Lessons Learned From Aretha Franklin’s Passing

Aretha Franklin, also known as the Queen of Soul, recently passed away at age 76. She had amassed a fortune estimated at over $80 million. (And experts agree that figure will continue to rise). Even though her long-time attorney had reportedly advised her for years to set up a trust, she never did.

Who Inherits

Because she had no will, her home state of Michigan will essentially write her will for her. Since at her death she wasn’t married, her children will likely inherit her assets outright. And they will inherit much less than they would have if Ms. Franklin had properly planned. And the charities or causes that Ms. Franklin supported over the years aren’t entitled to anything.

Without a will, Ms. Franklin didn’t get to choose who will be in charge of her estate, including who can control her music catalog. Her children, assuming they can agree, will decide who will be in control. And all of this is going to be played out in public view, including the valuation of her assets, her music catalog…. everything.

No Tax Planning

Because Ms. Franklin didn’t do any tax planning, by the time her estate gets settled, there’s going to be a lot less left of it. The federal estate tax emption is $11.18 million per person. Because the estate is worth over $11.18 million, the federal estate tax applies. (At least her home state of Michigan doesn’t have an estate tax). So assuming she didn’t use any of her exemption during her lifetime by making taxable gifts, there’s going to a big estate tax bill. The estate tax is calculated at a flat 40 percent rate!

Through proper estate planning, Ms. Franklin could have helped preserve the fortune that she worked so hard to build. For example, charitable planning could have helped reduce the estate taxes owed. Also, with proper planning, such as through life insurance, she could have created liquidity to pay any taxes due, so they wouldn’t have to come out of her estate.

Inheritance At Risk

Since her children are going to inherit her fortune out right, anything that goes to them will be included in their own estate for estate tax purposes. Also her children’s inheritance may be available to creditors or to their spouses if they get a divorce.

There’s a very high chance that this estate is going to take years to settle. Look at other famous celebrities like Prince who passed away without a will. Prince passed away over 2 years ago, and his heirs have still not received a penny of his estate.

There’s Hope

Hopefully, Ms. Franklin’s children will be able to focus on preserving their mother’s legacy, which is more than just the value of her estate. Not only was she a music and style icon, she impacted the civil rights and women’s movement. Even though Ms. Franklin herself didn’t implement an estate plan, her children have the chance to make it right for their own families. And now they have a chance to create proper legacy plans for themselves that will ensure that Aretha Franklin’s legacy will live on and continue to impact audiences over the world for many generations to come.

We Can Help

Not only can our firm help you ensure that your final wishes are honored, we can help preserve what you worked so hard for. And we can help keep your family out of conflict and out of court in the event of your death or incapacity.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you’ll get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Begin  by calling our office today to schedule a Planning Session. Mention this article to find out how to get this $500 session at no charge. Call us today at (813) 514-2946 to get started.

Do You Have An Ira? Avoid This Major Mistake.

Some folks think that because they’ve  named a specific heir as the beneficiary of their IRA in their will or trust that they don’t need to list the same person again as beneficiary in their IRA paperwork. Because of this, they often leave the IRA beneficiary form blank or list “my estate” as the beneficiary.

But this is a major mistake—and one that can lead to serious complications and expense.

IRAs aren’t like other estate assets

Your IRA is treated differently than other assets, such as a car or house. Your IRA beneficiary designation controls who gets the funds, no matter what you may indicate elsewhere.

So make sure that your  IRA’s beneficiary designation form is current and lists the correct beneficiary. It’s important to get this right. For example, if you listed an ex-spouse as the beneficiary of your IRA and forget to change it to your current spouse, might get the funds when you die, even if your current spouse is listed as the beneficiary in your will.  What if you want to do more than just give your IRA money to someone out right? Well, if you want your beneficiaries to inherit your IRA funds through a trust, we can help you.

Probate problems

If you mess up your IRA beneficiary form, you could subject your beneficiaries to a court process called probate. Probate costs unnecessary time and money.

When you name your desired heir on the IRA beneficiary form, those funds will be available almost immediately to the named beneficiary following your death. And you can protect that money from creditors.  But if your beneficiary has to go through probate to claim the funds, he or she might have to wait months, or even years, for probate to be finalized.

Plus, your heir may also be on the hook for attorney and executor fees, as well as potential liabilities from creditor claims, associated with probate, thereby reducing the IRA’s total value.

Reduced growth and tax savings

Another potential big problem is that your heir will lose out on an important opportunity for tax savings and growth of the funds. This is because the IRS calculates how the IRA’s funds will be dispersed and taxed based on the owner’s life expectancy. Since your estate is not a human, it’s ineligible for a valuable tax-savings option known as the “stretch provision” that would be available had you named the right beneficiary.

This means the beneficiary who eventually gets your IRA funds from your estate will have to take the funds sooner—and pay the deferred taxes upon distribution. This limits their opportunity for additional tax-deferred growth of the account and requires him or her to pay a potentially hefty income tax bill.

A simple fix

Fortunately, preventing these complications is super easy. Just be sure to name your chosen heir as beneficiary in your IRA paperwork (along with a couple alternate beneficiaries). And remember to update the named beneficiary if your life circumstances change, such as after a death or divorce.

We can help you select the ideal beneficiary for your IRA and other estate assets. We also have systems in place that will ensure your designated beneficiary form is always up-to-date with the correct heir listed should your life circumstances dictate a change. Call us today to get started.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make the best choices for the people you love. You can begin by calling our office today to schedule a Planning Session and mention this article to find out how to get this $500 session for free.

I Don’t Have Kids, So Why Do I Need Estate Planning? Part 2

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Last time, we shared the first part of our series on the importance of estate planning for those without kids. If you haven’t read it yet, you can do so here. Here in part two, we discuss the other risks involved for those who forego estate planning.

Someone will have power over your health care

Estate planning isn’t just about passing on your assets when you die. In fact, some of the most critical parts of planning have nothing to do with your money at all but are aimed at protecting you while you’re still very much alive.

Advance planning allows you to name the person you want to make health care decisions for you if you’re incapacitated and unable to make decisions yourself.

For example, if you’re temporarily unconscious following a car accident and unable to give doctors permission to perform a potentially risky medical treatment, it’s not always clear who’ll be asked to make that decision for you.

If you have a romantic partner but aren’t married and haven’t granted them medical power of attorney, the court will likely have a family member, not your partner, make that decision. Depending on your family, that person may make decisions contrary to what you or your partner would want.

Indeed, if you don’t want your estranged brother to inherit your property, you probably don’t want him to have the power to make life-and-death decisions about your medical care, either. But that’s exactly what could happen if you don’t proactively plan.

Even worse, your family members who have priority to make decisions for you could keep your dearest friends away from your bedside in case of your hospitalization or incapacity. Or family members who don’t share your values about the types of food you eat, or the types of medical care you receive, could be the ones making decisions about how you’ll be cared for.

You need to do estate planning in order to name health care decision-makers for yourself and provide instructions on how you want decisions made.

Someone will get power over your finances

As with health care decisions, if you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. The way to avoid this is by naming someone you trust to hold power of attorney for you in case of your incapacity.

Durable power of attorney is an estate planning tool that gives the person you choose immediate authority to manage your financial matters if you’re incapacitated. This agent will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting your Social Security benefits, selling your home, as well as managing your banking and investment accounts.

Because these powers are so broad, it’s important that you only give this power to someone you absolutely trust, and ideally, with the guidance of a lawyer who can watch out for your best interests.

The fact that durable power of attorney is already in effect when you’re incapacitated means your agent can begin handling your finances immediately, without waiting for a judge’s decision. Since courts are notoriously slow, this quick access can be immensely beneficial to ensure your bills get paid on time and you have the funds available when you need them.

Without signed durable power of attorney, your family and friends will have to go to court to get access to your finances, which not only takes time, but it could lead to mismanagement and even the loss of your assets should the court grant this authority to the wrong person.

Furthermore, the person you name doesn’t have to be a lawyer or financial professional—it can be anybody you choose, including both family and friends. The most important aspect of your choice is selecting someone who’s imminently trustworthy, since they will have nearly complete control over your estate.

Given all of these potential risks, it would be foolish to ignore or put off these basic estate planning strategies. Identifying the right planning tools is easy to do, and begins with a Family Wealth Planning Session, where we can consider everything you own and everyone you love, and guide you to make informed, educated, empowered choices for yourself and your loved ones.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling Myrna’s office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $500 session for free.

I Don’t Have Kids, So Why Do I Need Estate Planning? Part 1

It’s a common misconception to think that if you don’t have kids, you don’t need to worry about estate planning. But the fact is, it can be even MORE important to do estate planning if you don’t have kids.

Some of the common thoughts behind this mistaken belief may take one of these forms:

“If I die, everything will pass to my husband anyway, so why bother?”

“I’m single and I’m not rich, so who cares who gets my few meager assets?”

“Estate planning is an expensive hassle and it doesn’t even benefit me because I’ll be dead, so I’m better off letting a judge handle things.”

Consider these three inconvenient truths before you decide to skip estate planning.

Someone will get your stuff

Whether you’re rich, poor, or somewhere in between, in the event of your death everything you own will be passed on to someone. Without a will or trust, your assets will go through probate, where a judge and state law will decide who gets everything you own. In the event no family steps forward, your assets will become property of your state government.

Why give the state everything you worked your life to build? And even if you have little financial wealth, you undoubtedly own a few sentimental items, including pets, that you’d like to pass to a close friend or favorite charity.

However, it’s rare for someone to die without any family members stepping forward. It’s far more likely that some relative you haven’t spoken with in years will come out of the woodwork to stake a claim. Without a will or trust, state laws establish which family member has the priority inheritance. If you’re unmarried with no kids, this hierarchy typically puts parents first, then siblings, then more distant relatives like nieces, nephews, uncles, aunts, and cousins.

Depending on your family, this could have a potentially dangerous—even deadly—outcome. For instance, what if your closest living relative is your estranged brother with serious addiction issues? Or what if your assets are passed on to a niece who’s still a child and likely to squander the inheritance?

If your estate does contain significant wealth and assets, this could lead to a costly and contentious court battle, with all of your relatives hiring expensive lawyers to fight over your estate—which is exactly what’s happening with Prince’s family right now.

Finally, even if you have a spouse and your assets are passed to him or her, there’s no guarantee they’ll live much longer than you. In the event of their death without a will or a trust, everything goes to his or her family. What if you don’t want your spouse’s sister, brother, parents (or the new spouse he or she marries after you die) inheriting what you’ve worked so hard for?

Next time, we’ll continue with part two in this series on the value of estate planning for those without kids: how you could be leaving yourself at risk.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why she offers a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling Myrna’s office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $500 session at no charge.

DIY Will Dangers

More than ever, DIY wills are becoming more common. It’s understandable that with resources like Google, many of us are turning to the internet for information and resources. However, many people don’t realize how risky it is to create DIY legal documents because simply put, we don’t know what we don’t know.

Here’s what you need to know before you decide to create your own will or use an online service. While online companies are making legal services more accessible, they’re also doing their customers a disservice, as evidenced in the recent case of the Estate of Ms. Aldrich heard in a Florida appeals court.

Ms. Aldrich created her will using a downloaded template from E-Z Legal Forms without the advice and guidance of an estate lawyer. It appears, based on the forms she created herself, that she wished to leave specific assets to her sister, and then to her brother if her sister died before her. Her sister did die, but Ms.Aldrich, not realizing this would affect her own assets someday, did not properly update her will.

The assets specifically named in the will went to Ms. Aldrich’s brother, but the template she used did not include a residuary clause, which establishes where unnamed assets should go. As a result, the unnamed assets Ms. Aldrich acquired after she created her will passed under Florida’s intestacy laws and into the hands of her nieces, children of another pre-deceased sibling, instead of to her brother, as she seemed to have wanted.

Unfortunately, because she did not consult a lawyer, instead of leaving her brother her assets, Ms. Aldrich left him with a long, expensive, and otherwise unnecessary court battle. Services like E-Z Legal Forms do not provide personal legal advice or ongoing legal support. Had Ms. Aldrich worked with an estate lawyer to design and then update her plans, she would have left her brother an inheritance of love, rather than a nightmare of time, money and heartache.

This is an important lesson to learn because people too often create their will without having a lawyer review it and then forget to update it as loved ones pass on and new assets are acquired. In the end, their wishes aren’t honored because they weren’t clearly defined, leaving the matter in the hands of the probate court.

How to Collect Life Insurance Policy Proceeds

During the time of stress and grief after losing a family member, the last thing you want is to have a hard time accessing the proceeds of a life insurance policy….especially if you need financial support for living expenses or funeral expenses. That’s why it’s important that you understand how you can access those insurance proceeds as quickly and easily as possible.

We’ve outlined the typical procedure for claiming and collecting life insurance proceeds, along with discussing how beneficiaries can deal with common hiccups in the process. However, because all life insurance policies are different, and some involve more complexities than others, it’s always a good idea to consult with our firm if you need extra guidance.

Filing a claim
To start the life insurance claims process, you first need to identify who the beneficiary of the life insurance policy is—are you the beneficiary, or is a trust set up to handle the claim for you?

We often recommend that life insurance proceeds be paid to a trust, not outright to a beneficiary. This way, the life insurance proceeds can be used by the beneficiary, but the funds are protected from lawsuits and/or creditors that the beneficiary may be involved with—even a future divorce.

If the trust is the beneficiary, contact us so that we can create a certificate of trust that you (or the trustee, if the trustee is someone other than you) can send to the life insurance company, along with a death certificate when one is available.

In any case, you (or the trustee) will notify the insurance company of the policyholder’s death, either by contacting a local agent or by following the instructions on the company’s website. If the policy was provided through an employer, you may need to contact their workplace first, and someone there will put you in touch with the appropriate representative.

Many insurance companies allow you to report the death over the phone or by sending in a simple form and not require the actual death certificate at this stage. Depending on the cause of death, it can sometimes take weeks for the death certificate to be available, so this simplified reporting speeds up the process.

From there, the insurance company typically sends the beneficiary (or the trustee of the trust named as beneficiary) more in-depth forms to fill out, along with further instructions about how to proceed. Some of the information you’re likely to be asked to provide during the claims process include the deceased’s date of birth, date and place of death, their Social Security number, marital status, address, as well as other personal data.

In Florida, the vital records office creates the death certificate, and it will either send the certificate directly to you or route it through your funeral/mortuary provider. Once you’ve received a certified copy of the death certificate, you’ll send it to the insurance company, along with the other completed forms requested.

Multiple beneficiaries
If more than one adult beneficiary was named, each person should provide his or her own signed and notarized claim form. If any of the primary beneficiaries died before the policyholder, an alternate/contingent beneficiary can claim the proceeds, but he or she will need to send in the death certificates of both the policyholder and the primary beneficiary.

Minors
While policyholders are free to name anyone as a beneficiary, when minor children are named, it creates serious complications, as most insurance companies will not allow a minor child to receive life insurance benefits directly until they reach the age of majority. And the age of majority varies between states—with some it’s 18, and others it’s 21.

If a child is named as a beneficiary and has yet to reach the age of majority, the claim proceeds will be paid to the child’s legal guardian, who will be responsible for managing those funds until the child comes of age. If a minor is named you’ll need to go to court to be appointed as legal guardian, even if you’re the child’s parent. This is why we recommend that you never name a minor child as a life insurance beneficiary, not even as a backup beneficiary.

Instead of naming a minor child as a life insurance beneficiary, it’s usually better to set up a trust to receive the proceeds. By doing that, the proceeds would be paid into the trust, and whomever is named as trustee will follow the steps above to collect the insurance benefits, put them in the trust, and manage the funds for the child’s benefit.

Whatever you decide, you should consult with our firm to determine the best options for passing along your life insurance benefits and other assets to minor children.

Insurance claim payment
Provided you fill out the forms properly and include a certified copy of the death certificate, insurance companies typically pay out life insurance claims quickly. In fact, some claims are paid within one-to-two weeks of the start of the process, and rarely do claims take more than 60 days to be paid. Most insurance companies will offer you the option to collect the proceeds via a mailed check or transfer the funds electronically directly to your account.

Sometimes an insurance company will request you to send in a completed W-9 form (Request for Taxpayer Identification Number and Certification) from the IRS in order to process a claim. Most of the time, a W-9 is requested only if there is some question or issue with the records, such as having an address provided in a claim form that doesn’t match the one on file.

A W-9 is simply a way for the insurance company to verify information to prevent fraudulent activity. To this end, don’t be alarmed if you’re asked for a W-9. It’s a common verification practice, and it doesn’t automatically mean the company suspects you of fraud or plans to deny your claim.

While collecting life insurance proceeds is a fairly simple process, it’s always a good idea to consult with our firm if you have any questions or need help to ensure the process goes as smoothly as possible during the often-chaotic period following a loved one’s death.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Planning Session and mention this article to find out how to get this $500 session at no charge.

How to Correctly Name Beneficiaries for Your IRAs

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You could be unintentionally reducing your family’s wealth potential if you do not properly designate the beneficiaries of your IRAs. Improper estate planning could mean that your IRA assets could pass to the wrong people or entities, so how you execute your beneficiary designations is critically important.

Here are some of the steps that need to be taken to properly name IRA beneficiaries:

Spouse: A surviving spouse can either roll the funds into his or her existing IRA, or establish an inherited IRA and take distributions that will be calculated based on his or her life expectancy.

Children: Just like spouses, children can stretch required distributions from an inherited IRA over their own life expectancies.

Trusts: A trust can be named a beneficiary of an inherited IRA, but there are a number of complex issues involved, so be sure to consult with an experienced estate planning attorney for guidance.

Contingent beneficiaries: A surviving spouse may wish to disclaim interest in an inherited IRA, so the assets can pass to children or grandchildren. Therefore, it is important to name secondary as well as primary beneficiaries for your IRA so assets remain within the control of your family.

This article service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she educates and her empowers her clients so that they can protect what matters most. That’s why she offers a Planning Session, during which you’ll get more financially organized than ever before and learn about making the best decisions for yourself and your loved ones. If you’d like to get this $500 session for FREE, call Myrna’s office today.