Windsor: An Update on the Same-Sex Marriage March
I wrote about this case in the \”Love & the Law\” series. It has huge estate planning implications for the LGBT community and recently, the Obama Administration has recommended it instead of other same-sex marriage cases that the U.S. Supreme Court is deciding whether to hear. Factual synopsis: When Thea died, the federal government refused to recognize her marriage to Edie (they were legally married in Toronto, Canada) and taxed Edie\’s inheritance from Thea as though they were strangers. Under federal tax law, a spouse who dies can leave her assets, including the family home, to the other spouse without incurring estate taxes. Traditionally, whether a couple is married for federal purposes depends on whether they are considered married in their state. New York recognized Edie and Thea\’s marriage, but because of a federal law called the \”Defense of Marriage Act,\” or DOMA, the federal government refuses to treat married same-sex couples, like Edie and Thea, the same way as other married couples. Edie challenged the constitutionality of DOMA and sought a refund of the estate tax she was unfairly forced to pay. The Southern District Court of New York (“SDNY”) agreed with Edie and granted summary judgment, stating that it could find no rational basis for Section 3 of DOMA and therefore, Section 3 violated the Equal Protection Clause of the U.S. Constitution. The Bipartisan Legal Advisory Group (“BLAG”), hired by the House of Representatives to defend the government, appealed to the Second Circuit setting forth 3 basic legal arguments and additional non-legal arguments. The legal arguments were as follows: Federal estate tax law provides that the state of domicile determines marital status and because at the time of Thea’s death, New York didn’t perform same-sex marriages, the lower court’s decision should be overturned. The Second Circuit stated that it could predict that New York would have recognized the marriage at the time of Thea’s death, so that argument was defeated. Congress can prohibit same-sex marriages like states can per Baker v. Nelson. The Second Circuit reminded BLAG that state regulation and federal regulation are different. So Baker wasn’t applicable in this case. Section 3 of DOMA should be analyzed using the rational basis or “rational basis plus.” The Second Circuit stated there is no such thing as \”rational basis plus\” yet and set out a four-prong test for heightened scrutiny per Bowen v. Gilliard and City of Cleburne v. Cleburne Living Center and established that the LGBT community passed this test and should be considered a quasi-suspect class. After reviewing the non-legal arguments to provide rhetorical dicta, the Second Circuit affirmed SDNY’s decision, holding that “Section 3 of DOMA violates equal protection and is therefore unconstitutional.” The thorny part of this case is that the Second Circuit’s decision reads like a roadmap for the Supreme Court to punt the cases on DOMA back to the states. However, the argument against the proposition that state and federal regulations are different and, therefore, this should be an issue left for the states to decide, is that many regulations may be different but many state and federal regulations also overlap, if not in substance, in application. Hence, parsing the overlap of the rules and regulations that DOMA implicates may be more burdensome with respect to costs for both the states and the federal government than simply ruling that DOMA is unconstitutional.
Be Sure to Consider the Coin\’s Third Side
I wrote this piece before “the election” after reading an article on the “what if” of an election tie. Each party’s camp, of course, believed their candidate was going to win with a considerable margin. Yet, each party’s camp also had a team of lawyers already prepared for the “what if” of a tie. The article reminded me of a lesson I learned long ago from a very wise woman. And that lesson is that every coin has 3 sides, not 2 but 3. Moreover, irrespective of how unlikely it may be that the coin will land on its third side, that likelihood should never be ignored. The lesson of the third side is one I share with not just clients but everyone I can. However, let’s talk about estate planning for a minute. Of course, there’s no “what if” about death; we’re all going to die one day whether we want to or not, but estate planning is about much more than death. Consider the phrase, “estate planning”: Legally speaking your “estate” is everything you own. “Planning” is self-explanatory. So, estate planning is about planning for what you own. If you have loved ones, this plan naturally includes determining how those assets will be distributed to your loved ones during your lifetime and upon your death. The lesson of the third side is also about the “what ifs” of estate planning: Today, you’re a young couple with an infant and nothing but life insurance and what if…you win the lottery? Your parents left you with a substantial inheritance, which could have adverse tax implications for you, what if…there was a way you could roll it over? Your health is fine, your kids are adults and financially stable, your estate is sufficient to see you through retirement and what if…you don\’t own a home? You want to start taking a lot more time away from your small business, which you’ve successfully established and maintained over the last 15 years, what if…you\’ve been the sole proprietor all those years? This year, you’re taking advantage of the homestead exemption for your residence but you’re approaching retirement , want to give the house to your children, what if…you still need a place to stay? Like millions of others, you’re now behind retirement planning because Enron, the subprime mortgage, and the boyz on Wall Street took a chunk out of your 401(k), and what if…your partner becomes seriously ill? Today the federal estate tax exemption is $5.12 million; if Congress does nothing by December 31, 2012, what if …on November 30, you had sold your business for $8 million? Gran always said the third side is the least best or worst expected outcome. Consider the coin’s third side as you plan and you’ve planned just about as well as you can.
5 Smallbiz Takeaways from Torrents and Blizzards
In the wake of Superstorm Sandy was nearly unfathomable destruction of lives and businesses. However, the American spirit is resilient and, together, we\’re recovering. It is simply taking time. During disasters of that magnitude, we often chide ourselves for not being prepared or as prepared as we could have been because much more needs to be done long before the insurance check arrives. As an attorney and smallbiz owner who assists clients with preparing legacies and for potentially unpleasant events, the need to prepare for disasters isn’t lost on me. Smallbiz owners and their families who depend on the businesses\’ earnings are particularly vulnerable, so it\’s critical that we have a continuity plan for emergencies. Like the preparations outlined in a business plan that consider key operations and resources, so should your continuity plan. Below, are a few questions smalbiz owners should consider when devising a disaster recovery plan. Caveat: This list is by no means exhaustive, comprehensive, or tailored to any particular business. It just serves to help us prepare for the next storm. What would an all out disaster look like for your business? Consider the elements – wind, fire, earth, water – and how extreme amounts of any would impact your business operations, e.g., causing network outages, inventory destruction, and so forth. What are the procedures that would put your business back on track and, specifically, who will be responsible for what and when and how will they perform the necessary tasks?a. Who will lead the team or how will tasks be divided?b. Who will contact clients and vendors, and how? What if cell towers are down?c. Is the disaster just affecting your business or is it also affecting clients?d. What if the disaster occurs “after hours”?e. How will you assess the overall impact to your go forward? Which business resources or operations are likely to suffer more, e.g., are you a restaurant owner with no electricity but with a refrigerator and a freezer full of food? Are your clients local but your employees commute from long distances? Where are your critical client or customer files stored? What if you can’t access the building or your company’s network? Where exactly is your \”cloud?\” Can you temporarily relocate your business, where and do you have sufficient resources to do that? Indeed, this is a “short list” to help small business owners think about a particularly unpleasant topic. Yet, we smallbiz owners know that asking the important “what ifs?” often saves a bundle down the line, despite the torrential downpours, tumult in the streets, blazes, or blizzards. The Law Offices of Max Elliott continues extending its thoughts and prayers to families and businesses who experience disaster as winds of change forever sweep our world.
4+ Million Reasons and a Kid
It\’s sometimes difficult to understand the federal and state (for my purposes, Illinois) estate tax regimes and how they may affect you and your family. So this post and next week\’s post will try to explain visually and very simply, what the implications may or may not be. And this visual is so simple that it serves a dual purpose – it illustrates why some things should be left to graphic designers and not clipart. This week shows what can happen through December 31 of this year. Next week, you\’ll get to see 2013. 7 Points to Ponder: If you\’ve a minor child, then doing it yourself (DIY) is a bad idea; If you\’ve real property, then the Small Estate Affidavit probably won\’t work in Illinois; If you\’ve more than $100K in personal and/or real property, then a DIY will likely end with your loved ones in court; A trust should generally always include a will but court shouldn\’t be part of the deal; If loved ones end up in court with a sizable estate on a dispute regarding the estate\’s value, then they may also end up with a tax bill; The typical cost to probate a will in Illinois (take it to court) starts at about $2500; If the trust is valid and the estate is under $5.12M, then both Uncles should walk away empty-handed.
6 Not-so-Legal Ways to Protect Your Family
It seems there\’s a week, day, or month to celebrate every relationship and, accordingly, the third week in October has been designated \”National Estate Planning Week.\” Why we, estate planners, have a week dedicated to our practice area may, at first glance, seem self-aggrandizing. Yet, estate planning isn’t about lawyers but estate planning is about how individuals can protect their loved ones. Lawyers and other professionals simply guide the way. So instead of calling this week “National Estate Planning Week” maybe we should call it “National Family Fortification Week,” hmmm… Then again, I was going to suggest “National Family Planning Week” but that, too, could have been very misleading. Well, as they say, “a rose by any other name…” Throughout The Lotus Rules (fka the Shark Free Zone) are pieces explaining why estate planning is for everyone and not only the 1 percenters, discussions on basic estate planning documents, analyses on historical and pending cases and legislation involving relationship rights, and scary stories about car crashes and funeral home terrorists. However, I think this is the first post on point for fortifying your family, so welcome. Take simple steps early. If you’re a working young adult with loved ones, then you need a plan to keep potential serious illness or untimely demise from causing your loved ones even more grief. Your plan could be as simple as Powers of Attorney and life, health, and disability insurances. Tell your loved ones that they are indeed loved: “Mom, I won’t let you mortgage the house to pay for my medical bills and, here’s the agent information for all of my insurances.” Tears will probably flow but they\’ll be happy, proud tears. Teach your children the important lessons about life and money early, e.g., age 6, exemplify for them that living a happy and productive life is the goal and money is one tool that can help them reach that goal. Tailor your goals for you and your family; you\’re unique. An estate plan isn’t a goal; it’s another tool. Still, some wrenches are better than others. The same thing applies with respect to estate plans. A good estate plan just doesn’t involve obtaining life insurance, throwing funds in a retirement account, and creating a will. Those are good steps, but before taking those steps consider who will be your trusted advisors. Who\’ll take the time to get to know you and your family, work the plan, helping guide you and your family along over the next few decades? Take your time. OK, so you didn’t start out when you should have and you haven’t taken any steps yet, but holy crap, someone very close to you just passed away and surviving are kids, a dog, a spouse and…you want to do something NOW! Don’t. Well, don’t make any rash decisions, interview a few attorneys, talk to a few friends, chat with a few financial planners, and after the pain of losing a loved one has lessened, then start building your team. It will likely save you tons of resources down the road. Trust your team. Because of the attorney-client privilege issue, loved ones are not typically part of the initial consultation, but sometimes, if they\’re the cornerstone of the family or if a family business is involved, perhaps they should be. Make the initial meeting a \”let\’s get acquainted\” team meeting loved ones and professional advisors can give each other the \”sniff test.\” Discuss the broad strokes: wanting to ensure that the family is protected, that everyone knows who the “team” is, and create a comfortable, collaborative environment. Then later you can meet or speak with the attorney one-on-one regarding specifics. Estate planning is a technical practice with many complex moving parts, but some fundamentals have nothing to do with instruments and everything to do with being a loving family member.
A Seasonal Digression: Let\’s Not Forget the Judge
A funny thing happened to me on the way to the office. To put this note in proper context, you should know that I typically take a bus to work, a bus that spans the various socio-economic demographic areas of Chicago. I also usually carry an American Bar Association tote because it’s lined and wide – good for lunch, heels, and files. … On this day, I sat in a seat facing other passengers, one of which had boarded shortly after I did. He was obese, somewhat cognitively challenged but not as much as one might think. But the only way to know that was to either talk with him or associate with such people on a long-term basis. My mother told me to always “be nice” to strangers who speak to you, and I have had occasions to associate with vulnerable individuals people for years at a time. So … This large, huffing, puffing, scraggly-looking, strange-noise-making, gentleman finally puffed out rather loudly, but pointing softly at me, “Excuse me?!” “Yes?” “Your bag…It says (huff) ABA… Do you know (huff)…are you with…do you work for the ABA?” “No. I’m a lawyer.” “Oh. (Huff) Really?! So did you hear about that case in California where the guy beat up his girlfriend she hired an attorney, and he beat up the attorney, too, and then the judge let the guy go?!” “No, I didn’t hear about that…” “(Huff). Oh. Okay. Well, does the ABA recommend judges?” “Yes. The American Bar, Illinois Bar, and Illinois State Bar Associations rank judges as qualified or unqualified.” “Do you know where they keep the list? Where I can get a copy?” “You can phone the associations or go online. Also, I know the Chicago Sun-Times and Tribune typically publish the list before election day.” “Ok. Since Chicago lets your vote early will the list be out now?” “It should, but that’s a good question, which I don’t have the answer to.” “Ok. Thanks. I usually vote but skip the judges, which is wrong. Thank you.” “You’re welcome.” No, I didn’t forget to include the huffing. The gentleman actually calmed down as I looked squarely into his eyes and shared a meaningful conversation. Eventually, he moved to a seat in the very back corner of the bus and started making sounds again. A woman setting a few seats away from him moved even further away. This is not a statement of judgment – I don’t know her story either. Other folks also occasionally turned around to see who was making the noise. A few minutes later, it was my stop. As I got up to wait at the back door, I looked at the gentleman, thanked him for asking me about the voting process and also for asking good questions. We then wished each other a good day. Was he delusional? I don’t know. I’m a lawyer, not a psychotherapist. However, I do know that our conversation was one of the best I’ve had during this election season.
4 Occasions When a Will Won\’t Work
Recently, law students received the following hypothetical to answer: “Ms. Angel Booth has phoned you, Ms./Mr. Associate, and said, “Hi, this is Angel Booth and I want to set up a will because I want to completely disinherit my daughter.” What is your response?” After getting rid of the “deer-in-headlights” look, the students came up with a myriad of answers. Yet and unfortunately, this isn’t an uncommon scenario and for valid reasons. Furthermore, this occurs not just between parents and children, but between as many relationship pairings as you can think of. Still, this scenario goes to reason number 1. Using a will is a tenuous proposition at best if you’re trying to disinherit an heir. Admittedly, I’m being a tad hyperbolic, because it can work – after a lengthy court battle involving lawyers, doctors, and a ton o\’ family members. To disinherit an immediate heir, in Illinois, using a standalone will where the value of the estate is more than $100,000 in personal or real property will beg for a contest and bye-bye goes a large portion of the estate – in probate litigation. Mamma Mega Millions Marries Gorgeous. Yes, you’ve been smitten by the most gorgeous, decades younger, individual walking the planet. You’ve worked your petooty off as a single mother, put your children and your siblings through university, and now want to enjoy the million-dollar fruits of your labor with Gorgeous in the bounds of matrimony. You will probably be advised to have an airtight prenuptial agreement. You also want a will prepared, but a will that leaves most of those millions to Gorgeous will shout, “Probate Litigation!” and siblings, children, BFFs, third cousins, you name it will probably shout back with claims against the estate. Grandpa Disses Daughter-in-Law. So, while it can’t be proven that she murdered your dearly departed son, you, Grandpa, just don’t agree on anything with your daughter-in-law about your grandchildren. In your opinion, she isn’t parenting the way your loving son would have. Still, you’ve saved about $30,000 that you want the children, ages 7 and 8 to have upon your death. I previously wrote about the imprudence of leaving substantial financial gifts outright to minors. This is another example. In Illinois, if a minor receives a substantive gift, e.g., more than $10,000, the funds must be transferred into a restricted vehicle for the minor whereby the guardian or custodian is given control. Typically, the guardian or custodian is an adult member of the minor’s family, i.e., Dastardly Daughter-in-Law or a trust company. Thirty-thousand dollars isn’t usually sufficient for a trust company; thus, DDIL will likely gain control over the $30,000. Calling Dr. Cooper. Finally, setting aside seedy scenarios, let’s consider Dr. Amy Cooper. She has a thriving practice with three other doctors and has started accumulating a substantive portfolio. She doesn’t mind paying her fair share of taxes, but doesn’t want her beneficiaries to pay more than their fair share either. Leaving everything outright to her partner and children in a will, however, results in the very thing she doesn’t want.
3 Traps to Avoid Wrapped in \”No Charge\”
There I was, sitting in a seminar, as my colleague began lecturing on powers of attorney. I was actually interested in hearing the next presentation on a more complex matter but, of course, you never know what nuggets can be gleaned from a refresher on the basics. Plus, Illinois laws change all the time. So I sat and appeared interested while deciding what to cook for dinner when suddenly another panelist blurted out quite fervently, “I disagree! A durable power of attorney is not better than a springing power of attorney!” My ears perked up; no one loves a good shark fight better than a little guppy like me. Somewhere in the annals of The Shark Free Zone is an article or 2 explaining POAs. However, as a refresher, powers of attorney are authorizations to allow others to make important decisions on your behalf when you’re incapacitated. Property POAs allow agents to make financial decisions. Healthcare POAs allow agents to make healthcare decisions. Individuals think because these documents are free that they’re simple. Well…let’s return to the shark fight. A durable POA goes into effect upon signing and lasts through incapacity until death. A springing POA has a designated beginning and ending, even though the agent signs the document. For example, the Illinois Statutory Power of Attorney forms suggest one designates a springing term to begin or end upon the determination of incapacity by a court. This suggestion shows why such basic forms aren’t so basic, even though free, and why they should be carefully reviewed before making the designations and taking the suggestions. Trap 1: Waiting until a court determination of incapacity in order to act under a property POA may result in financial mayhem if a loved one is too ill to pay the bills. Occasionally, individuals will say, “I don’t need a property POA because my child is also on my bank account with me.\” Trap 2: When a person is a joint owner on your bank account, that person’s creditor or creditors can place a lien or liens on the whole account. People also sometimes ask, “I have a living will, so do I really need a healthcare POA?\” If I were the smart-ass sixteen year-old I once was, then my answer would be, “Well, if the only time you want your agent to act is if there is a question about when to pull the plug, then no.” However, I am very far from being 16, thank goodness, and so I answer accordingly: A healthcare POA can include living will language and more. You can give you agent the authority to talk with doctors about your medical allergies, your medical history, and more. Trap 3: A living will only applies to individuals with terminal illnesses or who are in a vegetative state. A lot more can happen to one between a cold and a coma, and it helps you and your loved ones if you’re prepared for that “in-between-time.” Free doesn’t necessarily mean easy and suggestions are not rules.
4 Points to Ponder for Your Peace of Mind
The house is quiet. The treat you bought yourself is still in the fridge. You and your spouse have a dinner date in the middle of the week. Your cell phone is no longer a constant reminder of the triple life you lead: companion, professional, and parent. You’re a tad stiff in the morning, but nothing that a few asanas and a hot cup of coffee won’t cure. Plus, there’s nothing wrong with a little stiffness after the decades you’ve spent working out, right? Right. Your mind continually and comfortably drifts off to favorite travel destinations or that mid-week date during meetings you must attend in order to be a “sober second” when asked; and you’re getting asked less and less, thank goodness. Life is . . . pretty good. So, while you have some time on your hands, allow me to provide you with 4 points to ponder related to that pretty good life. Your children are out of the house for good, leading their own lives with their own families. Does this mean you have grandchildren to enjoy and then return to the fray? If so, have you thought about providing or helping to provide for their education? Your career has moved right along or your wok has become more and more tolerable. You’ve gone this far, so you’re in it for the long haul. Have you thought about what to do if, working near the end of the long haul, you are injured for a substantial length of time? Can you afford it? Do you have long term disability insurance or a strategy viable to ensure that you’ll still be able to assist with educating the little brutes or brutesses once they’re about to enter high school or university? The end of the long haul is clearly in sight. Accordingly, the previous point bears revisiting. Also, do you have a strategy for making it through the “Golden Years” comfortably? Do you know how you’re going to draw down your retirement funds so to maximize your money and minimize your taxes? People are living longer now so our resources must keep up. Will you be able to just sit on that old porch swing and smile? Family isn’t charity; it isn\’t a cause. Family is a wonderful responsibility and gift shared amongst its members. However, as those responsibilities, even to ourselves, wane and are fulfilled, how have we shown responsibility toward our community? Is there an organization, a group, a center whose work you admire and would like to try to help ensure the work and programming will continue? You see, estate planning isn’t just about planning for death. These 4 points to ponder prove it. How are you going to (1) help family, (2) help yourself heal peacefully, (3) protecting your porch swing, and (4) helping your community?
Why We Provide Wills for Heroes…
As serendipity would have it, my colleague, Stephen Hoffman, has recently posted a piece I wrote for him, leaving me with empty space, if I so choose, to fill with something a little different and something a little personal and I so choose: Congratulations to my \”brother,\” Kevin Bell, who retired today, with a full pension, from his position as a Detective for the Chicago Police Department. When Kevin received his first opportunity to request a patrol assignment, more than 20 years ago, he requested a patrol in the roughest, most gang-infested neighborhood on Chicago\’s south side. He knew that the African-American community needed to see and understand that all police weren\’t against them, but were sincerely patrolling to protect them. Kevin was shot at point blank range during that first assignment and survived because of his vest. He subsequently returned to the same assignment, undeterred. When we were out together for an evening of fun with friends and family, whatever side of the city we were on, if there was a disturbance, a person having difficulty, Kevin was there and helping out because he understood that, as a police officer for the City of Chicago, he was never really \”off duty.\” He was passed up for detective often; some say it was because of his ethnicity. Nevertheless, he stayed the course, undercover or in open blues, and was finally awarded his detective shield. Kevin has protected our streets – north and south, east and west – for decades. I pray that there is another officer, just as dedicated, moving up in the CPD ranks. But even if there is, I can\’t be as proud of him as I am today. An African-American man, with a private Catholic school background and a bachelor’s degree from a well-respected university, who consciously and intentionally decided to protect our streets, our homes, and our communities as his career instead of doing something more lucrative and safe, is a man who deserves, at the very least, a word of thanks from us all. Thank you, Detective Kevin Bell (Ret.), my cousin, my brother, my hero.