Another Aspect of the Estate Tax Debate: Income Inequality?

A new study in the United Kingdom provides an ominous warning about the wealth prospects of younger people.

It seems we’ve been hearing the terms “income inequality” or “wealth inequality” frequently used in recent years to describe a growing economic trend of wealth concentration among a shrinking segment of the population.

These terms are now commonly used: from the work of economist Thomas Pikkety, to the Occupy Wall Street Movement, to every speech given by Senator Bernie Sanders, and even to the pages of The Economist. While we like to believe that everyone has a fair shot and that hard work is rewarded, a new study out of the United Kingdom raises some doubts.

Recently reported in The Independent article titled “Inherited wealth will decide how rich young people will become, a study warns,” the study suggests that due to rising home prices, stagnant wages and diminishing pensions, the wealth of young people will not come from their own hard work. Instead, it will be primarily determined by the inheritances they receive from their parents.

Although this study was conducted in the United Kingdom, many of the same sentiments and perceptions also exist in the U.S.. In the U.K., this is prompting many young people to oppose estate tax cuts or repeal. As one liberal Democrat was quoted as saying, “It cannot be right that the wealthiest families amass vast fortunes, while millions of young people see their incomes fall and home ownership slip out of reach.”

As the new Congress and President Trump undertake discussions about the future of the estate tax here in the U.S., the debate may turn at some point to discussions of income inequality, wealth concentration and the potential social role of estate taxation.

Reference: The Independent (January 5, 2017) “Inherited wealth will decide how rich young people will become, a study warns.”

Ali’s Family Fight Could Go 15 Rounds

Boxer Muhammad Ali’s family is set to have a massive fight over his estate.

It never took much prompting to get Muhammad Ali to claim that he was the greatest fighter of all time. He was a legend for not only the power of his fists and the quickness of his feet, but also for his sharp wit and talking up himself and talking down his opponents.

The controversial and beloved figure passed away last year, after a long struggle with Parkinson’s disease.

While Ali can no longer fight, his family still can and it appears they are going to, according to the Daily Mail in “Revealed: Muhammad Ali’s widow will receive DOUBLE the $6M inheritance awarded to each of his nine children sparking ‘World War Three’ between warring relatives.”

The heart of the dispute appears to be longstanding animosity between Ali’s children and his widow.

The children are upset, even though all nine of them will receive $6 million from their father’s estate. They are not happy that the widow will receive twice the amount they will get.

Although the children have often feuded with each other, they have apparently agreed to set those disputes aside for now, until they have their say about their father’s widow.

It is not clear exactly what the children plan to do and if they have any grounds to dispute the amount their stepmother was left in Muhammad Ali’s will.

Reference: Daily Mail (January 3, 2017) “Revealed: Muhammad Ali’s widow will receive DOUBLE the $6M inheritance awarded to each of his nine children sparking ‘World War Three’ between warring relatives.”

Reasons to Change Your Estate Plan

Whenever you have significant changes in your life, you should change your estate plan. But, what counts as a significant change?

Estate planning attorneys always tell their clients that anytime the client undergoes a significant change in life circumstances, the client should come back to the attorney so the estate plans can be changed to reflect the new circumstances. However, that leaves open the question of what changes are considered significant enough to require immediate change to an estate plan.

While it is impossible to list all of the possible significant changes, Forbes recently listed some common ones in “6 Reasons To Revise Your Estate Plan As Soon As Possible,” including:

•If you get divorced, you should change your estate plan to exclude your ex-spouse.

•If you get re-married, then changes need to be made to include your new spouse in your estate plan, especially if you have children from a prior relationship that need to be provided for.

•If you have another child, it is important to change your plan to make sure that the new child is included.

•If you have a serious illness or injury, then your estate plan should be reviewed to make sure you can meet your needs.

•If the tax laws change, consider reviewing your estate plan to determine how the changes could affect your planning.

•If you receive a large inheritance, then you will want to change your estate plan to reflect your new financial circumstances.

Reference: Forbes (January 2, 2017) “6 Reasons To Revise Your Estate Plan As Soon As Possible”

Changing the Way We Die

After facing his own mortality, B.J. Miller has made it his life’s goal to change the way that people pass away.

When he was a sophomore in college, B.J. Miller went out drinking with friends. On the way to a convenience store at 4 a.m., he decided to climb to the top of a commuter rail car. When he got to the top, he received a massive electrical shock and fell.

He woke up in a hospital a few days later, severely burned and in great pain. Doctors had to amputate both of his legs below the knees and his left arm. Rather than retreating into a permanent shell, Miller went back to school and eventually became a doctor.

Learning from his own near-death experience, Dr. Miller decided to devote his medical career to end-of-life, or palliative care, focusing on the quality of life for the terminally ill and their families.

Dr. Miller eventually became executive director of a small hospice in San Francisco known as the Zen Hospice Project. Once a pioneer, the Zen Hospice is now a role model for a growing effort nationwide to “reclaim death as a human experience instead of primarily a medical one.”

Dr. Miller talks about his experience and his mission in the New York Times Magazine article, “One Man’s Quest to Change the Way We Die.” The article chronicles the story of one young man’s journey to accept a terminal diagnosis of mesothelioma and how Dr. Miller’s approach helped him, and his family, to achieve some peace with the loss of such a young, promising life. The piece is fairly long, but well worth a read, especially if you or someone you love is dealing with a terminal illness.

Reference: New York Times Magazine (January 3, 2017) “One Man’s Quest to Change the Way We Die.”

Will Trump Kill the Estate Tax?

One of the biggest questions concerning estate planning right now, is whether Donald Trump will carry out his campaign promise to eliminate the estate tax and whether or not he should.

The estate tax is a one of those hot button issues over which political parties are sharply divided. While campaigning for the presidency, Donald Trump repeatedly said he would eliminate the tax. His is a position that most Republicans in Congress share. Now that Donald Trump and congressional Republicans have the power to do away with the estate tax, the question becomes whether they will actually do so.

Financial Advisor addressed that question in “Death to the Death Tax?”

“I think there’s a chance he [Trump] will repeal the whole thing,” said tax attorney Martin Shenkman, whose namesake firm in Jersey City, N.J., and New York City focuses on estate and tax planning for high-net-worth individuals, closely held businesses and real estate professionals.

Shenkman also said there’s speculation about abolishing the gift and generation-skipping taxes. He pointed out that, while these taxes do not raise a lot of revenue, they were at one time intended to minimize the wealth-concentration in our country. Whether or not they still serve this social purpose, or should, is up for debate.

With all of this uncertainty, no one can predict the final outcome, but, as Shenkman said, “There’s no reason to stop planning because of this uncertainty, if the end result of the planning is to get assets in a better place than they are now regardless of the tax.”

Reference: Financial Advisor (January 3, 2017) “Death to the Death Tax?”

Ask the Chinese If You Need a Will

If you think that you do not need to have a will or other estate plan, then you might want to pay attention to an ongoing crisis in China.

Not too long ago, the Communist Party in China had strict rules about the accumulation of wealth and passing it on to heirs. During the Cultural Revolution, things were very simple. A person could not accumulate wealth at all, so there was nothing to pass on.

This led to most Chinese people not bothering to create wills or estate plans.

However, the Communist Party has since loosened its rules and many Chinese people are now extremely wealthy. Unfortunately, most of them have stuck with the habit of not getting estate plans and that is causing problems.

This was reported recently by USA Today in “Chinese don’t have wills — and now it’s a big problem.”

The Chinese courts have seen a flood of inheritance disputes that are clogging up their system and slowing down affected business. Families are fighting over this new wealth in the country and even the Communist Party is growing concerned.

It is estimated that only 1% of the country’s senior citizens have wills. Even those who do have wills of some sort, cannot avoid issues.

Some 60% of wills challenged in the country are found to be invalid. The Communist Party is now actively encouraging people to get proper wills.

While the problem is not as severe in the U.S., too many people here also do not have wills.
That causes the same issues as the Chinese have.

Make 2017 the year to get your estate plan completed or reviewed!

Reference: USA Today (Jan. 2, 2016) “Chinese don’t have wills — and now it’s a big problem.”

Lesser Known Estate Planning Mistakes

Some celebrity estates are discussed endlessly. Everyone hears about the mistakes they made. Other celebrity estate planning mistakes go little noticed, but they can be just as important.

Celebrities are perhaps more aware than anyone else, how the media can sometimes appear to randomly decide to focus on one thing and not something else. Some celebrity marriages or breakups are discussed endlessly, while others are barely mentioned at all. The difference between the two is not always clear.

The same thing happens with celebrity deaths and estates.

The estates of some celebrities are the subject of headline after headline, usually pointing out mistakes that are made. For example, the estates of Robin Williams, Whitney Houston and Michael Jackson are well-known because of the mistakes in estate planning and the family feuds that ensued.

Other celebrity estate plans and their mistakes are not mentioned as often, but they can also be instructive.

Recently, the Lamorinda Weekly mentioned a couple of these lesser known mistakes in “Avoid These Celebrity Mistakes With Your Estate Plan,” including:

•Failure to Update – Actor Heath Ledger prepared a comprehensive estate plan that left provisions for his parents and his sisters. However, he never updated his plans after his daughter was born and, as a result, she was not even mentioned in the plans. It did end well, however, with the family putting the bulk of the estate in a trust for her benefit.

•The Hidden Estate Plan – Florence Griffith Joyner also went to the trouble of getting an estate plan. The problem was that she did not tell anyone where to find the plan. No one was ever able to locate her will and the estate was only settled after four years of bitter fighting between her family members.

Regardless of your celebrity status, contact a qualified estate planning attorney to do things right and to avoid unnecessary mistakes.

Reference: Lamorinda Weekly (Dec. 28, 2016) “Avoid These Celebrity Mistakes With Your Estate Plan.”

Custom Coffins

If you have always wanted to be buried for eternity in an airplane, largemouth bass or something else, that can be arranged.

When people plan for their own funerals or for those of recently deceased loved ones, they normally choose from a wide-range of coffins at varying price points. Most of these coffins have a lot in common. They are all in the basic shape of a rectangular box. The shape has been standard for a long time.

However, the Wills, Trusts & Estates Prof Blog reports on a different type of coffin in “The First Family of Custom Coffins.”

A family in Ghana is in the business of creating coffins in the shape of just about anything, so that people can be buried in something that represents their life. A YouTube video of their work is available at the blog’s website.

This is part of a larger trend concerning death and funerals. People are choosing to turn away from traditions in place of specific ways for the deceased to be remembered. The trend includes everything from humorous obituaries to lavish services and now custom coffins.

Many families find that by customizing the funeral experience in unusual, nontraditional ways, they get a better sense of closure and peace.

There is a potential downside to this trend, however.

The unusual arrangements are often made after the deceased has passed away. That leaves open the question of whether it is how the deceased would like to be remembered.

One thing people can do to make sure they are remembered in the way they want, is to leave specific funeral instructions as part of their estate planning.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 30, 2016) “The First Family of Custom Coffins.”

Put Investments in Your Trust

Deciding what should go into your trust and what should not, can sometimes be complicated. However, it is not complicated when talking about your investment accounts.

Once you get a proper trust drafted by an experienced estate planning attorney, you then need to start funding the trust. You need to start adding your assets into the trust.

That can sometimes be difficult, since you might not want everything to go into your trust right away. Your estate plan might be created so that it keeps certain assets out of the trust for various reasons. You might not want to wait to put some things in the trust until after you pass away when your will directs that it is where they should go.

One class of assets, however, should almost always go into your trust as The Herald Bulletin discusses in “If you have a trust, that’s where your investments should go.”

Any investments that you have should almost always go into your trust. This is done for tax reasons most of the time, but it is a clear call.

That does not mean, however, that you should put your IRA into a trust. That is a complicated decision that you will want to talk to your attorney about.

However, any other investments should be put into the trust.

Whenever you have questions about what should or should not be placed into your trust, the best thing to do is to ask your estate planning attorney.

Reference: The Herald Bulletin (Dec. 17, 2016) “If you have a trust, that’s where your investments should go.”

Be on the Lookout for Trust Scams

Unscrupulous companies employ salespeople to scam the elderly into paying large sums for worthless estate planning documents that are not created by attorneys.

As a recent article in My San Antonio “‘Trust mill’ scam hits elderly hard” illustrates, this is an important thing of which elderly people need to be aware. A reader wrote in to ask questions about an estate plan his parents had purchased from what they thought was an attorney in Dallas.

When the man’s father passed away, his mother could not find the original documents, but was able to receive copies of a will, revocable trust and general durable power of attorney from the party that sold them to the couple.

The reader wanted to know if the copies could be used in place of the originals.

What happened next is all too common.

The columnist consulted with the state bar and learned quickly that there was no Dallas attorney. The person who sold the couple the documents had never been an attorney. It was actually a salesperson hired by a company to sell elderly people so-called estate plans.

Companies known as “Trust Mills” sell people form estate documents, which leave the victims thinking that they have good estate plans.
They do not.

They have one-size fits all documents that are often worth less than the paper they are printed on.

If you want to get an estate plan, do not rely on someone who shows up at your door or who offers you a free lunch to sit through a seminar. Make sure that you are dealing with an actual estate planning attorney.

Reference: My San Antonio (Dec. 15, 2016) “‘Trust mill’ scam hits elderly hard.”