Category Archives: Probate

Undue Influence?

Posted on by under Business Succession Planning, Business Transitions, Elder Law, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

This NY Times article discusses how a hospital manipulated a long term patient (net worth > $100 million) to obtain gifts, pledges, and other favors from her. Undue influence is a common probate or trust litigation issue. Wills in Kansas and Missouri are only valid if executed without undue influence. Most attorneys hear undue influence and think of a child or other prospective heir trying to persuade a family member to favor them over other relatives or heirs. But what about organizations, hospitals, and others looking for a piece of an individual’s or family’s inheritance? Food for thought.

If my law firm, Johnson Law KC LLC, can help you or your family with your estate planning needs, call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2013, Stephen M. Johnson, Esq.

Talking to Family about Inheritances

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Gift Tax, Illiquid Assets, IRA, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

CNBC has this article about a recent US Trust study about when parents should talk to their children (and grandchildren) about inheritances. As the article points out, many children of wealthy families realize they’re wealthy based on the lifestyle they enjoy. But there’s a big difference between knowing “My family’s wealthy and takes exotic vacations” and knowing “Mom & Dad have XYZ income each year, a house held in ABC trust, a controlling interest in Family Co LLC, a vacation home also held in trust, and a net worth of $_______.” When to tell family members specifics is an important question to consider in careful consultation with your family’s accountant, attorney, and other professional advisors. As the article suggests, maturity levels, financial acumen, and other factors come into play. But as the article rightly concludes, “even if parents don’t give their kids “the number” for their wealth, they should at least give them the skills and the values to manage it well.”

Beyond the tax and legal details of structuring entities that attorneys and other wealth advisors do, imparting skills and values to manage a legacy is vital. Without the skills and values, a child or grandchild may not know how a family member became wealthy, why a family member managed their lifestyle as they did, or what legacy the wealth should have. I encourage clients to be open and honest with their families when the time comes to discuss inheritance and legacy. But don’t just give your family the numbers, give them the context and share your values and passion and legacy with them.

If my law firm, Johnson Law KC LLC, can help you or your family with estate planning or asset protection needs, or give you ideas for spurring these important conversations with your family, please call (913-707-9220) or email me (steve@johnsonlawkc.com) for  a convenient free consultation.

(c) 2013, Stephen M. Johnson, Esq.

Tax Like its 1972?

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, LLCs, Missouri, Probate, Small Business, Trusts, Wills

Bloomberg provides this interesting article on Summer Redstone’s appeal of the IRS arguing his 1972 transaction was a gift. Some might think that 41 years is a bit late (!) to be challenging a transaction (or collecting tax on it), and many of the lawyers quoted were surprised by the IRS’ claims. It will be fascinating to watch how this case plays out. If the IRS’ argument turns out to be merited (albeit 41 years late), this has ripple potential in the estate planning and tax communities, as attorneys, accountants, and advisors grapple with how to insulate clients (and themselves) from liability decades after the fact.

Stay tuned for updates from the recent 2013 KC Estate Planning Symposium, which I attended last week (25-26 April 2013). This year’s program featured a host of top speakers on topics ranging from grantor trust tax, FLP and other case law updates to special needs trusts, IRAs, asset protection, and Social Security planning.

If my office, Johnson Law KC LLC, can help you or your family with gift tax or other estate planning issues, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient free consultation.

(c) 2013, Stephen M. Johnson, Esq.

Intent, Trusts, and No Contest Clauses

Posted on by under BDITs, Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Gift Tax, Gifts to Minors, Kansas, LLCs, Missouri, Probate, Small Business, Trusts, Wills

The Kansas Supreme Court recently issued an interesting decision in Hamel v. Hamel, arising from Rooks County, Kansas (north central Kansas). Hamel teaches us 3 lessons: as you contemplate estate planning, business succession, and your wealth management goals, be sure (1) your estate planning documents clearly communicate your intent , (2) others (family members and professional advisors) understand your intent, and (3) your estate planning documents provide broad discretion and the necessary powers to handle various transactions. Intent matters and clearly communicating your intent makes all the difference.

Hamel involved Lawrence Hamel, a trust beneficiary and child of the decedent, Arthur Hamel, challenging his father’s trust, specifically whether the trustee had authority to sell farmland owned by the trust. Arthur’s trust said another son (who was a trustee of the trust), Dennis,  had priority (or first refusal rights) to buy the land owned by the trust, and that Dennis had 3 years to buy the land from the trust. Dennis signed an installment sale contract to buy the land over 6 years, paying 5% interest (no interest during the 6th year), funding the purchase with money from the trust with a mere $10,000 down payment, and for Dennis to get all the income and profit the land generated during the 6 years. So Dennis wanted to self deal with the trust on very favorable terms (he was a trustee in his fiduciary capacity and the buyer in his individual capacity, a conflict of interest which the trust waived), have a year of payments interest fee, minimal down payment, and get the land’s revenue before he owned the land. Not surprisingly, Dennis’ brother Lawrence objected. Lawrence pointed out that while their father had wanted Dennis to have the land and permitted favorable inter-family sale terms, the deal had to be done within 3 years, not 6. Enter the trust’s no contest clause, which said if you object to the sale or other trust administration aspects, you lose your inheritance.

This family’s trust dispute wound up at the Kansas Supreme Court. The Justices, in an 8-1 opinion, agreed with Lawrence that the 6 year installment sale to Dennis was too long, since the trust only allowed for 3 years. Instead of enforcing the no contest clause (and disinherit Lawrence for his objections to the farm sale), the Court found that Lawrence had probable cause to challenge the sale of the farm from the trust to his brother. The Court found probable cause in the 3 year sale provision: “while the Trustees [Dennis and a sister] possessed broad authority to sell the Trust real estate, they were not authorized to enter into a contract for the sale of the farmland that extended beyond the 3-year period specifically provided by the Trust.” (Hamel, pg. 24) The installment sale could go far, but not that far. As the Court saw it, Lawrence was just looking out for the Trust’s best interests (the Trustee’s job and fiduciary duty), when the Trustees were cutting corners, so of course he could object and make the Trustees follow the Trust’s rules. The Court didn’t address it, but there may also have been tax traps lurking beneath the surface of this installment sale. The IRS looks closely at inter-family sale and transactions and asks: (1) was the farm properly valued (or did the family take too many discounts)? (2) is the buyer paying the seller a fair market rate of interest for the entire installment sale period? (interest free loans are gifts) (3) is the buyer a bona fide purchaser, or is the “sale” really just a gift wrapped in different paper?

Installment sales are an important technique for asset protection, estate planning, and business succession planning. But they have to be carefully structured and done right, or the result is a long, expensive, contentious, public mess. Installment sales are frequently used by serial entrepreneurs trying to transition a business; farmers, ranchers and landowners trying to pass the family farm on to the next generation, or business owners who are ready to retire from the day-to-day grind. When coupled with a Missouri inheritor’s trust (a beneficiary defective inheritor’s trust), grantor trust (an intentionally defective grantor trust), a FLP (family limited partnership), or a family LLC (family limited liability company), an installment sale can be an efficient, effective, and integral part of a complex estate plan. A good installment sale will freeze an asset’s value for tax purposes, get it off your balance sheet (for tax and asset protection purposes), and add value to the asset’s legacy for generations.

If my law firm, Johnson Law KC LLC, can serve you or your family’s legal needs, call (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient consultation.

(c) 2013, Stephen M. Johnson, Esq.

Elder Law and Finances

Posted on by under Elder Law, Estate Planning, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Retirement, Special Needs Trusts, Trusts, Wills

CNBC has this interesting article about a dilemma many people face – when to take over an elderly parent’s checkbook and finances. To pay bills for an elderly parent, you must have a durable financial power of attorney in place. There are a myriad of elder law issues to examine as well. You need an experienced estate planning and elder law attorney to help guide you and your loved ones.

If my office, Johnson Law KC LLC, can help you or your elderly parent with your estate planning or elder law needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a convenient, free consult.

(c) 2013, Stephen M. Johnson, Esq.

Cross posted to The KC Elder Law Blog.

Inheriting personal property

Posted on by under Estate Planning, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Missouri, Probate, Small Business, Trusts, Wills

This Daily Mail article talks about Delta Airlines’ new policy prohibiting transfer of frequent flier miles to family members or friends upon death. Frequent flier miles are a form of personal property – you accumulate them and then trade them for a ticket or two on a flight of your choice – and this is another limitation on transferring (or alienation, as lawyers like to say) of personal property. Is it legal? Sure – if you’re issuing personal property to others, you can specify the conditions (e.g. only this airline, these flights, this time of year, these destinations, etc). Like many licenses, airline tickets (or movie, theater, or sporting game tickets) have restrictions on use, re-use, and transfer. The moral of this story is don’t count on being able to pass your frequent flier miles on to your family.

If my office, Johnson Law KC LLC, can help you or your family with estate planning questions, please call me (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2013, Stephen M. Johnson, Esq.

Selecting a Trustee

Posted on by under Business Succession Planning, Business Transitions, Estate Planning, Family Business, Financial Powers of Attorney, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Prenups, Probate, Retirement, Small Business, Trusts, Wills

So you’ve decided it’s time to do some estate planning and you’ve talked with you estate planning attorney. And the lawyer asks who you want to serve as trustee. A friend or family member? Your bank or a trust company? Here’s a helpful article on some non-legal issues to think about when selecting a trustee.

The lawyer walks you through some of the pros and cons of each option – a friend or family member probably won’t expect to be paid for their service, but they may not know anything about investments or administering the trust for you and your family, so they could jeopardize your financial legacy to your descendants. A bank or trust company will usually serve for a fee of 1%/year of assets under management and they have professional investment and advising services included (so you’ll be getting a good return on investment and monthly or quarterly financial statements), but they might not want real estate or closely held (and non-diversified) business interests or other assets in the trust. And banks and trust companies often change through mergers and other business deals over the years, not to mention the internal turn over of trust officers and employees that you actually work with.

Even if you don’t set up a trust, the lawyer will ask a similar question about your will (who’s your executor?), your living will and your financial and medical powers of attorney (who’s your agent/attorney in fact?). Who’s going to be making decisions on your behalf? Who do you trust to handle your last affairs and settle your estate? The law doesn’t provide many answers, but a good estate planning lawyer can walk you through your options, and help you select the person or institution best suited for your unique situation and your needs. If I can help you on your estate planning journey or answer any other questions, please give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient appointment with my firm, Johnson Law KC LLC.

(c) 2013, Stephen M. Johnson, Esq.

Preparing Your Kids for an Inheritance

Posted on by under BDITs, Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, LLCs, Missouri, Probate, Small Business, Trusts, Wills

The WSJ/Barron’s has this fascinating article about the new $5.25 million per person lifetime gift tax exemption that Congress passed as part of the deal to avert the fiscal cliff. But the question that arises, especially as some young, wealthy heirs and heiresses’ antics grace the tabloid and Internet headlines: can a child properly handle their inheritance? If you give your child $5 million, will they save and invest it wisely, or will they spend it frivolously and waste your hard-earned wealth and financial legacy to them? This age-old issue is nothing new – there’s a non-tax reason that custodian bank accounts exist for minors, that trusts are popular, that savings bonds, CDs, and 529 college savings accounts exist – parents and grandparents need to be able to shepherd the money their children and grandchildren will receive. Yes, a gift is giving away money without formal strings attached – not reserving some right to take it back if a financial rainy day comes along, if your child wastes the money on things you don’t approve of, or if the child turns out not to have any financial or investing sense. But legal techniques exist to help protect the gift while your child learns how to work with their inheritance.

If the economic downtown hit your portfolio like high tide hitting a beautifully crafted sand castle on the beach (as it impacted most people’s hard-earned investments, savings, and home equity), or if you’re still working to build up wealth as the economy slowly recovers, you may be looking at smaller gifts for family members. Maybe  you anticipate giving tens or hundreds of thousands to loved ones, not millions. The same principle still applies – can you child or grandchild handle getting a check for $5,000, $10,000, $100,000?

Parents and grandparents need to talk with their children and grandchildren about money, investing, saving, and inheritances. It may not be an easy or fun talk and it might be awkward at first, but it’s a lot easier to discuss now than when you’re gravely ill or when your family is trying to clean up a messy estate after you’ve died. Look for some tips on how to inherit and handling an inheritance soon on this blog. In the meantime, if I can help you or your family with your estate planning, small business, or asset protection needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com). At Johnson Law KC LLC, we’re here to serve your needs – now and for many years to come.

(c) 2013, Stephen M. Johnson, Esq.

To Plan or Not to Plan: Rip Van Taxes

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Generation Skipping Tax, Gift Tax, Illiquid Assets, Kansas, Missouri, Probate, Small Business, Trusts, Wills

Happy Thanksgiving! Yahoo Finance has this article about the coming “fiscal cliff” and some people’s race to do year-end estate and tax planning, while others are brushing off the tax planning opportunity and waiting to see what, if anything, Congress will do.  While the estate, gift, and generation-skipping tax exemptions are likely to be at the highest point in our lifetimes and the rates are probably at historic lows, the article  points out that maxing out your exemptions may only really matter if you’ve got $10 million of spare assets to give away in trusts. Anecdotally, many estate planning attorneys are seeing clients with $5 million+ estates setting up irrevocable trusts this year, but many middle class clients aren’t as concerned about looming tax increases. The article correctly notes that the estate tax “is not a tax on everyone, it’s a tax on people [with substantial assets] who aren’t paying attention.” Whatever you’re stance on the fiscal cliff and taxes, don’t be caught unprepared for the changes ahead like Rip Van Winkle.

So if you don’t have $5 million+ in assets, why bother with estate planning? Well, if you’re a high risk professional (accountant, architect, attorney, doctor, executive), asset protection is an issue. Maybe you’ve recently gotten married, divorced, or had a child. Or maybe you’re like most clients we work with who want to ensure their family’s taken care of and a surviving spouse and children don’t have to deal with a legal and financial mess after a loved one’s passing.

Whatever your estate planning motivations or needs, we can help. Our office, Johnson Law KC LLC, has years of collective experience doing estate planning, ranging from simple wills for individuals and young couples to complex dynasty trusts and advising on how best to transition the farm or family business. Give us a call (913-707-9220) or email (steve@johnsonlawkc.com) and we’ll schedule a convenient appointment to serve your estate planning needs.

(c) 2012, Stephen M. Johnson, Esq.

Estate Planning: Beyond Taxes

Posted on by under Digital Estate Planning, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

Conrad Teitell, a noted tax and non-profit lawyer, has these helpful tips to remind people that while a good estate plan will minimize or completely avoid taxes for your and your family, estate planning is about more much than taxes. I would add that consulting with an estate planning attorney is crucial. Any adult with any complexity in their life (married, divorced, kids, grandkids, house, more than $50,000 in assets, business interests, life insurance, IRAs, favorite charities or college, anticipated inheritance, etc) needs to talk with a lawyer about their estate plan.

Every adult needs a will and/or trust, a living will, and durable financial and medical powers of attorney. Our law firm’s estate planning documents include digital estate planning provisions (for email, social media, digital photos, online banking, and more) standard. While digital estate planning is a cutting edge field and certainly not included in most online legal services or other one-size-fits-all forms, at Johnson Law KC LLC, we listen to your needs and provide custom tailored solutions that will protect you and your family for generations to come. Give us a call (913-707-9220) or email us (steve@johnsonlawkc.com) for a free 1/2 hour consultation on your estate plan.

(c) 2012, Stephen M. Johnson, Esq.