New Ebay-Like Site Helps With Estate Administration
One of the challenges in both estate planning and in post-death administration is personal property. During a lifetime, many individuals accumulate vast quantities of personal property including but not limited to jewelry, china, furniture, textiles, antiques, and the like. Few people have the stamina to go through and catalog all of their possessions or make decisions about which if their heirs, if any, should receive each item. Moreover, circumstances change and items that were once valuable may become obsolete (like an eight-track tape collection) while marginal property sometimes ages and becomes more valuable over time.
Likewise, trustees and administrators are often left with the emotionally challenging task of fairly dividing up a lifetime of personal property among beneficiaries or heirs. As the old adage goes, one person’s garbage is another person’s treasure. Some items particularly have little or no commercial value but immense personal value to the heirs or beneficiaries. How does one divide grandma’s favorite quilt among competing heirs without cutting it into pieces? The division of personal property can often be one of the more stressful aspects of estate administration.
Recently, a new web site has offered a creative solution bringing market forces to the equitable distribution of personal property. According to its promotional material, eDivvyup is an online auction site designed specifically to help with the division of the deceased personal’s property. Operating in a fashion similar to eBay, an auction on eDivvyup is a private auction restricted to invited participants. The trustee or administrator catalogs the deceased’s personal property and allows the beneficiaries or heirs who are interested to bid on it. As aptly stated on the eDivvyup web site, “While specific items may hold sentimental value for you, they are not worth the fighting and long-term damage to relationships.” Thus heirs and beneficiaries can express their true desire for particular items of personal property through the efficient application of market forces.
While not necessary or appropriate for every estate, the eDivvyup site appears to offer a novel solution to an age-old problem of dividing personal property that may be commercially worthless but emotionally priceless. According to the site, eDivvyup offers its services for $49.99 for the first 50 items and an additional 99 cents for each additional item listed. If you find yourself facing a King Solomon dilemma, eDivvyup may be just the solution.
Treated Like a Dog?
You may remember the surprising news that the late Leona Helmsley left a $12 million bequest in her will for her Maltese dog named Trouble. With the large bequest, Helmsley’s will provided that Trouble would continue to enjoy the same opulent life even after Helmsley’s passing. In addition to the money, Helmsely’s will also provided that Trouble would be buried next to Helmsley in the family mausoleum. Helmsely’s will also set aside an additional $3 million for cleaning and maintenance of the mausoleum. With the $12 million gift, Trouble was apparently the recipient of one of the largest single individual trusts from Helmsley’s fortune, estimated to be worth $4 billion.
Now it appears that poor Trouble will not receive the entire gift and have to survive on a mere $2 million. Helmsley’s grandchildren alleged that Helmsley was not mentally competent when she signed the 2005 will which left the large bequest to Trouble. According to this article in the New York Post, a Manhattan judge approved an agreement to reduce Trouble’s inheritance from $12 million to $2 million. Under the new deal, $10 million of Trouble’s bequest will go to Helmsley’s large charitable foundation.
It seems only appropriate that Leona Helmsley, dubbed by some as the “Queen of Mean” would have an equally controversial animal. According to a former housekeeper, Trouble slept in Helmsley’s bed and was fed chef-prepared meals in porcelain bowls and silver trays. This same housekeeper actually sued Helmsley for nerve damage she allegedly suffered after being repeatedly bitten by the animal. Trouble’s care taker estimated Trouble’s annual expenses at $190,000 including an estimated $100,000 for the dog’s security squad (which was apparently warranted because of the alleged death threats against Trouble). Given that Trouble is already nine years old, Trouble’s trustees did not oppose the settlement, apparently believing $2 million was adequate for Trouble’s care.
Can I Avoid Probate by Placing My Child on Title to my Assets?
In California, there are some very good reasons for avoiding the probate administration process. My three favorite reasons include (i) the cost; (ii) the time involved; and (iii) the public nature of the proceedings. For most estates, probate administration costs generally run from four to eight percent of the gross value of the estate and frequently take at least eight months to complete. To avoid these problems, some individuals engaged in what I affectionately refer to as ‘backyard’ estate planning. With respect to many assets, this involves using joint tenancy, which avoids the probate administration system (you can find a list of other probate avoidance devices here). Often I am asked whether this is a reasonable solution to avoid probate but avoid the cost of preparing an estate plan. In most circumstances, my answer to the question is a resounding “no”.
Under California law, joint tenancy includes what is referred to as the “right of survivorship” which means that when one tenant passes away, the asset transfers to the surviving tenant by operation of law. With a bank account, a surviving tenant can present a death certificate to the financial institution and remove the surviving tenant from the joint tenancy account. With real estate, the surviving tenant executes a form known as an affidavit of death of joint tenant which then places title solely in the name of the survivor. While these devices can work well with domestic partners or married couples (who are also bound by family law), they often fail when used with other parties such as children. In fact, using joint tenancy in these situations often creates more problems than it solves.
With respect to financial accounts, the decision to place another person on the account as a joint tenant grants an ownership interest in the entire account to the new joint tenant. The most obvious risk is that the new joint tenant has ownership over the entire account, and can clean it out almost immediately. While the original owner would have a legal claim against the new joint tenant under these circumstances, often you have to sue the joint tenant and find the missing assets before they will be returned (which is frequently challenging if not impossible in many cases). With respect to real estate, making such a transfer, unless accompanied by separate agreement, is frequently considered an irrevocable transfer. What this means is that if the original owner changes his or her mind about disposition, or wants to sell or refinance the property, the original owner will not be able to do so without the consent of the new tenant.
The Latest Service: a Virtual Safe-Deposit Box?
One frequent issue that arises in both estate planning and estate administration is effective communication. Many individuals are concerned that their beneficiaries will not find their estate plan, asset accounts or important confidential information after their death. Often these individuals don’t want to share their confidential information with their beneficiaries while they are alive, but are concerned that their beneficiaries will not find the information after their death. Conversely, I have encountered numerous heirs and beneficiaries (usually administering probate estates) who are concerned that they might not have located all of the decedent’s assets or accounts.
One company, iGoodBye.com, has harnessed the power of the internet to create a novel solution to the problem of communicating confidential financial information after your death. At iGoodbye, the user creates a private account which can store copies of estate planning documents, financial accounts, passwords and other private, personal information. The user is provided with a password that will allow his or her beneficiaries to access the private information only after the users’ death (your death is verified with a death certificate). The user is given the security of knowing that all of their information is stored in one central location but accessible by their beneficiaries only after their passing. Essentially, the service appears to be a virtual safe-deposit box for your important estate documents. At this posting, iGoodBye.com service is $29.99 per year and the service can even be used without cost, if the user agrees to charge the annual cost to his or her beneficiaries following the users’ death.
Even When Done Correctly, Managing Finances During Incompetency Can be Challenging
A durable power-of-attorney is designed to allow someone to manage aspects of your life in the event you become incapacitated. For instance, imagine a situation where you had a stroke and could no longer communicate. Who would pay your bills? Who would deal with your insurance? What if you needed to access your IRA account to pay for in-home care? These are the problems that a durable power-of-attorney is designed to address. A power-of-attorney designates an agent (or attorney-in-fact) to make these decisions and manage your life during incapacity. Two recent articles published in the Los Angeles Times, however, illustrate the occasional challenges with powers-of-attorney facing even those who thought they planned properly.
The first article discussed the challenges faced by one couple who, after hiring an attorney to prepare a durable power-of-attorney, presented the document to Boston-based Fidelity Investments, where the couple held their retirement accounts. Despite the fact that the power-of-attorney had been prepared by an attorney, Fidelity initially advised the couple that their retirement plan didn’t have “a power-of-attorney provision.” In other words, Fidelity would not honor the power-of-attorney. Fortunately, Fidelity is reviewing its policy and anticipates being able to accept permanent versions of powers-of-attorney in the next few months.
Ray Charles' Management Problems Continue After his Death
Children of legendary recording artist Ray Charles are in a battle over the management of the late singer’s assets. The estate’s management and family member’s wishes have clashed according to a recent article published in the Los Angeles Times. The issue stems from the children’s’ wishes to handle the marketing of their father’s name and image, and assert a greater voice in the way his charitable foundation is run.
In 2002, Charles gathered his children and told them that the bulk of his assets would be left to the foundation, but that $500,000 would be placed in trusts for each of them. Charles also indicated that there might be more for them “down the line,” which led some of his children to believe that they would own the right to profit from licensing his name and likeness. In 1992, prior to his passing, Charles established a partnership with two of his children to market apparel and other items bearing his likeness. Charles’ estate plan, however, is apparently silent with respect to the rights associated with the use of his image, rights that his children contend he pledged to them.
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