The Petrosewicz Law Firm Estate Planning Blog

Johnny Hallyday’s Estate Battle Pivots on Instagram Posts

The French rocker started using Instagram in 2012 and shared a mix of his personal and professional life with fans. Instagram has now helped two of his children defeat his widow in the first stage of an estate battle for an estate that the French news media values at tens of millions of dollars, reports The New York Times in the article “French Rock Star’s Instagram Defeats His Widow in Inheritance Battle.”

When Mr. Hallyday died in 2017, two testaments were found in a safe deposit box. One, which was written in Los Angeles, appointed his wife Laeticia as sole heir and manager of his estate. The will completely excluded his grown children from two prior relationships, David Hallyday and Laura Smet. This is not permitted under French laws of inheritance.

The two children have been fighting to prove that their father lived most of his life in France, and not in the United States.

Laeticia, who was the singer’s fourth wife, told a court outside of Paris that Johnny had settled in Los Angeles in 2007, their daughters Jade and Joy went to school in Los Angeles, and he had received a green card in 2014. Court documents also reflect her telling about his fascination for Elvis Presley and American culture.

However, his son David offered something that was a bit more concrete: a chart of where the couple spent their time from 2012 to 2017, based on Johnny’s Instagram posts.

The chart revealed that Johnny spent at least 151 days in France in 2015 and 168 days the year after. He then spent eight straight months in France, mostly because of his illness, before his death in 2017.

The court accepted the children’s argument, ruling that it, and not an American court, had the competence to make decisions on Johnny’s estate.

The battle over the inheritance includes the performer’s rights on more than 1,000 songs, as well as properties in France, California and on St. Bart’s in the Caribbean. The French public has been fascinated by his life and now, by the estate battle. An estimated 15 million people watched a tribute to him in Paris after his death, when he received a hero’s tribute.

This case is an example of how social media and the law intersect. As we live more and more of our lives online, social media posts are increasingly being used as evidence. The newness of the material is similar to what happened in the early 20th century, when the telephone was still relatively new and the admissibility of conversations on the telephone as evidence, was still being debated.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The New York Times (May 29, 2019) “French Rock Star’s Instagram Defeats His Widow in Inheritance Battle.”

Are Inheritances Taxable?

Inheritances come in all sizes and shapes. People inherit financial accounts, real estate, jewelry and personal items. However, whatever kind of inheritance you have, you’ll want to understand exactly what, if any, taxes might be due, advises the article “Will I Pay Taxes on My Inheritance” from Orange Town News. An inheritance might have an impact on Medicare premiums, or financial aid eligibility for a college age child. Let’s look at the different assets and how they may impact a family’s tax liability.

Bank Savings Accounts or CDs. As long as the cash inherited is not from a retirement account, there are no federal taxes due. The IRS does not impose a federal inheritance tax. However, there are some states, including Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania, that do have an inheritance tax. Speak with an estate planning attorney about this tax.

Primary Residence or Other Real Estate. Inheriting a home is not a taxable event. However, once you take ownership and sell the home or other property, there will be taxes due on any gains. The value of the home or property is established on the day of death. If you inherit a home valued at death at $250,000 and you sell it a year later for $275,000, you’ll have to declare a long-term capital gain and pay taxes on the $25,000 gain. The cost-basis is determined, when and how you take ownership.

Life Insurance Proceeds. Life insurance proceeds are not taxable, nor are they reported as income by the beneficiaries. There are exceptions: if interest is earned, which can happen when receipt of the proceeds is delayed, that is reportable. The beneficiary will receive a Form 1099-INT and that interest is taxable by the state and federal tax agencies. If the proceeds from the life insurance policy are transferred to an individual as part of an arrangement before the insured’s death, they are also fully taxable.

Retirement Accounts: 401(k) and IRA. Distributions from an inherited traditional IRA are taxable, just as they are for non-inherited IRAs. Distributions from an inherited Roth IRA are not taxable, unless the Roth was established within the past five years.

There are some changes coming to retirement accounts because of pending legislation, so it will be important to check on this with your estate planning attorney. Inherited 401(k) plans are or eventually will be taxable, but the tax rate depends upon the rules of the 401(k) plan. Many 401(k) plans require a lump-sum distribution upon the death of the owner. The surviving spouse is permitted to roll the 401(k) into an IRA, but if the beneficiary is not a spouse, they may have to take the lump-sum payment and pay the resulting taxes.

Stocks. Generally, when stocks or funds are sold, capital gains taxes are paid on any gains that occurred during the period of ownership. When stock is inherited, the cost basis is based on the fair market value of the stock or fund at the date of death.

Artwork and Jewelry. Collectibles, artwork, or jewelry that is inherited and sold, will incur a tax on the net gain of the sale. There is a 28% capital gains tax rate, compared to a 15% to 20% capital gains tax rate that applies to most capital assets. The value is based on the value at the date of death or the alternate valuation date. This asset class includes anything that is considered an item worth collecting: rare stamps, books, fine art, antiques and coin collections fall into this category.

Speak with an estate planning attorney before signing and accepting an inheritance, so you’ll know what kind of tax liability comes with the inheritance. Take your time. Most people are advised to wait about a year before making any big financial decisions after a loss.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Orange Town News (May 29, 2019) “Will I Pay Taxes on My Inheritance”

Will Contests May Be Rare, but They Do Happen

In an ideal world, wills and estate plans are created when people are sound of mind and body, just as the familiar legal phrase describes. The best way to avoid a will contest is to have a well-written will, prepared by a qualified estate planning attorney who can help avoid a legal contest. However, there are times when this is not the case, says The Huntsville Item in the article “Legal Corner: Will contests while rare are messy.”

A will is contested when the person challenging the will believes that it does not represent the true intent of the testator to pass the estate to the people he wanted.

A will must be written in the correct form and executed according to the law in order to be valid. This is why it is necessary to work with an estate planning attorney to create a will. A person may try to do it on their own, typing it out, downloading a form or copying a form, but because the law is very strict about the form and execution, many of these do-it-yourself wills end up being deemed invalid by the courts.

When the will is not valid, the laws of intestacy are applied to the person’s estate. This is rarely in accordance with the person’s wishes, but at this point, it’s too late.

To make a will, the person must have “testamentary capacity.” That means that he or she knows what they are doing, what their estate includes and who the recipients of the estate will be. They also must not have been subject to undue influence. That means that the person making the will is so controlled and dominated by another person, that they were not able to make the will that they wanted.

When the sad day comes that a loved one passes, the family grieves. Each member will deal with the loss in their own way. For some people, the intense level of emotions can bring about conflicts. Sometimes these are the result of old battles that were never resolved. Sibling rivalry that’s been simmering for decades can emerge.

One of the goals of a properly prepared will, is to prevent any family fights after a loved one has passed.

Studies have found that the struggle over mom’s necklace or dad’s watch are not about the material items themselves, but over the symbolic meaning of those items. When families fight over inheritances, it’s rarely because of the actual item or even the money.

As the family’s older member, you want to do anything you can to avoid fracturing the family after you’ve gone.

Unless you take the steps to create a will and a strong estate plan, your loved ones could be entrenched in a long inheritance conflict that lasts years and consumes more resources than anyone can spare.  However, with careful planning, you can avoid inheritance conflicts. After all, estate planning is more for those you love than for you.

Rely on the skill and knowledge of an experienced estate planning attorney and leave your family intact.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Huntsville Item (May 26, 2019) “Legal Corner: Will contests while rare are messy”

What You Need to Know, If the Next Generation Is Inheriting the Family Farm

Understanding the tax liabilities for inheriting, buying or being gifted the family farm, is critical to avoid a costly financial misstep, says Capital Press in the article “The family farm is coming to you: What’s next?” You’ll need to work closely with your estate planning attorney and CPA to make sure you understand the basis in the real estate, especially if the property is sold and taxes will need to be paid. How you inherit the property, makes a big difference in the tax bill.

If you receive the property as a gift from parents while they are alive, then you retain their income tax basis in the property. If they inherited it also, they likely have a low tax basis. Farms with a basis of $50,000 that are now worth $2 million are not unusual. If the farm is sold, there will be a capital gains tax on the difference between the basis and the present value, which could be more than $600,000.

If you inherit the farm from a parent and then sell it for $2 million, its value at the time of their death, you would not have to pay a capital gains tax. That saves $600,000.

If you bought the farm from a parent’s trust or estate for $2 million, then you have a $2 million basis in the property and will probably not owe any property gains tax, if you eventually sell it for $2 million.

If you own the farm without other family members, you should start planning your next steps. To whom do you want to pass the farm? If you want to keep the farm in the family, work with an attorney who is familiar with farm families, so that you can keep working the land and reduce any disputes.

Farmers often separate business operations from the land, with the operations held by one business and the land held by another entity. This allows the estate planning attorney to plan for succession in how operations and land are transferred to the next generation. It also provides asset protection, while you are alive.

Make sure that your farm succession plan and your estate plan are aligned. A common issue is finding that buy-sell documents don’t align with the will or trust. Some farmers use a revocable living trust as a will, so they can incorporate estate tax planning and transition the farm privately upon death.

Contact Benecia Flores at the Petrosewicz Law Firm at (281) 344-9455 or [email protected] to discuss preserving your inheritance.   

Reference: Capital Press (March 24, 2019) “The family farm is coming to you: What’s next?”

Phony Inheritance Scams Snags Southwestern Senior

The Hawkins County Sherriff’s Office was notified by a Deputy from Mineral County, Nevada, that he was working on a case where an elderly Hawkins county man was scammed, according to the Times News article “Elderly Hawkins man loses $4K in phony $89.5 million inheritance scam.”

This is a cautionary tale for seniors, who are often targeted by scammers, and their adult children, who need to protect their aging parents.

The 80-year-old victim had received phone calls from a man claiming to be an attorney from the African nation of Ghana named Abu Jones. He told the elderly man that he’d inherited $9.5 million, which could only be collected after paying fees to the U.S. Treasury Department. He was instructed to send money order payments to a person in Hawthorne, Nevada.

The person from Hawthorne was being scammed as well.

The elderly man sent several payments to the Hawthorne resident, who in turn sent those payments on somewhere else. He told police that he wasn’t sure how much money he had sent to the person in Hawthorne, but believed it was in excess of $4,000.

A bank in Hawthorne was working with the Hawkins County Sherriff’s Office to try to return a portion of the money to the victim.

Scams centered in outsized inheritances and fraudulent lottery prizes are very common. They all require payment of some kind of fees, in order to receive the inheritance or the prize. Needless to say, there is no inheritance, nor is there a prize.

The public is reminded to never send money orders, gift cards or give anyone credit card numbers or gift card numbers, if they are requested by someone making a promise of a big payday.

The first thing to do if you are targeted, is to hang up. The second is to call the local authorities, especially if the caller is persistent and seems to have obtained personal financial information about you or has dire news about a family member.

Many of these crimes go unreported, because the victims are embarrassed that they have fallen for what appears in hindsight to be a very obvious scam. Seniors who are more trusting than younger people, or who suffer from even mild cognitive decline are most vulnerable.

The Petrosewicz Law Firm can assist you with your elder law needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Times News (March 4, 2019) “Elderly Hawkins man loses $4K in phony $89.5 million inheritance scam.”

Inherited Real Estate That You Don’t Want? Here’s What to Do

You may have inherited real estate property and not have any experience in owning, managing or selling real estate, so it may feel like an overwhelming burden, says AOL in the article “What to do when you inherit real estate that you don’t want.” However, it’s really not all bad news. You have many options, when you inherit real estate property. You just need to learn what to do with it.

The first thing to know is that you are probably in the middle of a very emotional time, so it’s best not to do anything for the time being. In some states, you don’t have a choice about that, and it’s not a bad thing. For example, in Arizona, there is a 90-day waiting period before you can sell an inherited home.

You will need to start looking for an attorney and a real estate professional to evaluate your options, before doing anything. The estate planning attorney who handled the estate will be able to help, as there will likely be some taxes to be paid and they may be familiar with the property.

Be aware that you are a target for real estate investors. People who inherit real estate may not know the property’s value or understand why it may be worth more in the future. They also know that children often want to get rid of their inherited property quickly, and that a cash payout can be very tempting. They expect to get the property from you at a great discount, fast. Don’t fall victim to this.

Find out how much the property is worth. Do a lot of homework. Look at comparable properties in the area. Don’t rely too heavily on an appraisal, which may have been done as part of the valuation of the estate by the person who gave you the property. Sometimes the appraisal may be dated, or it may reflect other factors that are no longer relevant to the property’s value.

Speak with a number of realtors before choosing one. Remember that they are sales people and have winning personalities and a sympathetic ear. This is a business transaction first. Have them prepare estimates on the value of the property and ask for references. Contact the references and speak with them candidly.

There will be costs associated with the sale of the property. In addition to the real estate commission, you may have to make some investments in the property, if it has not been taken care of over the years.

You might consider selling the property at auction, as-is, which would eliminate any need to dress it up and would speed the process. However, be careful when it comes to the buyer of your property and make sure all costs and fees are in a contract. Have your attorney review the contract to be sure no one is taking advantage of you.

Take your time and be cautious. Your estate planning attorney will have some guidance for you. Selling the family home is an emotional experience, but as a seller, you’ll need to be all business.

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: AOL (Feb. 25, 2019) “What to do when you inherit real estate that you don’t want”

Farmers, Don’t Make These Five Estate Mistakes

First mistake: some farmers think they don’t have to do anything because the federal estate tax exemption is so high, and their net worth is well under the limit. However, just because the estate tax exemption has doubled until 2025, does not mean they don’t need estate planning. The article “5 Estate Planning Mistakes You Don’t Want To Make” from Ag Web takes readers through some big mistakes that have been made by farm families in the past.

The estate exemption will only be this high for a limited period of time. When the Tax Act expires in 2025, the exemption will be back down to $5.5 million per person and $11 million for a couple. However, there is an election in 2020. There is no guarantee that the limits will remain in place until 2025.

The family is a bigger risk to the future of any family business than taxes. Blended families, stepparents, siblings and half-siblings and how family relationships work or don’t work is the bigger reason why family farmers, ranchers and business owners need estate and succession planning.

Second, people make a huge mistake in trying to treat their children the same. Fair does not always mean equal. Think about who is working on the farm, and who is not. Who is going to do a great job maintaining the family legacy, and who has already left to live in another state? Be mindful of the difference in your children, and talk with them, individually and in a group, so they know what your intentions are.  

Third, you cannot simply title your property, so your kids and your spouse own it together and it passes to them when you die. It sounds nice and simple, but it’s a huge mistake. People think they want to do this to avoid probate, but it creates many problems. For one thing, if you just add names on property and there is no bill of sale, you create a taxable gift. What happens if one of your children gets divorced? Their name is on the deed, their spouse may be entitled to a portion of your farm, and suddenly your wife, children, and an ex-wife are all owners of the property.

Fourth, the plan to “sell off the farm, when I retire” plan is a terrible tax burden to place on yourself. If you sell the last crop and auction off the equipment, there will be a big income tax bite. Farmers tend not to pay a lot of income taxes. They sell this year’s grain next year, and they deduct next year’s expenses this year. They buy equipment in December and then depreciate it, but then when you do a retirement sell off, you get all the taxes that you’ve been pushing away all at once.

Fifth is the one that dooms so many families, both farmers and non-farmers. You can’t copy your neighbor’s estate plan and hope it will work. Every family is different, and no matter how small your town, everybody does not know the exact details of everybody else’s business. The farmer down the road may do lifetime gifting that works for him—and lands your family in an unfixable situation.

Estate planning is very specific, and every family has its own needs. Talk with an estate planning attorney, who has experience with farm families and succession plans.  

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Ag Web (Jan. 15, 2019) “5 Estate Planning Mistakes You Don’t Want To Make”

Common Estate Planning Mistakes That You Can Avoid

The number one estate planning mistake is failing to have or to update an estate plan, says the Times Herald in the article “Top six estate planning mistakes.” Therefore, start by working with an estate planning attorney to create an estate plan, and you’ll be way ahead of most Americans. Why does this matter?

An estate plan allows you to stay in control of your assets while you are alive, provide for your loved ones and for yourself in the event you become mentally or physically incapacitated, and when you die, give what you have worked to achieve to those you wish. It costs far less to take care of all of this while you are alive. It’s a gift to those you love, who are spared a lot of stress and costs if it must be figured out after you have passed.

Once you have a plan in place, you have to keep it updated. An estate plan is like a car: it needs gas, oil changes, and regular maintenance. If your family experiences significant changes, then your estate plan needs to be reviewed. If you change jobs, have a change in your financial status, or if you receive an inheritance, it’s time for a review. When there are changes to the law, regarding taxes or non-tax matters, you’ll want to make sure your plan still works.

The second biggest mistake we make is failing to plan for retirement. If you start thinking about retirement when it is five or 10 years away, you’re probably going to be working for a long time. When you are in your twenties, it is the ideal time to start saving for retirement. Most people don’t start thinking about retirement until their thirties, and many don’t plan at all.

There are many different “rules” for how to save for retirement and how to calculate how much income you’ll need to live during retirement. However, not all of them work for every situation. Advisors are now telling Americans they need to plan for living until and past their ninetieth birthday. That means you could be living in retirement for four decades.

Mistake number three—failing to fund trusts. Trust funding is completely and correctly aligning your assets with your trust. If you don’t fund the trust, which means putting assets into the trust by retitling assets that include bank accounts, investment accounts, real estate, insurance policies and other assets, adding the trust as an additional insured to home and auto insurance policies and have every change verified, you have an incomplete estate plan. Your heirs will have to clean up the mess left behind.

Fourth, failing to communicate your estate plan to your executor, beneficiaries and heirs is a common and easily avoidable mistake. Talk with everyone who is a part of your estate plan and explain what their roles are. Speak with the person you have named as Power of Attorney and Healthcare Proxy on a regular basis. Make sure they continue to be willing and able to perform the tasks you need them to do on your behalf. Make sure they know where your documents are.

Fifth, don’t neglect to make arrangements for bills to be paid and financial matters to be handled, when you are not able to do so. There are many studies which show that after age 60, our financial abilities decrease about 1% per year. Expect to need help at some point during your later years and put a plan in place to protect yourself and your spouse. If you are the main bill-payer, make sure your spouse can take care of everything as well as you, before any emergency strikes.

Finally, talk with your successors about what you would like to happen if and when you become mentally unable to make good decisions, including caregiving options. As we age, the likelihood of needing to be in a nursing home or other care facility increases. You can’t necessarily rely on your spouse living long enough to take care of you. Make sure that your financial power of attorney contains the appropriate gifting language, your assets are titled properly, and your successor financial agents know about the plan you have created. If you don’t have a long-term care policy now, try to buy one. They are less expensive than having to pay for care.

Protect yourself, your family and your loved ones by addressing these steps. You’ll be giving yourself, your spouse and your loved ones peace of mind.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Times Herald (Dec. 14, 2018) “Top six estate planning mistakes”

Here’s a Good Way to Undermine Your Entire Estate Plan

The advice you receive from a well-meaning person at the bank, an online financial website or even or a relative at a family gathering can sometimes be extremely detrimental to your estate plan. Making all your accounts as Transfer on Death (TOD) or Payable on Death (POD) to avoid probate sounds like a simple solution. However, a simple solution does not always work well for a complex matter. That’s the warning from The Mercury in the article “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan.”

In some states, probate is a complex and expensive problem. However, in others it is simply a court review of the estate to make sure that everything is in correct order. Therefore, avoiding probate should not be the driving force in an estate plan.

Sometimes joint titling and payable on death does work, especially in families where there is only one child or one heir. This is also a good solution, if the POD or joint account owner is your spouse.

However, here is where things get dicey. Let’s say your spouse passes away, and you name one of your children as the joint or payable on death for all accounts. Let’s say you also do that on your real estate properties and other assets and accounts.

How your accounts are titled overrides anything that your will says. If your will directs that all your assets be distributed in equal shares to your children, but your one child has become the legal owner of your assets when you die, you have created the perfect estate litigation storm.

On your death, the adult child becomes the owner, and has no legal obligation to share any of those assets with his or her siblings.

To take the example further, if the child dies shortly after you, then the assets go to his or her spouse. If his or her spouse is not living, then all your assets go to the estate, and not to their siblings as you had intended.

Another issue that is not resolved through titling is the ability for the estate to pay expenses. If son John becomes the owner of all your assets, who is going to pay for inheritance taxes, funeral expenses and other costs associated with settling an estate?

A smarter move than taking a simple piece of advice and trying to apply it to a complex matter: make an appointment with an experienced estate planning attorney in your state and create a plan for how you would like your assets to be distributed upon your death. Plan for expenses that occur, like funeral expenses and inheritance taxes. You can now rest easy, knowing that you’ve just spared your family the divisiveness and stress that can occur from well-intentioned but inappropriate advice.

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Mercury (Dec. 4, 2018) “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan”

Farm Family Succession Gets Help from Local Extension Office

Roughly half of all producers do not have a succession plan in place, according to a report in TheFencePost.com titled, “Extension helping Nebraska farm families plan for the future.”  It means that farm and ranch families are not preparing for the inevitable and the next generation is at risk, if they want to continue to operate the family business.

A succession plan forces operators to answer numerous questions about business, family, tax and legal issues, so it’s important to plan ahead.

For a farm to transition to the next generation, the size of the operation must be considered. It takes roughly 1,200 to 1,500 row crop acres to support a family. Will there be enough land to support the new family, as well as the older generation, when they are in retirement? That means that crop farmers may need as much as 2,600 acres to 3,000 acres to support the younger and older generations. If the farm includes livestock, the number of farmland acres could be lowered.

In some situations, two families are trying to live off a farm, that simply isn’t able to support them.

When it comes to estate planning, it’s common for older generations to want to divide their assets and land equally among their children. While it seems like a good idea, this type of division can lead to problems. For instance, if one child and spouse has devoted themselves to keeping the farm going, what should happen to the other child and spouse who aren’t involved in the farm at all?

Treating the next generation fairly doesn’t always mean treating the children equally. This is a dilemma that many family businesses encounter, whether the family business is a farm or a trucking business.

Many people, when they are in their 50s, have inherited a ranch or farm and have never run an operation before. They need help figuring out whether to keep the farm, how to run it and how to make legal decisions.

A key to the success in making sure the next generation runs the family business, is planning well in advance and keeping the lines of communication open among all family members.

For families who are not sure how to handle the succession plan, there are resources that can help the entire family. For starters, sit down with an estate planning attorney who works with farm and ranch families. They will be able to help with creating an estate plan and making sure it aligns with a succession plan.

Contact Benecia Flores at the Petrosewicz Law Firm at (281) 344-9455 or [email protected] to discuss preserving your inheritance.   

Resource: The Fence Post (Aug. 8, 2018) “Extension helping Nebraska farm families plan for the future”