Barnes Lipscomb & Stewart PLLC

Surprises from Gloria Vanderbilt’s Estate

After a glamourous life that spanned many decades and was featured in many headlines, it turns out that Gloria Vanderbilt’s estate was nowhere near as big as expected.

Details are slowly coming to light about heiress Gloria Vanderbilt’s estate. A New York City apartment is being left to Leopold “Stan” Stokowski and her remaining money is being left to her youngest son, Anderson Cooper, the CNN news anchor.

Her estate planning is a reminder of the issues many families must address and the importance of having your affairs in order, when you receive a difficult diagnosis. She died of stomach cancer.

Survivor Net reports in its article “Gloria Vanderbilt’s Estate and Anderson Cooper: Surprising New Details That Show How Important Estate Planning is on a Cancer Journey” that $1.5 million was left to Vanderbilt’s youngest son, CNN anchor Anderson Cooper. Her oldest son Leopold was given her New York City co-op. Vanderbilt didn’t leave anything to her estranged middle son, Chris Stokowski.

When people hear that her estate was only $1.5 million, they’re surprised, since many believed the number was well over 200 times that amount. However, it really isn’t a surprise to Cooper, who said in a 2014 radio interview, “I don’t believe in inheriting money…I think it’s an initiative sucker. I think it’s a curse. Who’s inherited a lot of money that has gone on to do things in their life? From the time I was growing up, if I felt like there was some pot of gold waiting for me, I don’t know if I would have been so motivated.”

Vanderbilt was an heiress to a massive fortune. She was born into a trust fund with the equivalent of roughly $35 million in today’s terms. When she died, people thought Cooper would receive a similarly sizable fortune. Gloria Vanderbilt was estimated to have a net worth of roughly $200 million. However, probate documents have shown that Cooper will only receive $1.5 million, according to Page Six.

The 95-year-old Vanderbilt was diagnosed with advanced stomach cancer only about a month before she died, according to Cooper. While it’s likely that she’d already considered her estate planning, her very quick bout with cancer is an important reminder to those diagnosed that it can be wise to plan ahead.

While it can be challenging for patients and their family to think about financial planning while still reeling from a cancer diagnosis, the sooner it’s addressed, the less stressful it will be. You don’t want to delay until your disease and treatment have progressed, so that it’s taxing for your physical and mental energy. This would make thinking about finances even more undesirable.

A qualified estate planning attorney will be able to asset the patient and their family with creating an estate plan to protect them during their illness, should they become incapacitated, and after they pass.

Reference: Survivor Net (July 8, 2019) “Gloria Vanderbilt’s Estate and Anderson Cooper: Surprising New Details That Show How Important Estate Planning is on a Cancer Journey”

Why You Might Want to Plan Your Own Funeral

Everyone knows the saying that nothing is certain but death and taxes. We have to pay our taxes. However, do we want to plan for our own deaths? It would be better for all concerned, if we did.

The National Funeral Directors Association asked people if they thought it was important to plan for their own deaths. Ironically, while 62.5% agreed that this was important, only 21.4% have done so. How do you start?

WHNT’s recent article, “How to plan for life after death,” says the first step is having that conversation with someone you trust. It may be a close friend, a family member or an attorney.

Next, think about some important considerations like what you want in terms of a funeral service, burial or cremation, if you want life insurance to pay your last expenses and how your estate should be handled. That includes having an estate plan created with an experienced attorney.

The National Institute on Aging has created a comprehensive list of considerations for those who are facing end of life decisions. It’s also a great resource for caretakers.

This planning will may make the process easier for those you leave behind, especially if you work with an experienced estate planning attorney.

There are also some fundamental decisions that can also ease the financial burden on your loved ones.

The average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery and the installation of a headstone at the cemetery.

The National Funeral Directors Association reports that the median cost to move the remains of a loved one to a funeral home in the U.S. is $325. Embalming can run about $725, and the average cost of a vault in the United States is $1,395, as of 2017.

According to the 2018 NFDA Cremation & Burial Report, the 2018 cremation rate is estimated to be 53.5% and the burial rate is projected to be 40.5%.

Forbes says that roughly 42% of people opt to be cremated, because of the costs involved with a standard funeral in the United States.

The main thing is having all your paperwork in order. In addition to planning your funeral, meet with an estate planning attorney to make sure your loved ones will have the necessary legal documents. Planning in advance makes it easier for those you leave behind.

Reference: WHNT (June 30, 2019) “How to plan for life after death”

How to Select the Long-Term Care Insurance That’s Best for You

Having long-term care insurance is much better than not having it. Buying it during your 40s or 50s, is a far better time to purchase it than in your 60s, when health issues may make you uninsurable.

Your insurance agent will be able to explain the different types of long-term care or LTC insurance for you. Select insurance companies offer this kind of insurance coverage for individuals. If you work for the federal government, you may obtain LTC insurance through the federal FLTCIP program. Regardless of how you buy them, there are a variety of options that will depend upon your individual situation.

Some policies may pay for care not only in a nursing home but also in an assisted living facility or at the home of the person who requires care.

Policies may also include cost-of-living adjustments, which will increase future benefit payments.

Some companies also offer LTC policies that cover both spouses at a discounted rate, rather than having to purchase two separate policies.

Fed Week’s recent article, “Selecting among Long-Term Care Options to Hold Down Costs,” explains that there also are life insurance policies that double as LTC insurance.

Therefore, if these policies cover long-term care expenses; the policy’s death benefit will be reduced.

However, if long-term care is not needed, the insured individual’s beneficiary eventually can receive the full death benefit.

Remember also that the ongoing premiums will be lower, compared with policies bought when a person is older.

When you’re shopping for LTC insurance, there are some tactics that can reduce your policy cost. Here are just a few:

• Reduce benefits. A policy that pays benefits as long as you need long-term care can be very expensive. However, a policy with a five-year maximum payout will be less expensive. There are not many people who will need more than five years of long-term care.
• Wait longer. You can reduce costs, by extending the period before you collect benefits. A policy with a 90-day waiting period will be less expensive than an LTC policy with a 20-day wait. Of course, this is only a bargain, if you can afford to pay for 90 days from your own resources.
• Look out for automatic inflation increases. If you are working to keep costs down, consider a “future purchase option” that will let you buy more coverage, if you need it, even if you have faced health issues. Your alternative is a policy that increases your benefit annually from $100 a day to $105—$110, etc. This becomes very costly, very quickly.

Reference: Fed Week (June 27, 2019) “Selecting among Long-Term Care Options to Hold Down Costs”

Update on Navy Veterans’ “Blue Water” Benefits

“The decision by U.S. Solicitor General Noel Francisco ends months of uncertainty over whether the Trump administration would appeal the case to the U.S. Supreme Court.”

A landmark lower court ruling that “blue water” Navy veterans who served during the Vietnam War deserve to be included in the Agent Orange Act, will not be challenged by the Justice Department, which conveyed this to the U.S. Supreme Court on June 4.

According to The National Law Journal’s recent article, “Justice Department Will Not Challenge Benefits for Blue Water Navy Vets,” the decision by U.S. Solicitor General Noel Francisco ended months of uncertainty for tens of thousands of former service members or their survivors, who may now be eligible for benefits for their exposure to Agent Orange.

In January, these blue water Navy veterans, who served on ships within the 12-mile territorial sea of the Republic of Vietnam, won their case in the U.S. Court of Appeals for the Federal Circuit. The court held that the Agent Orange Act of 1991 includes those veterans. Until that ruling, these vets had been denied the presumption of Agent Orange exposure during the Vietnam War.

The Justice Department, in upholding the Department of Veterans Affairs’ interpretation, argued that the Agent Orange Act covered only those veterans who served on the ground or inland waterways of Vietnam.

The Federal Circuit rejected the Justice Department’s request to put its decision on hold while the government decided whether to appeal to the Supreme Court. Ever since, the Solicitor General has asked for several extensions from the Supreme Court, as he decided whether to appeal. A decision to appeal the Federal Circuit ruling would have brought out the Trump administration in a fight with Vietnam veterans and the head of the Veterans Administration.

The Solicitor General, consulting with federal agencies, generally makes decisions on government appeals to the Supreme Court.

Francisco’s decision not to appeal was announced in a motion to dismiss in another case in the U.S. Supreme Court—Gray v. Wilkie. That action also involved a blue water Navy veteran. The Supreme Court had scheduled February arguments in the Gray case but removed it from the docket at the request of the Solicitor General, who said this recent decision, if not appealed, would also give the relief sought by Gray.

Blue water Navy veterans in both the Federal Circuit and the Supreme Court cases had broad amicus support from veterans’ organizations and legal services groups, many of which were represented by major law firms.

Reference: The National Law Journal (June 5, 2019) “Justice Department Will Not Challenge Benefits for Blue Water Navy Vets”

Small Business Plans to Prepare for the Unexpected

When you are the center of a small business, it’s not hard to lose sight of the big picture. Running the day-to-day activities often leads small business owners to overlook preparing for emergencies and succession.

If an owner under-insures and under-invests in their small business, neglects to plan for the future or unexpected events, a small business can easily go under.

Think Advisor’s recent article, “The 6 L's of Small-Business Planning” says that a successful business essentially becomes a security blanket. That’s because business owners don’t adequately prepare for events that could change the course of their financial well-being. It’s critical to address the important events that can disrupt everything personal and business.

Liquidity: If a business owner has to write a big check for some unexpected repairs after a storm, the money must come from somewhere. Small businesses rarely have substantial liquidity, because so much of their capital is tied up in the company. Therefore, a line of credit is the most frequent solution for owners with this situation. You should instead try to ensure that you have access to cash in the short term, if necessary.

Long-term disability: In many instances, business owners are the main contributors to their small company’s success. If they can’t work, the whole company can suffer. She should have a plan to protect against this scenario. First, it is important to identify who can step into a leadership role for a short time. If the disability is long term, examine the ways in which it might affect the company’s value and succession plan. You can purchase business overhead insurance or policies that offer income replacement. You can also create buy-out agreements, so key employees can buy out the disabled business owner.

Loss of life: In the event that an owner suddenly dies, you should have life insurance to fund a buy/sell plan. Without a plan, you may become forced to work with your deceased business partner’s spouse.

Long-term care: Baby boomers with business wealth may wonder what will happen if they need significant medical care, which is a legitimate concern. There’s an additional consideration: the elderly parents of business owners. If an owner steps away to help provide care for an ailing parent, the potential disruption to the company may be significant. Look at where the capital is going to come from to offset the cost of long-term care for family members, because you don’t want a forced liquidation of business assets.

Longevity: Consider the impact to the company, if the owner has an unusually long life. This should include an examination of how that person’s role will change and who will succeed them through phases of potentially decreasing interest and capacity.

Legacy/legal: Look at what the business owner envisions as her legacy for the future. There are numerous types of trusts, gifts and legal vehicles can be used to help make certain that the business won’t be ruined by taxes, when ownership is passed to the next generation. Talk to an estate planning attorney about doing this the right way.

Corporations and publicly owned companies have built-in processes that evaluate procedures, profits and risk. A small business would do well to take a lesson from big companies to schedule regular reviews and keep the business moving forward.

Reference: Think Advisor (May 28, 2019) “The 6 L's of Small-Business Planning”

How Do You Pick the Right Person to be a Trustee?

One of the reasons people delay creating an estate plan and trusts, is that they don’t know who to name as a trustee. That’s not a good reason to put off something this important.

Your trustee may be in charge of a big or small estate, the care of a special needs individual or the family millions. Whatever they are responsible for, they have an important job. Clients often reach an impasse, when it comes to completing their estate planning because they are just not sure who the trustee should be. Sometimes a friend is a better choice than a family member. Other times, someone who is not a family member is a better selection.

Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.

If you go with a family member or friend, she should be financially savvy and good with money. You want someone who is knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor.

A good thing about selecting a friend or family member as trustee is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics. Family members also usually don’t charge a trustee fee (although they are entitled to do so).

However, your family may be better off with a professional trustee or trust company that has expertise with trust administration. This may eliminate some potentially hard feelings in the family. Another negative is that your family member may be too close to the family and may get caught up in the drama. They may also have a power trip and like having total control of your beneficiary’s finances.

The advantage of an attorney serving as a trustee, is that they have familiarity with your family, if you’ve worked together for some time. There will, however, be a charge for their time spent serving as trustee.

Trust companies will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company when the beneficiaries don’t get along, when there is a problem beneficiary or when it’s a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions if it will reduce the assets under management that they’re investing. You can solve this by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee.

Your estate planning attorney has helped many others make this decision, and they will be able to help you evaluate candidates to make the choice that is right for you and for your family.

Reference: Forbes (May 31, 2019) “How To Choose A Trustee”

 

Footnote from Barnes Lipscomb Stewart & Ott PLLC

This article references using your attorney as trustee.  We generally do not recommend this and  we would be concerned about other attorneys who propose themselves as trustee for a client's trust.  We beleive there are other and better options without the risk of conflicts.  

Why Everyone Needs a Plan for Digital Assets

Now that so much of our lives are lived online, we need a plan to prevent the loss of digital assets that include treasured family memories, financial accounts and, in some cases, entire businesses.

The loss of a spouse creates havoc for the surviving spouse or family members in new ways today. Access to a desktop computer, tablet, smart phones and other devices can be lost completely. Accounts that were on autopay may take months to be discovered and turned off. Just the simple act of paying the cable and electric bills can become time consuming, not to mention the potential for cryptocurrency or emails to be lost forever.

To help crack the codes, it many take hiring a tech person, and even then, it may prove fruitless. It can also take a lot of time, says Kiplinger’s recent article, “Make Sure Your Spouse Has Your Passwords.” The article explains that getting access to key financial and estate information has always been a critical issue for women. They’re statistically more likely than men to be widowed or may have a spouse who suffers from a serious illness.

With digital records and passwords, there’s no paper trail to help you locate accounts no one knew existed. It’s also common for women of all ages to delegate key financial and estate responsibilities to their spouse.

To address that problem, women need to organize both personal and financial records. This can include vital documents, like a will, powers of attorney for financial and health affairs, a living will and perhaps a trust. Women can also get organized with other important information, such as finding the warranty for a new TV, car titles, frequently contacted services (landscaper, electrician) and other professionals, like your CPA and insurance agent.

Make sure that, with your estate planning, you also check the beneficiary designations on life insurance policies or retirement accounts. People neglect to update these, after a spouse passes away.  You should also confirm that your joint bank account actually is in both of your names. Get a credit card in your own name and get a copy of each spouse’s credit reports. You should also have a copy of your will secured outside of your safe deposit box.

You can use a digital password manager, or a plain old notebook. However, whatever system you choose, it will be better than nothing. Make sure family members know where the password information is kept, and consider an online solution, if the family is tech savvy.

Reference: Kiplinger (June 6, 2019) “Make Sure Your Spouse Has Your Passwords”

Retiree IRAs Are Looking Good, Says Study

Good news on retiree finances is always welcome. A recent study shows that many IRA owners are in better financial shape than in the past.

The Employee Benefit Research Institute released a study of 7.5 million IRA accounts owned by retirees who were 60 or older. Eighty-one percent of those who had IRA accounts in 2012, still had their accounts in 2015. Even better, sixty-eight percent of the accounts had higher balances at the end of the study period than at the start.

FedWeek’s recent article, “Study Finds Encouraging Pattern among Retiree IRAs” reported that aside from the smallest accounts, those with fewer than $1,000, the pattern was consistent across all of the different account sizes.

The median increase–the point where half are above and half are below–was 12%.

Even among account holders past age 70½—when certain distributions are required—49% of the IRA accounts grew over the three year period.

An account holder is typically required to withdraw a minimum distribution known as a “Required Minimum Distribution” or “RMD,” which is the minimum amount you must withdraw from your account each year. You generally have to start taking withdrawals from an IRA account, when you reach age 70½. You have to take your first RMD for the year in which you turn age 70½. However, the first payment can be delayed until April 1^st of the year following the year in which you turn 70½.

The study found that those individuals making annual withdrawals before age 71 had bigger balance declines, than those who recently reached the required minimum distribution age of 70½.

Those large balance declines are thought to be because the second group was more likely to be making a withdrawal primarily because they’re required to do so. Therefore, they took the minimum required, the research said.

“Only when owners reached ages 85 or older, did a significantly higher percentage of accounts fail to have a positive balance after three years, either due to depletion or account closure,” it added.

The study is a hopeful sign in what has lately been a long series of negative reports on the financial well-being of seniors and their retirement finances.

Reference: FedWeek (June 6, 2019) “Study Finds Encouraging Pattern among Retiree IRAs”