Dr. Seuss Controversy Impact on Estate?

It may surprise you to know exactly how profitable the estate of Dr. Seuss continues to be. Eighty years after the publication of his first children’s book — “And to Think That I Saw It on Mulberry Street,” which is among the works being discontinued — the author’s collection still makes a whole lot of money, says The Wealth Advisor’s recent article entitled “How Dr. Seuss became the second highest-paid dead celebrity.”

Forbes.com’s annual inventory of the highest-paid dead celebrities, Theodor Geisel —AKA “Dr. Seuss”— ranks second, only trailing Michael Jackson. The Seuss empire raked in earnings last year of $33 million. In other words, the Vipper of Vipp, Flummox and Fox in Sox generated a bushel-full of dough in 2020.

Add to this, the fact that because of the news that six of his 60+ books will no longer be published, buyers are scrambling to purchase his back catalog. This means more money for the good doctor, as evidenced by the fact that recently nine of the top 10 spots on Amazon’s best-sellers list were occupied by Dr. Seuss, including classics “The Cat in the Hat,” “One Fish, Two Fish, Red Fish, Blue Fish” and “Oh, the Places You’ll Go!”

The answer to how Dr. Suess’ estate has maintained a $33 million fortune 30 years after his death, is that it’s his wife’s doing. Geisel died in 1991 at the age of 87. Two years after that, Audrey Geisel, founded Dr. Seuss Enterprises to handle licensing and film deals for her husband’s work.

She passed away in 2018, but Dr. Seuss Enterprises is still going strong. It’s shrewdly built the Seuss brand with kids’ merchandise and several television and film projects, notably the animated “Green Eggs and Ham” series, which debuted on Netflix in 2019, starring Michael Douglas, Keegan-Michael Key and Diane Keaton.

Past Seuss projects include Jim Carrey’s “The Grinch” in 2000; Mike Myers’s mediocre “The Cat in the Hat” in 2003, “Horton Hears a Who!” in 2008; not to mention the 2001 Broadway bomb “Seussical.”

Reference: The Wealth Advisor (March 9, 2021) “How Dr. Seuss became the second highest-paid dead celebrity”

 

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Old Sturbridge Village Museum Receives Millions from Will of California Woman

The gift from the estate of Helen A. Titus, known to her friends as “Susie,” is the biggest one-time bequest in the history of the Old Sturbridge Village Museum in Sturbridge, Massachusetts that dates to 1946.

Titus passed away in 2020 at age 81.

NBC 10 Boston’s recent article entitled “Old Sturbridge Village Gets $5M Gift From Estate of Trustee” reports that the native Californian fell in love with the architecture, the people and the history, both at the village and in New England after her visit.

“Susie was incredibly supportive of the museum over the past 20 years, and we are grateful that she made such a generous provision for the Village in her estate planning,” President Jim Donahue told The Telegram & Gazette. “Susie’s legacy and impact will live on for generations to come.”

Officials say that Susie’s gift is unrestricted. That means the Old Sturbridge Village Museum can use it as it sees fit.

The village will soon launch a campaign to raise money to help rebuild roads, HVAC systems and roofs. Donahue said he thinks that Susie’s gift will play a part in that campaign.

The 200-acre Old Sturbridge Village Museum depicts life in a rural New England town of the 1830s.

If you are considering a charitable donation in your last will or trust, speak with an experienced estate planning attorney. You can learn that there are several ways to incorporate charitable giving into your estate plan.

You can donate appreciated stock shares, your RMDs from your retirement accounts, or create a charitable remainder trust. These are only a few of the options you may not know about, that can help charities. Some will even benefit your heirs at the same time.

It is important to understand that all of the options have different tax implications. Your attorney will help you consider the tax impact of your charitable giving.

Playing it smart can result in ultimately increasing the amount that goes to the charity, as well as your family after you pass away.

Reference: NBC 10 Boston (March 7, 2021) “Old Sturbridge Village Gets $5M Gift From Estate of Trustee”

 

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The Stretch IRA Is Diminished but Not Completely Gone

Before the SECURE Act, named beneficiaries who inherited an IRA were able to take distributions over the course of their lifetimes ( Stretch IRA ) . This allowed the IRA to grow over many years, sometimes decades. This option came to an end in 2019 for most heirs, but not for all, says the recent article “Who is Still Eligible for a Stretch IRA?” from Fed Week.

A quick refresher: the SECURE ActSetting Every Community Up for Retirement Enhancement—was passed in December 2019. Its purpose was, ostensibly, to make retirement savings more accessible for less-advantaged people. Among many other things, it extended the time workers could put savings into IRAs and when they needed to start taking Required Minimum Distributions (RMDs).

However, one of the features not welcomed by many, was the change in inherited IRA distributions. Those not eligible for the stretch option must empty the account, no matter its size, within ten years of the death of the original owner. Large IRAs are diminished by the taxes and some individuals are pushed into higher tax brackets as a result.

However, not everyone has lost the ability to use the stretch option, including anyone who inherited an IRA before January 1, 2020. This is who is included in this category:

  • Surviving Spouses.
  • Minor children of the deceased account owner–but only until they reach the age of majority. Once the minor becomes of legal age, he or she must deplete the Strech IRA within ten years. The only exception is for full-time students, which ends at age 26.
  • Disabled individuals. There is a high bar to qualify. The person must meet the total disability definition, which is close to the definition used by Social Security. The person must be unable to engage in any type of employment because of a medically determined or mental impairment that would result in death or to be of chronic duration.
  • Chronically ill persons. This is another challenge for qualifying. The individual must meet the same standards used by insurance companies used to qualify policyowners for long-term care coverage. The person must be certified by a treating physician or other licensed health care practitioner as not able to perform at least two activities of daily living or require substantial supervision, due to a cognitive impairment.
  • Those who are not more than ten years younger than the deceased account owner. That means any beneficiary, not just someone who was related to the account owner.

What was behind this change? Despite the struggles of most Americans to put aside money for their retirement, which is a looming national crisis, there are trillions of dollars sitting in IRA accounts. Where better to find tax revenue, than in these accounts? Yes, this was a major tax grab for the federal coffers.

Reference: Fed Week (March 3, 2021) “Who is Still Eligible for a Stretch IRA?”

 

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How Can I Prep for a Telehealth Appointment?

Caring Bridge’s August 2020 article entitled “5 Tips to Prepare for a Telehealth Appointment” shares five steps to prepare for a virtual doctor’s appointment that will allow you to get the most out of your telehealth experience.

  1. Check your Technology. You need a computer, smartphone, or tablet with a camera for a telehealth appointment. Without a camera, it’s just a phone call, which may not be as effective, since your doctor can’t observe any physical symptoms or your physical expressions during the chat. Get the software and test it out beforehand.
  2. Get Your Medical Info Handy. You may be asked to fill out and return symptom and history forms by the day before your appointment. You should also be sure to write down notes for yourself for the predictable questions you’ll be asked during the visit itself like: When did this start? What makes the pain or issue better or worse? Don’t waste time trying to think through the answers to these questions on the spot.
  3. Be Ready to Do Your Own Physical Exam. Be ready to participate in your own physical exam. You may want to get a good scale, thermometer and blood pressure monitor to conduct your own exam. If you are able, on the day of your call, measure and document your blood pressure, heart rate, temperature, respiratory rate, and weight. You should also wear clothing that will make it easy to do the necessary show and tell during the call.
  4. Make a List of Your Questions. Create this list for the doctor in advance of your telehealth visit and be sure to prioritize them to make sure your main issues are addressed first. If all your questions aren’t covered, ask for a follow up telehealth visit.
  5. Sit in a Comfortable Spot. A typical telehealth visit takes about 20 minutes. Use the bathroom beforehand and have a glass of water handy, so you don’t have to get up. Create a comfortable, quiet space.

Remember, telehealth visits aren’t a replacement for ALL visits. You should be seen in-person if you believe you or a loved one are experiencing a heart attack, stroke, a head injury, trauma, or bleeding.

Telehealth is a terrific way to deliver medical care, provided we know its limitations.

Make the most of your visit by following these tips.

Reference: Caring Bridge (Aug. 18, 2020) “5 Tips to Prepare for a Telehealth Appointment”

 

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The Latest on the Denver Broncos and Late Owner Pat Bowlen ’s Trust

The Denver Post’s recent article entitled “Broncos ask Denver County District Court to confirm right-of-first-refusal is terminated” says that the battle over the Denver Broncos football team is far from over, and what Pat Bowlen intended in his trust may not come to pass.

After Pat Bowlen died in 2019 at age 75 after a long battle with Alzheimer’s, his two oldest daughters placed themselves at risk of being disinherited by challenging their father’s trust. The trust is tasked with choosing the next controlling owner of the Denver Broncos, a pro football franchise valued at more than $2.5 billion.

“This lawsuit is a proactive, necessary step to ensure an efficient transition of ownership, whether the team remains in the Bowlen family or is sold,” long-time Bowlen attorney Dan Reilly said in a statement. “We are confident that the court will find the right of first refusal is no longer enforceable, consistent with Colorado law and the intentions of Pat Bowlen and Edgar Kaiser in their written agreement more than 36 years ago.”

So, if the Broncos’ next controlling owner is Pat Bowlen ’s daughter Brittany, the preferred choice of the trustees, or if the team is sold to an outside buyer, they should be able to move forward without interference from Kaiser’s camp. Kaiser died in January 2012.

Even if this lawsuit drags on, it will not cause a delay in the Arapahoe County District Court battle between Bowlen’s daughters Beth Bowlen Wallace and Amie Klemmer and the trustees who want to invalidate the 2009 trust on the grounds that Pat did not have the capacity to sign his estate-planning documents.

This part of the Broncos ownership soap opera began in May 2020, when an attorney sent the Broncos counsel a letter stating that his client be sent “notice,” if the team named a new controlling owner or was sold. When Kaiser sold 60.8% of the Broncos to Bowlen in 1984, a right of first refusal was included in the agreement. A year later, Bowlen bought the other 39.2% from John Adams and Tim Borden for $20 million.

In 1998, Pat Bowlen offered retired quarterback John Elway the chance to buy 10% of the team for $15 million. However, Kaiser opposed, saying Bowlen had to offer any piece of the Broncos to him before he offered it to another party. The courts ruled in Bowlen’s favor, even though Elway didn’t take him up on the offer. The court said the right of first refusal only applied to the 60.8% ownership interest that Pat purchased from Kaiser. However, Pat’s win didn’t totally eliminate the right of first refusal, which gave Kaiser 14 days to decide whether to buy the team if Bowlen found a buyer.

Reference: Denver Post (Jan. 26, 2021) “Broncos ask Denver County District Court to confirm right-of-first-refusal is terminated”

 

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If My Estate Is the Beneficiary of My IRA , How Is It Taxed?

The named beneficiary of an IRA can have important tax consequences, says nj.com’s recent article entitled “How is tax paid when an estate is the beneficiary of an IRA?”

If an estate is the beneficiary of an IRA, or if there’s no designated beneficiary, the estate is usually designated beneficiary by default. In that case, the IRA must be paid to the estate. As a result, the account owner’s will or the state law (if there was no will and the owner died intestate) would determine who’d inherit the IRA.

An individual retirement account or “IRA” is a tax-advantaged account that people can use to save and invest for retirement.

There are several types of IRAs—Traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs. Each one of these has its own distinct rules regarding eligibility, taxation and withdrawals. However, with any, if you withdraw money from an IRA before age 59½, you’re usually subject to an early-withdrawal penalty of 10%.

A designated beneficiary is an individual who inherits the balance of an individual retirement account (IRA) or after the death of the asset’s owner.

However, if a “non-individual” is the beneficiary of an IRA, the funds must be distributed within five years, if the account owner died before his/her required beginning date for distributions, which was changed to age 72 last year when Congress passed the SECURE Act.

If the owner dies after his/her required beginning date, the account must then be distributed over his/her remaining single life expectancy.

The income tax on these distributions is payable by the estate. A compressed tax bracket is used.

As such, the highest tax rate of 37% is paid on this income when total income of the estate reaches $12,950.

For individuals, the 37% tax bracket isn’t reached until income is above $518,400 or $622,050 if filing as married.

Therefore, you can see why it’s not wise to leave your IRA to your estate. It’s not tax-efficient and generally should be avoided.

Reference: nj.com (Feb. 26, 2021) “How is tax paid when an estate is the beneficiary of an IRA?”

 

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Estate Planning and a Second Marriage

In California, a community property state, a resident can bequeath (leave) 100% of their separate property assets and half of their community property assets. A resident may only bequeath the entirety of a community property asset to someone other than their spouse with their spouse’s consent or acquiescence. This can be extremely important to those in second marriages with prior children.

Wealth Advisor’s recent article entitled “Estate planning for second marriages” asks, first, does the individual’s (the testator) spouse even need support? If they don’t, a testator typically leaves his or her separate property assets directly to his or her own children. However, because the surviving spouse is an heir of the testator, his or her will and/or trust must acknowledge the marriage and say that the spouse is not inheriting. Otherwise, the surviving spouse as heir may be entitled either to a one-half or one-third share in the testator’s separate property, along with all of the couple’s community property assets. The surviving spouse would inherit, if the testator died intestate (with no will) or he or she passed with an outdated will he or she signed before this marriage that left out the current spouse.

If the spouse needs support, consider the assets and family relationships. Determine if the assets are the surviving spouse’s separate property from prior to marriage or from inheritance while married. It is also important to know if the testator’s spouse and children get along and whether it’s possible for the beneficiaries to inherit separate assets. If the testator’s surviving spouse and children aren’t on good terms and/or are close in age, and if it’s possible for separate assets to go to each party, perhaps they should inherit separate assets outright and part company. If not, it can get heated and complicated quickly. For example, the testator’s house could be left to his or her children and a retirement plan goes to the testator’s spouse.

If that type of set-up doesn’t work, a testator might consider making the spouse a lifetime beneficiary of a trust that owns some or all of an individual’s assets. A trust requires careful drafting, so work with an experienced estate planning attorney.

Next, determine if the children need support, and if so, what kind of support, such as Supplemental Security Income. Also think about whether the children can manage an outright inheritance or if a special needs or a support trust is required.

This just scratches the surface of this complex topic. Talk to an experienced estate planning attorney about your specific situation.

Reference: Wealth Advisor (Feb. 23, 2021) “Estate planning for second marriages”

 

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Aretha Franklin ’s Estate and IRS Resolve Tax Debt

The IRS said that the singer Aretha Franklin ‘s estate owed more than $7.8 million in unpaid income taxes, plus interest, plus penalties, from the last seven years of her life. There’s no lack of drama in the Queen of Soul’s estate mess, but the IRS has been the most relentless creditor, as reported in the article “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt” from the Detroit Free Press.

This is actually a big breakthrough for Franklin’s four sons. The agreement will not only speed up the payment of the remaining tax burden, but it will also give the sons some money from their mother’s fortune. They could not receive any money from the estate, until this part of the IRS negotiations were resolved.

A petition was filed in Oakland County Probate Court on February 19 by the estate, which is why the details are public. The proposed arrangement includes an immediate $800,000 payment to the IRS, although the estate still maintains that the overall balance owned is not what the IRS claims.

Since Franklin’s death in 2018, the estate has been paying on the tax debt and the interest, while appealing the agency’s claimed total. As of December 2020, that balance was $4.75 million.

The new filing says that the final IRS bill will be determined, either by an agreement being reached or litigation in court.

This deal also maps out how Aretha Franklin’s posthumous income will be allocated, until the tax debt is settled. The document is backdated to January 1 of this year, and includes new income from song royalties, licensing agreements and the other money streams that are part of celebrity estates.

The agreement says that 45% of quarterly revenue will go towards the existing IRS balance, and another 40% will go into an escrow account to handle future taxes on the newly generated income, with 14% used to manage the estate. There will be immediate $50,000 payments to each of the four sons, and other quarterly cash payments may be authorized in the future.

No less than ten attorneys were involved, representing the sons. The agreement was submitted by Reginald Turner, a Detroit attorney who is also the incoming president of the American Bar Association. He was appointed last year as a temporary personal representative of the Franklin estate.

The family is waiting for a judge to approve the order.

Aretha Franklin died in 2018, after a long battle with pancreatic cancer. As her estate proceedings have continued, her career and her life have continued to stay in the public’s eye with high-profile musical celebrations, television commercials and film projects.

All of the posthumous work generates income, all of which will continue to be taxed. An estate plan could have saved the four sons from so much of the publicity, emotional stress, legal fees and taxes.

Reference: Detroit Free Press (March 1, 2021) “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt”

 

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What Is in Rush Limbaugh ’s Estate?

A year after announcing he had terminal cancer, Rush Limbaugh is dead. It also looks like he left a lot of money behind.

Wealth Advisor’s recent article entitled, “Rush Limbaugh’s Secret Estate Plan” reports that some estimates put his net worth above $600 million, which may be only his career earnings and not a real net figure. However, it gives you an idea about the amount of cash flowing into his operation over the years.

Rush Limbaugh’s “Southern Command” in Palm Beach alone can be worth up $50 million to his estate.

However, unless he made a whole lot more effort to look out for his posterity than anyone but the tabloids suggests his widow is in charge now. They didn’t have children, so she inherits it all.

Limbaugh’s attorneys structured his plans, but he hated taxes and protected his privacy. However, that privacy wasn’t perfect: the commercial rights to his show and auxiliary businesses were held in an LLC named after his widow Kathryn and himself. Kathryn Adams Rush Hudson Limbaugh = KARHL. KARHL Holdings LLC was formed in 2010, when they got married. The business has two employees, Kathryn and Rush. It shares an address with a charitable foundation the couple set up in their names.

The foundation is fairly modest by billionaire standards, but a few million dollars a year have moved in and then out to Rush-friendly organizations. Perhaps it will inherit his stake in KARHL and start making huge grants. No matter what, Kathryn will make those decisions. Now that Rush is dead, she and her aged mother are the only two officers of record, and if she inherits his interest in the LLC, the benefit goes to her.

Some of the tabloids reported that Rush hated Kathryn toward the end and tried to cut her out of his will. However, realistically, if he hated her, he would have liquidated the holding company and wound down the foundation. That didn’t happen.

With his diagnosis, Rush Limbaugh had a year to consider his mortality. There may have been a prenuptial contract, but her name is on all the organizations with his, and these organizations were set up after the marriage.

It looks like he intended for Kathryn to assume control of his assets.

The big question is who inherits his desk and his microphone?

Reference: Wealth Advisor (Feb. 18, 2021) “Rush Limbaugh’s Secret Estate Plan”

 

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Estate Planning for a Blended Family

When you do your estate planning, you should understand some of the issues that can arise for a blended family . The Williamson Herald  in Franklin, TN recently published an article entitled “Blended families can avoid estate planning challenges.” According to the article, you can rest easy knowing that you’re not alone. Over 50% of married or cohabiting couples with at least one living parent, or parent-in-law, and at least one adult child, have a “step-kin” relationship. That makes for a lot of estate-planning issues. However, this doesn’t have to be overwhelming. Let’s look at some ideas that may help:

Try to be fair but be flexible. It is not always easy to be as equitable as you would like in your estate plans, and often a person can feel they have been treated unfairly. In a blended family, these problems can be even worse. Remember that fair isn’t always equal, and equal is not always fair. When dividing your assets, you will need to make some decisions after carefully evaluating the needs of all your family members. There’s no guarantee that all of your family will be satisfied with your determinations, but you’ll have done your best.

Be clear in your communications. It’s best to have no surprises in estate planning, and that’s especially true in a blended family. Take the time to involve other family members and make your wishes and goals known. Just give them an overall outline.

Ask an experienced estate planning attorney about a revocable living trust. Everyone’s circumstances are unique, but many blended families discover that a simple will isn’t enough estate planning. Therefore, you may want to create a revocable living trust. This can provide you with more control than a will, when it comes to carrying out your wishes. Moreover, because you’ve transferred your assets to the trust, you’re no longer technically the owner of these assets. As such, the probate court isn’t involved, and your estate can likely avoid the time-consuming, expensive, and public process of probate.

Find the right trustee. If you do create up a living trust, you also must designate a trustee. That’s a person who will manages the trust assets. Married couples frequently serve as co-trustees, but this can cause tensions and disagreements. As another option, you can hire a professional trustee. This may be a person or an entity with the time, experience, and neutrality to make appropriate decisions and who can bring new ideas to the process.

Estate planning can be complex with a blended family, so read up on these issues and speak to an experienced estate planning attorney.

Reference: Williamson Herald (Franklin, TN) (Feb. 18, 2021) “Blended families can avoid estate planning challenges”

 

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