Second Marriages, Drunken Debauchery, & Children Left Behind
Often couples with no children think that they don’t need a will because their spouse will fulfill their wishes with respect to extended family. Sometimes it works; often it doesn’t. Though we can hope, we simply cannot predict what the future will hold for us or our loved ones, which is why planning is critical. Incapacity can strike in more ways than one leaving our extended family members or favorite charities empty: Gina and Lisle were in their second marriage. Gina was a widow when she and Lisle met. Her first husband was a generous man, with no extended family, so he left Gina the bulk of his estate. Lisle’s ex-wife retained a very good divorce attorney, so she ended up with nearly everything he owned, including the shirt off his back. Fortunately for Lisle, his ex found a wealthier second husband and Lisle was eventually able to buy a new shirt. Neither Gina nor Lisle had children but both had siblings and Gina had nieces and nephews who captured her heart. Lisle only had one brother, Jake, a scoundrel and leech, living off relatives and women who took pity on his substance abuse and inability to stay employed for longer than a couple of weeks.* One day, Lisle received a call from a hospital. Gina had been admitted after slipping and falling on an icy intersection crosswalk. She broke her ankle as a result of the fall. Lisle arrived at the hospital and the doctor told him that while treating Gina, they noticed she had an irregular heartbeat. They wanted to examine the cause and decided to keep Gina for a few days and run tests during that time. After running the tests, doctors determined that Gina had severe blockage but before the hospital could treat the blockage, Gina developed a bacterial infection. And this bacteria was very resistant. The bacteria was so resistant and Gina’s immune system so compromised by the blockage that she never recovered and died in the hospital. Gina left no will or trust but had a verbal understanding with Lisle that part of their combined estate was to go to Gina’s nieces and nephew to assist with their college education. However, as Lisle floundered in grief after Gina’s passing and became gravely ill himself a little more than a year after Gina\’s death, he fell victim to Jake’s undue influence and the nieces and nephews never got a dime. Sometimes it’s not your incapacity but the disability of others that may undermine your wishes if you haven’t a solid plan in place. *Whether he realizes it or not, Jake is incapacitated with respect to Illinois law, whose definition of incapacity includes, “because of gambling, idleness, debauchery or excessive use of intoxicants or drugs, so spends or wastes his or her estate as to expose the person with disability or dependents to want or suffering.”
Marriage Is Not a \”Cell Phone\”
Reading the New York Times commentary and analysis of the Supreme Court\’s hearing on the Prop 8 case involving California\’s same-sex marriage issue, what struck deeper than anything else was the seeming reluctance of the Court to do what it is appointed to do: protect the rights of those United States persons who have been discriminated against, marginalized, or otherwise made to suffer injustice. While an \”all-or-nothing\” choice can be frustrating and using the force of law to make a large minority accept a trend that improves the civil rights of thousands instead of ruling on a decision where a large majority has issue with whether the hunting of birds flying over a particular state violates an international treaty, U.S. Supreme Court justices are appointed for just that reason. It has always been my understanding that the Court, because it is the final arbiter of American justice, is supposed to make frustrating, difficult decisions when justice calls for such decisions to be made. What was the majority\’s opinion when race was removed from the de facto \”definition\” of marriage in Loving v. Virginia? A U.S. President and 118 members of Congress decided to define \”marriage\” and the distribution of more than 1000 federal benefits that accompany this definition for millions of U.S. citizens. So, is the argument that because we don\’t have a 2:1 margin in the country supporting same-sex marriage that we are stuck with this draconian definition that is based on \”history,\” and that history\’s rationale is that the purpose of marriage is procreation? Are we not in 2013 with the Internet and assisted reproductive technology? And, speaking of technology, \”newer than cell phones\” is an insulting comparison to a relationship with all the hallmarks of a marriage except the label and, more importantly the rights that are afforded that \”label.\” The cell phone analogy could arguably be found swimming in the ocean of reductio ad absurdum, which is arguably surprising coming from a Justice of the United States Supreme Court. As Justice Kennedy pointed out, more than 40,000 children in California alone are subjected to the marginalization of their families by a law that has no place in a civil society. The Justice referred to the emotional stigmatization these children face, but what about the financial benefits that the federal government attributes to married couples? If a child is living in a home with same-sex parents who, e.g., cannot take advantage of filing jointly on federal tax returns and discounts provided in medical and other benefits via ERISA and other government agencies, then money is being taken away from that family and, therefore, that child. So while I applaud Justice Kennedy for directing the public\’s attention to the children who are adversely affected by the so-called Defense of Marriage Act (DOMA) and its proponents, in my authentically humble opinion, the argument should have and could have gone further than what appears to be a gratuitous tug at the heartstrings. Becoming a lawyer, I was told and always take to heart that those with great gifts have an equally great responsibility and must not turn away from that responsibility when it calls for making difficult choices, such as whether to provide all U.S. citizens with all of the rights of marriage or no U.S. citizen with a cohesive, civil, and just legal foundation for loving, committed relationships.
Popping the Question, Prenupts, and Powers of Attorney
Valentine’s Day is quickly approaching and thousands of individuals will be “popping the question” and getting the question popped at them. This is, at least what jewelers around the country have been spending all those advertising dollars on. It’s also what those individuals wanting to be “popped,” so to speak, are also hoping for, and my hopes are with you. In celebration of that bended knee, larger than life smile, and mother’s joyous tears, I offer a few points to ponder after the popping and before the party planning. The points are sobering but will help to provide years of “bubble and squeaky” happiness long after you’ve settled in with each other. If you’re not cohabiting, have “the money talk.” If you are living together and haven’t had the money talk, tsk..tsk… If you are cohabiting and have had it, good for you! and have the money talk again. If there is a large disparity of income or both of you are very affluent, consider a prenuptial agreement. It is commonplace in such scenarios so no one should feel offended if it is mentioned or requested. The basic rule is that both parties should retain their own attorneys to draft and review the document, which should be signed before the formal engagement celebration, if there is one. If you’re cohabiting obtain life insurance and powers of attorney. If you’re not living together but engaged, obtain these items before going on the honeymoon. If you’re on relatively equal financial footing economically and the families are smiling, when you return from the honeymoon, add a will to your estate plan. If even one close family member is frowning, turn that frown upside down by promising to leave him or her something in your will and then add an in terrorem clause. Better yet, have a trust prepared with a pour-over will attached and leave him or her whatever you like with or without the in terrorem clause. Love means planning a relationship founded on pragmatic principles as well as butterflies in the tummy.
3-Cubed Lessons for Families & Lawyers who Serve Them
As the year draws to a close, reflection is a natural activity. So, below are reflections about relationships that are key to “family work,” whether you’re working on yours or working for someone else’s. Reconnecting. Most of us have various “families,” including the one into which we were borne. High school or college classmates who take the journey with us from late childhood into early adulthood is one example. Coworkers who eventually become close friends is another. Neighbors who share the block on which we raise our children and wave to the mail carrier is yet another. Therefore, staying connected or reconnecting with our several families provides us with multiple layers of protection, comfort, and enjoyment. Relationships – good and bad – take time. Even in a most loving family, a newborn crying, pooping, and sleeping takes adjusting to. We all have unique cycles that require a little getting used to. The question is, however, how soon can we identify relationships that aren’t beneficial so that the extraction is less difficult. Logically, identifying this point sooner rather than later is key or else we may end up paying attorneys a great deal of money to unravel a ball of thorns that could have been prevented. Women matter. We work just as hard as men, if not harder. But we’re paid less and that monetary standard reflects our diminished value in the eyes of our employers. That diminished value is based on the fact that we bring and nurture life – eventually more employees – and must take time off to do so. Continual and de facto ignoring women\’s value will cost employers, advisors, and society dearly. So it behooves all of us to recognize the true worth of our mothers, daughters, wives, partners, and sisters. Team estrogen is moving forward, making powerful decisions about family, community, and nation. Forced networking sucks. Understanding someone’s value system, work ethics, and motivation takes more than the 30-minute coffee klatch. I value my friends, family members, and colleagues so I don’t want to waste their time and the time of others with referrals who are a bad fit. Consequently, even if you’re just a referral source, that doesn’t change the fact that the first rule of networking is grounded in Lesson #2. Generations are unique. Matriarchs, patriarchs, other leaders, and managers should recognize that each generation has its own set of rules. Passing on the family fortune with a heavily detailed blueprint created by Great-Grandfather Algernone will probably not bode well for the fortune or the family. Algernone\’s framework may work with regular retrofitting, but the details must be fleshed out using the world as it exists in the eyes of the current generation and possibly next generation. If not, just leave the family fortune to the family pooch. Reach back. At the first glimpse of success, take the hand of a junior and bring him or her along. Make the time and take the time. Even if you didn’t see it; somebody had a hand in making your bootstraps. Thank you. Sincerely articulated, that 2-word sentence carries more gravitas than Olympic weight-lifters. Causes are everywhere – for a reason. Millions need food, shelter, clothing, books, medicine, water, and peace. Causes are everywhere – for a reason. Marriage doesn’t make the family, authentic relationships do. “She has hers; I have mine; what we build during our relationship will be ours.” This is a favorite mantra among divorce attorneys and it wreaks havoc for estate planners later when intent changes but the walls were never torn down. We must be mindful that where there are people and relationships there is overlap and trying to build one wall may undermine what could have been a solid and lasting foundation.
Einstein\’s Theory the \”Fiscal Cliff-mas\” Ain\’t
It is unlikely that Congress will come to agreement before January 1, 2013. Ergo, the middle class will take a hit – a number of hits. It will be challenging and we will prevail. We will feed, shelter, and educate our children; we will grow our businesses, careers, and gardens; and we will laugh, cry, and argue. There may be a pack of chewing gum in the stocking, but there will be no coal. There may be a used candle lit each day, but a candle will be lit. Prayers will be offered morning, noon, and night. Chanting and asanas will occur. Quantum mechanics, string theory, and Einstein\’s Theory of Special Relativity will continue to be studied and used as a basis to explain existence. Though Einsteinian intellect isn\’t required, Congress doesn\’t get it while dozens of leaders of major corporations do. These leaders, like the middle class, understand and support the need and the plans seeking tax increases on corporations and the very affluent, which I will define here as the top 2% of our country\’s population. And we in the middle class know that spending cuts are also necessary and we\’re willing to decrease funding for valuable programs. We already have and are still willing to go further but not without some give from the other side. Accordingly, we\’ll take care of our families and businesses the best way we can until Congress realizes that political posturing, scare tactics, and continued polarization and gridlock does not work for our country. Furthermore, kudos to the women engaged in this conversation. I\’ve heard repeatedly, from fiscally conservative women and women who are as liberal as liberal can be: \”Me and my family will take the financial hit; we\’ll work with that. Just don\’t diminish our civil rights or the rights of others because those rights are more important than money.\” That may sound \”warm and fuzzy\” to some, but the rights of others include the right to be recognized as a family, the right to determine how your family will grow in number, the right to determine how your child will be educated, and the right to determine how, where, and if you can practice and express your spiritual beliefs. Ergo, \”warm and fuzzy\” and critical are not mutually exclusive terms that can be applied to legal rights. So, despite the posturing and \”warm and fuzziness,\” we know this isn\’t quantum theory and when asked my thoughts, considering the millions of families who will be impacted but are resilient, with great umbrage toward Congress but great pride in the American spirit, I simply repeat the prudent words of a colleague who stated on a list serve during a mucky debate about guns and religion from which he refrained to participate, \”Carry on.\”
3 Ways A Will Is Not Cake (de Gateaux)
One primary reason many individuals in Illinois use a revocable living trust is to avoid the court process known as probate. Why do people want to avoid probate here? Well, probate is: Time consuming, requiring at least 7 months, typically 13 – 14 months, and sometimes longer to complete; Costly, at least $2,500 if there is no litigation, i.e., a claim made against the estate; and Public and so anyone in the public domain can view for himself or herself what a cheapskate the testator was or who got disinherited. However, even if your beneficiaries can wait a year, no claims will be lodged, $2500 is un morceau de gateaux, and no one gets disinherited, a few additional reasons make trusts more attractive than wills, especially with respect to gifting: You want to ensure your children or grandchildren have an opportunity to attend all 4 years of college and a good graduate program without financial aid angst. Trusts provisions known as “staggered mentoring” provisions and a separate educational subtrust help in this situation. If you and your spouse want to leave the family residence to your children, but you still want to maintain control of the residence during your lifetime, a QPRT (“qualified personal residence trust”) may do the trick. If you live in a state that does not match the federal estate tax regime, such as Illinois, and you want to leave more to the children by minimizing the amount of estate taxes your beneficiaries will have to pay both Uncles – Sam and Quinn, instead of the normal two-pot trust, a three-pot trust may work. As with most estate planning vehicles, trusts also have disadvantages in gifting, such as trust fees and administrative costs if the estate is very large. Additionally, unless the gift is given completely away, or you opt for an asset protection trust, it will be more difficult to use federal and state lifetime estate tax exemptions. Still, the advantages of having a trust, for many Illinois families, outweigh the disadvantages irrespective of the income bracket because every family is unique and minimizing taxes isn’t the only type of protection afforded by trusts. Disclaimer Woman Caveat: The materials provided in this blog, The Shark Free Zone, and throughout the website for The Law Offices of Max Elliott, Ltd. are for educational purposes only. By reading these materials, no attorney client relationship has been established. Additionally, because of the very complex nature of estate planning, one should not attempt to create or draft a trust on your own but seek the counsel of an estate planner. Finally, IRS Circular 230 Notice: \”To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code of 1986, as amended, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.\”
Preventing Family Feuds for the Smallbiz Owner
At a Chicago Bar Association’s Solo/Small Firm Committee Meeting, I gave remarks on why estate planning is not a “basic” endeavor. A favorite example was a about Ms. Small Biz (Ms. SMB) who was married to Mr. Manager and had College-Age Children. It’s a favorite example because it identifies the issues contemporary families comprised of smallbiz owners may confront with respect to business planning, disability, death, and succession planning: Ms. SMB is the sole proprietor of a small, lucrative, and growing graphic design firm. She has 3 employees in addition to herself, and her son works part time during the school-year and full-time during the summer. Her daughter, however, has no interest in the business. But Ms. SMB has great vision for the business with a Pinterest page, a blog, and even a design auction website. Her husband is satisfied with his position as a midlevel manager with a software company. So the family is happy and enjoying its status. For several years now, Ms. SMB has been consistently reaping the fruits of 10 years of hard work and wants to ensure that in the event of her disability or death, her family and business are safe and wrapped up in a neat little package. So how should the estate planning attorney assist? First, we should assess the following: her stand-alone net worth; when the last time, if ever, was her business valued; what is the best legal entity for her business (at this point it should not be a sole proprietorship); who will run the business – digital assets and all – if she suffers a long-term illness; upon her death does she want the business sold or transferred to her son or her son and employees, or family and employees; who will wind the business up if she wants it sold; and if it is sold who gets what and in what form? Undoubtedly, Ms. SMB will need a will or a trust. She will also need to consider the tax implications of the business entity, e.g., LLC, S-Corp, FLP, she decides on. And what about those digital assets; do we need to consult with an IP colleague? However, what is equally important is her decision about what to do with the business at her death. This decision will weigh heavily on her attorney’s counsel about choosing fiduciaries. For example, will that person understand her business, can he or she successfully execute a buy/sell agreement, and can he or she manage winding up the business? Additionally, she wants to provide for both children equally. But giving half of the business’ financial interests to the daughter when the daughter has shown no interest may start a family feud between the siblings. Perhaps life insurance may help and may help in two ways. Once, the attorney ascertains the value of her business and, subsequently, her estate, life insurance can help lower the value of the estate for estate tax purposes and equalize the gifting between her two children. This example shows that smallbiz owners have a several critical decisions and options to make and consider at the start and near the end of their involvement with their businesses. Also, because the decisions made in the beginning can significantly affect the options with respect to succession planning, new smallbiz owners should seek to create a business plan that isn’t a stand-alone plan, but one that also encompasses estate planning. Ms. or Mr. Smallbiz & Family is just one of the faces of today’s family and the multiple faces and overlaps of today’s family shows why estate planning isn’t a “basic” area.
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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.
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.