Estate Planning Short-Cuts Create More Problems

Let’s start with the idea of putting all the man’s assets in his wife’s name. For starters, that means she has complete control and access to all the accounts. Even if the accounts began as community property, once they are in her name only, she is the sole manager of these accounts.

If the husband dies first, she will not have to go into probate court. That is true. However, if she dies first, the husband will need to go to probate court to access and claim the accounts. If the marriage goes sour, it’s not likely that she’ll be in a big hurry to return access to everything.

Another solution: set the accounts up as joint accounts with right of survivorship. The bank would have to specify that when spouse dies, the other owns the accounts. However, that’s just one facet of this estate planning hack.

The next proposal is to put the ranch into the adult children’s names. Gifting the ranch to children has a number of irreversible consequences.

First, the children will all be co-owners. Each one of them will have full legal control. What if they don’t agree on something? How will they break an impasse? Will they run the ranch by majority rule? What if they don’t want to honor any of the parent’s requests or ideas for running the ranch?  In addition, if one of them dies, their spouse or their child will inherit their share of the farm. If they divorce, will their future ex-spouse retain ownership of their shares of the ranch?

Second, you can’t gift the ranch and still be an owner. The husband and wife will no longer own the ranch. If they don’t agree with the kid’s plans for the ranch, they can be evicted. After all, the parents gave them the ranch.

Third, the transfer of the ranch to the children is a gift. There will be a federal gift tax return form to be filed. Depending on the value of the ranch, the parents may have to pay gift tax to the IRS.  Because the children have become owners of the ranch by virtue of a gift, they receive the tax-saving “free step-up in basis.” If they sell the ranch (and they have that right), they will get hit with capital gains taxes that will cost a lot more than the cost of an estate plan with an estate planning attorney and the “courtroom mumbo jumbo.”

Finally, the ranch is not the children’s homestead. If it has been gifted it to them, it’s not the parent’s homestead either. Therefore, they can expect an increase in the local property taxes. Those taxes will also be due every year for the rest of the parent’s life and again, will cost more over time than the cost of creating a proper estate plan. Since the ranch is not a homestead, it is subject to a creditor’s claim, if any of the new owners—those children —have a financial problem.

We haven’t even mentioned the family business succession plan, which takes a while to create and complements the estate plan. Both plans exist to protect the current owners and their heirs. If the goal is to keep the ranch in the family and have the next generation take the reins, everyone concerned be better served by sitting down with an estate planning attorney and discussing the many different ways to make this happen.

Learn how a living trust can spare your family the problems that occur when stuck in the court system. 

Reference: My San Antonio (April 29, 2019) “Estate planning workaround idea needs work”

Why is Angelina Jolie Leaving Her Total Estate to Just One of Her Kids?
Angelina Jolie leaves her estate to just one child

Why is Angelina Jolie Leaving Her Total Estate to Just One of Her Kids?

Angelina Jolie has made the decision to reward her son Maddox for supporting her during her divorce from Brad Pitt by leaving her entire estate to him. Jolie wasn’t happy that only one out of her six children totally sided with her in the couple’s divorce. Others close to the Jolie/Pitt family say that Brad is upset with Jolie for leaving the other children out of her estate and treating Maddox as her “Golden Child.”

Hollywood News Daily reports in its article, “Angelina Jolie Plans To Leave Son Maddox Millions Ignoring Other 5 Children Per ‘Radar’” explains that the final estate planning decision to will Maddox her empire was made by Jolie because of his loyalty.

“Brad is in an absolute fury and fit to be tied over Angie’s moves!” revealed the insider. “It finally seemed like they were reaching some kind of compromise with the divorce. But he’s been blindsided by this mess over Maddox.”

In September of 2016, the story surfaced that Jolie decided to file for divorce from Pitt, after becoming increasingly worried about his parenting methods. The news reportedly followed a nasty encounter between Brad, Angie and Maddox that put the family through one of the nastiest celebrity divorce and custody battles in recent memory.

Jolie claimed that Pitt allegedly attacked Maddox during the fight. An investigation was made by the Los Angeles County Department of Children and Family Services, but no charges were filed. However, according to a family friend Brad remains very upset by the entire situation and especially angry with Angelina for not setting the record straight.

Brad feels that his other children are getting short-changed, and he won’t permit it, the friend says.

Brad Pitt is angry that Jolie would treat their children so differently, cutting out Pax, Zahara, Shiloh, and 10-year-old twins Knox and Vivienne. Leaving it all to Maddox, is just wrong in Brad’s view.

“Maddox took his mother’s side in the divorce, and now she’s made him the head of her movie empire,” said the insider.

“He’s her golden boy, but Brad feels someone needs to remind her that she has five other children!”

If this rumor winds up being true, then most likely Pitt and Jolie will continue to wage brutal battles regarding the welfare of their children for years to come.

Read here about estate planning for parents with young children.

Reference: Hollywood News Daily (April 24, 2019) “Angelina Jolie Plans To Leave Son Maddox Millions Ignoring Other 5 Children Per ‘Radar’”

Does Estate Planning Include Your Account Passwords?
Good estate planning includes account passwords

Does Estate Planning Include Your Account Passwords?

With most bank customers receiving financial statements electronically instead of on paper, there are some actions you need to take to be sure your accounts are incorporated into your estate planning. Do you use passwords for your accounts? Of course you do. Should you incorporate your passwords into your estate planning? Absolutely you should. Not only your financial accounts, but what about your social media accounts such as Facebook? Would you like a loved one to take control of your Facebook account after you die or become disabled? How do they take control? When is the last time you saw a physical copy of a photograph? Nowadays photos are stored in the cloud. How does your family access those photos? Is sharing passwords the simple answer (it is not)? Does sharing passwords violate the law (it does)? Good estate planning no longer is limited to the stuff you can touch and feel. Much of our lives are saved in the cloud. This is what we call digital asset estate planning.

Kiplinger’s recent story, Your Estate Plan Isn’t Complete Without Fixing the Password Problem,” says that having online access to investments is a great convenience for us. We can monitor bank balances, conduct stock trades, transfer funds and many other services that not long ago required the help of another person.

The bad thing about these advancements, is that they can make for a very difficult situation for a surviving spouse or executor attempting to determine where the assets of a deceased person are held.

This was in the news recently, when the founder and CEO of a cryptocurrency exchange died unexpectedly. Gerry Cotten didn’t share the password to the exchange’s cold storage locker—leaving $190 million in cryptocurrency belonging to his clients totally inaccessible. Investors may never see their funds again.

You can see how important it is to provide a way for someone to access your data, if you become incapacitated or die.

The easiest, but least secure answer is to just give your passwords to a trusted family member. They’ll need passwords to access your accounts. They’ll also need a password to access your email, where electronic financial statements are sent. Another simple option is to write down and place all passwords in a safe deposit box.

Your executor or guardian/attorney-in-fact through a power of attorney (in the case of incapacitation) can access the box and your passwords to access your computer, email and financial platforms.

This is a bit safer than simply writing down and providing passwords to a trusted friend or spouse. However, it requires diligence to keep the password list updated.

Finally, the most secure way to safely and securely store passwords is with a digital wallet. A digital wallet keeps track of all your passwords across all your devices and does so in an encrypted file in the cloud.

There’s only one obstacle for an executor or surviving spouse to overcome—the password for your digital wallet.

See how you can incorporate your passwords and other digital assets in your estate planning.

Reference: Kiplinger (April 19, 2019) “Your Estate Plan Isn’t Complete Without Fixing the Password Problem”