Source: https://blog.zarembalaw.com/2018/02/index.html
Timestamp: 2019-04-22 00:47:28+00:00

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There is now a family dispute between the late Ed Keith’s two daughters over what happened to their father’s $92 million estate, including $38 million that had been earmarked for a foundation intended to benefit disadvantaged youth.
In 2016, ten years after Ed Keith died, Lisa Keith filed suit to compel her sister, Celeste K. White, to provide a full accounting of millions of dollars that she controlled as co-trustee of Ed’s estate. Ed Keith was a self-made businessman who owned 500 apartment units in Napa and many other holdings.
Lisa Keith questions the propriety of a variety of financial decisions made by Celeste White. This includes $15 million invested in a for-profit real estate company, the purchase of a $2.4 million condo in Santa Barbara, the acquisition of a Land Rover for a winery and the construction of a stable for their polo ponies.
Lisa Keith is one of Ed’s five children from two marriages. Her sister, Celeste, lives in Napa with her husband, Dr. Robert White, who was named the executor of Ed’s estate.
Lisa alleges that the Whites made questionable decisions regarding the money from their father’s estate and argues that an estimated $1.8 million in trustee fees paid to Celeste should be refunded to the trust.
A Napa County Superior Court judge recently ruled that Lisa had no standing to ask for an accounting of foundation funds, because she’s not a director or beneficiary of the foundation. However, since she’s a beneficiary of the trust, she continues to ask for an accounting of Ed’s trust funds.
The other $38 million was to be divided equally among Keith’s five children. After all the bills were paid, there was $9.2 million left to be split among the five siblings.
Lisa looked into what happened to her father’s foundation and found several facts that led her to become concerned. Celeste reportedly paid herself and her husband more than $300,000 annually from the foundation and $15 million from the foundation was invested in a for-profit real estate investment company managed by Celeste. Of that $15 million, $2.4 million was used to buy a condo in Santa Barbara.
Lisa says the foundation was “shortchanged to support Celeste and her husband’s lifestyle,” according to court documents.
Lisa claims that after her father’s death, Celeste had Lisa and her other siblings removed as directors of the foundation, leaving just Celeste and her husband in charge. She also claims the foundation then dropped any requirement that it benefit disadvantaged youth or children in need. However, Celeste’s attorneys said Ed removed Lisa as a director of the Foundation before he died.
According to court documents, the Edward Keith Foundation distributed $38 million to charities. But Lisa believes that if her father was alive, he wouldn’t have chosen to support some of those charities.
If there is one thing the family can agree on, it’s this: Ed wouldn’t have wanted a battle over his estate.
11 years after James Brown’s death, his estate planning has failed to distribute his wealth efficiently.
James Brown’s estate was to donate millions of dollars to underprivileged children in Georgia and South Carolina. The kids haven’t seen a nickel yet. That’s because more than a dozen lawsuits related to the estate have been filed since Brown died on Christmas Day in 2006, including one filed in January in federal court in California. In the latest suit, nine of Brown’s children and grandchildren are suing the estate’s administrator and his widow, Tommie Rae Hynie. They claim that she made “illegal back-room agreements” with the estate involving copyrights for songs that Brown wrote.
There have been several other suits by people who contest the will. One came from a person who thought she should’ve been appointed as a trustee of the estate and one by people who were trustees of the estate but then were removed. In addition, James Brown II, 16, filed an action to assert his right to be viewed as a son and heir.
James Brown’s will earmarked $2 million to underwrite scholarships for his grandchildren, and it gave his costumes and other household effects to the six children he recognized, a bequest estimated to be worth another $2 million. However, the majority of the estate was to be given to the I Feel Good Trust, which he set up to distribute scholarships for children from South Carolina, where he was born, and Georgia, where he lived for much of his life.
The value of the estate itself is also somewhat of a mystery. Estate administrators say in court papers that it could be worth less than $5 million, but others have given estimates as high as $100 million. Most of the value is from the song copyrights that Brown retained as the songwriter. Brown’s songs are frequently used in commercials, including recent ads by L. L. Bean and Walmart, which can generate a small fortune.
First came the ‘trust protector' as a way to keep generational trust provisions relevant. Enter now the "Integrity Monitor", a carefully defined role in Special Needs Trusts.
An Integrity Monitor should have the investment management industry and forensic expertise needed to prevent any wrongdoing in the administration of the trust. If you don’t have an expert in money management malfeasance dedicated to overseeing the investment program of your trust, it could easily lead to the loss of thousands of dollars that would otherwise have enriched the life of the beneficiary.
It’s common practice for major companies, agencies, and governments to hire “inspector generals” to oversee their operations and prevent the occurrence or reoccurrence of illegal or unethical business practices, as well as to detect fraud. Courts and regulators also often require that such a monitor be placed within a company to prevent future abuses as part of a legal settlement when the company has engaged in past wrongdoing.
You shouldn’t wait until something goes wrong with the administration of a special needs trust to add this important layer of independent protection. The annual cost is fairly insignificant and an integrity monitor who’s doing his or her job will more than pay for that expense.
Who knew that by expressing your preferences or actually making the formal arrangements yourself you’d be giving such a great gift to your family and friends.
If your wishes are documented, it can help eliminate your family’s stress during a highly emotional time. A 2017 study by the National Funeral Directors Association found that while 66% of Americans believe that pre-planning is important, only 21.4% had actually completed the exercise.
You should also think about how you’ll pay for your funeral expenses. Perhaps you can designate funds in your savings or investment account or use life insurance proceeds. By pre-paying, you can lock-in today's funeral prices but be sure your funds are safe. Ask if the salesperson is an agent of your funeral home and how and where your money will be held.
Relatives Don't Let Relatives Live in New Jersey!
Granted, this post offers irrelevant advice to Virginians but hopefully, it can reinforce why you left New Jersey!
The inheritance tax rate on transfers to nieces and nephews is 15% in New Jersey. There is an exception if the bequest is less than $500. In that case, there’s no tax. Therefore, if an aunt or uncle leaves a niece or nephew $500 or more, there will be a tax on the entire amount.
One easy solution to the issue of the inheritance tax is including a provision in the aunt or uncle’s will that all taxes are to be paid from the residue of their estate. This is pretty common. It means that all of the inheritance tax would be paid before any assets are distributed to the beneficiaries. A daughter might receive less than what she might otherwise inherit, but this would have the effect of treating all three beneficiaries the same. The aunt or uncle will need to be certain they have enough assets flowing through their estate to pay the tax. That may require some planning, so speak with a qualified estate planning attorney.
Hey, Mom and Dad: What’s My Inheritance?
When is a good time to discuss your inheritance, taxes, and estate planning with your parents?
Many of us might reply: Never! By the same token, screaming at your sister in a fight over Mom’s Hummel figurines isn’t a pleasant thought either. No matter how you look at it, this conversation will be uncomfortable. This is because it’s based on one ominous certainty: that the people we love are going to die. Reports that research from the Resolution Foundation showed that inheritable wealth for those currently aged 20-35 will double in the next 20 years—hitting an all-time peak in 2035.
Even so, it’s wise to discuss inheritance with your family, while the older generation is still living. This will decrease the risk of post-funeral family battles and establish definition and clarity regarding the parent’s wishes and plans. Yes, it’s awkward, but it’s the smart move. Finances are frequently a forbidden subject in families. Approaching the topic of inheritance in the wrong way can be seen as disrespectful and pushy at best. At its worst, it can ruin relationships.
Hobby Lobby’s Charitable Trust made a charitable contribution of appreciated property; unfortunately, the Tenth Circuit denied their 3.2 million dollar refund.
Hobby Lobby describes itself as the largest privately owned arts-and-crafts retailer in the world, with more than 800 stores and 32,000 employees in 47 states. Hobby Lobby started as a home business by David and Barbara Green in 1970. They created the David and Barbara Green 1993 Dynasty Trust Agreement (DBGDT), with their son Mart named as the trustee. The Trust included a clause that it was intended to "carry out the mission of our family to serve the Lord."
Putting everything into the trust is a great estate planning strategy because future appreciation won’t be included in the Green estates. They might have used an "intentionally defective grantor trust" (IDGT), which would have avoided the income tax complications of fiduciary returns during their lifetimes. However, having the trust as a separate income tax entity has some significant advantages, like being able to distribute income to descendants based on current needs and a generous entity level charitable deduction. But there was an unexpected charitable deduction problem that gave rise to the litigation.
For 2004, DBGDT paid $8.4 million on its original return. There was $57 million included in income in flow through from the trust's 99% interest in Hob-Lob Limited Partnership, which is where most of the stores were. The refund of $3.2 million was based on increasing charitable deductions by $9.1 million to $29.7 million. Contributions by trusts are generally unlimited, but there’s a limitation based on Unrelated Business Taxable Income (UBTI). That wasn’t an issue, rather it was the ability to take deductions at fair market value.
A charitable deduction by an individual will typically be based on the fair market value of the property. In this case, there were three properties, but the bulk of the appreciation was contained in one of them in Virginia, which was donated to the National Christian Foundation. The jury found the property to be worth $28,500,000. The property had been acquired less than a year before, with a basis of less than $11 million.
The IRS argued that charitable deductions for trusts are limited to basis, because the trust's charitable deduction is from gross income, and the inclusion of unrealized appreciation in income is questionable. The district court ruled in favor of the trust, but the Tenth Circuit did not buy in.
The Court of Appeal found the IRS’s arguments unpersuasive and said that the district court misconstrued the statute, relying in part on §642(c)(1)'s use of the phrase “without limitation.” The Supreme Court held that the phrase “without limitation,” as used in the predecessor statute to §642(c)(1), was intended only to make clear that the percentage limits outlined in §170 that apply to charitable deductions made by individuals and corporations do not apply to charitable deductions made by estates and trusts. The Tenth Circuit said that presumably the same holds true for §642(c)(1). Thus, §642(c)(1)'s use of the phrase “without limitation” can’t be construed as a signal by Congress to authorize the extent of the deduction sought by the Trust in this case.
Finally, the district court concluded, in part, that because §170 in certain instances allows individuals to claim a deduction for the fair market value of donated property, it’s okay to interpret §642(c)(1) in the same way. Not so. The language of §170 expressly discusses the fair market value of the donated real property, the court said, whereas §642(c)(1) merely refers to gross income and does not otherwise incorporate §170's discussion of the fair market value of donated real property.
If Congress intended for the concept of “gross income”, in this instance, to extend to unrealized gains on property purchased with gross income, it would’ve said so, the Tenth Circuit held.
If this had been an IDGT, there wouldn’t have been a problem using the fair market value, although there would have been a 30% limitation to deal with, which might have been a problem for the Greens, who are committed to being very philanthropic.
Long-term care (LTC) refers to a broad range of services that assist those with chronic conditions, such as cognitive impairment or a need of help to perform the essential activities of daily life (ADLs), such as dressing, bathing, eating, transferring in/out of a bed or chair, and continence.
A U.S. Department of Health and Human Services report from September 2008 determined that about 70% of people over age 65 will require long-term care (LTC) services at some point, and some 40% will require nursing home care. It's also expensive.
Data from Genworth's 2017 Cost of Care Survey found the national median cost of an assisted living facility is $3,750 per month. A nursing home costs $8,010 per month. The cost is also typically more for those with dementia. According to the American Association for Long-term Care 2008 Sourcebook, more than half of people needing nursing home care require a stay of more than 12 months, with almost 25% staying more than three years. Those in the latter group, can really wreck a family's finances.
In addition, most people don’t know that Medicare only covers a very narrow set of LTC costs. Similarly, Medicaid only covers those with very limited financial resources. For all but the extremely wealthy, long-term care insurance (LTCI) is the best solution to defray the expense of home healthcare, assisted living, or nursing home care. Yes, it can be pricey. Getting coverage when you are relatively young and still in good health helps to keep the costs down.
Some folks are worried they’ll be paying LTCI premiums for many years and die before they ever use the benefit. However, we do the same type of thing for auto or homeowners insurance. Everyone gets this coverage because the financial risk of doing without is too great.
Insurance companies have combination life insurance/LTCI policies, called "hybrids," that address the fear of wasted premiums. With these hybrid policies, provided that the premium is paid for your lifetime, you or your heirs will receive the full policy benefit, as the life insurance death benefit, the LTC benefit, or a combination.
Reviewing LTCI options can be difficult, because of the number of policy variations. Speak with a fee-only financial planner to review your situation before talking to an insurance agent.
It’s not uncommon for conflicts to arise in estate matters between stepparents and stepchildren, as tensions in blended families can carry over into disputes over an inheritance, beneficiary rights to a trust, or estate property.
Some refer to this as “Stepmother Phenomenon” and it starts with the life expectancy gap in the U.S. between men and women. A man reaching 65 today can expect to live, on average, until 84; a woman turning the same age today can expect to live, on average, until 86. Widowed females also far outnumber widowed males (11.2 million vs. 2.9 million). When these widowed females and males have stepchildren, it is obvious that the number of surviving stepmothers heavily outweighs the number of surviving stepfathers.

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