Jarvis Law Office

How Will Trump's Election Affect Wealthy Estates?

The press is now exploring the impact of the various changes to the tax code proposed by Presidential candidate Donald Trump during his campaign and what impact they might have on dynastic wealth now that he is President-elect in "Trump's Changes to the Tax Codes May Encourage Dynastic Wealth."

The biggest change Trump has proposed is to eliminate the estate tax, which would obviously make it easier to keep money in the family. He has also proposed changes to how inherited capital gains would be taxed. It appears that no capital gains would ever be taxed as part of the estate until the asset was sold.

This includes interests in family businesses. That would also make it easier to keep inherited wealth in the family. Further, Trump has indicated that he would limit charitable deductions, which has some worried that less money will go to charity. Taxes such as the gift tax and the generation-skipping tax could also be repealed.

Of course, until Trump proposes legislative action we cannot be certain what he will do and whether it is likely Congress will agree with the plans.

An estate planning attorney can advise you on creating an estate plan under the present tax codes as well as keep the plan up to date with any changes in the future.

Reference: New York Times (Nov. 11, 2016) "Trump's Changes to the Tax Codes May Encourage Dynastic Wealth."

Estate Plan Requires Careful Thought and Planning

A general durable power of attorney, a health care power of attorney and living will are all very necessary documents needed in place for end-of-life care, but there are a few more pointers that can help make the plan successful, according to Barron's points in "Three End-of-Life Estate Plan Lessons."

The other tips include:

• If you have an estate plan, then it is important to let your family know what state you want to be in at the end of your life. Your estate plan should be tailored to the individual laws in your state. If you are moved to another state, the plan might not be as effective.
• You need to pick the strongest surrogates for your powers of attorney as possible. They need to be people who know how to handle things. They also need to be people who have the willpower to stand up to other loved ones who might disagree with the decisions being made.
• If you think your child might be overly emotional or too heartbroken, do not put that child in the position to tell the doctors when to remove you from life support. Pick someone else to do that.

An estate planning attorney can guide you through the process of creating an estate plan that best fits your individual circumstances.

Reference: Barron's (Nov. 8, 2016) "Three End-of-Life Estate Plan Lessons."

A Qualified Personal Residence Trust (QPRT) Can Still Be Useful

Barron's recently published an article on some of the benefits and drawbacks of QPRTs in "Holding Vacation Homes in Trust."

Because of relatively high estate tax exemptions and low interest rates, qualified personal residence trusts are not as useful as they used to be.

However, people who expect to have estates with values over the estate tax exemption or who have homes that could rapidly rise in value can still benefit from a QPRT, as long as everyone in the family is on the same page about what should happen to the home.

A QPRT is an irrevocable term-limited trust that can help to stretch your gift tax exemption. When a residence is put into the trust the value of the residence is locked in for tax purposes.

The owner can still live in the home and is responsible for it. The residence can even be sold as long as another residence is then put in the trust.

When the term of the trust ends, the trust beneficiaries become the new owners of the residence. However, if the current owner passes away before the term of the trust is over, the purpose of the trust is defeated and the home becomes part of the estate.

Major drawbacks of a QPRT?

Once the trust is ended the current owners can only continue to live in the home if they pay fair market rent and the trust beneficiaries, who are the new owners, are responsible for upkeep. Thus, if the beneficiaries are not financially independent and able to pay for upkeep, a QPRT is normally not a good option.

If the beneficiaries wish to sell the residence, they might have to pay more in taxes than if they had inherited the home through other means.

Consequently, a QPRT can be a good idea. An experienced estate planning attorney can help you determine if it is right in your unique circumstances.

Reference: Barron's (Nov. 4, 2016) "Holding Vacation Homes in Trust."

An Estate Plan Needs to Be Precise

Legal intrigue can surround an estate plan if it isn’t specific and raises some questions, according to The New York Times in "Maurice Sendak's Estate Is Awarded Most of a Book Collection."

The lesson to be learned from this case begins with the Rosenbach Museum and Library in Philadelphia, which housed many original drawings and books owned by Maurice Sendak, the author of Where the Wild Things Are. Most people believed the collection would stay at the museum. However, his will contained provisions that his estate should create a foundation and a museum in Connecticut to make the items available for public viewing.

In 2014, Sendak's estate took the items back from the museum. The museum filed a lawsuit in Connecticut probate court because Sendak's will also included a provision that "rare edition" books should be given to the Rosenbach.

In short, the court had to determine whether 340 books could be considered rare editions, including illuminated volumes of William Blake's poetry that could be worth millions.

The court recently ruled that 88 of the books should remain with the Philadelphia museum but the rest should go to the estate.

It is important to be as precise as possible when creating an estate plan. While to some experts it might seem obvious whether or not a particular book edition is rare, the term leaves room for disagreement as this lawsuit illustrates.

Sendak could have been specific about exactly which titles he wished to remain at the museum in Philadelphia and which he wanted to belong in a new museum in Connecticut.

Consult with an estate planning attorney who can guide you in being specific in setting up your estate plan.

Reference: New York Times (Nov. 1, 2016) "Maurice Sendak's Estate Is Awarded Most of a Book Collection."

And Now Redstone Questions His Competency

The complicated case of Sumner Redstone and his mental competency just got more complicated, according to Bloomberg in "Sumner Redstone Sues Two Ex-Girlfriends on Elder Abuse Claims."

Within the last year Redstone, a 93-year-old media mogul, has faced lawsuits brought by an ex-girlfriend, a granddaughter and the former CEO of his company Viacom. The lawsuits share one claim in common: due to his advanced age, Redstone was too mentally incapacitated to handle his own affairs and was being manipulated by his daughter.

In each of these cases Redstone claimed he was competent. In fact, he won the case brought by the ex-girlfriend and settled the other two favorably.

Investors in his companies were hoping that was the end of the saga.

However, now there is a new case that centers on Redstone's mental capacity. This time the case was filed by Redstone himself. He has sued two of his ex-girlfriends claiming they took advantage of his diminished mental capacity to enrich themselves in what amounts to elder abuse. Redstone is asking that $150 million be returned to him.

It is not clear how Redstone's attorneys plan to explain his testimony in one of the other cases. After all, he previously established that he was at full mental capacity.

Reference: Bloomberg (Oct. 25, 2016) "Sumner Redstone Sues Two Ex-Girlfriends on Elder Abuse Claims."

What Sort of Music Would You Like on Your Death Bed?

As you think of your passing you can even plan your music through a “singing will,” according to a New York Times column "My Deathbed Playlist (and Yours)."

Plans for end-of-life care usually include a living will, general durable powers of attorney and health care powers of attorney, but it doesn’t have to end there – it can become even more detailed.

The idea of the singing will is to create a list of the music you want to be played when you are at the end of life. It is a playlist of songs that meant something to you during your life – the hearing of which will make the experience of passing away more meaningful.

At least, that is what the people who create them believe.

Of course, a singing will has no legal effect and the circumstances of someone passing away might preclude the playing of specific music.

You should plan for your own end-of-life care at least with basic legal documents including a living will, general power of attorney and health care power of attorney. An experienced estate planning attorney can help make sure you have the plan that works best for you. While you are at it you might add some other touches.

Reference: New York Times (Nov. 5, 2016) "My Deathbed Playlist (and Yours)."

Approach Estate Planning Technology Apps with Caution

Despite the latest technology in the world becoming more popular and more common, end-of-life and estate planning through apps and online services have not moved to the forefront. New start-ups are hoping to bring about change, according to The New York Times in "Start-Ups for the End of Life."

One app that is discussed allows people to get a customized estate plan supposedly tailored to their state laws. A user reported that she compared the will the app gave her to one her parents had an attorney draft and it looked the same.

Looks can be deceiving.

As with downloadable will forms available from some websites, an estate plan created by an app might not be the best estate plan for everyone's needs and it is only valid if it is properly executed. If things are not done precisely right, any money saved by using the app will be much less than money spent trying to fix any problems in probate or otherwise.

The best way to get an estate plan is to hire an experienced estate planning attorney.

An estate planning attorney can guide you through an estate plan that is not only legally valid but meets your unique needs.

Reference: New York Times (Nov. 2, 2016) "Holding Vacation Homes in Trust."

Extremely Wealthy Often Struggle with What’s Best for Their Children

People who have made their own way in the world and become extremely wealthy can face a dilemma of how to contribute to the future of their children. Bill Gates, who has three children, will not be leaving them his fortune, according to SF Gate in "Bill Gates explains why he's not leaving his fortune to his children."

Wealthy parents often wonder if it would be better to leave that money to their children or to leave their children little, which would hopefully motivate the children to work hard and earn their own fortunes. There is not a simple solution that will make everyone comfortable.

Gates' reasoning is the common one that he does not think it would be good for his children to receive such large inheritances and that they should earn their own money. He did also say, however, that he will provide his kids with money for college and a safety net.

According to Gates, his children agree with his wishes and reasoning.

Beyond the two extremes of leaving children everything and leaving them nothing, there is plenty of room in between. Estate plans can be created that give the children some funds and plans can be crafted in such a way to incentivize children to do good things and work hard in exchange for larger inheritances.

An estate planning attorney can guide you through a plan that will meet your unique circumstances.

Reference: SF Gate (Oct. 27, 2016) "Bill Gates explains why he's not leaving his fortune to his children."

Dementia Can Have a Major Impact on Finances

The Washington Post recently published an article that explains the impact of Alzheimer’s on mental abilities, as well as the high financial cost of the disease in "Facing financial reality when early dementia is diagnosed."

The financial costs of Alzheimer's can go far beyond health care and assisted living expenses, which can be astronomical. Because the disease impairs patients' mental abilities, even in its early stages it can have a negative impact on a person's ability to manage finances. Patients often forget to pay their bills. They give more money than they should to charities. And, in many cases they fall victim to scams.

The net effect is that patients can easily lose all of their money just when they need it more than ever.

Planning ahead can help guard against this problem.

By getting a General Durable Power of Attorney now, you will be granting someone else the ability to manage your finances when you are no longer able to do so for yourself.

An elder law attorney can guide you through the process of setting up a plan that will help manage your finances.

Reference: Washington Post (Oct. 28, 2016) "Facing financial reality when early dementia is diagnosed."

Be Considerate in Disposing of Ashes

While the traditional method of disposing of one’s remains is burial in a cemetery, more and more people are looking at cremation and disposal of the ashes. However, as reported by FOX News in "Man scattering friend's ashes halts Metropolitan Opera performance," that can lead to problems.

A recent example happened during a performance at the Metropolitan Opera in New York City.

During an intermission a man stood up and spread his friend's ashes in the orchestra pit. The musicians were not in the pit at the time. However, the ashes caused enough alarm that the performance was cancelled as was another performance scheduled for later in the day.

This is obviously an extreme example. Scattering human ashes inside a public building is never a good idea.

Other cases are not as obvious. For example, if the ashes had been scattered on the field at Yankee Stadium, it might not have caused as much alarm. However, that does not mean it is legal to spread ashes on baseball fields. It depends on state laws and the field owner's policies.

An estate planning attorney can guide you in creating an estate plan that meets your wishes but doesn’t lead your loved ones to an illegal act.

Reference: FOX News (Oct. 30, 2016) "Man scattering friend's ashes halts Metropolitan Opera performance."