From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans
Adult children can help aging parents with their estate plans

From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans

Sometimes the first attempt is a flop. Imaging this exchange: “So, do you want to talk about what happens when you die?” Answer: “Nope.” That’s what can happen, but it doesn’t have to, says The Wall Street Journal’s recent article “Readers Offer Their Advice on Talking to Aging Parents About Estate Plans.”

Many people have successfully begun this conversation with their aging parents. The gentle persuasion method is deemed to be the most successful. Treating elderly parents as adults, which they are, and asking about their fears and concerns is one way to start. Educating, not lecturing, is a respectful way to move the conversation forward.

Instead of asking a series of rapid-fire questions, provide information. One family assembled a notebook with articles about how to find an estate planning attorney, when people might need a trust, or why naming someone as power of attorney is so important.

Others begin by first talking about less important matters than bank accounts and bequests. Asking a parent for a list of utility companies with the account number, phone number and if they are paying bills online, their password, is an easy entry to thinking about next steps. Sometimes a gentle nudge, is all it takes to unlock the doors.

For some families, a more direct, less gentle approach gets the job done. That includes being willing to tell parents that not having an estate plan or not being willing to talk about their estate plan is going to lead to disaster for everyone. Warn them about taxes or remind them that the state will disburse all of their hard-earned assets, if they don’t have a plan in place.

One son tapped into his father’s strong dislike of paying taxes. He asked a tax attorney to figure out how much the family would have to pay in estate taxes, if there were no estate plan in place. It was an eye-opener, and the father became immediately receptive to sitting down with an estate planning attorney.

A daughter had tried repeatedly to get her father to speak with an estate planning attorney about his estate plan. His response was the same for several decades: he didn’t believe that his estate was big enough to warrant doing any kind of planning. One evening the daughter simply threw up her hands in frustration and told him, “Fine, if your favorite charity is the federal government, do nothing…but if you’d rather benefit the church or a university, do something and make your desires known.”

For months after seeing an estate attorney and putting a plan in place, he repeated the same phrase to her: “I had no idea we were worth so much.”

Between the extremes is a third option: letting someone else handle the conversation. Aging parents may be more receptive to listening to a trusted individual, who is of their same generation, about good estate plans. One adult daughter contacted her wealthy mother’s estate planning attorney and financial advisor. The mother would not listen to the daughter, but she did listen to her estate planning attorney and her financial advisor, when they both reminded her that her estate plan had not been reviewed in years.

Estate planning takes many forms.

Reference: The Wall Street Journal (December 16, 2019) “Readers Offer Their Advice on Talking to Aging Parents About Estate Plans”

How Can Celebrities’ Estate Planning Be Impacted by Alzheimer’s?
Gene Wilder's Estate Planning Affected by Alzheimer's

How Can Celebrities’ Estate Planning Be Impacted by Alzheimer’s?

Forbes’ recent article, “Top 7 Celebrity Estates Impacted By Alzheimer’s Disease” looks at seven celebrity estates that were affected by Alzheimer’s disease and how the estate planning was done too late.

  1. Rosa Parks. The civil rights icon died at 92 in 2005. She was suffering from Alzheimer’s disease. Legal battles over her estate continue to this day. Her estate plan left her assets to a charitable institution she created. However, her nieces and nephews challenged the validity of her will and trust, due to her mental deficiencies and allegations of undue influence. That claim was settled, but there have been fights over broken deals and leaked secrets, claimed mismanagement of her estate and assets, allegations of bribery and corruption and a battle over Rosa’s missing coat that she wore at the time of her famous arrest at the Alabama bus stop in 1955.
  2. Gene Wilder. Wilder’s widow–his fourth wife, Karen–and his adopted daughter didn’t fight over Gene’s estate after he died, which shows good estate planning. Wilder makes the list because of how his widow used her husband’s struggle—which she kept private while he was alive—to bring attention to the terrible disease, including permitting his Willy Wonka character to be used in a campaign to raise awareness.
  3. Aaron Spelling. The Hollywood producer left behind a reported fortune worth $500 million. His death certificate listed Alzheimer’s disease as a contributing factor. Spelling changed his estate plan just two months before he died, reducing the share to his daughter, actress Tori, and his son, Randy, to $800,000 each.
  4. Etta James. Legendary blues singer Etta James passed away in 2012, at 73. Her family said she had been struggling with Alzheimer’s disease for several years, and her illness ignited an ugly court battle between her husband of more than 40 years and her son from a prior relationship, over the right to make her medical and financial decisions, including control of her $1 million account. Her husband, Artis Mills, alleged that the power of attorney she signed appointing her son as decision-maker was invalid, because she was incompetent when she signed it. Mills sued for control of the money to pay for Etta’s care. After some litigation, Etta’s leukemia was determined to be fatal, which led to a settlement. Mills was granted conservatorship and permitted to control sums up to $350,000 to pay for Etta’s care for the last few months of her life.
  5. Peter Falk. The Lieutenant Columbo actor died at 83 in 2011, after living with Alzheimer’s disease for years. His wife Shera and his adopted daughter Catherine fought in court for conservatorship to make his decisions. Shera argued that she had power of attorney and could already legally make Peter’s decisions for him, which included banning daughter Catherine from visits. The judge granted Shera conservatorship, but ordered a visitation schedule for Catherine. However, a doctor, who testified at the hearing, said that Falk’s memory was so bad that he probably wouldn’t even remember the visits.
  6. Tom Benson. The billionaire owner of the New Orleans Saints and Pelicans was the subject of a lengthy and bitter court battle over control of his professional sports franchises, and hundreds of millions of dollars of other assets. Prior trusts, that he and his late wife established, left the sports franchises and other business interests to his daughter and two grandchildren. One of granddaughters operated the Saints as lead owner, until she was fired by her grandfather. Tom decided to take the controlling stock of the teams out of the trust and substitute other assets in their place, taking over control of the teams. However, his daughter and grandchildren fought the move. A 2015 court ruling declared Benson to be competent, despite allegations he suffered from Alzheimer’s disease. Benson then changed his will and trust and left everything to his third wife, Gayle. They all settled the dispute in 2017, leaving other assets to the daughter and grandchildren—but ultimately leaving Gayle in control of the Saints and Pelicans, after Benson’s death in 2018 at age 90.
  7. Glen Campbell. Campbell’s 2007 estate plan left out three of his adult children. They sued to challenge their disinheritance after he died. They dropped the case in 2018, without receiving a settlement. The fact that Campbell’s final will was drafted several years prior to his Alzheimer’s diagnosis was a critical factor in the outcome of the lawsuit.

The estate planning of these celebrities show the importance of proper estate planning, before it is too late. Wills and trusts that are created or changed after someone is diagnosed with Alzheimer’s disease, dementia, or similar conditions are more apt to be challenged in court.

Can you tackle elder law on your own?

Reference: Forbes (November 25, 2019) “Top 7 Celebrity Estates Impacted By Alzheimer’s Disease”

Should I Name a Minor as an IRA Beneficiary?
Care Should be Taken When Designating a Minor a Beneficiary of an IRA

Should I Name a Minor as an IRA Beneficiary?

People often leave assets to minors, but is making a minor an IRA beneficiary a really bright idea?

There are many ways to give assets to those for whom you want to leave a legacy. You can leave tangible assets. However, the age of the person to whom you leave the gift will frequently decide the form of, and the conditions under which, they receive the property. Let’s look at some of the advantages and potential negatives of leaving an IRA to a minor.

Investopedia’s recent article, “Designating a Minor as an IRA Beneficiary,” explains that there are several reasons why someone might want to give an IRA to a beneficiary who is not yet an adult. One of the most obvious is that IRAs can provide much greater flexibility and potential for long-term growth than, for example, savings bonds. IRAs also don’t have to be used for higher education or any other specific purpose in order to avoid taxation. Young beneficiaries also get the benefit of a lower required minimum distribution (RMD) over their lifetimes, as the beneficiary’s life expectancy is used when calculating their RMDs.

For example, if you died and left $100,000 of IRA money to a one-year-old granddaughter this year, her current life expectancy would be 81.6 years. Assuming that the funds in the account grow at 8% to 10% per year, she could withdraw several million dollars from the account during her lifetime. If the money were in a Roth IRA, she’d probably also save at least a million dollars in taxes.

If you leave an IRA to a minor, there must be an appointment of a guardian to manage the account, until the child reaches adulthood. Minors can’t own legal property of any kind in their name. Instead, you can appoint a guardian to manage the property on their behalf, until they reach the age of majority (18 or 21, depending on the state). If you do not do this, the court will appoint one for you—and that could be a person who may have very different thoughts about how the account should be managed and invested.

The law prohibits IRA custodians from dealing directly with minors in any capacity. A will doesn’t solve the problem because wills only deal with probate assets, and IRAs are exempt from probate. The minor’s parents or another relative can petition the court for guardianship, if you fail to make an appointment. However, this can be expensive, time-consuming and really unnecessary.

There are a couple of different ways that your beneficiary can receive the IRA. One option is to put the distributions inside a custodial account, like an UGMA or UTMA account. However, there could be adverse tax consequences for the minor’s parents (or whoever claims the minor as a dependent on a tax return) if the minor’s income is above a certain threshold. That’s because the parent or guardian must pay tax on the excess at their top marginal tax rate. This also gives the minor sole custody of the property at the age of majority, but she may not be prepared at that time to handle a large sum of money.

Another possibility is to put the money into a 529 plan. This will let the assets grow tax free, until they’re used to pay for qualified higher education expenses.

A more comprehensive solution may be to use a revocable living trust as the beneficiary for the IRA. The minor is named the beneficiary for the trust, and the guardian would be appointed as the trustee. A big benefit of a trust is that you can provide specific instructions as to how you want the guardian to handle the IRA distributions for the minor.

There are several available options, so talk with an experienced estate planning attorney about what makes the most sense for you and your family.

Care should be taken when designating beneficiaries of IRAs.

Reference: Investopedia (September 7, 2019) “Designating a Minor as an IRA Beneficiary”