that's when the checks started to arrive. Fortensky also stated that he was in "regular contact" with Ms. Taylor and had just spoken to her right before she entered the hospital for the last time. Don't be surprised if Mr. Fortensky's interview causes other beneficiaries of Elizabeth Taylor's estate to loosen their lips too.
