Tom Clancy’s Widow Wins Legal Battle Over Taxes on $86 Million Estate

Judge rules trust for grown children must shoulder the bill

By Scott Calvert

Tom Clancy image, estate planning taxes

Tom Clancy’s widow has scored a legal victory in a long-running dispute over who should foot the hefty taxes on the author’s estate, which includes a rare World War II tank. Photo: Carlos Osorio/Associated Press

BALTIMORE—Tom Clancy’s widow has scored a legal victory in a long-running dispute over who should foot the hefty taxes on the best-selling author’s $86 million estate, which largely comes from a minority share of the Baltimore Orioles and includes a rare World War II tank.

Siding with Alexandra Clancy, a Baltimore judge ruled Friday that no taxes will come from the two-thirds share of the estate of which she is sole or main beneficiary. Instead, he ruled the entire $11.8 million tax bill is to be borne by the roughly $28.5 million trust that Mr. Clancy, who died in 2013, left his four adult children from his first marriage—a 41% tax hit.

The four children wanted the tax bill split evenly between their trust and a family trust of which Ms. Clancy is the main beneficiary. That would have raised the overall estate taxes to $15.7 million and divided it between the two sides at $7.85 million apiece.

If the judge’s ruling survives a potential appeal, Ms. Clancy would avoid paying the $7.85 million, while the adult children would owe nearly $4 million more than if they had prevailed in the case.

Although “some evidence” indicated Mr. Clancy wanted the family trust to help shoulder the tax burden, probate Judge Lewyn Scott Garrett wrote in his ruling that much of the evidence supported Ms. Clancy’s claim that her inheritance should be tax-free.

The judge pointed to language in the will that he said offers “the clearest and the predominant evidence” of Mr. Clancy’s intent, and he said that can only be achieved if his widow’s portion pays no tax. Her roughly $57.5 million share of the estate consists of the family trust and a tax-exempt marital trust. She and Mr. Clancy had a daughter, who is a minor.

Jeffrey Nusinov, Ms. Clancy’s lawyer, said in a statement, “We are pleased with the court’s thorough, well-reasoned opinion on this important issue.” Mr. Nusinov, managing attorney of the Baltimore law firm Nusinov Smith LLP, declined to comment further.

Sheila Sachs, attorney for the adult children, said she would review the decision with her clients before considering an appeal.

Mr. Clancy, who died at the age of 66, made his fortune writing techno-thrillers featuring the exploits of fictional Central Intelligence Agency analyst Jack Ryan.

Much of his estate consists of a 12% stake in the Orioles, valued at $65 million, according to court papers filed last year.

Mr. Clancy’s fascination with military equipment was on display in such best-sellers-turned-blockbusters as “The Hunt for Red October” and “Patriot Games.” Court filings detailed some unusual assets, such as a 1943 M4A1 Sherman tank known as a Grizzly. He kept it at a 535-acre Chesapeake Bay estate valued at $6.9 million.

An inventory filed with the court said Mr. Clancy had 26 “handguns and long guns of various makes and models” worth about $35,000.

Tom and Alexandra Clancy’s joint assets included six penthouse condominiums spread over 17,000 square feet at the Ritz-Carlton Residences on Baltimore’s Inner Harbor.

Judge Garrett’s ruling also restores J.W. “Topper” Webb to his role as the Clancy estate’s executor, called a “personal representative” in Maryland. Mr. Webb drafted a 2013 amendment, known as a codicil, to Mr. Clancy’s will, and his law firm advised Mr. Clancy on estate planning.

The judge said his ruling rendered “moot” the dispute between Mr. Webb and Ms. Clancy over his interpretation that the family trust was required to share in the estate taxes. Mr. Webb didn’t immediately respond to a request for comment on Monday.

Source: http://www.wsj.com/articles/tom-clancys-widow-wins-legal-battle-over-taxes-on-86-million-estate-1440438903

Write to Scott Calvert at scott.calvert@wsj.com

Complications Cloud Possibility of a Movie Based on ‘Watchman’

By MICHAEL CIEPLY and BROOKS BARNES

Town Revisits Its ‘Mockingbird’ Past

As Harper Lee’s new novel, “Go Set a Watchman,” debuts, her hometown of Monroeville, Ala., takes stock of its Harper Leerelationship to the writer and her work.

LOS ANGELES — Typically, the outsize attention given a novel like “Go Set a Watchman” would set off an immediate scramble in Hollywood for the film rights.

But, as with seemingly everything surrounding the recently rediscovered book by Harper Lee, which was published on Tuesday by HarperCollins, the situation is not that simple.

Those who represent Ms. Lee say they are not entertaining any offers at the moment, to comply with her request that the film rights be sold only after international publication of the book is complete. Beyond that, there is a question of what role Universal Pictures, which released the film version of Ms. Lee’s “To Kill a Mockingbird” in 1962, would play in a film of “Watchman,” which has several of the same characters.

Other concerns may include an uncertain audience for ’50s-era period film, and how moviegoers would respond to a new portrayal of the lawyer Atticus Finch, who is depicted as a racist in “Watchman,” but is so identified with Gregory Peck’s Oscar-winning portrayal of him as a colorblind champion of justice in “Mockingbird.”

Ms. Lee “is quite particular about film rights in general and would want to have a say in how it is produced,” Andrew Nurnberg, the British agent who represents Ms. Lee, said in an email about any prospective movie version of “Watchman.”

Mr. Nurnberg gave no specific time table for when the rights might be sold, but said the book had generated “heaps of interest” among film companies. He added that some inquirers have also expressed interest in remaking “To Kill a Mockingbird,” which Ms. Lee opposes.

In any case, Universal’s role in any film based on “Watchman” still needs to be clarified. A spokeswoman for Universal declined to comment.

But two people briefed on the studio’s position, who spoke on the condition of anonymity, said Universal executives thought that no film could be made from “Go Set a Watchman” without their consent or participation. One of those people said the studio — which has become more focused on blockbuster fare like “50 Shades of Grey” and “Jurassic World” — had not yet decided whether it would welcome or participate in any screen version of the new book.

Deals and disputes over the control of characters have led to situations as complicated as one that found MGM, Universal and Dino De Laurentiis sharing credits on “Hannibal,” which folded the cannibal Hannibal Lecter and the F.B.I. agent Clarice Starling into a film that had to reconcile rights related to Thomas Harris novels, a De Laurentiis film called “Manhunter” and “Silence of the Lambs,” which had been released by Orion Pictures before its acquisition by MGM.

Robert Mulligan, who directed “To Kill a Mockingbird,” joined Alan J. Pakula, its producer, in making it through their Pakula-Mulligan company. They introduced the book to Mr. Peck, whose own Brentwood Productions joined in the project.

Sandy Mulligan, Mr. Mulligan’s widow, and Hannah Pakula, Mr. Pakula’s widow, declined to discuss whether the Mulligan or Pakula estates held sequel or character rights.

Shot on Universal’s back lot, “To Kill a Mockingbird” became what one former Universal executive this week referred to as a “sacred” property. It has not been mined for remakes or sequels and its principal relic on the lot — the character Boo Radley’s house — has been kept off the studio’s regular tram tour, though it is occasionally opened to V.I.P. tours.

Mr. Peck died in 2003 at 87. Until the end of his life, he answered letters and spoke to groups about Atticus, who came to stand for opposition to racial bias.

(In 1999, Mr. Peck became the second recipient, after Harry Belafonte, of the Marian Anderson Award, which recognizes artists who effect social change.)

“I never had a part that came close to being the real me until Atticus Finch,” he once said, according to Lynn Haney Trowbridge’s 2003 biography, “Gregory Peck: A Charmed Life.”

Carey Paul Peck, one of Mr. Peck’s children, said he did not know whether the Peck estate held rights that might complicate any attempt to film “Go Set a Watchman.”

Asked whether he had concerns about the characterization of Finch in “Watchman,” in which it is revealed that he once attended a Klan meeting, Mr. Peck said he did not.

“Have at it. It’s a free society,” Mr. Peck said in a phone interview.

At the same time, he said he did not expect that any film of “Watchman” would approach the achievement of “Mockingbird.”

“That’s kind of the gold, the rest is dross,” he said. “It’s not going to be the same caliber.”

Netflix, which has rights to show “To Kill a Mockingbird” on its service, has not yet considered “Go Set a Watchman” as the basis for a new film or show, a person briefed on the matter said. HBO similarly has no plans for a film project. One executive with a company that has helped to finance prominent films in the United States and Britain questioned whether any studio would invest in the period drama, unless a star of, say, Leonardo DiCaprio’s stature were to agree to play the role of Atticus. (In the book, the character is 72.)

Ms. Trowbridge said she believed that Gregory Peck would have applauded a new film, even one that presented a more complicated view of Atticus Finch.

“He was a sophisticated, educated reader,” Ms. Trowbridge said. “I think he would have said, go ahead.”

Ms. Trowbridge’s biography portrayed Mr. Peck as having viewed both Atticus Finch and Ms. Lee’s father, A. C. Lee, on whom Finch was based, as almost uniquely without flaw: “Asked if any human being could be as noble and idealistic as Atticus, Greg said, ‘I’ve met two in my lifetime — my own father and Harper Lee’s.’ ”

Mr. Peck wore A. C. Lee’s gold watch to the 1963 Oscar ceremony as a good-luck charm, and came away with the best actor award.

Mary Badham, nominated as best supporting actress that year for her portrayal of Finch’s young daughter, Scout, said she saw the makings of a fine film in “Go Set a Watchman.”

But that, she said, would require close attention to an aspect of the book and of Atticus that she thinks some have overlooked. Some early readers have focused on the unseemly opposition Atticus has to the National Association for the Advancement of Colored People, for instance, without catching the extent to which, Ms. Badham said, Finch may be engaging in dialectics meant to challenge his now-grown daughter.

“In the right hands, it could do very well,” Ms. Badham said. “But it needs very sensitive handling.”

Alexandra Alter contributed reporting from New York.

Source: www.nytimes.com A version of this article appears in print on July 17, 2015, on page B1 of the New York edition with the headline: Film Version of ‘Watchman’? First, Untangling the Rights . Order Reprints| Today’s Paper|Subscribe

 

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Clients Divorcing? Be Sure to Handle These Estate Planning Details

Review all documents to ensure the right people inherit.

In my 30 years of practice, I have come to the conclusion that while a client may not want to be married to the person he or she is married to, that does not mean he or she wants to be divorced. Therefore, as the divorce progresses, emotions swirl, and anger and angst set in. The CPA, who has ongoing, in-depth knowledge of the client’scracked egg shell image, estate planning financial situation, can be instrumental in making sure that all details are attended to during this turbulent time.

Here are some issues CPAs and their clients must take into account during a divorce:

  1. Restraining orders. In many states, when a divorce petition is filed, what is known as an “automatic temporary restraining order” is put in place. Under a restraining order, most estate planning (such as changing estate planning documents or the designation of beneficiaries) cannot occur without a court order. In essence, all planning comes to a halt (unless a court rules otherwise) until the divorce is over. However, some documents may be revised while the divorce is pending. These may include a financial durable power of attorney and health care proxy documents, and documents that pertain to the disposition of the client’s remains. Ensure that your clients review such documents, especially if they put the client’s spouse in charge.
  2.  

  3. State law, particularly as it applies to wills. In many states, a divorce, once completed, revokes the provisions in a client’s will that name a spouse as a beneficiary. However, you should still encourage divorcing clients to review and revise all estate planning documents, especially wills. Otherwise, they may unintentionally leave portions of their estate to an ex-spouse or former in-laws, as happened in a recent case in New York (In re Estate of Lewis, 978 N.Y.S.2d 527 (N.Y. App. Div. 1/3/14)). New York resident Robyn Lewis left everything to her husband, including her home, in her will. She got divorced, but did not change her will before she died at age 43. Though, under New York law, her ex-husband was now not allowed to inherit, Lewis had left her home to her father-in-law as a default provision—a provision not automatically revoked under New York law. Lewis’s family of origin contested the will, but the New York appellate court upheld the decision that the home now belongs to her ex-father-in-law.
  4.  

  5. Beneficiary designations. When a client gets divorced, you should review all primary and secondary designations of beneficiaries for his or her life insurance policies, IRAs, and annuities, as getting a divorce does not automatically revoke those contract beneficiaries. In Hillman v. Maretta, 133 S. Ct. 1943 (U.S. 2013), for example, the U.S. Supreme Court ruled that a man’s ex-wife was still the beneficiary of a $124,558 life insurance policy, even though he had remarried before his death, as he had not changed his beneficiary designation after they divorced.
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  7. Life insurance. Life insurance policies need be carefully reviewed to determine how the divorce will affect them. For example, if a couple purchased a second-to-die life insurance policy because they thought the marital deduction would defer the estate taxes until they both died, that policy must be reviewed to see what happens in the event of a divorce.
     
    Sometimes, after a divorce, one party does rightfully remain the beneficiary of a life insurance policy on his or her ex-spouse’s life. In these situations, the named beneficiary should, during divorce proceedings, mandate that the policy remain in force and that duplicate statements be mailed to his or her ex-spouse to ensure that payments are made on time.
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  9. Estate tax. After they divorce, clients will lose the estate tax marital deduction—and therefore incur higher estate taxes if their spouse dies before they do. Prepare clients for these extra taxes by discussing topics such as what assets will cover the estate tax and whether they should obtain additional insurance.
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  11. Embedded income taxes. In a divorce, many clients view the assets at their current values. The reality is that an asset may have a significant embedded gain because of a very low cost basis, depreciation, or recapture or because it is a non-Roth retirement planning asset. CPAs can call a client’s attention to embedded taxes and make sure they are taken into account in determining how the assets are to be divided.

 
If you are representing both spouses, be aware of potential conflicts of interest when providing advice to either of them that may be perceived as being adverse to the other spouse. In addition, ensure that both spouses have formally agreed to have the CPA represent both parties during the divorce. CPAs should consider the guidance on conflicts of interest in the AICPA Code of Professional Conduct (1.110.010 Conflicts of Interest for Members in Public Practice).


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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Robin Williams’ Foolproof Estate Plan? How To Avoid Family Fallout

Posted by Steven Maimes,

Hartford Courant article by Kevin Hunt

5-12-15_Robin_Williams_foolproofBy Hollywood standards, Robin Williams created an uncommonly sophisticated, tax-efficient estate plan before his tragic death by suicide in August 2014.

It appeared almost beyond dispute, with a real-estate holding trust and at least one other trust, covering everything from his Villa Sorriso (Villa of Smiles) mansion in Napa Valley — listed after his death at $29.9 million — to his “memorabilia and awards in the entertainment industry” designated for either his children or widow.

But as March ended, attorneys for the estate and heirs appeared before a probate judge in San Francisco Superior Court in an ongoing battle between Williams’ widow, Susan Schneider Williams, and three children from his first two marriages.

What went wrong?

“Kids fight over the china and silverware,” says Darren Wallace, an attorney and estate planner at Day Pitney’s Stamford office. “These are the things that get people upset.”

Aside from the entertainment-industry memorabilia, Williams also left his children the “tangible personal property” in the Napa Valley home. Schneider Williams, in a court filing, requested clarity on the meaning of “memorabilia” and asked that “jewelry” left for his Williams’ children exclude his watch collection. After their marriage in 2012, Robin Williams amended one of his trusts so that she could live in their 6,500-square-foot waterfront home in Tiburon, Calif., valued at $6 million, the rest of her life and retain most of its contents. In the court filing, she asks for all property in the Tiburon home, even items the trust specifically designates for the children.

Schneider Wiliams also filed a suit in December alleging that some of Williams’ clothing and photographs, among other possessions, had been taken from their home by his three children, Zachary, Zelda and Cody. To avoid a jewelry-watch-photo challenge, says Wallace, an estate needs specifics.

“We try to be very clear in the drafting,” he says. “It looks like, from some of the reports, that language used to dispose of these things was what I would call more general language. With a client like Robin Williams, where there’s clearly celebrity or even in the more routine case, with specialty assets you could identify as having particular financial or sentimental value like wine collections, a gun collection, a car collection or art or jewelry, it’s important not to rely on more general language. You can’t leave it up to interpretation.”

Wallace often recommends a Qualified Terminable Interest Property Trust, known as a QTIP (available in any state), for blended families because it provides for the surviving spouse while retaining control of the trust’s assets after the surviving spouse’s death. A surviving spouse could remain in the family home, for example, but the house and assets ultimately belong to the children.

“It allows for exactly the situation they’re dealing with,” says Wallace. “It might not make everybody happy, but at least it avoids this type of division where everyone is putting stickies on everything they’re claiming.”

Supplement a will or trust with side letters or guidance memos, for further clarity. “Express in very clear language, not necessarily legalese,” says Wallace, “the intentions carrying out the estate plan.”

Nobody likes a movie spoiler, but a spoiler alert for a will is not a bad idea. Give your children and other loved ones an indication what you will leave them.

“Set expectations,” says Wallace, “so the folks involved, in this case the widow and children, have some idea of what the plan might call for so they’re not learning about it for the first time following a tragic event. After they lose a loved one, they’re going to be grieving. They don’t want surprises.”

Philip Seymour Hoffman, who died of a heroin overdose in 2014, did not leave money for his three children because, as court documents revealed, he did not want trust-fund kids. He left his estimated $35 million estate to Mimi O’Donnell, his partner and mother of the children. Because they were not married, however, O’Donnell did not qualify for the estate-tax law’s unlimited marital deduction. That estate-planning blunder left Hoffman with a $15 million tax bill.

The recent court appearance of Williams’ heirs probably says more about the relationship between his widow and his three children than the thoroughness of his estate planning. The judge apparently agreed: He gave the heirs two months to resolve the dispute by themselves.

Source:  courant.com Posted by:  Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/headlines/robin-williams

 

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

A college with a $94 million endowment is shutting its doors, and people in higher ed should be scared

by Peter Jacobs for the Business Insider

sweet briar college, estate planningA women’s liberal arts college in Virginia announced Tuesday that its Spring 2015 semester would be its last.

Sweet Briar College — located near Lynchberg, Virginia — will close “as a result of insurmountable financial challenges,” the school said in a statement.

Sweet Briar administrators cited several trends that informed the decision to close, including the declining number of female students interested in all-women colleges and the dwindling number of students overall interested in small, rural liberal arts colleges.

Last year, Bloomberg Businessweek reported that small, private US colleges were in a “death spiral” in light of dropping enrollment rates. This decline comes amid competition from cheaper online colleges and community colleges, which are enticing to students in a job market that’s weaker than it once was.

Several colleges similar to Sweet Briar have recently made changes to survive financially, according to Scott Jaschik at Inside Higher Ed. But each choice has come with its own trade-offs. Jaschik highlights two other women’s colleges in Virginia:

Mary Baldwin College has embarked on a plan to preserve its identity as a residential undergraduate liberal arts college by creating new colleges of education and health professions. College leaders say this approach will make the women’s residential college financially sustainable, but many professors fear that the institution’s liberal arts ideals are being compromised.

Randolph-Macon Woman’s College, meanwhile, renamed itself Randolph College and in 2007 started enrolling men. As has been the case at many women’s colleges making that decision, some alumnae objected.

Randolph College’s endowment is over $125 million.

The Sweet Briar statement in part reads:

In March 2014, the College began a strategic planning initiative to examine opportunities for Sweet Briar to attract and retain a larger number of qualified students and determine if any fundraising possibilities might exist to support these opportunities. Unfortunately, the planning initiative did not yield any viable paths forward because of financial constraints.

Speaking with IHE, Sweet Briar College President James F. Jones Jr. lamented the closing of the college as a part of a broader change in “the diversity of American higher education.”

“The landscape is changing and becoming more vanilla,” Jones said.

As Jaschik notes, Sweet Briar’s closing is not unique, especially given the financial burdens many schools have faced since 2008. But, Jaschik writes, “the move is unusual in that Sweet Briar still has a $94 million endowment, regional accreditation and some well-respected programs.”

Mary Baldwin College recently created new colleges of education and health professions.

Shutting the school now — as opposed to when Sweet Briar runs out of funds — will allow the college to offer help to its students and faculty as they transition out after the semester.

“We have moral and legal obligations to our students and faculties and to our staff and to our alumnae. If you take up this decision too late, you won’t be able to meet those obligations,” Sweet Briar College board of directors chairman Paul G. Rice told IHE.

Here’s how Sweet Briar plans to offer support, according to IHE:

While all employees will lose their jobs, the college hopes to offer severance and other support. Students (including those accepted for enrollment in the fall) will receive help transferring. This semester will be the last one at the college, but it will remain officially open through the summer so that students can earn credit elsewhere and transfer it back to Sweet Briar to leave either with degrees or more credit toward degrees.

Sweet Briar announced on its Facebook page that it has expedited transfer arrangements with four local colleges.

Source: BusinessInsider.com Read more: http://www.businessinsider.com/sweet-briar-college-closing-2015-3#ixzz3TMzAxfY7

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Fundamental Family Estate Planning Goals

estate plann image, After you have given some thought to what the true north fundamental goals of your family are (and if you are new to the family, how your true north values mesh with those of the family you are blending into) then the question is: what do you do with that? At what velocity are your goals set? Are you happy at a modest level? Do you wish to shoot for a sonic boom?

If a strong sense of family and family safety is a paramount value, what goals to you put in place achieve it? I would assume that open communication would then be critical so that there are no surprises. Does that mean every member getting together on a regular basis?

If you do not live near each other, does that mean regular virtual communication? Do you establish a system for mentorship within the family? Does the family have a no-questions-asked “family bank” for emergencies? Is there a “travel bank” for family get togethers? Do you have a grandparents “summer camp” where the grandparents and grandchildren all get together for one week each summer (without the middle generation) and embark on a series of educational and recreational activities where the focus can be on the wider concept of family? Do you wish to establish family traditions that will continue on for subsequent generations and show the connections and strength of the family as it expands? The Kennedys had their family compound in Hyannis Massachusetts. Other families have weekend reunions in different locations. What would yours be?

How are holidays handled? Do they rotate? Do you have a common facebook site that posts pictures and has written narratives? How are new family members introduced? Are there traditions to make the entering spouse (and family) feel comfortable? Are there roles that the new family member should play to have a voice and be included? Will you assign a family leader (formally or informally) to keep this value on top of his mind? How would that person be selected, and when would the position rotate?

If entrepreneurism is a paramount value, what goals do you put in place to achieve it? Are there open discussions about the history of the family’s entrepreneurism? Is there instruction on business plans and what they mean? Are there “classes” on the financial components of this – balance sheet, profit and loss statement, risk, borrowing money, capital financing? If there is a family business, is there an articulated expectation about who can work in it and when? Are there policies about family members in summer jobs, internships?

How is ownership handled? How are family members who are not owners handled? How are family members who are not employees but who are owners handled? What is the process for communication? What about cash flow? What information do the family member employees and the family member owners receive? What is the exit strategy for a family employee or owner? What if a family member wants to go his/her own way? Are there funds available for that? Are those loans? What does all this do to inheritance?

If philanthropy and giving back to the community at large are fundamental values, what are the steps necessary to achieve them? A family I worked with was a hard working family that built a significant business in the food services industry. When I met the parents, they were in their 90s; the business was being run by the next generation with an eye toward sale and conversion of the business to cash. The parents’ estate planning documents consisted of simple wills – all to each other and then to their children. When the parents had established the company they had put the shares of stock in the children’s names and therefore, for estate planning purposes, most of the wealth had already shifted to the next generation. Having said that, what the parents had in their names was still significant, and yet no thought had been given to their planning.

In my discussions with them it became clear that the parents wished that there was an entity like the family business that would collectively engage subsequent generations. It was also clear to me that philanthropy was a fundamental value in this family. Specifically, the parents had worked hard with time and money to do what they could to end homelessness and to provide food and shelter for homeless people. Yet, this philanthropy was not “organized”; it was in the parents DNA, and they had transmitted it to their children, yet there were no enabling structures.

We established a charitable foundation for the parents as part of their estate plan, and at their death, their entire net worth was added to that foundation. The foundation is now operated by all of the children and there is a plan underway for the grandchildren to become involved. There are family philanthropy meetings and a meeting of all family members during the Thanksgiving season. The family sets policies, reviews grants, goes on site visits and has active discussions about how to continue their parents’ goal of ending homelessness.

Should it be a family rule that each member over the age of 8 years must do something on a volunteer basis – go to a food bank; mow an elderly neighbor’s lawn? Should there be accountability for philanthropy? Are there common times of the year such as Thanksgiving when the family gets together and makes a decision as to how a collective sum of money should be dispersed? If the family is to give $100, or $1,000 or $10,000 that year, should there be a collective gift for part of it? How would the charities be selected? Would individual family members be assigned to participate in site visits (on a multi generational basis) and then provide a report and recommendations? Should it be a collective or an individual goal to contribute a certain percentage, such as 10% of income, to philanthropy each year? If the family has a business should part of the profit be used for community-based endeavors?

A helpful exercise is to think about, discuss and write down first the three most important true north values that your family has, and then the three goals that would support the sustainability of those values. It is important to consider how those goals would be implemented, by when they will be implemented (so that they are trackable) and who is in charge of the implementation.

 

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Understanding Your Estate Planning Goals

estate planningMany of the families I have worked with have unwritten rules about what their true north fundamental values are, and when entering into a family through marriage, it is important to look at what those are, what the undercurrents are and how they mesh with the entering spouse’s value system. To create a sustainable legacy the values must mesh so that when shocks (good or bad) come to the system, the system becomes stronger because it has built in mechanisms to sustain those shocks.

When a family does not have a clear vision of its own true north, or when that vision is clouded or destroyed, chaos happens. One family I have worked with has an unwritten rule that in-laws will never really be part of the family. The daughter-in-law never understood that rule (although all the warning signs were there) and after a lavish wedding was hurt and surprised that she was not treated better by the parents.

Four children and ten years later she sued the son for divorce, and it is one of the ugliest divorces I have ever seen, with continuous litigation in which the parents have had to participate through depositions and discovery. This is a wealthy family, but the root of the disagreement has nothing to do with money and everything to do with the family value that excludes in-laws. The son never stood up to his parents and allowed the emotional abuse of his wife to continue for a very long time.

Observing this from the sidelines it is interesting to note that if the daughter-in-law had understood the family code and accepted that she was not going to change it and gone in knowingly, her surprise and resentment could have been mitigated. If her husband had stood up to his parents, that may have helped. If they had strengthened their bond through counseling, that may have helped. If husband and wife had had a frank discussion with the parents, that may have helped. None of that happened and chaos ensued.

In another family I worked with, the father, patriarch of the family and founder of a very successful business, was diagnosed with cancer in his 50’s and knew that the cancer was a death sentence. His 25-year-old son was working in the business with him, and the father knew he was not ready to take the helm. We decided to have a very frank discussion with the family so that the family and his son could hear from the father himself what mattered. The family had been under the impression that the prime value in the family was working hard and making a successful business. That was true, but the father’s final illness put on the table the true value – family first, business second. In a very poignant discussion three months before the father died, he gathered his family (and me) and told his son that he did not want the legacy of the business to be his son’s legacy, that he knew his son was not quite ready, that he would fight for his life as long as he could but that death was inevitable. He gave his son permission to try to run the business (even if he failed), shrink the business, hire others, sell the business or do whatever else was prudent. (As will be discussed in the next chapter the financial security of his wife had already been handled by another mechanism so the son did not have the additional concern of knowing that any business risk impacted his mother’s financial security).

The meeting was one of the most powerful discussions I have ever witnessed. There were a lot of tears. The father died. The son decided to try to continue his father’s legacy and fifteen years later the business is very successful and the family is intact. What is most impressive to me is the fact that in the final inning the father had the courage to have this discussion and made it clear to all that he was giving permission for the son to make the decisions, even if that meant the business failed. It was one of the clearest examples of family first I have ever had the privilege to observe.

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Family Business Magazine Reviews “It’s More Than Money – Protect Your Legacy”

Its More Than Money CoverI am pleased to announce that the January/February issue of Family Business Magazine (http://familybusinessmagazine.com/) includes a wonderful review of my latest book, “It’s More Than Money – Protect Your Legacy”.

Written by Barbara Spector, it indicates, “The book also presents advice on risk mitigation, including strategies for protecting the family’s reputation on social media, questions to consider when deciding whether to make gifts to heirs, and the advantages of prenuptial agreements. In addition, the book offers information on achieving philanthropic goals.”

She really got the essence of exactly why I wrote the book. Click here to read the entire review!

Beyond the $5 Million Federal Exemption: Today’s Estate Planning Trends

Family estate planning document image, estate planningAs 2015 continues to unfold, estate planning advisors should take note of the latest trends, which appear to be here to stay:

 

  1. Simplify, Simplify, Simplify (and get back to the basics) – The federal gift, estate, and generation-skipping tax exemptions are, for now, remaining at $5 million (adjusted for inflation). The trend, therefore, will be to simplify and unwind complicated structures, including trusts, which no longer have any estate tax benefit.

    Clients under the tax threshold will not want to pay to establish traditional, revocable bypass trusts, so there will be a trend back to creating simple wills. Managing the complexity and the administrative burden of numerous entities would be frustrating for many of these clients.

    Although the sentiment that “the law may change” will encourage some clients to cling to those structures, the move will be toward simplicity. Clients want transparent, understandable planning tools and no longer believe they need anything complex to accomplish their overall goals. Post-mortem techniques will allow advisors and families to have a “second look” nine months after the date of the decedent’s death to correct any factual mistakes or changes in the law that may have happened since the documents were established.
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  3. Increase in Emphasis on State Estate Tax Planning. – For many families, federal estate tax planning will no longer be the main driver – state estate taxes will now be in the spotlight. In some states, there is a minimal $1 million exemption and the state estate tax rates reach 16 percent. For a $10 million estate that may not pay any federal estate taxes, the state estate taxes could be as high as $1.44 million.

    Although the state in which a family is domiciled controls the bulk of the tax, it becomes complicated to calculate the state inheritance taxes when families own property in several different states. If a husband and wife are domiciled in Florida (which does not currently have a separate state death tax), owns a vacation home on Cape Cod, and has commercial real estate in Greenwich, they would have to pay state estate taxes to both Massachusetts and Connecticut because they owned real property in both states. The state that claims estate tax domicile will prevail in assessing the estate tax on more than the real property and tangible personal property physically located in that state – it will reap the tax on the decedent’s intangible assets too, including investments and stock in the family business no matter where it is located. The determination of domicile for state estate tax purposes is fact-driven and differs from the determination of domicile for state income tax purposes. Estate planning professionals need to pay particular attention to these points.
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  5. Increased Focus on Intergenerational Planning – As greater wealth passes down unhampered by federal estate taxes, it will become easier to hold broad discussions on family wealth that cut across generational lines. Insurance professionals must shift gears from the old goal – preserving the wealth by making sure that the government interferes as little as possible – to emphasizing the capture, preservation, and management of the assets for the good of a family system for generations to come. This requires a candid and thoughtful conversation with the family to discuss their common goals, their visions for the future, and how the family business will be managed in subsequent generations.
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  7. Investment Choices on Dynasty Trusts Established to take Advantage of the Federal Gift Exemption. At the end of 2012, many high net worth families took advantage of their ability to gift $5 million, adjusted for inflation, and transferred assets to trusts. In the year-end rush, many of those trusts now have investments but no investment strategy. Now that this increased exemption has become permanent, many families will continue to implement and fund these trusts. From a leverage point of view, current law dictates that those assets, no matter how much they appreciate, will bypass estate tax for subsequent generations and will do so until the trust terminates. From an estate planning point of view, advisors should consider investment leverage and with their fiduciary duty in mind, contemplate investing those assets for future growth. Many families are also purchasing life insurance as part of this investment strategy, as it provides additional leverage and the funds used to purchase the insurance have already been moved out of the federal transfer tax system.
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  9. Understanding the Impact and Influence of Double Inheritors. Many baby boomer women in this country will be double inheritors – they will inherit wealth from their parents and from their spouse. Over the next 20 years, the amount of wealth that will pass through and be controlled by baby boomer women will be staggering. As advisors, it is imperative that we understand the enormity of this market and acknowledge that reaching the woman client is different from reaching the male client. That woman client may be happily married now (and widowed later), single, divorced, widowed or remarried.
     
    Author Tom Peters, who has written extensively about organizations, leadership, and trends in the marketplace, is convinced that women represent the number one economy – and he believes that the impact of the women’s market on our global economy may be even bigger than the impact of the Internet. Understanding and reaching the double inheritor market is an important client service and an increasingly important business opportunity for estate planning advisors.

 
Now that the $5 million federal exemption appears to be permanent, estate planners need to refocus their energies – and their clients – to creating estate plans that are less concerned with avoiding federal taxes, and more concerned with managing and maintaining wealth for current and future generations.

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

A Goal of Hard Work Created The Family’s Estate

Home and money image, estate planningAn Italian immigrant I know came to this country at a very young age with a grade school education and aspirations of a better life for himself and his family. Those aspirations brought him to work with what he knew – real estate. To him, land meant wealth that could never be taken away. He did not need a college education to develop real estate. He knew with good tenants there would be good cash flow. His immediate goal was survival coupled with those America stands for (land of the free, home of the brave and a place where hard work can bring tangible, financial rewards).

He started his family in a traditional marriage and raised hardworking children. (It is interesting to note he never viewed a good college education as a key value for his family; he valued hard work. It was fine if his children were educated, but that was not a goal). His initial goals were a strong family and wealth through hard work and entrepreneurism in real estate.

As time and life went on, his net worth increased and the course became tougher and the goals increased. He instinctively followed the message of IBM founder, Tom Watson who said, “I’m no genius, but I’m smart in spots, and I stay around those spots.” He stuck to his mission and did not enter into new lines of businesses for three decades. As he became successful, he bought more real estate and more real estate and more real estate. He involved his children in the real estate business at very young ages – discussing it with their parents at the dinner table, piling into the car after dinner and driving through the small city looking at what was for sale, how each piece was valued, where the trends were, what was successful, what was not successful. If the father saw a property that he thought was a “catch”, he would call the owner and make an offer – whether or not the property was formally for sale. His now adult son told me that the habit of driving around for a few hours every night is still ingrained in him, and no matter where he and his family travel, they still do an ongoing analysis of the real estate.

The patriarch reached the point where he owned most of the town and employed many of the citizens in construction and real estate management. To him their families were as important as his own. He valued hard work and loyalty, helping his workers out in difficult personal times or illness.

His goal of coming from Italy to America to raise a family and achieve success was surpassed in the first ten years; yet he never stopped raising the bar, achieving new goals and setting new standards. He remained on the cutting edge of real estate development and his goal grew into revitalizing and shaping the city in which he lived. He wanted its people employed, and he wanted the city to be a magnet for those from other towns to come and shop and dine. His business broadened from acquiring apartment houses and office buildings to starting restaurants and stores.

His children and grandchildren (and most of their spouses) are all employed at some level in the family enterprise since, in addition to his entrepreneurial aspirations, a central value was a tight knit family with a sense of safety. His goal became to use the enterprise he’d built as a safety net for his family, his employees and his community – yet to continue to instill hard work. No one individual (including his family members) would ever become independently wealthy from the enterprise. It is held in a dynasty trust and will continue to support his goals long past his time on this earth.

Although he did not set off with a specific end goal in mind, he knew his compass was set to true north. He used that as a guide and kept course through the obstacles life threw him. His business and family were sustained because of his focus and persistence on his chosen direction. His story is one that shows that although it may be important to know what your long-term goals are – write them down and adjust them and you go – the goals that emanate from true north are instinctual. With focus and perseverance they endure. I am confident every member of his family and his extended family understands that his values are what they have accomplished and what matter to them.

 

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 Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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