Estate Planning: Mistakes or Misunderstandings

Top Estate Planning Mistakes or Misunderstandings – And How to Avoid Them

We have all heard the phrase: nothing in this world can be certain in life, except death and taxes. As an estate planner, I address these two issues every day. I counsel clients on the best strategies to pass their estates to their loved ones, how to efficiently manage their affairs if they can’t make decisions for themselves, and advise them on the most financially efficient ways to accomplish their goals. With nearly 20 years of estate planning experience, I have collected a list of common mistakes or misunderstandings.

#1. DIY Documents.

Estate plans should not be considered a “Do It Yourself” endeavor. With the guidance of an experienced estate planning attorney, you ensure that you’re considering all the issues, your planning goals are met, and your legacy will be easily passed on to others. Wills completed through automated computer programs or purchased at stationary stores may result in negative financial and substantive impacts to your loved ones.

#2. “I Don’t Need an Estate Plan.”

Everyone can benefit from an estate plan. Even if you think you don’t own anything, everyone should have a financial power of attorney and a medical power of attorney. Did you know that if you don’t create your own individualized estate plan, then the state of Oregon has a “One Size Fits All” plan for you? Unfortunately, Oregon’s “One Size Fits All” plan doesn’t meet the customized needs of many people, and it can lead to unintended consequences.

#3. Choosing the Wrong Decision Maker.

Many times, a parent will want their adult children to work together to make financial and medical decisions when the parent can no longer do so. Unfortunately, in my experiences, many times these types of plans don’t work well. Instead, when siblings disagree, an impasse may occur. In the worst-case scenario, litigation may be the only solution to resolve the conflict. Other times, people choose a friend for help, and then for a variety of reasons, the friend is no longer able to help. And on occasion a trusted person turns and becomes a financial abuser. Picking the right decision maker, aka fiduciary, is very important and should be a well-informed and thoughtful process.

#4. Thinking a Will Avoids Probate.

Probate is a court supervised administration of a decedent’s estate. Now don’t get me wrong, I don’t think probate is the 9th level of Dante’s Inferno; and as an attorney, I am very familiar with the rules of court procedure. For certain situations, probate is a beneficial process. But time and time again, clients have the misunderstanding that their wills are not subject to probate. They are shocked when they learn that a will almost always ensures that an estate will be probated. To avoid probate, consider creating a revocable trust.

#5. Letting Your Plan Collect Dust.

Having a plan, but not looking at it again is a mistake. Estate planning is a dynamic process. The plan should not be chiseled in stone and then set on a shelf, never to be thought of again. In general, I recommend that clients review their estate plans every five years. And sooner if there have been significant life changes, such as marriages, divorces, births, substantial changes in assets, medical diagnoses, etc.

#6. “I’m Not Rich, So I Don’t Care About Estate Taxes.”

Thinking you don’t have enough to be concerned about estate taxes (also known as “The Death Tax”) may be a mistake. Even if you own less than $11.58 million which is the 2020 amount when the federal estate tax hits, your estate may still be subject to state estate tax. Both Oregon and Washington have state level estate tax. Without specific tax planning, an Oregonian who dies with a net worth more than $1 million has exposure to Oregon estate tax. The same is true for Washingtonians. However, Washington’s amount is more generous at $2.193 million in 2020.

It is never too late to prepare an estate plan. If you have more questions or want to talk about your estate planning goals and needs, contact one of our estate planning attorneys. Our combined years of estate planning experience is over 130 years.

Be sure to check out SYK’s newest video – featuring Anastasia and focusing on Estate Planning.

Anastasia (Stacie) Yu Meisner is a member of the SYK Estate Planners practice. Her practice focuses on estate planning, mediation, probate, trust and estate administration. In addition, she also works with guardianships and conservatorships, as well as business transactions and formation.

The Pandemic Makes the Power of Attorney More Important Than Ever

“Have a financial Power of Attorney. And a health care Power of Attorney, also known as an Advance Directive. These legal documents are terrific tools to help navigate the typical administrative run around that we all face”.

Do you have a loved one living in a care facility and due to Covid-19 they are not able to leave? Or are you self-isolating in your home and unable to run your typical errands? Are any of your or your loved one’s financial or medical needs being unmet due to the Coronavirus? If so, you’re not alone.

I recently received a call from a daughter whose elderly mother was stuck in a care facility.  Both the daughter and her mother were befuddled because all of the mother’s financial affairs were on hold.

As a general practice the daughter would organize her mother’s monthly bills and go through them with her. She would help her mother write checks to pay her doctor co-pays, her cable bill, etc. Also the daughter would join her mother on calls to manage her mother’s banking and investments needs.

Now the daughter can’t visit her mother. And both women wanted to know if they would be in trouble with bill collectors or at the very least pay a lot of late fees if they were not able to timely address mom’s financial affairs.

My advice in these types of situations is to have a financial Power of Attorney. And a health care Power of Attorney, also known as an Advance Directive. These legal documents are terrific tools to help navigate the typical administrative run around that we all face with banks, doctor’s offices, investment companies, etc.

With a financial Power of Attorney the mother could officially grant her daughter with the legal authority to manage and help with her financial affairs.  And the daughter would be able to write the checks and make calls for her mother.  With an Advance Directive it would be much easier for the daughter to talk with her mother’s doctor and other health care providers.

Even though we may never have another Covid-19 pandemic that impacts everyone, life happens and you never know when you may not be able to address your affairs because of an illness or injury.  We never know when we may find ourselves or our loved ones in one of these situations. So it is incredibly important for all adults to have both a financial and medical Power of Attorney naming someone to speak on their behalf and manage their affairs.

These are documents that are not just important for older adults. They are important for young adults too. I have seen a number of young adults injured in accidents and unable to manage their own affairs. Many headaches and delays could be avoided with a little advance planning.

If you have more questions or want to talk about a Power of Attorney or other estate planning issues, contact one of our estate planning attorneys.

Anastasia (Stacie) Yu Meisner is a member of the SYK Estate Planners practice. Her practice focuses on estate planning, mediation, probate, trust and estate administration. In addition, she also works with guardianships and conservatorships, as well as business transactions and formation. 

Donor Advised Funds – SYK Attorney Featured in Portland Business Journal

SYK attorney Anastasia Yu Meisner is a sought after source of knowledge in the area of planned giving. Recently, she put pen to paper for the Portland Business Journal, sharing her knowledge about tax reform, and how it will make donor-advised funds a more popular tool for charitable planned giving.

“Donor-advised funds have been a popular tool for charitable planned giving for a few decades.

They allow a donor to make such charitable contributions to sponsoring charities including appreciated assets, real estate and closely held business interests. The option also allows users to take tax deductions in the year of the contribution and retain the right to advise how funds are distributed in future years from the DAF to a charity or charities.

With the passage of the Tax Cut and Jobs Act of 2017, DAFs likely will become a more attractive tool for certain donors. This is due to expectations that more tax payers will benefit from claiming the new higher standard deduction rather than itemizing deductions as they had in the past. For individual filers the standard deduction increased from $6,350 to $12,000 and for joint filers the deduction increased from $12,700 to $24,000.”

For the full article, please see the Portland Business Journal’s website.

Anastasia (Stacie) Yu Meisner is a member of the SYK Estate Planners practice. Her practice focuses on estate planning, mediation, probate, trust and estate administration. In addition, she also works with guardianships and conservatorships, as well as business transactions and formation. Meisner’s extensive experience in mediation has made her a sought after source of knowledge. In 2018, Ms. Meisner was appointed Pro Tem Judge for the Washington County Probate Department. She also serves as pro bono counsel for the Korean American Coalition of Oregon.

Carrie Fisher: Some Early Thoughts on Her Estate

Carrie Fisher

May the Force be with you Carrie – you were one of the brightest stars.

The entertainment world lost an iconic legend today. Carrie Fisher, best known for her role as Princess Leia Organa in the Star Wars films, passed away this morning after suffering a heart attack on December 23, 2016, while on a flight from London to Los Angeles. In addition to her Star Wars role, Ms. Fisher starred in many other films, and also authored several books, plays, and screen plays. She recently published her autobiography, The Princess Diarist.

From a legal perspective, it is far too early to analyze Ms. Fisher’s estate to any degree. However, one can make a number of observations:

  • Fisher was not married at the time of her death, but was survived by one child, her daughter, actress Billie Lourd, age 24. Ms. Lourd therefore would be Ms. Fisher’s sole natural heir.
  • Fisher was married for a short time to singer, Paul Simon. Ms. Lourd’s father is talent agent Bryan Lourd. However, Ms. Fisher and Mr. Lourd were never legally married. Therefore, neither Paul Simon nor Bryan Lourd would be an heir to Ms. Fisher’s estate, absent an express bequest in her will or trust.
  • Fisher was the child of two entertainers, the late Eddie Fisher and Debbie Reynolds. Eddie Fisher died in 2010, and was survived by four children, including Carrie Fisher. Presumably, Ms. Fisher was a partial heir to Eddie Fisher’s estate, although few details of that estate appear to be public. However, Ms. Reynolds is still living and will likely leave her estate to her surviving son and Ms. Lourd.
  • Fisher was a California resident, so her name and likeness will be protected by the California Celebrity Rights Act for another 70 years. However, her depiction of Princess Leia was apparently transferred by contract to Lucasfilm Ltd. when she starred in the first Star Wars film at the age of 19.
  • Along with her other principal Star Wars actors, Harrison Ford and Mark Hamill, Ms. Fisher agreed to take a percentage of the movie’s profits, plus a take of TV screenings, re-releases and more. Therefore, these residual profit rights will presumably be inherited by Billie Lourd.
  • Carrie Fisher was involved with a number of charitable causes during her lifetime. Her will or trust may therefore include bequests for charitable causes.
  • While Congress and the new administration are considering a repeal of the federal estate tax, any such legislation will likely be effective no earlier than January 1, 2017. Therefore, the portion of Ms. Fisher’s estate that exceeds the 2016 estate tax exemption amount of $5.45 million will be subject to a federal estate tax at the rate of 40%.

Because of their notoriety, the estates of well-known celebrities are often illustrative of many issues that many people face in their estate planning. Only time will tell if important lessons will emerge from the Estate of Carrie Fisher.

A growing “epidemic” of dementia

Leaders from the Group of Eight (G8) industrialized countries are met last week in London for a special summit on a rapidly growing problem: dementia. Dementia is a medical disorder affecting cognitive function. It includes Alzheimer’s, vascular dementia, dementia with Lewy bodies (DLB), fronto-temporal dementia, and a variety of others that impact patient memory, thinking, and even behavior.

As reported by Reuters recently, the disorder currently affects an estimated 44 million people worldwide, but health care experts expect that number to more than triple to 135 million people by 2050. G8 leaders are now meeting to discuss the rapidly growing costs associated with the disease. Treatment costs already exceed more than $600 billion, or about 1.0% of global GDP. Costs the G8 likely won’t be talking about though are the growing legal expenses associated with trying to enforce or defend estate plans of dementia patients.

A diagnosis of dementia can cause significant legal problems. Even a hint of incapacity makes an estate plan vulnerable to court challenge, threatening the decedent’s intended distributions and forcing his or her family to go through stressful and often expensive litigation.

With dementia on the rise, it’s now more important than ever to make sure you have a clear and effective estate plan in place. If possible, you should put a final plan in place before capacity becomes an issue. If it’s too late for that though, there are still things you can do; just be sure to consult a litigation attorney as part of the planning process. Acting now could save you and your family a great deal of heartache (and money) down the road.

A Tale of Two Wills

What do you get when you mix a reclusive heiress with a will disinheriting her closest relatives? Unfortunately, litigation.

The story of Huguette Clark, reclusive daughter of a copper magnate and former United States Senator, should serve as a cautionary tale for everyone; even those with an estate worth significantly less than her estimated $300 million.

As reported by the New York Times, Huguette executed two wills in 2005. The first left the bulk of her estate to her closest relatives. The second, executed just six weeks later, cut out her relatives entirely, leaving gifts instead to her goddaughter, doctor, accountant, lawyer, and a foundation for the arts (among others).

Executing such vastly different wills in such a short period of time left the door wide open to legal challenge. Each side now has to develop their own narrative for what happened, painting dueling images of the reclusive heiress: a resolute millionaire vs. a vulnerable invalid. Was she a stubborn, strong-willed individual that had been jaded by “minimal contacts” with her family? Or did doctors, nurses, lawyers, and accountants isolate and exploit a vulnerable 104 year old woman? The outcome of the case is uncertain. What is certain is that the “dirty laundry” of what was once one of America’s richest families will now play out in the public arena.

It didn’t have to be that way. Better planning could have significantly reduced the likelihood of claims for undue influence and/or diminished capacity.

The lesson? Consulting with litigation attorneys as part of the planning process can sometimes help prevent litigation.

Click here to read the full NYT article.

Court orders Thomas Kinkade’s former girlfriend to pay $11,000 a month in rent to Kinkade’s estate

The probate process continues to unfold in the administration of the estate of American painter Thomas Kinkade. This week, lawyers from both sides argued in court about the amount of rent that Amy Pinto-Walsh (Mr. Kinkade’s girlfriend at the time of his death on April 6, 2012) must pay to Mr. Kinkade’s estate. The judge set the amount at $11,000 per month, without utilities, dated retroactively to July 1, 2012. The property is under 24 hour surveillance. The judge added the security costs to the rental estimate to arrive at the $11,000 figure.

I wrote earlier blog posts about the issues surrounding Mr. Kinkade’s Last Will(s) and the other issues that have come up in the administration of his estate. These issues will be decided in future hearings.

Most estates will never own mansions that require 24-hour security details; however most estates will own interests in real property of some sort. These property interests can lead to all sorts of disputes, including fights like the one that is playing out in the administration of Mr. Kinkade’s estate.

One reason that real estate can be a cause of confusion is that it can be owned in a number of different ways – individually, jointly (with or without survivorship rights), in trust, or by an entity like an LLC. The picture has been further complicated in Oregon by the adoption of the transfer-on-death deed (“TOD Deed”) in early 2012. The TOD Deed allows a property owner to record testamentary transfer instructions on the deed itself. At the owner’s death, the property transfers subject to the instructions on the deed, not as directed under the owner’s Last Will or trust. With all of the different ways real property can transfer, confusion is common.

Revocable living trusts and Last Wills usually include provisions to deal with the distribution of real estate that an individual owns at death, and some of these documents allow for tenants to continue then-existing rental agreements. If a person dies without a Last Will, the property will likely pass to the decedent’s heirs at his or her death. Estates occasionally have to act as landlords and sometimes even evict tenants after a property owner has died. The best way to avoid problems with the administration of real estate is to plan properly by discussing all of your property interests (and their ownership) with your financial and legal advisors.

There are many lessons to be learned from the administration of Mr. Kinkade’s estate. Like many celebrities, Mr. Kinkade had complicated family relationships and a lot of money. Mr. Kinkade did not leave clear instructions for the handling of his affairs, and now the dirty laundry is being aired in public. History is littered with examples of celebrities who planned properly, those who planned poorly, and those who did not plan at all. Michael Walker and I will be discussing the lessons that can be learned by analyzing some of these examples at an upcoming seminar in our office. We will review the estates of Jacqueline Kennedy Onassis, Michael Jackson, Marilyn Monroe, "MCA" and others

If you would like to join us for a discussion about "Famous and Infamous Estates" from 7:30-9:00 am, on October 11, please rsvp by calling our office at (503) 226-2966 or by email at events@samuelslaw.com. Light refreshments will be provided
 

Samuels Yoelin Kantor Seminar Series

COMPLIMENTARY SEMINAR SERIES

Samuels Yoelin Kantor LLP’s seminar series helps keep our clients and colleagues informed on recent developments and industry best practices. The seminars typically take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary. Participants qualify for (1) Continuing Professional Education (CPE) credit. To register, please use the links below or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!


Estate Planning in the Digital Age: Virtual Assets

Thursday, September 27, 2012
7:30 – 9:00 A.M.
at Samuels Yoelin Kantor LLP offices
Light refreshments will be served

Presented by Victoria D. Blachly and Michael D. Walker, P.C.

What happens to your Facebook account when you die? What about your email and online bank accounts? We’ll discuss these questions, analyze different user-and-online-provider relationships and review recent legislative progress in these areas. We’ll also cover the Virtual Asset Instruction Letter and analyze several cloud-based options for storing account log-in directions and passwords.

To register for this seminar, contact events@samuelslaw.com or call us at 503-226-2966.

Upcoming Seminars:
          Oct 11 – Famous and infamous Estates
          Nov 8 – Estate Planning for new parents
 

Beneficiary Designations – the Importance of Proper Planning

In the process of preparing their estate plan, many people are surprised to learn that their wills or trusts generally do not control what happens to assets such as retirement plans, IRAs, life insurance, and annuities when they die. Rather, these assets are controlled by beneficiary designations that the person may have signed when opening the account or purchasing the life insurance. Here is a list of important points to consider in making sure your beneficiary designations coordinate effectively with your overall estate plan:

  1. Carefully determine the current status of the beneficiary designation on each retirement account or life insurance policy. Do not assume that a beneficiary designation on one account will be the same on other accounts. If there are multiple retirement accounts, find the beneficiary designation paperwork for each account. Also, applicable law requires that for qualified retirement accounts such as 401k plans (as well as IRAs in some states), the surviving spouse must sign a written consent if the account’s primary beneficiary will not be the surviving spouse.
     
  2. As life brings change, change your beneficiary designations. For example, upon a marriage, divorce, birth of a child, death of a previously-named beneficiary, or other significant life event, make sure your beneficiary designation on each account is updated.
     
  3. If a prospective beneficiary is a minor, young adult, has special needs, or has problems with creditors or chemical dependency, then carefully consider whether additional planning is necessary. For example, if a minor is a designated beneficiary under a life insurance policy, then absent other planning, it could be necessary to have a conservator appointed to manage the life insurance proceeds until the minor becomes an adult. However, as legal “adulthood” is 18 in most states, if the conservatorship ends at age 18, then the assets could be prematurely dissipated due to the young person’s inexperience or youthful indiscretions. If a special needs beneficiary is receiving governmental benefits, the receipt of such assets could cause those benefits to be curtailed or eliminated. Finally, if a beneficiary has problems with creditors (including a former spouse), then these assets could potentially become subject to the claims of these creditors.

    In all these situations, if the retirement account or life insurance proceeds are payable to a trust that is specially designed for the intended beneficiary, then many of these problems can be avoided. Any such trust must be carefully drafted in order to obtain the best possible tax results.
     

  4. Beneficiary designations can also be incredibly important to proper tax planning. When a surviving spouse is named as the primary beneficiary of retirement accounts or IRAs, the spouse can “roll over” the account to his or her own IRA. In addition, if surviving children or other beneficiaries are named as beneficiaries of IRAs, current law allows these beneficiaries to maintain the account in an “inherited IRA,” which in turn allows them to only take required minimum distributions (or “RMDs”) based upon that beneficiary’s life expectancy. Hence, a younger beneficiary could potentially extend the tax-deferral benefits of an inherited IRA for decades following the death of the original IRA owner (this technique is sometimes referred to as a “stretch IRA”). Finally, for a life insurance policy, proper tax planning might include not only structuring beneficiary designations properly, but also causing the ownership of the policy to be owned by an individual other than the insured, or by a trust commonly known as an “irrevocable life insurance trust,” or “ILIT.”
     

 

It was Professor Plum, in the library, with the lead pipe.

Many law school professors test their students by presenting long and complicated fact patterns which must be analyzed issue by issue. When the law student graduates, he or she must then pass a state-specific exam consisting of the same sort of questions. These essay questions are designed to cover a broad range of topics in each area. The fact patterns are long and occasionally outrageous. For example, in the criminal law section of my Massachusetts Bar Exam I had to write an essay about the following fact pattern:

Guy 1 hires Guy 2 to kill Guy 1’s Wife. Guy 1 pays Guy 2 with a bag of drugs. Guy 2 goes to Guy 1’s house to kill Wife. Guy 2 breaks the glass in the kitchen door, reaches through, turns the door handle, and lets himself in, only to find Guy 1 and Wife in their kitchen arguing violently. Wife realizes Guy 2 is there to kill her so she stabs herself (thereby killing her unborn child). Wife dies 366 days later. Examine the issues.

Needless to say, real life rarely introduces such issue-packed cases. The administration of the $60 million estate of American painter Thomas Kinkade is an exception to that rule, packing enough legal elements to satisfy any bar examiner. In addition to the handwritten wills that I discussed in an earlier post, Mr. Kinkade’s girlfriend Amy Pinto-Walsh has refused to move out of the home she shared with the decedent. As a result, the estate has been footing the bill for the mortgage each month and sending Pinto-Walsh bills for rent, upkeep and maintenance.

Additionally, Kinkade’s wife Nanette Kinkade has filed court documents contesting the handwritten wills and accusing Pinto-Walsh of taking advantage of Kinkade as he escalated his alcohol and drug use, became estranged from his wife and four daughters, and ultimately died of toxic levels of alcohol and valium. Mrs. Kinkade is accusing Pionto-Walsh of using her influence over Mr. Kinkade to get the artist to change his will on several occasions near the end of his life.

Finally, the Kinkades were residents of California, a community property state. One-half of Mr. Kinkade’s estate therefore belonged to Mrs. Kinkade at her husband’s death – since they were separated, but not divorced. The court battles are all being fought over control of the other half, which is estimated to be worth about $30 million.

Very few of us will ever make millions by selling our paintings, but our estates may run into the same issues Mr. Kinkade’s has: imperfectly executed or updated documents, substance abuse issues, fighting relatives and charges of improper influence over mom or dad. It is also likely that the states in which we live and die will play a significant part in the administration (and taxation!) of our final affairs.

Many problems can be avoided with proper planning. Sometimes the best answer is to appoint a neutral party to play referee or to manage assets, other times the answer is formally documenting your wishes in the appropriate manner. Whatever the issues, the planning starts with communicating concerns over potential problems to your attorneys and advisors.

Jeff Cheyne and I will be discussing some of the common errors in estate planning and administration at an upcoming seminar in our office. If you would like to join us from 7:30-9:00 am on Tuesday August 23, please rsvp by calling our office at (503) 226-2966 or by email at events@samuelslaw.com. We will be discussing a broad spectrum of issues – from well drafted wills that don’t control any assets, to dying with no will at all – and many topics in between. Light refreshments will be provided.