The Estate of Kobe Bryant

On January 26, 2020, beloved basketball star Kobe Bryant died in a helicopter crash at the age of 41. Given Kobe’s estimated net worth (he earned an estimated $680 million over his 20-year career with the Lakers alone), his estate plan (or potential lack thereof) has been a hot news topic ever since. However, Kobe’s lifetime earnings are only a small part of his financial and estate planning picture. In 2013, Kobe co-founded the venture-capital firm Bryant Stibel, and in 2016 began investing in sports drink brand BodyArmor. As the result of a recent investment in BodyArmor by Coca-Cola, Kobe’s initial $6 million investment in the company is now worth an estimated $200 million.

Kobe was, of course, survived by his wife, Vanessa, and rumor has it they married without a prenuptial agreement. Depending on how Kobe’s estate plan, if any, was structured, Vanessa is likely to inherit a large portion, if not all, of Kobe’s estate. Due to the unlimited marital estate tax deduction, she will inherit those assets free of estate tax. However, Vanessa will now have the task of managing her late husband’s estate, including his various business endeavors, and planning the eventual disposition of that estate. The work and difficulty involved in doing so will depend, in large part, upon the planning, or lack thereof, that Kobe completed during his lifetime.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

IRS Confirms: No “Claw-Back”

Ever since the 2017 Tax Cuts and Jobs Act (“TCJA”) doubled the federal estate tax exemption amounts (adjusted for inflation to $11.58 million for 2020), estate taxes have been a thing of the past for most individuals. Some high net-worth individuals, however, have kept in mind that the TCJA is set to “sunset” on December 31, 2025, at which point the estate tax exemption amount will revert back to amount in effect in 2017 ($5 million, as adjusted for inflation). Those individuals have therefore questioned whether it is possible to utilize a portion of the presently available exemption amount by making taxable lifetime gifts, or whether the IRS would later “claw back” the temporarily increased exemption amount by reducing a taxpayer’s available estate tax exemption by the cumulative total of the gifts made by the taxpayer while the TCJA was in effect.

On November 22, 2019, the Internal Revenue Service issued final “anti-claw-back” regulations in the form of Treasury Decision 9884. This decision provides that an estate may compute the applicable estate tax credit using either the exemption amount applicable during the decedent’s lifetime or the exemption amount applicable on the date of the decedent’s death, whichever is greater.

26 CFR § 20.2010-1 provides the following example (edited for simplicity):

Individual A (never married) made cumulative taxable gifts of $9 million, all of which were sheltered from gift tax by the cumulative total of $11.4 million in basic exclusion amount allowable on the dates of the gifts. The basic exclusion amount on A’s date of death is $6.8 million. Because the total of the amounts allowable as a credit in computing the gift tax payable on A’s gifts (based on the $9 million of basic exclusion amount used to determine those credits) exceeds the credit based on the $6.8 million basic exclusion amount allowable on A’s date of death, the credit for purposes of computing A’s estate tax is based on a basic exclusion amount of $9 million, the amount used to determine the credits allowable in computing the gift tax payable on A’s gifts.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

The SECURE Act of 2019: The End of “Stretch” IRA Distributions

On January 1, 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, making widespread changes to the rules and regulations regarding retirement assets, became effective.

From an estate planning perspective, the most significant change is the requirement that most non-spouse beneficiaries of an inherited IRA or other inherited retirement asset, such as a 401(k), must withdraw the entire balance of the inherited asset within 10 years of the decedent’s death. Prior to the SECURE Act, beneficiaries of inherited retirement assets were able to “stretch” the required minimum distributions (RMDs) out over their projected lifetimes, thereby reducing the total income tax burden.

The following classes of beneficiaries are exempt from the 10-year distribution requirement, and may continue to “stretch” distributions out over their lifetimes:

–     Surviving spouses;

–     Minor children (but only until age 18);

–     Chronically ill and disabled beneficiaries; and

–     Beneficiaries who are not more than 10 years younger than the decedent.

Ultimately, this change will result in a greater tax burden for most beneficiaries, and individuals whose estates include IRAs and other retirement assets should review their beneficiary designations and overall estate plan with the new rules and regulations in mind.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

How Not to Amend your Revocable Trust

A California state court recently held, in Pena v. Dey, that interlineations made by a grantor to the text of his trust agreement were not sufficient to amend the terms of the trust. The grantor, James Robert Anderson, sent the marked-up copy to his estate planning attorney, with a post-it note instructing the attorney to prepare a written amendment. The trust agreement itself provided that any amendment must be made by way of a written instrument, signed by the grantor and delivered to the trustee.  Unfortunately, Anderson subsequently passed away before the amendment was finalized, and his successor trustee petitioned the court for instructions regarding the validity of Anderson’s “amendments.” In its written decision, the court stated: “While the law considers the interlineations a separate written instrument, and while there can be no doubt Anderson delivered them to himself as trustee, he did not sign them.” The amendments were, therefore, not effective.

Pursuant to Wis. Stat. § 701.0602(3), if a trust agreement does not set forth a specific method for amending the terms of the trust, the grantor may amend the trust agreement by means of:

1.    A subsequent will or codicil which expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or

2.   Any other method manifesting clear and convincing evidence of the grantor’s intent.

While this statute may sometimes permit a grantor to amend his or trust agreement by simply penciling in the desired changes, most trust agreements will provide for a specific method of amendment. If the grantor does not comply with the proscribed method, his or her attempted amendment will most likely be ineffective. In other words, it’s always better to be safe than sorry.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Wisconsin Legislature Considers Online Notarization

The next time you need to execute a document in the presence of a notary public, you may be able to find one online!

Assembly Bill 293 and Senate Bill 317 (introduced June 13 and July 10, 2019, respectively), if passed by the Wisconsin Legislature, would allow a Wisconsin notary public to become commissioned as an “online notary” who is authorized to notarize legal documents online.  Pursuant to the Bills, online notarial acts must be accomplished via communication technology, such as videoconferencing, which allows the notary to communicate in real time with the affiant.  Both Bills would permit online notaries in the State of Wisconsin to notarize the signatures of individuals present anywhere in the United States, not just within the State.

One concern regarding these Bills is whether or not they should authorize the online notarization of estate planning documents such as wills, trusts, marital property agreements, durable powers of attorney, and health care powers of attorney, given that many of these documents must be signed by one or more witnesses, in addition to being notarized.  The Bills, as written, do not presently exclude estate planning documents from online notarization.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

IRS Announces 2020 Estate and Gift Tax Exemption Amounts

On November 6, 2019, the IRS announced the final estate and gift tax exemption amounts for 2020, as adjusted for inflation.  The estate and gift tax exemption for 2020 will be $11.58 million per person, whereas the annual gift tax exclusion amount is unchanged at $15,000.  The adjusted estate tax exemption amount means that an individual will be able to shelter up to $11.58 million in assets from estate tax upon his or her death in 2020, and a married couple will be able to shelter up to $23.16 million in assets (assuming that portability is utilized).

Keep in mind, however, that the Tax Cuts and Jobs Act will sunset on December 31, 2025 without further legislation, at which point the increased exemption amounts will return to those in effect in 2017 ($5 million, as adjusted for inflation).  In addition, new legislation reducing the estate, gift tax, and GST exemption amounts could be in the works depending on the results of the 2020 election.  For examples of some previously introduced bills to this effect, see our two recent blog posts, Dueling Estate, Gift, and Generation Skipping Transfer Tax Senate Bills and Yet Another Estate, Gift, and Generation Skipping Transfer Tax Senate Bill.  The moral of this story, therefore, is that the historically high exemption amounts now in effect may not be here to stay.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

National Estate Planning Awareness Week

In 2008, the 110th United States Congress passed House Resolution 1499, designating the third week of October (October 21-27, 2019) as National Estate Planning Awareness Week.  In doing so, Congress undoubtedly hoped that it would increase awareness with regard to the importance and benefits of estate planning.  However, a 2019 survey found that only 43% of respondents had prepared an estate plan, compared to the 76% of respondents who believed estate planning to be important.  Some indicated that this was the result of procrastination, whereas others mistakenly stated that their assets were not significant enough to require estate planning.

This Estate Planning Awareness Week, remind yourself and your loved ones of the benefits of an estate plan.  A Last Will and Testament or Revocable Trust ensures that your assets are distributed according to your wishes upon your death (as opposed to the default rules under state law).  Durable Powers of Attorney for Finances and Powers of Attorney for Health Care allow your designated agents to act on your behalf in the event of your incapacity, thereby avoiding the necessity of guardianship.  Finally, documents such as a Living Will and Authorization for Final Disposition memorialize your wishes with regard to end of life care and your funeral and burial arrangements.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

You aren’t cookie-cutter, so why is your estate plan?

You may have seen a recent news article about the Will of Dennis Valstad, a man from Ripon, Wisconsin, who specifically bequeathed the sum of $500,000, in equal shares, to those individuals who attended his funeral.  To that end, the envelope containing Dennis’ Last Will and Testament instructed: “Do not open until after the funeral”.  Dennis, who had living siblings but no spouse or children, left additional instructions that, if an attendee felt they did not need the money (roughly $1,800.00 per person), they should donate it to charity.

Dennis’ nontraditional bequest might not be something that you would include in your own Will or Revocable Trust, but it goes to show that your estate plan can truly be anything you want it to be (within the confines of the law, of course).  While most individuals generally want to leave the majority of their estate to their children or close family members upon their death, there is always opportunity to customize your estate plan to meet your individual goals and circumstances.  Examples of this include adding specific bequests of liquid assets or tangible personal property to individuals or charities, establishing a trust for the care of your pet, or, like Dennis, distributing a portion of your estate among those who attend your funeral.

If you have questions on this topic, please contact Lin Law LLC at (920) 393-1190.

What is probate, and why does everyone want to avoid it?

During our initial meetings with clients, they often tell us that one of their goals in preparing an estate plan is to avoid probate.  However, they don’t always have a good understanding of what probate is or what avoiding probate might entail.

“Probate” is, essentially, the court-supervised process of winding up a decedent’s affairs by preparing an inventory of the decedent’s assets, paying any outstanding bills, claims, or expenses, and distributing the decedent’s remaining assets to his or her designated beneficiaries or heirs.  The important phrase in that description is “court supervised,” as most, if not all, of the same work is required even if probate is unnecessary, either during the decedent’s lifetime or upon his or her death.  All documents filed in connection with the probate administration, including a list of the beneficiaries, an inventory of the assets, and a final accounting of the probate administration, are public record.  And, even with the advent of electronic filing, probate is a lengthy process that occasionally requires court appearances by the involved parties or their attorneys.

So, probate is often vilified in light of its public and sometimes tedious nature, and people seek to avoid it.  Some methods of bypassing probate include joint ownership with rights of survivorship (most frequently used in the case of married couples), re-titling assets to a revocable trust, or making assets payable on death to one or more designated beneficiaries.  However, whether or not “probate avoidance” is desired or necessary in a given situation will depend, in large part, upon the nature of the assets that would otherwise be subject to probate.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

What’s Mine is Yours – even if we move to Florida

Wisconsin is one of a minority of states and U.S. territories that operates under a marital property (aka community property) regime. What this means for married couples is that each spouse owns an undivided one-half (1/2) interest in “marital property,” which, as a general rule, includes any and all property acquired during the marriage, with some exceptions. The marital property regime provides various estate planning and tax benefits to married couples, provided that the marital property characterization of real and personal property is maintained.

However, what happens to a couples’ marital property assets if they relocate to a common law state (one without a marital/community property regime), such as Florida?  Luckily, Florida is one of sixteen total states that have adopted the Uniform Disposition of Community Property Rights at Death Act. The Act creates a rebuttable presumption, with limited exceptions, that marital property brought from a community property state to a common law state will remain community property. The Act also permits individuals to exchange assets while maintaining the marital property characterization of assets that are received in return.

For states that have not adopted the Act, and as additional insurance for couples residing in those that have, married individuals can enter into a written agreement (e.g., a post-nuptial agreement, community property agreement, marital property agreement, etc.) that specifically dictates the character of their assets.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.