Looking a Gift-Horse in the Mouth: Renouncing a Bequest

gift horse, wills and trusts, renunciation, bequests, hunterdon county, union county, new jersey

Looking a Gift-Horse in the Mouth: Renouncing a Bequest

Why would anyone lucky enough to be a beneficiary under a will decide to reject the gift being left to them? The law calls this type of rejection a “disclaimer” or “renunciation”—and it’s a very important estate planning tool to consider whether you are administering or are the beneficiary of an estate.

First, let’s consider why someone would renounce a gift. For some people, it is simply a personal preference—for one reason or another, they do not want to benefit from the estate of the decedent. Far more common though, are situations where the intended beneficiary has substantial financial obligations, or is in a position where any inherited property would be at great risk.

For example, imagine your great-aunt named you as a beneficiary in her will and then she unfortunately passed away right on the same day you learned that a collection agency is hounding you for tens of thousands of dollars. In a situation like this, you might expect to be bankrupt within a couple of months. If you accept the bequest from your great-aunt, all or a portion of it may be consumed by your creditors. That’s probably not what your great-aunt would have wanted, so you can renounce the gift, have it go back to the estate and then be paid out to the other beneficiaries.

Most bequests can be renounced, assuming the following criteria are met. The renunciation must:

• Be formally made in writing to the executor or administrator

• Identify exactly what property is being disclaimed (for real estate, you must also identify the municipality, block, lot and precise interest of the beneficiary)

• Be made within a specific time period (See N.J.S.A. 3B:9-4.2)

There are some situations where renunciation is not available. The most common situation is one where the beneficiary has already acted in some way to “encumber” the bequest.

For example, if you borrowed money from someone and the loan was made based on the fact that you were expecting to receive a bequest from your great-aunt (which would be used to pay back the loan), you cannot then renounce the bequest. You are barred by statute and common law from renouncing because doing so would be inequitable to the lender.

Sometimes the beneficiaries of an estate are asked to “waive” their rights to renounce (aka disclaim) bequests. When this happens, the beneficiaries are asked to sign a formal written document that bars them from exercising the right to disclaim in the future. This is common when real property in the estate has been left to multiple beneficiaries or if the beneficiaries are attempting to obtain financing based in whole or in part on an expected inheritance.

One important final issue to consider is the tax consequences of accepting or renouncing a bequest. In some instances, the IRS will not honor a renunciation, and thus it is important to obtain the advice of a qualified estate or tax attorney prior to making any decisions about renunciation. For experienced counsel on estate planning in Hunterdon or Union Counties, New Jersey, contact Alec Borenstein, Esq., by email at alec@bmcestateplanning.com or call 908-236-6457 today.

Time Out: Team Owner Tom Benson’s Estate Hit By Possible Undue Influence

wills, trusts, tom benson, estate planning, union county nj, hunterdon county nj, brooklyn ny

Time Out: Team Owner Tom Benson’s Estate Hit By Possible Undue Influence

Brawls over estate plans are common. They usually occur after the death of a primary beneficiary. In the case of Tom Benson and his family, the game started early.

 Worth an estimated $1.87 billion, Tom Benson is a self-made man who built a fortune leveraging car dealerships and banking institutions. In addition to his businesses, Mr. Benson also owns two sports franchises, the New Orleans Saints in the National Football League (NFL), and the Pelicans, a National Basketball Association (NBA) franchise.

Now 87, Mr. Benson created a family firestorm in January of this year by attempting to transition assets previously placed in irrevocable trusts for the benefit of his grandchild, Renee Benson and her two children. If the asset transfer sought by Mr. Benson is approved, control and primary ownership of the sports franchises would pass to the third wife of Mr. Benson, who he married in 2004, after the death of his second wife.

Renee Benson has long been groomed as the heir apparent to the sports empire created by her grandfather. Shortly after Ms. Benson and her children received word they were being cut out of future control of the business, they filed a lawsuit to have Mr. Benson declared mentally fit.

Believing her grandfather unduly influenced by his current wife, Gayle Benson, Rene Benson sought a court ruling giving her authority to protect the property and “person” of Mr. Benson. In February, a court found the following:

  • Benson is under significant pressure.
  • Help should be provided to Mr. Benson in managing his assets
  • Two receivers were appointed to help Mr. Benson

Since then, the receivers focused their investigation on the Shirley Benson trust; this trust holds the assets at issue in the case. Control of the fate of the teams appears to rest in the declaration of the ownership of the business assets.

Mr. Benson holds half the company—plus one share—and Renee Benson and her two children own the rest. In a court filing, the receiver’s report they do not believe Mr. Benson is entitled to the one extra share that imparts control of the businesses interests held in trust. The receivers recommend the extra share be split, or given to the Shirley Benson trust—a move that end runs the attempt of Mr. Benson to call the shots.

As multiple lawsuits play out, the results of a medical examination of Mr. Benson are expected soon. Is Mr. Benson being inappropriately influenced by his wife to cut out his long-time heirs? Is Renee Benson herself seeking undue influence? Is it a little of both? Time and the court will tell.

When you need to make informed decisions about your wealth and business assets in New Jersey or New York, please feel free to call us at (908) 236-6457 or email alec@bmcestateplanning.com.

Save Your Children From Themselves: The Estate of Whitney Houston

wills and trusts, estate planning, Union County NJ, Hunterdon County NJ, Whitney Houston, Bobby Brown, Bobbi Kristina

Save Your Children From Themselves: The Estate of Whitney Houston

Whitney Houston passed away in 2012.  In her estate plan, Whitney named her daughter, Bobbi Kristina Brown, as her sole heir.  In January of this year, Bobbi Kristina was found unresponsive in a bathtub in her residence.  She has yet to regain consciousness. Bobbi Kristina’s story has a lot to teach us about how to protect our children with proper estate planning.

In Whitney’s Will, created in 1993, and updated in 2000, Ms. Houston created a testamentary trust for her daughter.  The trust is structured to release funds to Bobbi Kristina as follows:

  • 10% of Whitney’s estate was transferred to Bobbi Kristina on her 21st birthday
  • Another 1/6th on her 25th birthday
  • At 30, Bobbi Kristina gets the remainder

While the testamentary trust created by Whitney shows some foresight in holding back assets until her daughter is slightly older, it sidesteps the questions faced by parents interested in passing wealth to their children, including:

  • Is my child mature enough to receive significant wealth with no outside guidance? When will he or she be old enough?
  • Are there better ways to transmit wealth where I can avoid estate taxes?
  • Can the money be protected once my child inherits my estate?

Unfortunately, the tragic postscript to Whitney’s death and Bobbi Kristina’s accident is still not over.  Bobbi Kristina’s partner, Nick Gordon, has made claims that he and Bobbi Kristina were married at the time of her accident.  Representatives for the Houston family deny that claim.

Moreover, Whitney’s Will was created when she was still married to Bobby Brown, when Bobby Kristina was just seven years old.  Whitney never updated her Will when she divorced Mr. Brown. In Whitney’s Will she named Mr. Brown as guardian of Bobbi Kristina at that time.  As it appears Bobbi Kristina is now incapacitated, Mr. Brown is now insisting on being named Bobbi Kristina’s guardian, giving him more access to the Houston estate than otherwise due to his divorce from Whitney.

This dramatic story speaks to the importance of using your estate plan to protect your children from themselves, as well as the need to update your documents after a change in family status. It’s extremely unfortunate that Bobbi Kristina’s plight is common knowledge, and we hope for a full recovery, but we must learn from her situation to ensure we protect our families to the best of our abilities.

If you have any questions about your estate plan in New Jersey or New York, please feel free to call us at (908) 236-6457 or email alec@bmcestateplanning.com.

By at .