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A Trust Could Prevent People in Distress From Signing Away Their Inheritance

A parent may be shocked when their child gives away their inheritance for some quick money.

A recent MarketWatch article described the anguish of being distressed and giving up your inheritance for some quick money in "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"

A reader wrote in with a story about a friend who inherited $800,000 from his father's will. The friend was addicted to drugs and agreed to sign his rights to the inheritance away to his own brother for only $10,000.

Now that the friend is sober, the reader wonders whether there is any way to get the inheritance back.

The column writer suggests that the friend hire an attorney and sue the brother for fraud based on the premise that he knowingly took advantage of someone who was mentally incapacitated. That might work in some cases.

But not so fast.

There are some states and courts that are not quick to undo agreements that drug addicts voluntarily enter into, especially if it cannot be proven they were high at the time of making the agreement.

This is the type of scenario about which many parents have nightmares, when it comes to their addicted children. Leaving the child an inheritance outright can quickly be lost.

Fortunately, there are ways to avoid the problem altogether without disinheriting the drug-addicted child.   Various forms of Trusts can be used to protect the inheritance with a trustee who is granted the discretion to distribute the money for the benefit of the child.

A qualified estate planning attorney or trust attorney can guide you in a plan that fits your unique circumstances.

Reference: MarketWatch (Jan. 24, 2017) "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"

A Celebrity’s Death Often Increases Sales of Their Work

The passing of Debbie Reynolds puts Singin’ In The Rain into top seller position.

Singin' In The Rain recently became the bestselling DVD on Amazon and was placed on iTunes’ New and Noteworthy list, according to TMZ in "Debbie Reynolds Singin' In The Gains Death Causes Spike In Sales, Searches."

This comes as no surprise to estate planners and others who follow celebrity estates.

Whenever a major celebrity passes away, their work almost always sees an increase in sales. Reynold’s case is a bit unusual, since she had not been in the limelight for quite some time. However, since her death came only a few days after her daughter passed away, the increase in sales should not be a surprise.

While sometimes these increased sales are temporary, they are not always so and can continue for many years. This means that celebrities, even minor ones, will want to make sure their estates are prepared to handle increased revenue and potentially new commercial opportunities.

Reference: TMZ (Dec. 29, 2016) "Debbie Reynolds Singin' In The Gains Death Causes Spike In Sales, Searches."

Estate Planning Is Still Needed Even If the Estate Tax Is Eliminated

Estate Planning is not just about avoiding the Federal Estate Tax.

Even if the Republican-controlled Presidency and Congress eliminate the Federal Estate Tax, the need for Estate Planning will not be eliminated, according to Forbes in "Five Reasons You Need a Will (Even If the Estate Tax Is Repealed)!"

In addition to the reasons explained by Forbes in its article, there are many non-tax-related reasons why proper estate planning will remain essential.  Everyone needs some level of estate planning, and the potential repeal of the Federal Estate Tax will not change that simple fact.  The Federal Estate Tax is not, and never was, the only (or even the main) reason why everyone should engage in some form of estate planning.   

“Estate planning” is about making sure that the assets people accumulate during their lives are properly and efficiently distributed to their beneficiaries in accordance with their desires.  However, while that objective may be simply stated, in many situations the goal can be a lot more complicated to achieve than most people realize.  Comprehensive estate planning consists not only of tax planning, but also of planning for the many non-tax related and personal issues that may arise in any situation (regardless of a person’s wealth).  Among other reasons/circumstances, sophisticated estate planning is needed to reduce or avoid the application of local transfer taxes (e.g., the NJ Estate Tax and/or the NJ Inheritance Tax), for unmarried partners and other “non-traditional families”, for people who have been married more than once, and for people with (i) minor children, (ii) disabled beneficiaries (i.e., special needs planning), (iii) spendthrift or “financially handicapped” beneficiaries, (iv) closely held business interests, (v) property in more than one State, (vi) charitable objectives, (vii) complex distributive desires, (viii) significant assets that are governed by beneficiary designation forms, (ix) children from more than one relationship, (x) a desire to protect their beneficiaries’ inheritances from future creditors (such as a potential future ex-spouse), (xi) valuable illiquid assets (e.g., real estate, business interests), or (xii) an imminent long term care need (i.e., Elder Law and Medicaid qualification planning).  Despite the fact that someone may not need to be concerned about the Federal Estate Tax, the need for estate planning will always remain vital and necessary.  Even the complete and permanent (only time will tell?) repeal of the Federal Estate Tax would not signify the “death” of estate planning.

The potential for Estate Tax repeal should not deter anyone from implementing a comprehensive estate plan that addresses their many tax and non-tax related goals, and no prudent person should fall victim to the myth that estate planning would not be necessary if the Federal Estate Tax is repealed.  Professional estate planning and estate/trust administration services will always play a vital role in everyone’s overall financial plan.  

Reference: Forbes (Dec. 8, 2016) "Five Reasons You Need a Will (Even If the Estate Tax Is Repealed)!"

Family Dynasty Trusts Head toward Termination

Trustees need to plan for automatic termination of Great Depression trusts.

Dynastic trusts from the days of the Great Depression are near expiration and planning is required, according to Wills, Trusts & Estates Prof Blog in "Preparing for Trust Termination."

Most of the trusts created at that time have mandatory termination dates at which time, the trust assets must be distributed to the residual beneficiaries.

The first challenge for many trusts and trustees will be determining the residual beneficiaries. In many cases they could be distant relations of the original trust settlors and not the same people who currently receive regular distributions from the trusts.

Once the beneficiaries are determined, they will need to plan for how receiving the trust assets, will impact their lives and financial futures. Depending on the amount of money received, the beneficiaries' tax and estate plans could change dramatically.

Those who do not plan appropriately, could face negative consequences that could have been avoided.

Trust beneficiaries should seek the advice of an experienced estate planning attorney to guide them during the administration and termination of any Trust.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 5, 2016) "Preparing for Trust Termination."