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$40 MILLION ESTATE SITS UNCLAIMED

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Imagine the good that $40 million could do. If you had this kind of money you would be able to do amazing things for your family.

Of course, there are people who don’t have any living family members. However, if someone has ever showed you any kindness, you could repay this person in an absolutely unbelievable manner. You could also do incredible things for charitable organizations or institutions that mean something to you.

Making sure any or all the above takes place requires the execution of an estate plan. If you had no family and you didn’t leave behind a last will the assets that were in your possession at the time of your death could be consumed by your state of residence via escheat rules.

This is a scenario that is in play right now in New York.

The case of Roman Blum is not the first intestacy case that the state of New York has ever encountered, but it certainly is the largest. Blum, a Holocaust survivor who died in January of 2012, left behind a fortune valued at around $40 million.

He died without a will, and nobody has come forward claiming to be a relative. Efforts by the state to locate a living relative or relatives have come up empty to this point.

Under the New York statutes if the money goes unclaimed for a period of three years the state assumes ownership of these funds.

This is what can happen to your resources if you have no family and you fail to execute a last will. Even if you aren’t a millionaire, you can probably find better uses for the money.

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With a generation-skipping trust you can keep more of your hard-earned resources in the family for a longer period of time.

Why would there be any need to utilize an estate planning device like a generation-skipping trust to preserve your wealth? The answer can be broken down to three words: the estate tax.

We have a federal estate tax that is imposed on assets that you are transferring that exceed $5.25 million. The maximum rate of this tax is 40% in 2013. While New York estate tax is imposed on assets being transferred that exceed $1 million, with a graduated tax rate that caps at 16%. This tax is often criticized because people say it is an instance of double taxation. They say that the estate tax is levied on assets that are left over after taxes have been paid on earnings.

In fact, this description may not go far enough. The estate tax can be imposed over and over again as assets are passed from generation to generation, so the same assets can be taxed multiple times.

By conveying assets into a generation-skipping trust you can slow this process down considerably. With these devices you skip a generation and name your grandchildren as the beneficiaries.

Your children can benefit from assets that have been placed into the trust, so you are still providing something for them. However, they never own the assets outright so there is no estate tax imposed on that generation.

When they pass away the beneficiaries of the trust assume ownership of the assets. This transfer is taxable, but you facilitated the avoidance of one imposition of transfer taxes by creating the trust.

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Some people who are in a position to give life-changing amounts of money to their loved ones may take pause. If you were to give a young person a significant gift or inheritance he or she may see no reason to get an education and make an individual mark on the world.

One thing you could do if you felt this way would be to convey assets into a 529 college savings plan for the benefit of a future college student. And, if it is an issue you may actually be able to gain some estate tax efficiency in the process.

The way that it works is you put money into the account in much the same way as you would a 401(k) account. The assets that have been placed in the account are invested, and the growth is not subject to taxation as long as the student does wind up using the funds for college expenses.

From a tax perspective you are reducing the value of your taxable estate as you place money into the 529 account. However, you have to concern yourself with the gift tax because your contributions into the account for the benefit of another are considered to be taxable gifts.

The good news is that there is a $14,000 per year, per person gift tax exclusion that exists outside of the lifetime unified gift/estate tax exclusion. As a result you could fund the 529 account with $14,000 contributions each year to stay within this exclusion amount.

Ultimately you would be transferring assets out of your taxable estate for the benefit of a loved one in a tax-free manner

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Most Americans do not have Wills. We have discussed the problems with this before on this blog, but it is a subject that is always worth revisiting. If we did not think it was important for people to have estate plans, then we would not do what we do as estate planning attorneys.

However, we can only discuss the many reasons why you should have an estate plan so often. If you are reading this, then by now you know what many of those reasons are and you have heard them many times before. The real question is, if you know the reasons why you should have an estate plan, what is it that is stopping you from taking the next step and getting one?

The answer to that question will be different for different people. For some people it is time. For others it is the perceived expense of estate planning. Some people do not really want to think about their own mortality. It is important to think about why you have not yet gotten estate plan. What is your reason? If we know your reason, only then can we really help you understand how to overcome the problem and move forward with an estate plan.

If you would like to discuss why you do not have an estate plan, we would love to hear from you. We would like to talk about your reasons for not having one so that we can address them with you one on one.

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When a celebrity passes away, it is often interesting to see if there is anything that we can learn from their estate. All too often, we learn the many ways that the celebrity did not plan their estate in an ideal way. However, sometimes, we find out that the celebrity did everything the right way.

It is still early in the estate process, but at this point it appears that Lakers owner Jerry Buss did a good job in planning his estate. The big issue with his estate was the ownership of the basketball team. The value of the team is high enough that there are obvious estate tax issues. Buss needed a way to leave the franchise to his family without forcing a sale to pay the estate tax. Initial reports indicate that he did this and his children will inherit the franchise. That is good news for Lakers’ fans.

It also good news for business owners everywhere. It lets you know that it is possible to leave your business to your family and not lose it to the estate tax. There are several different ways to accomplish this. If you have a business that you would like to leave to your family, then talk to an estate planning attorney about what your options are and how to pick the best option for your business and for your family.

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Recently, Bob Marley’s widow, Rita Marley, and his half-brother, Richard Booker, settled the legal issues between them. The case is an interesting one and is instructive of a common estate planning pitfall that can lead to arguments and litigation between family members.

Generally, Marley’s family has been very protective about how the late singer’s image and likeness can be used. They have even only supported one official documentary out of fear that the singer’s image might be tarnished. Rita Marley filed a lawsuit against Booker that alleged Booker was using the singer’s image to promote concerts and sell merchandise in violation of the family’s copyrights and trademarks. Booker maintained that before he passed away, Bob Marley had given him permission to do so. Booker filed a counter suit on that basis.

In this case, the sides were able to reach a settlement that resolved the issues between them. The problem is that the family fight occurred in the first place. Bob Marley’s mistake might have been telling one person one thing about his property, but not making it clear in his estate plan that he had done so. These situations often lead to family arguments. For most people the argument will not be about valuable, important image rights. However, even something as minor as telling a child that he or she will receive a particular item of personal property, but not making mention of it in your estate plan can lead to problems for your family.

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The Nebraska legislature is considering joining a small group of states that have recently enacted legislation granting the estates of deceased persons’ access to the deceased’s digital assets, such as Facebook and Google+ accounts. The reason that they are doing so is that digital assets are new and under current laws, an estate has to get a special court order to access the accounts and remove or update them. The process can be quite a hassle.

New York is not one of the states that has such a law. If you think that it should, it would be a good idea to contact your state representative in Albany and express your concerns. Of course, even after doing so, it will take a long time for the legislature to enact any new law that takes care of the issue.

Someday, New York might have similar legislation to what is being considered in Nebraska. Until that time, there are things that you can do to make things easier on your relatives. The simplest thing to do is to just make sure that someone responsible can find your user names and passwords for the websites that you frequent. You can also make your accounts and access to them a part of your larger estate plan. If you do not do that, then your relatives will have to jump through the hoops just to update your Facebook page to let your distant friends know what happened to you. Talk to an estate planning attorney about the best option for your digital assets.

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We have previously told you about non-attorneys who set up websites to sell Living Trusts. It should go without saying to our savvy readers that purchasing a Living Trust from one of these websites is a terrible idea. Some of these same people have a new method to try to take your money and give bad estate planning advice.

The new trend is to offer what they call estate planning organizers. Supposedly, you can use these organizers to gather all of the information that you need to plan your estate. Once, you have it all organized, then you can take it to a real attorney and get your estate plan done more easily. While that may sound like a good idea, it is completely unnecessary. These organizers are selling for hundreds of dollars. That is unnecessary money spent before you even start your actual estate planning. A few file folders are really all that you need to organize your documents to take to an estate planning attorney.

Of course, that is not the only problem with these organizers. Many are merely being used as loss-leaders to later sell people the worthless Living Trusts. Know who you are dealing with online. Make sure that before you spend anything to get an estate plan you are dealing with a licensed attorney.

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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.