Tag Archives: estate planning

by | July 18, 2012 · 7:00 am

Video on Elder Financial Abuse

150x150Pinnacle Trust has posted a new video on our website that raises awareness about the growing problem of elder financial abuse. Financial elder abuse has exploded in this country in recent years, affecting over 1 million victims and costing over $8 billion per year. This is partially explained by two demographic and economic realities:

  1. We have a growing senior population. The fastest-growing segment of the total population is the oldest  old—those 80 and over. Their growth  rate is twice that of those 65 and over and almost 4-times that for the total population. In the United States, this group now represents 10% of the older population and will more than triple from 5.7 million in 2010 to over 19 million by 2050.
  2. Economic uncertainty and pressure on the caregiving generation. The “sandwich generation,” those over age 45 who are providing some level of care to an aging relative while still working and caring for other family needs, is under enormous financial pressure to maintain a lifestyle that has been stymied by recession, excessive debt, and a housing bust that has shut off easy access to bloated residential equity.

The jump from these two realities to the abusive acts carried out by others – primarily the children or other relatives of the elderly victim – is a moral failure by individuals and by society in general. We should be doing all we can to protect and preserve the dignity and resources of this greatest generation.

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by | June 27, 2012 · 7:00 am

Is it time to rethink life insurance for wealth transfer?

There are many reasons for buying life insurance. Among them are income replacement of the wage earner, debt payoff at death, funding college education in the event of premature death, business buyout obligations, and so on.

Life insurance as a means of passing an estate began to fade from the financial landscape during the last secular bull market that began in 1980. Level premium and guaranteed whole-life policies were replaced with policies with variable premiums, and cash values which were interest rate sensitive or tied to the ever-rising equities markets. Much of this was in response to consumer demand for policies that emphasized living benefits as opposed to just death benefits. Policy equity could be tapped for retirement income when death benefits were no longer needed or to fund other future lump sum needs. Life insurance as an estate transfer device generated more yawns than excitement. Throughout the next thirty years, permanent life insurance was seen as a necessary evil mainly for those with estates large enough to need the cash from insurance to pay estate taxes.

Today, with the lackluster returns from the financial markets, and estate taxes only affecting estates over $10 million (for married couples, $5 million for individuals)  it might be time to rethink the role that permanent life insurance can play as a pure wealth transfer device.

Consider Rudy and Sandra. They are 58 and 56 respectively, and have savings and investments of $500,000. They have four children aged 22, 26, 29, and 30. As part of the sandwich generation, both of their parents are still living, but neither set of parents is financially well-off so a future inheritance is unlikely. Their children are not dependent on them, but they face financial pressures that their parents did not have, and Rudy and Sandra are concerned about their future. Rudy and Sandra would like to leave the bulk of their assets to their children at their death. However, based on what they need in retirement, there is a possibility that they will deplete their funds before they die, leaving nothing for their children. Rudy had plenty of life insurance when the children were younger, but he cancelled it after they left home.

Based on their current age and health status, Rudy or Sandra could purchase $500,000 of affordable level premium guaranteed whole life insurance that  can ensure an inheritance for their children even if they consume all of their portfolio assets during retirement. If their children later become financially independent and the insurance is no longer needed for wealth transfer, they can access the guaranteed cash value which has grown independently of the financial markets.

For more information, download our Whole Life Insurance Report

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by | January 7, 2011 · 3:59 pm

Tales from the Estate Planning Crypt

Wealth, fame, and celebrity often come with a price. One of these is a loss of privacy resulting in the public airing of sometimes very dirty laundry. Nowhere is this seen more than where money and inheritance are involved. Beginning this month, I will feature a weekly story in what I call Tales from the Estate Planning Crypt – not so that the rest of us can gloat or think that this will never happen to us – but because they do happen everyday to normal people like us. And, perhaps we can learn something from these stories so that we can make better estate planning decisions. We can help you walk through the difficult and murky waters of planning for the contingencies that these stories represent. Don’t wait for your story to appear here!

Walt Disney heirs embroiled in ugly family feud

DisneyWalt Disney World is a great vacation spot and a wonderful way to spend the holidays.  Walt Disney passed in 1966 at the age of 65.  He left behind two daughters and 10 grandchildren.  One of his two daughters, Sharon Mae Disney, had married and then divorced a real estate developer named Bill Lund.  Lund was the man who located and helped select Orlando, Florida as the site for Disney World.  Sharon and Bill had twins, born in 1970, named Michelle and Brad. Sharon created trusts to pass on her share of the Disney fortune to her three children (her other child was from a prior marriage).  Under the trusts, the twins were entitled to substantial distributions.  How substantial?  In additional to yearly distributions of around one million dollars, they can each receive larger amounts, every 5 years, of approximately $20 million.  However, the larger payments would only be made if the trustees determined that the beneficiary was competent to handle the money.  Before Sharon died, she selected her ex-husband, Bill, as one of the co-trustees for the twins.

In 2009, Sharon and Bill’s daughter, Michelle, suffered an aneurysm.  Bill moved her from California to Arizona, where he lived, so he could care for her.  Family members and friends of Michelle launched a court battle to remove Bill, claiming he acted against Michelle’s wishes in moving her and even trying to isolate her from family and friends.   Not very Disney-like! Eventually, Michelle partially recovered from her condition.  When she learned what her father had done, she became angry with him.  She requested that other people be named as her guardian and conservator to make decisions for her as she continued to recover, and she did not want to be under the control of her father or his wife (Bill had remarried, and Michelle apparently did not care for her stepmother … sounds almost like an old Disney movie).

During that court process, co-trustees of Michelle’s trust learned that Bill had entered into secret land deals on behalf of the trust.  More troubling than that, he also personally profited from the deals … which was not permitted under California law.  So the other co-trustees started a second court proceeding, this time in California, seeking to remove Bill as a trustee. Bill initially fought the removal efforts.  He claimed the land deals brought in a lot of money for the trust.  Eventually, citing his own poor health, he agreed to resign (in exchange for yearly payments of $500,000). But that hasn’t ended the family feud.  Now Michelle and other family members are again battling her father, Bill.  This time, the fight is in an Arizona probate court and centers around Michelle’s twin brother, Brad, and his trust money.

Brad is developmentally disabled.  He lives next door to Bill and his wife, and Michelle claims that an independent guardian and conservator is needed to protect Brad from, among others, the (evil?) step-mother. Brad says he’s happy with Bill and his wife managing his affairs and his money.  He’s upset with his money being used to pay expensive lawyers for the guardianship fight, and he wants the court process ended. The battle has gotten so heated that the Arizona judge overseeing the case actually sent one of the lawyers involved (representing Michelle and other family members) to jail.

As many families can attest, there is something special about that Disney magic … too bad it’s not special enough to keep his grandchildren from ugly battles in court!

You can read the full story from the Arizona Republic here, along with a more recent update.

-David Russell, CFP

Disclosure: This report is intended to serve as a basis for further discussion with your other professional advisors. Although great effort has been taken to provide accurate numbers and explanations, the information in this report should not be relied upon for preparing tax returns, legal documents, or making investment decisions. If investment returns are included with this report, the assumed rates of return are not in any way to be taken as guaranteed projections of actual returns from any investment opportunity. The actual application of some of these concepts may be the practice of law and is the proper responsibility of your attorney.

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