Estate Planning Tragedies and Scorned Siblings

Estate Planning Attorneys don’t have to practice very long before they have a growing list of sad stories filled with family tragedies triggered by poor planning. Whether you are a Child, Parent or Estate Planning Professional I heartily recommend you read the article Siblings Scorned from Private Wealth on-line magazine. Many of you may recognize the situation quoted in the article.

The death of a parent often shifts the family dynamic, making issues arise that appear to be based on current events but in fact are perceived slights that occurred years ago and are now playing out as the parents’ estate is doled out.
” The children can be 60 or 70 years old, and they’re talking about events that happened when they were 15,” says Michael Dribin, a trusts and estate attorney in Miami. “There’s this deep-seated animosity that is just beneath the surface between these siblings that just stays beneath the surface as long as one or both parents are alive. But once both are gone, it’s like that glue evaporates.”

I would like to suggest reading the article putting together an estate plan and then begin an open, honest family discussion about what is going to happen after the passing of the final parent. Take the time to do what’s right and avoid a family tragedy. Remember, good planning is no accident.

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Are You Prepared to Care For Your Parents?

We have often used this forum to discuss the “Sandwich Generation”, those who are still caring for their children while facing caring for their aging parents as well. I came across this article in the USA Today which I would suggest you read. It is very important that those of us with aging parents hope for the best but prepare for the worst. Remember, good planning is no accident.

USA Today article: Caring for elderly parents catches many unprepared

http://www.usatoday.com/money/perfi/basics/story/2012-03-25/caring-for-an-elderly-parent-financially/53775004/1

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Fine Art and the IRS

When it comes to the IRS and taxes, the message is more often than not that you really can’t have your cake and eat it too. Unfortunately, this also means that heirs oftentimes end up between a rock and a hard place. For an extreme lesson, consider the case of Ileana Sonnabend.

What do you do when something is both so valuable as to trigger taxation and yet also so valuable – and illegal – that it is without value on the market? Some readers might have run across this story last month, but it gets coverage over in this recent article in Forbes.

Sonnabend was a bit of an art buff, to put it lightly, and her collection of modern art requires a doctorate in modern art history to fully articulate, with such names as Jeff Koons, Roy Lichtenstein, Andy Warhol and Cy Twombly rounding out the gallery walls. At her death, all of these works passed to her heirs and, to pay for the estate taxes thusly triggered, her heirs had to sell those very pieces.

It’s a sad story, if you just stop there. However, then you miss the most unique of artwork (and, at the very mention of “most unique,” it’s worth noting that some of these artists considered toothpaste a means of expression), a piece known as “canyon” by Robert Rauschenberg.

“Canyon” is really a mixed media piece incorporating a stuffed bald eagle, putting the production and sale of same on the darker side of the law as far as the Bald Eagle Act of 1940 is concerned. Accordingly, “Canyon” is not only art, but it’s illegal art. Nevertheless, it squeaks by on a technicality: it predates the Bald Eagle Act.

As such it is beyond value, literally, because it is restricted from the market. But that doesn’t put it beyond the interest and reach of the IRS. Apparently, the IRS incorporated the piece as part of the taxable estate, even though it was beyond selling by U.S. law, it could still be sold internationally (and on black markets.)

That’s a strange place for a strange piece of art, to be sure, but it does highlight the fact that art, as both real property and expensive property, requires more than a little planning. Sonnabend herself didn’t take advantage of any estate planning, forcing her heirs to sell the very art for which the estate tax was assessed.

Again, to learn more about (and understand) the art you’ll need a doctorate degree, but to learn more about Sonnabend and her legacy you should consult the original article. On a more personal note, to make proper estate planning arrangements for your own art and the rest of your estate engage competent counsel to help you take advantage of available techniques that can save your own unique collection and the family you hope to inherit it.

At Idaho Estate Planning we have a network of resources to help you care for yourself and/or your loved ones. Let’s work together and initiate a plan that works for your individual circumstances. Remember, good planning is no accident.

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DIY Powers of Attorney – Not a Good Idea

The internet has become an unprecedented tool for legal research and empowerment. For example, I write here to advance public awareness of estate planning law through the power of the internet, after all. Nevertheless, too much information also can lead to a dearth of actual information, or at least a lack of good useful information.

Beware of the simple estate planning tools you find online, as confirmed in a recent Elder Law Answers post.

Off-the-shelf and stock power of attorney forms not only can be ineffective, but they also can prove a liability and a detriment to your plans. Such forms may purport to cover every conceivable situation only to find that they do not satisfy the statutory substance or format required by your state.

Moreover, anyone who has had an encounter of the first kind with any aspect of a bureaucratic system (you’ve finished your taxes, right?) knows that one-size-fits-all forms have their limitations.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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Young Facebook Billionaires Find Estate Planning Fix

Not too long ago the taxation and accounting world had a new star in Mark Zuckerberg, the wunderkind behind Facebook. Why? Because his unparalleled control over the company was about to create the biggest tax bill ever when the company went public and his stock became publically valued.

Indeed, the taxation and accounting world can be rather morbid in that regard, but at least for Zuckerberg there is some good news that has come out of the woodwork. Tax or no taxes, he has saved a great deal through forethought and proper estate planning.

Certainly it’s unique to meet anyone who begins their estate planning at age 25 but Mark Zuckerberg and his partner in business, Dustin Moskovitz, did just that. As reported in a recent article from Deborah Jacobs at Forbes, the pair had the foresight to set up their private stock up with a certain form of trust before the true boom in value. As a result, they locked in that lower value and locked out those incredible taxes.

As Jacobs estimates in her article, the pair shifted more than $185 million into what’s often known as a zeroed-out GRAT. In somewhat more plain English this device was a Grantor Retained Annuity Trust in which the rate of appreciation exceeds the rate of interest, thereby securing the excess amount (like all that created from going public) from taxation for the beneficiaries of the GRAT.

Sometimes the young do have something to teach their elders, and in this case the crew over at Facebook serves as an incredible example of what has been an incredible technique.

For more information and math on Zuckerberg and his partners check out the original article. Also, if you’re interested in learning more about GRATs, then there’s no time like the present to investigate whether you should create your own.

Note: Not only is the GRAT most advantageous when an economy is set to rebound, but the process itself is in the sights of many new budget and taxation plans by the current administration. (Translation: This opportunity might not be around much longer!)

At Idaho Estate Planning we have a network of resources to help you care for yourself and/or your loved ones. Let’s work together and initiate a plan that works for your individual circumstances. Remember, good planning is no accident.

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Beyond Science Fiction, Test Tube Babies and Estate Planning

When science moves too fast for the law it can create some pretty strange situations. For instance, beyond a doubt, the strangest (and most commonplace) example is posthumous birth. How can the law accommodate new fertility and tissue-preserving techniques?

Well, it’s really not all that able to, nor does it want to, and as pointed out in a recent article in Trusts & Estates.

If you’re old enough to get past the fable of the stork and his precious cargo for expectant mothers around the world, then you’re also old enough to understand much of the logic behind the laws supporting inheritance. For example, when people become parents of children, more often than not, they wish to legally pass on certain inheritances.

To a certain extent, this involves the assumption that you were there (in every sense of the word) for the act that created the child. However, modern science has given us the ability to manipulate genetic material and create human children from cryogenically preserved sperm, in vitro fertilization, and other fertility procedures. Taking it a step further, modern science has allowed for the birth of a child from the genetic material of a parent who is no longer alive.

While that may be a gift in the face of fatal disease and treatments that cause inferility, it’s also a huge burden on tax and inheritance law that can’t quite wrap itself around the concept. For example, how do you determine the standing of a child conceived and born after probate? Is that child even a “child” of the deceased?

The case of Capato v. Astrue, as discussed in the original article, represents something of a happy ending to the dilemma. In that case, the children (twins) were held to be children of the deceased, and so entitled to his social security surviving child benefits. Nevertheless, the case hinged on that very distinction between genetic offspring and “child.”

The distinction, in most cases, is decided by the Uniform Parentage Act (UPA) Section 707. As summarized in the Trusts & Estate article, that section provides that if a person dies before his genetic material is used in conception, the decedent isn’t a “parent” of the resulting child unless the decedent expressly consented to be a parent of such a child.

What does that mean? It means you need to plan for children that you and your spouse, in a certain sense, won’t have together. It also means that if you’ve planned enough to preserve your reproductive tissues and abilities, then it is necessary to plan for those possible children, and explicitly so.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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USA Is Tax Haven For Multinational Families

Globalization has been an incredible force for a number of reasons, some good and some not so good. For instance, for the first time there are individuals and families that are, first and foremost, citizens of the world before they are citizens of any given country or tax authority. How can you be both?

As a recent Bloomberg article points out, this is a growing concern. For many families hoping to pass on wealth, the solution is a careful system of offshore and U.S. based trusts or entities. As far as wealth transfer and taxation laws are concerned, there are two junctures. The first is the point at which wealth leaves one individual. The second is the point when wealth is accepted by another. Interestingly, at each of these points of wealth transfer, taxation is triggered when both occur under the same set of laws.

In the U.S. this means the transferor gets a gift tax or an inheritance tax on whatever falls under U.S. jurisdiction, and the transferee may get hit with anything from income to capital gains to real estate taxes, and even their own estate taxes down the line once they bequeath the assets.

Being a citizen of the world often means that a failure to plan will subject you and yours to any number of taxes, perhaps in multiple jurisdictions. However, careful planning also can yield some serious advantages.

Determining what is best from a tax standpoint for you, your family and your international assets can be a high-wire act.

Be sure to read the original article for additional information and ideas.

Ultimately, as is usually the case, it really boils down to your unique situation and the various borders you, your family, and your assets casually touch and cross. If you are not careful, those borders (and their taxing authorities) can come back to bite you.

Understanding the complexities of Tax Planning is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Business Planning and Estate Planning

Planning for your estate is, more often than not, also an activity of coming to understand your estate and the nature of the things you own. If you’re a small business owner, it’s often more important to come to terms with the nature of your business and your ownership in it earlier rather than later.

As pointed out in a recent article over at BusinessWeek, ownership is an integral concept to think through at the point of start-up, but it’s important to remember to think in the long-term, too.

The shape that you give a business will, in the many ways discussed in the article, shape the way it is perceived and received by potential investors. Likewise, though, the initial allocation of rights and ownership will shape both the long-term capabilities of the business and the nature of the business assets that figure into your estate.

The many complications and folds take time to understand, and often rely entirely on the individual circumstances, and for that reason it’s important to form a thoughtful plan, or risk losing sight of the long-term goals of the business and for your assets.

To form a business, then, is a balancing act. While you balance between profit and loss, you also need to balance between present and future, to include between present business and future wealth transfers.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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Inherited Wealth – A Blessing Or A Curse?

If you are setting up an inheritance for the next generation, or if you yourself may be an inheritor, here’s an important (if depressing) fact to consider: more often than not, immediate wealth is easily (and quickly) squandered.

A recent Wall Street Journal article points out the trend, and whatever your present relation to the estate planning process, it’s an important fact to consider.

When you think of squandered wealth it’s all too easy to come up with stories of professional athletes and 15-minutes-of-fame pop-stars. Regardless, famous people are no better and no worse than the rest of us. In reality, this problem can affect anyone with some sudden influx of wealth, perhaps especially an inheritor.

In fact, there are some objective numbers to support this assertion. According to the latest available data from the Federal Reserve’s Survey of Consumer Finances, more than nine million households in the U.S. reported getting an inheritance of at least $100,000. And, looking to the future, the Center for Retirement Research at Boston College estimates that baby boomers – those 78 million people born from 1946 through 1964 – are expected to inherit some $8.4 trillion during their lifetimes. In turn, these boomers are just as likely to hope to pass it down immediately. These handoffs make for a large margin of error, both as individuals and as a society.

As an inheritor, the challenge is to be the “exception” and that will take work. As an estate planner, giving up wealth here and now, there is still work to be done and it is all the more pressing! Properly planning and transferring wealth to your loved ones is about planning for the entire process – the long-run – and the future well being of your family.

It’s important to know and understand the ways you can plan to protect your inheritors, and there are many tools available once you understand this goal. Often, you’re protecting your inheritors from themselves.

When it is all said and done, it’s the family you’re planning for in the first place. Therefore, in order to plan properly, first you need to understand your family. Proper planning ought to include discussing these issues with your family and then making the final decisions. Communication is key. We’ve said it before, proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. Let’s work together to implement an estate plan that works for you. Remember, good planning is no accident.

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Foreign Inheritances

There has been a recent spate of news regarding foreign accounts and foreign taxation, even in expatriation and becoming a foreigner. However, very little has been written regarding how to accept foreign gifts and bequests. Thankfully, there is some small guidance in a recent Forbes article that I thought was worth pointing out.

In many ways it’s difficult to be both an American Citizen and a Citizen of the World, but certainly one of the most punishing difficulties is the IRS itself. Of course, in an era of globalization, the intersection with international citizens and loved ones of different citizenship is all the more common.

The global village also complicates the world of estate planning and with it, international wealth transfers and taxation. What if you are the recipient of a gift or an inheritor of assets from an international estate?

To remain square with the IRS, you’ll want to file a Form 3520 with the IRS and affirm the recently received assets for what they are – foreign gifts or bequests and not taxable income. As gleaned from the original article, you’ll want to file a Form 3520 if:

You receive either of the following during the tax year:

1. More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or
2. More than $14,375 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.

But do not tarry! If you delay filing the Form 3520 when required, then expect penalties to apply.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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