Mon, 17 August 2009
The recent deaths of two wealthy men, one very well known, the other not, illustrates yet again the complications and costs of not preparing an estate plan. The media has focused in the last few months on the story about Michael Jackson’s death and its aftermath. No doubt we will be bombarded with this story for months and years to come. Jackson left a mountain of debt, assets that in death are probably worth more than when he was alive, and a less than traditional family. Jackson did, however, do some things right. He left a will which included trusts for his children and a clear indication of who he wished to be appointed as their guardian.
Then there is Yung-Ching Wang. Most people probably never heard of Wang but he ranked among Forbes Magazine’s top 200 wealthiest people in the world when he died last year at the age of 91. Wang was a true success story, born into poverty, the son of Taiwanese farmers, he turned a $700,000 loan from the United States government during the height of the Cold War into a multi billion dollar international manufacturing conglomerate. His company, Formosa Plastics, became the largest manufacturer of the ubiquitous plastic materials that we find in all kinds of products today.
By all accounts, Wang was a management guru and a visionary. His personal life was a little bit more, shall we say, messy. He left a wife, to whom he was married for 72 years and 9 children. None of those children, however, were born to his wife. Oh, and he didn’t have a will. No written plan of distribution from a man whose rightful heirs is now open to interpretation and who left property and other assets around the United States and around the world.
One of his sons has filed a complaint in New Jersey state court (he was a part time resident there) seeking to be appointed administrator, the official estate representative charged with gathering assets, paying all debts and taxes and distributing the balance to his heirs. He already has a fight on his hands from two of his sisters. Had Wang executed a will appointing someone this initial fight could have been avoided.
The battle promises to last for years and drain the estate of countless dollars. One of the big questions is who the rightful heirs should be, not an easy answer since Wang fathered his children with several different women. New Jersey’s intestacy laws address distribution of estates when no valid will exists but the laws are not perfect and there, no doubt, will be issues for which clear cut answers don’t exist. Legal battles will ensue.
The lessons learned from the Michael Jackson and Yung-Ching Wang cases are clear for all of us. You can save your family much heartache and expense by leaving a clearly thought out estate plan. In Jackson and Wang’s cases, their estates are so complicated that courts will need to step in at some point to assist in the distribution. However, Jackson’s family will have a much easier time than Wang’s since Jackson at least took care to express his wishes in writing. For the average estate that usually is enough to eliminate the fighting the typically ensues when a loved one passes away.
Category:Estate Plan -- posted at: 6:00am EDT
Mon, 19 January 2009
Very often, when I prepare wills, powers of attorney and health care directives (living wills) for clients they react with surprise when they see the length of my documents. “Why”, they say, “is the will you are preparing 20+ pages when my previous one was only 2?” “The document is designed to cover as many scenarios as possible”, I explain, “not knowing which scenario may in fact occur”. It is not good enough to simply address the most likely ones, especially if yours turns out to be one of the uncommon ones.
Narrowly or poorly drafted wills can cause unpleasant and expensive results. Let’s take the simple task of designating an executor, the person who is appointed the official representative of the estate and is charged with gathering the assets, paying the debts and taxes, if any, and following the instructions set forth in the will and making final distributions to the heirs. It is a good idea to have one or more backup or alternate executors, in case someone can’t or won’t serve, when the time comes.
Now, most people would think in terms of the executor dying as the reason a back up is necessary, but that is just one possible scenario. Yet, I not infrequently see a will drawn up that states “if my executor dies then I appoint my alternate to serve”. Let’s say Child A is the executor and Child B is the alternate. Mom dies and A doesn’t want to serve. No problem. A will step aside in favor of B, right?. Except that A is alive and the will only provides that B can serve if A has died. So, what now?
B can serve as administrator. Same role and responsibilities but some very important differences. An executor can serve without a bond if the will so provides but an administrator cannot. And that can be an expensive difference. The bond acts similar to an insurance policy in that the company issuing the bond will pay out the inheritance if the assets are lost or misappropriated. The bigger the estate the higher the cost, sometimes tens of thousands of dollars. While a bond can be very important, many close knit families see it as unnecessary. Unfortunately, in our case there is no choice. Had the will stated that the alternate can step in if the executor dies or otherwise can’t or won’t serve, then the bond could have been avoided. A very expensive mistake and a reason you want to be sure that the attorney drafting your will is experienced in estate planning or elder law.
Category:Estate Plan -- posted at: 6:00am EDT