Business owners

Can a Trust Own My Business after I Die?

In general, the answer to the title question is yes, your trust can own your business after you die. However, there are a number of considerations that may impact the answer to this and the following questions. One consideration is the type of business interest you own. Is your business a limited liability company (LLC), a partnership, a corporation, or a sole proprietorship? Another consideration is how your business is managed. Is your business managed as an LLC, a partnership, or a corporation?

How Does the Trust Get Ownership of the Business?

  • LLC: If your business is an LLC, a trust can receive ownership of your business interest when you execute an assignment of interest. If you are the LLC’s sole member, then after you have executed the transfer document assigning your interest to the trust, the trust will own 100 percent of your business. If your LLC has other members, your trust will own only the percentage of the business that you own. For example, if you have a 25 percent ownership interest in an LLC, your trust will own 25 percent. It is important to review the LLC’s operating agreement to see what restrictions, if any, there are on transferring your interest. Also, some operating agreements will require the other members’ consent prior to any transfer. If your LLC issues membership certificates, you should submit your assignment document to the LLC and have new membership certificates issued in the trust’s name.
  • Partnership: As with an LLC, a partnership interest is transferred to a trust by an assignment of interest. Again, it is important to review any partnership agreement to determine if there are restrictions or other conditions, such as consent requirements, to a transfer.
  • Corporation: If your business is a corporation, you should contact the corporation to determine what documentation will be needed to transfer your stock to your trust. For closely held corporations without specific documentation requirements, you can transfer your stock to your trust by executing an assignment of stock. You should submit this document to the corporation so that new stock certificates can be issued showing that the trust owns the stock. As with other types of business interests, you should check the corporate governing document, if any, to determine if there are restrictions or other conditions on making a transfer to your trust.
  • Sole Proprietor: If you own your business as a sole proprietor, you have not created any separate legal business entity that needs to be transferred. To transfer ownership of your business’s assets to your trust, you will simply transfer ownership in the same way as you would any other assets that are in your personal name. 

How Is the Business Managed?

How the business is managed after it has been transferred to the trust is very fact specific and will depend on several factors, such as what kind of business has been transferred and how that business was managed prior to the transfer. 

  • LLC: After a business interest has been transferred to a trust, the trustee will own the interest. If the interest is a single-member LLC where the member runs the business and is also the trustee, the trustee would continue to run the business’s day-to-day affairs, just like prior to the transfer. After the member’s death, the successor trustee would manage the business unless the trust and operating agreements have specified otherwise or the trustee has delegated their business management duties to another person. If, however, the business interest is a manager-managed multimember LLC where the member has not participated in day-to-day management decisions and such decisions have been delegated to a manager, the LLC would continue to be managed by the manager both prior to and after the member’s death.
  • Partnership: In a partnership where the partner participated in day-to-day management and has now transferred their ownership portion to a trust of which they are the trustee, the trustee will continue to manage the business as before the transfer. As with an LLC, after the partner’s death, the successor trustee will step in to manage the business unless the trust and partnership agreements specify otherwise or the trustee has delegated their management duties to another person. If the partnership has delegated these duties to its officers or employees, then depending on what the trust and partnership agreements direct, the trustee will most likely continue to allow the other officers/employees to manage the business, both prior to and after the partner’s death.
  • Corporation: After transferring the corporate stock to the trust, the trustee, as the owner, will be entitled to vote that stock according to the terms and conditions of the corporation’s governing documents. Normally, a transfer of stock to a trust will not change the corporation’s management.

What Do the Beneficiaries Receive?

The trust’s terms will determine what the beneficiaries are entitled to receive. The trust is entitled to receive income or profit distributions to owners or stockholders. Whether that income is distributed to the beneficiaries, and on what terms, will depend on the trust agreement’s terms.

Special Note About S Corporations

If your business is taxed as an S corporation (and you do not have to actually be a corporation to be taxed as an S corporation), there are special rules about who can own an S corporation. It is important to seek the advice of a qualified legal or tax professional prior to transferring ownership of your S corporation business interest to a trust and after the death of the grantor/trustmaker.

Although your trust can own your business after you die, you must consider many factors when transferring your business ownership interest to your trust. Therefore, it is important to consult a qualified professional who can ensure that you have considered all the factors and help you properly complete the transfer.

Vacation Property

Important Questions to Ask When Investing in a Vacation Property

According to the National Association of Home Builders, in 2018 there were approximately 7.5 million second homes, making up 5.5 percent of the total number of homes.1 These homes are not only real estate that must be planned for, managed, and maintained, they are also the birthplace of happy memories for you and your loved ones. Following are some important estate planning questions to consider to ensure that your place of happy memories is protected.

What Will Happen to the Property at Your Death?

The fate of your vacation property at your death largely depends on how it is currently owned. If you are the property’s sole owner or if you own it as a tenant in common with one or more other people, you need to decide what will happen to your interest in the property. If you own the property with another person as joint tenants with rights of survivorship or with a spouse as tenants by the entirety, your interest will automatically transfer to the remaining owner without court involvement. If a trust or limited liability company owns your vacation property, the entity will continue to own the property after your death. The trust instrument or operating agreement may lay out additional instructions about what will happen at your death. 

What Do You Want to Happen to the Property at Your Death?

The wonderful thing about proactively creating an estate plan is that you get to choose, in a legally binding way, what happens to your money and property. It is important to note that, if you do not create a plan for your property (and if it is not owned in joint tenancy with right of survivorship or tenancy by the entirety), your state will decide for you according to its laws and by putting your loved ones through the probate process. Probate is the court-supervised process that winds up your affairs and distributes your money and property to the appropriate people. It is also important to note that owning property in a different state from where you reside could lead to your loved ones having to open two probates (one in the state where you resided at death and one where the vacation property is located). There are several different options for handling your vacation property.

  • Give the property outright to a loved one. This person may be your oldest child, someone who has expressed interest in continuing to use the property, or an individual with the financial means to maintain the property.
  • Leave the property outright to a group of people. Because your whole family enjoys gathering together now, you may wish for them to continue gathering at the vacation property after you pass away.
  • Give the property to a group of people as tenants in common and create an ownership agreement. Because there are multiple parties involved, each with their own property interest and personal financial situations, an ownership agreement can lay out each one’s rights and responsibilities.
  • Prior to your death, transfer the property to your revocable living trust to be held for a long period of time or indefinitely. Because the trust is the property’s owner when you die, the beneficiaries will merely look to the trust to see what happens. There is no need for probate, and you can specify any rules you may have for the property and how it is to be held or distributed to one or more chosen beneficiaries. Note: State law may limit how long the trust can remain in effect (the rule against perpetuities). If you want the trust to hold the property indefinitely, speak with an experienced estate planning attorney about how to accomplish this goal.
  • Prior to your death, transfer the property to a special trust that owns only the property to be held for a long period of time or indefinitely. This option may be advisable if you want to separate one property from the rest of your money and property to be managed on its own or if you have asset protection concerns. This trust agreement would also lay out each beneficiary’s specific rights and responsibilities with respect to their use and enjoyment of the property.
  • Prior to your death, transfer the property to a limited liability company to be held for a long period of time or indefinitely. Depending on your objectives for the property, transferring it to a limited liability company may provide the beneficiaries with some additional asset and liability protection. The company operating agreement may also specify each company owner’s rights and responsibilities with respect to any company property. 
  • Instruct your trusted decision maker who will wind up your affairs to sell the property. If you believe that the money from the property’s sale would be of greater use to your beneficiaries or that none of them would want to buy the property, selling it can be an effective way to provide some money to benefit your loved ones differently.

Can Your Beneficiary Afford the Vacation Property?

While there may be a lot of happy memories associated with your vacation property, you know that there are also a lot of responsibilities. When you decide to leave your property outright to a person or group of people, they will become responsible for financial obligations such as mortgage payments (if any), utility bills, and property insurance and taxes. If you wish your beneficiary to keep the property, you need to consider whether they can meet the financial obligations; if not, they may end up prematurely selling it.

If More than One Person Will Have an Interest in the Property, Do They All Get Along?

All your children may get along now, but will they still be able to come together and see eye to eye when you are no longer living? Owning property together means that they need to be able to communicate, agree, and equally contribute to the property’s maintenance. A proper estate plan can address these potential issues by outlining

  • everyone’s responsibilities with respect to the property,
  • everyone’s rights to the property,
  • who makes the decisions,
  • what to do if a dispute arises, and
  • how someone can walk away from the property.

What Should You Do to Make Your Wish a Reality?

First, you need to legally document your wishes to ensure that your loved ones know what your wishes are, that they will be followed, and that all possible scenarios have been planned for. Second, if you have concerns about your beneficiaries being able to financially maintain the property, you need to meet with a financial advisor to design a plan that allows you to set aside money for its maintenance. Also, you need to meet with an insurance agent to make sure that the property is properly insured based on its intended use and to acquire additional life insurance in case you need another source of financial liquidity for its maintenance. Finally, you should meet with your tax adviser to make sure that you know of any potential tax consequences of transferring the vacation property, whether during your lifetime or at your death.

If you are interested in learning more about your options for protecting your vacation property and having your wishes for it carried out, please contact us.


Footnotes

  1. Na Zhao, Nation’s Stock of Second Homes, National Assoc. of Home Builders Discusses Economics and Housing Policy, Eye on Housing (Oct. 16, 2020), https://eyeonhousing.org/2020/10/nations-stock-of-second-homes-2/).
child and father

An Estate Plan Should Not Be a Set-It-and-Forget-It Endeavor

As we all know, life happens. There is really nothing we can do about it. However, some of the most common life events can have a dramatic effect on your estate plan. If you think your estate plan is like a slow cooker and you can set it and forget it, you and your loved ones may be in for a stomach-turning surprise when it is time to put your plan into action. Let us take a look at some common life changes and the impact they may have on your already established estate plan.

Birth of a Child

It is common for parents to have their estate plan prepared after the birth of their first child. However, depending on what provisions are in the first iteration, a second child might have difficulty getting their share without court involvement if the clients do not revise their plan after the birth of a subsequent child.

Example: Ten years ago, Tim and Leslie had a daughter named Tabitha, which prompted them to have a revocable living trust prepared, outlining how the trust’s money and property were to be managed for Tabitha’s benefit. Five years later, Tim and Leslie had a second daughter, Tina. Months after Tina’s birth, Tim and Leslie both passed away in a plane crash. However, Tim and Leslie had not revisited their estate plan after Tina’s birth, so she is not mentioned anywhere in their trust. For Tina to receive any benefit from her parent’s money and property, someone will need to petition the probate court to sort out the situation. This process can be time-consuming, costly, and public, and the exact opposite of the outcome Tim and Leslie wanted when they created a revocable living trust to begin with.

Birth of a Grandchild

Many grandparents love spending time with and supporting their grandchildren in any way they can. However, depending on the family structure, a grandchild who has been left out of an estate plan may have no recourse and may miss out on the opportunities the grandparents may otherwise have intended their grandchildren to have.

Example: Ted and Gladys had two children, John and Adam. In 2020, Ted and Gladys met with their estate planning attorney to create an estate plan. Because they strongly believed in the value of higher education, they created subtrusts for their two grandchildren, John’s daughters, Mary and Ellen, to help offset the cost of their future tuition. In 2021, Adam welcomed a son, George. Unfortunately, Ted and Gladys passed away shortly thereafter. Although updating their trust was on their to-do list, they never got around to it. Therefore, when Ted and Gladys passed, Mary and Ellen were the only grandchildren to receive money for their education, leaving George to find alternate avenues for funding his education.

Death of a Family Member

A number of people are involved in creating a will or trust. There are those who are creating the estate planning documents (will maker or trust maker, respectively), those who receive a benefit from the estate planning document (beneficiaries), and those who are in charge of carrying out the document’s instructions (personal representative, executor, or successor trustee). Aside from the will or trust maker, the death of any of these individuals can greatly impact the estate plan. A beneficiary’s death may mean that others receive a larger share or that the deceased beneficiary’s descendants receive that share. Reviewing your estate plan to make sure that your wishes will still be carried out is important, even if your first-named beneficiary is no longer living.

Example: Stacy, a single woman, created a will, leaving her modest amount of money and property to her mother, her only living parent. Ten years later, both Stacy and her mother passed away while bungee jumping in Costa Rica. Because Stacy named no contingent beneficiary in her estate plan, the probate judge must look to the state inheritance law, which gives everything to her only living sibling, her estranged brother, Robert, whom she has not seen for fifteen years.

In addition, it is crucial that you select backups for your personal representative, executor, or successor trustee in case the first person you named passes away (even if it is before you). If you named no alternate, or not enough alternates, then depending on your estate plan’s terms, your loved ones may be able to pick the successor person or a judge may have to look to state law to determine whom to appoint as the new person in charge. For families who are prone to conflict, this type of situation could spell disaster.

Example: Roger named his wife, Janice, as the successor trustee of his revocable living trust. Under the wise guidance of his estate planning attorney, Roger named his sister, Joan; his son, Jason; and his best friend, Charles, as additional successor trustees. Six years later, Roger, Janice, and Joan passed away while visiting Roger’s mother. Because Roger had named backup successor trustees, his trust’s administration continued smoothly under Jason’s direction, preserving Roger and Janice’s nest egg and keeping nosy relatives and neighbors from learning their financial details.

Purchasing a New Home

Purchasing a new home can dramatically impact a trust-based estate plan. Typically, for this type of plan to work as intended, either all accounts and property need to be owned by the trust or the trust needs to be named as the beneficiary. Usually, when you create the trust, you prepare a deed transferring your home to it, making it easy to ensure that the trust owns your home (if your estate planning attorney recommends that strategy). However, if you decide years later to buy a new or second home, you need to remember to fund your new real estate into your trust to avoid probate. When you purchase real estate, most title companies will assume that you are doing so as an individual or, if you are married, as a married couple. If you want the home to be purchased in the trust’s name, you will need to notify the title company or follow up with your estate planning attorney after the transaction has closed to transfer the new property into the trust.

estate planning attorney with an older couple

Do You Update Your Estate Plan as Often as Your Resume?

A resume is a snapshot of your experience, skill set, and education that provides prospective employers insight into who you are and how you will perform. Imagine not updating your resume for five, ten, or even fifteen years. Would it accurately reflect your professional abilities? Would it do what you want it to do? Probably not. Estate plans are similar in that they need to be regularly updated to reflect changes in your life and the law so they can do what you want them to do. Outdated estate plans, like outdated resumes, simply do not work.

Take a Moment to Reflect

Think for a moment about all of the changes in your life so far. What has changed since you signed your will, trust agreement, and other estate planning documents? If something has changed that affects you, your trusted helpers, or your beneficiaries, your estate plan probably needs to reflect that change.

Below are examples of changes that are significant enough to warrant an estate plan review and likely updates:

  • A new family member that you want to provide for in your estate plan (child, grandchild, etc.) was born.
  • A new family member that you want to provide for was adopted.
  • You, a trusted decision maker, or a beneficiary got married.
  • You or a beneficiary got divorced or separated from a spouse.
  • A loved one passed away.
  • A loved one is now battling an addiction.
  • One of your trusted decision makers is now incapacitated.
  • A loved one is now disabled.
  • You or a loved one is now suffering some health challenges.
  • Your financial status or a beneficiary’s has changed, either for better or worse.
  • Laws pertaining to tax, retirement accounts or benefits, property, or other relevant topics have changed.
  • You, a trusted decision maker, or a beneficiary moved to a new state.
  • Your family circumstances have changed.
  • Your business circumstances have changed.

Procrastination

Estate planning is usually at the bottom of a person’s to-do list. After it has been completed, most people do not think about it again. Do not be like most people. Estate planning is an ongoing project that requires review and attention. There is no time like the present to review your estate plan. Call our office now to get your estate planning review scheduled. As with most people, if it is on the calendar, you will make it happen. Just as you update your resume and meet with your doctor, dentist, CPA, or financial advisor regularly, you should meet with us regularly as well. We will ensure that your estate plan reflects your current needs and the needs of the people you love. Updating is the best way to ensure that your estate plan will do exactly what you want it to do.

family holding hands

Don’t Have a Lot of Money? Here Are Seven Ways You Can Still Leave Your Family a Great Legacy

Although the word “inheritance” usually conjures up images of property or accounts with significant monetary value, you can leave your family an even longer-lasting inheritance by doing these seven things, whether or not your bank account is overflowing.

Make a Plan

Often, people who do not have a lot of money think that it is unnecessary to have an estate plan. After all, what is an estate plan without an estate? Yet estate planning is more than making sure a person’s wealth passes to the next generation. It also involves making your wishes known with regard to certain items of property, burial arrangements, and end-of-life care decisions. Family relationships have been irreparably damaged over the question of who gets the homemade Christmas tree ornaments, and children have agonized over how much to spend on their parent’s casket and other burial arrangements, not wanting to skimp on something they feel represents their love for their parent.

Your family can have peace of mind knowing with certainty that they are carrying out your wishes if they have a crystal clear understanding of what those wishes are. Whether or not you have much money, you can leave an important legacy to your family simply by making a plan.

Avoid Unnecessary Expenses

Although a number of things are more important than money, there is nothing wrong with preserving the money you have. You can leave more money in your family’s hands  by avoiding unnecessary estate administration expenses such as probate. If you own real property, such as a home, you can avoid probate by creating a trust and transferring your property into the trust or by using a transfer-on-death deed, if your state’s law allows that. If you have bank accounts, retirement accounts, or life insurance policies, you can avoid probate by using payable-on-death designations, transfer-on-death registrations, and beneficiary designations or by transferring the accounts into a trust.

If your estate’s value is below a certain limit, small-estate proceedings allow the transfer of property by a simple affidavit, but the limit amounts vary from state to state, so it is important to understand what your state’s limits are and rely on the affidavit option only as a last resort. Spending a small amount of effort up front by using such types of designations can save a lot in later expenses and delays.

Write Personal Letters

Aside from the time it takes, writing personal letters to your family members costs little or nothing, but such letters can be far more valuable than vast amounts of money. Personal letters could share stories, give encouragement, provide advice, or express emotions. For example, a grandparent could write a letter to a grandchild commemorating a special occasion in that grandchild’s life (such as high school graduation) with the grandparent’s memories of the grandchild and expressions of love and admiration for the grandchild’s talents and qualities. This type of personal letter will be a family treasure that will endure long after any possession that money can buy.

Family Traditions

Family traditions are a wonderful and lasting legacy. What makes them even more wonderful is that they can be completely tailored to your family’s interests and priorities, they can be started at any time, and they do not have to cost a lot of money. Many traditions revolve around holidays, such as picnics at the lake on the Fourth of July or making Great-grandma’s sugar cookies every Valentine’s Day. Maybe your family has traditions around the Super Bowl or Friday night movies.

Even if you do not currently have many family traditions, it is not too late to start. Your own imagination is the only limit on creating a fun tradition that your family looks forward to and repeats regularly.

Family Heirlooms

It is important not to underestimate the value of family heirlooms. Although heirlooms may or may not be worth much money, their sentimental value can be enormous. From Grandma’s wedding dress to the trunk that Great-great-grandpa used to haul his possessions across the sea when he emigrated from Italy to the United States, such heirlooms are a treasured part of a family’s legacy.

It is crucial that the story of the item’s significance also be preserved so that an unsuspecting but well-meaning person does not throw the item out with the trash. So be sure to record to whom the item belonged, how it was used, and why it is important.

Pictures

The adage says that a picture is worth a thousand words, and sometimes, a picture is worth more than thousands of dollars. You can create a family history with pictures by snapping photos of everyday family activities as well as big family events.

Also, be sure to go through old family photos, because you may be the keeper of some of the only surviving photos of certain ancestors. Helping younger generations understand who their grandparents and great-grandparents were with pictures that can put faces to names is a valuable legacy to leave.

Family History

A person can derive identity and much strength from knowing where they came from, what struggles and challenges their ancestors went through, and how they prevailed. Numerous websites are available to help you trace your family history back through hundreds of years. But a family history can also start with your own story, which you can preserve by writing down or making a voice recording of your personal experiences.

Children, grandchildren, and subsequent generations will consider it a great treasure to learn your thoughts about where and how you grew up, the challenges you faced, and how you persevered through them. You can also write down your memories of your parents and grandparents if they did not write their own personal histories.

Even if you do not have a lot of money to leave to your family, you can still leave them a great legacy by making a plan, avoiding unnecessary expenses, writing personal letters, leaving family heirlooms, creating family traditions memorialized with pictures, and recording your own and your family’s history.

multi-generational family

Estate Planning Lessons We Can Learn from Encanto

Not only is Disney’s award-winning animated film Encanto hugely entertaining, it also contains the following valuable estate planning lessons:

  • Leaving a family legacy is important and can have an impact beyond your immediate family.
  • Be sure to consider the significance of multigenerational planning.
  • Treating each beneficiary as a unique person is essential.
  • Naming the “strongest” child as your fiduciary may not always be the most sensible decision.

A Family Legacy Can Impact More Than Just Your Immediate Family

In Encanto, the Madrigal family had received a “miracle,” and family members received unique “gifts” associated with the miracle. Along with the miracle and the gifts they had received, the Madrigal family also recognized their responsibility to use their miracle and gifts to benefit the whole town. They took their responsibility very seriously.

Like the Madrigal family, you can use your estate plan to benefit the world around you. You can design your plan so that the money and property you leave will cultivate a legacy that will not only impact your immediate family but can also benefit the community for generations to come. The Carnegie Foundation, which funds libraries and learning centers around the country, and the Bill & Melinda Gates Foundation, which fights poverty, disease, and inequity around the world, are well-known examples. But you do not have to be a billionaire to establish a family foundation. In its simplest terms, a family foundation is a means of providing charity that is funded with family assets and often employs family members to work for its cause. Family foundations are an effective way to involve your family in establishing a charitable legacy that can benefit the community.

If a family foundation does not fit your estate planning goals, there are additional ways to leave a legacy and impact your community on a smaller scale. For example, you could fund a scholarship, a room in a library, or even a park bench. Another option is to talk to your financial advisor about donor-advised funds. Such charitable gifts can be a powerful source of family pride, creating meaning and a legacy for your family.

The Significance of Multigenerational Planning

In Encanto, Abuela was just as concerned about her grandchildren and helping them to obtain and properly use their gifts as she was about her own children. Although designing an estate plan that benefits only your children is typical, grandparents may also want to look at ways they can benefit multiple generations by using vehicles such as family trusts, family “banks,” or funding 529 college savings plans. Encanto teaches us to think beyond what we can leave to only our children; there are multiple ways to help future generations as well, financially or otherwise.

Each Beneficiary Is Unique

Encanto’s soundtrack went viral, and the song “We Don’t Talk about Bruno” hit No. 1 on the U.S. Billboard Hot 200 chart.[1] Bruno is the black sheep of the Madrigal family and can be viewed as a metaphor for any family’s marginalized members. Just like Bruno, there may be members of our own family whom we are reluctant to talk about—perhaps the one who is an embarrassment to the family because they have not lived up to expectations or followed societal norms. Still, we need to acknowledge that family members come in a lot of different flavors and be willing to recognize the good and potential in each of them, even if they do not fit the mold. Likewise, you should tailor your estate plan to fit each beneficiary’s individual needs. For example, an incentive trust or special needs trust may make sense for some beneficiaries to help them reach their potential, but it may not make sense for others.

Another cautionary tale from Encanto is about exerting control. Abuela Madrigal did not want to involve Bruno or Mirabel in the family endeavors because they did not conform to her idea of what they were supposed to do and how they were supposed to act. When designing your own estate plan, be careful about trying to exert control from the grave by requiring children or grandchildren to do or achieve certain things to qualify for their inheritance. At some point, you have to let people make their own choices and live their lives without punishing them for not conforming by withholding money or property.

Think Before Putting More Pressure on the “Strong” One

In Encanto, Luisa is the physically strong sibling. Most families have the characteristically “strong” child who takes on most of the responsibility along with most of the pressure. It is natural to appoint this responsible child as the trustee, the agent under a power of attorney, or in another fiduciary role in your estate plan. Yet, just as Luisa sings, “pressure that’ll tip, tip, tip till you just go pop,” sometimes we, too, assume that the “strong” or “responsible” one can continue taking on more responsibility. Think twice about whom you appoint as a trustee or fiduciary because that person might just be at their breaking point; maybe that responsibility is a load that can be shared.

If after watching Encanto you begin thinking about your estate plan and the kind of legacy that you want to leave for successive generations and the community, please call us. We can help you ensure that your legacy is properly planned, administered, and enduring.


[1] Gary Trust, Encanto’s “We Don’t Talk About Bruno” Hits No. 1 on Billboard Global 200, Billboard (Feb. 7, 2022), https://www.billboard.com/music/chart-beat/we-dont-talk-about-bruno-encanto-number-one-global-200-1235028107/.

man playing guitar

When Rock Legends Pass Away: The Possible Fates of Meat Loaf’s $40 Million Estate

Meat Loaf, whose real name was Michael Lee Aday, passed away earlier this year at the age of seventy-four. The singer behind 1977’s Bat Out of Hell—one of the best-selling albums of all time—experienced ups and downs befitting his larger-than-life persona. He hit bottom with his 1983 bankruptcy but rode a 1990s career rebirth to newfound financial success. The musician, actor, and producer’s net worth was estimated to be $40 million at the time of his death in January 2022.

There is no questioning the legacy of one of rock and roll’s biggest icons. But there are still unanswered legal questions about the fate of Meat Loaf’s estate. Many stars, including Jimi Hendrix, Aretha Franklin, Prince, and Michael Jackson all died without wills, sparking long legal battles among surviving family members. Although there is no evidence to suggest that Meat Loaf died intestate (i.e., without a will), we can speculate about his estate plan based on his life, legacy, and available legal instruments.

The Rise, Fall, and Rise Again of Meat Loaf

Meat Loaf titled his 1999 autobiography To Hell and Back.[1] Described as a “rages-to-riches-to-rags-to riches” tale, it encapsulates a life that seemed to have few dull moments.

Many would describe Meat Loaf’s style as theatrical, and he may have been taking cues from his early career as a stage actor. Meat Loaf appeared on Broadway in Hair and The Rocky Horror Picture Show, and in the Rocky Horror film, before releasing his first album, Bat Out of Hell, in 1977.

The album became the third-best-selling album in history, but success sent Meat Loaf into a downward spiral of drugs, erratic behavior, and broken relationships. In 1983, facing dozens of lawsuits from his musical partner, Jim Steinman, over song rights, Meat Loaf filed for personal bankruptcy.[2]

From there, Meat Loaf slowly ascended once again to the top of the entertainment world. He reconciled with Steinman, and the two collaborated on the successful comeback album, Bat Out of Hell II. By the time of his death, Meat Loaf had appeared in hundreds of TV shows, endeared himself to a younger generation of fans thanks to his movie roles in Wayne’s World and Fight Club, married twice, and had two children.

Meat Loaf and Estate Planning Issues

Although Meat Loaf’s $40 million net worth[3] is relatively small compared to the richest celebrities in the world, it is still a considerable inheritance to leave behind. Presumably, his fortune will go to his second wife, Deborah, and his two daughters from his first marriage, Pearl and Amanda.

Meat Loaf adopted Pearl when she was a young child. Pearl’s half sister, Amanda, is six years younger than Pearl. Because Meat Loaf was known for giving money to charities, he may also have included charitable giving in his estate plan—assuming he had one.

Our estate planning attorneys hope that Meat Loaf did have a plan in place, and that at a minimum, it addresses the following issues.

Estate Tax and the Lifetime Exemption

While most people do not have to worry about the federal estate tax, it can come into play for high-net-worth individuals like Meat Loaf if they fail to take measures to avoid it by thoughtful estate planning.

In general, the estate of an individual who dies in 2022 is not subject to the estate tax if their estate is worth less than $12.06 million. The amount of the lifetime gift tax exemption is tied directly to the estate tax. By giving away gifts over the course of their lifetime, a taxpayer can reduce the value of their estate at their death and avoid or reduce the estate tax, but certain gifts also reduce the taxpayer’s remaining estate tax exemption at death. However, a married couple can combine their exemption amounts because the first spouse’s remaining estate tax exemption can be “ported over” or transferred for the surviving spouse to use during their lifetime or at their death.

An estate worth $40 million, such as Meat Loaf’s, will owe estate tax. However, there are ways to avoid or defer paying the tax. One way would be to use the unlimited marital deduction to leave everything to his wife. This option allows someone to transfer all of their assets (accounts and property) to their US-citizen spouse at any time—including at the time of their death—without incurring gift or estate tax.

Using a bypass trust is another way to avoid the estate tax. In this case, Meat Loaf could have created a trust to hold an amount equal to his unused individual lifetime exclusion amount ($12.06 million), with any excess passing to his wife either outright or through a marital trust, therefore bypassing estate tax liability. Meat Loaf’s wife would probably be a beneficiary of the bypass trust, so this approach is just a variation of leaving everything to her. Though this structure is more restrictive than a 100 percent outright distribution, it can offer some creditor and asset protection benefits.

Adopted Children and Children with Different Needs

Under the law, adopted children are treated the same as natural-born children. Most parents of adopted children agree with this stance, and there is no indication that Meat Loaf would have wanted to depart from it.

Some parents, though, treat their children differently in their estate plan, not because they do not care for them equally but because the children have different needs. Such differences can be reflected in the estate plan.

For example, Meat Loaf’s daughter Pearl is married to a member of the band Anthrax. In fact, Pearl is a musician herself. Not only does she have her own band, she also toured with her father for several years. It is a good guess that, between herself and her husband, Pearl is already financially well-off and not dependent on her father’s inheritance.

Her sister, Amanda, an actress who has appeared in popular TV shows and movies, is probably not hurting for money either. But if one sister was financially successful and the other was not, Meat Loaf might have made a provision in his estate plan that directed a larger share of his assets to the child with greater financial needs.

Blended Families

Blended families can prove challenging in both life and death. Someone with children from a previous marriage might have to balance wanting to provide for their children and for their spouse. Specifically, there might be concerns that if all the money were left to the current spouse, who is not the parent of children from a previous marriage, the spouse might not feel obligated to take care of those children.

For someone like Meat Loaf who may have been in this situation (there is no evidence that he was; this is just to provide an example), a qualified terminable interest property (QTIP) trust might be a solution. A QTIP trust can be structured in such a way that Meat Loaf’s wife would receive income from the trust property throughout her life, but when she passed away, the remainder of the trust assets would go to Amanda and Pearl, and his wife would be prevented from excluding them. In other words, if Meat Loaf had set up a QTIP trust, the funds would be distributed according to his wishes; his wife could not control the disposition of the remaining funds at her death.

Instead of setting up a single or “pot” trust for multiple beneficiaries, Meat Loaf could have chosen instead to establish multiple trusts that took immediate effect at the time of his death. Such separate subtrusts, or testamentary trusts, can be created for separate family members to simultaneously meet their individual needs.

There is some evidence that Meat Loaf used trusts, so he may have created living trusts that distributed assets during his lifetime. Variety reports that Meat Loaf and his wife held at least two homes in the same trust.[4] It could be that when Meat Loaf died, the property in this joint trust became his wife’s exclusive property.

Meat Loaf’s Plans Could Remain Private

The fate of Meat Loaf’s estate may be revealed in time. If the estate has to go through probate (for example, if Meat Loaf still owned assets in his individual name instead of in a trust, with no beneficiary designation, or if he used a will-based estate plan with no trusts), the probate records will become public. But if Meat Loaf properly funded and used trusts to his advantage, the details of his plan are unlikely to enter the public record, and we may never know what became of his $40 million fortune.

If he did not have an estate plan, state intestacy law would apply. Meat Loaf owned homes in multiple states, including California, Tennessee, and Texas, but it appears that he died as a resident of Tennessee. This means that a Tennessee probate court would oversee the domiciliary proceeding while California and Texas would have jurisdiction over the real estate subject to any ancillary proceedings there. In addition, the laws of the state where real estate is physically located typically govern what happens to that property when the owner dies, possibly resulting in different dispositions of property in certain circumstances.

Though intestacy laws are intended to accomplish what a state assumes the decedent would want, dying intestate is often a worst-case scenario because the decedent effectively loses all control over the details of their legacy. But it is not just celebrities who require an estate plan. Everybody should have, at the least, a basic will that outlines which assets go to whom. Beyond that, there are many ways to divide assets among trusts. Through savvy estate planning, individuals of any net worth can take control of their legacy, avoid estate taxes, and provide for loved ones long after they are gone.

For help and guidance designing your estate plan, please reach out to our office and schedule an appointment.


[1] David Dalton & Meat Loaf, To Hell and Back: An Autobiography (2011).

[2] Richard Milner, The Crazy Way Meat Loaf Was Stripped of His Money, Grunge (Jan. 21, 2022, 10:14 AM EDT), https://www.grunge.com/250486/the-crazy-way-meat-loaf-was-stripped-of-his-money/.

[3] What Was Meat Loaf’s Net Worth?, Celebrity Net Worth, https://www.celebritynetworth.com/richest-celebrities/singers/meat-loaf-net-worth/ (last visited Apr. 27, 2022).

[4] Mark David, Meat Loaf Moves to Texas, Dirt (May 29, 2012, 6:29 PM PT), https://www.dirt.com/more-dirt/real-estate-listings/meat-loaf-moves-to-texas-1203471733/.

Does a Domestic Partner Have the Same Rights as a Spouse When It Comes to Estate Planning?

The short answer to whether couples in a domestic partnership have the same rights as married couples when it comes to estate planning is probably not. To a large extent, the state in which you live, and maybe even the city or county, determines domestic partners’ rights.

What Is a Domestic Partnership?

Everyone knows what a marriage is, but not everyone knows what a domestic partnership is. To answer whether domestic partners have the same estate planning rights as married spouses, it is helpful to first define what a domestic partnership is. A domestic partnership is an alternative to marriage that was originally created for same-sex couples who could not legally marry.1 However, when the US Supreme Court legalized same-sex marriage in 2015 in Obergefell v. Hodges,2 marriage became an option for same-sex couples as well. A domestic partnership is not just for same-sex couples; any couple can choose this status when marriage is not something they desire, for whatever reason.

In general, a domestic partnership is a relationship in which two adults live together and plan to do so indefinitely. They each may intend to remain the other’s only domestic partner, may be financially responsible for each other, and may or may not enter into a legal agreement defining their rights and responsibilities. In fact, the laws on domestic partnerships and the legal rights and benefits domestic partners receive vary widely by state. Most states offer no domestic partnership benefits; the remaining states offer either full domestic partnership benefits or fall somewhere in between. Examples of such benefits include the following: 

  • health insurance
  • sick leave
  • parental leave
  • death benefits
  • the power to make financial and medical decisions on the partner’s behalf
  • adoption rights

Some states that offer domestic partnership benefits require that the couple formally register in order to receive them; other states do not require formal registration. As a result, it is essential to understand your state’s laws when determining the benefits a domestic partner may have.

Estate Planning Issues Unmarried Couples Face

Now that we have defined what a domestic partnership is, it is essential to understand the estate planning issues that unmarried couples face (including those who are not in a valid domestic partnership recognized by local law). Every state has default rules that address what happens to a person’s property upon their death or who can make decisions for a person who is incapacitated and cannot make decisions for themselves. For married people, the default person is usually a spouse. But problems such as the following can arise if your significant other is not a legally recognized spouse:

  • Being unable to manage your significant other’s financial affairs or speak with institutions or government agencies on their behalf if they become incapacitated (If your partner has not set up a financial power of attorney naming you as their agent authorized to act on their behalf, a court will need to appoint someone as guardian or conservator to manage their affairs. If there is no spouse, state default laws usually give priority to a child, a parent, or another relative when appointing a guardian or conservator.)
  • Being unable to make medical decisions for your significant other, visit them in a hospital, or obtain healthcare information about them during a serious illness or incapacity (If your partner has not set up a healthcare power of attorney and a living will (sometimes referred to as an advance healthcare directive), there are default laws that specify who is authorized to make those decisions and receive medical information—usually a child, parent, sibling, grandchild, or grandparent if there is no spouse.)
  • Losing out on income, government benefits, insurance benefits, or retirement benefits that are exclusive to a deceased person’s surviving spouse
  • Paying more in federal estate or gift taxes because there is no marital deduction or exemption for unmarried couples
  • Being unable to take advantage of a tax deferral by rolling over retirement accounts because they can be rolled over only by the deceased account owner’s surviving spouse
  • Being unable to serve as executor or personal representative of your deceased partner’s estate if your partner has not created a will and named you to serve in that role (If a person dies without a will, state default laws usually provide that a surviving spouse, child, or another relative has priority to serve in that role.)
  • Losing property or accounts after your significant other’s death if your name was not on the title
  • Losing custody of your children if you are not their legal parent either through adoption or a legal proceeding giving you parental rights

As this list demonstrates, unmarried couples face a number of estate planning issues. Depending on your state and the extent to which your state’s law recognizes domestic partnerships, some of these potential benefits may still be available to you as an unmarried person in a domestic partnership. Other benefits however, such as benefits under federal estate and gift tax laws or retirement account laws, are available only to married couples.

Because domestic partnership laws vary so widely, it is important to consult an experienced estate planning attorney in your area who can help you understand the laws that apply to your situation and the estate planning you must do to ensure that your significant other will have the rights and benefits you want them to have if you become incapacitated and upon your death. We are available to help you craft an estate plan that clearly specifies your wishes for your loved ones, money, and property regardless of the legal relationship between you and your partner.

References

  1. Barbara Stark, Domestic Partnerships and Same-Sex Marriage, in Fam. L. in the World Cmty. 211 (2d ed. 2009), https://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi?article=1539&context=faculty_scholarship
  2. 576 U.S. 644 (2015).
medicine

Three Steps to Take When the Deceased Has Controlled Substances

There are so many things to think about when a loved one passes away. What to do with the prescription drugs (or other controlled substances) that are in your loved one’s medicine cabinet is not usually at the top of that list. Yet, to avoid running afoul of laws governing their disposal, it is important to understand the proper procedures for disposing of a deceased person’s controlled substances. 

What Are Controlled Substances?

In 1970, the US Congress passed the Controlled Substances Act (CSA), which established five categories (called schedules) of controlled substances. Drugs, other substances, and certain chemicals used in making drugs are placed on one of these five schedules according to the drug’s acceptable medical use and potential for abuse. Schedule I drugs have no currently accepted medical use and a high potential for abuse while Schedule V drugs have the least potential for abuse. Controlled substances range from drugs such as heroin and marijuana (Schedule I) to drugs such as Robitussin AC and Lyrica (Schedule V).1 

Secure and Responsible Drug Disposal Act of 2010

In 2010, Congress passed the Secure and Responsible Drug Disposal Act (Disposal Act) to address the growing concern about misuse of prescription drugs, particularly among teenagers. To reduce teen access to prescription drugs that are often found in the home, the Disposal Act expanded the ways legal possessors of controlled substances could deliver any unused or unwanted controlled substances to appropriate individuals or agencies for safe and effective disposal, such as through collection receptacles, mail-back packages, and take-back events.

The Disposal Act also allows any person lawfully entitled to dispose of a deceased person’s property to dispose of any controlled substances that were in the deceased’s lawful possession.2 In that case, what are the steps you should take when disposing of your loved one’s controlled substances?

The Three Steps to Take to Safely Dispose of a Deceased’s Unused or Expired Controlled Substances

If your loved one was living in an assisted living facility or was in hospice prior to their death, check with the healthcare staff to find out whether they will dispose of the unwanted or expired medications. If you learn that you are responsible for their disposal and there are no specific disposal instructions in the medication package insert or you have not received specific disposal instructions from a healthcare provider, follow the steps below.

Step 1: Determine if there is a drug take-back site or program.

The first step for properly disposing of a deceased person’s controlled substances is to determine whether there is a drug take-back site or program near you. This is the best way to dispose of unwanted or expired medications. You can check the Drug Enforcement Agency (DEA) website or ask about possible options at your local pharmacy or police station.

Be sure to remove all personal information from prescription medicine labels and packaging. All medicines dropped off at a take-back location will be destroyed. It is generally inadvisable to donate unused drugs, and the Federal Drug Administration (FDA) does not endorse this practice.

Step 2: Determine if the controlled substance is on the flush list.

If you do not have a drug take-back option available near you, the next step is to determine whether the controlled substance is on the FDA’s flush list. If the medicine is on the list, the next best option is to immediately flush the controlled substance down the toilet.

Medicines are placed on the flush list if they are either (1) highly sought because of their potential for misuse or abuse or (2) likely to cause death or serious illness from one dose if accidentally or inappropriately taken by children, vulnerable adults, or pets. Because these medications are so dangerous, they should not be placed in the trash. Flushing them down the toilet helps keep everyone in your home and community safer by reducing the risk of the drugs’ inappropriate or accidental use.

Some may wonder about the effects on the environment of flushing controlled substances. Based on available reports, most medicines found in water come from the body’s elimination of them through urine or feces. Flushing these few medications when there is no take-back option available is responsible for a very small part of the medicine found in our water. In addition, the FDA has determined that this risk is less than the risk of accidental or inappropriate use of such medicines.

Step 3: Put nonflush medicines in the trash.

If there is no drug take-back site available and the controlled substance you want to dispose of is not on the FDA’s flush list, you can dispose of the medicine by putting it in the trash after doing the following:

  • Mix the medicine (liquid or pills) with an unappetizing material such as dirt or cat litter. Do not crush tablets or capsules.
  • Place the mixture in a sealed container, such as a plastic ziplock bag, to prevent the mixture from leaking out of a garbage bag.
  • Remove or scratch out all personal information from the empty prescription bottles or medicine packaging.
  • Throw the sealed container with the mixture and the empty packaging in the trash.

There are so many loose ends to tie up after a loved one has passed away. Following these three simple steps for disposing of controlled substances will ensure that you have done your part to keep your family and community safer. If you need assistance wrapping up your deceased loved one’s affairs, please call us. We are glad to assist you.

References

  1. U.S. Drug Enforcement Admin., Drug Scheduling, https://www.dea.gov/drug-information/drug-scheduling.
  2. Secure and Responsible Drug Disposal Act of 2010, Pub. L. 111-273, 124 Stat. 2858, https://www.congress.gov/111/plaws/publ273/PLAW-111publ273.pdf.
age gap couple estate planning

Estate Planning Considerations for Couples with an Age Gap

With couples of similar ages, planning for the future is naturally a joint effort. However, if you are married to someone who is significantly older or younger than you, the future can look different and mean different things to each of you. To protect yourself, your spouse, and other loved ones, you need to have comprehensive financial and estate plans. For these plans to work as intended, it is important that you have an open and honest conversation with your spouse about the following financial and estate planning topics.

Views on Employment

Because you may rely on a job to provide you and your spouse with health insurance and income, and a job can take up a large amount of your time, it is important to discuss these questions about the future of your employment.

  • Are either of you currently working? If you are both working and bringing in an income, your lifestyle may change if one or both of you decide to retire or stop working in the near future.
  • After both of you are retired or no longer working, what do you want to do with your time? If one of you wants to travel while the other aspires to start a business, you may conflict as to what you are going to be doing together as a couple.

Managing Your Finances

Retiring or stopping your employment means losing one type of income. For many, their retirement accounts will provide a large portion of the money they will be living on during their retirement; however, this does not happen overnight, it takes advance planning. It is important that, as a married couple, you discuss the following topics to ensure your financial security:

  • If you are currently working, when do you see yourself retiring? If you are planning to retire soon, it is crucial to meet with your financial planner to make sure your finances are in order and that you can afford to stop receiving a paycheck.
  • Is there a period of time when both of you will be retired or not working? Depending on your current income needs, if neither of you is working, will you have enough money from other sources to support your lifestyle?
  • Do you have a plan for when you are going to withdraw the required minimum distributions from your retirement accounts? If you are unsure, talk with your financial advisor. They can advise you on the best strategy given your current account balances and desires for the future.
  • Is the younger spouse anticipating using the retirement funds from the older spouse for their lifetime as well? Is there enough money to do so?

Estate Planning Considerations

Crafting an estate plan is the best way to guarantee that those you love are taken care of. If you do not create your own estate plan, your state’s laws will determine who gets your money and property, and how much, when you die, as well as who will make decisions for you in the event you cannot make them for yourself. As you review or begin your estate plan, the following questions will touch on some of the more crucial issues you need to consider.

  • Who will serve as your trusted decision-makers (executor or personal representative, successor trustee, agent under a financial power of attorney, and agent under a medical power of attorney)? Because of your age difference, it is prudent to name alternates to these positions in the event your first choice (usually your spouse) cannot act on your behalf. If you have children from a previous relationship, you may also want to consider if and in what order you want to name them to one of these important decision-making roles.
  • Whom do you want to name as your beneficiary upon your death? If that person is your spouse, do you want them to receive the inheritance outright or in trust? If you want to give an inheritance to your children, will this be immediately available upon your death or unavailable until after your surviving spouse’s death?
  • Do you have children from your current marriage? Will they be treated the same as children from a previous relationship, or will they receive preferential treatment?

These are just some of the questions you and your spouse should be considering as you plan for your future. If you have any questions or are ready to take the next steps in crafting your estate plan, call us.