Jarvis Law Office

African American Museum Won’t Feature King Artifacts

The Washington Post has reported in "Why no major Martin Luther King Jr. artifacts will be at the new African American museum," that the National Museum of African American History and Culture may not be displaying any of the personal artifacts of Dr. Martin Luther King Jr.

The reason the museum, which opened recently in Washington D.C., will not have a King display is most likely the result of disagreements within his estate.

King's children met with the curator and offered to loan the museum King's Bible and Noble Peace Prize to display but the curator turned them down. The official reason given for the decline was that the museum prefers to display gifted items, not those that are loaned and can be taken back. That is of particular concern here because King's children have a long history of feuding with each other over their father's estate.

The Bible and the Noble Peace Prize have often been a source of contention between the children.

This is another example of the consequences when the heirs of an estate cannot peaceably settle their differences. Unfortunately, in this case the entire nation has to face those consequences as visitors to the museum will not be able to see King's artifacts.

Reference: Washington Post (Sept. 11, 2016) "Why no major Martin Luther King Jr. artifacts will be at the new African American museum."

The Frequent Changes in Estate Tax Laws May Be the Big Problem

The real reason estate taxes are unfair, according to The New York Times editorial "Why Taxing Fairly Means Not Taxing inheritances," is that politicians keep changing them. The argument was put forth by N. Gregory Mankiw.

Arguments have been put forth in the past that the estate tax is unfair because it could possibly force heirs to sell off portions of their inheritances, and that those who have accumulated wealth have a right to pass it on to their families. However, Mankiw argues it is the constant changes that are the real problem.

The idea is simply that because the estate tax exemption and rate is subject to change, the amount of tax that has to be paid, if any, depends on the moment that a person dies. A person who passes away on one day can pay a lot more or less than a person who passed away the previously day if the law has recently changed.

The author believes that is not fair.

While this argument is unlikely to persuade people who support the estate tax, it might lead some politicians to consider how changing the tax can hurt people. 

Reference: New York Times (Sept. 9, 2016) "Why Taxing Fairly Means Not Taxing inheritances."

Think of Your Estate Plan When Planning for Retirement

You can make a mistake if you do not think of your estate plan when you think ahead to retirement, according to Life Health Pro in "Bequest goals: more than just an issue for the wealthy."

The primary reason for this is that if you would like someone else to have a given asset after you pass away, then you need to make it so your retirement plan preserves that asset so that you will still have it to pass on. For example, if you would like to leave your home to your children, then your retirement plan needs to be sufficient enough for you not to have to sell the home to have funds to live on when you are no longer working.

This is true whether you have a large mansion or a more modest house.

What this means is that you should not think of life as entirely separate stages when you do your planning. Think about what type of estate you want to leave behind when you plan for your retirement and act accordingly.

An estate planning attorney can help guide you through your planning.

Reference: Life Health Pro (Aug. 9, 2016) "Bequest goals: more than just an issue for the wealthy."

Divorce Can Create Problems with Inheritance Plans

Family Studies recently discussed the different feelings that may surface during estate planning about daughters-in-law and sons-in-law in "Inheritance and Divorce."

Some people want to make sure that if their child ever gets divorced, the ex-spouse does not receive any portion of the inheritance. Other folks do not mind if the ex-spouse gets some of the inheritance.

The article discusses a specific case where soon after getting married a man's father created a trust for the man's benefit. About 10 years later the man filed for divorce. One issue in the divorce was how to treat the trust and whether it should be considered marital property.

The court determined that the man's interest in the trust was worth $2 million and decided that it should be marital property. The man's wife was given 60% of the trust's value when the divorce was finalized.

The man appealed and won. The higher court declared the trust was not marital property.

The higher court's decision is the normal outcome. Inheritances are usually excluded from divorce settlements in most states.

Nevertheless, it is best when estate planning to think about what you want and to state specifically in the estate plan what you want to happen in case an heir gets divorced.

An estate planning attorney can guide you in your options about your particular circumstances in estate planning.

Reference: Family Studies (Sept. 6, 2016) "Inheritance and Divorce."

CEO of Wrestling Organization Sells Shares

Bloomberg has reported that Worldwide Wrestling Entertainment CEO and majority owner Vince McMahon has sold 1.55 million shares worth $32.5 million in its report “WWE CEO Vince McMahon Sells 1.55 Million Shares in Estate Move.”

According to regulatory filings, the stock sale was done as an estate planning move. As McMahon’s overall estate plan is not a matter of the public record, we can only speculate on the exact purpose of the move.

Quite often, these moves are done for a number of different reasons.

The cash might be used to pay an anticipated estate tax bill. This could also be done to equalize the inheritances for different heirs. It could also be done to have the cash available for a trust that is to be created for charitable or other purposes.

An important takeaway to keep in mind is that McMahon’s stock sale illustrates that when making estate plans you are not limited to what you can do with your assets. You can adjust them as necessary to make your plan more effective.

Reference: Bloomberg (Aug. 17, 2016) “WWE CEO Vince McMahon Sells 1.55 Million Shares in Estate Move.”

Gifting Provides Lifetime Experience

As recently discussed by Merrill Lynch in “Why Make Your Heirs Wait?” many people prefer to see results and the subject of gifting to heirs rather than leaving to descendants as a way of passing from one generation to the next.

The key points are:

• If you give to one heir now, other family members might wonder what is going on and might want a gift as well, even if they do not have a pressing need for it. You should talk to your family and make sure everyone knows that a gift now might make their eventual inheritances smaller.
• Do not give to your family for selfish reasons. Consider whether the receiver actually needs and wants the gift. Giving someone a responsibility they do not want or are not ready for could be a burden to them.
• Do not give away so much that you neglect your own needs. Before giving to anyone take stock of how much money you need for your own retirement and the effect the gift may have on your comprehensive estate plan.

An estate planning attorney can guide you on the best way to pass on your wealth to the next generation and help you develop a plan for gifting.

Reference: Merrill Lynch (Aug. 2016) “Why Make Your Heirs Wait?”

Courts Can Loosen Restrictions Placed on Trust

The Wills, Trusts & Estates Prof Blog recently published an article on a court’s right to ease restrictions placed on a trust that can defeat its purpose in “Rockefeller University Wins Legal Battle Over Will Restrictions.”

James P. Martin of New York created a testamentary trust in his will that named specific income beneficiaries. When the last of those beneficiaries passed away, the trust was to be dissolved and a new trust created that gave the remaining principle to Rockefeller University for the purposes of combating arteriosclerosis.

The university took control of the funds in 2007.

The will included many restrictions on how the university could invest the funds in the trust. There were restrictions about what stocks could be sold and what type of securities could be purchased. The result was that the trust investments severely underperformed the market and the university’s general endowment.

The university petitioned the court to ease the restrictions, which the court agreed to do.

This was a fairly straightforward case as some of the corporate stock not to be sold was in companies that no longer existed and many of the restrictions clashed with modern portfolio theory.

Reference: Wills, Trusts & Estates Prof Blog (Sept. 3, 2016) “Rockefeller University Wins Legal Battle Over Will Restrictions.”

Recent Divorce Creates Need for New Look at Old Plan

Forbes recently discussed the potential impact of divorce on an estate plan in its article, which illustrates the dangers and pitfalls, “The First Thing You Must Do When Your Divorce Is Final,” which illustrates the dangers and pitfalls.

If your ex-spouse’s name is still on estate planning documents, then many of them will still be legally enforceable. For example, if your ex-spouse is named as a beneficiary of a life insurance policy or a trust, your ex-spouse may still be a beneficiary until the documents are changed, depending on your state’s law. Beneficiaries on retirement accounts can also be a big issue after a divorce.

If your ex-spouse is named as a power of attorney, then your ex-spouse will still have that authority. The one document that might not still be valid as written is a will, as many states will strike any will provisions that include an ex-spouse if the will was created before the divorce was finalized.

However, not changing your will to exclude an ex-spouse means you do not get to determine who should get the assets instead.

What this means is that after getting a divorce you need to review your estate plan and make any necessary changes. The one caveat? You should not disobey any orders made during the divorce.

For example, if you were required by the terms of the divorce to leave your wife as a beneficiary of a life insurance policy, then you must continue to do so for as long as required.

An estate planning attorney can help you with any updates necessary to reflect changes that can have an impact on your estate plan.

Reference: Forbes (Aug. 14, 2016) “The First Thing You Must Do When Your Divorce Is Final.

IRS Targets Break for Transfers within Family Businesses

Bloomberg recently published an article covering restrictions proposed by the IRS on the transfer of ownership within a family business in “IRS PROPOSES NEW REGULATIONS FOR §2704 — A BETTER MOUSE TRAP?”

Because many family-owned businesses place restrictions on who and when shares can be sold, tax benefits have been available because it is sometimes difficult to find outside buyers.

It is assumed that any purchaser would want a discount. This could be taken into account when transferring between family members as well. For gift and estate tax purposes the shares can be valued at less than market value.

This is known as a “discounted” value.

For the last decade the IRS has wanted to do away with this discounted value or to at least lower the discount amount. Previously, the agency has asked Congress to act, but now the agency is proposing new regulations to take care of it without congressional action.

Experts are divided about the effectiveness of the new regulations.

What the IRS has proposed is extraordinarily complex, even for an agency known for its complex regulations. The courts will also eventually have to decide whether the regulations are appropriate.

An estate planning attorney can guide you on the rules and regulations involved with selling shares in a family business.

Reference: Bloomberg (Aug. 19, 2016) “IRS PROPOSES NEW REGULATIONS FOR §2704 — A BETTER MOUSE TRAP?”