Downbeat Legacy for James Brown, Godfather of Soul: A Will in Dispute


AIKEN, S.C. — James Brown’s will was meant to be everything his life was not.

The manic energy that fueled a career of funk classics, pyrotechnic dancing and relentless touring as the Godfather of Soul also contributed to a trail of broken marriages, estranged children, tax liens and brushes with the law over drugs, weapons and domestic violence.

By comparison, his will was as orderly as a book of prayer.

The bulk of his estate, worth millions of dollars — perhaps tens of millions — was to go to a trust to provide scholarships to needy children here in his native state and in Georgia, where he grew up. But nearly eight years after his death, at 73, on Dec. 25, 2006, the I Feel Good Trust has not distributed a penny to its intended recipients.

Some of his children, who hope to turn Mr. Brown’s former home into a Graceland-style attraction, have challenged the will, which largely ignored them. So has a woman he treated like a wife, though he later contested the legality of their marriage.

The disputes prompted the South Carolina government to seize control of Mr. Brown’s estate, jettison his instructions and redirect half of his assets. Last year the state’s Supreme Court overruled those actions, calling them an unprecedented overstepping of authority that threatened to undermine public confidence in the probate process.

Today nothing is settled. The estate remains mired in lawsuits, two sets of executors have been replaced, and a lower court has yet to follow some of the court’s instructions. Millions of dollars have been paid in recent years to creditors, law firms and various vendors, but not to schoolchildren or other beneficiaries. And Mr. Brown’s body remains in a temporary resting place, not the memorial that is planned for his home.

“This thing could go on for an eternity,” said Alan Leeds, a former tour manager for Mr. Brown. “I don’t know how you resolve it. There’s just chaos and confusion and mixed agendas.”

The battle over Mr. Brown’s will continues as a recent documentary and film focus attention on his life. The biopic, “Get On Up,” released in August, is considered an Oscar contender, while HBO in October began showing the documentary, “Mr. Dynamite: The Rise of James Brown.”

Mr. Brown’s music remains popular and each year it generates millions of dollars in royalties for the estate. His songs show up routinely in commercials or in the work of hip-hop performers who pay to use snippets in their own recordings. (The drum break from “Give It Up or Turnit a Loose” has been used so often that it’s been described as “the national anthem of hip-hop.”) Even Mr. Brown’s trademark grunts and squeals are available as ringtones.

The Roots of Charity

By Mr. Brown’s own account, his interest in education stems from his childhood. Born in a one-room country shack, he grew up under segregation in dire poverty and never made it through the seventh grade.

In 2000, the year he signed his will, Mr. Brown explained on an audio tape how he hoped his scholarship fund would burnish his legacy and benefit both white and black children. The will also put aside $2 million in scholarships for his seven grandchildren and divided his personal property, like costumes and household effects, worth perhaps another $2 million, among the six children he recognized. Any heir who challenged the arrangement would be disinherited, the will said.

There was trouble from the start, though. Many of Mr. Brown’s children and grandchildren sued to overturn the will and to remove three longtime associates he had appointed as executors of the estate: his accountant, David Cannon; his personal lawyer, Albert H. Dallas; and a former judge, Alfred Bradley.

Several of the children argued that Mr. Brown, who had had drug problems, had been influenced by lawyers and managers who stood to profit from what the children claimed was his diminished mental capacity.

“Our position is that Mr. Brown did not make a valid will,” said Louis Levenson, the lawyer for four of Mr. Brown’s children. “He was highly influenced by the people who were closest to him, who had the most to gain by the creation of the charitable trust.”

By the end of 2007 all three executors had resigned — Mr. Cannon in the midst of allegations that he had misappropriated Mr. Brown’s money. (He was later sentenced in a separate case to three years of house confinement after being charged with breach of trust in his management of Mr. Brown’s affairs.)

The state district court replaced the original executors with two South Carolina estate lawyers, Adele Pope and Robert Buchanan.

The State Steps In

In 2008, Henry McMaster, then the South Carolina attorney general, intervened. He said that Mr. Brown’s charitable goals had been endangered by the court challenges filed by his family.

Under a proposed settlement with the family, he redirected a quarter of the estate’s assets to Mr. Brown’s children and grandchildren and a quarter to the singer Tommie Rae Hynie, whom Mr. Brown married in 2001 but had left out of the will. Mr. Brown filed for an annulment in 2004 after learning that Ms. Hynie was already married to another man, but let that action lapse after she signed a document promising never to claim she had been his common-law wife; earlier, she had also signed a prenuptial agreement in which she renounced any interest in the estate.

Ms. Hynie said in an interview that Mr. Brown had never meant to disinherit her. “I was very loyal to my husband,” she said. “I loved him very much and he loved me.”

As part of the settlement, the district court agreed to remove the executors, Ms. Pope and Mr. Buchanan, partly because they had balked at the settlement and were at odds with the family. In their place, the attorney general appointed his own administrator, Russell L. Bauknight, a public accountant, to oversee the estate.

But last year the South Carolina Supreme Court threw out the attorney general’s settlement. It described the state’s entry into administration of the estate as “an unprecedented misdirection” of the attorney general’s authority that had led to “the total dismemberment of Brown’s carefully crafted estate plan and its resurrection in a form that grossly distorts his intent.” Based on what it had reviewed, the court said that there was no evidence that Mr. Brown had been unduly influenced or that the will was anything but a true expression of his intent.

The court also voided Mr. Bauknight’s appointment, though it left open the door to his reappointment. It directed the lower court to appoint a new panel to oversee the estate in accord with Mr. Brown’s wishes.

During the past 18 months, the lower court judge to whom the case was returned, Doyet A. Early III, has continued to hold hearings into the matter. But he did not appoint the new panel, and he has reappointed Mr. Bauknight to administer the estate. The judge has not made clear whether he will enforce the terms of Mr. Brown’s will or try to arrange for another settlement among the parties. He has not responded to a request for comment.

“It’s pernicious,” said Virginia Meeks Shuman, who teaches estate law at the Charleston School of Law. “This idea that you can just completely disregard the testator’s wishes is fine if we are going to live in a country where people don’t have a right to say what happens with their assets when they die.”

Despite scolding by the Supreme Court, Mr. McMaster — who was elected lieutenant governor last month — defended his plan as “a terrific settlement” that resolved the “labyrinth created by the entangling lawsuits filed by everybody against everybody.”

A Question of Value

Just how big the estate is remains a matter of significant and unusual debate.

In 2009, when they transferred control of the estate to the attorney general’s administrator, the existing executors valued it at $86 million. They based that figure on offers that they said had been made to buy the copyrights to the more than 800 songs Mr. Brown wrote or controlled and to the dozens of albums he recorded in his 50-year career. In 2006, for example, a Royal Bank of Scotland appraisal found that just a portion of the assets was worth $42 million.

Mr. Bauknight has declined to embrace those figures, choosing instead to value the estate at the time of death at $6.5 million. He has said an investment firm helped establish the figure, but did not detail the analysis.

He has charged Ms. Pope with inflating the estate’s value to increase her fee as a fiduciary.

Ms. Pope, who has said she is entitled to $2.8 million in fees plus costs in a claim she filed with the estate, defended the valuation. She said she is only looking for the standard percentage awarded to fiduciaries.

Mr. Bauknight, meanwhile, has declined to discuss how he set his valuation, or to answer questions about the estate. “I am not an agent of the state, now or ever,” he wrote in an email to explain why he does not feel such matters are public.

Sue Summer, a reporter for The Newberry Observer, a small newspaper in South Carolina, has challenged that assertion and in July secured a court ruling directing the state to release documents about the estate’s finances. The state, which for years has declined to answer questions or provide documents, is appealing.

Mr. Bauknight, the executor, has said in court and interviews that he wants a quick resolution to the outstanding issues so that Mr. Brown’s charitable wishes can be fulfilled. His lawyers have cast him as something of a savior of the estate who hired an experienced music licensing agent, Peter Afterman, to generate more royalties by placing Mr. Brown’s songs in major commercials, thus, making it possible to retire a $14 million loan early.

Mr. Afterman and his company, Inaudible Productions, have been paid $1.2 million in fees by the estate since 2011. They also represented the estate in the sale of music and other rights to the makers of the two new films, both co-produced by Mick Jagger, another Afterman client. The biopic lists Mr. Afterman as an executive producer and the documentary credits him as one of four producers.

Mr. Afterman and Mr. Bauknight did not respond to questions about what the estate received for the rights and whether Mr. Afterman, as a producer, had also been paid by the filmmakers.

Mr. Brown’s body remains at a temporary resting place here, in a mausoleum at the home of his daughter Deanna, three miles from his mansion in Beech Island. The family had hoped to turn the mansion into a memorial and tourist attraction modeled on Elvis Presley’s Graceland, but the plans are on hold until the estate dispute is resolved.

Ms. Pope is still in court these days, pushing to have Judge Early follow the terms of Mr. Brown’s will. Ms. Hynie and five of the six children whom Mr. Brown recognized, on the other hand, are trying to secure a settlement similar to the scuttled state plan. One of Mr. Brown’s sons, Daryl, and a grandson, William, differ from the rest of the family on that issue, arguing that the officials had tried to replace a dead man’s priorities with their own.

“They didn’t do that to Strom Thurmond’s estate,” William Brown said. “They didn’t do it to Elvis Presley’s estate. What’s wrong with that picture?”

Source: The New York Times – photo courtesy


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Realities of Boilerplate Trust Clauses

estate planningMany clients sign estate planning documents without paying much attention to the clauses they contain. One clause that few clients pay attention to is the one governing how that client’s incapacity could be determined—and therefore how the client could be removed from serving as a fiduciary or trustee. A high-profile case on this topic recently played out in California probate court between former Los Angeles Clippers owner Donald Sterling and his estranged wife, Shelly. Here are several lessons from that case, whose outcome ultimately allowed Shelly Sterling to sell the team:

Review all “boilerplate” clauses in estate planning documents. Make sure that clauses that may seem benign when the donor is healthy and competent would also apply later.

Plan for disability or incapacity. This planning should be as important to a client as planning for death. Thinking through who will serve as successor trustee if the donor/trustee is removed for reasons of incapacity is important. Nuances, such as whether spousal estrangement should disqualify a party from serving as sole trustee, really do matter. (The Clippers were owned in a trust. The trust agreement contained a provision, which Donald Sterling agreed to when he signed the trust, that authorized his removal as trustee based on an expert’s determination that he lacked mental capacity.)

Put in place checks and balances to avoid conflicts. Conflicts may arise down the road. For example, should someone who has a vested economic benefit in the outcome of such a critical decision be able to overrule the donor? Should Donald Sterling have designated someone to replace him so there would always be two trustees? Shelly Sterling assumed the role of sole trustee after two doctors determined that Donald Sterling was mentally incapacitated and no longer able to conduct his legal or business affairs.

Think carefully about who can determine incapacity. Should a donor such as Donald Sterling have mandated that his own personal physician be one of the physicians who had to determine whether he was incapacitated?

Consider the consequences of a legally estranged spouse. When legal estrangement with a spouse happens, it is good practice to review all financial structures and estate planning documents—especially the control provisions. Did Donald Sterling affirmatively decide that his wife would have control if he was unable to serve as trustee, or did that happen by default? The trust documents apparently did not prevent Shelly Sterling from assuming sole trustee power even if the couple were estranged.

Identify to whom the trustees should be accountable. Besides the spouse, who else should the trustees account to? Children? Independent advisers?

Designate who will serve as guardian of person and property if protective proceedings commence. That designation would be included in a client’s durable power of attorney. Being named guardian gives a person legal standing in most states to defend the client in an incapacity hearing.

Regularly review estate planning. The Sterling case underscores the importance of regular review. Disability or incapacity does not occur at once—it can creep in over time. Continuous (or at least annual) attention to planning is a safety mechanism that catches inconsistencies early and allows adjustments.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Case Studies – Estates & Family Values: The Ghost of Authority

An elderly couple I had been representing for 10 years came to my office with a family dilemma. One of their sons Family business image, estate planning tipshad quit the family business a few years before, gone to work for a competitor and lost his job. He still owned stock in the family business and wanted his job back. The other children in the business did not want to let him back in, and the parents came to me to find out what his legal remedies were and how they could facilitate a solution.

A red flag went up when I heard that he was no longer working in the company but still owned stock. Another red flag went up when I heard he had been let go by the competitor. The mother felt he should not be able to go back to the family business as he had left it, and the other children did not want him back. The father, who was no longer the head of the family business but remained the authority figure, remained quiet.

They asked me if all of the children could come into the office and talk with me and with the parents. I agreed to that. The son who wanted to be employed again did not attend. He was suspicious of the meeting.

During that meeting the other children told me emphatically that the entire time he worked in the business he was trouble. He felt he knew more than anyone else and was difficult to get along with. He walked out the door for more money when the company was having a difficult time, and under no circumstances did they want him back. The children had two issues – they wanted him to sell his stock back to them, and they believed that because their father did not tell him that he could not come back, it did not matter what they said; he was going to believe he still had a chance to be employed again.

The father was in that meeting and still would not say that the son could not have another shot at employment. The father felt bad that he was having a hard time supporting his family. It became clear to me in that meeting that this was not a sandbox I could be or should be in. I represented the parents and this was not an issue that dealt with them directly.

I did see the ghost and it was the ghost of authority. The father had merely a vestige of the authority he once had, but that was enough to keep the game in suspense. Everyone was waiting for him to take action, but his age and his switch from business to fatherly concerns had benched him. I felt it was unlikely he was ever going to be able to do it. The family was stuck and no legal mechanism would unstick it.

I referred the family to a psychologist who worked with the father, the children in the business and the son who sought re-entry. He was able to bring the ghost of authority to light and open up communication among all family members that led to an acceptable resolution. The son was cashed out and is now otherwise employed. All family members still speak and spend holidays together. Although the parents came to me for legal guidance, this was not a legal dilemma.

As the population ages and as we live longer with reasonable levels of mental competence, the ghost of authority may become more prevalent and very real – particularly in families of first generation wealth where the wealth has been created by a very strong, controlling patriarch or matriarch. The issues pertaining to when that person should no longer have the “final say” are complicated. It is very difficult to change the “movie script” and switch the lead actors to supporting roles. In many such families there is not room for discussion until the older generation begins it, and therefore the older generation’s understanding that the conversation has a time and a place is critical to sustainable legacy.


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Estate planning for the 99%

12-16-14_Estate_Planning_for_the_99Here are some common estate planning mistakes that most clients make—and how to avoid them.

The relatively recent increase in the federal estate tax exemption (to $5 million, indexed for inflation) means that many more people are under the mistaken impression that they do not have to plan their estates. It is important to remember that no matter the client’s net worth, a goal of estate planning is to be sure that the proper documents are in place and that the plan is coordinated. With that in mind, let’s look at a few common mistakes and their remedies.

  1. Outdated or unsigned estate planning documents
  2. I can’t count the number of times people have walked into my office with documents they thought they had signed but actually never did. Or they walked into my office with documents that are several years old. The typical reasons for their behavior include an inability to face death or a denial about the possibility of their own demise; the Scarlett O’Hara rationale—“I’ll think about that tomorrow”; lack of desire to pay an attorney to review or revise documents; or an inability to make a decision on a fiduciary choice such as who will serve as the guardian of minor children, or as an executor or trustee.

    The CPA is the gatekeeper of all financial information and, for the most part, is meeting with or speaking to the client at least once a year. It is wise when discussing tax returns to lead the discussion to financial planning topics, including estate planning. (The AICPA PFP Section provides free resources to help CPAs add financial planning to their current practice.) A coordinated financial approach serves the interests of the client and the adviser.


  3. Lack of complete beneficiary designation forms
  4. Twenty-five years ago, most clients owned the bulk of their assets in their individual names. At death, those assets passed through the terms of a will to the named beneficiaries. Times have changed. For many clients, a significant amount of their net worth is not held in their individual names and does not pass under the terms of a will but rather by contract to the heirs. Assets that pass by contract—and therefore by designation of beneficiaries—include life insurance, annuities, and retirement planning assets.

    Many clients fill the form out with a primary designated beneficiary when they open an account or start employment and then never revisit that form. It is important to review it when there is a life change—marriage, divorce, death of a spouse or loved one, or the birth or adoption of children—and when there is a change in how the client wants the assets disposed of. For example, if a client wants to donate assets to a qualified charity, the best way to make that transfer may not be through a will or trust, but rather through the designation of a beneficiary of the tax-deferred asset. That’s because a qualified charity can receive those funds free of any income, gift, or estate tax.


  5. Lack of understanding that a transfer for insufficient consideration is a gift
  6. It never ceases to amaze me how many clients believe that “selling” real estate to a child for consideration of $1 is a sale and not a gift. The lack of understanding that the transfer was a taxable gift can wreak havoc on the plan and on the composition of the taxable estate.

    We now live in a transparent world. It is very easy for estate tax examiners to access a registry of deeds website and track the history of land transfers. Today, it is routine for an examiner to do just that.

    Recently, I was involved with an audit in which the examiner, through a national database, delivered to our office a very thick package of all the parcels of real estate throughout the country that the client had owned during his lifetime. The package included deeds to him and deeds from him. The examiner sent a summary letter asking for the details of each transfer: What was the fair market value? What was the consideration for the transfer? Were the parties related? What happened to the proceeds?

    The lack of comprehension—that a transfer for less than consideration is a gift, or at least a gift sale, and that it has consequences for the estate tax—also has ramifications for the preparer of the return. It is therefore prudent when preparing gift and estate tax returns to make a thorough inquiry as to each piece of real estate the client purchased, sold, or transferred.

    With the significantly increased federal exemptions, it is also important to understand the tax consequences of a gift transfer. As a reminder, if an asset is gifted for $1 and removed from the client’s taxable estate, the donee inherits the donor’s income tax basis in the property. If instead the property is transferred to the donee beneficiary at death through the estate plan, then it is fully included in the decedent’s estate and the heir receives the full, stepped-up income tax basis in the property, even if there is no federal estate tax due. The state estate tax consequences should also be fully explored when deciding whether it is advisable to make a gift during life or at death.


  7. Not understanding the consequences of jointly owned bank accounts

Many people add another person’s name to a joint bank or investment account for a reason that may sound good at the time. For example, an elderly parent may add a child’s name to those accounts as a matter of convenience.

Siblings who co-own a vacation home may also open a joint bank account. There are several types of joint accounts.

If an account is held jointly with a right of survivorship, then at the death of one owner, the other owner receives the account. An account that is joint only for convenience may not be intended to pass to the surviving joint owner, but rather be added to the assets that pass through the probate estate. Whether a joint account is one of survivorship or is instead a matter of convenience can be determined by looking at several factors. These include, for example, how the signature card was completed when the account was opened, whose Social Security number the account is taxed to, whether the other owner used the funds for his or her own purpose or only for the use of the person who primarily established the account.

Joint ownership may have unintended consequences. Consider an example in which a parent adds a daughter to investment accounts and bank accounts. Even if the daughter does not consider those funds to be hers, the daughter’s creditors or a divorce court may view that differently. In addition, holding the funds may affect the financial aid eligibility of the daughter’s children. Or the daughter may predecease the parent after the parent’s incapacity, which can lead to the account being inaccessible for bill payment. Owning joint accounts is something that should be thought through and thoroughly discussed. Alternatives, such as formal trusts, should be considered as part of the discussion.


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Managing Estate Goals in The Family Business

12-9-14_managing_estate_goalsIn life there will be major goals, and supporting goals. Major goals should be set in the areas of business (including career, family business), finance (including family wealth), education (including what it means to the family and how it will be paid for), family (marriage, children, extended family), creativity (artistic, visionary interests), physical care (health and exercise), public service (issues of importance), faith (religious services, education and participation), and community (whether the community is local such as the town or city, or virtual through other connections).

These goals all connect with each other and when built together, create a sustainable family system grounded in the “true north values” – the course the family wants to go, as well as its ultimate destination and arrival time.

The goals should align with the fundamental values. For example, if the fundamental family values are entrepreneurism and a sense of family safety and if a major goal is to establish a profitable family business in the local community that will employ and support this generation and following generations, then each of the areas referenced above should be explored as part of the goal-setting process.

Goals will change as life and generations change. In some ways legacy goal setting (at the Meta level) is akin to Maslow’s hierarchy of needs. However, at the foundational base are the true north values that each family has. The goals and objectives build from those values and plot the course for the future shaping of the legacy.

These goals will include financial safety and survival, and then when congruent with the true north values will lead to sustainability and perhaps affluence. Financial security or affluence may lead to a greater desire to take care of the community and world at large. Of course, for most families this is not linear; it is just that the emphasis shines on different phases at differing points. Many families know what their true north is, work hard, have faith, and give back to the community and world at large. It is just that the amount of emphasis placed on each sector changes as the need the sector faces changes.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

The Way-Early ‘529’ Gift

Grandparents Can Start a College-Savings Plan Before a Baby Is Born

By Peter S. Green

Photo illustration by John Weber

So you just threw your daughter a big wedding. Now comes the not-so-obvious next step: setting up “529” plans for estate planning, estate planning tips,the future grandchildren.

If that seems like rushing things, think again. With the average four-year price of a private college nearing $165,000 and rising 3.7% a year, anxious families are looking at lots of strategies for helping future grandchildren get a college education. One strategy is to open a 529 college-savings plan and have it start growing years before the future student is even born.

After all, anyone can start a 529, which is funded with after-tax income; the fund’s earnings and principal will be untaxed as long as the money goes to expenses that qualify as higher education. It makes particular sense for older parents with adult children to open a 529, as it helps get the savings ball rolling early. Moreover, if they later transfer ownership of the account to their grown children, both generations can benefit from some gift-tax exemptions.

Benefit Keeps on Giving

Jim Holtzman of Legend Financial Advisors in Pittsburgh explains: If a future grandparent starts a 529 whose beneficiary is the future parent, the grandparent can contribute tax-free up to $70,000—five years’ worth of contributions at $14,000 a year—or up to $140,000 for two grandparents. When an infant arrives with his or her own Social Security number, the parents—or the grandparents who still own the account—can designate the newborn as the beneficiary. Such transfers will likely avoid taxes, though they will eat into the donor’s lifetime gift allowance of $5.34 million.

In addition to increasing the amount of giving both sets of parents can do without owing gift tax, this can help wealthier grandparents reduce their estate below taxable level, particularly in states such as New York and Pennsylvania, where state estate-tax exemptions are far lower than the 2014 federal level, also $5.34 million.

Grandparents and parents can be tempted to maintain ownership of the account to help keep Junior on the straight and narrow. “The advantage of using a 529 is that the account-owner retains control, so when the kid graduates from high school, she’s not going to buy a Harley,” says Nancy Farmer, chief executive of the Tuition Plan Consortium, a group of 277 colleges in 39 states that lets parents (and grandparents) prepay tuition.

But if grandparents hang on to a 529 account, it can hurt a student’s eligibility for aid. Distributions from a parent-owned or custodial 529 reduce federal financial aid by just over 5% of the distributed amount. But distributions from a grandparent-owned 529 can reduce eligibility by half the distributed amount, says Mark Kantrowitz, publisher of, a website advising on funding college education.

And while grandparents’ assets aren’t considered in aid decisions by state schools, they do figure in some private-college aid grants, says Maura Griffin, a principal of Blue Spark Capital Advisors in New York.

Five Years Ahead?

When is the right time for prospective grandparents to act? Right now, says Cameron Casey, an estate-planning lawyer with Ropes & Grey in Boston. Waiting until a grandchild is born to start a 529 for them can mean years of lost earnings potential.

A 529 plan started with the maximum $14,000 initial gift, five years before a child is born, funded with $500 every month and earning interest at 3% compounded monthly, would yield $226,784 by the child’s 18th birthday. The same plan started at birth would yield $167,336.

Of course, the future is unpredictable. If a future grandparent thinks he or she may not live to see a grandchild’s birth, a will can provide for an executor or trustee to carry out 529 plans using assets in a revocable trust.

For grandparents concerned about what to do if the grandchild doesn’t go to college or has sudden medical needs, a special trust might be a better vehicle, says Ms. Casey, as it will allow more flexibility. Using a 529’s funds for something besides higher education will trigger a 10% penalty and make the earnings taxable.

If no grandchild ever arrives, it can be possible to reassign the account to a close relative without owing taxes or penalty.


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

New Risks to Wealth Management

Traditional risks related to the family’s wealth (including financial, intellectual and social assets) include the wealth management image, estate planningillness or death of the key family stakeholder, economic downturn and changes in the regulatory or legal environment. New risks are triggered by the dissipation of wealth due to generational mathematics –with each ensuing generation, the wealth is splintered – and the lack of creation of new wealth. This is a very turbulent economic time, with the increased complexity of legal and tax matters and the increased complexity of wealth management choices. These risks can be mitigated when the family coordinates its advisors and monitors the integration of all professional services.

The risks are further mitigated when the family embraces and encourages financial education and financial literacy across the generations. Mentoring, shadowing, and exposure to the concepts and resources along the generation continuums reduce the chances for unintended consequences.

New Risk: The Bracket Game: To Gift or Not to Gift…That Is The Question…..

On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). The Act significantly changes the federal estate tax, which impacts estate planning for many, and also presents significant estate planning opportunities. The biggest surprise in the new law is the ability to give away $5 million of assets now and remove those assets and any appreciation in their value from the donor’s taxable estate. In a marriage, this doubles the amount to $10 million. This law is in effect until December 31, 2012, and it is unclear what the state of the law will be from 2013 on.

This significant increase in the gift exemption adds to the donor’s ability to gift the annual exclusion of $13,000 each year and the donor’s ability to pay anyone’s tuition and medical expenses as long as payment is made to the provider.

The Act has prompted spirited discussions, “Well, now that I can really give that much, should I? What are the non-tax risks to making those gifts?”

Factors to consider when deciding whether to gift or not to gift:

  1. How much is enough?

    This question is always worth discussing. Warren Buffet’s answer is, “Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.” (Although Buffet did not leave his children the bulk of his fortune, he did leave each of them a foundation of $1 billion dollars to give to the charities of their choosing.) In my experience, the answer depends upon the individual, often changes over the lifetime of the donor, and has to do with his/her children and the economic times.

  2. What strings do I want on the gift?

    Whatever the amount, you must decide how much control there is over the gift. Is it to be given outright? In trust? Who is the trustee? How long should the trust extend? What are the terms of distribution? Who are the permissible beneficiaries?

    Note that a gift is different than a sale- there are some techniques such as IDITs that have cash going back to you- they are a sale not a gift and that is why strings are permissible.

  3. Should I leverage the gift?

    In addition to the strings that you want to impose on the gift, you should also address leverage. If you make a gift that is eligible for a minority or marketability discount, that increases the value of the gift by at least 20%. If you fund an irrevocable trust and anticipate that the trustee will use the funds to make annual life insurance premium payments, then significantly more may be added to the trust through leverage than if the gift were to be invested along more traditional methods.

  4. Am I willing to assume the risk that the gift, once given, is gone?

    What if the gift recipient becomes divorced or has creditor issues during the donor’s lifetime, and the gift is jeopardized? Can you live with that consequence? The cascading effects from a gift can have far-reaching consequences. For example, if the donor parent gifts 20% of the stock in his closely held business to his children; and one of the children becomes divorced, it is not just that the child’s interest in the business may be vulnerable.

    Even if it is not vulnerable, the divorce court also has the right to order the valuation of the child’s interest in that business. To do that means valuing the business in its entirety. Having that asset valued in a hostile environment – where the ex-in-law’s lawyer will try to value that as high as possible – will in all likelihood be in direct opposition to the donor parent’s valuation and appraisals for estate planning and transfer tax purposes.

    In addition, if the donee child is ordered to pay alimony or child support, then the income from the gifted asset will be taken into account when the court establishes the dollar amount. If the income is phantom income, which the child donee does not actually receive, that can present additional complications and litigation.

  5. Am I willing to give up the “fruit as well as the tree”?

    In most cases, the fruit and the tree – meaning the income and the principal – go hand in hand. For example, are you ready to give away 20% of the underlying asset, knowing that the corresponding 20% of the income which is attributable to that asset will also no longer be available to you?

  6. Have I considered gift splitting?

    Gift splitting – where one spouse makes the gift, and the other gives consent to that gift – is a very effective estate planning technique for the second marriage couple. Frequently, in that case, one spouse is wealthier than the other. If the less wealthy spouse does not have $5 million of assets in his/her own right, then using the less wealthy spouse’s $5 million exemption in full or gift splitting, with the wealthier spouse giving his/her assets to his/her own children can be a very creative technique. In effect, it doubles the amount that can be gifted. When considering this technique, especially if there is a prenuptial agreement or postnuptial agreement in place, care should be taken to protect the estate of the less wealthy spouse who consented to this gift or allowed the use of his/her $5 million exemption. The possibility that the exemption could decrease later, resulting in additional estate taxes in his/her estate to his/her beneficiaries, should be thought through and discussed.

  7. Should I gift more than the $5 million/$10 million exemption and incur the 35% gift tax?

    For many very wealthy individuals, this is a question to consider seriously. The gift/estate tax rate has not been this low in eight decades. The difference between a tax-exclusive gift and a tax- inclusive bequest is significant at the higher dollar levels, and exploring this (especially if the underlying assets have significant growth potential or discount opportunities) should be an option.

The best solution is to have a team of strong advisors from different disciplines who know and who trust each other- John Schwan, Heather Davis and I will be discussing this in the next segment- that is what is in the client’s best interest and as long as that what is true north that is what matters the most when mitigating risk.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Using a Will to Focus on Family Values

Will Image, ethical willsWriting an Ethical Will in addition to the conventional, legal one that is the centerpiece of all estate planning can give you a chance to focus on your family’s values and its true north. These wills focus on spiritual legacies in addition to the material ones. Also known as “value” or “mission” statements, Ethical Wills can be very important in crystallizing family values:

  • They can describe religious or moral values you believe are important to share with subsequent generations.
  • They enable you to describe yourself, to personalize and pass on some of the important “life lessons” you have learned.
  • They can serve as a source for recording details of your family history that might otherwise be lost forever.
  • They give you a chance to explain to your heirs why the philanthropic donations you have made have been so important to you.
  • They enable you to share with your children and grandchildren cherished memories you have of them, and to let them know personally how important they have been to you

Ethical Wills give you the chance to be remembered the way you want to be remembered, and they give you the chance to articulate the values that you want to endure in your family as the generations pass

An alternative to a written ethical will is a video legacy. As Iris Wagner of Memoir Productions ( asks, “Do you wish to communicate with future generations about your heritage, your values and beliefs? Would you like to reflect on your life story and tell it ‘from your lips’?

As a lasting legacy, shouldn’t your story be told by you on camera?” The act of preparing an ethical will allows you to preserve your family’s non-financial legacy. As Iris points out, an ethical will benefits both the narrator and the recipient. It benefits the narrator because it is a celebration of life by which the narrator focuses on meaning, perspective and purpose. It is an open communication with important people. An ethical will clarifies family values, convictions, priorities and goals. For the narrator an ethical will can lasso, heal the past and resolve conflicts, leading the narrator to forgiveness and peace. An ethical will also benefits the recipients. It is a guidepost to living through the sharing of wisdom and enduring values. It improves relationships and clarifies relationships. An ethical will sends the family recipients messages of love which can be quite helpful when they are grieving and healing. It is a perpetual legacy of shared and strengthened values, memories and connections.

In addition to understanding your family’s values, it’s important to be aware of any ghosts that may be lurking in the family closet. Every time a new client comes to me with an extremely complicated situation, I sense a ghost. I am not sure whether it is “Caspar the Friendly Ghost” or a scary ghost, lurking in the attic.

I do know that the ghost impacts the way that the family is operating and how its members communicate. After 30 years practicing estate planning law I know that if I do not pay attention to that ghost, the solution I offer will not help solve the problem and may, in fact, make that problem much more significant.

So when that client is sitting in front of me with a tangled story, I listen and carefully observe what is not being said as much as what is being said. I understand that even though the family may be coming to me for a legal solution to its problem, the reality may be that the problem and the solution are not legal, and should be addressed by a different kind of professional. It is, of course, emotionally safer to visit a law office and speak about how to solve a problem legally than it is to deal with it on a more personal level. But that is not what law or lawyers are supposed to do. The legal structure can enable a plan and allow goals to be implemented, but it cannot address the fault lines of emotional family issues.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Including Fundamental Values in Estate Planning

sailboat image, fundamental valuesAlthough every family has these fundamental values, not every family is aware of what they are. Sometimes they are assumed and lie dormant until there is a sudden event that shocks the system, forcing the family to address its values and legacy. The shock may be negative – a divorce, a huge financial loss, a physical tragedy or the death of a key family member. The shock may be positive – the sale of a family business leading to significant liquidity, winning the lottery, marriage, an inheritance.

It would, of course, be much better to think about your family legacy before a shock happens. Take the time to focus on what your family stands for, what you would like to transmit to subsequent generations and how you would like your family to partner with the larger community. Intentional legacy planning creates a stronger family unit. It is easier for those entering the family to understand what the values are if the family itself has focused on what the family stands for and begun a plan to implement it.

When learning to sail, a novice starts out in calm water in a boat that cannot overturn. As the skills advance and as the sailor understands the interaction of the compass, the team on board, the boat, the sails, the wind, the weather and the water, the sailor will advance – from a pond to a lake to an ocean and, if very adventuresome, to a trans- Atlantic cruise. As the journey becomes more complicated, so will the team on board, the boat, and the sails. The wind, water and weather will always change, but the compass will always point to true north.

I remember one of the first times I sailed on Cape Cod. I was a teenager and had taken sailing lessons at Stone Horse Yacht Club in a small sailboat known as a Waterbug. It could not tip over, and in the inlet I had enough confidence in my expertise to convince my younger sister that it was safe to crew on my maiden voyage. We never got out of the canal. The cross winds were quite a bit harder than sailing on smooth water in the inlet. There was a restaurant, Thompson’s Clam Bar, on the side of the canal. After watching me turn the boat around in circles and go nowhere for more than an hour a man having lunch went down to his motor boat and towed us out to the open ocean. My sister made us stay out there for 3 hours until she was sure that everyone who had been having lunch at Thompson’s and witnessed my lack of prowess had gone home. By dusk we made it in safely.

Learning to sail is an acquired skill. It takes attention, diligence and practice in different waters. To be very good you must sail through squalls, and you must make plenty of mistakes and then right your course. This is, of course, true in life too. The compass will point to north but getting there requires attention, discipline and practice. If you tried to sail the open ocean without a compass you would be flirting with disaster. If you try to lead your family without a clear understanding and focus of what your fundamental values are, you will be flirting with disaster.

The family of Christopher Reeve is an inspirational example of a family with fundamental values of integrity, generosity, strength and commitment to the community at large include. After his 1995 paralysis from a horseback riding accident, Reeve and his wife formed The Christopher and Dana Reeve Foundation, which has contributed more than $48 million to spinal cord research and nearly $15million to quality of life grants.

The Reeves had built in instincts to command a powerful legacy. Christopher Reeve’s father was the poet and scholar, F.D. Reeve. His great grandfather was the first national commander of the American Legion. Christopher was well educated, having attended Cornell and Julliard before beginning his acting career. Ironically, his acting career led him to the role of the superhero – “Superman”- the symbol of strength and vitality. Yet it was his life-changing injury – the shock to an otherwise “charmed” life – that focused his family on its fundamental values and focused the legacy on medical research and philanthropy.

Clearly one of the components of this family’s value was to tackle hard problems and make a significant difference. When faced with such a horrendous shock to the system, Christopher and Dana Reeve did not engage in pity; they looked outward and harnessed their strength to focus on what they could do to find a cure – not only for Christopher, but for all who had suffered spinal cord injuries.

The Reeves used their foundational beliefs and the gifts they had been given and the contacts they had made along the way to raise the awareness of spinal cord injury and harness funds to promote scientific research. They lobbied for increased governmental funding and, notwithstanding tremendous physical adversity, they went on the road to promote their good work. Another shock happened when Dana Reeve (who was also an actress), who had taken over Christopher’s work and foundation after his death at age 52 of a heart attack, was diagnosed with lung cancer and died at the young age of 44. Their children have banded together and moved the legacy forward. Christopher’s son and Dana Reeve’s stepson, Matthew Reeve is very active in the foundation and is also an independent movie producer and director, carrying on the artistic side of the legacy.

The hard working family of Ralph Lauren has instilled the values of hard work, entrepreneurism and striving for success in its next generation. Ralph Lauren was born in the Bronx, the son of Jewish immigrants. His father was a house painter. From an early age he wanted to work hard and achieve business success. Under his picture in the 1957 DeWitt Clinton High School year book is the statement: “wants to be a millionaire”. He showed a flair for fashion and business in his early years in the fashion industry, and that led to The Ralph Lauren Corporation which today boasts $6.9 billion in sales.

His children are carrying these values and legacy forward. His daughter, Dylan Lauren, founded a candy empire. His son, David serves as executive vice president of global advertising, marketing and communications for The Ralph Lauren Corporation.

The Laurens have taken this legacy of hard work and entrepreneurial spirit into their philanthropy. The Polo Ralph Lauren Foundation supports initiatives in cancer care, education and service in underserved communities. The corporation partnered with Memorial Sloan-Kettering Cancer Center in New York City to create the Ralph Lauren Center for Cancer Care and Prevention, the only outpatient center of its kind in Harlem. In addition the corporation and its foundation fund: the Pink Pony Campaign (providing proceeds to fight cancer), the American Heroes Fund (to provide scholarships to the children of 9/11 victims), the Polo Fashion School (encouraging educational opportunity through volunteerism and grants), the Ralph Lauren Volunteers (encouraging employee participation in non profit community-based programs), and The Star Spangled Banner (providing the funding for the restoration and preservation of the flag that inspired the national anthem). Dylan Lauren, with her candy empire, partners with charitable organizations and has a special emphasis on charities that support animals.

Public service is the dynastic Kennedy family’s legacy. Their commitment began in this country’s memory with the patriarch and matriarch, Joseph P. Kennedy and Rose Kennedy who combined their fundamental values of hard work, faith, commitment to family and commitment to the world at large. In spite of enduring and very public tragedies this family has continued to impact the fabric of our country through its commitment to public service and political leadership. The Kennedy family legacy began with very focused, disciplined parents who knew early on what values they wanted to impart and passed them on to subsequent generations who worked through turbulent family and world times to keep the legacy on course.

Not all families have the dynastic power of these, but every family can think about what matters most at its core – what are the values that comprise its “true north” and have been passed down in its DNA and will be passed on to future generations.

Even when the instinct is there, success in transmitting these values to subsequent generations requires intentional strategic planning and begins with an understanding of what the values are that are at the family’s core.

It is interesting to note that the Reeve, Lauren and Kennedy families, along with many of the flourishing families I have dealt with as part of my practice, hold the underlying core value that family is important and that a strong family is essential. A strong family system with shared beliefs will absorb the shocks from the external world and adapt and become more resilient and sustainable each time a new shock (positive or negative) occurs.

Do you have a clear, articulated understanding of what your family’s predominant values are? See “Across Generations: A Five-Step Guide for Creating an Expression of Donor Intent” by Susan Turnbull and Amy Zell Ellsworth for a wonderful discussion of family values. Values they include are highlighted below.

Examples include:

  1. Taking care of, supporting and loving each other (a sense of safety)?
  2. Virtue: Knowing right from wrong?
  3. Faith: Commitment to God?
  4. Patriotism: Commitment to country?
  5. Commitment to cultural heritage?
  6. Military service?
  7. Commitment to philanthropy?
  8. Service to community?
  9. Hard work?
  10. The importance of education?
  11. Creativity?
  12. Individualism?
  13. Public service?
  14. Entrepreneurship?
  15. Perseverance?
  16. Gratitude?
  17. Merit?
  18. Responsibility?
  19. Resourcefulness?
  20. Trust?
  21. Forgiveness?
  22. Generosity?
  23. Thrift?
  24. Wisdom
  25. Communication?
  26. Independence?
  27. Leadership?
  28. Loyalty?
  29. Respect?

Including your fundamental values when establishing your estate plan is vital to creating an estate that will pass the test of time.


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,

Common Post-ATRA Estate Planning Mistakes

A false sense of security can lead a client (and his or her adviser) to make mistakes.

estate planning imageThe American Taxpayer Relief Act of 2012 (ATRA), P.L. 112-240, changed the game in estate planning by significantly increasing the amount of wealth that a taxpayer may pass free of federal gift and estate tax to beneficiaries. Many advisers and clients who are under ATRA’s $5.34 million exemption (inflation-adjusted for 2014) believe their past planning is sufficient, that estate taxes are no longer relevant as part of their planning, and no further action is required.
This false sense of security can lead a client (and his or her adviser) to make several mistakes. This article examines three of them.

  1. Mistake: Ignoring the impact of the state estate tax
  2. I recently had a telephone conversation with a very angry client whose mother had recently died. Her mother’s net worth was under the federal exemption, and I told her that the Massachusetts estate tax was estimated to be $160,000. I wanted her to reserve the cash now to pay the tax instead of investing it. All the publicity about the increased federal exemption had led the daughter (and many Americans) to believe that estate taxes were no longer relevant. I explained to her that her mother had been very aware of the Massachusetts estate tax and did not want to gift any of her assets to reduce it, as she had begun her planning when her estate would have been subject to a much more significant federal estate tax.

    Many states have an estate tax, and the rates in some rise as high as 20%. Fewer people paid attention to state taxes back when the federal estate tax exemption was much lower. Now that the federal estate tax is out of play for some of them, clients need to revisit their planning for state estate taxes.

    This is especially true for clients who have real estate or tangible personal property located in more than one state. That’s because the estate may be subject to state estate tax in several jurisdictions and there may be a dispute as to which state the decedent was domiciled in. It is important to review the plans of those clients and consider what options exist now.

  3. Mistake: Blind reliance on “portability”
  4. For federal estate tax purposes, the gift and estate tax exemption is now portable, meaning that if one spouse does not fully use his or her exemption during his or her lifetime, the surviving spouse can take advantage of it later.

    While clients and advisers may rely on portability as a default strategy, other considerations should be taken into account. Portability does not include an inflation-adjustment factor for the first spouse to die’s exemption. (This is different from a credit shelter trust where the funded assets and their appreciation will bypass estate tax at the death of the surviving spouse.) Portability is federal and is not recognized at the state estate tax level.

    Portability is an important planning strategy, but it should not be used as the absolute strategy. All factors should be considered and reviewed on an ongoing basis before assuming it is the “right” answer.

  5. Mistake: Failing to understand that the cost of long-term care may cause more significant erosion to family wealth than estate or income taxes

Families whose assets are under the exemption threshold and no longer have to plan to avoid or reduce the estate tax should still be concerned about the erosion of the family’s wealth. With an aging population that is living longer and needing additional assistance with custodial care, the key goals of estate planning could very well shift. Instead of focusing on how they can help clients protect their accumulated wealth from taxation, CPA planners may concentrate on helping clients protect their accumulated wealth from the escalating cost of health care. While the focus may change, the need for financial planning will be just as critical. The CPA, as a trusted adviser, is well-positioned to start that vital conversation and keep reviewing it as the client’s situation changes.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at To download Annino’s FREE eBook, Estate Planning 101 visit,