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Prince - Purple Rain

How Does the Death of Prince’s Brother Impact the Late Rock Star’s Estate?

Alfred Jackson was one of six of Prince’s siblings who were heirs to their brother’s fortune worth at least $100 million. But they sold 90% of his estate rights last year to Primary Wave, a well-funded and growing entertainment company that invests in music publishing and recording rights. Prince’s sister Tyka Nelson also struck a deal with Primary Wave, and was given cash up front as the estate proceedings drag on.

The StarTribune’s recent article entitled “Death of Prince heir complicates estate settlement even more” reports that because of these moves, about a third of Prince’s assets could wind up being controlled by parties who were not related to him—which adds to the tough job of settling the late rock star’s estate.

Just a few hours after signing with Primary Wave in August of 2019, the sixty-six-year-old Jackson succumbed to heart disease, while at his home in Kansas City. However, unlike Prince, he had signed a will. Jackson did not have a wife or children. However, in another twist, rather than leaving his estate to his siblings, he bequeathed all his assets to a friend, Raffles Van Exel, who claims to be an entertainment consultant. However, he’s best known for hanging out with Whitney Houston in her final days, as well as Michael Jackson’s family. Exel was also a creative force behind O.J. Simpson’s notorious “If I Did It” book project.

Primary Wave’s deal with Jackson is being reviewed by his own family, at least his siblings who aren’t related to Prince. They aim to contest his will.

Prince’s accidental death by fentanyl in 2016 created one of the largest and most complicated probate court proceedings in Minnesota history. That’s because the rock star failed to draft a will. The value of his estate is somewhere between $100 million to $300 million estate and is comprised of potential music royalties.

Prince’s heirs are unable to get their money from his estate until it is settled. Because the probate proceedings are dragging on, Primary Wave offered Prince’s heirs the chance to raise cash by selling their estate rights. These heirs are all approaching 60. Jackson wanted to enjoy life now, rather than wait for the process to be finalized. The siblings, by that time, may be too old, sick or dead to enjoy their inheritance.

Primary Wave tried to get at least three of Prince’s siblings — Sharon, Norrine, and John Nelson, to sell their estate rights. However, the three refused and said in a recent court filing that they are concerned that Primary Wave will use its deep pockets to their detriment. The company’s involvement would only lead to more delays and tensions, the siblings said in a letter directly to the probate judge. With the case draining their “limited resources,” the three explained that they are unable to pay legal counsel in this case and are representing themselves.

The terms of Primary Wave’s deals with Tyka Nelson and Alfred Jackson are private. However, the company has been asserting its rights in Prince’s probate case. A 2019 court filing said that the company says it “stands in the shoes” of the two heirs.

Reference: StarTribune (February 22, 2020) “Death of Prince heir complicates estate settlement even more”

Key Terms: Estate Planning Lawyer, Wills, Intestacy, Probate Court, Inheritance, Asset Protection, Will Contest, Probate Attorney

Should You Name a Trust as an IRA Beneficiary?

An IRA may not be placed into a trust while the account owner is alive. An IRA also may not be owned by more than one person. The IRA owner can name a trust as a beneficiary of an IRA. Just because you can do this, does not mean it is a good idea, says the article “Naming Your Trust as an IRA Beneficiary” from The Press of Atlantic City. The IRA owner could also take all of the funds and deposit them into a trust, but that would be another bad idea. Why? It is because all of the funds withdrawn would be subject to income tax.

Therefore, why would anyone want to name a trust as the beneficiary for an IRA?

  • If you want an heir, like a second spouse, to inherit the income but not the balance of the principal after you have died. This is done so the second spouse cannot name their children as the beneficiary, instead of the original account owner’s children.
  • If you are concerned with the ability of heirs to manage your IRA funds wisely, a trust can be the beneficiary and you can set the terms with which the heirs can have access to the funds.
  • Minor children cannot be direct beneficiaries of an IRA, and a disabled child may become ineligible for government benefits, if he or she receives an inheritance directly.
  • If you want your IRA funds to be inherited by grandchildren instead of children, a trust is the way to go.
  • If creditor protection is a concern under the laws of your state, a trust would keep the IRA funds from being tapped by claims of creditors.

Here is why you would NOT want to name a trust as the beneficiary of your IRA:

  • There are no tax benefits to having the trust inherit your IRA.
  • Trusts have expenses. Trustee fees and tax rates on funds left inside the trust, but not in the IRA, may be substantially higher than personal income tax rates, depending on the beneficiary.
  • The trust will have to keep going long after your own death. That means tax returns must be filed, fees paid, and the trustee must maintain the trust.
  • Some companies that hold IRAs do not allow trusts to be beneficiaries of IRAs. Before you get into figuring out if this is the right route for you, find out first if your custodian will permit it.

There are many other facts to consider before deciding to name a trust as the beneficiary of an IRA. Speak with your estate planning attorney to see if it is a suitable solution for you and your family.

Reference: The Press of Atlantic City (February 13, 2020) “Naming Your Trust as an IRA Beneficiary”

Terms: IRA, Trust, Trustee, Personal Income Tax, Beneficiaries, Estate Planning Attorney, Second Spouse

End of Life Checklist

Creating an End-of-Life Checklist

Spend the energy, effort, and time now to consider your wishes, collect information and, most importantly, get everything down on paper, says In Maricopa’s recent article entitled “Make an end-of-life checklist.”

The article says that a list of all your assets and critical personal information is a guarantee that nothing is forgotten, missed, or lost. Estate planning attorneys can assist you and guide you through the process.

Admittedly, it’s an unpleasant subject and a topic that you don’t want to discuss, and it can be a final gift to your family and loved ones.

When you work with an experienced estate planning attorney, you can add any specific instructions you want to make that are not already a part of your will or other estate planning documentation. Make certain that you appoint an executor, one you trust, who will carry out your wishes.

Have ready for your attorney all of your vital, personal information. This should include your name, birthday, and Social Security number, as well as the location of key documents and items, birth certificate, marriage license, military discharge paperwork (if applicable), and your will, powers of attorney, medical directives, ID cards, medical insurance cards, house and car keys and details about your burial plot.

In addition, you need to let your family now about the sources of your income. This type of information should include specifics about pensions, retirement accounts, 401(k), or you 403(b) plan.

Be sure to include company and contact, as well as the account number, date of payment, document location, and when/how received.

You also need to include all medicine and medical equipment used and the location of these items.

And then double check the locations of the following items: bank documents, titles and deeds, credit cards, tax returns, trust and power of attorney, mortgage and loan, personal documents, types of insurance – life, health, auto, home, etc. It’s wise to add account numbers and contact information.

Another area you may want to consider is creating a list of online passwords, in printed form, in a secure place for your family or loved ones to use to access and monitor accounts.

Be sure to keep your End-of-Life Checklist in a secure place, such as a safe or safety deposit box because it has sensitive and private information. Tell your executor where it is located.

Reference: In Maricopa (Feb. 14, 2020) “Make an end-of-life checklist”

Key Terms: Elder Law Attorney, Estate Planning Attorney, Wills, Power of Attorney, Living Will, Advance Directive

C19 UPDATE: Paying for Covid-19 Testing and Treatment if You Have a High Deductible Insurance Plan

What is a High Deductible Health Plan (HDHP)?

A HDHP is a health insurance plan with a higher deductible than traditional insurance plans. Many people choose this type of health insurance for the cost savings as the monthly premiums are usually lower than traditional insurance plans. A high deductible plan (HDHP) can be combined with a health savings account (HSA), allowing you to pay for certain medical expenses with pre-tax money.

For 2020, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $6,900 for an individual or $13,800 for a family. (This limit doesn’t apply to out-of-network services.)

How Does This Apply to Covid-19 Testing & Treatment?

The IRS recognizes that people with HDHP plans, where in general, all costs are paid out-of-pocket before medical benefits kick in, may be reluctant to seek care or be tested when ill.

To respond to the current Covid-19 emergency, the IRS on March 11 issued guidance in Notice 2020-15 stating (emphasis added)

“a health plan that otherwise satisfies the requirements to be a high deductible health plan (HDHP) under section 223(c)(2)(A) of the Internal Revenue Code (Code) will not fail to be an HDHP under section 223(c)(2)(A) merely because the health plan provides health benefits associated with testing for and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible (self only or family) for an HDHP. Therefore, an individual covered by the HDHP will not be disqualified from being an eligible individual under section 223(c)(1) who may make tax-favored contributions to a health savings account (HSA).”

In short, the IRS said that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).

The IRS noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP. Testing and treatment for the virus can be covered under the umbrella of “preventive services.”

This Applies Only to Covid-19 Emergencies

The IRS cautions that this new policy statement only applies to Covid-19 emergencies:

“This guidance does not modify previous guidance with respect to the requirements to be an HDHP in any manner other than with respect to the relief for testing for and treatment of COVID-19.”

Check with Your Provider

If you are currently enrolled in a HDHP health insurance, be sure to check with your provider for details about your specific benefits coverage.

Resources: IRS Notice 2020-15, “HIGH DEDUCTIBLE HEALTH PLANS AND EXPENSES RELATED TO COVID-19,” https://www.irs.gov/pub/irs-drop/n-20-15.pdf

Suggested keywords: COVID-19 health benefits, HDHP health plans, COVID-19 testing, IRS Notice on COVID-19, insurance benefits for coronavirus, paying for coronavirus testing

Early Onset Dementia

What Do We Know about Early-Onset Dementia?

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early-onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.”

There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare. Plus, everyone over the age of 18 needs a healthcare power of attorney and a financial POA.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

Key Terms: Elder Law Attorney, Medicare, Paying for a Nursing Home, Long-Term Care Planning, Long-Term Care Insurance, Assisted Living, Nursing Home Care, Elder Care, Estate Planning, Power of Attorney, Caregiving, Dementia, Alzheimer’s Disease

SECURE Act

What Should I Know about the Secure Act of 2019 and IRAs?

New federal rules for IRAs will significantly add to the tax burden for some heirs by telescoping the permitted period for withdrawals. But this pain can be greatly reduced by converting regular IRAs to Roth IRAs before bequeathing them, explains CNBC’s recent article entitled “Here’s a way to beat the tax burden for IRA heirs.”

Before the new legislation, all heirs could enjoy their entire life expectancy to take withdrawals from inherited IRAs. As a result, they were able to stretch out these accounts, and the tax on withdrawals, over decades. That’s why they were given the nickname “stretch IRAs.”

But this changed in December of 2019 when Congress passed the Secure Act of 2019. The bill preserves the lifelong stretch period for surviving spouses, minor children, the chronically ill, and other individuals who aren’t more than 10 years younger than their benefactors (this group would include most siblings). However, for other heirs—including adult children—the new rules restrict the stretch period to a single decade. Beginning with the IRA bequests from benefactors who die in 2020, heirs must now take out all of the funds from these accounts within 10 years and pay ordinary income tax on each withdrawal.

With this accumulated wealth to heirs, adult children will also be saddled with a huge tax burden. This means more of a need for estate planning to address this. Without estate-planning expertise, these beneficiaries will likely withdraw 10% of the IRA’s assets every year for 10 years to lessen the tax impact.

A wise solution for some is to convert their regular IRA into a Roth IRA. Unlike regular IRAs, contributions to Roth IRAs are made solely with post-tax money. Though unlike regular IRAs, Roth IRAs carry no income tax on withdrawals, the Secure Act means they will now be required to drain the account within 10 years of inheritance.

Note that as you get near retirement, converting to a Roth has a few other advantages. Holders of regular IRAs must begin taking annual required minimum distributions (RMDS) at age 72 (before the new legislation in December, this age was 70½).

However, if you plan to keep working or are retiring with sufficient income from other resources, you may not decide to take withdrawals. Rather, you may want to allow these assets in your account grow intact rather than gradually weaning them for withdrawal. Converting to a Roth allows you to do this.

Depending on your situation, a Roth conversion might be a wise option if—not only to lessen your heirs’ tax burden but also to sustain the growth of your retirement nest egg.

Ask your estate planning attorney about a Roth IRA conversion and how it fits into your estate plan.

Reference: CNBC (Feb. 12, 2020) “Here’s a way to beat the tax burden for IRA heirs”

Key Terms: Elder Law Attorney, Inherited IRA, Estate Planning, Required Minimum Distribution (RMD)

Planning for Long Term Care

Planning for Long-Term Care Before It’s Too Late

Starting to plan for elder care should happen when you are in your 50s or 60s. By the time you are 70, it may be too late. With the national median annual cost of a private room in a nursing facility coming in at more than $100,000, not having a plan can become one of the most expensive mistakes of your financial life. The article “Four steps you can take to safeguard your retirement savings from this risk” from CNBC says that even if care is provided in your own home, the annual median national cost of in-home skilled nursing is $87.50 per visit.

There are fewer and fewer insurance companies that offer long-term care insurance policies, and even with a policy, there are many out-of-pocket costs that also have to be paid. People often fail to prepare for the indirect cost of caregiving, which primarily impacts women who are taking care of older, infirm male spouses and aging parents.

More than 34 million Americans provided unpaid care to older adults in 2015, with an economic value of $522 billion per year.

That’s not including the stress of caring for loved ones, watching them decline and needing increasingly more help from other sources.

The best time to start planning for the later years is around age 60. That’s when most people have experienced their parent’s aging and understand that planning and conversations with loved ones need to take place.

Living Transitions. Do you want to remain at home as long as is practicable, or would you rather move to a continuing care retirement community? If you are planning on aging in place in your home, what changes will need to be made to your home to ensure that you can live there safely? How will you protect yourself from loneliness, if you plan on staying at home?

Driving Transitions. Knowing when to turn in your car keys is a big issue for seniors. How will you get around, if and when you are no longer able to drive safely? What transportation alternatives are there in your community?

Financial Caretaking. Cognitive decline can start as early as age 53, leading people to make mistakes that cost them dearly. Forgetting to pay bills, paying some bills twice, or forgetting accounts, are signs that you may need some help with your financial affairs. Simplify things by having one checking, one savings account and three credit cards: one for public use, one for automatic bill-paying and a third for online purchases.

Healthcare Transitions. If you don’t already have an advance directive, you need to have one created, as part of your overall estate plan. This provides an opportunity for you to state how you want to receive care, if you are not able to communicate your wishes. Not having this document may mean that you are kept alive on a respirator, when your preference is to be allowed to die naturally. You’ll also need a Health Care Power of Attorney, a person you name to make medical decisions on your behalf when you cannot do so. This person does not have to be a spouse or an adult child—sometimes it’s best to have a trusted friend who you will be sure will follow your directions. Make sure this person is willing to serve, even when your documented wishes may be challenged.

Reference: CNBC (Jan. 31, 2020) “Four steps you can take to safeguard your retirement savings from this risk”

Key Terms: Elder Care, Nursing Facility, Long Term Care, Cognitive Decline, Retirement Savings, Advance Directive, Estate Plan, Continuing Care Community, Caregiving

Form Wills

How Bad Can a Do-It-Yourself Estate Plan Be? Very!

Here’s a real world example of why what seems like a good idea backfires, as reported in The National Law Review’s article “Unintended Consequences of a Do-It-Yourself Estate Plan.”

Mrs. Ann Aldrich wrote her own will, using a preprinted legal form. She listed her property, including account numbers for her financial accounts. She left each item of property to her sister, Mary Jane Eaton. If Mary Jane Eaton did not survive, then Mr. James Aldrich, Ann’s brother, was the designated beneficiary.

A few things that you don’t find on forms: wills and trusts need to contain a residuary, and other clauses so that assets are properly distributed. Ms. Aldrich, not being an experienced estate planning attorney, did not include such clauses. This one omission became a costly problem for her heir that led to litigation.

Mary Jane Eaton predeceased Ms. Aldrich. As Mary Jane Eaton had named Ms. Aldrich as her beneficiary, Ms. Aldrich then created a new account to receive her inheritance from Ms. Eaton. She also, as was appropriate, took title to Ms. Eaton’s real estate.

However, Ms. Aldrich never updated her will to include the new account and the new real estate property.

After Ms. Aldrich’s death, James Aldrich became enmeshed in litigation with two of Ms. Aldrich’s nieces over the assets that were not included in Ms. Aldrich’s will. The case went to court.

The Florida Supreme Court ruled that Ms. Aldrich’s will only addressed the property specifically listed to be distributed to Mr. James Aldrich. Those assets passed to Ms. Aldrich’s nieces.

Ms. Aldrich did not name those nieces anywhere in her will, and likely had no intention for them to receive any property. However, the intent could not be inferred by the court, which could only follow the will.

This is a real example of two basic problems that can result from do-it-yourself estate planning: unintended heirs and costly litigation.

More complex problems can arise when there are blended family or other family structure issues, incomplete tax planning or wills that are not prepared properly and that are deemed invalid by the court.

Even ‘simple’ estate plans that are not prepared by an estate planning lawyer can lead to unintended consequences. Not only was the cost of litigation far more than the cost of having an estate plan prepared, but the relationship between Ms. Aldrich’s brother and her nieces was likely damaged beyond repair.

Reference: The National Law Review (Feb. 10, 2020) “Unintended Consequences of a Do-It-Yourself Estate Plan”

Key Terms: Estate Planning Lawyer, Wills, Beneficiaries, Litigation, Heirs, Litigation, Beneficiaries

Long Distance Caregivers

How Can Long-Distance Caregivers Help Loved Ones?

A recent article noted that long-distance caregivers have the same concerns and pressures as local caregivers, perhaps even more. They spend about twice as much on caregiving as people caring for a loved one nearby, because they’re more likely to need to hire help, take uncompensated time off work and pay for travel. A huge challenge for this group is just staying informed and assured that the person needing care is in good hands. As a result, long-distance caregivers must have good communication and a solid team on the ground.

AARP’s recent article entitled “Long-Distance Caregiving: 5 Key Steps to Providing Care From Afar” provides us with five steps to staying informed and effective as a long-distance caregiver and thoughts for implementing the measures.

  1. Be sure you have access to information. Having a means of receiving good information and possessing legal authority to make financial and health-care decisions is critical for all primary caregivers, but it’s even greater for ones caring from a distance. Arrange as much as you can during an in-person visit.
  • Start the discussion on finances and map out with your loved one how to pay for health care and everyday expenses.
  • Ask whether your parent or other senior is able to sign the forms or make the calls necessary to give doctors, hospitals and insurers permission to share information with you or another trusted family member. This should include banks and utilities.
  • Be sure the senior has designated a durable power of attorney for health care and financial decisions.
  • Know what to do in an emergency, as far as access to the home by a neighbor, if needed.
  1. Create your on-the-ground support team. Don’t try to do it all, especially if your loved one has more serious or complicated health issues. In addition to healthcare professionals, ask friends, family and community groups to join a network of caregiving helpmates. Remember to add your loved one as part of the team.
  • Assign roles and tasks, that the members of the team are willing and able to do.
  • Create a list with contact info for everyone and keep it up to date.
  1. Consider hiring a reputable caregiving professional. They’re often called a geriatric care manager, aging life care manager, or eldercare navigator or coordinator. These professionals are frequently licensed nurses or social workers who can also be valuable mediators or sounding boards, when family members disagree on care decisions.
  • Verify the person’s professional certifications, see how long the person has been in the field and request references.
  • Care managers can charge $50 to $200 an hour. Medicare doesn’t cover this service, nor do most health insurance plans. However, if you can handle it financially, an experienced manager may be able to save your family time, money and stress with even a short call.
  1. Find ways to communicate regularly with your local support group and loved one. You should leverage technology. With permission, place video monitors, wearable activity trackers, remote door locks to prevent wandering (if the care recipient has dementia) and even electronic pill dispensers that can tell you if someone has taken the prescribed medications.
  2. Leverage your visits. Nothing’s better than an in-person visit. When you can manage one, come with a list of things you need to know or discuss.
  • Interview possible home aides or house cleaners or meet with social workers or other professionals involved in your loved one’s care to discuss any concerns.
  • Look for signs of abuse, which means monitoring your senior’s checking account and see if there are any irregularities and look for red flags of physical or emotional mistreatment, like bruises, unexplained injuries, or a sudden change in personality. Note if your family member talks about a person you’ve never met who visits often and has been “very helpful.”

Although you may have several practical tasks to tick off your list, it’s important to spend quality time with your loved one. And seek the advice of a qualified elder law attorney, if you have any questions.

Reference: AARP (Oct. 30, 2019) “Long-Distance Caregiving: 5 Key Steps to Providing Care From Afar”

Key Terms: Elder Law Attorney, Disability, Elder Abuse, Financial Abuse, Elder Care, Undue Influence, Caregiving, Dementia, Alzheimer’s Disease, Geriatric Care Manager

Siblings Caring for Parents

How Can Siblings Work Together to Care for Dad?

Sibling rivalries can reappear when the family must pull together to help care for an aging parent. This is especially true, if one adult child is doing the bulk of the caregiving and there’s little support from siblings.

The same is true when one sib is paying for professional caregiving or medical expenses. There can also be power struggles between older and younger siblings, who think they know what’s best for Dad and want to have control these types of decisions.

AARP’s recent article entitled “Family Conflict: Primary Caregiver Often Pitted Against Siblings” adds  the fact a parent may have a preference for which child will be the primary caregiver. That can create resentments with siblings. The article provides some smart strategies that can help you navigate potential issues with siblings:

  1. Create consensus. Have a meeting with your siblings and talk about Dad’s condition, the caregiving needs and what may occur going forward. When you’re in agreement, create a caregiving plan that speaks to the part each person will play. Although one person will do most of the work, the other sibs must be supporting players or provide respite care. Make sure to review what’s happening with your Dad and how his needs are changing. Adjust the plan as needed.
  2. Set up a division of labor. Discuss the sibling who’s best suited to which responsibilities based on abilities, financial resources, location to your parent, availability and other factors. You should also, try to be flexible about swapping tasks from one sibling to another, as circumstances changes.
  3. Decide how to communicate. Make sure everyone agrees to keep each another apprised of any changes in your parent’s condition or needs. Get together to determine the preferred way of communication (like group texts or email) for sharing important data between scheduled meetings.
  4. Ask for what’s needed. If you’re the primary caregiver, don’t set yourself up to shoulder every caregiving task or decision. That can create resentment and burnout. Be assertive and direct. Detail the specifics of what you need.

Reference: AARP (Oct. 28, 2019) “Family Conflict: Primary Caregiver Often Pitted Against Siblings”

Key Terms: Elder Law Attorney, Caregiving

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