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Redlands California Estate Planning Blog

Heirs of Prince want Comerica removed as estate administrator

As California fans of Prince continue to mourn his death, his heirs have petitioned a court to reduce Comerica Bank & Trust's role as estate administrator. The late singer and songwriter's siblings claim in their legal filings that Comerica has collected $10 million in fees from the estate while spending $45 million on probate expenses. Additionally, the estate still owes $31 million in federal and state estate taxes. As time passes, interest increases the tax bill.

The heirs want to assume greater control of the estate and end Comerica's future involvement in the estate. Disagreements between the heirs and administrator have been ongoing as the heirs find fault with the administrator's inventory of the late artist's assets and cash flow projections.

How to be an executor of a will

Successfully carrying out the task of closing a deceased family member's estate may require an executor to probate the will, secure assets, notify beneficiaries and more. California residents who have done this job have benefited from working with attorneys, accountants and financial and insurance advisors. Unfortunately, executors often make mistakes that can easily be avoided by having the right frame of mind and remembering a few basic things.

It's good to remember the end goal in regard to probate/estate administration. The executor's role is to move the estate forward and close it within a reasonable amount of time. An executor will likely deal with negative consequences if they use their role to bring up past family issues or to go on a power trip. They will need to be somewhat humble to do their job well.

Estate planning and personal property items

California residents who are developing their estate plans should make sure to address what should happen with their personal items, some of which may be valuable. When doing so, there are some issues they may want to keep in mind.

Personal property items can easily become forgotten or lost. They may be set aside in storage, placed in the attic of a home that is sold to someone outside of the family, stolen by family members or misplaced in some other way. One way individuals can keep track of these assets that they want to give to their loved ones or friends is to use software that can keep track of them. It is also a good idea to attach documents like appraisals, receipts and other types of bona fides of providence so that they are easily available.

Overview of gross estate and federal estate tax exemption

The Tax Cuts and Jobs Act significantly raised the federal estate tax exemption. For the executor of an estate in California to know if an estate has exceeded this exemption, the person must calculate the gross estate of the decedent. Estates with values above the exemption will need to complete form 706 for the Internal Revenue Service. If any estate taxes are owed, they must be paid no later than nine months after the person's date of death.

Changes to tax law in 2018 raised the federal estate tax exemption to $11,180,000 per person from $5,490,000 per person. In 2019, the exemption went up again to $11,400,000 per person or $22,800,000 for a married couple.

Analyzing Lee Radziwill's estate plan

Those in California who follow politics or pop culture may have heard about the recent passing of Lee Radziwill. While many people mourn her death, her estate plan was designed to make it easier to respect her final wishes. She had a will that was probated in New York as well as a revocable trust. Her assets were transferred into the trust when she passed away.

Typically, wealthy individuals use a trust as a substitute for a will. It makes it easier to avoid probate and the public spectacle that it can create. However, Radziwill was required to have a will as some issues related to settling her estate could not be done without it. The will that was probated was put into place in September 2018, and the trust was created in 2017. This meant that she was likely updating both documents as life events occurred.

The role of trusts in financial planning for special needs child

Parents of special needs children in California often turn to trusts to provide funds and security for their kids. Eligibility for government benefits often factors into these decisions because many people want to ensure that their children remain eligible for government programs. Frequently, trusts solve this problem because they can set aside money to help a special needs person while not inflating his or her income and assets.

A special needs trust states how its assets will supplement a person's existence while he or she collects government benefits. This way, an individual remains eligible for public support for housing and other basic needs. The trustee will grant funds to the person as needed for extra expenses like travel and entertainment. Parents may fund a trust as soon as they create it or at the time of their passing. Funding could come from estate assets or a life insurance policy.

Estate planning and hip-hop artists

California hip-hop fans may be aware of some of the trust and estate planning issues that have arisen after the death of some hip-hop artists. For example, XXXTentacion created a trust and a last will and testament in 2017. He was murdered a few months later, in June 2018. He made his brothers and mother his beneficiaries, but there was a rumor that an ex-girlfriend was pregnant by him. In such a case, it might be possible for a child born after a parent's death to challenge an estate plan.

Estates may also face lawsuits or participate in litigation after a person's death. For example, the estate of the Notorious B.I.G. sued a snowboarding company for copyright and trademark infringement in using the rapper's image on its product. Rapper Doug E. Fresh is suing a neighbor in Harlem for a construction project that has stalled on behalf of an estate for which he is an executor.

Understanding estate taxes after a person's death

After people pass away in California, there are still a number of tax tasks and obligations related to their estate, which includes all of the assets owned by a person at the time of death. This includes real estate, bank accounts, securities, overseas properties and even gifts made during a person's lifetime. In addition, there are other types of property that are also considered to be part of a person's estate, even if their ownership structure is more complicated. These include annuities, some types of life insurance proceeds, jointly held property with a right of survivorship and property that the person can control even without ownership.

All of these assets are added together after a person's death. This amount is compared to the federal exemption for estate taxes, taking provisions for gift tax adjustments into account. If the estate is larger than the federal exemption amount, the executor must file a special tax return for estate taxes, IRS form 706. In some cases, no estate tax may be due because of special regulations for transfers between spouses, but the form must still be completed.

Using a trust as a way to protect assets in estate planning

Protecting your assets as you age and for the people you love after you die is complex. There is no single solution that works in every scenario. Depending on your age, the kinds of assets you own, and your legal and medical situation, a variety of solutions can offer you financial and legal protections.

For many people in a broad range of familial circumstances, the creation of a trust can be a great way to protect assets for the future. Properly funded trusts can offer benefits to heirs and beneficiaries that last a lifetime. Well-planned trusts can also offer protections to the creator ranging from tax benefits to the ability to access state benefits such as Medi-Cal.

When do you need to start making a last will or estate plan?

Public education often fails to provide people with important information about the necessities of modern life. Many people don't learn in school about how to file taxes, maintain a house or fulfill their social and interpersonal obligations to their families and loved ones. Financial and legal responsibilities are very rarely part of the curriculum for high schools. That can leave many people unprepared for the demands of the real world.

However, just because no one has told you it's time to create an estate plan or last will doesn't mean that you can continue putting off that important job indefinitely. There is no real rule about when you should begin estate planning. However, there are certain common sense concepts that can help you determine if it is time for you to create a last will.

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