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Category Archives for Asset Protection

The Perils of Promises…Marlon Brando’s Story

Legendary Oscar-winning actor Marlon Brando left the bulk of his estate (worth approximately $26 million) to his producer and other associates.

Brando created a valid last will and testament. However, he did not include his longtime housekeeper Angela Borlaza – who later sued alleging that Brando promised that she would inherit a home from him when he died.

A Promise Is A Promise…

While a promise is a promise, not all promises are legally equal.  In the courtroom, an oral promise is usually not treated the same as a written promise. In this case, Brando either never promised Borlaza anything or promised to give her the home, but never got around to putting it in his will (or in a written contract).  Borlaza claimed a promise about a home was made and sued his estate for $627,000.

However, the alleged promise was oral. The law generally favors written evidence when it comes to estate planning matters, so the court examined only what was written in Brando’s will on the assumption that he made all of his wishes known. Borlaza eventually settled the matter for $125,000, but she was lucky to get even that.

Oral promises about inheritances are typically not legally valid and usually only introduce confusion and uncertainty about formal estate planning documents (such as a will or trust). Courts can – and reasonably must – rely upon the documents, like a will, when probating an estate. Although you might be trying to save money or time by promising inheritances to family members, friends, or others, but you aren’t doing anyone a favor. Luckily, there is a way to make your promises and wishes legally valid.

Put It in Writing – The Key to Making Promises Work

Make sure that your loved ones receive everything you promised them by putting your wishes in writing through a last will and testament, a trust, or other estate planning tool. Don’t rest on your laurels. It is imperative to update your estate planning documents when any significant or life changing events occur such as:

  • a new oral promise you made to someone
  • adoption
  • birth
  • circumstance changes (change in health, wealth, or state of residence)
  • divorce
  • income changes
  • marriage
  • divorce
  • re-marriage

Need help putting your wishes in writing? You’re in the right place. Contact our office today and let us help you decide what type of estate plan might work best for your situation. It’s easier than you think and will give you the peace of mind that your loved ones aren’t forgotten.

Escape From a Bad Trust: 5 Strong Reasons to Decant Your Trust

When a bottle of wine is decanted, it’s poured from one container into another. When a trust is decanted, trust assets are poured from an old trust into a new trust with more favorable terms.

Why Should a Trust Be Decanted?

Trusts are decanted to escape from a bad trust and provide beneficiaries with more favorable trust provisions and benefits.

Here are 5 strong reasons to decant your trust:

1. To clarify ambiguities or drafting errors in the trust agreement. As trust beneficiaries die and younger generations become the new heirs, vague provisions or mistakes in the original trust agreement may become apparent. Decanting can be used to correct these problems.

2. To provide for a special needs beneficiary. A trust that is not tailored to provide for a special needs beneficiary will cause the beneficiary to lose government benefits. Decanting can be used to turn a support trust into a supplemental needs trust, thereby supplementing, but not supplanting, what government benefits cover.

3. To protect trust assets from the beneficiary’s creditors. A trust that is not designed to protect the trust assets from being snatched by beneficiary’s creditors can be rapidly depleted if the beneficiary is sued, gets divorced, goes bankrupt, succumbs to business failure, or suffers a health crisis. Decanting can be used to convert a support trust into a full discretionary trust that beneficiary’s creditors will not be able to reach.

4. To merge similar trusts into a single trust or create separate trusts from a single trust. An individual may be the beneficiary of multiple trusts with similar terms. Decanting can be used to combine trusts into one trust thereby reducing administrative costs and oversight responsibilities. And, on the other hand, a single trust that has multiple beneficiaries with differing needs can be decanted into separate trusts tailored to each individual beneficiary.

5. To change the governing law or situs to a different state. Changes in state and federal laws can adversely affect the administration and taxation of a multi-generational trust. Decanting can be used to take a trust, governed by laws that have become unfavorable, and convert it into a trust that is governed by different and more advantageous laws.

You’re Not Stuck With Your Trust: We’ll Help You Escape

We include trust decanting provisions in the trusts we create. Including trust decanting provisions in an irrevocable trust agreement or a revocable trust agreement that will become irrevocable at some time in the future is critical to the success and longevity of the trust. Such provisions will help to ensure that the trust agreement has the flexibility necessary to avoid court intervention to fix a trust that no longer makes practical or economic sense.

You and your loved ones don’t need to muddle through with outdated and inappropriate trust provisions. If you are interested in adding trust decanting provisions to your trust or would like to have the decanting provisions of your trust reviewed, please call our office at 480-776-6055.

Tony Soprano’s Estate Planning Mistake and How You Can Avoid It

Actor and producer, James Gandolfini was famously known as the likeable mafia man Tony Soprano on the long running cable television series, The Sopranos. On the show, family meant everything. Well, sort of, anyway. In real life, Gandolfini’s family really did mean everything and he had the best intentions when it came to providing for them.

However, he made a classic mistake by failing to take advantage of tax incentives, legal protections and opportunities. The Internal Revenue Service (IRS) ended up taking half of his estate. Don’t fall into the same trap.

An Estate Planning Attorney Could Have Saved Gandolfini Millions

When James Gandolfini died suddenly in 2013, his estate was an estimated $70 million. In addition to leaving $1.6 million to friends and relatives and bequeathing properties and land in Italy to his kids, his will was fairly straight forward. He provided:

  • 30% to one sister
  • 30% to another sister
  • 20% to his wife
  • 20% to his daughter
  • Separate trusts for his wife and his 13-year-old son

Although he was very generous to his two sisters, his plan failed to take advantage of some key tax incentives and opportunities. Shockingly, the IRS ended up taking over half of his total net worth. An estate planning attorney could have saved millions of dollars that would have gone to his family instead of Uncle Sam.

3 Ways an Estate Planning Attorney Can Help You

It’s clear that anyone with an estate value equal to that of Gandolfini should have a knowledgeable estate planning attorney. However, you need a good estate planning attorney, too. Here are three ways an estate planning attorney can help you:

  1. Assess your current financial situation. Many people don’t fully understand what they have – or how to valuate it. A good planner always starts by reviewing your tax returns, income sources, liquid and illiquid assets, wills, insurance policies, and estate and retirement planning documents;
  1. Identify your goals. Identifying your goals and taking your current needs into account provides the foundation for a solid estate plan structure;
  1. Develop a plan. Developing an estate plan is where we can really make a difference – especially in:
  • Explaining how estate planning documents work
  • Weighing the pros and cons of each of those documents
  • Identifying tax issues and taking advantage of incentives and opportunities
  • Creating a “network” with other professionals such as CPAs, insurance professionals, and financial advisors

Best of all, an estate planning attorney can keep you on track by periodically reviewing your estate plan, advising you when to update your estate planning documents, and steer you in the right direction to avoid having your assets taken by the IRS. Call us today at 480-776-6055 to learn more!

 

Michael Jackson’s Estate Liable For $200M in Taxes Due to Unfunded Trust

Michael Jackson, the “King of Pop,” had always been a controversial superstar. Over the years, he became the father of three children, Prince Michael Jackson II, Paris-Michael Katherine Jackson, and Michael Joseph Jackson, Jr.

While Jackson created a trust to care for his children and other family and friends, he never actually funded it. The result? $200 million in estate taxes and years of court battles.

3 Essential Purposes of a Trust

A trust is a fiduciary arrangement which allows a third party (known as a trustee) to hold assets on behalf of beneficiaries. There are basically three essential purposes of a trust:

  • Avoiding probate. Unlike wills, funded trusts are not subject to probate as ownership is transferred outside of the grantor’s will. However, unfunded, or underfunded, trusts will go through probate.
  • Maintaining privacy. Probate is a matter of public record. However, since trusts aren’t subject to probate, privacy is maintained.
  • Mitigating the chance of litigation. Since trusts are not subject to the probate process, they are not a matter of public record. Therefore, fewer people know estate plan details – mitigating the chance of litigation.
  • Providing asset protection. Assets passed to loved ones in trust can be drafted to legal protection so assets cannot be seized by predators and creditors.

While these are arguably the most essential purposes, trusts can also affect what you pay in estate taxes as well.

Sadly, Jackson could not take advantage of any of these benefits. Although he created a “pour-over” will, which was intended to put his assets into a trust after his death, the estate still had to be probated.

The probate, along with naming his attorney and a music executive as his executers (instead of family members), fueled a fire that could have been avoided.  With nearly $600 million at stake, it’s no surprise that everyone wanted a piece of the pie.

Don’t Burden Your Family!

Losing a loved one is difficult enough without having to endure legal battles afterward.  In Jackson’s situation, a proper estate plan could have reduced litigation, legal fees, and estate taxes.  His situation, although it deals with hundreds of millions of dollars, applies to anyone who has assets worth protecting.  In other words, it likely applies to everyone!

There are many types of trusts and estate planning vehicles available to ensure that you don’t burden your family after your death.  We’ll show you how to best provide for and protect your loved ones by creating the type of estate plan which is tailored to fit your needs.

 Revocable Trust vs. Irrevocable Trust: Which Is Best for You?

Trusts  allow you to avoid probate, minimize taxes, provide organization, maintain control, and provide for yourself and your heirs. In its most simple terms, a trust is a book of instructions wherein you tell your people what to do, when.

While there are many types of trusts, the major distinction between trusts is whether they are revocable or irrevocable. Let’s take a look at both so you’ll have the information you need:

Revocable Trusts. Revocable trusts are also known as “living trusts” because they benefit you during your lifetime and you can alter, change, modify, or revoke them if your circumstances or goals change.

  • You stay in control of your revocable trust. You can transfer property into a trust and take it out, serve as the trustee, and be the beneficiary. You have full control. Most of our clients like that.
  • You select successor trustees to manage the trust if you become incapacitated and when you die. Most of our clients like that they, not the courts, select who’s in charge when they need help.
  • Your trust assets avoid probate. This makes it difficult for creditors to access assets since they must petition a court for an order to enable the creditor to get to the assets held in the trust. Most of our clients want to protect their beneficiaries’ inheritances.

Irrevocable Trusts: When irrevocable trusts are used, assets are transferred out of the trustmaker’s estate into the name of the trust.  You, as the trustmaker, cannot alter, change, modify, or revoke this trust after execution. It’s irrevocable and you usually can’t be in control.

  • Irrevocable trust assets have increased asset protection and are kept out of the reach of creditors.
  • Taxes are often reduced because, in most cases, irrevocable trust assets are no longer part of your estate.
  • Trust protectors can modify your trust if your goals become frustrated.

As experienced estate planning attorneys, we can help you figure out whether a revocable or irrevocable trust is a good fit for you and your loved ones. Call us at 480-776-6055 to set up a meeting!

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