Why Would I Need a Post-Nup?

Vigour Times’ recent article entitled “Here’s Why Married Couples Might Want To Sign A Postnuptial Agreement” looks at the situations that might prompt a couple to prepare a postnuptial agreement.

For example, married couples may need to adjust a pre-nup they signed before they were married. They want to make certain the new terms are based on the things that have occurred since that time.

Changes in marital dynamics can trigger a change in the terms of a pre-nup. For instance, couples may not have thought that one spouse would begin to earn a lot more than the other or that, as the marriage endured over time, greater trust grew between the partners.

A post-nup may also come into play when a couple is thinking about divorce but still trying to work things out. According to the Centers for Disease Control and Prevention, over 10 years as many as 43% of first marriages can fail.

Because divorcing sooner rather than later could be more advantageous to one of the spouses, their agreement may say the marriage ended as of the date of the post-nup for purposes of calculating alimony and property division, should efforts to repair a marriage be unsuccessful.

There are circumstances when a post-nup is needed to work around state laws to allow one spouse to leave the other one less than what is required by state law.

Many people don’t know that once they’re married, state law usually gives their spouse a minimum percentage of the estate, even if the deceased spouse tried to leave it to someone else. One example of this is where a person in a second marriage wants to leave all their assets to children from a previous marriage.

Ask an experienced estate planning attorney to make sure the plan is consistent with the estate documents, especially as to trusts.

There also may be external forces, such as a future change in wealth that trigger a post-nup. For instance, in the event of a potential inheritance, for example, an heir — or the relatives leaving the assets — may insist on a post-nup, so the wealth will stay on their side of the family and not be included in any possible divorce negotiations.

Reference: Vigour Times (Nov. 27, 2022) “Here’s Why Married Couples Might Want To Sign A Postnuptial Agreement”


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Women may Be Sister of Charles Manson and Wants His Estate

Attorneys Christopher B. Johnson and Colin T. Greene told Los Angeles Superior Court Judge William Barry that their client, Nancy Claassen of Spokane, Washington, claims to be the sister of the late Charles Manson . They said that she will challenge the purported Manson will submitted by the other estate administrator contestant, longtime Manson pen pal Michael Channels.

KFI AM’s recent article titled “Woman Says She’s Manson’s Sister, Wants to Administer Estate, Contest Will” reports that Channels’ attorney, David Baldwin, said the will is currently at the Kern County Superior Court. Channels claims the will was written in 2002, was filed in Kern County in November 2017 and names him as the executor of Manson’s estate. However, Jason Freeman, a 45-year-old Florida man who says he’s Manson’s grandson, has filed a competing petition asking to be appointed the estate’s permanent administrator.

Charles Manson Jr. committed suicide in June 1993, and his father died at age 83 on in November 2017 of heart failure caused by colon cancer that had spread to other parts of his body.

When asked outside the courtroom after the hearing why Claassen waited so long to enter the case, Johnson said he and Greene were just hired and were trying to update the court on the wishes of their client, who Johnson said has an interest in the case as Manson’s nearest living relative. The attorneys said they hoped everyone claiming a relationship to Manson will be willing to submit to DNA testing.

Freeman won a big court victory when a Kern County commissioner ruled in 2018 that he was entitled to Manson’s remains, which were later cremated. Freeman and the temporary special administrator over Manson’s estate say the 2002 Charles Manson will is a forgery. Claassen also is challenging the will’s authenticity.

Manson was convicted of seven counts of first-degree murder and one count of conspiracy to commit murder in the deaths of Tate, the La Biancas and four other people at the Tate home in 1969.

Manson and followers Charles “Tex” Watson, Leslie Van Houten, Patricia Krenwinkel and the late Susan Atkins were all convicted and sentenced to prison in 1971. Manson also was convicted in December of that year of first-degree murder for the July 25, 1969 death of Gary Hinman and the August 1969 death of Donald Shea. Manson and the others originally were sentenced to death, but a 1972 state supreme court decision commuted all capital sentences in California to life in prison.

Reference: KFI AM (April 27, 2021) “Woman Says She’s Manson’s Sister, Wants to Administer Estate, Contest Will”


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What Is the Purpose of an Estate Plan?

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.

The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”


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How Digital Assets Figure into Estate Planning

Digital Assets – Yahoo Finance’s recent article entitled “Who inherits your selfies when you die?” laments that the internet ruins everything, and a simple death is no exception.

If asked to close out a family member’s estate, it now includes social media accounts, cloud storage and frequent flyer miles.

Digital assets are files created electronically. They exist as data held on a digital storage drive or computer hard drive.

However, items made by hand can become a digital asset, such as a painting or handwritten notes become digital assets, if they’re scanned and uploaded to a computer.

It can also be images, photos, videos, files containing text, spreadsheets, or slide decks.

The first time anyone has to deal with the laws and rules about incapacity and death, is when a loved one becomes ill or has passed away. It’s an emotionally tough time, and they’re likely to be grieving when trying to make important decisions on a project they know nothing about.

Know that we no longer solely have a paper trail to our lives. Think about the number of digital accounts you log into to manage your household and personal finances.

It’s significant, and an executor’s role is now dependent on knowing and finding both our physical and digital lives.

Your executor won’t know what you have, unless you tell them in advance.

Your home office is paperless and behind a locked screen. We all have wishes and preferences about those assets, and these wishes and preferences need to be documented and shared.

Today’s home office is a digital home office. We will soon have the same spectrum of choices in estate planning for our digital assets, as we have for our physical ones.

However, right now, there aren’t a lot of pre-planning options.

You should create a list of your digital assets and passwords, so others you trust will know where to find them. Back up data should be stored in the cloud to a local computer or storage device.

Ask an experienced estate planning attorney about how to organize and address your digital assets in your estate plan.

Reference: Yahoo Finance (April 16, 2021) “Who inherits your selfies when you die?”


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Why Won’t IRS and Social Security Like My Power of Attorney?

The IRS and the Social Security Administration (SSA) don’t recognize traditional powers of attorneys (POAs). Forbes’s recent article entitled “Two Times When Your Power of Attorney Isn’t Going to Work” explains why.

The IRS says that you must use Form 2848, “Power of Attorney and Declaration of Representative” to allow anyone to act on your behalf. This form requires you to state the tax matters and years for which the agent is authorized to act. That’s different from a traditional POA for financial matters, which usually has blanket statements allowing the agent to take any or a broad range of actions on your behalf in certain matters.

A married couple that files joint tax returns must also have each spouse separately complete and sign a form. There is no joint form.

Technically, the IRS might accept other Power of Attorney as the instructions to Form 2848 indicate this. However, the POA must meet the requirements of Form 2848 to be accepted as a substitute. That can be a tall order.

The Social Security Administration is similar. It says on its web site that it doesn’t recognize a Power of Attorney. When you need someone to manage your Social Security benefits, you contact the SSA and make an advance designation of a representative payee.

A 2018 law created this feature that lets you name one or more individuals to manage your Social Security benefits. The Social Security Administration must usually work with the named individual or individuals. You can rank up to three people as advance designees. Therefore, if the first one isn’t available or is unable to perform the role, the SSA will move to the next person on your list.

Someone who already is receiving Social Security benefits can designate an advance designee at any point, and a person claiming benefits for the first time can name the designee during the claiming process. The designation can be made using your “my Social Security” account on the Social Security web site or by contacting the Social Security Administration by phone (800-772-1213) or at the local field office. A designee can also be named through the mail by using Form SSA-4547 – Advance Designation of Representative Payee.

Representative payees generally must be individuals, but it also can be a social service agency, nursing home, or one of a number of other organizations recognized by the SSA to serve as payees. If you don’t name any representatives, the SSA will name a representative payee for you, if it decides you need help managing your money. A relative or friend can apply to be representative payees, or the SSA can make the selection.

Reference: Forbes (Jan. 28, 2021) “Two Times When Your Power Of Attorney Isn’t Going To Work”


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Does My Family have to Pay My Credit Card Debt when I Die?

Market Realist’s recent article entitled “What Happens to Credit Card Debt When You Die?” says that the short answer is that the deceased’s estate pays off any credit cards they have left behind. Credit card  and other debts can pass on to others in some cases, which is a big reason why estate planning is so important.

When a person dies, their assets are frozen until his or her will is verified, their obligations are settled and their beneficiaries are identified in the probate process.

Then, the state will order that the deceased’s remaining assets (such as leftover cash and property with cash value) be used to pay off the credit card. However, retirement accounts, eligible brokerage accounts, and life insurance payouts are usually protected from this debt reconciliation. Once the debts are settled, the beneficiaries get their inheritance.

The obligations are paid off until they’re all settled, or until the estate runs out of money. Unsecured debts, like credit cards, are usually paid off after secured debts, administrative fees and attorney fees.

There are some circumstances in which another person is legally obligated to pay the deceased’s debt.

Typically, no one is legally required to pay off a deceased individual’s debts, but there are some exceptions:

  • Co-signers must pay loans
  • Joint account holders must pay credit card accounts
  • Spouses have to pay particular types of debt in some states; and
  • Executors of an estate must pay outstanding bills out of property jointly owned by the surviving and deceased spouses in some states.

In addition, surviving spouses may be required to use community property to pay their deceased spouse’s debt in certain states.

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska would also be included in this list, if a special agreement is in place.

If there was no joint account, co-signer, or other exception, only the estate of the deceased person owes.

Reference: Market Realist (Feb. 11, 2021) “What Happens to Credit Card Debt When You Die?”


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How Does Home Ownership Transfer after a Parent Dies?

In most cases, the home is owned by a couple as “joint tenants with rights of survivorship” or as “tenants by the entirety.” The latter is less common. The first thing you’ll need to know about selling a home after the death of a parent, is how your parents held title, or owned, the home, begins the recent article “Home ownership after the death of a spouse” from nwi.com.

Tenancy by the entirety is a form of ownership available only to married people in a limited number of states and offers several advantages to the owners. It creates an ownership interest where the spouses own property jointly and not as individuals. It also creates the rights of survivorship, so that the surviving spouse owns the property by law when the first spouse dies.

Joint tenancy with rights of survivorship is similar to tenants by the entirety, in that they both convey rights of survivorship. However, joint tenancy does not treat the owners as a single unit. If you own entireties property with a spouse, you may not transfer your interest without your spouse’s permission because you own it as a unit.

In joint tenants, if one of the tenants want to transfer their interest in the property, he or she may do so at any time—and do not need the permission of the other tenant. This has led to some sticky situations, which is why tenants by the entirety is preferred in many situations.

If your parents own their home as tenants by the entireties or as joint tenants with rights of survivorship, the surviving spouse owns the home as a matter of law, and legally, ownership begins at the moment that first spouse dies.

Different states record this change of ownership differently, so you’ll need to speak with an estate planning attorney in your community (or the state where your parents lived, if it was different than where you live).

To notify the recorder’s office of the death, some state laws require the submission of a surviving spouse affidavit, which puts the recorder and the community on notice that one of the owners has died and the survivor now owns the home individually. Here again, an estate planning attorney will know the laws that apply in your situation.

There was a time when people recorded a death certificate, but this does not occur often. The affidavit makes a number of recitals that are important, and the recorded document proves the change of title.

In most cases, there is no need for a new deed, since the surviving spouse owns the property at the time of death, and the affidavit itself demonstrates proof of the transfer of title in lieu of a deed.

Reference: nwi.com (March 14, 2021) “Home ownership after the death of a spouse”


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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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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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Is Cardiovascular Disease in Mid-Life Linked to Alzheimer’s Disease as We Age?

A new study published in the Journal of the American College of Cardiology suggests that cardiovascular disease in mid-life is linked to Alzheimer’s Disease decline in senior years.

New Atlas’ recent article entitled “Poor mid-life heart health linked to dementia in later years” reports that the research found subjects in their 50s with mild hypertension displayed evidence of impaired brain metabolism in areas associated with Alzheimer’s and dementia.  The research was led by a team of Spanish researchers.

The article explains that atherosclerosis is a common cause of cardiovascular disease, involving the slow build-up of cholesterol and fats on artery walls. It can remain asymptomatic for a long time, progressively narrowing a person’s arteries over the course of years, before any clinical signs show up. Atherosclerosis is, therefore, similar to Alzheimer’s disease and other neurodegenerative conditions, where it takes many years before dementia-like symptoms appear.

Scientists have seen a consistent association between heart disease and cognitive decline in senior citizens for several years. However, the new study is the first to consider the earliest stages of both conditions. Juan Domingo Gispert, joint first author on the study, said his goal is to better understand how these two seemingly disparate conditions may be connected.

“…there is abundant evidence linking cardiovascular risk factors and Alzheimer’s disease,” says Gispert. “If we can gain a more precise understanding of this relationship at asymptomatic disease stages, we will be in a position of design new strategies to prevent Alzheimer’s, matching the success of current strategies to prevent cardiovascular disease.”

The study reviewed PET scans from 547 subjects. The average age of subjects in the cohort was 50, and everyone in the group was diagnosed with subclinical signs of atherosclerosis.

“We found that a higher cardiovascular risk in apparently healthy middle-aged individuals was associated with lower brain metabolism in parietotemporal regions involved in spatial and semantic memory and various types of learning,” explains Marta Cortés Canteli, joint first author on the study.

These specific brain areas that exhibit lower levels of metabolism are the same ones known to be impacted by neurodegenerative diseases, such as Alzheimer’s. A lead author on the study, Valentin Fuster, believes that a possible causal link exists between this early stage of heart disease and dementia in later life.

“We think that cardiovascular risk factors the affect the large vessels carrying blood from the heart to the brain also affect the small vessels in the brain,” says Fuster.

Critics note that the new study doesn’t provide any longitudinal data—it merely suggests is a link between subclinical atherosclerosis and impaired metabolism in certain brain areas. As a result, it’s impossible at this point to determine if this association plays a part in any subsequent onset of Alzheimer’s disease. Cortés Canteli suggests this particular question is one they hope to answer, but it will take years of work.

“The next step will be to determine whether individuals with subclinical atherosclerosis in the carotid arteries and low brain metabolism at the age of 50 go on to experience cognitive decline 10 years later,” says Cortés Canteli.

“…although everybody knows about the importance of caring for ourselves and controlling cardiovascular risk factors in order to avoid a heart attack, the association of these same risk factors with cognitive decline may increase awareness of the need to acquire healthy habits from the earliest stages of life,” Fuster noted.

Reference: New Atlas (Feb. 15, 2021) “Poor mid-life heart health linked to dementia in later years”


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