Category Archives: Common Myths

  • 14
    Jun 16
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Photo of the musician Prince on a purple motorcycle

Bequeathing Trouble: Prince’s Estate Plan

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Prince’s death came as an enormous shock to the world. And the $150 million in estate taxes that his family will end up paying will come as a shock to them. It turns out that Prince’s estate plan was to not have a plan.

The untimely death of the enigmatic music icon left two things:

  1. Millions of grieving fans
  2. A vault of unreleased recordings

But just what’s going to happen to those recordings—a collection reportedly large enough to release new music for the next 50 years—and the 57-year-old pop star’s $300 million in assets, is still very unclear.

Why?—because Prince died without setting up an estate.

The absence of an estate plan is surprising for an artist known for his meticulous attention to detail, but in reality it is an all too common occurrence for the wealthy.

  • “It’s too expensive”
  • “It’s too much trouble”
  • “I’m not planning to die”

These are ALL lines I’ve heard over the course of my career, and they’re all equally frustrating to hear. I really shake my head at the “It’s too expensive” excuse. Consider Prince’s example. If his estate is worth $300 million, as reported by CNBC, then his family will pay half of that in taxes. Compared to $150 million, spending $50,000 in estate planning sounds pretty cheap to me.

You see, whether Prince wasn’t ready to think about his own mortality, or he simply forgot to form an estate doesn’t matter. What DOES matter is that his heirs are now going to be mired in paperwork with government.

By failing to form an estate plan (or even a will), Prince died intestate, which means no instructions were left. No instructions mean the government has to fill in the blanks. A court will appoint an executor for the estate, and after debts, taxes, and probate costs, will divide what’s left according to the laws of intestate succession.

Prince completely surrendered his right to control what happens to his worldly possessions—music, money, property, clothing, jewelry, etc.—by not taking the time to form an estate plan.

Worse still, he’s pass along the financial, emotional, and legal burden of settling the estate to his family.

In my experience, when a high-value individual dies intestate, lengthy in-family legal battles over rights, custody, or the valuation of assets, are not far off.

In the case of Prince, the deceased artist’s sister and half-brother have very different ideas about what should happen to his unreleased recordings, and those different ideas will—at some point—lead to a legal confrontation.

Prince’s legacy—his legend, his unpublished songs, his wealth, his property, his famous outfits, everything—will be controlled by people he has never even sat down and had a conversation with.

The executors of Prince’s estate literally don’t know him any better than you or I do—we can only hope they’ll make decisions he would approve of.

  • 22
    Jul 15
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3 Ways to Reduce the Stress of a Conservatorship

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3 Ways to Reduce the Stress of a ConservatorshipThe illness, incapacity or death of a loved one is certainly an emotional blow to a family. Additional stress can come from disputes regarding the conservatorship of loved ones – especially when things don’t go smoothly.

A conservatorship deals with money, which can be stressful on its own. A conservator has many responsibilities in the position. In addition to managing the incapacitated person’s affairs, the conservator is responsible for keeping detailed accounting records and for providing annual reports to the courts that detail the protected person’s assets.

Here are three ways to reduce the stress of serving as conservator:

  1. Keep all financial accounts separate.
  2. Never use the money for personal expenditures.
  3. File annual accountings with the court.

Of course, there’s a fourth tip as well: Hire a qualified CPA or probate law firm to help you keep track of the conservatorship assets. This is often the best way to reduce stress in a conservatorship. It will give you the personal confidence that things are being done correctly, and will reduce your risk for personal liability.

Being a conservator is a detail-oriented job, and one that involves providing for the needs of the incapacitated person while keeping track of all income and expenditures. At the same time, family members or other involved parties may have concerns about how the conservator is fulfilling his or her responsibilities. They may wonder if conservator is making bad choices or they may even suspect the conservator of stealing money from the protected person’s accounts.

Wherever money is involved, emotions can run high (as can temptation). And since a conservatorship involves money management for a protected person, conservators need to take care to understand their responsibilities, and follow them. At the same time, family members or involved parties need to be aware of potential mistakes or, worse, misdoings.

If, for example, a conservator squanders money reserved for the care of the protected person, the family or involved parties may feel they need to call the police for assistance. But in these instances, the police will usually not take any action, stating that it is a “civil matter”. Such situations then must be handled through probate court.

If you suspect something is amiss with a conservator, do what you can to gather evidence about the situation to make sure the conservatorship is being handled properly. If the conservator is mishandling the estate, enlist the assistance of an experienced probate attorney to resolve the situation and, if necessary, recover lost funds or assets.

Remember, it is natural to feel some stress if you’re involved in a court proceeding involving a conservatorship. You are likely unfamiliar with particular court rules and laws as well as uncertain of how to deal with judges and lawyers.

But you’re not alone. If you have a loved one who needs the assistance of a conservator or have been appointed as a conservator, it’s important to consult with an experienced probate attorney.  We’re here to help – and to put your mind (as well as that of the protected person) at ease.

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  • 25
    Feb 15
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Estate Planning: What Is a Trust?

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Estate Planning What Is a TrustA trust is similar to a will. It’s an elegant way of specifying how your property gets distributed upon your death. Property placed in a trust can pass to your designated beneficiaries without the delays and expense of going to probate court.

But – a big but – a living trust is not a complete substitute for a will. You won’t be able to name a guardian for a minor child, for example. For many people a trust is a more efficient way to transfer property at death, especially large-ticket items such as a house. Here are a few benefits of placing your property in a trust:

  1. You can avoid probate. This allows you to bypass probate and to pass the property directly to your designated beneficiaries. This is especially important if you own real property in multiple states.
  2. A trust can help with property management for those who can’t or do not want to manage for themselves. (This is particularly beneficial for older individuals who want to make sure they will be cared for without the need for guardianship or conservatorship.)
  3. Trusts can reduce estate and gift taxes.
  4. A trust protects assets from creditors and lawsuits better than does a will.
  5. If you want to protect family wealth for future generations, you can set up a trust to protect these assets (whether a business or other accumulated assets). You can also save estate taxes (if this is relevant). A trust can also protect these assets from irresponsible heirs over several generations.

There are a variety of types of trusts. They are both flexible and complex. One of the most common types of trusts is called an AB trust, also called a bypass trust. An AB trust helps provide significant estate-tax savings as well as preserve assets to survive the blending of families when and if spouses get remarried. You need three things to create a trust for your estate:

  1. The creator, also called settlor or grantor
  2. Trust property
  3. Beneficiaries

You don’t need to name someone to manage your trust (though this is certainly a good idea). The court can always choose someone to administer the trust. You can have a trust as long as you have someone who created the trust, you have property in the trust and some identifiable beneficiaries.

Think of a trust as a special place where ordinary property from your estate goes, as the result of some type of transformation that occurs, that takes on a new identity with immunity from estate taxes and resistance to probate. In this article, I primarily discussed “living trusts” or revocable trusts. You can read more about this type of legal instrument here.

I’d love to hear from you. If you have any questions please give us a call or leave a comment below.

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