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WHEN JEFFERSON WAS A MISTAKE

Davidov Law Group

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We have written many times in this space that you need to update your Will whenever there is a significant change in your circumstances. There is another reason that you should update your Will from time to time. You should also update you Will when the life circumstances of your Executor change significantly.

In the early years of the United States, if one of the goals of your estate was to free slaves, then Thomas Jefferson would have been an excellent choice to designate as the Executor in your Will. Out of all of the founding fathers, Jefferson was the most outspoken in condemning slavery. The only reason he did not free his own slaves was that as property under the law, the slaves were subject to the claims of Jefferson’s many creditors. In 1798, a wealthy man named Tadeusz Kosciuszko nominated Jefferson to be the Executor of his Will, which left money that was to be used to purchase and free slaves. However, by the time that Kosciuszko passed away in 1817, Jefferson was in poor health and had to decline to serve as Executor. Eventually, litigation over the estate ensued and the money was never used to free slaves.

Make sure that you update your Will and name a new Executor when the person designated is no longer able to serve in that capacity.

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Most people do not know that there are circumstances where they can create a valid Will that a court will later rule is invalid because it is too old and other things have happened in the intervening years. It is rare that it happens, but it does happen. It happened to the estate of the legendary actor Sir Peter Ustinov.

Ustinov created a Will in 1968 and then got remarried a few years later. His Will is subject to Swiss law. The courts in that country ruled that the Will was too old and invalidated by the intervening marriage. Because of that ruling, Ustinov’s estate is treated as if he died intestate. Ordinarily, that would mean that the estate would all go to his wife. However, he had children from his previous marriage. They claim that Ustinov later created Trusts in England that are still valid. Apparently, the Trusts leave the majority of the estate to the children. The parties have been fighting about the estate for 9 years and there is no end in sight.

The real issue is that Ustinov did not update his Will when the circumstances of his life changed. He should have updated his estate plan when he got remarried. He then should have looked at his plan every few years to make any other changes. His failure to do so has many people believing that his entire estate has been spent on lawyers.

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Estate planning involves financial projections, and this can only be done with a reasonable modicum of accuracy when there is some kind of consistency within the numerical pattering you are working with. However, the recent wild swings in the estate tax parameters year to year has made estate planning quite challenging because what makes sense on December 31st of a given year may not be appropriate the next day. In 2008 the estate tax exclusion was $2 million; in 2009 it was $3.5 million; in 2010 the tax was repealed entirely; and throughout almost all of 2010 the law stated that the estate tax exclusion in 2011 would be $1 million.

There are many different permutations of this hodgepodge that you can highlight, but for instance, if an individual passed away with assets of $3 million in 2008 when the top rate was 45% and the exclusion was $2 million his or her heirs would owe the IRS $450,000. If this person held on until 2009 or 2010, no estate tax would be due. But under the law as it stood until December of 2010, this individual’s $3 million estate would have been presented with a $1.1 million tax bill if he or she died in 2011.

Thankfully, for at least two years we can enjoy some estate tax relief. A new bill that would extend the Bush era tax cuts had been gaining momentum since the midterm elections, and it ultimately passed though Congress and was signed into law by the President on December 17th. In addition to extending these cuts the new law is reducing Social Security payroll taxes by 2%, so the average American will see a little extra fluff in his or her paycheck.

As for the estate tax, the exclusion has been raised from the $1 million that was on tap for 2011 to $5 million for individuals and $10 million for couples. The rate of taxation has been reduced as well, dropping from 55% to 35% on any portion of an estate that exceeds the exclusion.

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If you want to contest a family member’s Will it is important that you do everything right and within designated time frames. Probate Courts will not wait for you to learn what you need to do, nor will they make allowances if you miss deadlines. The battle over Sherman Hemsley’s Will is a good illustration of this.

About a month before he passed away, Hemsley wrote a Will and left everything to a woman he claimed was his “beloved partner.” A man named Richard Thornton came out of nowhere to challenge the Will and claim that he was Hemsley’ half-brother. However, people familiar with Hemsley did not know about a brother. Recently, DNA tests confirmed that Thornton is Hemsley’s brother, which would ordinarily make the Will contest case much better. However, Thornton missed the deadline to have the DNA results entered in evidence in the case and the Court will not consider them.

Make sure that you hire an experienced Probate attorney as soon as you think you might want to contest a Will. You do not want to miss any important Probate deadlines.

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Often times in this space we take something for granted. We assume that our readers are interested in estate planning, so they must know what an estate plan is. That is our mistake. Many people do not really know what an estate plan is. With this post we hope to make up for that by telling those readers what an estate plan actually is. An estate plan is a collection of legal documents that are created for one of three basic purposes. Let’s look at those purposes.

1) To determine how a person’s property will be distributed after he or she passes away. This is the oldest purpose of estate planning and what is usually thought about when people hear the term. There are many ways that an estate plan can serve this purpose.

2) To determine how a person’s financial and healthcare affairs will be protected if he or she is incapacitated. This is a much newer purpose of estate planning, but it is equally important.

3) To determine who will care for a person’s minor children if the parents pass away. Not all estate plans serve this purpose as not everyone has minor children.

That’s it. An estate plan is a collection of legal documents that serve one of those three purposes.

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When you are doing your estate planning research you will frequently hear mention of the fact that the population of the United States is getting older and the senior population is rising. A very interesting dynamic emerges when you combine this demographic with the fact that medical science is advancing by leaps and bounds, fueled by amazing technological breakthroughs. More people are living longer, and it would seem as though this trend will continue as more becomes possible medically.

All of this has everything to do with long term planning because how you arrange your finances and set your goals is going to be relative to how long you can logically expect to live. The group of Americans who are 85-years-old and older are the fastest growing demographic subset, and if this is any indication it is probably prudent to prepare for the possibility of living into your late eighties and beyond.

This increased longevity is invariably going to add to the numbers of people living in assisted living communities and nursing homes. The costs of these facilities are already very high, they are rising, and experts say that they will continue to increase. A MetLife study reveals the fact that the cost of a private room in a nursing home in America in 2009 was $219 a day or $79,935 per year; in 2010 it had increased by 4.6% to $229 a day or $83,585 per year.

The rates for living in an assisted living community grew at an even quicker pace. In 2009 the average annual cost was $3,131 a month, which works out to $37,572 annually. These figures shot up to $3,293 per month and $39,516 per year in 2010, an increase of 5.2%.

In the state of New York the costs associated with long-term care are quite a bit higher than the national averages as you might expect. The annual cost of a private room in a nursing home in New York in 2010 was $127,750.

When you stop and think about a $130,000 annual expense coming in at the end of your life it is clear that some advance preparations are probably going to be necessary. The prudent course of action is to discuss the matter with an elder law attorney and do what it takes to address the possibility of a stay in a nursing home or assisted living community.

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I do not need to tell my readers in the New York area about the devastation that Hurricane Sandy has brought to our homes and neighbors. If you can help someone in person, I implore you to do so. If not, please follow this link to learn about other ways to help.

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Many people who create Trusts do not have a family member who is an appropriate person to appoint to serve as a Trustee. The person who serves as a Trustee should be financially responsible and someone who will not be tempted to administer the Trust for his or her own benefit instead of the benefit of the Trust beneficiaries. Ideally, the person should also be someone who the beneficiaries respect enough to defer to in decision-making without unnecessary challenges.

Many people do have responsible and respected family members who can act as Trustees, but those who don’t have to look for other options. Some people choose to use professionals. Banks and Trust Companies will act as Trustees for a fee. They can both be excellent options. Another option is to hire an attorney to act as a Trustee. Because of the professional ethics demanded of attorneys, they will act for the benefit of the Trust. Yet another option is to appoint the best family member that you can and hire an attorney to act as an advisor to the family member Trustee when the need arises for professional advice.

Talk to your estate planning attorney about who you should appoint to serve as a Trustee for the Trusts that you create and whether you would benefit from a professional as a Trustee.

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Many people are often concerned that after they spend their money in retirement, they will not have anything left over to leave to their families. It can be a difficult problem simply because people are living longer and longer thanks to advances in medical science. Many people will need more money in their retirement years than they planned for. However, with proper planning, you can make sure that you have something to leave behind for your loved ones.

Whatever your retirement plan is, make sure that you tell your estate planning attorney about it. You estate plan can take it into consideration and your attorney can craft a plan that is tailored for the retirement plan that you have. In some cases, you might need to change your retirement plan slightly, and you attorney might be able to help you with that too or suggest another professional who can.

Whatever you do, do not make the mistake of thinking that you do not need an estate plan because you are going to spend it all before you pass away. While people are living longer and longer in general, not everyone is. Make sure that you have a plan in place even if you do not think you need one.