Articles Posted in Estate Planning and Documents

As ABC’s hit sitcom “Modern Family” becomes a reality for many American families, the estate planning industry must evolve as the number of same-sex marriages increases. A Gallup poll released on July 29, 2013, revealed that the majority of Americans, 52%, would vote in favor of legalizing gay marriage in all 50 states. A more recent poll by Civil Beat shows that 44% of voters in the state of Hawaii would vote to legalize gay marriage in the state, a rapid increase from the 37% favorability in an April 2012 poll on the same issue. Other recent reports reveal that New Jersey is poised to become the 14th state in the U.S. to recognize gay marriage, and Hawaii to become the 15th. Although support for gay marriage is growing, the current inconsistency in states’ recognition of gay marriage posits important estate considerations for legally married, same-sex couples.
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August 5, 2013, will mark the 51st anniversary of Marilyn Monroe’s tragic death due to a drug overdose in 1962. Marilyn was an extremely successful American actress, model, and singer, who became a major style icon for young women during the 1950s and early 1960s. After her death at the age of 36, Marilyn’s Will was filed in the New York Surrogate Court on August 17, 1962, with the largest slice of her assets bequeathed to one Mr. Lee Strasberg. Strasberg, Marilyn’s mentor and acting tutor, received the remainder of Marilyn’s Estate, as well as her personal effects and clothing, a financial and also sentimental gain. Accordingly, the Fourth provision of Marilyn’s Will reads in relevant part:

(d) I give and bequeath all of my personal effects and clothing to LEE STRASBERG, or if he should predecease me, then to my Executor hereinafter named, it being my desire that he distribute these, in his sole discretion, among my friends, colleagues and those to whom I am devoted.
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It is still as true today as it was in 1789 when Benjamin Franklin coined the phrase “nothing can be said to be certain, except death and taxes.” Despite his best efforts to avoid falling victim to this inviolable inevitability, Japanese supercentenarian Jiroemon Kimura, who was recognized by Guinness World Record as the oldest living man in the world, fell victim to the former of Franklin’s two certainties when he tragically died on Wednesday, June 12, 2013, at the age of 116. Before you shed any tears for Mr. Kimura, however, consider the fact that Mr. Kimura achieved something in life that should make him the envy of every inhabitant of the world he left behind. I am not talking about Mr. Kimura living until 116, despite the fact this was quite the accomplishment. No, what I am alluding to is worth far more than simply living to see the invention of both the automobile and the iPhone; Mr. Kimura was retired for 51 YEARS!
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This month the Supreme Court ruled that a widow was not entitled to the proceeds of her husband’s life insurance policy worth $125,558.03. The Court held that her husband’s ex-wife was entitled to the proceeds as the result of an all too common mistake-he forgot to change his life insurance beneficiary after he divorced his previous wife. This case originated in Virginia, where a statute provides addresses this very situation, i.e., where an individual with a life insurance policy divorces the beneficiary of that policy and, subsequently, forgets to amend the beneficiary. Specifically, “Section 20-111.1(D) of the Virginia Code renders a former spouse liable for insurance proceeds to whoever would have received them under applicable law, usually a widow or widower, but for the beneficiary designation.” Hillman v. Maretta, 2013 WL 2371463 (June 3, 2013) (citing Va. Code Ann. §20-111.1(D)(Lexis Supp. 2012)). So what was the problem?
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In a story that seems to be match made for an Alanis Morissette song (see, e.g., Ironic), the largest sole lottery jackpot winner in U.S. lottery history is none other than eighty-four year old Gloria C. MacKenzie of Zephyrhills, FL. With her net payout expected to be roughly $270 million, it is safe to say that Ms. MacKenzie should be able to live comfortably for the rest of her life (hopefully a life that will far surpass the ninety-eight years of the “old man” described in the aforementioned Alanis Morisette song). But, regardless of where Ms. MacKenzie’s winnings take her in life, one thing is certain: It is time for her to update her estate plan! Already off to a good start in avoiding the pitfalls that befall so many lottery winners, Ms. MacKenzie waited nearly three weeks before claiming her winnings, choosing instead to spend that time consulting with advisors to prepare for her newfound riches. In fact, on her trip to Tallahassee to claim her prize, Ms. Mackenzie was joined by her attorney, William Brant, as well as her financial advisor. Lottery Spokesperson David Bishop said that Ms. Mackenzie’s advisors were very prepared when they arrived and had taken the past few weeks to “get everything in order.”
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In Florida, a tenancy by the entirety is a form of property ownership which can only exist between a husband and wife. Under Florida law, when a married couple owns assets as tenants by the entirety, each spouse is said to own the property “per tout,” meaning that each spouse holds the whole or the entirety, and not a share or divisible part. Accordingly, property held by a husband and wife as tenants by the entirety belongs to neither spouse individually, but each spouse owns, in essence, an undivided 100% interest in the same asset. This may sound like mathematical nonsense because, of course, adding each spouse’s 100% ownership yields 200% ownership of the same asset. Nevertheless, the purpose of tenancies by the entirety is to grant each spouse an undivided right to the whole, even though property held by tenants in the entirety is beyond the exclusive control of either spouse.
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There are three issues that were raised by the challenge to the Defense of Marriage Act (“DOMA”). One issue was whether or not Congress overstepped its authority by infringing on a matter that is traditionally left to the states. Historically, states have had authority to regulate marriage and issues relating to the family. However, Section 3 of DOMA defined marriage, albeit in the name of allowing states to determine their own definitions of marriage. Another issue was what level of scrutiny should be applied to government regulations that are based on a person’s sexual orientation. The final issue was whether or not DOMA impermissibly discriminated against a class of people in violation of the Fifth Amendment.
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The Case
The Supreme Court of the United States recently overturned the Defense of Marriage Act when it found the act to be unconstitutional in United States v. Windsor. The following provides the background of that historic and monumental decision.

In 1996, after Hawaii state court seemed likely to permit same-sex marriage, The House of Representatives felt it necessary to “defend the institution of traditional heterosexual marriage” in light of “the orchestrated legal assault being waged against traditional heterosexual marriage by gay rights groups and their lawyers.” H.R. Report 104-664 “Defense of Marriage Act,” 104th Congress. The result was the Defense of Marriage Act (“DOMA”). Section 2 of the Act established that states were not required to give effect to same sex relationships treated as marriage in other states, and Section 3 defined marriage as “only a legal union between one man and one woman as husband and wife.” DOMA was applied not only at the state level, but also the federal level. The result was that same-sex spouses could not benefit from over 1,100 federal benefits, even if they were legally married under state laws. One of the federal benefits that was denied to same-sex couples was the spousal estate tax exemption.
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Same-sex marriage has been a hotly debated topic lately, especially because the United States Supreme Court recently ruled on the subject in two separate cases. Because same-sex marriage is not allowed in a majority of states or under federal law, same-sex couples were until recently deprived of many of the privileges and benefits that married couples receive. One area in which same-sex couples who are unable to marry were disadvantaged is taxes.
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Estate planning for married couples offers many advantages. Married couples are able to file a joint Federal Income Tax return which can lead to an overall savings. There is also a Federal Estate and Gift Tax marital deduction for passing property to a surviving spouse. This deduction allows the transfer taxation to be deferred until the surviving spouse passes the property – either during life or through a testamentary transfer. A surviving spouse can also use the remainder of a deceased spouse’s allowable exclusion (which is $5.25 million per person as of January, 2013). There is also a spousal rollover option for individual retirement accounts that allows a surviving spouse to treat the deceased spouse’s IRA account as his or her own. Without this, the IRA becomes payable over the life expectancy of the oldest beneficiary of the account. Married couples can also own real property as a tenancy by the entireties. This is a joint form of ownership that has a right of survivorship. There is also an elective share available to the surviving spouse and entitlement to social security benefits.
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