What Is the Process of Conservatorship?

The headlines surrounding Britney Spears’ fight against her father’s conservatorship have kept the issue in the public eye. It’s how her father controls her finances and her life, dating back to 2008 when she suffered a very public mental health crisis. Her $60 million fortune is controlled by her father Jamie Spears, according to the article “Britney Spears Is Under Conservatorship. Here’s How That’s Supposed to Work” from npr.com. In this case, only her father has the ability to negotiate business opportunities and other financial arrangements.

Britney made a passionate plea before a Los Angeles Superior Court judge to end the conservatorship, saying she is exploited, unable to sleep, depressed and cries daily.

Her conservatorship was set up because of the court’s agreement in 2008 with her father that she was no longer able to manage her own affairs. The judge appointed Jamie Spears, known as the “conservator” to care for another adult (the “conservatee”), who is deemed to be unable to care for themselves.

The conservatee does not lose all rights. They may still take part in important decisions affecting their property and way of life. They have a right to be treated with understanding and respect, and they have basic human rights. However, the court is saying that decisions about where to live and how to support the person need to be made by someone else. This is an extreme situation and is usually done only as a last resort. Once the court has appointed a conservatorship, only a court can lift it.

Conservatorships are usually used for people with a severe cognitive impairment or older people with severe dementia. Guardianships are also appointed for individuals with severe developmental disabilities. Spears is not the typical person under conservatorship. In the last 13 years, she has released albums, judged on The X Factor and earned an estimated $148 million performing in Las Vegas. Spears told the court she should not be in a conservatorship, if she can work and provide money and pay other people.

Many reforms to guardianship laws have taken place, including one principle that guardianship should only extend to the areas of the person’s life they are not able to manage. However, the Spears’ conservatorship includes every aspect of her personal affairs, as well as her property management.

Individuals under guardianship don’t select their guardian, but they may in some instances make recommendations and requests. The court is supposed to give serious consideration to their requests. The court does not seem to be recognizing this or other changes in Britney Spears’ case. She has been asking since 2014 for her father to be removed from his prime role in the conservatorship, and in 2020 she asked the court to suspend her father from his role entirely.

Family members are usually named as guardians, but there can be bankers, or professional guardians named. A wealth management company was added to Spears’ conservatorship in recent months as a co-conservator, but her father remains in charge of all aspects of her life.

Ending a guardianship is difficult, unless the guardianship has been set up for a specific length of time. If there’s a lot of money involved, things can get complicated. The guardian may not agree to steps to modify the guardianship because they will lose income. There’s a real conflict of interest in this case, as Spears’ father is also her business manager.

There is a trend towards avoiding guardianship and having a person or a handful of people who can help with decision making, while permitting the person to be involved in some way. However, the Britney Spears case is unlike any conservatorship case.

Reference: npr.com (June 24, 2021) “Britney Spears Is Under Conservatorship. Here’s How That’s Supposed to Work”

For more information about Conservatorship, click here to sign up for our blog.

 

Why Is It Important to have a Will?

A Gallup poll released in June showed that slightly less than half of all Americans have a will to tell loved ones what they want to happen with their estate after they die. What’s surprising is that the results of this survey have been almost the same since 1990, explains the article “6 Reasons You Need to Make a Will Now” from Real Simple. The survey also showed that upper-income Americans are more likely than lower-income Americans to have a will, and the younger people are, the less likely they are to have a will.

One of the lessons from the pandemic, is how fragile our lives are. It’s never too early to start planning and properly document your wishes. If you need more reasons to begin estate planning, here are six:

No will often leads to unwanted consequences. A major misconception is the idea that you don’t need a will because everything you own will go to your family. Not necessarily. Each state has its own laws about what happens if you have no will, and those laws are usually based on bloodlines or kinship. Most states leave two-thirds of your assets to your children and one-third to your spouse. Will your spouse be able to maintain the same standard of living, or even remain in the family home if this is how assets are distributed? A no-will situation is a no-win situation and can fracture even the best families.

Wills are used to name guardians for minor children. No parent, especially young parents, thinks that anything will happen to them, or even more unlikely, to both parents. However, it does. Creating a will offers the opportunity to name guardians to care for your children after death. If you don’t designate a guardian, a judge will. The judge will have never met your children, nor understand your family’s dynamics, and might even determine that the children should be raised by strangers.

Wills and pet trusts can protect pets after your demise. If you have beloved animal companions, it’s important to understand what can happen to them after you die. The law considers pets to be property, so you can’t leave money to your pet. However, you can create a pet trust and name a person to be the caregiver for your pet, if it survives you. The trust is enforceable, and the pet’s care can be detailed. Otherwise, there is no guarantee your pet will avoid being euthanized.

Taxes are part of death. Creating an estate plan with an experienced estate planning attorney who is knowledgeable about estate taxes, could save your heirs from losing a significant part of their inheritance. There are many tools and strategies to minimize taxes, including making charitable gifts. Plans for large estates can be structured in a way to avoid as much as 40% of tax exposure. It’s even more important to protect a smaller estate from being lost to taxes.

Peace of mind. Remember, wills and estate plans are not just for the benefit of the person who creates them. They are for the family, the surviving spouse, children, and grandchildren. If you did not take the time and make the effort to create an estate plan, they are the ones who will live with the consequences. In many cases, it could change their lives—and not for the better.

Putting it off never ends well. When you’re young and healthy, it seems like nothing can ever go wrong. However, live long enough, and you learn life has ups and downs and unexpected events—like death and serious illness—happen to everyone. Creating an estate plan won’t make you die sooner but having one can provide you and your loved ones with security, so you can focus on living.

Reference: Real Simple (June 25, 2021) “6 Reasons You Need to Make a Will Now”

To set up a consultation with Calvin Curtis, click here.

For more information about this or other topics, click here.

It’s Time to Stop Procrastinating and Have Your Estate Plan Done

While many people have had their wills updated or created in response to the pandemic, millions of Americans have yet to do so, reports the article “How to Stop Stalling On Getting a Will and Estate Plan” from AARP Magazine. The main reasons for the big stall? They haven’t “gotten around to it,” or, they think they don’t have enough assets to leave to anyone and don’t need a will. Neither reason is valid.

Estate Plans Protect Us During Life. A will is a legal document used to distribute assets after death. It saves families from unnecessary costs and stresses resulting from intestacy, which is what having no will is called. However, there are more documents to an estate plan than just a will. One is a health care directive, often called a living will. This document names someone of your choosing to make medical decisions for you if you are unable. It is also used to outline the kind of medical treatments you do or do not want.

Imagine your family faced with making the decision of keeping you on a heart and lung machine or pulling the plug and letting you die. Would they know what you want them to do? Without a living will, they have to make a decision, and hope it’s the one you would have wanted. That’s quite a burden to put on your loved ones, especially since there is a simple way for you to convey your wishes in a legally enforceable manner.

You also Need a Power of Attorney. A financial power of attorney appoints a person of your choosing to make financial and legal decisions on your behalf, if you are incapacitated. This is an important document and can be created to be as broad or as narrow as you want. You can provide the direction for someone—a trusted, responsible adult—to manage finances, including paying bills, managing a portfolio, paying a mortgage and generally taking over the business of your life. Without it, your family will need to go to court to obtain a guardianship and/or conservatorship to take care of these matters.

Estate Planning Requires Hard Conversations. When people say they “haven’t gotten around” to doing their wills, what they are really thinking is “This is too unpleasant a topic for me” or “I can’t bring myself to have this conversation with my children.” Death and sickness are uncomfortable topics, and most people find it painful to discuss them with their spouses and their children.

However, imagine the great relief you will feel when your loved ones know what your wishes are for sickness and death. You can also imagine the relief they will have in knowing that you took the time give them the tools needed to deal with whatever the future will bring.

Joint Wills are Never a Good Idea. A joint will can leave a surviving spouse in a terrible legal and financial situation. They are not even valid in certain states. They can restrict a surviving spouse from changing the instructions of the will, which could create all kinds of hardships. Circumstances change, and a joint will won’t allow for that. Most couples opt for a “Mirror” will, where they leave the estate to each other and/or their children.

Blended Families Need Special Treatment. If your family is made up of children from different parents, it is important to understand that stepchildren are not treated the same as children by the law. You may love your stepchildren as if they were your own, but unless you specifically name them in the will, they will not be included. Your estate planning attorney will know how to address this issue.

A few final thoughts: estate planning laws of each state are different, so you should meet with an estate planning attorney who practices in your state. The Power of Attorney and Health Care Directives should name the people who you feel will carry out your wishes and can be trusted to do as you want. The person does not have to be the oldest male child. They don’t even have to be related to you, as long as the person you choose is trustworthy, responsible and good with managing money and details.

Reference: AARP Magazine (Nov. 12, 2020) “How to Stop Stalling On Getting a Will and Estate Plan”

What are the Biggest Estate Planning Mistakes?

One of the largest wealth transfers our nation has ever seen is about to occur, since in the next 25 years, roughly $68 trillion of wealth will be passed to succeeding generations. This event has unique planning opportunities for those who are prepared, and also big challenges due to the ever-changing legal and tax world of estate planning.

Fox Business’ article “5 estate planning disasters you’ll want to avoid,” discusses the biggest estate planning errors to avoid.

Failing to properly name beneficiaries. This common estate planning mistake is easily overlooked, when setting up a retirement plan for the first time or when switching investment companies. A big advantage of adding a beneficiary to your account, is that the account will avoid probate and pass directly to your beneficiaries.

Any account with a properly listed beneficiary designation will override what is written in your will or revocable living trust. Therefore, you should review your investment and bank accounts to make certain that your beneficiaries are accurate and match your intentions.

Naming a minor as a beneficiary. This can be a problem, if they are still minors when you die. A minor won’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21 (depending on state law). When a minor receives an asset as a beneficiary, a court-appointed guardianship will be created to supervise and manage the assets on behalf of the minor. To avoid this mistake, you can name a guardian for the minor child in your will.

Forgetting to fund a trust. Creating a trust is the first step, but many people don’t properly fund their trust after it’s established.

Making a tax mess for your heirs. A significant advantages of passing on real estate or other highly appreciated investments or property, is that your beneficiaries receive what is known as a “step-up” in basis, so that they aren’t responsible for any income taxes on the appreciated assets when they are received. The exception is when inheriting retirement accounts, such as 401k’s and traditional IRAs. Except for a surviving spouse, inheriting a traditional IRA or 401k means that you are now responsible for the taxes owed. With the recent passage of the SECURE Act, most non-spouse beneficiaries must totally withdraw a 401k or IRA within 10 years. It is deemed to be ordinary income for beneficiaries, which could result in a huge tax bill for your heirs. To avoid this, you can convert some or all of your retirement account assets to a Roth IRA during your lifetime, which lets you to pay the conversion taxes at your current income tax rate—a rate that may be much lower than your children or grandchildren’s tax rate. When you pass away, any money that is passed inside a Roth IRA goes tax-free to your heirs.

Failing to create a comprehensive estate plan. Properly establishing your estate plan now, will care for your loved ones financially, and can also save them a lot of emotional stress after you’re gone.

Talk to an experienced estate planning attorney about planning now. It can really affect your family for generations. It is one of the best gifts that you can leave your family.

Reference: Fox Business (Nov. 12, 2020) “5 estate planning disasters you’ll want to avoid”

 

What are Power of Attorney Options?

FedWeek’s recent article entitled The Options in Granting Powers of Attorney” explains that a power of attorney designates someone else to handle your affairs, if you can’t.

Here are the major types:

  • Limited power of attorney. This allows an agent to act on your behalf under specific circumstances, like a home sale closing that you can’t attend, and/or for a defined period of time.
  • General power of attorney. Gives broad authority to your agent, who at any time can write checks to pay your bills, sign contracts on your behalf and take distributions from your IRA.
  • Springing power of attorney. This isn’t effective when you execute it, but rather “springs” into effect upon certain circumstances, such as your becoming incompetent. You can say in the document what’s needed to verify your incompetency, like letters from two physicians stating that you no longer can manage your own affairs.

A power of attorney is important because your agent can act, if you become incapacitated. To serve this purpose, a power should be “durable,” so it will remain in effect if you become incompetent. Other powers of attorney may not be recognized, if a judge determines that you no longer can manage your affairs.

Without a power of attorney, your family may have to ask a judge to name a guardian to act in your best interests. A guardianship proceeding can be expensive and contentious. You might also wind up with an unwelcome interloper managing your finances. To avoid this situation, designate a person you trust as agent on your durable power.

A health care power of attorney, also known as a health care proxy or a medical power of attorney, should be a component of a complete estate plan. This document names a trusted agent to make decisions about your medical treatment, if you become unable to do so.

The person you name in your health care power doesn’t have to be the same person that you name as agent for a “regular” power of attorney (the POA that affects your finances).

For your health care power, chose a person in your family who is a medical professional or someone you trust to see that you get all necessary care.

Depending on state law, it may go into effect when a doctor (whom you can name in the POA) determines in writing that you no longer have the ability to make or communicate health care decisions. For more information, click here.

Reference: FedWeek (Aug. 26, 2020) “The Options in Granting Powers of Attorney”

 

Don’t Overlook Key Parts of Estate Plan

The importance of having key estate planning documents cannot be overstated. That includes a will, an advance directive, powers of attorney for health care and financial matters and guardianships for minor children. Trusts may also be part of an estate plan, and they need to be created and funded in a timely manner. However,, according to the article “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar” from Think Advisor, there are a number of frequently overlooked additional parts to an estate plan that make a difference.

Financial Overview. This gives a broad outline of your assets and can be a useful discussion starting point, when one spouse manages the money and the other needs to be brought up to speed. It includes information about larger assets, including the home, investments, cars and other valuables.

A Directory. Creating a complete master list of all accounts, including the account number, website addresses and the names of any individuals that you deal with on a regular basis, avoids sending loved ones on a scavenger hunt. Keep this document safe—either encrypt it or keep it in a locked, fireproof safe in your home.

Personal Property. Wills contain directions about property, but not everything gets included. Make a list of any tangible personal property that you want to go to specific people, like jewelry or artwork, and create a detailed memo. It won’t be part of the will, but most states consider such memos legally binding, as long as they are mentioned in the will. Your estate planning attorney will know what is best for your situation and in your state.

Plan for Pets. The best way to do this is with a pet trust, which is enforceable. You name a person to take care of your pets, and how much money they should use to care for the pet. The will can be used to specify who should be your pet’s caretaker. You can leave assets for the pet, but the designated person is not legally bound to use the money for the pet’s well-being.

Digital Estate Plan. Make a plan for your digital property, including tangible digital devices, like computers and phones and the data stored on devices in the cloud and online accounts, including social media, websites, emails, photos, videos, etc. Start by making an inventory of all digital accounts, which needs to be stored in the same way your directory is: under lock and key.

End of Life Plan. Advance directives are used to direct your wishes towards life-extending care, but they don’t always go into detail. Providing additional information to loved ones who might need to make health care decisions could alleviate a lifetime of guilt. Having conversations is a starting point but putting your wishes into a document is better.

Ethical Will. An ethical will in which the person hands down their belief system to loved ones is a gift and part of your legacy. What would you want the next generation to know about your beliefs? What life lessons do you want to share?

Reference: Think Advisor (July 22, 2020) “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar”

To learn more about this or other topics, sign up for our weekly blog digest or our monthly newsletter. Click here.

What Should I Know about Beneficiaries?

When you open most financial accounts, like a bank account, life insurance, a brokerage account, or a retirement account (e.g., a 401(k) or IRA), the institution will ask you to name a beneficiary. You also establish beneficiaries, when you draft a will or other legal contracts that require you to specify someone to benefit in your stead. With some trusts, the beneficiary may even be you and your spouse, while you’re alive.

Bankrate’s article entitled “What is a beneficiary?” explains that the beneficiary is usually a person, but it could be any number of individuals, as well as other entities like a trustee of your trust, your estate, or a charity or other such organization.

When you’re opening an account, many people forget to name a beneficiary, because it’s not needed as part of the process to create many financial accounts. However, naming a beneficiary allows you to direct your assets as you want; avoid conflict; and reduce legal issues. Failing to name a beneficiary may create big headaches in the future, possibly for those who have to deal with sorting out your affairs.

There are two types of beneficiaries. A primary beneficiary is first in line to receive any distributions from your assets. You can disburse your assets to as many primary beneficiaries as you want. You can also apportion your assets as you like, with a certain percentage of your account to each primary beneficiary. A contingent beneficiary receives a benefit, if one or more of the primary beneficiaries is unable to collect, such as if they’ve died.

After you’ve named your beneficiaries, it’s important to review the designations regularly. Major life events (death, divorce, birth) may modify who you want to be your beneficiary. You should also make certain that any language in your will doesn’t conflict with beneficiary designations. Beneficiary designations generally take precedence over your will. Check with an elder law or experienced estate planning attorney.

Finally, it is important to understand that a minor (e.g., typically under age 18 in most states) usually can’t hold property, so you’ll need to set up a structure that ensures the child receives the assets. One way to do this, is to have a guardian that holds assets in custody for the minor. You may also be able to use a trust with the same result but with an added benefit: in a trust you can instruct that the assets be given to beneficiaries, only when they reach a certain age or other event or purpose.

Reference: Bankrate (July 1, 2020) “What is a beneficiary?”

What are the Estate Planning Basics?

Estate planning is an all-encompassing term that refers to the process of organizing, inventorying and making plans for the proper handling of your affairs after you die, including your dependents as well as your assets, valuables and heirlooms. This typically involves writing a will, setting up a power of attorney and detailing funeral arrangements with the help of an experienced estate planning attorney.

CNET’s article entitled “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents” provides us with some of the key steps in getting started with estate planning.

Create an Inventory. Your estate includes all of the things you own, such as your car and other valuable possessions, plus “intangible assets” like investments and savings. If you own a company, that’s also part of your estate. Everything you own should be given a valuation. Have your home and other valuables appraised.

Evaluate your family’s needs. A big reason for estate planning is to make certain that your family is cared for, in the case of your death or incapacitation. If you’re a breadwinner for your family, the loss of your income could be devastating financially. Consider a life insurance policy to help provide a financial cushion that can be used to cover living expenses, college tuition cost, and mortgage payments. You may also need to designate a guardian, if you have children under the age of 18.

Make job assignments. Dividing up a person’s property can be a tough and emotional task. Make it easier by ensuring that all of your assets have been assigned a beneficiary. You’ll also name a few people to coordinate the process of dividing up your belongings. List your beneficiaries, so they know who gets what.

Create a Will. You should have a legally binding document setting everything out in as much detail as possible. A will is a legal document that directs the way in which you want your assets and affairs handled after you die. This includes naming an executor, who is someone to manage how your will is executed and take care of the distribution of your assets.

Help your family if you’re incapacitated. A living will (also known as a medical care or health care directive) states your healthcare preferences, in case you’re unable to communicate or make those decisions on your own. If you need life support, a living will states your preferences.

Start estate planning sooner rather than later. Talk to an experienced estate planning attorney today.

Reference: CNET (June 8, 2020) “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents”

Why Is Walt Disney’s Grandson Unable to Claim his $200 Million Inheritance?

Los Angeles County Superior Court Judge David J. Cowan recently claimed that Walt Disney’s grandson Bradford D. Lund had Down Syndrome—despite being presented with DNA evidence proving the opposite. The judge also ruled Lund to be “unfit” to receive his $200 million inheritance from Walt Disney and appointed him a temporary guardian to make all his legal decisions. This was all ordered without a hearing. Lund’s legal team is now trying to contest the rulings.

Inside the Magic’s recent article entitled “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance” says that in the complaint, Lund’s attorney Lanny Davis alleges that the probate court’s action is “all too reminiscent of a perspective where facts do not matter but alternative facts do, where the constitution does not matter…”

The alternative facts Davis spoke of are from a 2016 court decision by Superior Court Judge Robert Oberbillig from a 10-day trial brought on by “disgruntled relatives” against Lund. The trial came after seven years of litigation questioning whether Lund was required to have a limited guardianship. In that trial, Lund was examined by two court-appointed physicians, one court-appointed expert and by Judge Oberbillig himself in open court.

From the investigation, Judge Oberbillig rejected the family’s claims that Lund needed guardianship and ruled that Lund was “not incapacitated.” However, Judge Cowan ignored Oberbillig’s ruling and the DNA evidence that showed Lund doesn’t have Down Syndrome. Instead, Cowan stated from the bench: “Do I want to give 200 million dollars, effectively, to someone who may suffer, on some level, from Down syndrome? The answer is no.”

From this statement, Lund’s legal team brought an additional cause of action that claims Judge Cowan and the Los Angeles Court violated an anti-discrimination law, when Judge Cowan made this “indisputably false” statement and “perception.” They claim this resulted in discrimination against Lund and his loss of freedom regarding the right to counsel and property rights without due process of law.

On Feb. 27, 2020, Lund’s counsel also filed a federal civil rights case in the U.S. District Court for the Central District of California against Judge Cowan for alleged violation of Lund’s constitutional due process rights in the appointment of a limited guardian ad lit em.

Lund was supposed to have received his portion of his mother’s trust fund when he was 35, which was 15 years ago. He is now 50 years old.

Reference:  Inside the Magic (March 25, 2020) “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance”

What are the Main Estate Planning Blunders to Avoid?

There are a few important blunders that can make an estate plan defective—most of these can be easily avoided by reviewing your estate plan periodically and keeping it up to date.

Investopedia’s article from a few years ago entitled “5 Ways to Mess Up Estate Planning” lists these common blunders:

Not Updating Your Beneficiaries. Big events like a marriage, divorce, birth, adoption and death can all have an effect on who will receive your assets. Be certain that those you want to inherit your property are clearly detailed as such on the proper forms. Whenever you have a life change, update your estate plan, as well as all your financial, retirement accounts and insurance policies.

Forgetting Important Legal Documents. Your will may be just fine, but it won’t exempt your assets from the probate process in most states, if the dollar value of your estate exceeds a certain amount. Some assets are inherently exempt from probate by law, like life insurance, retirement plans and annuities and any financial account that has a transfer on death (TOD) beneficiary listed. You should also make sure that you nominate the guardians of minor children in your will, in the event that something should happen to you and/or your spouse or partner.

Lousy Recordkeeping. There are few things that your family will like less than having to spend a huge amount of time and effort finding, organizing and hunting down all of your assets and belongings without any directions from you on where to look. Create a detailed letter of instruction that tells your executor or executrix where everything is found, along with the names and contact information of everyone with whom they’ll have to work, like your banker, broker, insurance agent, financial planner, etc.. You should also list all of the financial websites you use with your login info, so that your accounts can be conveniently accessed.

Bad Communication. Telling your loved ones that you’ll do one thing with your money or possessions and then failing to make provisions in your plan for that to happen is a sure way to create hard feelings, broken relationships and perhaps litigation. It’s a good idea to compose a letter of explanation that sets out your intentions or tells them why you changed your mind about something. This could help in providing closure or peace of mind (despite the fact that it has no legal authority).

No Estate Plan. While this is about the most obvious mistake in the list, it’s also one of the most common. There are many tales of famous people who lost virtually all of their estates to court fees and legal costs, because they failed to plan.

These are just a few of the common estate planning errors that commonly happen. Make sure they don’t happen to you: talk to a qualified estate planning attorney.

Reference: Investopedia (Sep. 30, 2018) “5 Ways to Mess Up Estate Planning”