Estate Planning and Trusts Blog

Actor Robert De Niro’s Bad Prenup

Robert De Niro & Grace Hightower
Robert De Niro and Grace Hightower’s prenup is at the center of their divorce.

Wealth Advisor’s recent article, “Robert De Niro Prenup Breakdown Can Rock NYC Real Estate (And $500M Dynasty),” says that Oscar-winning actor Robert De Niro is estimated to be worth $300 million and with a $400 million Queens real estate development partnership with his son Raphael, there’s plenty more money.

Grace Hightower has been with De Niro one way or another since 1987. They were married 10 years later, almost split in 1999, and then reconciled five years later. A big issue in their current divorce is the lack of a firm prenuptial contract (prenup) protecting De Niro’s fortune.

When the couple got back together, the terms were that she would get $500,000 in cash, along with what it would take to buy her out of the marital home. She’d also get an apartment, then valued at $6 million, as well as $1 million a year in upkeep. However, unfortunately for De Niro, the contract also apparently confirmed in writing that everything he made after the prenup was executed was a partnership, 50-50.

A good prenuptial contract should be reviewed, just like an estate plan. If it’s out of date, it should be modified to something more current and defensible. The actor may have only been worth $100 million when the prenup was written. Now that he’s tripled that net worth, the numbers no longer add up the same way.

Meanwhile, De Niro is in deep trying to renovate an entire neighborhood into a Hollywood-style film production hub. Purchasing the land is costing close to $75 million. And it’s not all his money. His son Raphael (from a previous marriage) is a high-powered real estate broker lining up venture investors and adding his own funds to the project. If Grace wants $50 million or even $10 million now, De Niro and his son could have a problem. To comply with the prenup, he may have to allow Grace to participate in the new project instead of giving her cash. Or he may have to borrow or liquidate properties to come up with cash.

A good prenup  – or regular reviews – could have avoided all of this.

Reference: Wealth Advisor (June 24, 2019) “Robert De Niro Prenup Breakdown Can Rock NYC Real Estate (And $500M Dynasty)”

Other articles you may find interesting:

Angelina Jolie Leaving Her Estate to One Child?

Billionaire Conrad Prebys’s Son Gets $15M after Being Disinherited

Smart Second Marriage Planning Tips

second marriage can cause family discord
Second marriages can cause family feuds if careful planning isn’t done.

Forbes’s recent article, “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle,” says it’s wise to squeeze some reality into your romance.

That begins with good communication, a skill that’s important in every marriage.

You should begin this conversation long before setting a date to say, “I do.” Let’s look at some tips for making sure your next marriage gets off on the right financial foot:

Be open. Talk frankly and openly about your plans and obligations to any children and former spouses. Talk about your credit history, assets, debts and any financial support you must provide.

Look at your property. Review the assets that each of you will bring into the marriage and discuss how they ultimately will be used or bequeathed.

Update your accounts. Be sure that all your records are up to date when you remarry.

Sign a prenup. This isn’t just to protect the assets of the wealthier spouse. It can be important if you both already have established careers, children, or significant assets. A prenup lets you decide together, and in advance, which assets you’ll share and which you’ll keep separate in the event of divorce or death.

Work with an estate planning attorney. He or she will help you update your estate planning documents, retitle your investments, and modify any beneficiaries on retirement, life insurance, and annuity accounts. Since the probate laws aren’t typically designed for blended families, special estate planning may be needed, especially if you or your new spouse have children and grandchildren from previous marriages.

Without an appropriate estate plan, some or all of your assets will likely pass to your current spouse and then to his or her children – not yours – if you die first.

But some smart second marriage planning may avoid feuding, bitter feelings, and big legal expenses among your survivors.

Reference: Forbes (June 20, 2019) “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle”

Other articles you may find interesting:

Does Having a Will Avoid Probate?

A Basic Form Doesn’t Work for Estate Planning

What Happens When Real Estate Is Inherited?

real estate
Inheriting real estate can mean inheriting wonderful memories – or divisive problems.

The number one question on most people’s minds when they inherit real estate is whether they have to pay taxes on it. For the most part, you don’t have to pay taxes on what you inherit unless you live in a state with an inheritance tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania). There are tax forms that may need to be filed, says the Petoskey News-Review in the article “The pros and cons of inheriting real estate,” but not every estate has to pay taxes.

The estate has to pay taxes on any gains or losses after the death of the decedent, if and when the executor sells the real estate. The estate will have either capital gains or capital losses based on the difference between the decedent’s purchase price and the selling price.

What if Mom gifts the house to her children before she dies? If she bought the house for $100,000, gives it to her children, and then they sell it for $120,000, they’d have to pay capital gains taxes on the $20,000. But if they receive the real estate after Mom dies, they’ll get a step-up in basis – they inherit the property valued as of the date of Mom’s death. So, if Mom bought the house for $100,000 and its fair market value at her death was $220,000, and the children then sold it for $220,000, there would be no capital gain.

People who inherit property should have it appraised by an experienced real estate appraiser to determine the actual value at the date of death. An estate planning attorney will be able to recommend an appraiser.

One of the biggest disagreements that families face after the death of a loved one centers on selling real estate property. Some families actually break up over it. It would be far better for the family to talk about the property before the parents die and work out a plan.

The problem often centers on a summer home that’s being passed down to multiple children. One child wants to sell it, another wants to rent it out for summers and use it during winters, and the third wants to move in. If they can resolve these issues with their parents while they’re still alive, the real estate is less likely to become a divisive issue when the parents die and emotions are running high. This also gives the parents a chance to talk about what they want to happen after they die, and why.

Conflicts can also arise when it’s time to clean up the house after someone inherits the property. Mom’s old lemon juicer or Dad’s favorite barbecue fork seem like small items until they become part of a family’s memories or history.

The best thing for families that desire to pass a house down to the next generation is to start the discussion early and to make a plan. An estate planning attorney can help the family work through the issues, including creating a plan for how the real estate property should be handled. The attorney will also be able to help the family plan for any taxes that might be due so there are no ugly surprises.

Reference: Petoskey News-Review (June 25, 2019) “The pros and cons of inheriting real estate”

Other articles that may interest you:

What Do I Do With Dad’s Timeshare When He Dies?

Filing Estate Taxes for a Deceased Family Member

How Do Transfer on Death Accounts Work?

Transfer on Death beneficiaries
A Transfer on Death or Payable on Death account is simple to set up, but may not be the best option for all situations.

Even estates with Wills usually end up in probate court. In some states, that isn’t a major problem, while in others it can be an expensive headache. But by changing some accounts to transfer on death (TOD), you can prevent some assets from going through probate, says Yahoo! Finance in the article “Transfer on Death (TOD) Accounts for Estate Planning.”

Here’s how it works:

A TOD account (for investment accounts)  – or a Payable on Death (POD) Account for bank accounts – automatically transfers the assets to the named beneficiary when the account holder dies. Let’s say you have an investment savings account with $100,000 in it. Your son is the beneficiary on the Transfer on Death account. When you die, the investment savings account transfers directly to him.

A more formal definition: a TOD (or POD) is a provision on a financial account that allows the assets to pass directly to an intended beneficiary – the equivalent of a beneficiary designation. The laws that govern estate planning vary from state to state, but most banks, investment accounts, and even some real estate deeds can become TOD or POD accounts.

Depending on the financial institutions policies, Transfer on Death account holders may be able to name multiple beneficiaries and split up assets any way they wish. For instance, you may be able to open a TOD account naming two children and they’ll each receive 50% of the account at your death.

The beneficiaries you name have no right or access to the TOD account while you’re alive. You can change the beneficiaries at any time, as long as you’re mentally competent. Just as assets in a Will can’t be accessed by heirs until the testator dies, beneficiaries on a Transfer on Death account have no rights or access to a TOD account until the original owner dies.

Simplicity is one reason why people like to use the TOD account. A TOD account usually requires only that a death certificate be sent to an agent at the account’s bank or brokerage house. The account is then re-registered in the beneficiary’s name.

Whatever your Will says doesn’t impact a TOD or POD account. If your Will instructs your executor/personal representative to give all of your money to your sister, but the beneficiary on a TOD account is your brother, the money in the TOD account will go to your brother. Your sister will get any other assets that don’t have a named beneficiary.

But there are also drawbacks to Transfer on Death and Payable on Death accounts – especially when there’s a blended family or other complicated family situations involved.  Talk with an estate planning attorney about how a TOD or POD account may fit into your estate plan.

Reference: Yahoo! Finance (June 26, 2019) “Transfer on Death (TOD) Accounts for Estate Planning”

Other articles you may find interesting:

Are Your Estate Planning Documents Age-Appropriate? (Part 1)

Are Your Estate Planning Documents Age-Appropriate? (Part 2)

 

Does Having a Will Avoid Probate?

a will means probate
Probate will not be avoided just because you have a Will.

Many people I talk to are shocked to find out that having a Will doesn’t mean you’ll avoid probate. In fact, unless you die with no debt and no assets, a Will makes it very likely your estate will be subject to probate.

So, why have a Will?

If you die without a valid Will, the state decides who gets your stuff. In Florida, that’s covered in Chapter 732 of the Florida statutes. Basically, it says that if you’re not married and have no children, everything goes to your parents; if they’re dead, it goes to your siblings. If you’re married, it goes to your wife and possibly your children (depending on the circumstances).

The statutes don’t address who will be the guardian of your minor children. That will be decided by lawyers and a judge ($$$).

If you create a Will, you can choose who gets your stuff – subject to Florida’s laws mandating how much you have to leave your spouse and restricting who can legally inherit your homestead. You’ll also be able to name who you’d like to serve as your Personal Representative if there is a probate, and who you’d trust to serve as guardians of your minor children.

When would a probate be necessary?

Generally, a probate would be necessary if you die with certain types of assets held in your individual name – such as bank accounts, investment accounts, savings bonds, and real property. No one will be able to access or manage those accounts/assets until a judge declares who is entitled to them.

Unfortunately, in Florida, this usually requires a fairly long, drawn out process involving a lawyer ($$$).

Occasionally a simplified process called Disposition Without Administration can be done without a lawyer, but it still costs over $200 just to file the form with the probate court. Use of this simplified process is very limited – basically it’s used when a person dies with a couple thousand dollars in a bank account, there’s no debt, and the spouse or child wants to be reimbursed for the funeral and medical expenses they paid out of their own pocket.

Is there any way to avoid probate?

Probate isn’t always a bad thing. It provides for the orderly payment of your debts and distribution of your remaining assets. It also legally protects your beneficiaries and Personal Representative from the claims of your creditors. This can be very valuable in second marriage situations, or in any family situation where there could be problems.

But, yes, there are ways to avoid probate and some of them are very simple and inexpensive. The simplest way to avoid probate is to name joint owners or beneficiaries on bank and investment accounts. Joint ownership on real estate will also avoid probate. In Florida, you can also name a beneficiary on your real estate deed (I don’t recommend this except in very limited situations). Creating a revocable living trust and retitling your assets in the name of the trust will also avoid probate.

Is there a downside to naming beneficiaries or joint owners?

Yes, sometimes using these methods without legal advice can create unforeseen problems. If you name beneficiaries or joint owners on all your liquid assets, and then a probate is needed for other assets, there’s no money to pay for the probate or taxes and your house, business, guns, or valuable heirlooms may have to be sold to provide those funds. The assets you left to the joint owner or beneficiary became 100% theirs the minute you died, and they have no legal obligation to share them with anyone or use them for your probate expenses or taxes.

Joint ownership with anyone other than your spouse can also create problems with creditors, divorces, and Medicaid planning.

Additionally, under Florida law, you have to leave your spouse a minimum of 30% of every asset you have any ownership in – even those with beneficiaries and joint owners. If you don’t, your spouse can take it away from the named beneficiaries. And, if you decide to leave your homestead to someone Florida says you can’t leave it to, the state will penalize you and your proposed beneficiary and the judge will distribute the homestead according to the law, not your wishes.

Can I type or handwrite my own Will?

Florida has many laws pertaining to what makes a Will valid. If these laws aren’t followed to the letter, the Will isn’t valid and you’ll be treated as if you died without a Will. So while you could certainly type up something simple, or use a form you find on the Internet, I wouldn’t recommend it unless you’ve personally researched and complied with all the Florida laws.

Florida doesn’t recognize handwritten Wills at all.

Additionally, never write on your original Will. Most of the time, the changes you tried to make won’t be valid, and you could end up making your entire Will invalid.

Other articles you might find interesting:

A Basic Form Doesn’t Work for Estate Planning

Yes, You Should Have a Will

Billionaire Conrad Prebys’s Son Gets $15M after Being Disinherited

Conrad Prebys
San Diego real estate developer and philanthropist Conrad Prebys.

Debra Turner, the longtime live-in partner of San Diego developer and philanthropist Conrad Prebys, has tried to sue the directors of the Conrad Prebys Foundation for their decision to give $15 million to Prebys’ son, Eric, who had been left nothing by Prebys in his estate planning documents.

The San Diego Union-Tribune reported in the article “Court fight continues over control of $1 billion Prebys estate,” that in January, a San Diego Superior Court judge dismissed Turner’s suit, holding that she had no legal standing to bring it. She then filed an amended complaint. However, recently the judge dismissed her lawsuit.

The legal fight has kept the estate money from going to the charities favored by Conrad Prebys. During his lifetime, he donated more than $350 million to various organizations – most of them in the San Diego area.

Turner says the issue arises from the foundation board’s decision to disregard Prebys’ wishes and give money to his only child, a physicist at UC Davis, who had been written out of the legal documents in 2014.

“When Conrad made a decision, it was done, and he was adamant about revoking Eric’s gift,” Turner told The San Diego Union-Tribune in 2017.

Prebys died in 2016, and his trust left gifts to twelve individuals and institutions. The bulk of his assets were left to to his foundation to “support performing arts, medical research and treatment, visual arts, and other charitable purposes” consistent with the causes he cared about when he was alive. However, a few months after his death, the foundation directors – five unpaid volunteers handpicked by Prebys – met to consider the next steps. The directors included Turner and Laurie Anne Victoria, a longtime executive with Prebys’ real-estate company. Victoria is also the trustee of the Prebys estate.

According to Turner’s lawsuit, a foundation attorney had warned the directors that Eric might contest the will, and if he won, he could “get it all.” Several weeks later, Eric’s attorney indeed sent a letter to the board, raising questions about Conrad’s mental competency at the time that the trust was amended. Eric also believed that Turner had exerted undue influence on his father’s decisions. Turner denied the allegations. But in December 2016, the other directors authorized a settlement. Eric got $9 million, plus $6 million to cover the estate taxes.

Turner then sued the board members on behalf of the foundation, alleging they had breached their duties to protect the estate’s assets.

Victoria defended the settlement as “the only reasonable decision” to avoid the uncertainty, expense and publicity of litigation with Eric and to begin fulfilling Conrad’s charitable wishes. She said the money represented less than 1% of the overall estate.

Turner is no longer on the board, and in dismissing her suit, Superior Court Judge Kenneth Medel said that, under corporate law, Turner can’t sue on behalf of the foundation because she’s no longer a director and, thus, lacks standing. Although she was a director when she filed the suit, the law requires her to maintain board membership throughout the litigation, according to the decision.

Reference: The San Diego Union-Tribune (March 29, 2019) “Court fight continues over control of $1 billion Prebys estate”

Other articles you may find interesting:

Angelina Jolie Leaving Her Estate to One Child?

Prince’s Estate Battle Drags On

Understanding Your Trust Document

revocable living trust document
Trust documents will never be as easy to read as a novel, but they’ve gotten better!

Forbes’s recent article, “A Beginner’s Guide To Reading A Trust,” says that while many attorneys have tried to simplify trust documents, there’s still some legalese hanging around. Let’s look at a few tips for reviewing your trust.

First, familiarize yourself with the terms in the trust document. There are some basic terms you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is frequently referred to as the donor, grantor,  settlor, or trustmaker. It’s also necessary to identify the trustee – the person who will hold the trust assets and administer them for the benefit of the beneficiaries.

Next you’ll want to see who the beneficiaries are and then look at the important provisions in the trust document that pertain to how the assets are to be distributed to the beneficiaries. Is the trustee required to distribute the assets all at once to a specific beneficiary, or can she give the money out in installments over time?

It’s also important to determine if the distributions are completely left to the discretion of the trustee, or whether the beneficiary has a right to withdraw the trust assets.  See if the trustee can distribute both income and principal, or just income. What happens at the death of a beneficiary?

Other important provisions to review in your trust document include whether the beneficiaries can remove and replace a trustee, if the trustee must provide the beneficiaries with accountings, and whether the trust is revocable or irrevocable. If the trust is revocable and you’re the grantor (creator), you can change it as often as you’d like – as long as you have mental capacity. If the trust is irrevocable, generally, it’s very difficult to make changes without going to court. Revocable trusts become irrevocable at the death of the grantor. So, if your father was the grantor and he passed away, his trust is now irrevocable.

Finally, you should review the “boilerplate” language, as well as the tax provisions.

Of course, if you have any questions or need help interpreting the terms of your trust document, be sure to talk to your estate planning attorney.

Reference: Forbes (June 17, 2019) “A Beginner’s Guide To Reading A Trust”

Other articles you may find interesting:

Are No-Contest Clauses Valid In Florida?

Naming a Child as Successor Trustee?

Why is an Advance Directive so Important with Dementia?

An advance directive is so important when dementia sets in.
Advance directives are so important when dementia sets in.

The Roanoke Times advises in the recent article “What to do in absence of advance directive” to talk to an experienced elder care attorney when dementia may be an issue with a parent or other loved one. Then ask your physician for a geriatric evaluation consultation for your loved one with a board-certified geriatrician and for a referral to a social worker to assist in navigating the medical system.

Everyone older than 55 should have advance directives in place. That way, if they become incapacitated, a trusted agent can fulfill their wishes in a dignified manner. Think ahead and plan ahead.

As a family’s planning starts, the issue of competence or mental capacity must be defined. A mere diagnosis of Alzheimer’s disease doesn’t necessarily indicate current incompetence or a lack of capacity. At this point, a person still has the right to make a decision—despite family members disagreeing with it. Competency should be re-evaluated after a number of “poor” choices or an especially serious choice that puts the person or others at risk.

A geriatric evaluation consultation will test your loved one’s factual understanding of concepts, decision-making and cogent expression of choices, the possible consequences of their choices, and reasoning of the decision’s pros and cons. If she passes the evaluation, she’s deemed to have the mental capacity to make choices on her own. If she cannot demonstrate competency, an attorney can petition the court for a competency hearing, after which a guardian may be appointed to oversee her affairs.

The time to address these types of issues is before the patient becomes incapacitated. The family should discuss living wills, health care proxies, powers of attorney, and estate planning now with an experienced elder law or estate planning attorney.

Taking these proactive steps can be one of the greatest gifts a person can bestow upon herself and her loved ones – peace of mind. If you put an advance directive in place, it can provide that gift when it’s needed the most.

Reference: Roanoke Times (June 17, 2019) “What to do in absence of advance directive”

Other articles you may find interesting:

Having the “Someday” Talk with Parents

Cognitive Decline Doesn’t Have to Happen

How Can a Collector Leave a Legacy?

An art collector's heirs may not share the love.
An art collector’s heirs may not share the passion.

A few years after Joan Rivers’ death in 2014, her family put hundreds of Joan’s personal items up for auction at Christie’s in New York.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price. This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A common problem for some collectors of art and other valuable collectibles is that their heirs may feel much less passionately about the works than the person who collected them.

If you’re a collector, you can gift, donate, or sell during your lifetime. You can also wait until you pass away and then gift, donate, or sell posthumously. If you want to make certain your wishes are carried out or to eliminate family conflicts after your death, you can take the decision out of the hands of your family by placing your valuable collection into a trust.

Your trust will have your wishes documented in the agreement and you can choose the trustees – whether you choose trusted family members or independent advisers. You, as a collector, might like to seal your legacy by making a permanent loan or gift of art to a museum. However, your children or other family members can renege on these agreements if they’re not adequately protected by trusts or other legal safeguards after your death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over a valuable collection after your death is to have frank discussions about estate planning with your family well before the reading of the Will or trust. This can ensure that your wishes are respected.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

Other articles you may find interesting:

How To Disinherit A Child

The Importance of Funding Your Trust

Filing Estate Taxes for a Deceased Family Member

Filing personal and estate tax returns is one of the executors jobs.
Filing personal and estate tax returns is one of the executor’s most important jobs.

If you’re the executor (or personal representative) of a loved one’s estate, and they were well-off, you’ll be dealing with several tax issues. The article “How to file a loved one’s taxes after they’ve passed away” from Market Watch gives a general overview of the decedent’s potential tax liabilities.

Winding down the financial aspects of the estate is one of the tasks done by the executor. The executor is identified in the decedent’s Will or appointed by a judge. If the decedent had a revocable living trust or an irrevocable trust, the trust document names a trustee who works in conjunction with the executor.

The executor is responsible for filing the federal income tax returns for the decedent’s personal income (Form 1040) as well as for the income generated by the estate or trust (Form 1041). The estate’s first federal income tax year starts immediately after the date of death. The tax year-end date can be December 31 or the end of any other month that results in a first tax year of 12 months or less. The IRS form 1041 is used for estates and trusts and the estate income tax return is due on the 15th day of the fourth month after the tax year-end.

For example, if a person dies in 2019 and the executor chooses December 31 as the tax year-end, the estate tax return would be due April 15, 2020. An extension is available, but it’s only for five and a half months. In this example, the due date could be extended to September 30.

There’s no need to file a Form 1041 if all of the decedent’s income-producing assets are directly distributed to the spouse or other heirs and, thus, bypass probate. This is the case when property is owned as joint tenants with right of survivorship, as well as with IRAs and retirement plan accounts and life insurance proceeds with designated beneficiaries.

Unless the estate is valued at more than $11.4 million in 2019, no federal estate tax (also known as the “death tax”) will be due.

But the executor needs to find out if the decedent made any large gifts before death. That means gifts larger than $15,000 in 2018-2019 to a single person, $14,000 for gifts in 2013-2017; $13,000 in 2009-2012, $12,000 for 2006-2008; $11,000 for 2002-2005 and $10,000 for 2001 and earlier. If these gifts were made, the excess over the applicable threshold for the year of the gift must be added back to the estate to see if the federal estate tax exemption has been surpassed. Check with the estate attorney or tax professional to ensure that this is handled correctly.

The unlimited marital deduction permits any amount of assets to be passed to a spouse – as long as the decedent was married to a U.S. citizen. However, the surviving spouse will need expert estate planning to pass the family’s wealth to the next generation, without a large tax liability.

While the taxes and tax planning are more complex when significant assets and estate taxes are involved, estate planning is perhaps even more important for those with modest assets as there is a greater need to protect the family and less room for error. An estate planning attorney can strategically plan to protect family assets even when the assets are not so grand.

Reference: Market Watch (June 17, 2019) “How to file a loved one’s taxes after they’ve passed away”

Other articles you may find interesting:

Widowed? What Happens Next?

Why Unmarried Couples Need Estate Planning