Does a Will Supersede a Beneficiary Form ?

It’s a simple question: do you know who your retirement account beneficiaries are? These tax-deferred accounts are complex, with significant tax implications for heirs that become more challenging if key information is missing on beneficiary forms, which is often the case. According to this recent article from The Street, “Secure your IRA—Review Your Beneficiary Forms Now,” the SECURE Act was the biggest retirement law change in decades. As a result, there has never been a more important time to review beneficiary forms.

Start by requesting a copy of your beneficiary designation forms from all of the institutions that hold your IRAs, 401(k)s, 403(b)s, and any tax deferred savings accounts to check for errors and accuracy. Most people fill these forms out when the accounts are opened and never give them a second thought.

The courts see many cases where family dynamics changed, but beneficiary forms were never updated. The cost and stress of estranged or divorced spouses receiving a lifetime of retirement savings because no one thought to update the form cannot be overstated.

It is pretty easy for most of us to locate our wills, trusts and life insurance policies, but we tend not to keep copies of our retirement account beneficiary forms. This makes no sense, as these are the accounts where most people have saved the bulk of their wealth.

Account owners are generally unaware of how important the beneficiary document is, or the consequences of the information being out of date. These documents are more powerful than the will.

These assets pass outside of the will. No matter what your will says, the assets in the accounts pass to whoever is named on the beneficiary form.

If there is no beneficiary named on the form, the asset will likely be paid to your estate. When this happens, the account must be fully distributed within five years of the account owner’s death, if they died before their required beginning date of distributions. If there are no named beneficiaries and the account owner dies on or after the required beginning date, there may be less of a negative impact. An estate planning attorney will be able to help you and your heirs plan for this event.

The SECURE Act made this harder for anyone who dies after 2019. For retirement accounts inherited after December 31, 2019, there are classes of beneficiaries and each has their own distribution rules.

Many trusts named as beneficiaries of IRAs/retirement plans no longer work as planned. If your estate plan named a trust as a beneficiary for a tax-deferred account, speak with your estate planning attorney to make any necessary changes.

The SECURE Act eliminated the use of the “Stretch” IRA for most non-spouse beneficiaries. This means that most heirs will need to empty any inherited accounts within ten years of the death of the owner, rather than stretch the distributions over their own lifetimes. Failure to do so could lead to a 50% penalty of the amount not distributed plus taxes.

Your estate planning attorney may be able to create alternatives to the stretch IRA, but the first step to address this issue is to obtain your beneficiary forms. Once you have them in hand, you can make the necessary changes and begin to plan for the optimal distribution of your assets.

Reference: The Street (Dec. 28, 2020) “Secure your IRA—Review Your Beneficiary Forms Now”

 

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Mortgage Surplus Funds – How to get the money after Foreclosure?

If you had your home foreclosed and there was money left over, how do you get the mortgage surplus funds ?

First let me state, I am an attorney in New York. These rules apply to New York State only. If the property is in another state, you need to speak with an attorney from that state.

Lets say there was a mortgage on the property for $100,00. Because of family fighting or loss of a job, that property goes into foreclosure. The house is sold at auction for $300,000. The mortgagor bank gets its $100,000 but who keeps the extra $200,000. The answer is the former owner. However, so many owners leave that money with the state because they don’t know what to do.

  1. The court appointed referee files a surplus money report stating how much mortgage surplus funds are left over. Usually that amount is zero but if there is money left over, this one page form tells you how much.
  2. Those mortgage surplus funds are then deposited with the County Commissioner of Finance or equivalent.
  3. Any party who is still owed money has to now file a Notice of Claim under RPA Section 1361 with the County Clerk. This includes the former owner.
  4. Three months after step 3, you must then file a motion with the court to give you the mortgage surplus funds. The Court will appoint a referee (often the original one) to oversee the process.
  5. The referee will hold a hearing to see if anyone else is owed money.
  6. The Referee will make a report to the Court and recommend a Court Order for how much money you will receive.
  7. Once the Court signs the order, then you can get you left over funds.

There is no reason that a person who has lost there home should also lose additional money simply because the process is complicated. If you have mortgage surplus monies that you need to collect, please contact me and I will see if I can help.

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How Do You Stop Family Disputes Over an Inheritance?

More than two-thirds of all advisors surveyed by Key Private Bank said the hardest part of estate planning is navigating family disputes, according to a 2019 survey. The sensitivities of simply talking about estate planning often present emotional challenges to putting a plan in place, especially when the family includes multiple marriages and blended families.

Advice is offered in a recent news article from CNBC, “Executor of a Family Estate? Here’s How to Avoid Infighting Over Inherited Wealth.”

Much of the problem, experts say, stems from poor communication. A dialogue needs to be open between generations that is a two-way conversation. In most instances, the older generation needs to invite the younger generation to get the ball rolling.

A lack of clarity and transparency can lead to problems. One example is a father leaving the family farm to his children, with a plan that also included money to help run the farm and legal documents to help the transition go smoothly. However, the children didn’t want the farm. They wanted to sell. Disagreements broke out between siblings, and the family was bogged down in a big fight.

Clearly Dad needed to talk with the children, while his estate plan was being created. The children needed to be upfront and honest about their plans for the future, and the issue could have been solved before the father’s death. The lesson: talk about your wishes and your children’s wishes while you are living.

After someone dies, they may leave behind an entire estate, with a lifetime of personal items that they want to gift to family members. However, if these items are not listed in the will, the heirs have to decide amongst themselves who gets what. This is asking for trouble, whether the items have sentimental or financial value. In fact, sentimental items often generate the most controversy.

When conflicts arise, the presence of a third party who doesn’t have emotional attachments and is not embroiled in the family disputes can be helpful.

If the issue is not addressed before death, there are a few ways to move forward. An estate planning attorney who has seen many families go through this process can offer suggestions while the will is being prepared. There are facilitators or mediators who can help, if things get really rocky.

Heirs may wish to create a list of items that they would like to be reviewed by the executor. This option works best, if the executor is not a sibling, otherwise charges of favoritism and “Mom always liked you best” can spiral into family spats.

Some families group items into buckets of equal value, others set up a lottery to determine who picks first, second, etc., and some families literally roll the dice to make decisions.

Reference: CNBC (Nov. 12, 2020) “Executor of a Family Estate? Here’s How to Avoid Infighting Over Inherited Wealth”

 

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How Do Joint Accounts and Beneficiary Designations Work in Estate Planning?

Joint Accounts and Beneficiary Designations – Most people think a will is the most important tool in the estate planning toolbox, but in many instances, it is not even used. Assets in the will go through probate, and wills control assets in your name only. If you don’t have a will, your state laws will provide one under its law of Intestate Succession. Instead of making a will, some people just name their spouses or children on joint accounts, says the article “Protecting Your Assets: Joint Accounts and Beneficiary Designations” from The Street. however, that can lead to big problems.

Let’s look at a typical family. They own a home, an IRA, life insurance and some bank and investment accounts. They have wills that leave everything to each other, and equally to their children upon their deaths. If a child predeceases them, they want the child’s share to go to the child’s children (their grandchildren). This is called per stirpes, meaning it goes to the next generation. The husband and wife have also listed each other as joint account owners and beneficiaries and then listed their children as contingent beneficiaries on all financial accounts.

When the husband dies, all his assets go to his wife. When she dies, she had named her living children as beneficiaries. If she signed a quit claim deed putting the children’s names on the house before she died, the will and probate may be bypassed altogether.

Sounds like a great plan, doesn’t it? Except like most things that sound too good to be true, this one is not a great plan. Here’s what can and very often does go wrong.

Let’s say a daughter inherits a bank account and is sued, files for bankruptcy or divorces. Her entire inheritance is vulnerable, with no protection at all because of her joint accounts.

What if you say in your will that you want everything to go equally to all three children when you die, but you only put one son as a beneficiary on your accounts? When you die, only one son inherits everything. The will does not supersede the beneficiary designation. If the son wants to keep all your assets, he can, no matter what he may have promised you and his siblings.

If the wife dies first and the husband remarries, he may want to leave everything to his new wife. He’s hoping that when she dies, she’ll distribute the assets from his first marriage to his children. He even has a will and changes the beneficiary designations on his investment accounts to make sure that happens. However, when he dies, she owns the accounts and can name whoever she wants to inherit those accounts. She has the legal right to cut out anyone she wants. The husband may have avoided probate, but his children are left with no inheritance.

We all like to believe that our spouses and children will do the right thing upon our death, but the only way to ensure that this will happen is to have an estate plan created using trusts and other planning strategies. Avoiding probate may be a popular theme but making sure your assets go where you want to them to is far more important than avoiding probate. Meet with an estate planning attorney to ensure that your family is protected, the right way.

Reference: The Street (Oct. 30, 2020) “Protecting Your Assets: Joint Accounts and Beneficiary Designations”

Suggested Key Terms: Heirs, Joint Ownership, Per Stirpes, Wills, Surviving Spouse, Beneficiary Designations, Estate Planning Attorney, Probate, Trusts, Inheritance

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What Does Entertainer Chadwick Boseman ’s Estate Look Like?

Chadwick Boseman passed away in late August after a four-year battle with colon cancer. He died without a will, and his estate is estimated at $938,500, according to papers filed in Los Angeles County probate court.

Boseman is best known for the movie “Black Panther,” as well as “42,” “Get on Up” and “Marshall.” He appeared earlier this year in Spike Lee’s “Da Five Bloods.”

USA Today’s recent article entitled “Chadwick Boseman’s wife seeks to administer estate of ‘Black Panther’ star, who died with no will” reports that in the court papers, Boseman’s wife, Simone Ledward (referred to in the documents by her legal name, Taylor Simone Ledward), asked to be appointed administrator with limited authority over the actor’s estate.

When there is no will to designate an executor, state law or a judge will make that determination. Most states say that the surviving spouse or registered domestic partner, if any, is the first choice. An adult child is then usually next on the list, followed by other family members.

If there’s no will, state law will direct what happens to property. If the deceased person was married, the surviving spouse typically gets the largest share.

Distant relatives inherit, only if there is no surviving spouse and if there are no children. If no relatives can be found, the state gets the assets.

In addition to Ledward, the actor is survived by his parents, Leroy and Carolyn Boseman, who are also named in the papers. Boseman’s family, including Ledward, were by his side when he died at his Los Angeles home.

According to People, Boseman and Ledward became engaged in 2019 and their last public appearance together was at the NBA All-Star Game in February in Chicago.

Boseman paid tribute to his wife during an acceptance speech at the 2019 NAACP Image Awards. “Simone, you’re with me every day. I have to acknowledge you right now. Love you.” Ledward blew him a kiss and mouthed back the words, “I love you.”

Reference: USA Today (Oct. 16, 2020) “Chadwick Boseman’s wife seeks to administer estate of ‘Black Panther’ star, who died with no will”

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Estate Administration – Act Quickly to Protect an Estate

For most families, the process of estate administration or the probate of a will starts weeks after the death of a loved one.  However, before that time, there are certain steps that need to be taken immediately after death, according to a recent article “Protecting an estate requires swift action” from The Record-Courier. It is not always easy to keep a clear head and stay on top of these tasks but pushing them aside could lead to serious losses and possible liability.

The first step is to secure the deceased’s home, cars and personal property. The residence needs to be locked to prevent unauthorized access. It may be wise to bring in a locksmith, so that anyone who had been given keys in the past will not be able to go into the house. Cars should be parked inside garages and any personal property needs to be securely stored in the home. Nothing should be moved until the estate administration or probate has been completed. Access to the deceased’s digital assets and devices also need to be secured.

Mail needs to be collected and retrieved to prevent the risk of unauthorized removal of mail and identity theft. If there is no easy access to the mailbox, the post office needs to be notified, so mail can be forwarded to an authorized person’s address.

Estate planning documents need to be located and kept in a safe place. The person who has been named as the executor in the will needs to have those documents. If there are no estate planning documents or if they cannot be located, the family will need to work with an estate planning attorney. The estate may be subjected to a probate proceeding.

One of the responsibilities that most executors don’t know about, is that when a person dies, their will needs to be admitted to the court, regardless whether they had trusts. If the deceased left a will, the executor or the person who has possession of the will must deliver it to the court clerk. Failing to do so could result in large civil liability.

At least five and as many as ten original death certificates should be obtained. The executor will need them when closing accounts. As soon as possible, banks, financial institutions, credit card companies, pension plans, insurance companies and others need to be notified of the person’s passing. The Social Security Administration needs to be notified, so direct deposits are not sent to the person’s bank account. Depending on the timing of the death, these deposits may need to be returned. The same is true if the deceased was a veteran—the Veteran’s Affairs (VA) need to be notified. There may be funeral benefits or survivor benefits available.

It is necessary, even in a time of grief, to protect a loved one’s estate in a timely and thorough manner. Your estate planning attorney will be able to help through this process.

Reference: The Record-Courier (Oct. 17, 2020) “Protecting an estate requires swift action”

 

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What Doesn’t Medicare Cover ?

Medicare Part A and Part B, also known as Original Medicare or Traditional Medicare, cover a big part of your medical expenses after you turn age 65. Kiplinger’s recent article entitled “7 Things Medicare Doesn’t Cover” reviews what doesn’t Medicare cover, plus information about supplemental insurance policies and strategies that can help cover the additional costs, so you don’t end up with unexpected medical bills in retirement.

Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can buy a separate Part D prescription-drug policy that does, or a Medicare Advantage plan that covers both medical and drug costs.

Long-Term Care. One of the biggest possible expenses in retirement is the cost of long-term care. However, you can purchase long-term-care insurance or a combination long-term-care and life insurance policy to cover these costs.

Deductibles and Co-Pays. Medicare Part A covers hospital stays, and Part B covers doctors’ services and outpatient care. However, you’re on the hook for deductibles and co-payments. In 2020, you’ll have to pay a Part A deductible of $1,408 before coverage begins, and you’ll also have to pay some of the cost of long hospital stays – $352 per day for days 61-90 in the hospital and $704 per day after that. Over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit, called “lifetime reserve days,” and thereafter you’ll pay the full hospital cost.

Dental Care. Medicare doesn’t provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. There are some Medicare Advantage plans that cover basic cleanings and X-rays, but they generally have an annual coverage cap of about $1,500. Look at coverage from a separate dental insurance policy or a dental discount plan.

Routine Vision Care. Medicare typically doesn’t cover routine eye exams or glasses (exceptions include an annual eye exam, if you have diabetes or eyeglasses after having certain kinds of cataract surgery). However, there are Medicare Advantage plans that have vision coverage, or you may be able to buy a separate supplemental policy that provides vision care alone or includes both dental and vision care.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, which can cost as much as $3,250 per ear. However, a few Medicare Advantage plans cover hearing aids and fitting exams, and some discount programs provide lower-cost hearing aids.

Medical Care Overseas. Medicare usually doesn’t cover care you get while outside of the U.S., except for very limited circumstances (such as on a cruise ship within six hours of a U.S. port). Medigap plans C through G, M and N, however, cover 80% of the cost of emergency care abroad, with a lifetime limit of $50,000. Some Medicare Advantage plans cover emergency care abroad.

Reference: Kiplinger (Oct. 1, 2020) “7 Things Medicare Doesn’t Cover”

 

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Why Did Mary Trump Claim Her Family Stole Her Inheritance?

The president’s niece, Mary Trump, has filed a lawsuit in the New York Supreme Court in Manhattan claiming that Donald Trump and his siblings failed to do their fiduciary duty. They instead squandered Mary Trump’s birthright, according to a report in The New York Times.

The Real Deal’s recent article entitled “Mary Trump sues her family for real estate inheritance “fraud”” says Mary Trump alleges that Donald Trump and his siblings burdened their late brother Fred Trump Jr.’s real estate portfolio—some of which Mary inherited from her father—with inflated management fees and loans with no repayment terms, in an attempt to weaken its value.

The lawsuit says Mary Trump had some of the “crown jewels” of the real estate empire amassed by Fred Trump Sr. Her stake was 10% of the land underlying Beach Haven, a 40-acre complex in Coney Island with 26 buildings and vacant parcels of land.

She also had a 5% interest in the land underneath Shore Haven, a 30-acre parcel with 32 buildings and a shopping center in Bensonhurst.

The lawsuit also claims that Donald Trump and his siblings worked with an appraiser to undervalue her holdings.

The lawsuit alleged that the president, his brother Robert and a sister (former federal judge Maryanne Trump Barry) claimed they were Mary’s protectors. However, instead they secretly stole her share of minority interests in the family’s extensive real estate holdings.

Robert Trump passed away in August 2020.

According to the court pleadings, this was a destructive pattern of behavior to “enrich themselves at the expense of everyone around them.”

“They concocted scheme after scheme to cheat on their taxes, swindle their business partners and jack up rents on their low-income tenants,” the lawsuit reads.

“Fraud was not just the family business – it was a way of life,” the complaint says.

The White House press secretary denied the allegations.

Mary Trump is a psychologist and the niece of President Trump. Her 2020 book about him and their family, Too Much and Never Enough, sold nearly one million copies on the day of its release.

Reference: The Real Deal (Sep. 25, 2020) “Mary Trump sues her family for real estate inheritance “fraud””

 

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Estate Planning for a Second Marriage and Blended Family

It takes a certain kind of courage to embark on a second marriage, even when there are no children from prior marriages. Regardless of how many times you walk down the aisle, the recent article “Establishing assets, goals when planning for a second marriage” from the Times Herald-Record advises couples to take care of the business side of their lives before saying “I do” again.

Full disclosure of each other’s assets, overall estate planning goals and plans for protecting assets from the cost of long-term care should happen before getting married. The discussion may not be easy, but it’s necessary: are they leaving assets to each other, or to children from a prior marriage? What if one wants to leave a substantial portion of their wealth to a charitable organization?

The first step recommended with a second marriage is a prenuptial or prenup, a contract that the couple signs before getting married, to clarify what happens if they should divorce and what happens on death. The prenup typically lists all of each spouses’ assets and often a “Waiver of the Right of Election,” meaning they willingly give up any inheritance rights.

If the couple does not wish to have a prenup, they can use a Postnuptial Agreement (postnup). This document has the same intent and provisions as a prenup but is signed after they are legally wed in the second marriage. Over time, spouses may decide to leave assets to each other through trusts, owning assets together or naming each other as beneficiaries on various assets, including life insurance or investment accounts.

Without a pre-or postnup, assets will go to the surviving spouse upon death, with little or possibly nothing going to the children.

The couple should also talk about long-term care costs, which can decimate a family’s finances. Plan A is to have long-term care insurance. If either of the spouses has not secured this insurance and cannot get a policy, an alternate is to have their estate planning attorney create a Medicaid Asset Protection Trust (MAPT). Once assets have been inside the trust for five years for nursing home costs and two-and-a-half years for home care paid by Medicaid, they are protected from long-term care costs.

When applying for Medicaid, the assets of both spouses are at risk, regardless of pre- or postnup documents.

Discuss the use of trusts with your estate planning attorney. A will conveys property, but assets must go through probate, which can be costly, time-consuming and leave your assets open to court battles between heirs. Trusts avoid probate, maintain privacy and deflect family squabbles.

Creating a trust and placing the joint home and any assets, including cash and investments, inside the trust is a common estate planning strategy. When the first spouse dies, a co-trustee who serves with the surviving spouse can prevent the surviving spouse from changing the trust and by doing so, protect the children’s inheritance. Let’s say one of the couple suffers from dementia, remarries or is influenced by others—a new will could leave the children of the deceased spouse with nothing.

Many things can very easily go wrong in second marriages. Prior planning with an experienced estate planning attorney can protect the couple and their children and provide peace of mind for all concerned.

Reference: Times Herald-Record (Sep. 21, 2020) “Establishing assets, goals when planning for a second marriage”

 

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Dividing Pablo Picasso ’s Estate, a Disaster

Pablo Picasso left behind 1,885 paintings, 1,228 sculptures, 7,089 drawings, as well as tens of thousands of prints, thousands of ceramic works and 150 sketchbooks when he passed away in 1973. He owned five homes and a large portfolio of stocks and bonds. “The Master” fathered four children with three women. He was also thought to have had $4.5 million in cash and $1.3 million in gold in his possession when he died. Once again, Picasso did not leave a will. Distributing his assets took six years of contentious negotiations between his children and other heirs, such as his wives, mistresses, legitimate children and his illegitimate ones.

Celebrity Net Worth’s recent article entitled “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will” explains that Picasso was creating art up until his death. Unlike most artists who die broke, he had been famous in his lifetime. However, when he died without a will, people came out of the woodwork to claim a piece of his valuable estate. Only one of Picasso’s four children was born to a woman who was his wife. One of his mistresses had been living with him for decades. She had a direct and well-documented influence on his work. However, Picasso had no children with her. Dividing his estate was a disaster.

A court-appointed auditor who evaluated Picasso’s assets after his death said that he was worth between $100-$250 million (about $530 million to $1.3 billion today, after adjusting for inflation). In addition to his art, his heirs were fighting over the rights to license his image rights. The six-year court battle cost $30 million in legal fees to settle. But it didn’t settle for long, as the heirs began fighting over the rights to Picasso’s name and image. In 1989, his son Claude sold the name and the image of Picasso’s signature to French carmaker Peugeot-Citroen for $20 million. They wanted to release a sedan called the “Citroen Xsara Picasso.” However, one of Picasso’s grandchildren tried to halt the sale because she disagreed with the commission paid to the agent who brokered the deal—but oddly enough, the consulting company was owned by her cousin, another Picasso.

Claude created the Picasso Administration in Paris in the mid-90s. This entity manages the heirs’ jointly owned property, controls the rights to exhibitions and reproductions of the master’s works, and authorizes merchandising licenses for his work, name and image. The administration also investigates forgeries, illegal use of the Picasso name and stolen works of art. In the 47 years since his death, Picasso has been the most reproduced, most exhibited, most stolen and most faked artist of all time.

Pablo Picasso’s heirs are all very well off as a result of his art. His youngest daughter, Paloma Picasso, is the richest, with $600 million. She’s had a successful career as a jewelry designer.  She also enjoys her share of her father’s estate.

Reference: Celebrity Net Worth (Sep, 13, 2020) “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will”

 

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