Should Young Families have an Estate Plan?

Young families are always on the go. New parents are busy with diapers, feeding schedules and trying to get a good night’s sleep. As a result, it’s hard to think about the future when you’re so focused on the present. Even so, young parents should think about estate planning.

Wealth Advisor’s recent article entitled, “Why Young Families Should Consider an Estate Plan,” explains that the word “estate” might sound upscale, but estate planning isn’t just for the wealthy. Your estate is simply all the assets you have when you die. This includes bank accounts, 401(k) plan, life insurance, a home and cars. An estate plan helps to make certain that your property goes to the right people, that your debts are paid and your family is cared for. Without an estate plan, your estate must go through probate, which is a potentially lengthy court process that settles the debts and distributes the assets of the decedent.

Estate planning is valuable for young families, even if they don’t have extensive assets. Consider these key estate planning actions that every parent needs to take to make certain they’ve protected their child, no matter what the future has in store.

Purchase Life Insurance. Raising children is costly, and if a parent dies, life insurance provides funds to continue providing for the surviving spouse and children. For most, term life insurance is a good move because the premiums are affordable, and the coverage will be in effect until the children grow to adulthood and are no longer financially dependent. Having as much as 10 times your income may not be excessive.

Make a Will and Name a Guardian for your Children. For parents, the most important reason to make a will is to designate a guardian for your children. If you fail to do this, the courts will decide and may place your children with a relative with whom you have not spoken in years. However, if you name a guardian, you choose a person or couple you know has the same values and who will raise your kids as you would have.

Review Your Beneficiaries. You probably already have a 401(k) or IRA that makes you identify who will inherit it if you die. You’ll need to update these accounts, if you want your children to inherit these assets.

Consider a Trust. If you die before your children turn 18, your children can’t directly assume control of an inheritance, which can be an issue. The probate court could name an individual to manage the assets you leave to your child. However, if you want to specify who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, consider asking an experienced estate planning attorney about a trust. With a trust, you can name a designated person to manage money on behalf of your children and provide direction regarding how the trustee can use the money to help care for your children as they grow. Just because a child is over 18 or 21 doesn’t mean they must receive their inheritance in a lump sum. Trusts aren’t just for the very well-to-do. Anyone may be able to benefit from a trust.

My office is fully open to schedule a consultation to discuss these matters.

Reference: Wealth Advisor (April 13, 2021) “Why Young Families Should Consider an Estate Plan”  

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Who Owns Marilyn Monroe’s Estate?

Marilyn Monroe’s photos and likeness are used to sell t-shirts, posters, coffee mugs, and, well, you name it. When she died in 1962, she left no family and had a net worth of $800,000, which is equivalent to about $7 million today. Monroe spent her money freely, and gave some to relatives, employees and strangers. After her estate was settled, her fortune had declined to about $370,000. In her will, she gave $10,000 each to her longtime assistant and her half-sister. She put $5,000 in a trust fund for the education of her assistant’s child, and she left a $100,000 trust fund for her mother.

Celebrity Net Worth’s recent article entitled “How A Random Venezuelan-Born Actress Ended Up Owning The Rights To Marilyn Monroe’s Estate” says that her physical property was left to her acting coach Lee Strasberg. In her will, Monroe gave Strasberg 75% of her intellectual property rights. The remaining 25% was given to her therapist, Dr. Marianne Kris.

Dr. Kris died in 1980, and her stake in the Monroe estate was given to the Anna Freud Centre for the Psychoanalytic Study and Treatment of Children in London. However, what happened to the Strasberg 75% share?

Just a few years after Monroe died, in 1966, Paula Strasberg died. In 1967, Lee re-married actress Anna Mizrahi, a 28-year-old from Venezuela. Lee died in 1982, so the actress was then the owner of 75% of Monroe’s estate.

After taking over Lee’s 75% share of the Monroe estate, she signed deals that used Monroe’s name, signature and image on thousands of products and endorsements. Over time, Anna made Marilyn one of the highest-paid dead celebrities in the world, generating tens of millions in revenue and profits.

Eventually, Anna partnered with the celebrity management company called CMG. Years later, a lawsuit revealed that the CMG deal reportedly guaranteed Anna a minimum of $1 million a year. However, as it turned out, Anna made more than $7.5 million in licensing revenue in just the four years between 1996 and 2000, when she created Marilyn Monroe, LLC.

In January 2011, Anna sold her 75% stake in the Monroe estate to Authentic Brands Group for an estimated $20-30 million.

Reference: Celebrity Net Worth (April 2, 2021) “How A Random Venezuelan-Born Actress Ended Up Owning The Rights To Marilyn Monroe’s Estate”

 

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What Could Proposed Estate Tax Bill Mean to You?

U.S. Sen. Bernie Sanders has released proposed legislation named “For the 99.5%” Act. If passed in its present form, the legislation would bring estate tax exemptions back to the 2009 thresholds of $3.5 million per individual and $7 million per married couple. Exemptions are currently $11.7 million and $23.4 million, as reported by Think Advisor in a recent article “Sen. Bernie Sanders Introduces Estate Tax Bill.”

Larger estates would also be subject to higher tax rates. The current 40% tax rate would be raised to 45% and taxable estates larger than $10 million would be taxed at 50%, amounts greater than $50 million at 55% and any estates valued at greater than $1 billion would be taxed at 65%.

The same rates would apply for all gift taxes, for which the threshold would be lowered to $1 million.

Sanders spoke at a Senate Budget Hearing committee, stating that his bill was designed to have the families of the “millionaire class not only not get a tax break but start paying their fair share of taxes.”

Another bill introduced by Sanders would prevent corporations from shifting profits offshore to avoid paying U.S. taxes and restoring the top corporate rate to 35%, where it has been since 2016.

In contrast, Senators John Thune, South Dakota (R) and John Kennedy, Louisiana (R), introduced legislation in early March to repeal the estate tax entirely.

Frank Clemente, executive director for Americans for Tax Fairness, said the tax plan released by President Biden during his campaign also tracked the 2009 estate tax levels that are the basis of Sanders’ bill, but because of the higher tax brackets for larger estates, his group believes the Sanders bill would raise about twice as much revenue as the Biden plan.

History teaches us that there is a long distance between the time that a bill is introduced, and many changes are made as proposed legislation makes its way through the law-making process. In this case, it can be safely said that there will be changes to the tax and estate laws, and that may be the only sure thing.

Now is a good time to review your estate plan, if these federal estate changes will have an impact on your family’s wealth. Familiarity with your current estate plan and staying in touch with your estate planning attorney, who will also be watching what Congress does in the coming months, will allow you to be prepared for changes to the tax planning aspect of your estate plan in the near or distant future. My office is fully open to schedule an appointment to discuss if these proposals may affect you.

Reference: Think Advisor (March 25, 2021) “Sen. Bernie Sanders Introduces Estate Tax Bill”

 

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