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Avoiding Escheatment

Bigstock-The-words-Own-It-on-a-branding-50996468The process by which a state government claims ownership of a deceased person's accounts who has no heirs or beneficiaries is called escheatment. It is something that everyone needs to know how to avoid to make sure their accounts are not inadvertently seized while they are still alive.

If a person passes away and no beneficiaries or heirs can be found, then the state government will claim the property for itself. Today many state governments continuously experience revenue shortfalls and this has led some of them to be overly eager and aggressive about claiming property through escheatment.

What often happens is that an account holder has not stayed in contact with a brokerage or financial institute for a long time. The financial institute then reports the assets in an account as unclaimed property. Rather than making any effort to locate the person who owns the account, the government claims the property as its own. This can create issues for people who have long term investments as part of their retirement and estate plans.

Recently, Investopedia listed how you can avoid this happening to your stock accounts in "4 Ways to Avoid Escheatment of a Stock Account."

The tips include:

  • Make regular contact with the brokerage even if it is just to speak to a representative.
  • Cash all dividend checks. Even if you think the amount of the dividend is too small to bother with, cash the check so that the brokerage knows a living person is receiving the checks.
  • Complete any proxy voting paperwork even if you do not care about it, as this will show that you are still alive.
  • Update contact information when it changes so that the brokerage knows how to get in touch with you.

If you follow the above steps, then your estate will not find itself in the position of the government having already claimed your assets through escheatment before the assets could be distributed to your heirs.

An experience estate planning attorney help you avoid escheatment by having appropriate default heirs listed in your estate plan.

For more information about estate planning, please visit my estate planning website.

Reference: Investopedia (October 29, 2015) "4 Ways to Avoid Escheatment of a Stock Account."

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Review Your Old Trusts

Bigstock-Living-trust-and-estate-planni-89797730Estate laws change regularly, which means that estate planning methods that were once a great idea are no longer advisable for many people. One example of that has to do with the estate tax, capital gains taxes and trusts.

Irrevocable bypass trusts used to be one of the best estate planning devices for many married couples. In these trusts, one spouse funds the trust with an amount just below the estate tax exemption. When that spouse passes away, the trust is then used for the benefit of the heirs, with the rest of the estate passing to the surviving spouse.

Consequently, this approach lowered the size of the surviving spouse's eventual estate and lessened the estate tax burden for the married couple. However, as Kiplinger's Retirement Report points out in "Old Trusts Create Tax Issues for Heirs," estate tax laws have changed significantly since the time when many of these trusts were created.

The estate tax exemption is far higher than it used to be, and spousal portability now allows a married couple to double its estate tax exemption.

The problem for irrevocable bypass trusts is that assets in them do not receive the step up basis for purposes of the capital gains tax. What this means is that for many families, efforts to get around the old estate tax laws are actually creating a greater tax burden now and they would be better off without the bypass trusts entirely.

This is just one example of why it is important to review your estate plan with an attorney every few years. You want to make sure your estate plan is always ideal given the current estate laws, not older out of date laws that may not be relevant to your unique circumstances.

All that noted, every family situation is different. For example, in blended family situations, the irrevocable bypass trust may be the appropriate solution to avoid disinheriting your own children!

Make no estate plans or changes to your current estate planning without the prudent guidance of a qualified estate planning attorney.

For more information about estate planning, please visit my estate planning website.

Reference: Kiplinger's Retirement Report (October, 2015) "Old Trusts Create Tax Issues for Heirs"

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What Is the Worst That Can Happen Without A Will?

Bigstock-Tomorrow-Live-Euripides-84204023Despite hearing many warnings, people do not believe that anything bad will possibly happen if they never get a will. They assume that their family can work everything out. However, that does not always happen.

In a recent article, "What to do when a parent dies and leaves no will," Market Watch published an email of a woman whose father failed to make a will.

The woman recounts how her father told her and her sister that he was making the sister a signatory on his bank account so that she could pay any bills of his estate out of it. He said that the rest of his estate would be divided equally between them.

Five months later the father passed away without a will.

Unfortunately, he had not just made the one child a signatory on his bank account; he made her a joint owner. Everything in the account became hers. To add salt to the other sister's wound, the sister who “inherited” the bank account used other money from the estate to pay the bills. This drove a wedge between the sisters so deep that one of them will no longer attend family events and as a result is becoming cut off from the rest of the family.

The father actually made two common mistakes in this case.

First, he never should have made one child a joint owner of his bank account, if he intended that they share equally. Second, he should have prepared a will. Perhaps the father thought he still had plenty of time to get a will later and just never got around to it. Don’t we all? This story illustrates why “procrastination” is never a good strategy. People, such as this man, pass away unexpectedly all the time. When that happens and they do not have wills, their passing often creates feuds within the family.

Learn a lesson from this tragedy and contact an estate planning attorney to help prepare your estate plan without delay.

For more information about estate planning, please visit my estate planning website.

Reference: Market Watch (September 5, 2015) "What to do when a parent dies and leaves no will"

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Heirs Sue over Nazi Loot / York, PA

Bigstock-Vintage-brass-telescope-on-ant-44347372When the Nazis took over territory during World War II, they looted many valuable items from the homes of fleeing and imprisoned Jews. The process to recover the stolen property continues today. However, as many of the original owners have passed away, it falls on their heirs to attempt recovery.

When the Nazis rose to power in Germany, the wealthy Jewish couple Ludwig and Margaret Kainer fled to France. They left behind a valuable art collection that included original Monets and Degas amongst other pieces. All of their valuables were confiscated by the Nazis. After the war and before any of that property could be recovered, the Kainers passed away. They had no children. The art ended up in the trust of Swiss Banks, which at least nominally transferred them to a foundation that had previously been set up by Mrs. Kainer's father.

A recent articleinThe New York Times, titled "Heirs Sue Bank Over Sale of Nazi-Looted Art," has the full story.

The foundation sold one piece of the art a few years ago. However, the Kainer's heirs claim that the bank and foundation did not do due diligence to track them down. The heirs are suing to recover the money from the sale. The bank, of course, claims it did enough to track down the heirs. If the bank turns out to be correct, then it will win this lawsuit.

Most of the time when heirs are filing lawsuits decades after someone passes away, the problem could have been avoided by proper estate planning. However, this is an unusual situation because of the complications of war and looted valuables. Although the valuables can be recovered, it is a long and difficult process.

For more information about estate planning, please visit my estate planning website.

Reference: The New York Times (October 17, 2014) "Heirs Sue Bank Over Sale of Nazi-Looted Art"

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