Cox Law Group

10/11/2022

As digital assets become more common for us all, it’s important to incorporate them into estate plans. These four steps will help ensure your digital accounts and subscriptions aren’t lost when you die.

These four steps will help ensure your digital accounts and subscriptions aren’t lost when you die. What’s will happen to your Facebook account or the song

09/01/2022

New Post: Right of Occupancy Trust Safeguards Your Residence or Other Property for Loved Ones

08/08/2022

05/16/2022

Estate planning or lack thereof, affects us all, regardless of age, wealth or our place in society. For example, Meat Loaf, an American rock singer, died at age seventy four earlier this year. Prior to his death, the singer partnered with composer Jim Steinman to produce one of the best selling record albums of all time, Bat Out of Hell in 1977. A few short years following the albums debut, Meatloaf filed bankruptcy. After many years Meatloaf created newfound financial success. His net worth was estimated to be $40 million when he died on January 20, 2022.

There is no questioning the legacy of one of rock and roll’s biggest icons. But there are many unanswered questions about the design and distribution of Meat Loaf’s estate. Many stars, including Jimi Hendrix, Aretha Franklin, Prince, and Michael Jackson died without wills, igniting emotional legal battles among surviving family members. Although there is no indication Meat Loaf died intestate (i.e., without a will), we will postulate the strategy and details of his estate plan based on his publicly known habits, legacy, and related legal instruments.

The Rise, Fall, and Rise Again of Meat Loaf

Meat Loaf's 1999 autobiography To Hell and Back.[1] described as a “rages-to-riches-to-rags-to riches” tale, reflects a life with few dull moments.

Meat Loaf’s dramatic lifestyle may have had its roots in his early Broadway appearances in Hair and The Rocky Horror Picture Show, and in the Rocky Horror film.

Later, in 1977 his first album, Bat Out of Hell, became the third best-selling album of all time. Yet the impact of Meat Loaf's success sent him into a downward spiral of drugs, erratic behavior, and broken relationships. In 1983, he faced dozens of lawsuits from his musical partner, Jim Steinman, over song trademark rights. The result was that Meat Loaf filed for personal bankruptcy.[2]

Meat Loaf slowly ascended once again to the top of the entertainment pinnacle. He reconciled with Steinman, and the two collaborated on the successful comeback album, Bat Out of Hell II. By the time he died, Meat Loaf had appeared in hundreds of TV shows. He endeared himself to a younger generation of fans via his movie roles in Wayne’s World and Fight Club. During that time, he also 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 world's richest celebrities, he still left a considerable inheritance. We must presume 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. Meat Loaf had a reputation for donating to charities, so he may also have included charitable giving in his estate plan, if he had one.

If Meat Loaf did have a plan, it probably addresses the following issues.

Estate Tax and the Lifetime Exemption

While most people don't have to worry about Federal estate tax, it can come impact high-net-worth individuals like Meat Loaf if they fail to take necessary estate planning measures to avoid it.

Generally, 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. A taxpayer can reduce the value of his or her estate thus avoiding or reducing estate tax, but certain gifting strategies can reduce the taxpayer’s estate tax exemption. A married couple can combine their exemption amounts; the first spouse’s remaining estate tax exemption can be “ported over” or transferred to the surviving spouse.

A $40 million estate, like Meat Loaf’s, will owe estate tax unless measures are taken to avoid or defer the tax. The unlimited marital deduction allowed Meatloaf leave his entire estate to his wife. without incurring gift or estate tax.

A bypass trust is another way to avoid the estate tax. Meat Loaf could have created a trust to hold his unused individual lifetime exclusion amount ($12.06 million), with any excess passing to his wife outright or through a marital trust, thereby bypassing estate tax liability upon Meatloaf's death. Assuming Meat Loaf’s wife would be a beneficiary of the bypass trust, Meatloaf could have left his entire estate tax free to her. A bypass trust is more restrictive than outright distribution, but it offers some creditor and asset protection benefits not offered by outright distribution.

Adopted Children and Children with Different Needs

By law, adopted children are treated the same as biological children. Most adoptive parents support this law. There is no indication that Meat Loaf departed 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.

For example, Meat Loaf’s daughter Pearl is married to a member of the band Anthrax. Pearl herself is a musician. Not only does she have her own band, but Pearl also toured with her father for several years. Pearl is likely financially stable, so she is not dependent on inheritance from her father.

Pearl's sister, Amanda, who has appeared in some popular TV shows and movies, is also probably not financially strapped. But hypothetically, 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 providing for their children against providing 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 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 sub trusts, 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 end result of Meat Loaf’s estate may be revealed in time. If the estate is probated the probate records will become public. But if Meat Loaf properly used and funded Trust and other estate plan strategies to his advantage, the details of his plan are unlikely to ever become public knowledge.

If Meatloaf did not have an estate plan, state intestacy law would apply. Meat Loaf owned homes in multiple states, including California, Tennessee, and Texas, but he died a resident of Tennessee. Therefor a Tennessee probate court would oversee the primary probate proceeding and California and Texas would have jurisdiction over the real estate subject to ancillary proceedings in those states. Since the laws of the state where real estate is physically located typically govern what happens to that property when the owner dies, California or Texas law rather Tennessee law could determine the disposition of Meatloaf's homes in those states.

Intestacy laws are designed to accomplish what the decedent would want, but the intestate decedent loses all control over distribution of their legacy. To prevent such an outcome, even a basic will can outline the desired distribution of assets. Individuals with significant net worth can choose from many estate planning options and strategies to control their legacy, avoid estate tax, and provide for loved ones after their death,

For help and guidance designing your estate plan, please reach out to the lawyers at Cox Law Group (410) 988-3973, www.TheCoxLawGroup.com.

[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/.

https://thecoxlawgroup.com/blog/

03/07/2022

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.
● Is 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 decisionmakers (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. Contact the lawyers at Cox Law Group (410) 988-3973, www.TheCoxLawGroup.com, if you have questions about whether using a TOD deed is appropriate for your circumstances.

03/03/2022

Using Beneficiary/Transfer-on-Death Deeds

What Is a Transfer-on-Death Deed?
If you own real property, such as a home, in your sole name but you have not created a trust and transferred your property’s title to the trust, it is virtually guaranteed that your beneficiaries (or heirs) will have to deal with probate after your death. If the time and expense required to create a living trust does not make sense for your situation but you still want to avoid the probate process, a transfer-on-death (TOD) deed may be the solution. A TOD deed (also known as a beneficiary deed) does what it sounds like it does—it transfers your real property to your selected beneficiaries upon your death, similar to a payable-on-death designation for a bank account or a transfer-on-death registration for an investment account. During your lifetime, you continue to own and control the real property, so you can sell it, lease it, refinance it, give it away, or do anything else with it you choose. You also continue to be responsible for paying the mortgage and taxes and maintaining the property. If you still own the property at your death, the TOD deed works to automatically transfer the property to your named beneficiaries without having to go through probate. And if you change your mind during your lifetime about whom you have named as beneficiaries in the TOD deed, you can amend or revoke it at any time.

How is it used?
More than twenty-five states now allow the use of TOD deeds, and more states are considering adopting laws that allow them. You do not have to actually live in a state that allows TOD deeds to be able to use one, but the property must be located in such a state. The requirements for creating a TOD deed vary by state, but in essence, the process includes the following basic steps.

Complete the TOD Deed
With the assistance of an experienced estate planning or real estate attorney, determine the specific form or language required for the TOD deed to comply with the relevant state’s law. Remember to look at the requirements in the state where the property is located. A TOD deed will look much like any other property deed, but it will contain specific language that makes it clear that the deed does not take effect until after your (the owner’s) death.

Name Your Beneficiary
Your beneficiary can be one or more people or organizations, such as a business or a charity. You may want to consider naming a contingent, or alternate, beneficiary in case your first choice for beneficiary passes away before you do. You want to be sure to use the beneficiary’s legal name rather than categories or relationships, such as “my children.” For example, if you are naming your two daughters as your beneficiaries, you should use “Jane Doe and Julie Smith” instead of “my daughters.” If you name more than one beneficiary, you should indicate on the deed how the beneficiaries will own the property (as equal joint tenants with rights of survivorship, as tenants-in-common, each as to an equal one-half share, or some other form of co-ownership).

Describe the Property
Be sure to use your property’s correct legal description in the TOD deed. Your property’s legal description may be found on the current deed recorded in the official property records, your sales contract, or your mortgage documents. However, legal descriptions are not always copied accurately. It is important to consult an experienced real estate or estate planning attorney or a title company regarding the preparation of deeds and the accuracy of legal descriptions on deeds.

Sign the Deed
If you are the property’s sole owner, you are usually the only person who needs to sign the deed. However, if you are married and live in a community property state or if you have declared the property your homestead, it may be prudent or required that both you and your spouse sign the deed, a joinder, or a waiver to show that your spouse has no objection. An experienced real estate or estate planning attorney or title company can ensure that your intended transfer meets all legal requirements and is properly documented.

If you co-own property with someone else as tenants in common, you can use a TOD deed to designate a beneficiary for your share of the property. If you co-own the property as joint tenants, all co-owners will need to sign the deed, and it will not be effective until the last surviving owner passes away. If only one co-owner signs the TOD deed, it will not be effective unless the signer is the last owner to die. Keep in mind that even if you and your co-owner sign a TOD deed, if you die first, the surviving co-owner can revoke the TOD deed before their death.

Example: Julie and John own property as joint tenants with rights of survivorship, meaning that when one of them dies, the other becomes the owner of the entire property. They sign and record a TOD deed that names their niece Stacy as the beneficiary. When Julie passes away, John becomes the property’s sole owner. At John’s death, if John has not revoked the TOD deed or sold the property, Stacy becomes the property’s owner.

If your state requires it, have the owners’ signatures notarized. An attorney or title company can usually arrange for a notary to be present if necessary. The beneficiary does not need to sign the TOD deed. In fact, a beneficiary does not even need to be told about the deed (although it is usually a good idea to do so). However, the deed will be recorded and become a matter of public record, so you will not be able to keep it a secret either.

Record the Deed
File the deed with the proper land records authority, such as the county clerk, recorder’s office, land registrar, or office of land records in the county where the property is located. This will require paying a minimal recording fee. Recording the deed is a very important step because the TOD deed will be effective only if you record it. A beneficiary cannot record the TOD deed after you die and have it be effective. Again, consider working with an experienced real estate or estate planning attorney or title company to ensure that the TOD deed is accurate and effective.

Benefits of a TOD Deed
There are a number of reasons why you might want to use a TOD deed. As already discussed, a TOD deed can be used to avoid the public and sometimes costly and time-consuming probate process. In an effort to avoid probate, some property-owning parents will put their adult children’s names on their existing deed. The problem with this approach is that because the adult child is a current owner, the parents’ property becomes immediately subject to the child’s creditors, divorce settlement, etc. In addition, this approach may cause unintended gift tax consequences. If the property is subject to a mortgage, there may also be real estate transfer, conveyance, or documentary stamp tax consequences and even the inadvertent triggering of the mortgage’s due-on-sale clause. A TOD deed avoids this problem because there is no immediate transfer or change in beneficial ownership—a child beneficiary has no ownership in or legal right to the property until after their parents’ death.

Another benefit of TOD deeds is that they can be created cheaply and easily. In addition, a TOD deed can be changed or revoked at any time, but be sure to follow your state’s laws for effective revocation. A TOD deed will take precedence over a last will and testament, even if the will was written later, so it is important to remember that a will cannot change or revoke a TOD deed.

Disadvantages of a TOD Deed
One of the downsides of a TOD deed is that if you have multiple beneficiaries, there are legal idiosyncrasies you might not know about that can significantly impact the other beneficiaries’ inheritances or result in an outcome that does not reflect your ultimate wishes.

Example: Mom has four adult children. She creates a TOD deed naming her four children as the beneficiaries of her home as joint tenants with rights of survivorship. Mom’s oldest child dies, leaving two children. Mom is incapacitated and cannot update the TOD deed. When Mom dies, the home will go to her remaining three living children, leaving the deceased oldest child’s two children (Mom’s grandchildren) with nothing. However, if the TOD deed named her four children as beneficiaries of her home as tenants in common, each beneficiary would inherit a separate but equal share, and in this example, the deceased child’s one-quarter share will be distributed according to their estate plan (and not automatically revert to their surviving siblings).

In sum, a TOD deed can be an inexpensive and simple way to avoid the probate process upon your death and transfer your real property to your intended beneficiaries. However, it is important to understand the practical and legal implications for your individual situation and wishes. Contact the lawyers at Cox Law Group (410) 988-3973, www.TheCoxLawGroup.com, if you have questions about whether using a TOD deed is appropriate for your circumstances.
Using Beneficiary/Transfer-on-Death Deeds

What Is a Transfer-on-Death Deed?
If you own real property, such as a home, in your sole name but you have not created a trust and transferred your property’s title to the trust, it is virtually guaranteed that your beneficiaries (or heirs) will have to deal with probate after your death. If the time and expense required to create a living trust does not make sense for your situation but you still want to avoid the probate process, a transfer-on-death (TOD) deed may be the solution. A TOD deed (also known as a beneficiary deed) does what it sounds like it does—it transfers your real property to your selected beneficiaries upon your death, similar to a payable-on-death designation for a bank account or a transfer-on-death registration for an investment account. During your lifetime, you continue to own and control the real property, so you can sell it, lease it, refinance it, give it away, or do anything else with it you choose. You also continue to be responsible for paying the mortgage and taxes and maintaining the property. If you still own the property at your death, the TOD deed works to automatically transfer the property to your named beneficiaries without having to go through probate. And if you change your mind during your lifetime about whom you have named as beneficiaries in the TOD deed, you can amend or revoke it at any time.

How is it used?
More than twenty-five states now allow the use of TOD deeds, and more states are considering adopting laws that allow them. You do not have to actually live in a state that allows TOD deeds to be able to use one, but the property must be located in such a state. The requirements for creating a TOD deed vary by state, but in essence, the process includes the following basic steps.

Complete the TOD Deed
With the assistance of an experienced estate planning or real estate attorney, determine the specific form or language required for the TOD deed to comply with the relevant state’s law. Remember to look at the requirements in the state where the property is located. A TOD deed will look much like any other property deed, but it will contain specific language that makes it clear that the deed does not take effect until after your (the owner’s) death.

Name Your Beneficiary
Your beneficiary can be one or more people or organizations, such as a business or a charity. You may want to consider naming a contingent, or alternate, beneficiary in case your first choice for beneficiary passes away before you do. You want to be sure to use the beneficiary’s legal name rather than categories or relationships, such as “my children.” For example, if you are naming your two daughters as your beneficiaries, you should use “Jane Doe and Julie Smith” instead of “my daughters.” If you name more than one beneficiary, you should indicate on the deed how the beneficiaries will own the property (as equal joint tenants with rights of survivorship, as tenants-in-common, each as to an equal one-half share, or some other form of co-ownership).

Describe the Property
Be sure to use your property’s correct legal description in the TOD deed. Your property’s legal description may be found on the current deed recorded in the official property records, your sales contract, or your mortgage documents. However, legal descriptions are not always copied accurately. It is important to consult an experienced real estate or estate planning attorney or a title company regarding the preparation of deeds and the accuracy of legal descriptions on deeds.

Sign the Deed
If you are the property’s sole owner, you are usually the only person who needs to sign the deed. However, if you are married and live in a community property state or if you have declared the property your homestead, it may be prudent or required that both you and your spouse sign the deed, a joinder, or a waiver to show that your spouse has no objection. An experienced real estate or estate planning attorney or title company can ensure that your intended transfer meets all legal requirements and is properly documented.

If you co-own property with someone else as tenants in common, you can use a TOD deed to designate a beneficiary for your share of the property. If you co-own the property as joint tenants, all co-owners will need to sign the deed, and it will not be effective until the last surviving owner passes away. If only one co-owner signs the TOD deed, it will not be effective unless the signer is the last owner to die. Keep in mind that even if you and your co-owner sign a TOD deed, if you die first, the surviving co-owner can revoke the TOD deed before their death.

Example: Julie and John own property as joint tenants with rights of survivorship, meaning that when one of them dies, the other becomes the owner of the entire property. They sign and record a TOD deed that names their niece Stacy as the beneficiary. When Julie passes away, John becomes the property’s sole owner. At John’s death, if John has not revoked the TOD deed or sold the property, Stacy becomes the property’s owner.

If your state requires it, have the owners’ signatures notarized. An attorney or title company can usually arrange for a notary to be present if necessary. The beneficiary does not need to sign the TOD deed. In fact, a beneficiary does not even need to be told about the deed (although it is usually a good idea to do so). However, the deed will be recorded and become a matter of public record, so you will not be able to keep it a secret either.

Record the Deed
File the deed with the proper land records authority, such as the county clerk, recorder’s office, land registrar, or office of land records in the county where the property is located. This will require paying a minimal recording fee. Recording the deed is a very important step because the TOD deed will be effective only if you record it. A beneficiary cannot record the TOD deed after you die and have it be effective. Again, consider working with an experienced real estate or estate planning attorney or title company to ensure that the TOD deed is accurate and effective.

Benefits of a TOD Deed
There are a number of reasons why you might want to use a TOD deed. As already discussed, a TOD deed can be used to avoid the public and sometimes costly and time-consuming probate process. In an effort to avoid probate, some property-owning parents will put their adult children’s names on their existing deed. The problem with this approach is that because the adult child is a current owner, the parents’ property becomes immediately subject to the child’s creditors, divorce settlement, etc. In addition, this approach may cause unintended gift tax consequences. If the property is subject to a mortgage, there may also be real estate transfer, conveyance, or documentary stamp tax consequences and even the inadvertent triggering of the mortgage’s due-on-sale clause. A TOD deed avoids this problem because there is no immediate transfer or change in beneficial ownership—a child beneficiary has no ownership in or legal right to the property until after their parents’ death.

Another benefit of TOD deeds is that they can be created cheaply and easily. In addition, a TOD deed can be changed or revoked at any time, but be sure to follow your state’s laws for effective revocation. A TOD deed will take precedence over a last will and testament, even if the will was written later, so it is important to remember that a will cannot change or revoke a TOD deed.

Disadvantages of a TOD Deed
One of the downsides of a TOD deed is that if you have multiple beneficiaries, there are legal idiosyncrasies you might not know about that can significantly impact the other beneficiaries’ inheritances or result in an outcome that does not reflect your ultimate wishes.

Example: Mom has four adult children. She creates a TOD deed naming her four children as the beneficiaries of her home as joint tenants with rights of survivorship. Mom’s oldest child dies, leaving two children. Mom is incapacitated and cannot update the TOD deed. When Mom dies, the home will go to her remaining three living children, leaving the deceased oldest child’s two children (Mom’s grandchildren) with nothing. However, if the TOD deed named her four children as beneficiaries of her home as tenants in common, each beneficiary would inherit a separate but equal share, and in this example, the deceased child’s one-quarter share will be distributed according to their estate plan (and not automatically revert to their surviving siblings).

In sum, a TOD deed can be an inexpensive and simple way to avoid the probate process upon your death and transfer your real property to your intended beneficiaries. However, it is important to understand the practical and legal implications for your individual situation and wishes. Contact the lawyers at Cox Law Group (410) 988-3973, www.TheCoxLawGroup.com, if you have questions about whether using a TOD deed is appropriate for your circumstances.