Tempe Arizona Estate Planning

Timing Inheritance for Their Own Good

Having an estate plan forces you to ask many important questions, and one of them is when the right time is for your children to have access to their inheritance. The answer is different for every family.

You know your kids best—the one who turns a dollar into ten bucks with seemingly no effort and one who burns through cash like an ATM machine. Some children never learn to manage money well, and others seem to be born with good financial skills. There are ways to control when your children inherit wealth, and how much they inherit.

Wealth Advisor’s article asks, “When Should Children Have Access To Their Inheritances?” The article looks primarily at distributions from trusts created by a will (testamentary trusts). However, these considerations also apply to trusts created during your lifetime, which are called inter-vivos trusts or revocable trusts.

Distributions can be discretionary, mandatory or event-driven. A common distribution structure includes mandatory distributions at specified ages, such as 25, 30, and 35. A third of the principle is distributed at age 25, with half of the balance doled out at age 30, and the remaining balance distributed at age 35.

In addition to mandatory distributions, a trust can provide that the trustee has the authority to make either fully discretionary distributions or distributions under some “ascertainable standard,” such as for the beneficiary’s health, education, maintenance and support.  However, detailing only mandatory distributions or event-based distributions significantly reduces the fiduciary’s flexibility.

A trust should be created with the help of an experienced estate planning attorney. He or she will help guide your decisions about trust distributions, that include both the principal and the income generated by that principal.

In many situations, when an estate plan is designed, you may not be sure of the ultimate size of your children’s inheritance. In that case, your attorney can help you plan for an income stream in today’s dollars, as well as a cost of living adjustment to account for inflation. This will eliminate any mandatory income distributions that may mean large distributions to children at relatively young ages.

Alternatively, you could give the trustee the power to make these decisions, and let your children have access to whatever amounts the trustee thinks is appropriate. There’s also a hybrid approach, giving the trustee certain mandatory distributions combined with discretionary distributions. Some estate planning attorneys believe that this provides the most asset protection and flexibility.

For those children who have the right financial acumen and who are deemed sufficiently responsible, the responsibilities of trustee can be passed to them at specific ages, which allows for the continuation of asset protection and divorce protection for the assets left to such beneficiaries.  This strategy allows beneficiaries to achieve the control they are looking for without losing the asset protection and divorce protection for those assets when they are distributed out of the trust.

Contact the Soto Law Firm today to determine what your best option should be based on your goals and family dynamics.

Reference: Wealth Advisor (July 30, 2018) “When Should Children Have Access To Their Inheritances?”

Elvis’s Daughter Sues Money Manager, Says She’s Left with $14,000 From Father’s Fortune

The only daughter of the king of rock says that her former money manager was “reckless and negligent” with investments, while paying himself a hefty $700,000 salary. He’s counter-suing.

Lisa Marie Presley says she’s lost the $100 million-dollar trust fund set up for her by her dad, Elvis Presley, as a result of reckless investments and excessive fees by her former money manager, Barry Siegel. The Daily Mail’s recent article, “Lisa Marie Presley claims her ex-money manager lost $100 million trust fund left to her by Elvis with 'reckless and negligent' investments while paying himself a salary of $700,000.”

Instead of telling Lisa Marie the truth about the investments, Siegel covered up the dire straits of her finances, Presley's lawyers say in court pleadings. Siegel is counter-suing, contending that Presley “squandered” away her fortune, because of her “uncontrollable spending habits.” Siegel wants $800,000 in damages.

Presley’s complaint against Siegel and his company, Provident Financial Management, says that Siegel “enriched himself with exorbitant fees.” She claims that he and his firm ran the $100 million trust fund her father set up for her “into the ground.” What’s now left is just $14,000.

Siegel’s largest investment of the trust funds was in American Idol's holding company, which ended up going bankrupt.

Presley says that despite allowing the trust's assets to be run to ruin, Siegel profited richly from his "service" as trustee. She claims that from 2005 and the time of the American Idol bankruptcy, he billed $4.9 million to "manage" the trust, an average annual salary of $701,000 per year. However, had he disclosed the trust's true financial condition to Presley and restricted spending to the trust's "income" rather than its principal assets, she would have lived comfortably on an annual budget of between $1.5 and $2 million per year, after taxes.

On this budget, Lisa Marie says Siegel's lucrative compensation package would have amounted to between 40% to 50% of Presley's post-tax annual budget—"an amount she undoubtedly would not have agreed to, had she been aware of her true financial condition.”

Instead of telling Presley the truth, Siegel covered up the dire straits of her finances, say her lawyers. Siegel repeatedly told Lisa that she was in "good shape" with her finances, the documents state. Her attorneys cited several emails from Siegel responding to inquiries from Presley about how her trust fund was doing:

“We're in good shape on your finances.”

“We're ok.”

“Be assured that we are doing everything on our end to maintain both your current lifestyle and the future of you family.”

These were what Siegel allegedly told Presley. She fired him and Provident in 2015, after discovering that he had kept her in the dark about the trust's true financial condition.

Papers filed in court by Presley’s attorney claims that Siegel’s 2005 decision to sell 85% of her trust’s stock in Elvis Presley Enterprises (EPE) was blamed for a big part of the loss. Presley lost big when an investment in American Idol’s holding company went bankrupt after the show’s last season.

She also claimed that Siegel ran her trust’s real estate portfolio into the ground. The trust owned two houses in Hawaii and California and both had mortgages worth more than the properties were worth. Siegel agreed that she could afford to purchase an estate in England, with a transaction structured so poorly that the trust could not make a balloon payment and the mortgage on the estate defaulted.

This story illustrates why you should employ only the most trusted individuals to manage the assets that you intend to leave your posterity.  Furthermore, naming the right professional trustee to be in charge of trust assets can ensure that such individuals have a fiduciary responsibility to manage trust assets in the beneficiary’s best interests.  If you have questions about naming trustees or other fiduciaries for your family’s trust, contact the Soto Law Firm today to discuss your planning options.

Reference: Daily Mail (June 19, 2018) “Lisa Marie Presley claims her ex-money manager lost $100 million trust fund left to her by Elvis with 'reckless and negligent' investments while paying himself a salary of $700,000”

Million Dollar Theft from Husband’s Estate: Probation for Widow, 16 Years in Prison for Boyfriend

Million Dollar Theft from Husband’s Estate Probation for Widow, 16 Years in Prison for Boyfriend

Despite her involvement with the disbarred attorney who stole nearly $1 million from her late husband’s estate, the widow’s sentence did not include jail time.

Charlinette Detmers was ordered to pay $30,000 in restitution and sentenced to four years on probation by a North Carolina court, after pleading guilty to felony embezzlement.

Wealth Advisor’s recent article, “Lover stole nearly $1M from her late husband’s estate on Lake Norman,” explains that court records identify the victim of her embezzlement as her son, Tols Detmers, who was 19 years old when he sued his mother and her lover, a disbarred attorney.

Ms. Detmers is also required to work with her parole officer to find “suitable life skills and educational programs” and not travel out of state, without her parole officer’s permission, according to court documents.

Tols Detmers accused the two of spending hundreds of thousands of dollars that his late father left for him. Fritz Detmers, Tols’ father, lived in North Carolina, and died at age 78 in 2009.

The disbarred attorney is serving a 16-year sentence at state correctional institution for embezzling from the estate, prison records show. A Lincoln County grand jury indicted him on 11 counts of embezzlement. In June 2017, he pleaded guilty in Lincoln County Criminal Superior Court to five felony counts of embezzling $100,000 or more.

According to an affidavit, the disbarred attorney admitted using the money for personal benefit. In addition, court filings in a related civil case show that he spent about $9,200 on an engagement ring for a former secretary at the law firm whom he married. He also gave $15,520 to his wife’s now-defunct boutique shop in Denver.

Thousands of dollars were found to have been used for family trips at luxurious resorts and his personal bills.

This story is a prime example of how naming trustworthy individuals to serve in the proper fiduciary capacities is vitally important.  The individuals you name in your estate plan have broad authority to use estate assets in their administrative capacities.  Unscrupulous individuals, such as those in this story, show the consequences of the misuse of the authority given in a will or trust.  If you don’t think that your close family members can wisely handle such responsibilities, there are many other options, such as naming a professional fiduciary, that are available to you.  You should review your options and your estate plan with your attorney to determine what is the right course for your situation.  Contact the Soto Law Firm today for a free consultation to discuss your options in Arizona.

Reference: Wealth Advisor (February 26, 2018) “Lover stole nearly $1M from her late husband’s estate on Lake Norman”