The Estate Plan Phil Jackson Wished He Had

Phil Jackson and NJ Estate Planning

Today has been a lovely day. In fact, I’m having a hard time containing my smile right now. After three years of futility, my beloved New York Knicks have finally decided to part ways with the Zen Master – Phil Jackson.

In case you aren’t a Knicks fan, Phil Jackson, the basketball coach who coached Michael Jordan, Scottie Pippen, Kobe Bryant, Shaquille O’Neal, among other hall of famers, to NBA Championships, was hired as the Knicks President three years ago by the Knicks owner, James Dolan. Back then we were all hopeful that the Zen Master would guide our team back to respectability.

Alas, it was not to be. Jackson compiled a record of 80-166 in his three years as President. He was an absolute train wreck (I’m being kind) and infuriating to follow as a fan. His best quality was that he was not Isiah Thomas, but that’s another story.

All of this having been said, Jackson’s leaving reminds me of an estate planning technique that many of my clients have been asking me about – The Revocable Living Trust (RLT). Phil Jackson will probably want to have owned his New York property in a RLT, assuming he’s moving back to Montana (or Los Angeles?).

Let’s talk about trusts. I’ve heard a trust described as a contract between various parties to benefit other parties, but I find definitions like that hard to conceptualize.

Instead, thanks to my Partner Erin Calpin, I like to think about a trust as a box. Whenever there is a box, there are people involved with the box. There’s the person (or people – but I’m going to use the singular for simplicity) who creates the box – that person is called the Grantor or the Settlor. There’s the person who manages the box, that person is the Trustee. And then there is the best role to play, the person who benefits from what’s in the box, that’s the beneficiary.

The unique thing about a RLT is that (in most instances) the same person who creates the box is the same person who manages the box who is the same person who benefits from the box, i.e. the Grantor, Trustee and Beneficiary are all the same person.

If you create a RLT there is no tax benefit because for all intents and purposes the box is you, i.e., the assets can be managed just as easily as if they were in your own name. A RLT also does not have a separate Social Security Number. You can put things (or assets) in the box, you can take things out of the box. You can chuck the box entirely.

You must be wondering – if there is no tax advantage, then why would you want to create this magical box?

Great question! There are three main reasons to create the RLT. The first has to do with Incapacity. Specifically, as mentioned above, you are all three roles (Grantor/Trustee/Beneficiary) for the RLT. But, if you become incapacitated, your “successor trustee” can easily step into your shoes and manage your assets for you. Some banks would much rather your assets be in a RLT and your successor trustee step into your shoes to manage those assets then be forced to use a Power of Attorney. If you have ever had a Power of Attorney rejected from a bank you know what I’m talking about.

The second reason has to do with Privacy. A Will is a public document. You can easily find David Bowie’s or James Gandolfini’s will, because their wills are public documents. However, anything mentioned in a RLT is private. No one will gain access to the contents of the Trust because it’s private.

The third reason to create a RLT brings us back to our good friend Phil Jackson. The third reason to have a RLT is to avoid the probate process. Without getting into a much longer digression, anything in your individual name (that does not have a beneficiary form) will transfer to your beneficiaries through your Will. In order to probate (or to use) the will your executor has to qualify as the executor and then go through the probate process to make the necessary transfers. If all of your assets are in New Jersey, then it’s not that difficult.

But imagine this scenario. Phil Jackson names Jeannie Buss as his executrix. And Phil has property in Montana, New York and Los Angeles, and everything is owned in his individual name. When Phil dies, Jeannie has to qualify in Montana, New York and Los Angeles Surrogates Courts, paying the filing fees in each state (perhaps even having to make an appearance in each location) in order to transfer all of these homes to Phil’s beneficiaries. However, if Phil had his properties owned in the name of his RLT, Jeannie could deal with all of Phil’s properties in the comfort of her office at the Staples Center.

Similarly, if you live in New Jersey (New York is an altogether different story, we recommend all of our New York clients have RLTs) and you have properties in other states, you’re going to want to own them in the name of your Revocable Living Trust. You might also want a RLT for incapacity purposes, but especially if you own multiple properties in multiple states.

Unfortunately, I’m sure estate planning is the last thing on Phil Jackson’s mind. Fortunately, now that he is gone, Phil Jackson will be the last thing on my mind. Go New York Go New York Go!

Alec Borenstein, Esq., an estate planning attorney, is a Teaneck resident with offices in Springfield, Lebanon and NYC.  His firm’s website is bmcestateplanning.com. If you’d like a free estate planning consultation in the comfort of your own home or office, please email alec@bmcestateplanning.com or fill in the form to your right. 

What happens to your debt after you die?

One question I get often from clients is, What happens to my debt after I die? Great question – but before we delve into the answers, I wanted to share with you three opportunities in June to attend a seminar I’m hosting with Round Table Wealth Management titled: Trump: Time to Update Your Investment & Estate Plan, But How? On June 7, I’ll be presenting in Scotch Plains, on June 8 in Red Bank, and on June 13 in Princeton. Please email me if you’d like to attend and I’ll send you an invitation! Our first seminar in Franklin Lakes was a great success!

 

Back to our regularly scheduled programming: Debt. While you ponder your mortality from time and time and think about the distribution of your assets, have you thought about what will happen to your outstanding debt?

In the past we have written about the need to appoint an executor you trust who will administer your estate in the most efficient way possible. One of the responsibilities of your executor is to take care of your outstanding debt. This is done by using the assets and property you leave behind to cover the balance. It some cases, this may require liquidation of property. Whatever is left over after your debts have been paid may then be distributed among your heirs.

Consider the following types of debt and what happens to it when you die:

  • Student loans — Federal loans are discharged upon death. Private loans, however, are not. In some rare cases, a private loan company may issue debt forgiveness, but it is unlikely. If you pass away with private student loan debt, the balance will attempt to be collected from your remaining assets and estate. Should your estate fail to cover the cost, the private loan company will then attempt to collect the debt from your spouse.
  • Credit card — If you are the sole owner of the credit card debt, then the credit card company will attempt to collect the balance from your estate. Should you have a joint credit card account, the co-signor of the account will be responsible for the outstanding debt.
  • Medical debt — In the event that you have medical debt, the funds from your estate will be used by your executor to cover the cost. Another person may take on the responsibility of your medical debt if they signed legal documents agreeing to do so. In the event that your estate is unable to pay off your medical debt, it will not be inherited by your heirs.

When drafting your estate plan, it is always a good idea to try and reduce the debt you owe by as much as possible, especially if you want to leave substantial property or assets to your loved ones. Any debt you accrue while you’re alive may deprive your family of the inheritance you intended for them to enjoy.

Whether you need help setting up a trust, probating a will or creating a detailed estate plan, be sure to consult with a skilled attorney. To discuss your estate planning matter with us, contact Alec Borenstein, Esq., a partner with the firm at alec@bmcestateplanning.com or call 908-236-6457 today.

Why Are You Checking Email Today?

Business Succession Planning

Why are you checking email today? There could be many reasons. You could be addicted to your phone. You could be working. You might also own your own business, and when you own your own business you’re always on call. Which is why you’re checking your email today.

If you do own your own business, then you must wonder what will happen to that business if you pass away. Or you might be wondering what will happen to your business when you retire. I’ve been thinking a lot about these questions as I watch the show Rectify, on IFC.

Without going through the whole backstory (it’s a very complicated, powerful, amazing show), at some point we learn there is a family (tire) business that the owners go to great lengths to think about selling. The thing I loved about the show is that so many of the issues the owners had to face are exactly the same issue my clients deal with as they contemplate retirement (or an untimely passing).

For example, have you thought about:
– What happens when I retire?
– What will happen to the business if I pass?
– What happens if I get sick, or become disabled?
– If I have partners, what happens to my share of the business if something happens?
– What happens if my child divorces?
– What happens if I get a divorce?

We are about to witness the greatest wealth transfer in human history. There are about $30 trillion in assets that are about to be passed from one generation to the next, as the boomers retire and the next generation steps up. If you are in either category (thinking about retiring, or thinking about taking over a business), then you must assemble a great team of advisors and attorneys who can help you navigate the process. We can certainly help. If you have any questions about your business, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457 today.

One last thing – stay tuned for an email later this week about three more events we are hosting with Rountable Wealth Management about the new tax changes under the Trump Administration. The first event in Franklin Lakes was a tremendous success, and we look forward to having you come to one of the events in your area!

The Documents You Need for Your Estate Plan

The Documents You Need for Your Estate Plan

Whether you are thinking about creating an estate plan or already have one in place, it is important to ensure you have the proper documentation. Unless you have a law degree, understanding estate planning can be confusing.

In this DIY age, you may be inclined to try and create your estate plan on your own via the internet. Don’t. In fact, without an effective estate plan and proper documentation, your future heirs may suffer and your last wishes may not be upheld.

Following are the documents you need to ensure your legacy is preserved:

1. A will — For many people, this is the be all/end all of estate planning – the holiest of holy documents and the only one seen as worth having. A will is indeed vital to your estate plan as it provides instructions on how your property and assets should be disposed of and who your beneficiaries should be. In your will, you may describe how you wish to be buried, what charities you wish to donate to, who should care for your pets, and more. Additionally, your will allows you to name an executor to handle the administration of your estate after your death. Without this document, your estate is subject to New Jersey’s intestacy laws.

2. A health care proxy — A health care proxy is a document that names a trusted individual to make decisions about your health should you become unconscious or mentally disabled. No one wants to imagine what might happen to their loved ones if they should fall into a vegetative state or suffer from a terrible illness like dementia. Yet considering such possibilities and setting up a health care proxy is important to ensure your family knows your wishes should something happen to you.

3. Durable Power of attorney — Unfortunately, many estate planners stop at their will. While your will is extremely important to your estate plan, the buck doesn’t stop there. What if you should become incapacitated via accident, injury or illness? Who will handle decisions about your healthcare and finances? With a durable power of attorney, you name a trusted person who takes care of things like paying your bills, making medical decisions or handling your investments.

No two estate plans are the same. Your estate plan reflects your life, your estate, your assets and the legacy you wish to leave behind. Depending on your unique situation, your plan may be more or less complicated.

For more information about estate planning in Union or Hunterdon County, consult with Alec Borenstein, Esq., a partner with the firm at alec@bmcestateplanning.com or call 908-236-6457 today.

Improper Estate Planning Reveals the Secret KFC Recipe!

Happy New Year! In the culinary world, a secret recipe is everything. For fast food giant KFC, the recipe for its chicken is so closely guarded that it sits in a 770-pound safe covered in two feet of concrete and monitored by motion sensors and video cameras. Seriously, it sounds like something out of a Mission Impossible movie!

Yet recently, as covered in a New York Times article, the company’s lip-smacking spice blend may have been revealed to the world via the last will and testament of Colonel Sanders’ second wife. It all started this past August when Jay Jones, a reporter for The Chicago Tribune, traveled to Corbin, Kentucky to write a piece about the town where the famous Colonel first made his fried chicken.

Mr. Jones set up a meeting with Colonel Sanders’ nephew, Joe Ledington. At some point during the meeting, Mr. Ledington pulled out an old scrapbook that contained pictures and family memoirs. Allegedly, the scrapbook was the property of Claudia Ledington, Colonel Harland Sanders’ second wife who passed away in 1996. Tucked away in the back of the scrap book was Claudia’s last will and testament. In the last pages of the will was a handwritten recipe for a spice rub. Mr. Ledington claimed that the 11 spices and herbs listed in the last will were in fact the secret recipe locked up tight in a safe weighing nearly 800 pounds.

Yum Foods, the parent company that owns KFC, claims the recipe isn’t accurate. The exact spice blend from Claudia Ledington’s last will and testament is as follows and should be mixed with 2 cups of flower:

2/3 tablespoon salt
1/2 tablespoon thyme
1/2 tablespoon basil
1/3 tablespoon oregano
1 tablespoon celery salt
1 tablespoon black pepper
1 tablespoon dried mustard
4 tablespoons paprika
2 tablespoons garlic salt
1 tablespoon ground ginger
3 tablespoons white pepper

Now, from an estate planning perspective, a couple of things can be learned. First, you can bequeath amazing recipes to your descendants. However, if you have a recipe that may be responsible for hundreds of franchise restaurants and billions of dollars in revenue, you may want to update your estate plan. In 1996 when Claudia Ledington passed away, KFC was already a successful brand and household name. Instead of leaving the original spice rub on a hand-written note in the back of a scrap book, she may have wanted to rewrite and seal the document in a safe or safety deposit box.

Second, if you do have a secret recipe to leave in your safety deposit box, it’s never a good idea to leave your last will and testament in your safety deposit box. It’s like leaving the key to the deposit box in your deposit box.

Whether you need help leaving Grandma’s famous apple pie recipe to your children or establishing a trust, it is in your best interests to contact an experienced estate planning lawyer. If you have any questions, please call us at (908) 236-6457, or email me at alec@bmcestateplanning.com.

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