3 Reasons It Takes So Long to Receive an Inheritance

Usually the first thing that the beneficiary of an estate or trust asks is when they can expect to get their inheritance check. Unfortunately sending out the inheritance checks is the very last item on the “to do” list of the personal representative or trustee.  Why?  Because the personal representative or trustee has to fulfill all of the duties and responsibilities that are required for settling an estate or trust before handing the assets over to the beneficiaries.  Otherwise,the personal representative or trustee can be held personally liable for any unpaid bills and taxes.

Even with a simple estate or trust, the duties and responsibilities of the personal representative or trustee can be tedious and will delay the final distribution of the assets.  What can be so time-consuming about settling an estate or trust that will cause the plans you have for your inheritance to be put on hold?  Consider the following:

  1. Probate takes time and money. Probate is necessary when a deceased person leaves behind assets that are titled solely in the individual’s name without any beneficiary designated.  This is true even if the deceased person created a revocable living trust provided that the trust was not fully funded at the time of death.  Probate is a state court process that takes time and money and will delay the delivery of your inheritance check.
  2. Tax returns have to be filed and taxes have to be paid.  The personal representative or trustee is responsible for filing the deceased person’s final income tax return(s) and paying any taxes that are due.  Aside from this, the estate or trust may owe state estate taxes or inheritance taxes or federal estate taxes, in which case these returns must be filed and these taxes must be paid.  Finalizing tax returns and paying any taxes due will delay the delivery of your inheritance check.
  3. Beneficiaries have their own agenda. Even though the beneficiaries of an estate or trust usually want to get their inheritance checks in their hands as soon as possible, they don’t always act quickly or follow instructions.  Inevitably there will be at least one beneficiary who drags their feet when asked to provide information or sign and return legal documents or who will skip a signature and require documents to be resent.  One disengaged beneficiary will spoil it for the rest and delay the delivery of your inheritance check.

For additional information about why settling an estate or trust takes so long and what to do with your inheritance, refer to the following:

Photo: © MCA Records

Keeping Your Estate Plan Private – A Lesson From Buffalo Bills Owner Ralph Wilson

It appears that Buffalo Bills owner Ralph C. Wilson, Jr. did his estate plan right because the public doesn’t have a clue about Mr. Wilson’s final wishes regarding the future of his football team.

Mr. Wilson, a long time resident of Detroit, died in March 2014 and just last month his last will and testament was filed for probate in Wayne County, Michigan.  Since wills are public court records, several reporters were quick to snatch up a copy of the will.  But much to their dismay, the will reveals very little about the late NFL owner’s estate because the will is a short “pour over will.”

A pour over will is a simple type of will that is used in conjunction with a revocable living trust.  It states that anything not transferred into the name of the revocable living trust prior to death gets “poured over” into the trust after death.  So it is the revocable living trust, not the pour over will, which spells out all of the details about who will get what and when they will get it.  And since revocable living trusts are private documents that only those mentioned in the trust – beneficiaries, trustees and their respective legal and tax representatives – are allowed to read, the public is left in the dark about all of the intimate details of the trustmaker’s final wishes.

Buffalo Bills fans were hoping that the filing of Mr. Wilson’s will for probate would give them a clue about the fate of their beloved team.  But even though multiple bids have been received for purchase of the Bills, including offers from Donald Trump, Terry Pegula (owner of NHL’s Buffalo Sabres), and a group headed by rock star Jon Bon Jovi, Mr. Wilson’s will does not reveal if those bidding must agree to keep the team in Buffalo.  Of course this is something that Mr. Wilson clearly wanted and may have included in his revocable living trust, but only the beneficiaries and trustees of the trust know for sure.  Having been born and raised in Pittsburgh I’m of course a lifelong Steelers fan, so I can certainly feel for Bills fans – if the Steelers ever left Pittsburgh it would be a catastrophe – and I’m actually pulling for the Bills to stay in Buffalo too.  But in the end money may talk and the team may walk and Bills fans won’t know for sure until after the deal is done.

What estate planning lesson can be learned from this situation?  Let’s contrast Mr. Wilson’s smart trust planning against the very public wills of actors James Gandolfini and Philip Seymour Hoffman.  In the latter two cases the public has been allowed to take a very close look at each actor’s final – and in both cases unusual – wishes and how much each beneficiary will get and when they will get it.  That’s the real beauty of using a revocable living trust and not a will as the governing document of your estate plan – it keeps all of the intimate details of your final wishes confidential.

Photo:  Bills Steelers joint training camp, August 14, 2014, Latrobe, PA

Changes Are Coming to Rhode Island Estate Taxes in 2015

On the heels of changes made in Maryland and New York, Rhode Island is the latest state to tweak its state estate tax laws. Currently Rhode Island has the second lowest state estate tax exemption, an odd $921,655 due to the exemption increasing from $675,000 to $850,000 in 2010 and then being indexed for inflation thereafter.  Currently New Jersey has the lowest state estate tax exemption, a whopping $675,000, while the exemptions in the other handful of states that still collect a state estate tax range from $1,000,000 to $5,340,000.

Now, a mere four years later, Rhode Island lawmakers are at it again. This time they decided to increase the estate tax exemption from $921,655 to $1,500,000 for deaths occurring on or after January 1, 2015.  The exemption will then be indexed for inflation in 2016 and future years based on the Consumer Price Index for all Urban Consumers (CPI-U).  Lawmakers also eliminated the so-called “cliff tax” which resulted in an estate being taxed on its full value once it exceeded the value of the estate tax exemption.  Starting in 2015, an estate will only be taxed on the amount by which exceeds the exemption.  The estate tax rate was not changed.

Photo: “RIstatehouse” by Loodog at en.wikipedia – Transferred from en.wikipedia to Commons by User:Pauk using CommonsHelper.. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:RIstatehouse.JPG#mediaviewer/File:RIstatehouse.JPG

Actor Philip Seymour Hoffman – No Trust Fund Kids for Me

When Academy-award winning actor Philip Seymour Hoffman died back in February after injecting himself with a mixture of heroin, cocaine, benzodiazepines and amphetamine, he left behind three young children, son Cooper, age 10, and daughters Tallulah, 7, and Willa, 5, and an estate estimated to be worth $35 million. The actor also left behind a Last Will and Testament that was nearly 10 years old which bequeathed his entire estate to his “friend and companion,” costume designer Marianne “Mimi” O’Donnell.

Although Ms. O’Donnell is the mother of Mr. Hoffman’s three children, it seems odd that the actor didn’t (1) update his will after his daughters were born, or (2) leave anything at all to the children, doesn’t it?  Well, the reasons behind Mr. Hoffman’s unusual decision – to leave his entire estate to the mother of his children, a woman he chose not to marry, instead of at least part to his children – were revealed recently when legal papers were filed in Mr. Hoffman’s probate estate matter that is being overseen in Manhattan’s Surrogate Court.

According to the court documents filed in late July by Brooklyn attorney James Cahill, who is the court-appointed guardian for Mr. Hoffman’s children, although Mr. Hoffman did not believe in marriage, he treated Ms. O’Donnell like a spouse, including holding significant assets in joint names with her, and he believed that as the mother of his children she would take care of them.  The documents also reveal that over the past several years, including as recently as last year, Mr. Hoffman’s accountant tried to convince the actor to establish a trust fund for his children, but he refused, saying that he didn’t want them to become “trust fund kids.”

In a prior post I wrote about making your estate plan your decision – well that’s certainly what Mr. Hoffman chose to do.  But you have to wonder if he really knew that by choosing not to marry Ms. O’Donnell, about 40% of his estate (that’s $15 million) will go to pay estate taxes (both to the IRS and in New York).  And apparently Mr. Hoffman didn’t know that the right estate planning attorney can prevent your children from becoming “trust fund kids” by drafting the trust to simply not allow it.  It’s one thing to make your estate plan your way, but it’s another to make a plan that will hurt your family both emotionally and financially.

Photo: © Metro-Goldwyn-Mayer Studios Inc.