Iconic Designer Leaves a Fortune for Beloved Cat

The Burmese cat owned by Lagerfeld stands to inherit a sizable amount of the designer’s fortune, estimated at some $300 million, according to a report from CBS News titled “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet.” The cat, named Choupette, was written into his will in 2015, according to the French newspaper Le Figaro.

Before Lagerfeld died on Feb. 19, the cat already had an income of her own, appearing in ads for cars and beauty products. She has nearly 250,000 followers on Instagram and is an ambassador for Opel, the French car maker. She is also the subject of two books. Choupette has had her own line of makeup for the beauty brand Shu Uemura.

Lagerfeld was a German citizen, but he and Choupette were residents of France, where the law prohibits pets from inheriting their human owner’s wealth. German law does permit a person’s wealth to be transferred to an animal.

There are three approaches that Lagerfeld might have taken to ensure that his beloved cat would be assured of her lifestyle, after his passing. One would have been to create a foundation, whose sole mission is to care for the cat, with a director who would receive funds for Choupette’s care.

A second way would be to donate money to an existing nonprofit and stipulate that funds be used for the cat’s care. A third would be to leave the cat to a trusted individual, with a gift of cash that was earmarked for her care.

It is not uncommon today for people to have pet trusts created to ensure that their furry friends enjoy a comfortable lifestyle, after their humans have passed. Estate laws in the U.S. vary by state, but they always require that a human have oversight over any funds or assets entrusted to a pet. Courts also have a say in this. There are reasonable limits on what a person can leave to a pet. A court may not honor a will that seeks to leave millions for the care of a pet. However, it has happened before.

Real estate tycoon Leona Hemsley left many people stunned, when she left $12 million for her Maltese dog. In 1991, German countess Carlotta Liebenstein left her dog Gunther IV a princely sum of $80 million. To date, Gunther remains number one on the “Top Richest Pets” list.

For pets who are beloved parts of regular families and not millionaires in their own right, an estate planning attorney will be able to help you plan for your pet’s well-being, if it should outlive you. Some states permit the use of a pet trust, and a no-kill shelter may have a plan for lifetime care for your pet. You’ll need to make a plan for a secure place for your pet and provide necessary funds for food, shelter, and medical care.

Reference: CBS News (Feb. 21, 2019) “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet”

Challenges for Women Facing Retirement are Especially Daunting

Add to the challenges facing women in retirement are the rising costs of health care, as well as other deeply-rooted economic factors, says Next Avenue in the article “What Could Help Women Facing financial Challenges for Retirement.” This issue is top-of-mind for many, with a focus from the Senate and the EBRI pushing this public policy matter into the spotlight.

The barriers for women to accumulate wealth are very real. At the Senate hearing, Linda Stone, a WISER member (Women’s Institute for a Secure Retirement) presented some hard facts: there are 5.7 million more women than men at age 65, and of those who are over 85, 67% are female. One out of two women alive right now, will live until age 90. However, many people over age 85, and especially women, end up living in poverty or in near poverty, even if they were never poor throughout their lives.

The longer lifespan of most women comes with a resulting need for more income. Women traditionally have nine years with zero earnings, usually because they are rearing children or caring for elderly parents. Women’s careers also average 29 years compared to 39 years for men.

The gender mortality difference and the tendency for women to marry older men, leads to them outliving their partners and be more likely to live alone. This increases their chances of descending into poverty. Couples’ finances are also often exhausted by caring for the husband’s medical needs.

How can women be helped to achieve financial security in retirement?

  • Study ways to offer retirement protection to women, who spend significant time as caregivers, including considering providing Social Security credits for those years.
  • Encourage employers to offer retirement plans.
  • Allow part-time and temporary workers to participate in employer-sponsored retirement plans.

A briefing presented by the EBRI looked into the reasons why women tend to save less than men. The program referenced a blog post from Kimberly Blanton, of the Boston College Center for Retirement Research, which noted that “if the difference between paychecks for men and women is a gap, then the difference in wealth can be described as a chasm.”

The median net worth for women age 45 to 65 adjusted for inflation has actually declined in recent years. Older women of color have seen the largest decline in their net worth. The study was conducted by the University of Pennsylvania’s School of Social Work and the nonprofit Asset Funders Network.

The takeaway: there is a strong need for more public policy initiatives to help women save more for retirement.

Reference: Next Avenue (February 12, 2019) “What Could Help Women Facing financial Challenges for Retirement”

Can A Cell Phone Video Become a Will?
Old woman making a statement with her smartphone

Can A Cell Phone Video Become a Will?

What if a grandmother made a statement, while in an intensive care unit, that she wanted everything she owned to go to a grandchild and a brother-in-law? What if that statement was captured on a cellphone as a video? The question was a real one, posed by a reader of My San Antonio in the article “Can a video be used as a Will?”

There are two reasons why a cellphone video is unlikely to be accepted as a will by any court. One is that the cellphone video does not follow the formality of how a will is created and executed. Another is the statute of frauds, which basically says that to be lawfully valid, certain promises must be in writing.

Not only does a will need to be in writing, it must show clear intent to dispose of assets after death. The writing must be dated and signed by the person who is making the promise (the testator). If the will is written by the testator in his or her handwriting, it is known as a “holographic” will. If the will is typed or in someone else’s handwriting other than the testator, which is known as a “formal will,” then it must also be signed by two independent witnesses and must be notarized. The person who is having the will created (again, the testator), must also have legal capacity for the will to be valid.

In some states, including Texas, there was a time when a spoken will, known an a “nuncupative will” could have been recognized. However, that is no longer the case and a verbal will is no longer valid. Even when a nuncupative will was accepted, it was only accepted for inexpensive personal effects, not large assets or real property.

Some states, including Florida and Nevada, now allow a person to make a will online or on their computer and never have it transferred to paper. These are called “digital” or “electronic” wills. In these cases, e-signatures are allowed to be used. Other states have considered bills allowing digital wills, but the bills did not pass. The Florida law allows the digital will to be e-signed, but it must be witnessed by two independent individuals and it must be e-notarized. It should be noted that the will process is not permitted to be used by a person, who is in an end-stage illness or who is legally considered a “vulnerable adult.”

In the state of Texas, the grandmother in the example above is considered to have died without a will, meaning that she died “intestate.” Texas law will determine how her assets are distributed, and that will depend on her relationships and her survivors. If she was married and all children are from that marriage, her assets go to her spouse. If she was married and had children from a prior marriage, her assets are split unevenly between those children and her spouse. If there is no spouse, assets go to her children. There is a tremendous burden placed on the heirs of those who die without a will, since it does take a long time to figure out who their heirs are.

If she had a properly executed legal will, all these issues would be moot. Anyone who owns a home needs to have a will, and this should have been something that was taken care of, long before she became ill.

For more information about Utah’s laws regarding video wills, consult an estate planning attorney.

Reference: My San Antonio (Feb. 18, 2019) “Can a video be used as a Will?”

Spare Your Family From a Feud: Make Sure You Have a Will

If for no other reason than to avoid fracturing the family, as they squabble over who gets Aunt Nina’s sideboard or Uncle Bruno’s collection of baseball cards, everyone needs a will. It is true that having an estate plan created does require us to consider what we want to happen after we have died, which most of us would rather not think about.

However, whether we want to think about it or not, having an estate plan in place, and that includes a will, is a gift of peace we give to our loved ones and ourselves. It’s peace of mind that our family is being told exactly what we want them to do after we pass, and peace of mind to ourselves that we’ve put our plan into place.

A recent article from Fatherly, “How to Write a Will: 8 Tips Every Parent Needs to Know,” starts with the basic premise that a will prevents family squabbles. Families fight, when they don’t have clear direction of what the deceased wanted. That’s just one reason to have a last will and testament. However, there are other reasons.

A will is one way to ensure that your property is eventually distributed as you wish. Without a will, your estate is administered as an “intestate estate,” which means the state’s laws will determine who receives your assets after you pass. In some states, that means your spouse gets half of your estate, with your parents getting the rest (if there are no children). If the parents have died and there are no children, the rest of the estate may go to your siblings.

Most people—some studies say as many as 60% of Americans—don’t have a will. It’s hard to say why they don’t: maybe they don’t want to accept their own mortality, maybe they don’t understand what will happen when they die without a will, or perhaps they want to wreak havoc on their families. However, having a will is essential.

Don’t delay. If you don’t have a will in place, stop putting it off. Creating a will gives you the opportunity to effectuate your wishes, not that of the state. What if you don’t want your long-lost brother showing up just to receive a portion of your estate? If you don’t want someone to receive any of your assets, you need to have a will. Otherwise, there’s no way to know how the distribution will play out.

Be thoughtful about how you distribute your assets. If you have children and your will gives them your assets when they reach 18, will they be prepared to manage without blowing their inheritance in a month? A qualified estate planning attorney will be able to help you create a plan for distributing your wealth to children or other heirs in a sequence that will match their financial abilities. You may want to create a trust that will hold the assets, with a trustee who can ensure that assets are distributed in a wise and timely manner.

Every family is different, and today’s families, which often include children from prior marriages, require special planning. If you have remarried and have not legally adopted your spouse’s children from a previous marriage, they are not your legal heirs. If you want to make sure they inherit money or a specific asset, you’ll need to state that clearly in your will. If you are not married to your partner, they will not have any rights to your estate, unless a will is created that directs the assets you want them to inherit.

Parents of young children absolutely need a will. If you do not, and both parents pass away at the same time, their future will be determined by the court. They could end up in foster care, while awaiting a court decision. Battling grandparents may create a tumultuous situation. The court could also name a guardian who you would never have chosen. A will lets you decide.

Speak with an estate planning attorney to make sure you have a will that is properly prepared and follows the laws of your state. You also want to have a power of attorney and a health care agent named. Having these plans made before you need them, gives you the ability to express your wishes in a way that can be legally enforced.

Reference: Fatherly (Feb. 6, 2019) “How to Write a Will: 8 Tips Every Parent Needs to Know”

Kids Grown Up? Protect Them with These Three Documents
Protect your family with these three documents.

Kids Grown Up? Protect Them with These Three Documents

Without the right documents in place, you do not have the legal right to protect your own children, once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”

There are only three documents and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be involved with making any medical decisions.

It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.

HIPAA Authorization Form gives you the authority to speak with healthcare providers. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.

This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient.  This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.

A Healthcare Power of Attorney needs to be in place, so you can be named his or her “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.

Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.

The third document is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed conservatorship.

Keep in mind that these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.

Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.

Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”

Retiring Business Owners, What’s Going to Happen to Your Business?
37204586 - compass with needle pointing the word retirement, concept image to illustrate retirement planning

Retiring Business Owners, What’s Going to Happen to Your Business?

When the business owner retires, what happens to employees, clients and family members all depends on what the business owner has planned, asks an article from Florida Today titled “Estate planning for business owners: What happens to your business when you leave?” One task that no business owner should neglect, is planning for what will happen when they are no longer able to run their business, for a variety of reasons.

The challenge is, with no succession plan, the laws of the state will determine what happens next. If you started your own business to have more control over your destiny, then you don’t want to let the laws of your state determine what happens, once you are incapacitated, retired or dead.

Think of your business succession plan as an estate plan for your business. It will determine what happens to your property, who will be in charge of the transition and who will make decisions about whether to keep the business going or to sell it.

Your estate planning attorney will need to review these issues with you:

Control and decision-making. If you are the sole owner, who will make critical decisions in your absence? If there are multiple owners, how will decisions be made? Discuss in advance your vision for the company’s future, and make sure that it’s in writing, executed properly with an attorney’s help.

What about your family and employees? If members of your family are involved in the business, work out who you want to take the leadership reins. Be as objective as possible about your family members. If the business is to be sold, will key employees be given an option of buying out the family interest? You’ll also need a plan to ensure that the business continues in the period between your ownership and the new owner, in order to retain its value.

Plan for changing dynamics. Maybe family members and employees tolerated each other while you are in charge, but if that relationship is not great, make sure plans are enacted so the business will continue to operate, even if years of resentment come spilling out after you die. Your employees may be counting on you to protect them from family members, or your family may be depending upon you to protect them from disgruntled employees or managers. Either way, do what you can in advance to keep everyone moving forward. If the business falls apart the minute you are gone, there won’t be anything to sell or for the next generation to carry on.

How your business is structured, will have an impact on your succession plan. If there are significant liability elements to your business, risk management should also be built into your future plans.

To make your succession plan work, you will need to integrate it with your personal estate plan. If you have a Last Will and Testament in a Florida-based business, the probate judge will appoint someone to run the business, and then the probate court will have administrative control over the business, until it’s sold. That probably isn’t what you had in mind, after your years of working to build a business. Speak with an estate planning attorney to find out what structures will work best, so your business succession plan and your estate plan will work seamlessly without you.

Reference: Florida Today (Feb. 12, 2019) “Estate planning for business owners: What happens to your business when you leave?”

Suggested Key Terms: Business Owner, Succession Plan, Estate Planning Attorney, Key Employees

A Love Letter to Your Family
Senior couple meeting with an elder law attorney

A Love Letter to Your Family

Now, to the 70% of Americans who do not have an estate plan, the article “Senior Spotlight: Composing the ‘family love letter’” from the Lockport Journal should help you understand why this is so important. One reason why people don’t take care of this simple task, is because they don’t fully understand why estate planning is needed. They think it’s only for the wealthy, or that it’s only for old people, or even that it’s only about death and taxes.

Consider this idea: an estate plan is about protecting yourself while you are alive, protecting your family when you have passed and leaving a legacy for the living.

Some of the main elements of an estate plan are to create and execute documents that provide for incapacity and death, as well as provide information about your assets, liabilities and wishes.

You’ve spent a lifetime accumulating assets. It is now time to sit down with family members and have a heart-to-heart talk about the details of the estate and what your intentions are with respect to its distribution. The subject of death can be challenging for all. However, discussing your estate plan is vital, if you want to protect your family from what might come after you are gone. Each family has its own goals, so it’s a good idea to talk about it frankly, while you still can.

Without discussions and an estate, the chances of a family split, assets not going where you had intended and unnecessarily higher costs in taxes and legal fees, are a very real possibility.

If speaking about these topics is too hard, you may want to write your family a love letter. It would contain all the information that your family would need at the time of your death or if you become incapacitated because of illness or injury.

Your estate plan should also include the documents needed, so your family can make decisions on your behalf, if you are incapacitated. That includes a power of attorney, a health care directive and may include others specific to your situation.

Ideally, all this information will be located in one convenient place. Don’t put it on a computer where you use a password. If the family cannot access your computer, all your hard work will be useless to them. Put it in a folder or a notebook, that is clearly labeled and tell family members where it is.

They’ll need this information:

  • A list of your important contacts — your estate planning attorney, financial advisor, CPA, insurance broker and medical professionals.
  • Credit card information, frequent flier miles.
  • Insurance and benefits including all health, life, disability, long-term care, Medicare, property deeds, employment and any military benefits.
  • Documents including your will, power of attorney, birth certificates, military papers, divorce decrees and citizenship papers.

Think of these materials and discussions as your opportunity to make a statement for the future generation. If you don’t have an estate plan in place already or if you have not reviewed your estate plan in more than a few years, it’s time to make an appointment for a review. Your life may have not changed, but tax laws have, and you’ll want to be sure your estate is not entangled in old strategies that no longer benefit your family.

Reference: Lockport Journal (Feb. 16, 2019) “Senior Spotlight: Composing the ‘family love letter’”

When Was the Last Time You Talked with Your Estate Planning Attorney?
48479279 - what you need to know

When Was the Last Time You Talked with Your Estate Planning Attorney?

If you haven’t had a talk with your estate planning attorney since before the TCJA act went into effect, now would be a good time to do so, says The Kansas City Star in the article “Talk to estate attorney about impacts of Tax Cuts and Jobs Act.” While most of the news about the act centered on the increased exemptions for estate taxes, there are a number of other changes that may have a direct impact on your taxes.

Start by looking at any wills or trusts that were created before the tax act went into effect. If any of the trusts use formulas that are tied to the federal estate tax exemption, there could be unintended consequences because of the higher exemption amounts.

The federal estate tax exemption doubled from $5.49 million per person in 2017 to $11.18 million per person in 2018 (or $22.36 million per couple). It is now $11.2 million per person in 2019 (or $22.4 million per couple).

Let’s say that your trust was created in 2001, when the estate tax exemption was a mere $675,000. Your trust may have stipulated that your children receive the amount of assets that could be passed free from federal estate tax, and the remainder, which exceeded the federal estate tax exemption, goes to your spouse. At the time, this was a perfectly good strategy. However, if it hasn’t been updated since then, your children will receive $11.4 million and your spouse could be disinherited.

Trusts drafted prior to 2011, when portability was introduced, require particular attention.

Two other important factors to consider are portability and step-up of cost basis. In the past, many couples relied on the use of bypass or credit shelter trusts that pay income to the surviving spouse and then eventually pass trust assets on to the children, upon the death of the surviving spouse. This scenario made sure to use the first deceased spouse’s estate exemption.

However, new legislation passed in 2011 allowed for portability of the deceased spouse’s unused estate exemption. The surviving spouse’s estate can now use any exemption that wasn’t used by the first spouse to die.

A step-up in basis was not changed by the TCJA law, but this has more significance now. When a person dies, their heir’s cost basis of many assets becomes the value of the asset on the date that the person died. Highly appreciated assets that avoided income taxes to the decedent, could avoid or minimize income taxes to the heirs. Maintaining the ability for assets to receive a step-up in basis is more important now, because of the size of the federal estate tax exemption.

Beneficiaries who inherit assets from a bypass or credit shelter trust upon the surviving spouse’s death, no longer benefit from a “second” step-up in basis. The basis of the inheritance is the original basis from the first spouse’s death. Therefore, bypass trusts are less useful than in the past, and could actually have negative income tax consequences for heirs.

If your current estate plan has not been amended for these or other changes, make an appointment soon to speak with a qualified estate planning attorney. It may not take a huge overhaul of the entire estate plan, but these changes could have a negative impact on your family and their future.

Reference: The Kansas City Star (Feb. 7, 2019) “Talk to estate attorney about impacts of Tax Cuts and Jobs Act”

How Do I Prepare my Parents for Alzheimer’s?
Concerned aged mother and adult daughter discuss updating their estate planning documents and explore their options with regards to Alzheimer's

How Do I Prepare my Parents for Alzheimer’s?

Can your mom just sell her house, despite her diagnosis of Alzheimer’s?

The (Bryan TX) Eagle reports in the recent article “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents” that the concept of “mental capacity” is complicated. There’s considerable confusion about incapacity. The article explains that different legal documents have a different degree of required capacity. The bar for signing a Power of Attorney, a Warranty Deed, a Contract, a Divorce Decree, or a Settlement Agreement is a little lower than for signing a Will. The individual signing legal documents must be capable of understanding and appreciating what he or she is signing, as well as the effect of the document.

The answer the question of whether the mom can sign the deed to her house over to the buyer.  is likely “yes.” She must understand that she’s selling her house, and that, once the document is signed, the house will belong to someone else. A terminal diagnosis or a neurodegenerative disease doesn’t automatically mean that an individual can’t sign legal documents. A case-by-case assessment is required to see if the document will be valid.

The fact that a person is unable to write his or her name doesn’t mean they lack capacity. If a senior can’t sign her name (possibly due to tremors or neurodegeneration), she can sign with an “X”. She could place her hand on top of someone else’s and allow the other person to sign her name. If this is completed before witnesses and the notary, that would be legal.

A hard part of Alzheimer’s is that a person’s mental clarity can come and go. Capacity can be fluid in the progress of a neurodegenerative or other terminal disease. Because of this, the best time to sign critical documents is sooner rather than later. No one can say the “window of capacity” will remain open for a certain amount of time.

Some signs should prompt you to move more quickly. These include things like the following:

  • Short-term memory loss;
  • Personality changes (e.g., unusual anger);
  • Confusing up or forgetting common-usage words and names; and
  • Disorientation and changes in depth perception.

Any of the signs above could be caused by Alzheimer’s, dementia, or many other problems. Talk to your, or your parent’s, physician and an elder law attorney. He or she can discuss the options, document your parent’s legal capacity, and get the right documents drafted quickly. Your elder law attorney can also give you information about planning for long term care options to consider and can help you understand the costs associated with long term care. 

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