Varian Law LLC

Many Young People Are Depending On An Inheritance for Retirement!

A new study on the expectations of young people is very disturbing.

A large percentage of 18-22 year-olds are expecting that their retirements will be funded by the inheritances they expect to receive from their parents, according to a recent survey. This could mean they are spending all their own money and not saving any of it, according to Bloomberg in "Rich Kids Are Counting On Inheritance to Pay for Retirement."

When one looks deeper into the situation, however, the young people in the survey are not wasting all their money.  They have a lot more expenses at their age than older generations did. This is in part due to student loan debt. House prices are also continuing to rise in urban areas, and incomes for those just starting out have remained mostly stagnant for many years.  For now, the kids cannot afford to save. That might change in a few years as they grow into their careers.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and that may include how to wisely leave an inheritance for the next generation.

Reference: Bloomberg (June 7, 2018) "Rich Kids Are Counting On Inheritance to Pay for Retirement."

Foreign Property Can Present Estate Planning Challenges

Foreign real estate can present a challenging issue for estate planning.

Many countries have strict rules about who may inherit property. These rules are unlike anything in the U.S.  Attorneys who practice in the foreign country should be consulted so any estate plan can take the foreign laws into account when dealing with that property. Inheritors also face other issues, according to the Washington Post in "Inheriting property overseas can be a dream come true, but it comes with challenges."

Among other things, income generated from the property in the foreign country must be reported to the IRS. Whether any tax is due depends on whether taxes on that income are paid to the foreign country and how much those taxes are. Finally, the use and sale of the land might be restricted by the foreign country, so local attorneys should be consulted on those issues.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and that may include property in foreign lands.

Reference: Washington Post (May 29, 2018) "Inheriting property overseas can be a dream come true, but it comes with challenges."

Scammers Prey on Hopeful Heirs

People do inherit from a long, lost relative.  However, it is not all that often.

If you should inherit money from a long lost relative, someone administering the estate will contact you and let you know. This always comes as a very welcome surprise for the heirs. However, this rare occurrence is also the subject of a very common scam that might be increasing, according to the Gazette Extra in "Police warn of IRS, inheritance scams."

The scam is not a sophisticated one. It usually consists of someone receiving a letter in the mail informing them of an inheritance, but with a catch. To make sure the person receiving the letter is the appropriate heir, the “heir” is required to provide some personal details and send cash back to help facilitate the process.

This should raise alarm bells, but people want the inheritance so badly to be legitimate, that they are often taken in by the scam. They not only lose the cash they sent, but they are often then the victims of identity theft. How? It is because they have given the scammers too many personal details.

While a legitimate attorney might someday contact you about an inheritance, that attorney will never ask you for money up front to tell you about any inheritance that you might receive. If you receive word that you have an inheritance coming, do not send the messenger any money.  

Reference: Gazette Extra (April 19, 2018) "Police warn of IRS, inheritance scams."

Children Need Information Before Receiving Their Inheritance

Information and education can go a long way in helping your children to use an inheritance wisely.

Mistakes can be made by children who inherit money and lack the information on how to deal with it maturely and wisely, according to Nasdaq in "5 Things Your Kids Should Know Before They Inherit Your Money."

Much of what your children will need to know depends on how they are receiving your wealth. If you are leaving them the money in your IRA by designating them as beneficiaries, they will need to know the best way to handle that IRA, when they have to make withdrawals and what they are not allowed to do without facing severe tax consequences.

If the money is being left to them through a will or a trust, they will need to be informed about how to properly handle different types of investments.

The best thing to do is to sit down with your children and talk to them about what they might receive and how they should handle it.  It is also a very good idea to let them know who to trust for legal and financial advice should they have questions after receiving their inheritances.

An experienced estate planning attorney can advise you and your children on creating an estate plan that fits all of your unique circumstances.

Reference: Nasdaq (Jan. 29, 2018) "5 Things Your Kids Should Know Before They Inherit Your Money."

Inheritance May Be Lost As Life Spans Increase

As the cost for caring for elderly people increases, the amount of inheritances decreases.

The idea of leaving an inheritance is in jeopardy and may become a distant memory for many middle class families, according to the Financial Times in "Opinion Today: The end of inheritance."

Receiving even a small inheritance from parents allows families to build up some wealth. That wealth can, in turn, be left as inheritances for their children.

However, the overall population is aging.  The elderly are living much longer than in previous years and that increases the cost of providing long term care.  

If you want to determine if you can protect and preserve your estate for your descendants, you should consult with an experienced elder law/estate planning attorney.

Reference: Financial Times (Dec. 23, 2017) "Opinion Today: The end of inheritance."

David Cassidy Cuts Daughter from Will

David Cassidy left a small estate and disinherited his daughter.

David Cassidy, who starred on the TV show “The Partridge Family” chose to cut his daughter out of his Will, so she will not receive an inheritance from him, according to the Los Angeles Times in "David Cassidy cut daughter Katie Cassidy out of his will."

David Cassidy previously acknowledged that he had never had much of a relationship with his daughter. She was raised by her mother and stepfather and rarely saw her biological father.  David regretted this and the two reconciled before he passed away. However, David never changed his Will and Katie was specifically excluded from her father's prior Will (signed in 2004).  The open question is whether David never got around to changing his Will to include his daughter after their reconciliation.

Your Will and other estate planning documents should be reviewed and updated whenever you have had a meaningful change of circumstances in your life.  Most people have had a sufficient “change of circumstances” in their life at least every 5 to 10 years to warrant a review of their existing estate plan. 

Reference: Los Angeles Times (Dec. 7, 2017) "David Cassidy cut daughter Katie Cassidy out of his will."

Beneficiaries of Retirement Accounts Have Many Options

If your children inherit your retirement accounts, they will have several options about what to do with them.

The Wills, Trusts & Estates Prof Blog discusses some of the options that heirs have when inheriting retirement accounts in "What Your Kids Can Do When They Inherit Your Retirement Accounts."

Most people designate their spouses as the beneficiaries of their retirement accounts.  However, people sometimes name non-spouse beneficiaries, such as their children.

What children can do with retirement accounts is not as simple as it is for spouses.  However, there are a few options, which include:

• The assets in the account can be taken out immediately as one lump sum.
• The assets in the account can be taken out whenever needed, as long as the account is empty within five years.
• The children can choose to stretch the account out over their own expected lifetimes. They will need to make annual required minimum distributions and must take the first one by a set time.

An experienced estate planning attorney with knowledge of the post-death required minimum distribution rules can advise you and your beneficiaries regarding options with respect to retirement accounts.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 22, 2017) "What Your Kids Can Do When They Inherit Your Retirement Accounts."

An Executor Is Powerful, But They Must Follow the Law

Family members may have grievances with each other, but an Executor cannot just alter the distribution of assets.

An Executor does not have the authority to make things equal between family members, unless it is strictly within the law, according to the Napa Valley Register in "Can mom make son pay debt?"

The article was about an Executor who was the child of the deceased and charged with distributing equal shares.  However, one of the siblings had borrowed money from the deceased over the years and never paid any of it back.  Unfortunately, unless there is documentation of the loans, there is little chance the Executor can take that information into consideration.

There are several problems with what the Executor might want to do.  Among them is that the “loans” were most likely gifts and not loans. The mother may have “loaned” the money to the sibling, knowing that it would never be paid back, which makes it a gift.

If loans are undocumented, there is no way to prove they happened without a court battle.  Even if they were considered loans and not gifts, they could be well outside the applicable statute of limitations. 

To say the least, properly characterizing and memorializing a transaction as either a loan or a gift is absolutely essential to avoiding problems.  Whenever a transfer of money from one family member to another is involved, the parties should clearly indicate whether it is a gift or a loan, and document it accordingly.

An experienced estate planning and administration attorney can properly advise you whenever the issues noted above arise.

Reference: Napa Valley Register (Oct. 26, 2017) "Can mom make son pay debt?"

Your Children’s Marriages Can Complicate Your Estate Plan

It is possible you may not be confident in the intentions of your in-laws.

Tensions often arise with in-laws years after a marriage.  Someone in the U.K. recently expressed concern on how to protect a child’s inheritance from a bad son-in-law, according to the This Is Money advice column "I have a terminal illness and our son-in law is unreliable with money - how can we protect daughter's inheritance?"

The answer in the U.S. is the same as it is in the U.K.  

Parents are often wary that their son-in-law or daughter-in-law will meddle in their children's inheritance, spend the inheritance foolishly or, worse yet, walk-away with half of the inheritance after a divorce.

Instead of leaving a child an inheritance outright through a Will a trust can be used to protect the assets from a wayward in-law.  With a trust, you can make sure that your money is only distributed how and to whom you want.  If your child gets divorced, a trust can protect the inheritance.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which may include considerations for a son-in-law or daughter-in-law.

Reference: This Is Money (Sep. 8, 2017) "I have a terminal illness and our son-in law is unreliable with money - how can we protect daughter's inheritance?"

How to Potentially Reduce Challenges to Wills

A No-Contest Clause makes people think twice before challenging a Will.

A way around the problem of challenges to a Will is to include a no-contest clause, according to Press Enterprise in "The Pros and cons of the no-contest clause."

A no-contest clause helps prevent these challenges.  It simply states that anyone who challenges the Will will forfeit their right to receive anything.

 As a result, the document will be effectively rewritten to disinherit the challenger.

This is an easy way to stop many people from challenging an estate plan.  They might not be happy with what they received, but they do not want to risk getting nothing.

Some criticize these clauses as deterring people from challenging an estate plan when they have good reason to, such as when there has been undue influence used by someone else to get more of the estate than he or she should.  However, most states will not enforce a no-contest clause if the person challenging the Will has cause to do so.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and could include a no-contest clause.

Reference: Press Enterprise (Aug. 5, 2017) "The Pros and cons of the no-contest clause."