Estate Litigation

I would say about 33% of our forensic accounting work is related to Estates, Trusts and Wills or lack thereof. Usually the problems begin with poor record keeping, tax issues or outright fraud and theft. Today I am going to review some basics of estate planning so you can avoid or minimize some of the pitfalls. We had a case a while back where our firm was appointed by the court to take over and manage a wealthy widow’s finances. She was having some minor issues with dementia and her heirs.  The problem we had was that the children lived throughout the country and they would invite their mom to stay with them. At one point she went to Florida to stay with her daughter, and she stayed for a very long time. The other children insisted that she was being held captive by their sister. Eventually she would leave and go to New York and the same thing would happen. It is as if she was being constantly kidnapped, and because of her dementia she was unable to leave. When she was on these trips large amounts would be charged to her accounts and credit cards. The sad thing was that she was a Holocaust survivor. It was like she was in “The Hotel California” (by the Eagles) “Welcome to the Hotel California Such a lovely place (such a lovely place) Such a lovely face. They livin’ it up at the Hotel California What a nice surprise (what a nice surprise), bring your alibis Mirrors on the ceiling, The pink champagne on ice And she said, ‘we are all just prisoners here, of our own device’ And in the master’s chambers, They gathered for the feast They stab it with their steely knives, But they just can’t kill the beast Last thing I remember, I was Running for the door I had to find the passage back to the place I was before ‘Relax’ said the night man, ‘We are programmed to receive. You can check out any time you like, But you can never leave!”   Eventually we were able to put a stop to all the nonsense and resolve the financial issues. If you do not want something like that to happen to you here are some tips: You may want to sit down and make a list of all your assets and who you would like to inherit It is important to think about medical issues should they occur, beneficiaries for your young children or animals, etc. Make a list of all your assets and  where they are held. If you have a business, succession planning is important. Typically, we like to see an AB Trust set up so that you can maximize the estate deduction and still have some type of control over the business. How are the assets titled; joint tenancy – cheap and easy to do. The assets pass directly to the joint person.. Remember your pension plans and IRAs generally have beneficiaries and they should be updated. Once you do this you should probably talk to your CPA and your attorney about how to proceed with setting up a will and/or trust. Types of wills; Simple Wills, Testamentary Trust Will, Pour Over Will, Oral Wills, Joint Wills, Living Wills. There are several different types of wills, but the important thing is to make sure you have one. The big question is, when is a trust better than a will?   A trust provides more structure Protects your privacy It can reduce estate taxes If it is a living trust the trustee can manage property for you while you are alive Trusts are generally more difficult to contest than wills Trusts are more flexible than wills Trusts can impose greater discipline on beneficiaries   There are several kinds of trusts, and in order to pick the one that is right for you and meets all of your requirements you will need to talk to a CPA and an attorney. A few trust types are Revocable Trust, Irrevocable Trust, Dynasty Trust, Insurance Trust, Living Trust, Special Needs Trust, Spence Thrift Trust and Testamentary Trust. The biggest problem you can have with wills and trusts is that the person you have managing the assets is not competent.  The most important thing you can do, once you set up an estate plan is to designate a reliable executor, executrix or trustee. It all depends on the nature of your estate, your family situation and other factors. The main thing to remember is to have some idea of the potential executor and the pros and cons of each when you meet with your attorney to plan your estate Talk to the executor or trustee and make sure they understand the importance of good record-keeping Make sure they can pick good advisors to help handle taxes and legal issues Make sure they have a good disposition and are mostly grounded Name someone younger You never will find the perfect trustee or executor but picking the best one possible will save a great deal of headaches