Redmond Office Law Blog

Although many of us cannot relate to being the heir to the Hooters franchise with an estimated value of $130 million.  Many of these families face similar issues as those of more simple means. With the recent death of Robert Brooks, owner of the Hooters franchise, the family is facing a variety of issues that should have been addressed prior to the owner’s death. Mr. Brooks was survived by his son Coby Field of his first marriage, his daughter Bonie Bell of his second marriage and his wife Tammy, who was 21 years his junior. Mr. Brooks’ son was actively involved in the business and it does not appear from the simple Will that Mr. Brooks prepared that he accounted for his son’s active participation. Mr. Brooks also failed to provide for any privacy by merely setting up a simple Will.

Individuals that are involved in second marriages with children of a previous marriage and children of the current marriage need to take a variety of issues into consideration. For example, is there an active child in the business and should that child receive special consideration when it comes to the transfer of the family business? Should the children of both marriages be treated equally? Should the second wife receive a large inheritance if the assets were owned before the marriage? Do you want your assets and family feuds to become public knowledge which is what happens when a Will is probated or would you prefer to have things handled more privately with a Living Trust?

In addition to all of that, individuals need to make sure that their estate plan is up to date. From the information provided, it appeared that Mr. Brooks was not even living with his second wife at the time of his death. Clearly, if you have separated from a spouse, in middle of divorce proceedings or if the relationship has changed significantly, an update to your estate plan may be necessary.

When choosing someone to serve as your durable power of attorney or financial agent, you should evaluate a variety of issues. You should establish if that person has any prior financial problems or if that person has a criminal record. You should determine if that individual currently manages his or her own finances. Too often, individuals do not have family members to turn to serve as their power of attorney. In many instances, they turn to a long term friend or even a neighbor. In a recent case in New York a 90 year old woman designated a long time neighbor to serve as her power of attorney. He had been her neighbor since 1978 and she had known him for a long time. When the women died, her cousin’s determined that her power of attorney had embezzled money from her over the course of several years. In fact, they not only learned that he had embezzled from her, but that he had been charged with embezzlement in previous years and had served four months in jail for theft. When choosing a durable power of attorney that is not a close family member that you can trust, you should consider naming two agents so that there is a checks and balances or if you are at an age where you are not managing your finances any longer, perhaps a durable power of attorney is not the route to go. At that point, you may want to consider designating an institution to serve as a corporate Trustee and most of these financial institutions are regulated and there are several people acting on your behalf. This might be the necessary checks and balances that you may need.

When it comes to estate planning there are a variety of things that can effect your current estate plan. One of the biggest effects on a current estate plan is a recent divorce. Many couples have set up a joint living Trust, simple Wills and even Medical and Financial Powers of Attorney. What these couples need to understand is that in the event of a divorce, many of the joint assets in a Trust are no longer joint and for the most part the Trust is null and void. With a simple Last Will and Testament the divorce nullified any provisions that you would have for your current spouse and it would go to the default provisions which could include children, brothers and sisters or other family members.

The two documents a newly divorced couple or a couple in the midst of a divorce needs to address immediately is the Medical and Financial Powers of Attorney. The designation of your soon to be former spouse is not null and void until the divorce is final. For example, if you designated your wife as your primary medical decision maker and your sister as a back up, the divorce does not automatically remove your ex-wife and put your sister in the position as primary decision maker. You need to revoke and/or amend that Power of Attorney and you need to let your former spouse know that you have revoked his or her designation. For many people that are facing the emotional and financial aspects of divorce, updating an estate plan is a difficult issue to have to face. However, it is very important that you not ignore these documents and address them with your estate planning attorney as soon as possible.

When we think of celebrities and the heiress of an estate, we automatically assume that their affairs are always in order. We anticipate that they are surrounded by attorneys and have their Wills and Trusts all in place with people ready to step in at any moment. Unfortunately, we find very frequently that that is not the case. With the recent death of Casey Johnson, heiress to the Johnson & Johnson money, we learned that even a mother of a 3 year old child and a pet owner may not have had her affairs in order. Casey Johnson has been in the news so many times because of her relationship with reality television show host Tila Tequilla, but it was not Tila Tequilla that got her into the news as much as the custody of her two dogs. According to the news, Niki Hilton and Bijou Phillips requested that Tila Tequilla return the dogs to her and there was some issue as to whether or not one of the parties would be putting one of the older dogs down. Oddly enough, there was no mention in any of the reports about Casey Johnson leaving any directions not only about her 3 year old daughter, but about the placement of her pets. Each one of us has specific issues in our life and it is important that we leave the people that survive us details, not only on how we want our assets divided, but who we want to have custody of the things that are important to us, especially our children and our pets.

As we begin the new year we also face new estate tax issues. In 2001, the IRS created a 10 year schedule regarding the estate tax laws. In 2010, the estate tax was to expire resulting in no estate taxes for any individual dying the in the year 2010. However, there are capital gains issues that the beneficiaries may face. There is a possibility that law makers will revisit this issue early in 2010 and decide to override the tax’s expiration and implement a new law. Even if they do decide on an amount that can be passed tax free at the time of death, our law makers still need to decide how much any excess will be taxed. In 2009, any excess was taxed at the rate of 45% and that number has varied over the years as well.

Last week we talked about the importance of meeting with a Medicaid planning attorney to protect the assets of a non-nursing home parent when one of your parents is facing nursing home care. In addition to the importance of Medicaid planning, it is also important that the non-nursing home parent revisit his or her estate plan. For example, many husband’s and wive’s have set up estate planning documents to provide for each other. If you have taken the time to get mom qualified for Medicaid and have preserved a considerable amount of assets, including the home, for the father who is still living in the home, it makes absolutely no sense to leave all of that protected money and all of those assets back to your mother who is in the nursing home and receiving Medicaid. The father who is currently living at home needs to update his estate plan and consider by-passing his wife, who is living in the nursing home and receiving Medicaid and leave the remaining funds to other family members. If the non-nursing home father does not update his estate plan and his old Will or Trust takes over, that Will or Trust may leave all of his assets to his nursing home wife and ultimately she may loose the Medicaid that she originally qualified for. She will have to spend down the money she inherits and once that it is spent down, you will have to reapply for Medicaid.

When it comes to Medicaid planning, many families realize that there is a considerable amount of expense that may occur in placing a parent in the nursing home. Many of those family members do not think that they can afford to retain an attorney to assist them with their Medicaid planning. What families need to know is if you do not seek legal assistance with your Medicaid planning, you may end up spending down more funds on the Medicaid parent without preserving the necessary funds for the non-nursing home parent. Under the Medicaid system there are “legal tricks of the trade” that allow the non-nursing home spouse to protect a reasonable amount of assets and a considerable amount of income. Unfortunately, the Medicaid system, the government workers and/or the case workers at the nursing home are not going to be able to advise you on these various options. If you have a parent or family member facing nursing home care consider consulting with a Medicaid planning attorney as soon as possible.

As we find ourselves vacationing over the next several weeks to visit family and friends, many of us have a to do list of what needs to be packed before we leave. One simple item that everyone should take with them when traveling out of town or out of state is your Designation of Patient Advocate or Medical Power of Attorney. This document identifies who can make medical decisions for you and who can discuss medical information about you. If you find yourself in a strange hospital, family members may find themselves locked out or restricted from discussion your condition or even moving you back to your hometown hospital. I would recommend that you simply place a copy of your Patient Advocate in your suitcase or in glove box of your car and leave it there even when you return home for the next vacation.

I frequently have people come in to visit with me whose parents set up a life insurance policy for a child when that child was a minor. Forty, fifty and sometimes sixty years later that life insurance policy is still in effect and at that point has grown to a substantially larger amount. Unfortunately, by the time the insured individual dies, the paperwork regarding that policy including the policy itself is nowhere to be found. There are many ways to track or find out if a policy is in effect or to discover insurance policies.

The best way to start is to look for a paper trail. Determine if premiums were paid by looking back through old checkbooks and statements. Additionally, insurance companies are required to report the status of a policy at least annually, so worst case scenario you may have to wait for an annual statement in the deceased individual’s mail. For a larger policy, the insurance company would have potentially contacted the Medical Information Bureau during the underwriting process and the executor of the estate may have to contact them to request what is on file with the Medical Information Bureau. If information cannot be obtained by them in a timely manner, the executor may be able to call the deceased individual’s physician. Even if a small life insurance policy was applied for the insurance company would have paid a physician for a copy of the medical records and a copy of that request would likely be in the physicians file. Finally, if all else fails, you can visit http://www.lostpolicy.com/to determine if there is a record of any unpaid policy information.

Many people think that charitable giving only includes giving money or making financial donations to a non-profit, but many charities and non-profits can use in-kind donation. For example, many of us have jackets and clothing in our closets that have not been worn for years. This would be a perfect time to donate these items to individuals who have lost their home or are returning to the work force. Many of us have bought canned goods or boxed goods and wondered why we bought them and yet they still sit on our pantry shelves. These are the kind of items to donate to the local shelter that feeds the homeless. I recently had a situation with a client who’s family member passed away and left her the responsibility of selling the family members car. This family member was concerned about having strangers come over to her house and did not want the responsibility of researching the value or negotiating the sale price and ultimately donated the car to a non-profit organization. This car was in turn then provided to someone in need. Consider talking to your CPA or accountant about the deductions that can be taken for many of the charitable gifts that you make. Do not forget, you can not only give while you are living, but consider putting a provision in your estate plan to provide for your favorite charities at the time of your death.

When it comes to acting as an estate planning attorney, many of us find ourselves asking our clients, “how do you want to leave your assets in the event of death and who will manage your affairs in the event of incapacity?” Many times the clients turn the table on the attorney and ask, “what happens if the attorney dies, retires, or becomes incapacitated?” It is as important for estate planning attorneys to plan for the same unknown circumstances as we plan for our own clients. If you have faced a situation where your estate planning has died, retired or left the practice, keep in mind that your estate planning documents are your property. In many situations, the attorney has merely retained a photocopy and the originals in your possession and can be transferred to anyone you want. In situations where an attorney retires, his practice may be transferred or sold to another firm or to another attorney. You are not required to work with the attorney or firm it is transferred to, it is merely an option for you. If an attorney has died, many times his files will go un-transferred or may be picked up by someone else within the firm. Again, your estate plan is personal to you and you are always free to transfer your file to an attorney of your choice.

Estate planning is a very personal matter and you should always feel comfortable with the person you are working with because they are the ones that are discussing your personal, emotional, and financial matters. If you are facing a situation where your estate planning attorney passed away or retired or left the practice, all you need to do is contact the attorney of your choice and that attorney will make the necessary arrangements to have any previous file or copy transferred to the new firm. You do not have to get permission from the previous law firm or attorney to do business elsewhere.

Estate Planning for a traditional beneficiary can raise a lot of questions for families. For example, at what age should my children inherit from me, should I divide my assets equally between my children or should I provide for grandchildren and how should I plan for a child with special needs? For many, those questions seem difficult enough, but add to the mix a simple question of how to provide for a beneficiary who is incarcerated. Many families are facing a situation where a child or beneficiary is in prison either for their lifetime or for a specific period of time. If you were to die unexpectedly, would you want to provide funds directly to the incarcerated child or would you want funds set aside to be made available upon that beneficiaries release.

It is important to consider whether those funds would be subject to reimbursement for restitution charges or whether that child will really have much of a need for a significant amount of money if they are serving a lifetime sentence. Although this is a difficult subject to consider, failing to plan may leave an incarcerated beneficiary with more funds than necessary and/or those funds may be taken over by the state.

Hardship loans are a common occurance these days.  Many of my clients are doing workouts because they are lowering their payments or catching up with missed payments, but you need to be careful.  Many people are relying on these workouts and the banks are not coming through for people who need help.

Our office can assist and save many houses from foreclosure, but if the bank holds the foreclosure sale even a bankruptcy cannot save the home.  Do not let the workout get too close to the date of foreclosure.  Instead, make sure that you contact our office well in advance of the foreclosure date.  You need to contact our office at least 2 weeks in advance of the foreclosure date so we have enough time, if we need it, to save your home.

Recent reports have advised us that a large portion of individuals are employed by small businesses.  Many of those small businesses are family owned businesses that may have been started by Mom and Dad and employ one or more children.  When it comes to Estate Planning, your business succession plan should be addressed in your estate plan.  Many business owners wait too long to consider their succession plan and unfortunately, a health crisis arises and the decisions are made under a lot of stress.  It is always much easier to make decisions when you are not in failing health  or in emotional crisis.  In some situations, the business owner may not have a family member to consider and may want to look at a management team member or even someone from the outside.  Many attorney’s and CPA’s that deal with business succession planning and estate planning feel that business owners need to be very pro-active and start planning at a minimum of six to seven years in advance of their retirement. 

One of the most common issues in business succession planning and estate planning is the desire of a business owner to divide their estate equally amongst their children.  For many of these business owners, more than half of their wealth is tied up in the business and it is difficult to figure out a fair or equitable division.  If a business owner employ’s a family member, such as a son, the business owner needs to decide whether it would be prudent to make non-active children a passive or an active shareholder of that business.  In many situations, there is the ability to begin transferring or selling the business to the active son, while the business owner is still actively involved in the business.  The key to making sure that a business succession plan and estate plan work well together is to make sure that you create a team of advisors.  The best business succession plan and estate plan can typically consist of your corporate attorney, your CPA and your estate planning attorney.

Danielle will be presenting on FRIDAY, NOVEMBER 6, 2009 on the topic of Estate Planning.  This presentation will be held at SENIOR SERVICES, INC. located at 918 Jasper Street in downtown Kalamazoo.  The program begins at 2:00 p.m. and will also feature other local experts from Langland Family Funeral Homes, Senior Services, Inc. and First Community Federal Credit Union who will speak on a range of Senior focused topics.  You can call Don Ryan at 269-382-0515 to reserve your space.

See you there.   

In a day and age where scams seem to be at an all time high, many people would not think that individuals or representatives from a legal firm would mislead them.  However, in a recent Ohio case, an estate planning firm was fined $6.4 million for running what the State of Ohio called a “Trust Mill”.  A father/son operation, operating out of Ohio and California, sent out mass mailings to seniors over the age of 85 offering them a free in-home consultation.  Regardless of whether the seniors responded or not, many were called upon by sales representatives to discuss the senior’s estate planning needs.  The Court of Ohio found that this father/son law firm had used scare-tactics and incorrect information to convince these senior individuals that estate planning was necessary.  In some situations, a living Trust was not an appropriate document, but it was still “sold” to the seniors at a cost of almost $2000.  The Ohio Courts found that the individuals that were sold the estate plan never met with the attorney, but that all questions and consultations were handled by a sales representative with no legal background or experience. 

The Court also determined that all of this company’s efforts to get into the people’s homes was solely on the basis to primarily sell them annuities and other insurance products, which was how they would ultimately make their money.  If you have been solicited by a company that has a similar tactic, such as this one, you should contact the State Bar of Michigan and request the Ethics Department or you should contact the Michigan Attorney General at http://www.michigan.gov/ag/.

Elder law fraud can occur in any family.  We recently saw the conviction of Brook Astor, son of  multi-millionaire Charlene Astor.  Brook Astor, at the age of 85 was convicted of stealing from his mother while she suffered from Alzheimer’s in a nursing home.  While many of us think that that only happens in other states and cities the truth is it is happening right here in the State of Michigan.  Michigan Attorney General Mike Cox recently announced criminal charges against 6 Michigan residents who have been exploiting senior citizens.  These convictions are a result of a new project called “$CAMS”, which stands for Stop Crimes Against Michigan Seniors.  The organizations are in charge of uncovering potential financial exploitation by identifying various nursing home residents with past due accounts.  Since the project has been initiated 43 criminal cases have been solved.

For more information, contact the Michigan Attorney General’s office or contact Lynn Weinstein McCollum who is the Legal Services Developer through the Michigan Office of Services to the Aging at 517-373-7692.

Join the Kalamazoo Hospital Hospitality House on Friday, October 16, 2009, for Nationally acclaimed political satire group “CAPITAL STEPS” from Washington D.C.  The event is at Chenery Auditorium and begins at 7:30 p.m.  Tickets are only $35 with open seating.  For more information call 269-341-8250 or visit www.hhhkz.org

When it comes to dividing up money it is just a matter of how many people are receiving what percentage or what dollar amount. But, when it comes to dividing up personal property, division is not quite that simple. Many family members believe that they do not have enough valuable items to care, but what they loose sight of is the fact that many of their family members are not concerned about the monetary value of the asset, but the sentimental value. When setting up an estate plan, making sure that your money and assets go to the right people is important, but equally important is making sure that any tangible personal property is passed to friends and family that will appreciate and enjoy the gift. There are several ways to address the distribution of tangible personal property. One way is to simply gift the item while you are alive and know that the recipient is enjoying it now. Another simple process is to merely create a handwritten list that you sign and date that identifies specific items of tangible personal property that are to pass on to specifically identified individuals. Alternatively, you may feel that everything should be auctioned off at your death and any interested family members can attend the auction and purchase things from your estate and avoid picking and choosing who gets what. Regardless of what method you choose a method should be chosen.

For information on additional ways to track items or to assist you with your decision making process, go to www.edivvyup.com.

Many of us will never understand the wealth that transfers between Royalty and despite the fact that many of us, when we turn 25, will not inherit income from a $22 million estate like Prince Harry, it is still important for families to plan for the wealth that they are passing to their children.  In September 2009, Prince Harry turned 25 not only making him an eligible bachelor, but also entitling him to part of the inheritance from his mother Princess Dianna.  From his inheritance, he will receive all of the income until he turns age 30.  His brother William is currently 27 and has already been receiving his income. 

When deciding how much a child is to receive it is important to look at your net worth to determine how much income would be generated from it if it was invested after your death and whether or not the income and principal would be more than a child is capable of handling at a young age.  A young age for each child is subject to review as each child matures differently.  Even at age 30 many children are not mature enough to handle $1 million let alone $22 million.

It does not need to be official Organ Donation Awareness Month for us to be reminded of the importance of putting our wishes regarding organ donation in writing.  Many individuals may have discussed this issue with their family, but they have not actually registered for organ donation.  If you have merely marked the back of your driver’s license or told your family, your family may ultimately not honor your wishes or they can object later on.  If you have taken the time to register with the Secretary of State or with the Gift of Life, then your family does not have the right to object once you are in the registry. 

If you would like to register for organ donation, you should visit www.tsm-giftoflife.org and they can assist you with registering for many types of organ donation.  However, despite your actual registration, it is still important that you discuss this with your family so that any surprise that would otherwise occur is avoided.

When we think about Estate Planning we think about our mother and fathers, our minor children and many of the loved ones around us.  What we many times fail to think about when discussing or setting up our Estate Plan are our furry, four-legged friends.  When it comes to Estate Planning many of us consider our pets members of the family, but yet we fail to provide for their care or support after we are gone.

I recently encountered a situation whereby I had to make some very important decisions about my pets care and the amount of money that was spent providing for that pet’s care or even determining if the pet could be cured.  When I think about my own Estate Plan, I too wonder if I have made the necessary provisions to ensure that my pets are adequately cared for in the event of a critical situation.  In many instances we anticipate that if we leave a pet to a friend or family member that we will need to provide them with sufficient funds for food and annual shots.  However, many times the situations become more involved than the obvious and you need to decide whether or not that care giver should be provided sufficient funds to “save” an animal with such things with a veterinary hospital stay and emergency treatment.  Although many people say, “once I am dead I don’t want my pet kept alive for any unnecessary reasons”, but remember that once you have passed that pet on to a new family that becomes their pet and saving Fido or Fluffy may become important to them and may require that these issues be addressed.

It may not be what they do have in common, but what they should have in common.  Many times, people set up a Prenuptial Agreement prior to marriage and provide various things for a spouse including, but not limited to the right to live in the home or the right to receive income.  However, many times the spouse providing these benefits does not go back and revisit or update their estate plan to ensure that these items are provided for as well.  In some instances,  the husband’s Prenuptial Agreement may provide that the house is to be held for the benefit of his wife, yet under his Trust it provides that the house is to be sold and the proceeds are to be distributed to his children.  In many situations, this can create significant problems between the spouse and children for the simple fact that in most cases these are children of a previous marriage.  When setting up a Prenuptial Agreement, which is typically done in anticipation of divorce, it is also important to make sure that your estate planning documents do not contradict your Prenuptial Agreement or at the very least compliment that agreement.  Remember, your estate planning documents can always be amended in the event a divorce does occur, but it is important not to create additional problems for your family at the time of your death.

The old saying, “what’s mine is yours and what’s yours is mine”, for many married couples may no longer be true when it comes to estate planning and a second marriage.  As couples enter into second marriage from as young as their early 30’s to as late as their early 90’s, many of them bring assets that they have acquired prior to the marriage to the table.  In addition to those assets, many of these individuals bring children  from a prior marriage.  For many, ensuring that the children from the prior marriage inherit a majority of the assets can be important and for some it is not an all or nothing prospect.  Many second marriage couples want to make sure that the other person is provided for in the event of death.  However, there are many questions that these couples need to answer to ensure how things are handled at death is clear to both each other and to any children from the prior relationships.  For example, if one spouse owns the home should the surviving spouse have the right to merely live in the home, should they own the home or should they have the right to sell the home and purchase other property?  Should the surviving spouse inherit the deceased spouse’s IRA or should the children of the first marriage be able to roll that over?  Remember, if you leave your IRA to your surviving spouse they have the right to roll that IRA over and name completely new beneficiaries at the time of that spouse’s death. 

In addition to all of the questions about who should inherit assets from you an extremely important question is who should manage your assets if they are being held in Trust?   Should the surviving spouse manage the assets, should it be managed by an adult child or should it be managed by an institution?  In many situations, a surviving spouse may not want to deal with your children of a previous marriage in determining when and if they are entitled to receive income and principal and at the same time a surviving spouse may not want to feel accountable to your adult children regarding how they are handling your Trust.  As you can see there are some very important issues that need to be addressed and hoping they go away and never become an issue is NOT an option.

As we continue to hear about Michael Jackson’s estate and all of the publicity that it is receiving, many of us realize that we would not want our personal affairs to become public knowledge.  Although we would not be publicized in the same manner, the thought of friends and family being able to walk down to the Probate Court to obtain a copy of our Will and/or a list of our assets concerns many of us.  It is important to continue to inform individuals that a simple Last Will and Testament is merely a guideline for the Probate Court.  It identifies for the Court who will serve as the Personal Representative of your estate and how your assets will be divided.  As part of the Probate process the Personal Representative must list all assets that you owned including your home, investments, bank accounts, personal property and/or business interests.

Many of us would like to keep this information private and only make that information available to the beneficiaries who we have designated in our estate plan.  If keeping your final affairs and the assets that you pass on private is important to you, then a Living Trust is necessary.  A Living Trust allows you to identify a Trustee who will serve at the time of your death.  The Trustee will provide the division and distribution of your assets to only the beneficiaries identified in the Trust.  If a family member is not designated in the Trust, the Trustee is under no obligation to provide that family member with a copy of the Trust or identify any of the assets that you owned at the time of your death.  It keeps your affairs private and it keeps family out of your business.