Pennsylvania Trusts and Estates Blog

Congratulations to Attorney Richard E. Barnes on his book, "Estate Planning for Blended Families: Providing for Your Spouse and Children in a Second Marriage" (Nolo, $34.99).

Mark Kanny of the TRIBUNE-REVIEW reviews the book:

"A second marriage isn't a just second marriage; given the complexities, it's more like marriage squared, says author Richard E. Barnes. Just one legal aspects of those intricacies is addressed by Barnes, an attorney, in "Estate Planning for Blended Families: Providing for Your Spouse and Children in a Second Marriage" (Nolo, $34.99). Blended families means at least one partner has children from a previous marriage. "

Here is some of Richard Barnes' advice:

• Personally confront emotional issues from a previous marriage to be fair in making estate decisions.

• Know what your spouse is entitled to claim, including whether you live in a common-law state such as Pennsylvania or a community-property state.

• Prepare for predictably difficult topics of discussion, such as distribution of assets, by making lists to build in fairness about who gets Grandma's china or silver service.

• In the midst of disagreements, make sure to keep talking together -- which means knowing when to listen.

• When compromise proves impossible, look for a third way, which is another way of saying be creative.

• Be sure to use each non-spouse's full applicable exclusion amount, which reduces estate taxes. There is an unlimited marital deduction -- which means no estate tax on anything you leave outright to your spouse, with a few conditions.

• Explore the differences between wills and revocable living trusts. Trusts don't go through probate in court, but the issues are complex.

• Take full advantage of lifetime giving opportunities and other estate-reduction techniques.

• Make end-of-life decisions while you're well, including medical care such as heroic measures vs. hospice.

• Keep beneficiaries informed of your plans.

• Update your plans on a regular basis.

How in the world can you get married accidentally?

Read this story from the Des Moines Register click here.

" Iowa law recognizes so-called "common-law marriage." In fact, the law already reads broadly, "A man or woman who was or is held out as the person's spouse by a person by virtue of a common-law marriage is deemed the legitimate spouse of such person." A couple deemed married by the common law is legally married for all purposes just as surely as the couple that goes to the courthouse and gets a marriage license. A split-up requires a court-approved dissolution of the marriage before either partner can "re-marry" or un-do those marital 'defaults.' "

"Common-law marriage is something unfamiliar to most cohabiting straight couples, let alone gay ones, and certainly the common law didn't recognize marriage between persons of the same gender. But, with the state of Iowa allowing access to legal marriage by this alternate path for over a century, coupled with the Iowa Supreme Court's equal-protection ruling, it's axiomatic that the state must now recognize similarly the "common-law" marriage of same-gender couples."

Wow. That's scary. But if you live in PA don't worry. Pennsylvania no longer recognizes common law marriage.

Check out these weird will provisions: click here

Hat Tip to The San Diego Estate Center

"Intellectual property" includes patents, trademarks, copyrights and trade secrets. This area of the law protects "ideas and works" against unauthorized use of this property by others. If you are an author, artist, or inventor, your creations may be your most valuable assets. You are probably aware that your need to protect your rights to your creative works during your lifetime with patents, copyrights and trademarks. But have you planned for these assets after your death?

Forbes published a list of the 13 Top-Earning Dead Celebrities. The estates of these persons are making fortunes with the decedents' intellectual property. How much do they earn? The top-earning 13 decedents earned a combined $194 million over the last 12 months. It makes dying look like a good career move. Who are they? Elvis Presley, Charles M. Schulz, Heath Ledger, Albert Einstein, Aaron Spelling, Dr. Seuss (Theodor Geisel), John Lennon, Andy Warhol, Marilyn Monroe, Steve McQueen, Paul Newman, James Dean, Marvin Gaye.

[While he hasn't made Forbes' list, Marlon Brando has an estate that is a big earner. Unfortunately, since he died at age 80 in 2004, his estate has been involved in 26 different lawsuits. Most recently, Brando's trustees (producer Mike Medavoy, accountant Larry Dressler, and Brando's former personal assistant Avra Douglas) forming Brando Enterprises to protect and manage the "Brando brand." They brought suit against a group of companies that own the Broadcast Center Apartments in Los Angeles County for infringing Brando's trademark name by calling a series of apartments the Brando and the Brando Den. The Trustees want to build their own planned development on an island in the South Pacific and call it The Brando.]

Dead celebrities who made the list make money (or rather their estates do) by various licensing agreements for use of the celebrities works, images or names. For example, The King (Elvis Presley, for the uninitiated) earned $52 million last year. That topped Madonna's $ 40 million.

Albert Einstein, 4th, on the list, who died in 1955 is still earning. His estate earned $18 million last year form a deal with the Disney learning tools for infants called Baby Einstein, and licensing deals for use of his name and image with, for example, Nestle for a Japanese coffee brand and, with Kobe Bryant, a sneaker marketing campaign.

The lesson in this is that estate planners, executors and trustees need to pay special attention to a decedent's intellectual property

Copyrights protect expressions of ideas such as literary works, computer programs, musical works, fine art works, audiovisual work and architectural works. A copyright gives the owner the right to reproduce the work, distribute copies to the public, and the right to publicly display or perform the work. For works created after 1978 copyright lasts for the life of the author plus 70 years. The author, or if deceased, the author's widow or widower and children or grandchildren may terminate all transfers or licenses of the renewal copyright or any right under it (for pre-1978 copyrights) at the end of 56 years from the date the copyright was originally secured and recapture the last 39 years of copyright protection. Termination of a grant of rights made after 1977 can be made during a 5 year period beginning 35 years after the grant. There are many technical requirements, exceptions, and special rules relating to these termination rights and expert help must be obtained. In short, however, it is important that your estate plan and your executor not overlook this opportunity to recapture copyrights.

Note that selling or giving someone a piece of your art does not automatically take with it the copyright to the work. There is a difference between the artwork itself and the intangible rights related to it.

Trademarks protect distinctive terms and designs. The more distinctive the mark, the more protection it receives. For an example, you may own the trademark used by your company. Your estate plan can direct the next owner of the trademark and it is important that the executor file documents to record the transfer of the trademark registration if it is registered with the date or with the federal trademark office.

A patent is a right to exclude others from using or commercially exploiting an invention. Patents protect inventions, that is, any new and useful process, machine, or article of manufacture. A patent can also be obtained for an original and useful ornamental design for an article of manufacture. A patent must be transferred in writing. Any patent owned should be addressed in your estate plan. If you die before obtaining a patent, your executor can file a patent application.

Any author or artist should consider choosing a an executor who is knowledgeable in his or her field to serve as a special executor after his or her death. For example, an author might appoint a family member as executor to take care of the estate in general, but name a literary executor to be responsible for and carry out certain duties with regard to the decedent's written works.

Intellectual property can be a valuable assets and it must be managed in your estate to maximize
income streams income, address infringements, protections, registrations and maintenance.

Q: What is the difference between death and taxes?
A: Congress does not meet every year to make death worse.

Death and taxes - two subjects that are highly emotionally charged. Nobody really wants to talk about either one of them - together they are, well, taxing and deadly.

Do you break out in a cold sweat when discussing your will? Can you bear to think whether there will be enough money to live on if your husband dies? Can you even think about which kid will run the business when Dad dies? Let alone talk about it in a family meeting?

The first hurdle to be overcome is facing your own mortality. Whenever I meet a client I try to wait until they use their own euphemism for death, then I use that expression for the rest of the conference. There's a wide selection of substitutions for the "D" word - "pass on," "kick the bucket," "meet my maker," "when something happens to me," "get hit by a truck," "pushing up daisies," "six feet under" - just to name a few. People will say anything rather than "When I die." (I had one client who said "When I croak" - I like that!)

Some folks hold to the superstition that making a will brings on death. Superstitious, yes, but nevertheless, it is a real impediment to many people.

The next hurdle is the fear of giving up control. Estate planning doesn't mean giving your assets away. Many people know they must do something to reduce taxes but fear giving control of assets to children. They have heard too many horror stories about ungrateful children who spend the family savings and turn their backs on their parents. Most people want it both ways - they want to retain complete unfettered control over all their assets and also pay no estate taxes. There are techniques that permit transfer of value while retaining significant control and there are ways to protect funds. Learning about these approaches is part of the estate planning process.

Fear of dealing with an attorney is another big hurdle. (Now who could be afraid of a lawyer?) You might be afraid the lawyer will think you are uninformed, unsophisticated. Do you feel uninformed because you have to call the repairman to fix the air conditioner? Of course not. In the same way that you don't know how to fix am air conditioner, you don't know how to do an estate plan. This is no reflection on your intelligence or character.

You might be afraid of being gouged by fees, or be afraid the attorney isn't going to listen to you but just forge ahead with a standard plan you don't want. The key to overcoming these fears is finding the right lawyer. Most estate planning lawyers will talk to you on the phone briefly so that you can get a sense of their approach and how you will relate to him or her. You don't have to stick with the first lawyer you talk to. Like anything else, a referral from a satisfied client is often the best approach. Ask your friends who they use for an estate lawyer. Like any other important decision, it is good to do research and talk to a few lawyers before making the hiring decision. If you are married, perhaps you and your husband shouldn't have the same attorney - especially if its not a first marriage and there are children from a prior marriage. Don't forget - you are the boss, you are paying the bill.

What does it cost? Fear of the expense is another thing that keeps people from estate planning. Let's face it. Estate planning is not for you - it's for those you leave behind. You aren't going to be hurt by estate taxes. You will be "long gone." You aren't going to have to negotiate who gets the grandfather clock - the kids are going to have to slug that out. So how much money (not to mention time and emotional energy) are you willing to spend on an estate plan for your family? Estate planning is truly a gift to your family. Recognize it for what it is - caring for others. Leaving a well designed plan behind is the best gift you can give your family. Arrange your affairs to do the most good for your family, friends, and charities.

Don't be afraid to ask how the attorney charges. Most attorneys will charge an hourly rate and you can expect to pay a high rate for a specialist. (Heart surgeons charge more than nurse practitioners.) Some estate planning is done on a flat fee basis, but an estimate can't be given until the attorney knows what will be involved. Almost no one gets a "simple will." More is involved than a will and every family situation is different. As Zoe Hicks says in her book "The Women's Estate Planning Guide," "[b]e especially wary of attorneys who write themselves into your will as the estate's legal counsel. Sometimes these attorneys may charge very little (even nothing) for preparing the will, only to take a huge fee, in the form of a percentage of the estate, for acting as the estate's legal counsel later."

Tough family decisions are another emotional stumbling block. Is there a divorce looming for one of your children? Is one of the grandchildren handicapped? Will you or your spouse remarry? Who is going to control the family business after the parents are dead? Are any of the children capable of running it? Facing these issues can be so painful that they are avoided indefinitely. Then a real mess is left behind. Avoiding the problem doesn't make it go away.

What if one of the children is in and out of drug rehab, or one of the kids is a successful professional and the other is a struggling single parent with small kids and a minimum wage job. Do these children get treated equally in the estate plan ?

What about blended families - the children are yours, mine and ours. Do all of them share equally in both Mom's and Dad's estates? Facing tough decisions like these is hard. The estate planning attorney can give you options and choices, but ultimately the tough decisions are yours to make. Do you really want to have someone else make these decisions for you after you are dead? Worse, do you want your family to be torn apart with the fighting over your estate?

"You gain strength, courage and confidence by every experience in which you really stop to look fear in the face . . . . You must do the thing which you think you cannot do."
-- Eleanor Roosevelt

"So many persons think divorce a panacea for every ill, who find out, when they try it, that the remedy is worse than the disease"
--Dorothy Dix

If you are considering divorce or beginning the process of divorcing, you must review your estate plan to make sure it is appropriate in light of the anticipated divorce. No matter how far along the divorce is or how long the action has been pending, the law considers you to be legally married until the judge signs the final decree ending the marriage.

If you die or become disabled prior to the final decree of divorce, your estranged spouse may have legal control over you and your estate, and may be entitled to most, if not all, of your estate. This is probably not what you intend. Through properly drafted estate planning documents, you can provide that someone other than your spouse will have control over you and your estate, and you can limit your estranged spouse's rights as a beneficiary of your estate.

What happens to your estate plan when you get a divorce?

If you made a will before you were divorced, the law provides that any provision in the will for the benefit of your former spouse is ineffective. The former spouse has no rights in your estate, either as a beneficiary or as an executor or administrator. The will is not revoked, it is interpreted as if your ex-spouse had predeceased you.

This rule of law applies only to the ex-spouse. If your will makes provisions for the ex-spouse's children or more remote issue, or other relatives of your ex-spouse, these provisions of the will stand. The divorce has no effect on them.

If you made a will before the divorce and indicated in the document itself that you intended the provisions for your soon to be ex-spouse to be still valid after the divorce, then your announced intention overcomes the law.

If you die during the divorce and before the final decree, the rule of law excluding your soon-to-be-ex-spouse does not help you. If you will leaves everything to your soon-to-be-ex-spouse, that's who will get your estate.
Any other estate planning document, such as a trust, will also be interpreted in the same way provided that it is revocable at the time of your death. If you have made a revocable inter-vivos trust, sometimes called a living trust, any provision in this document for your ex-spouse will be invalid. The fact that the trust must be revocable for this rule to apply is an important one. If you made an irrevocable trust before your divorce, such as an irrevocable life insurance trust or "ILIT", and your ex-spouse is a beneficiary of that trust - the law will not save you. The transfer to the trust was made prior to the divorce and the ex-spouse's property rights were determined at that time since the trust, being irrevocable, cannot be changed by you in any manner. To avoid unintended results in this scenario, it is important in an irrevocable trust to specify that a divorce will remove the spouse from beneficiary status and that when used in the documents "wife" or "husband" means whomever you are married to, not a specific individual who is now your ex-spouse.

If you have signed a Power of Attorney giving your spouse the authority to act as your agent, this grant of power is revoked when either spouse files an action for divorce. Until the action for divorce is filed, the spouse can act using the power of attorney - this can be a very dangerous power. Note that unlike the will, the provision naming the spouse in a power of attorney is revoked when the divorce action is filed, not at the final decree.

When a divorce action is filed, only the appointment of the spouse as agent in the power of attorney is revoked, the whole power of attorney is not revoked so the named successor agent can serve. If the power of attorney includes an appointment of the spouse as guardian, if a court appointed guardian is necessary, that appointment is not revoked by filing for divorce. Instead, a court would have to decide if filing for divorce is a good reason not to appoint a spouse as a guardian. When the divorce becomes final, however, the appointment of the ex-spouse as guardian is revoked.

Another issue to think about during a pending divorce is health care issues. Have you remembered to change your living will and medical directive? If you don't, someone you might not want to make your decisions could be allowed to make decisions about your health. It is unclear whether filing for divorce or even being granted a final divorce decree revokes the designation of a spouse as a surrogate under your medical directive. Arguably, the surrogate is the same as an agent under a power of attorney and under the law an agent's power is terminated when divorce is filed.

If an ex-spouse is designated as a beneficiary on a life insurance policy, annuity contract, pension, profit-sharing plan or other contractual arrangement providing for payments to the spouse, any designation which was revocable at the time of death is ineffective and the beneficiary designation is construed as if the ex-spouse had predeceased. If the designation or a separate contract (such as a property settlement agreement) provides that the designation is to remain in effect even after the divorce, then the designation remains effective,

Note that the financial institution involved will not know whether or not there has been a divorce. If the ex-spouse claims the benefit as named beneficiary, PA law specifically provides that the paying company shall have no liability. The ex-spouse, of course, is liable but as is always the case with financial liability, one can only recover funds if the defendant still has the funds and has not spent them.