Law News and Tips
Fred L. Vilbig © 2018
Two recent high profile deaths highlighted one of the reasons people should consider using a trust for their estate plans.
On June 8th, Anthony Bourdain died.He was 61. He has been described as one of the most influential chefs in the world. Mr. Bourdain’s death was tragic because it was a suicide which is so tragic for everyone involved, but particularly for those who were close to the decedent. You always question whether there was something you could have done. It’s very difficult.
But very soon after his death, there were reports in the press about how he had taken care of his daughter with his estate. It’s not that it was a fortune, but it was just a discussion of how he took care of an important person in his life.
The second high-profile death was that of Richard “Old Man” Harris on June 25.He was the patriarch of the family on the TV show “Pawn Stars.”His death wasn’t necessarily a surprise. He was 77 and had battled Parkinson’s disease for some time. Still it’s always sad to lose someone you love.
Much like in the case of Anthony Bourdain, soon after his death, articles began to appear in the press regarding his estate plan. Evidently in 2017, he amended his will to cut his son, Christopher (and his children!), out of his will. We don’t know why, but that didn’t stop the press from speculating. Who needs those kinds of things aired in the press for the vultures to pick at?
And that brings me to my point: privacy. Apparently both Anthony Bourdain and Richard Harris planned their estates using wills. When a person dies, his or her will has to be filed with the local probate court. With a little ingenuity, people (such as reporters) can get a peek at it, and then what should be private becomes public.
With a trust, everything is private unless a lawsuit makes it public. The trust beneficiaries are given a copy of the trust and accountings, but the only people who are in the know are the ones who have a need to know. That way all of the family business is kept in the family where it belongs. That’s a better plan!
To talk about planning your estate using a trust, feel free to contact me to take a closer look.
Want to avoid problems with your estate? Estate planning can avoid this type of situation.
SMALL PACKAGE; BIG PROBLEMS
Fred L. Vilbig © 2018
I recently got a call from another attorney saying she had a “difficult” probate case and wondered if we would mind taking it over from her. Since the beneficiary was the Catholic Cathedral Basilica, I agreed without really getting all the details. My paralegal warns me (maybe it’s abuse) not to do things like that. This may read a little like Abbot and Costello’s “Who’s on First” routine.
It turns out it was actually two estates. The first to die was the tenant (the “Tenant”) of a house owned by the second to die (the “Landlord”). Neither the Tenant nor the Landlord had any close family. The Tenant’s will provides that everything goes to the Landlord.The house was in the City, so the Tenant’s estate will have to be probated in the Probate Court there. The City Probate Court is really swamped, so this can present a problem. From what we’ve been able to determine so far, the Tenant’s estate has less than $40,000 worth of assets in it, so we should be able to do what is called a small estate administration, an easier process. The problem is that the house is a mess, so we’ll have to hire someone to clean it out. Are you confused yet?
The Landlord lived in the County. Since he owned the house, this will probably be a full estate. In order to probate an estate, we need a personal representative. In this case, the Landlord had a will that named a personal representative (the “PR”), but the PR is elderly with health issues. However, after talking about what’s involved, he did agree to serve. That was a relief since it can get really complicated when there isn’t a named PR willing to serve.
In addition to the house, the Landlord’s estate appears to include some life insurance proceeds. It turns out that the Tenant had a life insurance policy that was payable to the Landlord. Since the Landlord survived the Tenant, the uncollected life insurance proceeds are payable to the Landlord’s probate estate. Are you confused now?
The problem is we don’t know how much the life insurance policy was worth. We won’t know until we have a PR appointed. Life insurance companies (in fact any financial institution) won’t talk to anyone in an estate situation until a PR is appointed. I understand why; it’s just kind of a bother.
In the end, we were able to simplify all of this, and there will be a nice sum of money (but not a fortune) going to maintain one of the gems of our region. The Cathedral Basilica is the largest single collection of mosaics outside of Ravenna, Italy – the second largest in the world! And they’re beautiful! So I feel justified in taking on a couple of involved, albeit small, probate estates. But I’m sure I’ll hear different from my paralegal. Oh well.
Dementia and sleep disorders often go hand in hand. People who live with dementia often experience poor sleep as they progressively lose cognitive function.
It's common for dementia patients to experience longer sleep latency, increased sleep fragmentation and a decrease in sleep efficiency and total sleep
time. Some experience confusion and wander at night, making it difficult to get good rest.
How Sleep Routines Help Dementia Patients
At any age, bedtime routines support healthy sleep. When we maintain a regular bedtime routine, going through that routine tells your body it's time to sleep. This sleep schedule happens subconsciously, so you don't have to think about it or even recognize that it's happening to work.
The subtle cues of going through a bedtime routine can help dementia patients orient themselves to the time of day. It offers calming reassurance that can make it easier to relax and fall asleep.
Developing a Bedtime Routine for Dementia Patients
Keeping a regular bedtime routine is essential to improving sleep in dementia patients. Consider these tips for supporting dementia patients with a bedtime routine.
Start forming nighttime habits: What you do in your bedtime routine isn't as important as simply doing it, each night without fail. The simple practice of going through the same steps every night before bed will help induce sleep and make it easier to get settled down at night.
Set a regular bedtime: Going through your bedtime routine at the same time each night offers reinforcement and reassurance that it's bedtime and time to wind down for the night. Try to help your patient go to bed at the same time each night and wake up at the same time each morning. A regular bedtime practiced consistently can offer a sleep cue that helps dementia patients feel sleepy and ready to go to bed at the appropriate time.
Avoid disruptive activities: Abstain from stimulating activities before bedtime as part of your routine. Turn off bright lights, and turn off the TV or other sources of noise. Offer a light snack, but be careful to avoid heavy meals or food that contains excessive sugar, fat, or even caffeine, as these can interfere with sleep.
But, be active during the day: Although stimulation at night isn't a good idea for dementia patients in need of sleep, activities during the day are an excellent choice. One option is to start your bedtime routine in the early afternoon, practicing light exercise such as walking or stretching.
Choose an enjoyable evening activity: Decide on a calming evening activity that can be done to wind down before bed. Good ways to wind down include crocheting or reading books aloud. Avoid watching TV, as the bright screen can interfere with maintaining a healthy circadian rhythm.
Practice massage therapy: Release tension built up throughout the day with a gentle massage. It can be practiced as the patient is lying down in bed, or in a chair before starting the rest of the bedtime routine. Massage can help dementia patients relax and improve circulation.This article is written by our Guest Blogger from: Tuck -Everything You Need for A Good Night's Sleep
Tuck Sleep is a community devoted to improving sleep hygiene, health and wellness through the creation and dissemination of comprehensive, unbiased, free web-based resources. Tuck has been featured on NPR, Lifehacker, Radiolab and is referenced by many colleges/universities and sleep organizations across the web.
AFTER MOM DIES?
Fred L. Vilbig © 2018
I recently met with a client whose mom had died. I’d written his mom’s trust almost 20 years ago, and now we had to administer it.
The first thing I always want to do is I want the named trustee to find out what assets were actually in the trust.When we do a trust plan, I always give clients a funding letter explaining how to transfer assets into their trust, but things get missed.This may or may not include joint assets which automatically pass to the surviving joint owner, if there is one.We are only interested in those assets that were only in the decedent’s name or where the decedent was the last surviving joint owner.
If there are assets outside the trust, then we need to determine whether we can do a small estate or we have to do a full estate. For instance, many people overlook their cars, as this client had, but as long as the total value of the probate assets is less than $40,000, we can administer those assets by simply filing an affidavit and the original will (if there is one). It’s simple and easy to do.If the probate assets are over $40,000, then we will need to do a full probate, and that discussion is beyond the scope of this article.
I always recommend that we file a decedent’s will. In addition to a trust, I always have my clients execute what we call a “pour over will.” This works kind of like a safety net for probate assets. If we had to open a full probate estate, the pour over will would simply scoop up those assets and pour them over into the trust. Even when we think that there aren’t any non-trust assets, we file a will in case assets are discovered later. A will is void if it isn’t filed with the probate court within a year of a person’s death, so we want to just be careful.
I also suggest that we publish a notice of trust. This is a notice published in a legal paper just saying that the client died, and there is a trust. What that does is it notifies creditors that if they have a claim, they need to file it with the trustee within six months of the publication of the notice. Without a notice, the claims period is one year. If anyone has a claim against the decedent, they would have to file within six months (or one year without the notice) of the notice publication date or be barred from filing the claim.
We then talked about taxes. If there is a surviving spouse, then he or she just files a tax return including all of the couple’s joint income. If there’s not a surviving spouse, then the fiduciary has to file a tax return for the decedent reporting income and paying taxes incurred up to the date of death. That is filed using the decedent’s Social Security number. Whether there is a surviving spouse or not, if there is real estate to be sold or if it is anticipated that the trust or estate will earn more than $600 before things get wrapped up, the fiduciary needs to get an employer identification number (and “EIN”). Any amounts held by the trust after death will need to use that EIN. And when real estate is sold, the title company is going to insist on having an EIN. And if the trust has more than $600 of taxable income, then a Form 1041 will have to be filed.
One of the more complicated things in administering the trust is the need for an accounting. Missouri law requires it if a beneficiary asks for it, but it just makes sense anyway. You need to start with the date of death value on all of the assets; show all of the income, payments, and adjustments made during the course of administration; and then come up with the remaining balance at the end showing who gets what. A thorough accounting can avoid a lot of problems at the end.
As you can see, there is a lot to administering a trust. If you want some direction, give us a call.
Fred L. Vilbig © 2018
It’s spring – at least according to the calendar. And for a lot of people, that means it’s time to start house hunting. If you’re going to move, early summer is probably the best time since the kids will be out of school and the weather should be okay. We’ve moved in February, and that was pretty unpleasant. So what’s involved in finding a house, getting a loan, and closing the deal? I’m going to focus on the contract. I am an attorney after all.
Most people work with a realtor. Realtors help buyers meet sellers. Some people already know each other, so a realtor may not be necessary there, but they can be helpful.
Once you find a home, you need a real estate contract. There is a standard residential form that realtors and most attorneys use, and it covers most situations. If there is something unique about your deal, there are places to include that.
The contract talks about financing. If you’re paying cash or don’t need to worry about financing, you can just check a box. Most people, however, need to find financing, so you can check the other box. You need to put in some limits on the loan amount and the interest rate to protect yourself, but that should be pretty easy to figure out. You just don’t want to have to close if you don’t get the loan you need to.
There are all kinds of riders (attachments) you can add, and a realtor or a real estate lawyer can help you wade through those. They can be pretty important depending on the deal.
You’re going to want to get title insurance. What that does is it protects you against buying a problem. Maybe the seller doesn’t really own the property; maybe there are easements that will keep you from using the property the way you want; or maybe the fence or driveway is on your neighbor’s property.
That last point brings up the survey. A regular title policy includes exceptions to coverage regarding survey matters. Your bank may require a “survey,” but it probably is what we call a “drive-by survey.” The surveyor can literally drive by the property and never get out of their car. Title companies won’t delete the survey exceptions without what we call a “stake-in-the-ground” survey. So be careful.
And if you’re buying a previously owned home, you’re going to want to insist on a detailed inspection. There never perfect, but they give you your best protection.
And something else for buyers to remember: your real estate agent gets paid when the deal closes; and the more the purchase price, the more they get paid. I know they are supposed to be working for you, but there is a built-in conflict of interest. Just something to think about.
The first consultation is free. Or call him now at (314) 241-3963
PLANNING FOR DIGITAL ASSETS
Fred L. Vilbig © 2018
As I’m writing this, Mark Zuckerberg, the CEO of Facebook, is in the middle of testifying before Congress about a data breach of some sort. To be honest, I haven’t really been following all of the reports on this situation, so I won’t pretend to understand what all is involved in this. But I do know that Americans have surrendered a huge amount of privacy to digital businesses. One study found that even with your cell phone off, the GPS on your phone can still track almost everywhere you go. And people put all kinds of personal stuff on line, and it really isn’t private.
That started me thinking about estate planning for your digital assets. More and more of our financial information is on line. Most people buy things on line which requires using credit cards or debit cards. Some people pay bills on line. A lot of people do on-line banking. And then people have all kinds of social media accounts that may have private information or pictures on them.
The question is, what happens to all of that when you die? I’ve had widows and widowers who knew their deceased spouse’s username and password. They have continued to use the deceased spouse’s accounts for quite some time after their death, even investment accounts. I understand the practicality of that, but I don’t endorse it.
The problem arises when no one knows the decedent’s username and password (or whatever the access procedure calls for). There are lots of digital pirates sailing the virtual sea. It’s not uncommon for one of those pirates to commandeer a digital account, steal the information, and run up bills. Your estate in the end might not end up being liable for those, but it can create a real headache for your personal representative or trustee (your “fiduciary”).
So what’s a person to do? First, you need to pick a fiduciary who has some working knowledge of digital finance and social media. They need to be comfortable working in the digital world. You have to name them in your will or trust. It may be that you want to have one fiduciary to handle your regular assets and another to handle the digital assets. Your call.
Next (or maybe even simultaneously) you need to make a list of your digital accounts, the user name, and the password. If a particular digital account has some special access procedure, you need to include that information on your list. The problem with all of this is that I end up changing usernames and passwords fairly frequently. In particular, I forget passwords and have to change them. So this list needs to be fairly accessible.
There are apps you can use to store all of that information. I am not endorsing any of these, but the ones I have heard about are PasswordBox, PasswordSafe, and SecureSafe.There are many more. If you’re old fashioned (or tech-challenged) like me, then maybe having a paper list in a safe or a Word document on your computer can work too. Just make sure that your digital fiduciary knows how to access that information. I’ve put a sample table at the end of this blog if you want to use that.
And when you’re doing all of this, be sure to investigate the particular terms and conditions of the digital accounts. For instance, Facebook has a way of deleting digital information or notifying certain people you have designated if your account remains inactive too long. Google has something similar. Twitter is much more draconian: it requires, among other things, a death certificate, a government issued ID, and a signed statement from a personal representative (which may require that you open a probate estate).
So planning for digital assets does require work, but besides the basic will or trust, it is work that you have to do. If you have any questions, contact me.
DIGITAL ACCOUNT LIST
|Digital Account||Username||Password||Special Instructions|
TAXES AND DEATH
Fred L. Vilbig © 2018
Tax Day is just around the corner.For those getting refunds, the date is probably irrelevant. You’ve probably already filed your tax return, deposited your refund check, and bought that big screen TV.
Tax Day is much more relevant for those who still owe some taxes. They may still be gathering information for their preparer.They most certainly are trying to figure out where they are going to get the money to pay the remaining taxes due.And they resent the fact that it costs probably over 50% of their earned income to be an American.
Yes, between state and federal income taxes, personal property tax, real estate tax, and sales tax, a number of people pay over 50% of their income in taxes.Sure there may be some who can avoid paying some of their taxes by making certain investments and things, but that is a very small number of people. The vast majority of American citizens don’t have those kinds of options. They have to work for a living, and so they pay taxes, and lots of them.
One of the only remaining (legal) tax savings (and it’s really only a tax deferral) options open to taxpayers is saving for retirement. It used to be that employers provided pensions to workers, and it was up to the company to worry about how that was going to get funded. Government employees (including teachers) still get this. But those days are gone.
For most of us, we have to take money out of our paychecks and put it in 401(k)s or IRAs. Although that can be painful now, it is critically important for the future. Although some people have gotten lazy and think that the government will take care of us all through Social Security and Medicare, Social Security checks don’t really go that far. And since the US has to borrow literally billions of dollars each year just to keep this flimsy boat afloat, who knows how much longer we can keep plugging the fiscal holes with foreign money.It’s a scary thought, so putting money away for retirement is absolutely critical.
And for those who have saved money, what happens to it if you die unexpectantly. I often have clients tell me they just going to live until they run out of money. The problem is no one really knows when that day will come.
So you do need to plan for that. If you’re married, your retirement money will probably go to your spouse. On the death of the second of you to die, you probably have named your children as the beneficiaries. The problem is that inherited IRAs can be taken away in lawsuits, and they can even get caught up in divorce settlements.If you don’t do any planning, then within five (5) years of your death, the government can take a huge chunk of your hard-earned money in taxes.
Although we surprisingly still get a lot of pushback from financial advisors on this, the best plan for retirement assets after a spouse is a trust. In 1999, the IRS gave us some “magic” language that allows us to do that. IRAs that go through a trust are protected from bankruptcies and court judgments, and they should never enter into any divorce settlement discussions.In my opinion, it’s the best way to go. But like I said, we still get pushback for some reason.
Call me to discuss further.It would be sad if all that money you worked so hard to save just went up in flames … I mean taxes …wait, that’s kind of the same things, isn’t it.
A CLIENT LETTER
Fred L. Vilbig © 2018
Let me commend you on what you are doing. Having helped my wife care for her parents as their health and mental capacity declined, I know how physically, intellectually, and emotionally draining this can all be. Growing up, we never really think about the kinds of things you have to deal with now. Some people walk away. Some people delegate the duties. Some people just want to end it all. But you are caring for your mother at what is probably the most difficult time in her life, and also of your life up to now. As I said at the beginning, I commend you.
That said, I wanted to answer some of your questions. The first was whether having your mom declared incompetent created any problems for you personally. To answer that, I need to define what I mean by declaring your mom incompetent.
If she had not done any planning, that would mean getting a court involved. It’s not the end of the world, but it is sort of a pain. You’d need to get a doctor to answer a formal set of questions (“interrogatories”) to say that your mom can’t perform certain basic functions of daily living. For instance, can she remember to take her medicine at the proper time? Does she know to wear a coat when it’s cold outside?
Once you have the interrogatories, you have a hearing. Assuming all goes as planned, the judge would then put you in charge of her finances (a conservatorship) and her person (a guardianship). You would next need to get a court order authorizing you to spend money, and then you have to file an annual financial report with the court.
Fortunately, your mom did all the necessary planning. She has a general durable power of attorney, a medical directive (which includes a medical power of attorney and a living will), and a trust. Although people can put others in charge of things even while they’re competent, your mom (as most people) wanted to retain control as long as she could. So in her case, in order for you to take over, you just need a doctor to certify that she is not able to perform some of the necessary basic functions of daily living.
Just as a caution to you, although getting that kind of certification from a doctor used to be fairly easy, I have noticed in recent years that doctors have become more cautious. They are often reluctant to make that certification. However, given the right circumstances, they will.
Once you do get the certification, you can pay your mom’s bills and make decisions regarding her care. There is no need for any court proceeding. I know you were worried about having to testify, so I’m assuming that is a relief.
I now want to return to your main question about liability. The doctor’s certification does not impose any additional personal liability on you. You are basically already doing what needs to be done. With the certification, you will just have the proper authority to do it. And you can do everything with your mother’s assets, not yours. You will have no additional personal financial liability for your mom.
Once again, I want to commend you on what you are doing. Even though it can be very challenging, it is the right thing to do. Our parents took care of us when we were young, and now it’s our turn. Life is funny that way.
Let me know if you have any more questions.
Fred L Vilbig
Fred L. Vilbig © 2018
One of my sons texted me the other day. He needs money. Not the way you’re thinking. He’s getting into the real estate business – multifamily units. He was renting an apartment but got tired of that, so he bought a 4-family, lives in one unit, and rents the other three. I wish I would’ve been that smart.
He’s going into business with one of his grade school buddies to buy more properties. But they want to get bigger properties. The problem is that that requires more money than the two of them have.
That seems to be a perennial problem for businesses – money. It happens all the time where a business needs to buy more equipment or expand facilities in order to grow and make more money. But the question is how.
Owners can borrow money, but banks can be stingy. They don’t like lending money when there’s a chance they won’t get it back. It has to be a pretty certain business opportunity for them to lend a bunch of money. Just to make sure, they will usually put some kind of a lien against the assets, and they’ll impose a bunch of financial covenants or promises on the business. Those covenants can be kind of a pain, but it is their money that they are lending you.
Instead of a bank loan, business owners can go to friends and family to get private loans. Those can get messy. It’s important to have a clear understanding about what’s going on. If things go well, your “lender” will want to treat it as an investment so that they get to share in the growth of the business. If things go badly, your “investor” will want to be treated as a lender so they can get paid back before the shareholders. And the understanding needs to be in writing – people are funny about remembering things the way they want to.
My son knew that he wanted to sell interests in the business. He also knew that this would raise securities law issues. He thought that meant he had to register with the federal Securities and Exchange Commission. That is a horrendous effort, so you try to avoid it at all costs… that is, short of prison. So small business owners need to fit into a federal exemption.
Generally, small (under $5 million with less than 35 investors) or purely intrastate security sales are exempted, though the devil is in the details. If you have investors in more than one state, you’ll probably need to file a Reg. D registration which is a simplified (although not simple) process. But even if you have all of your investors in one state (and intrastate offering), you may still be subject to that state’s securities law, so you need to look for a state exemption. In Missouri, you’re pretty safe if you have fewer than 25 investors.
But even if you’re exempt from state registration, you probably still are subject to the disclosure requirements. If you’re offering securities to people who will not be directly involved in the business, you cannot make a material misstatement (that is, tell a lie) and you cannot fail to disclose some material information about the business. And again, this kind of disclosure needs to be in writing because of that memory issue I mentioned earlier.
If you’re thinking about raising money to expand your business, give us a call. It’s important to everyone to get it right.
THE GREAT TRANSITION
Fred L. Vilbig © 2018
As I’ve said before, everyone is predicting that over the next decade or so, we are going to see the largest business transition in history. The aging baby boomers are either voluntarily or involuntarily going to pass their businesses on to the younger generation. It is important to plan. As I mentioned in my last column, my grandfather (God bless him) didn’t.
Although early in this process we thought that mom and dad would be giving their businesses to their kids, it looks like that is not the case. Many of the business owners put little away for retirement. Their businesses are their retirement savings. They can’t put that in jeopardy.
But why not sell the business to the kids? Many times the kids aren’t interested. Other times, the kids wouldn’t be a good fit for one reason or another. Quite often, the kids can’t get a loan, even an SBA loan, or they don’t want to personally guarantee a loan, putting everything they own at risk. What we are seeing more and more is sales to insiders or sales to outside third-parties. We recently closed on the sale of an asphalt company for these very reasons.
When we represent a buyer, we always suggest that the transaction be structured as a purchase of the company assets. The reason for that is that the buyer doesn’t want the seller’s liabilities. For instance, in preparation for the sale, the seller may have recently fired some employees without getting adequate releases. Or maybe there are pending income or employment tax issues. Maybe they’re unsatisfied liens. A buyer doesn’t want any of that baggage, so they buy the assets but leave the liabilities.
The problem is that liabilities can be pesky-particularly in product liability and environmental cases. The courts have decided that if you are buying an entire business and plan to continue it (even using the old name), then the buyer should be liable for some, if not all, of those liabilities. It’s very annoying.
That’s where “due diligence” comes in. In a well written purchase agreement, the seller will give the buyer lots of warranties and representations regarding all kinds of things. It would be nice if we could trust people, but we can’t. As President Reagan once said, “Trust, but verify.” That is due diligence.
For the buyer, due diligence takes many forms depending on the particular assets. If there is real estate, you’ll want title insurance. If you are buying things (like equipment or vehicles), you need to make sure there are no liens for loans. You’ll want to make sure there are no tax liens or outstanding judgments. And you’ll want the seller’s lawyer to certify the existence and authority of the seller. Buyers may not want to take the time or pay the money to do these investigations, but you ignore them at your peril. It’s sad when a buyer thinks he or she has purchased a golden nugget only to find out that they have iron pyrite (that is, fool’s gold).
So if you are in the market to buy your own business, caveat emptor, that is “Buyer beware.” The old saying applies: an ounce of prevention is worth a pound of cure. Sometimes that cure can be terribly expensive.
Call if you have any questions.