Posts

Legal Phrase of the Day: “Heirs at Law”

, , ,
Heirs at law on beach

Before I explain the concept of “heirs at law,” you might be thinking, why even bring this up? Of what relevance is this “Ye Olde Sounding Phraise” in today’s modern world?

It’s important for me to share the concept of “heirs at law” with you, dear GoFisch blog Reader, for three reasons.

  1. It helps explain why I, and other estate planners, ask so many darn questions. We need lots of info.
  2. The concept of “heirs at law” shows that you need to be open and honest and forthcoming with me, or any estate planner. Without complete transparency and truth, the estate plan runs the risk of being useless (the idea of “garbage in, garbage out” applies here).
  3. “Heirs at law” is yet another reason that a DIY will, or using an online service to produce your will, is just a terrible idea. You need an estate plan crafted by a trusted professional, unique to your special needs. Every family is different, so there can be no “one-size-fits-all” estate plan, and there are many moving parts to a comprehensive estate plan.

With that established, what does the term “heirs at law” actually mean?

Heirs at law are those folks who would inherit your property in the event you died without a will, which is called intestacy.1 It is critically important to determine who the heirs at law are, even for people not subject to the laws of intestacy (i.e., folks who have a will) for two big reasons.

  1. Heirs at law must be notified of the probate process.
  2. Heirs at law are allowed to challenge the will in probate court.

All in the (sometimes complicated) family

As I already stated, it’s a wise idea to work with your estate planner and provide all the information requested. As a practical matter, the extent of information you’ll need to provide your estate planner regarding heirs at law depends of the nature of your family and relatives. For instance, in the case of two people, married only to each other, with children only from that one marriage—then the spouse and children (and perhaps grandchildren) will be the obvious heirs at law.

In another example, a family could also constitute a remarriage with each spouse having children from previous relationships. In this case, the stepchildren would need to be adopted by the applicable stepparent to be considered an heir at law.

In other situations, the client relatives may be much more distant, requiring more fact investigation. For example, take the case of a client who is unmarried and without children. In such a situation, the estate planner will need to pay close attention to identifying other relatives.

The Importance of Discussing Your Estate with Your Family

Of course, with an estate plan you can bequeath your estate to whomever you choose. You don’t have to give anything to any of your obvious or non-obvious heirs at law or any other relative for that matter. (In colloquial terms we could call this “stiffing your relatives.”) Although with that said, you cannot choose to disinherit a spouse.

This point reiterates why the estate planner should know and have updated contact information of who are the heirs at law. Again, it’s required that heirs at law be notified of probate process and these heirs (unlike a non-relative work colleague or neighbor) also have the legal standing to contest the will in court.

Avoid the Worst Case Scenario: Litigation over an Estate Plan

Another reason the estate planner must have knowledge of the heirs at law is to ward off fraudulent claims if need be. This reason is particularly important if the heirs at law are distant relatives. (An unfortunate real-world example of this involves Prince and the complicated intestate process following the singer’s passing without an estate plan.)

Bottom line: heirs at law are important when it comes to the distribution of your estate (with or without a will). Of course, dying intestate is NOT optimal and you DO need a will for a number of important reasons. I’d love to discuss the topic over the phone (515-371-6077) or via email. Don’t hesitate to contact me at any time!

[1] Bonus word! If an Iowan dies without a valid will, they die “intestate” and the laws of “intestate” succession are used to determine who will inherit the estate.

/by

How a Letter of Instruction Works with your Estate Plan

letter of instruction

When I prepare estate plans for my clients, they typically include six key documents. For more complex estates, the plan may also involve trust and/or business succession documents. However, to make estate planning as simple and the least chaotic for your loved ones tasked with fulfilling your wishes, I also recommend drafting another document: a letter of instruction.

What Exactly is a Letter of Instruction?

Think of a letter of instruction like an easy-to-read-and-understand summary shortcut for your estate plan’s executors and representatives. Its main purpose is to help guide the person(s) settling an estate through the process, step-by-step, in plain, clear language.  The letter can serve as a cheat sheet of sorts. It’s not legally required and certainly doesn’t take the place of a valid will, but it’s a meaningful nod to those you have tasked with handling your affairs.

Avoid the Worst Case Scenario: Litigation over an Estate Plan

Your letter of intent doesn’t have to go by any specific form or outline, so some people tend to use it as a way of giving personal instructions and giving details beyond what is articulated in your estate planning documents. A useful letter of intent can include the following information:

  • Location(s) of:
    • Important papers such as birth certificates, any divorce/marriage certificates, citizenship papers, etc.
    • Estate plan.
    • Titles and/or deeds to real estate and rental property.
    • Recent copies of all financial statements like tax returns and other potentially important legal documents.
    • Safety deposit boxes and the respective keys.
    • Tangible property that may not be readily accessible
  • Names, passwords, account numbers, and PIN numbers for financial accounts.
  • Social security number.
  • Contact information for:
  • Instructions for the care of any pets. (You may also want to establish an animal care trust.)

6 Estate Planning Resolutions You Can Actually Keep

Regular Updates & Safe Storage

Like your other estate planning documents, the letter of instruction should be reviewed annually and updated as needed. Because the letter of intent includes confidential personal information it should be stored in a secure place that can also be accessible by your estate plan’s executor.

Estate Planning: On Valentine’s Day Skip the Heart Box & Go for Secure Storage

But First, an Estate Plan!

Before you go about drafting a letter of intent, it’s important to place a priority on executing an estate plan that helps you meet your goals and define your legacy. My free, no-obligation Estate Plan Questionnaire (the first of the six key estate planning documents) is a great place to get started. Otherwise, contact me by phone or email with any questions and to discuss which estate planning strategies may be best for you and your family.

/by

Think Estate Planning is Just for the Wealthy? Think Again!

, , , ,
wealthy dollar bills

There is a rumor that has been floating around that only the rich need estate planning. That is extremely false. Everyone needs an estate plan, but the wealthy don’t need estate planning as much as the middle-class and working-class folks. If this contradicts everything you’ve ever thought about estate planning allow me to explain.

The Case of Kingston Lear

Suppose Kingston Lear (get it?!), a wealthy Iowan, decides he doesn’t need a qualified and experienced estate planner, he can do it himself, or use an online, one-size-fits-all service. Hey, Lear figures, this way he’s saving both time and money. Also, nothing is going to happen to him for a while, he can get around to doing a proper estate plan with a proper estate planning professional “someday.”

How Much Does an Estate Plan Cost?

Of course, “someday” never comes, but Lear’s death does. His three daughters are aghast that Lear has no real estate plan. The template resembling an estate plan is completely inadequate for the size and complexity of Lear’s assets.

A Matter of Trusts

Lear could have easily, with the help of a professional advisor, set up a trust (even a plain, “vanilla” revocable living trust would have worked) to avoid probate. But, the online service he used didn’t even explain the difference between wills and trusts. So, Lear’s assets all must go through probate. This means that the time and money Lear though he was saving is gone in a flash.

(Legal) Word of the Day: Trust

Probate Costs and Fees, If You Please

Probate fees are going to equate to at least 2% cut of Lear’s estate. Remember, Lear’s estate is large and complex and valued at $10 million, so the actual figure is probably going to be more like four percent.

Using 4% as the figure for probate fees means a loss of $40,000 ($10 million X .04 = $400,000). This is $400,000 that could have been passed down to his daughters through a trust, or split generously between his heirs and charitable organizations near and dear to Lear’s heart.

Also, court costs may amount to another 1%, or loss of $10,000 more ($10 million X .01 = $100,000).

Loss of Privacy

Another major benefit of a trust—again, not explained to Lear because didn’t seek any individualized advice—is privacy. A will (or most any document that goes through probate, absent very special circumstances) is simply a public document. Anyone can read, copy, share, and write about it.

Consider one of Lear’s major assets was an ongoing business—a Shakespearean-themed jousting complex, where families could have fun practicing jousting.

horses at fence

Unfortunately, in some of the probate papers, it was disclosed that there had been numerous complaints by the Iowa Horse Association about the treatment of horses. It isn’t long until this hits the blogs, and some of the more sensational aspects of the report (though hotly disputed) goes viral. The jousting park, which had been quite profitable, is now eschewed by all the good people of the area. The daughters are forced to sell the business asset to preserve the family’s good name (or what’s left of it) and sell at a loss. While the jousting park had been worth as much as $1 million, the daughters have to sell, so there’s a “paper loss,” but nonetheless less a loss, of another $900,000.

Loss of Future Profits

The $900,000 is a conservative figure; it doesn’t include lost future profits. If not for the scandal becoming public, who knows how long the jousting park could have remained really popular and this profitable. Years? Decades? It’s quite difficult to quantify, but it’s certainly probable that there are some lost profits. The question is: how much?

Costs of Cases

Because Lear’s will wasn’t drafted by professional, there are many ambiguities and loopholes. It’s not long before the three daughters begin fighting and, with unclear direction from their father, they wind up suing each other.

Taking a court case all the way to trial can easily mean $50,000 in attorney’s fees, plus each daughter will want and need her own attorney. So, another $150,000 is lost to attorney’s fees!

Avoid the Worst Case Scenario: Litigation over an Estate Plan

Total Losses Equal?

Lear could have had his estate plan done by an Iowa professional for a few thousand dollars. Instead, he lost a total far greater than that:

  • Probate Fees: $400,000
  • Probate Court Costs: $100,000
  • Loss on Sale of Jousting Park: $900,000
  • Loss of Future Profits of Jousting Park: Incalculable?
  • Attorney’s Fees for Daughters’ Litigation $150,000

This is a hit for the inheritance of $1.55 million, leaving $8.5 million (rounded up), or a little less than $3 million per daughter. But you know what? That still leaves an inheritance of $8.5 million to be split amongst three sisters.

The Rich Can Afford Bad Estate Planning

crown silver

Lear acted unwisely, arguably recklessly! A great deal of his money was wasted that could have been used for great charitable work in Iowa through local nonprofit organizations. But, for all his foolishness, Lear’s daughters still end up with $3 million each. Will the daughters incur much suffering with “only” $3 million? No.

That’s the rub; the rich can afford to make big (and small) estate planning mistakes.

You Can’t Afford Poor Quality Estate Planning

Let’s look at this from a normal Iowan perspective. At least 2% in probate costs and fees, a huge drop in value in a key asset, attorney’s fees for litigation…can a middle-class estate merely shrug these kinds of losses off? Not a chance.

The rich aren’t like you and me. They can badly botch estate planning. You and I can’t afford to make mistakes with our estates; there’s no room (and not enough money!) for error.

Need an estate plan but aren’t sure where to start? It’s easy from start to finish. Fill out my obligation-free Estate Plan Questionnaire or contact me.

/by

YOU Are a Super Hero: Charitable Giving Through Estate Planning

,
super hero comic book

You are a superhero. Seriously, you have the ability to change the world or, at the very least, your little corner of it. You can affect this level of change just by asking yourself one simple question: what causes would I like to benefit in my will?

Bequests to Charities in Your Will

Yes, that’s right. You can include the nonprofits you care about most in your will, leaving a legacy after you have passed on. And, it doesn’t cost anything extra! Just the assets you’re choosing to gift. You can include charities like your church, alma mater, a local cause, or an international organization in your estate plan. And, if you ask the charity you care about most, I’ll bet they’ll tell you that the result of your charitable bequest, no matter how big or small, can make a huge impact.

Terrible, horrible, no good, very bad idea of NOT having a Will

What About My Kids?

When folks come to me for estate planning help, a major reason they do so—perhaps even the single reason they do so—is to benefit their children. Parents often think, “I love Charity X, but of course, I love my kids even more, and I’ve got to take care of my family.” Of course, you do! And, of course, you should! But, ask yourself another question: How much is enough for my kids? If you have lots of assets, and/or your children are adults, and successful on their own, could you provide adequate support for your children and still also include a bequest to one of more charities?

superhero-costume-children

Let’s Talk

Invite the whole family to the kitchen table sometime (even if your kitchen table is a virtual one, via email) and talk about the distributions you want to make at death. Ask if including gifts to charity from your estate plan would be appropriate and acceptable to the kids. Perhaps it’s a charity the whole family supports. Perhaps this will be the beginning of a multigenerational cycle of giving.

Why not talk about it? This can be an especially productive conversation if you can explain that taxes are going to eat up a lot of one or more of the assets anyway, and this can be avoided by giving said asset(s) to charity (since charities are tax-exempt).

The Importance of Discussing Your Estate with Your Family

Life Insurance

Sometimes when parents give a major asset(s) to charity, and their kids’ inheritance takes a real hit, they’ll buy a new life insurance policy to make up the shortfall to the kids. Or, they may even buy a new life insurance policy and name the charity directly as a beneficiary. There’s also a very helpful kind of trust called an ILIT, that significantly increases the impact of life insurance. Without getting too complicated, let me give you the basics.

An ILIT is an irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries.

(Legal) Word* of the Day: ILIT

What is the Role of an Estate Planner?

When it comes to estate planning, you’re thinking about so many different variables and scenarios, so what if you forget to factor in charity? Lucky for you, that’s why I’m here—to help you maximize charitable giving. That means determining how your generosity can not only help an organization make a difference but how you can maximize the financial and estate-related benefits from giving.

9 Reasons You Need a Lawyer to Write your Estate Plan

Studies Showed

A 2013 study* showed how lawyers, like me, can help charitable giving factor in estate planning. The scientifically-conducted research from the UK-based Behavioural Insights Team showed that when lawyers asked clients specific questions regarding charitable giving, the results were significant. Here are the results:

  • Control Group/Baseline

Lawyers who provided no reminder or inquiry to their clients about possibly benefiting a charity in their estate plan (bequests) resulted in 4.9 percent of those clients including a charity in their plans.

  • Test Group One

Lawyers who asked their clients, “Would you like to leave any money to a charity in your will?” resulted in 10.8 percent of their clients including a charity.

  • Test Group Two

Lawyers who said, “Many of our clients like to leave money to a charity in their will. Are there causes you are passionate about?” resulted in 15.4 percent of their clients including a charity. What a dramatic increase!

Here are the approximate dollar values associated with each group:

  • Control Group/Baseline

Average bequest $5,000

  • Test Group One

Average bequest $4,800

  • Test Group Two

Average bequest $10,200

Again, test group two gives a powerful example of the difference charity-minded estate planners can make.

In the study, there were a 1,000 people in each of the groups. That means that the “Test Group Two” raised over $1 million more than the control group.

volunteers taking selfie

What this means for you is that your lawyer plays an important role in reminding, guiding, and assisting you in your charitable giving so that you can use your superpower (giving through your will) to the fullest extent.

In 2017, $35.70 billion was contributed to US charities through bequests. Imagine if everyone worked with a lawyer with a strong focus on charitable giving! The impact could be incredibly transformative for the impact nonprofits can make in our communities.

Let’s Get Started

Harness your superpowers and get started with your legacy today. The best place to start is by filling out my Estate Plan Questionnaire. It’s easy, free, and there’s no obligation. It’s simply a document that gets you thinking and planning. Already have an estate plan, but want to update it to include the causes that are near and dear to your heart? Don’t hesitate to contact me.

/by

5 Celebrities Who Died Without a Will

,

After Prince’s unfortunate death in 2016 the news featured a multitude of articles commemorating his life and artistic influence. After those headlines faded, a new piece of news emerged: the artist died without a will. His estate, estimated to be between $150-$300 million, went to probate in the state of Minnesota and the state court appointed a special administrator to parcel out what Prince actually owned, the value of the property, and whom will actually receive the assets.

Prince Died Without a Will: 4 Reasons YOU Need an Estate Plan

It’s a bad idea for anyone to die without an estate plan in place, as it leaves a great deal up to the law of intestate succession. Most people would prefer to choose their beneficiaries and a trusted executor to carry out their wishes. Under intestacy laws, you cannot choose these important people. You also cannot use your estate plan to achieve goals to reduce or eliminate income, estate, or inheritance taxes. Basically, without a will, you have no control over who gets what of your hard-earned assets at death.

Unfortunately, far too many people (six out of 10 Americans) don’t have estate planning documents like a will or living trust. Plus, since celebrities often have complex and highly valuable assets, dying intestate is often an extremely complicated, litigious affair. (For the sake of your friends, family, and lasting legacy avoiding litigation is a good goal to have with an estate plan.) For instance, a big question in the Prince case is who will be the beneficiary of perhaps one of the most persistently valuable assets—the right of publicity, which includes elements like Prince’s name and likeness.

Avoid the Worst Case Scenario: Litigation over an Estate Plan

While the average Iowan won’t have to consider publicity rights a part of their estate, there are at least six key documents celebs and the non-famous alike should have that cover important elements like finances, healthcare, and personal disposition of property.

Learn from Prince and these other five celebrities (among many more) who passed away without the proper estate planning in place:

  1. Howard Hughes, entrepreneur/producer/aviator

Hughes died on a flight in 1976 with no surviving spouse, child, parent, or sibling. Without a will, his $500 million-valued estate was eventually decided by a small Texas county probate court jury five years after his passing. The probate had brought about a “circus-like” atmosphere as more than 600 people showed up in person claiming to be “wives, sons, daughters, first, second, third, fourth and fifth cousins” of the late Hughes (and that didn’t count all the people who petitioned via letter). A couple of wills were also produced but were eventually thrown out as fakes.

The Howard Hughes Estate: A Cautionary Tale

  1. Amy Winehouse, singer/songwriter

The British artist died in 2011 when she was just 27. Without a will, her estate worth millions went to her parents. Say, even if Winehouse did want her brother to inherit part of the estate, he couldn’t because of (U.K.) laws covering who inherits what.

hollywood sign

  1. Tupac Shakur, rapper/actor

Shakur was tragically shot and killed in 1996 at the young age of 25; after his death, “his mother had to file court papers establishing herself as the administrator of his estate and the sole living heir.” Shakur also left a complex web of financial dealings, spendings, and debts to figure out. Shakur’s estate was made more complicated over the years through several albums of his music (intellectual property) released posthumously. Additionally, Tupac’s biological father lost a lawsuit claiming he was entitled to half of the estate.

  1. Pablo Picasso, artist

It took more than six years of “bitter negotiations” for Picasso’s estate to be settled (for a pricey $30 million) after he died in 1973. Picasso passed at the ripe old age of 91 but did so without a will, so his assets were divided amongst seven familiar heirs. Picasso left a massive amount of valuable assets including 45,000 works of art, five homes, $4.5 million cash, $1.3 in gold, stocks, and bonds. “In 1980 the Picasso estate was appraised at $250 million, but experts have said the true value was actually in the billions.”

5 Celebrities With Crazy Estate Plan Provisions

  1. Sonny Bono, singer/U.S. Representative

Bono passed away in 1998 following a fatal skiing accident with no will to his name. Issues flared when Cher (of their former pop duo Sonny & Cher) alleged he owned her past due alimony and a man named Sean Machu said he was Bono’s illegitimate child. His fourth spouse became the estate’s administrator.

microphone

  1.  Billie Holiday, jazz musician/singer

The famed singer’s estate at the time of her death stands as a paradox to her modern posthumous fame. When Holiday died in 1959 she had “$0.70 in the bank and $750 strapped to her leg.” Since she died intestate under New York state law all of her royalties went to her estranged husband Louis McKay. Her total estate only continued to grow after her death including four Grammy awards, a movie about her life starring Diana Ross, and induction into the Grammy Hall of Fame.

You, yes you, can be a star too, but you need to have an estate plan in place to protect your legacy. The best way to get started is with my free (no obligation) estate plan questionnaire. Or, contact me to discuss your individual situation. Shoot me an email at gordon@gordonfischerlawfirm.com or give me a call at 515-371-6077.

/by

Four Major Ways to Classify Trusts

,
number four on wood

We dove into the definition of the term “trust,” but that’s just the tip of the iceberg when it comes to learning about the important agreement that’s often used for purposes including estate tax liability reduction, estate property protection, and probate avoidance. There are four standard ways of classifying trusts.

Trust Classifications

handshake over table

Trusts may be classified by their purpose, duration, creation method, or by the nature of the trust property. One common way to describe trusts is by their relationship to the life of their creator. Those created while the grantor is alive are referred to as inter vivos trusts or living trusts. Trusts created after the grantor has died are called testamentary trusts. Another helpful classification of trusts is comparing those which are revocable to trusts which are irrevocable.

Inter Vivos Trust

An inter vivos trust, also known as a living trust, may be either revocable or irrevocable. In a revocable trust, the grantor can retain control of the property, if the grantor so wishes, and the terms of the trust may be changed or even canceled. An irrevocable living trust, on the other hand, may not be changed or terminated after it is executed.

What the Queen of England can Teach us about Trusts

Testamentary Trust

A testamentary trust is most often a component of a will. The testamentary trust is created when the trustor passes away. The designated trustee then steps in and distributes or manages the assets of the trust according to the deceased’s wishes.

Show Your Kids You Love ‘Em with a Testamentary Trust

Revocable Trust

A revocable trust allows assets to pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. It is flexible in that it can be dissolved at any time, should your circumstances or intentions change.

A revocable trust typically becomes irrevocable upon the death of the grantor. You can name yourself trustee, or co-trustee, and retain ownership and control over the trust, its terms, and assets during your lifetime. You may also make provisions for a successor trustee to manage them in the event of your death or incapacity.

Although a revocable trust allows you to avoid probate, it’s subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.

Irrevocable Trust

An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust. An irrevocable trust is preferred over a revocable trust if your primary goal is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of tax liability on the income generated by the trust assets (although distributions to others may have income tax consequences). Trust assets in an irrevocable trust may also be protected in the event of a legal judgment against you

Latest Iowa Lawyer Issue: Read GFLF’s Article on Irrevocable Life Insurance Trusts

Let’s Get Started

You probably still have some questions on trusts…which is why I’m here! Don’t hesitate to contact me. I offer a free one-hour consultation at which point we can discuss your personal situation, see if a trust is right for you, and set up the steps to take for success.

/by

The Howard Hughes Estate: A Cautionary Tale

,
movie camera

I was scrolling through Netflix the other night and finally landed on The Aviator, which I haven’t seen in a while. The 2004 Scorsese film starring Leonardo DiCaprio tells the story of the eccentric aviation magnate and movie producer, Howard Hughes, who tragically battled OCD, paranoia, and chronic pain (from a near-death plane crash) and spent his later life as a hermit. That led me down a rabbit hole of internet research into the real Howard Hughes. As an estate planner, I naturally wondered what happened to his estate when he passed away in 1976. (Perhaps fittingly the aviator passed away in an airplane.)

Even if You’re Not a Billionaire, You Need an Estate Plan

Unfortunately, the tale of the Hughes estate is a cautionary one of what NOT to do.

Terrible, horrible, no good, very bad idea of NOT having a Will

Hughes—who was reputed to be one of the wealthiest men in the world—died intestate, meaning he died without a valid will. That can cause chaos, confusion, and cost ample time and money for regular folks. But, when your estate is worth billions like Hughes’ was, it causes a mass tangle of court proceedings. In the case of the Hughes estate, debate and disputes lasted a total of 34 years.

In the aftermath of his death, several documents were brought forth alleging to be the magnate’s will. All were deemed to be forgeries. A Nevada court determined Hughes died intestate, meaning the law determines how assets are distributed to heirs-at-law. However, Hughes died divorced (allegedly) and without any close relatives; he left no clear heir(s). This debacle of no will meant that many people came out of the woodwork claiming to be relatives.

5 Celebrities With Crazy Estate Plan Provisions

A Messy Web of Forgeries, Fraud, & Litigation

So, after years of attorneys, courts, and dubious claims, what actually transpired?

Eventually, $2.5 billion was split between 22 of Hughes legal cousins in 1983. (Undoubtedly he didn’t know some or even the majority of these people. It’s also been said he didn’t want his money to go to his distant relatives, but without an estate plan, his wishes were steamrolled by probate law.) In an interesting twist, a woman named Terry Moore came forth claiming she married Hughes on a boat in international in 1949 and that they were never divorced. She didn’t produce any proof of the marriage (like a marriage certificate), but the estate paid her a $400,000.

The Supreme Court even had to step in. They ruled in the messy dispersion of assets that the Howard Hughes Medical Institute owned Hughes Aircraft, which it then sold off in 1985 to General Motors for more than $5 billion. The Court also rejected lawsuits brought by Texas and California, claiming they were owed inheritance taxes, but the suits were eventually put to rest with settlements of $50 million and $150 million respectively in property and/or cash.

In 2010, more than three decades after Hughes passed, the last slice of Hughes pie (Summerlin residential development community near Las Vegas) was liquidated.

Think Estate Planning is Just for the Wealthy? Think Again!

Leave a Valuable Legacy

Undoubtedly, Hughes left his mark on 20th century American history. However, his legacy could have been cemented in the way he wanted (probably giving the bulk of his estate to the Howard Hughes Medical Institute and nothing to long lost cousins) if he would have had a proper estate plan created completed with valuable strategic tools like different trusts and charitable giving vehicles. While most of us will never have an estate valued even close to the likes of Hughes, we can be smart with what we do have and make certain what we choose is dispersed to whom we choose, when we choose. There’s no need for your assets to be tied up in red tape or be dispersed in a way that’s not fitting with your wishes.

5 Celebrities Who Died Without a Will

Contact me with your estate planning questions, or get started with my free, no-obligation Estate Plan Questionnaire, which will help you organize important information needed for the plan in one place.

/by

What We Talk About When We Talk About Estate Planning

,
Gordon Fischer Iowa City At Desk-Estate Plan

Estate planning.

Not exactly material for scintillating conversation. In fact, I’d bet most of us like to avoid this topic because it can be confusing, and requires lots of decision-making. And, well, yes, it forces one to think about one’s own mortality. Estate planning, after all, is a roadmap about what you want to happen after you move on from this life. While it may not be a fun topic, it is indeed a necessary one.

Estate plan: you almost surely need one

Almost everyone needs some kind of estate plan. If you’re young, healthy, unmarried, have no children, and have no significant or unusual assets…perhaps you could talk me into the idea that you don’t entirely need an estate plan. Even in such (rare) cases, I strongly recommend making sure your beneficiary designations are completed and up to date (for example, on your bank/credit union savings accounts and retirement benefit plan). But, if you are married, and/or have kids, and/or have significant or unusual assets, and/or own part or all of a business, you most definitely need an estate plan!

Baby in arms of dad

What IS an estate plan, anyway?

What do we talk about when we talk about estate planning? There are six documents that should be part of most everyone’s  estate plan. Plus, you should keep them updated and current. Also, don’t forget about assets with your beneficiary designations. For most Iowans, that’s good – six documents, keeping them current, and also remembering about those assets with beneficiary designations.

Sure, estate planning is complicated, but not that complicated. I’ll show you.

Six “must have” documents of your estate plan

There are six documents that should be part of most everyone’s estate plan:

  1. Estate planning questionnaire
  2. Will
  3. Power of attorney for health care
  4. Power of attorney for finance
  5. Disposition of personal property
  6. Disposition of final remains

We’ll go through each document briefly, so you have a sense of what each entails.

Estate Plan Questionnaire

Estate planning involves facing heavy questions, and depending on the amount of assets and beneficiaries you have, may take quite a bit of time and thought. I recommend clients (and even those who aren’t my clients) complete an estate plan questionnaire.

An estate plan questionnaire is an easy way to get all of your information in one place, and it should help you understand and prioritize estate planning goals. (I must also admit a questionnaire makes it easier for your attorney to build your estate plan!)

As with any project, it helps “to begin with the end in mind.” A questionnaire can help get you there.

Last Will and Testament

Now let’s get to the will. The will is the bedrock document of every estate plan, and it’s a little more complicated than other documents.

With your will, you’ll be answering three major questions:

  1. Who do you want to have your stuff? A will provides orderly distribution of your property at death according to your wishes. Your property includes both tangible and intangible things. (An example of tangible items would be your coin collection. An example of an intangible asset would be stocks.)
  1. Who do you want to be in charge of carrying out your wishes as expressed in the will? The “executor” is the person who will be responsible for making sure the will is carried out as written.
  1. Who do you want to take care of your kids? If you have minor children (i.e., kids under age 18), you’ll want to designate a legal guardian(s) who will take care of your children until they are adults.

Power of Attorney for Health Care

Assorted pills

A power of attorney for health care designates someone to handle your health care decisions for you if you become unable to make those decisions for yourself. This essentially gives another person the power to make decisions on your behalf. For example, if you don’t want to be kept alive with machines, you can clearly outline that in your power of attorney for health care. But keep in mind that power of attorney for health care isn’t just about end-of-life decisions – it can cover any medical situation.

Power of Attorney for Finances

The power of attorney for financial matters is similar, only your designated agent has the power to make decisions and act on your behalf when it comes to your finances. This gives them the authority to pay bills, settle debts, sell property, or anything else that needs to be done if you become incapacitated and unable to do this yourself.

It might be obvious by now, but I’ll say it just in case: choosing an agent for a power of attorney requires that you think long and hard about who would be best suited for the job and who you trust.

Disposition of Personal Property

Now, let’s get to the disposition of the personal property. This is where you get specific about items you want particular people to have. If you’re leaving everything to one or two people, then you may not need to fill this out. But, if you know you want your niece Suzie to have a specific piece of jewelry, and your nephew Karl to have that bookshelf he loved, then you’d say so in this document.

Disposition of Final Remains

We come to the disposition of final remains. This document is where you get to tell your loved ones exactly how you want your body to be treated after you pass away. If you want a marching band and fireworks shooting your ashes into the sky (that’s a thing, by the way), then this is where you make it known. It can be as general as simply saying “I want to be cremated,” or it can be specific and include details of plots you’ve already purchased or arrangements you’ve already made.

Choose your Final Resting Place & Maybe Plan a Party

Keep updated and current

OK, so you’ve gone to an estate planning lawyer, and these six “must have” estate planning documents have been drafted and signed. What else? You need to keep these documents updated and current.

If you undergo a major life event, you may well want to revisit with your estate planning lawyer, to see if this life event requires changing your estate planning documents.

What do I mean by a major life event? Some common such events would include:

  • The birth or adoption of a child or grandchild
  • Marriage or divorce
  • Illness or disability of your spouse
  • Purchasing a home or other large asset
  • Moving to another state
  • Large increases or decreases in the value of assets, such as investments
  • If you or your spouse receives a large inheritance or gift
  • If any family member, or other heir dies, becomes ill, or becomes disabled

This is just a short list of life events that should cause you to re consider your estate plan. There are many others.

Happy Pi Day: The One Constant in Estate Planning is Change

Don’t forget about your beneficiary designations

There are six “must have” estate planning documents, plus you need to keep them current. Also, don’t forget about your beneficiary designations. For example, savings and checking accounts, life insurance, annuities, 401(k)s, pensions, and IRAs are all transferred via beneficiary designations. These beneficiary designations actually trump your will.

Regarding assets with beneficiary designations, you must make sure that designations are correctly filled out and supplied to appropriate institution

What other documents might you need resides these six “must have” estate planning documents?

For most Iowans, probably the vast majority, what I’ve outlined above is enough. There may be folks who have more that $5 million in assets, or who have complex assets (for example, more than one piece of real estate), or own part or all of a robust business, or otherwise have unusual situations. In such cases, a trust may be helpful. But that will be more “advanced” estate planning. What I’ve described above is an excellent start.

See? That wasn’t so bad!

Glasses on estate planning documents

There it is in a nutshell. This is what goes into an estate plan.

Whether it’s complicated or simple, it does require some thought and time. But, it’s worth the investment – a proper estate plan can save you and your estate costs and fees; help your family and friends; and provide you peace of mind.

Perhaps most importantly, through proper estate planning, you can help your favorite charities in ways large and small. Really, without estate planning, it’s not possible, at your death, to help nonprofits you care about.

Begin today

Why not start right now on your own plan for the future with my free estate plan questionnaire? It’s provided to you free, without any obligation. I would love to discuss your estate plan with you; reach out at any time by email, gordon@gordonfischerlawfirm.com, or cell phone, 515-371-6077.

/by

Back to School: Political Science- How Changes to Legislation Impact Your Estate Plan

,
legislative building

On the GFLF blog this month, we’re going “back to school” with some fun legal lessons like last-minute gifts of personal property, nonprofit operation, and what planned giving actually means. Happy learning! 

If you have an estate plan already, give yourself a high-five! You’re well on your way to establishing a worthy legacy; effectively and efficiently transferring your hard-earned property; and saving your loved ones time, money, and emotional turmoil. Plus, you’re ahead of the more than half of Americans who haven’t done any estate planning!

Even though estate plans never expire there are many reasons you might need to revise or at least double-check your documents. Some common life events that could impact your documents and/or estate planning goals include: the birth of a child/grandchild; death of a beneficiary; marriage; divorce; moving across state lines; receipt of an inheritance; and other major financial status changes.

5 Scenarios for Estate Planning Revisions

I recommend my clients review their plans at least annually and if there’s any question if a life change would require an estate plan revision, it’s better to just ask! (Reminder, I offer a free one-hour consult! Even if I didn’t draft your current estate plan, I’m happy to discuss your situation to determine if an updated estate plan is in order.)

It can be easy to forget or overlook changes that occur outside the realm of your personal life that may impact your estate. For instance, changes in federal or state legislation could render your current estate plan provisions ineffective and irrelevant. A recent example that had a major impact was the Tax Cuts and Job Act of 2017.

Legislative Changes

The Tax Cuts and Job Act doubled the estate tax exemption, meaning the law massively increased the total amount of assets you can own before you are subject to estate taxes. For an individual to be subject to estate tax, your estate must exceed $11.2 million. For a married couple, the estate tax has no effect until total estate is worth more than $22.4 million. In short, the federal estate tax really only applies only to the richest of the rich.

What the New Tax Law Means for Your Estate Plan

Blast From the Past

But in 2017, before passage of the TCJA, the estate tax exemption was half of what it is now. Even more relevant, in 2001, the estate tax exemption was much, much smaller, just $675,000. From 2002-09, the estate tax ranged from $1 million to $3.5 million. Back in those days, even middle-class and certainly upper middle-class Iowans had to have some concern about the estate tax. After all, if you add up all your assets–real estate, vehicles, retirement benefit plans, insurance, etc.–you can reach that threshold surprisingly quickly.

Tax Talk: If You Die in Iowa is There a State Estate Tax?

Complex Trusts

It used to be that estate planners would establish complicated trusts to make certain clients avoided the estate tax. One example (of many) of such a complex trust is the A-B marital trust.

The A-B trust was almost entirely designed to minimize estate taxes. It was one trust, but with two parts. Under the A-B trust, the “A” trust holds the portion of the estate designed to qualify for the martial deduction, while the “B” trust was designed to maximize any unused estate tax exemption for the surviving spouse.

Now, an A-B trust isn’t as necessary unless a single person’s estate is greater than the federal estate tax threshold. (It might be necessary in a state that had a state estate tax, but Iowa does NOT have a state estate tax; we need only worry about the federal estate tax).

Estate planning for Married Couples: Avoid Conflicts of Interest

Cut the Complications

The upshot of the recent legislative tax change is that some folks could do with a much more simple trust than what they currently have. Considering the new estate tax regime, a simple revocable living trust will much more neatly fill their needs, and also be more easily interpreted, explained, and more easily defended in case of challenge. Also, with a simple revocable living trust, less can go wrong. There need not be any legale “Rube Goldberg” contraptions designed to avoid a federal estate tax that won’t apply anyway.

Funding and Administering Your Living Trust

We’re Not Just Talking Taxes

It’s important to know that estate planning is not just about protecting your estate from taxes. The benefits of estate planning are many when compared to dying intestate (without a will), including but definitely not limited to:

Plus, a good estate plan should be written to fit with your personal goals. It can be hard to think about a world where you won’t be alive, but it’s also a reality we must all face. How we prepare for our death (or incapacitation) can mean a world of difference for the loved ones and favored causes we leave to carry our torch on into the future.

Trusted Consultation

Was your trust drafted when the federal estate tax was lower? For the good of your loved ones, let’s optimize your planning strategy. If you’re not sure what kind of trust you have, or whether it really fits your situation, don’t stress one second. I offer a free one-hour consultation! Truly, I would love to hear from you; email me at gordon@gordonfischerlawfirm.com or call me at 515-371-6077.

/by

Back to School: Spelling Lesson Word of the Day

man reading newspaper

If spelling tests weren’t always your strong suit in school, fear not! Today’s legal word of the day is an easy one that’s having a momentary editorial heyday.

Ripped From the Headlines

As you probably heard, The New York Times took the highly unusual step of publishing an unsigned, anonymous op-ed entitled, “I am Part of the Resistance Inside the Trump Administration.” The person was identified only as follows:

“…. a senior official in the Trump administration whose identity is known to us and whose job would be jeopardized by its disclosure. We believe publishing this essay anonymously is the only way to deliver an important perspective to our readers.”

man with newspaper near train

Whodunnit?

The article led to a nationwide guessing game. Who is the senior official in the Trump administration who penned this “explosive” piece? Suspicion fell onto, of all people, Vice President Mike Pence. This is because the op-ed writer uses the word “lodestar,” and Pence has used this obscure word multiple times. (Pence vehemently denied he was the author, by the way.)

I don’t know who wrote the op-ed, and we may never know, but the real winner out of this news cycle is the word you never knew you needed in your vocabulary—lodestar!

So, What DOES Lodestar Mean?

Lodestar means “a star that leads or guides,” and is especially used in relation to the North Star.

timelapse of stars

Now, Let’s Talk About a Similar Kind of “Star”

At this point you’re like, “Gordon, this is a cool word I can def use in playing Scrabble, but what does it have to do with the law?”

Well, “lodestar” is a synonym and practically interchangeable with the word “polestar,” which is defined as a “directing principle; a guide.”

A court will use the term polestar like so: In this case, our polestar must be this principle . . .

Basically the court will use such-and-such as its guiding principle.

direction sign on a mountain

For example, in the law of wills, the Iowa Supreme Court stated In the Estate of Twedt that “the testator’s [maker of the will’s] intent is the polestar and if expressed must prevail.” You’ll see the same in the law of trusts, the intent of the settlor of a trust must be the polestar.

The word is also used in the law of charitable giving. The intent of the donor is the polestar which courts must follow if there are any issues. For example, suppose a donor posthumously donates $100,000 to a nonprofit, but the nonprofit no longer exists. What was the donor’s intent? Is it stated anywhere what the donor wanted to happen to the charitable funds if the nonprofit was no more? If not written, did the donor discuss the matter with anyone? To resolve any dispute involving a charitable gift, the guiding principle–the polestar–must be the donor’s intent.

Practical application of the Word Polestar

A major reason to have an estate plan is that YOU get to control your own future, rather than being controlled by outside forces or outside events. Through proper estate planning, you can be in total control of the answers to the following questions:

And if there are any questions or issues regarding your estate plan, lawyers and judges looking at your estate plan will make decisions based on YOUR intent. Your intent will be the polestar!

Top 10 Estate Planning Goals

Don’t delay any longer – thank your lucky (North) stars you still have time to make a proper estate plan. I’d be happy to talk with you about your estate plan any time, or you can get started on organizing your important info in my free Estate Plan Questionnaire. I can be reached via email (gordon@gordonfischerlawfirm.com) or by cell (515-371-6077). I’d truly love to hear from you.

/by