Author Archives: Rachel Ziegler, Kaiser Law Group

The Extraordinarily Odd Estate Plan of Ventriloquist Edgar Bergen

I’ve had the opportunity to read many unusual estate plans.   And I’ve certainly heard of highly unusual (and problematic!) celebrity estate plans.  But the story of vaudeville performer Edgar Bergen’s Will may “take the cake” as the most unusual. 

Edgar Bergen was a vaudeville actor, comedian, and performer who was most well known as a ventriloquist.   He performed with his dummy, Charlie McCarthy, for over forty years, beginning in the 1930s, first in theatre, then radio, and later in television and films.   Bergen was also the father of actress Candice Bergen, most famous for her role as Murphy Brown in the television series Murphy Brown which first aired in 1988. 

Edgar Bergen died in 1978 and his Will included a very unusual provision. Bergen left $10,000 for the benefit of his dummy, Charlie McCarthy.   He directed his Executor to pay the gift to the Actors Fund of America, a charity still in existence today, to establish a fund to be known as the “Charlie McCarthy Fund”, so that Charlie could continue to perform.  Bergen expressed his wish that the money be managed and invested so that Charlie could give charitable performances for those in need, especially destitute and disabled children.  Bergen explained in the Will that the gift was intended for “sentimental reasons” because of the companionship he had received from Charlie throughout his life.  Notably, Bergen failed to leave anything to his daughter whose career had not yet taken off. 

A trust for a dummy!  That’s a new, and certainly strange, one for me!  You may be wondering… would this even be legal now?  Sort of.  Massachusetts law does not allow trusts to be established for the benefit of tangible personal property (which a dummy is).  It does however allow charitable purpose trusts – trusts without specified (human) beneficiaries that are established for certain charitable purposes.  This law became effective in Massachusetts in 2012 when the Uniform Trust Code was enacted.  I believe the Charlie McCarthy Fund is a charitable purpose trust that would be legal in Massachusetts. 

I am not sure if Charlie ever actually performed after Bergen’s death.  Charlie was later gifted to the Smithsonian Museum by the Bergen Family Foundation.  If you want to learn more about Bergen’s Will and the impact of this unusual gift on his family, check out Candice Bergen’s 2015 autobiography, A Fine Romance. 

Ever wondered how an Estate Planning attorney advises her own parents?

Stamped: “June 29, 1912”

I’m sharing a real email I sent my Dad recently.  He sought my advice about how best to prepare a list of his financial information so I would have it if he died or became disabled.  This is right up my alley, so I happily complied and now want to share.

First, some background on my family.  Dad is a retired physician.  He is in his early 70s, healthy, responsible, and fully capable.  Mom died many years ago and Dad is unmarried but in a long-term relationship.  I have one brother.  He and I are responsible, close, and similarly situated.    

Like most dads, mine does not like to take advice from his children.   (The fear of dying on an extended European cruise seems to have led him to go against his better judgment!)   Listing financial information, and keeping the list up-to-date, is not an easy task for any of us.  Discussing the process with family members can be difficult too.  Hopefully, my email outline will help your family.

Dad –

I suggest you make a list of your financial information and try to keep it current.  It can be in an Excel spreadsheet, Word document, or even just handwritten.  Since keeping track of information can be burdensome over time, keep it simple.  I would maintain an electronic AND a hard copy of the list somewhere where we would look if you died or lost capacity.  It shouldn’t be locked in a safe or safe deposit box.  I encourage you to continue to get paper statements for all accounts, including all credit cards and bills. 

Here is what you should put on the list.  I am making some assumptions about what you own, so please add to this if I am missing any unusual assets.

ASSETS

List all Bank, Brokerage, Non-Retirement Investment, Pensions and Retirement accounts.  For each account list the following 4 things: (1) The name of the Institution/Bank; (2) The account number; (3) How the account is titled.  Is it in your individual name?  Is it in the name of a Trust?  Is it owned jointly with someone else? (4) If the account has a beneficiary, who is it?

Be sure to include on the list any accounts titled in the name of Mom’s Trust.

List all Life Insurance Policies.  For each policy list the following 5 things: (1) The name of the life insurance company; (2) The policy number; (3) Who owns the policy.  Is it owned by you or by a Trust? (4) Who is the beneficiary? (5) The location of the policy, if you have it.

List any important additional information about your assets, including a safe deposit box, tangible items or stock certificates stored elsewhere, and the title to your car.  Please list the item, location and information needed to access it.

LIABILITIES

List all Mortgages, HELOCs, and Car loans.  For each account list the following 2 things: (1) The name of the Lender; and (2) The account number

List all Credit cards.  For each card list the following 3 things: (1) Name of the credit card company; (2) The account number; (3) Is the amount due paid automatically? 

HEALTH CARE INFORMATION

List your Medicare Number.  List your Supplemental (Medigap) Health Plan and Member Number.  List your Long Term Care Insurance carrier and Account Number.  Where is the LTC insurance policy located? List name and contact info of Primary Care Physician. 

ADVISORS

List name and contact info of Estate Planning Attorney and location of original Estate Plan documents.  List name and contact info of Accountant.  List name and contact info of Financial Advisor.

DIGITAL ASSETS

Try your best to keep a list of usernames and passwords for your online accounts.  This should include bank/investment accounts you manage online, credit cards, email accounts, photo accounts, service/shopping accounts (like Amazon, Netflix, etc.), and social media accounts (like Facebook).  Do your best on this!  It is hard to keep up to date.  I struggle with this too.  I don’t think it is essential (or even possible) for it to be perfect.  If you have a Master Password for Phone or Computers, be sure to put that on the List.   

Rachel

Estate Planning on the Streets of Philadelphia

I discovered a hidden historical gem on the streets of Philadelphia this week.  13th Street, right in downtown Philadelphia, has been re-named in honor of Philly native and local hero Edith “Edie” Windsor.  Edie Windsor was a LGBT civil rights activist.  After her wife Thea died in 2009, Windsor, as Executor and beneficiary of Thea’s estate, was required to pay $363,000 in federal estate taxes on the assets she inherited.  Had Windsor been married to a man, the assets would have passed to Windsor completely estate tax free because they would have qualified for the unlimited Federal estate tax marital deduction.   Windsor could not benefit from the unlimited marital deduction even though she and Thea were legally married under state law because the Defense of Marriage Act (DOMA) limited marriage to a union between a man and a woman.  DOMA prevented same-sex married couples from receiving federal benefits available to heterosexual married couples.

Windsor sued the federal government alleging that DOMA was unconstitutional.  She asked the court to order the IRS to extend the estate tax marital deduction to same-sex married couples and refund her the estate taxes.

In 2013, the Supreme Court agreed with Windsor.  The court found that DOMA was unconstitutional.  It held that assets left after death to a same-sex spouse are eligible for the federal marital deduction and should not be subject to estate tax.  Windsor was entitled to an estate tax refund in full.  

In 2017, the IRS issued a Notice that provided some retroactive relief for same-sex taxpayers.  A taxpayer who had used estate tax exemption or allocated generation skipping transfer tax exemption to gifts to a same-sex spouse can now apply to the IRS to restore his or her exemptions.  Same-sex marriage became legal in Massachusetts in 2004.  Massachusetts same-sex married couples can obtain this relief retroactive to the Windsor decision.

Edie Windsor advocated for same-sex marriage for the rest of her life.  She died in 2017 at the age of 88.

Summertime Estate Planning … with Low Interest Rates

When interest rates are low – as they are this summer – some estate tax planning strategies become particularly advantageous.  In my last post I wrote about the benefits of intra-family loans with a low applicable federal rate (AFR).  It is also a good time to consider the following other estate tax planning strategies – Grantor Retained Annuity Trusts (GRATs) and Charitable Lead Annuity Trusts (CLATs).

Grantor Retained Annuity Trusts (GRATs)

A GRAT is an irrevocable trust funded by a grantor for the ultimate benefit of children, grandchildren, or other beneficiaries.  During the trust term, the grantor retains the right to an annual annuity.  In a “zeroed-out” GRAT, the value of the annuity is equal to the value of the original gift to the trust plus interest at the Section 7520 rate set by the IRS each month.  Any appreciation above the annuity amount passes to the beneficiaries gift tax-free.  It is a tax-advantaged way to pass assets to children or grandchildren. 

GRATs work especially well when interest rates are low.  The 7520 rate has been falling since the beginning of 2019.  The August 2019 rate is 2.2%, which is low.  For that reason, it may be a good time for you to established and fund a GRAT.  You will retain the right to an annuity for the GRAT term and your children or grandchildren will benefit from a tax-free gift at the end of the term. 

Charitable Lead Annuity Trusts (CLATs)

A CLAT is another type of irrevocable trust that is effective when interest rates are low.  During the CLAT term, an annuity of a set amount is paid to a charity.  At the end of the term, whatever is left in the trust passes to the trust beneficiaries – typically children and grandchildren – gift and estate tax-free. 

The present value of the charitable annuity must be equal to the initial gift to the trust, but the present value is discounted by the 7520 rate.  A low 7520 rate means that more will pass to children and grandchildren.  CLATs are a great tax-advantaged way to support a charity as well as benefit your family.  A low 7520 rate makes CLATs an even more appealing estate tax planning strategy.

Summertime is the Time to Make Intra-Family Loans

Interest rates have hit a low point this summer.  Low interest rates set each month by the IRS (the applicable federal rate (AFR) and the 7520 rate) make some estate tax planning strategies particularly effective.  For this reason, it may be a good time to take a break from the heat and sun this August to do some estate tax planning.  It will save your family some money, and perhaps pay for next year’s summer vacation. 

One estate tax planning strategy that is very effective when interest rates are low are intra-family loans.  Intra-family loans are loans to family members.  They can be made outright to a family member or to a trust for his or her benefit.  Often parents or grandparents wish to loan money to children or grandchildren to buy a new home, renovate an existing home, or make a business investment.    The loans can be forgiven over time to take advantage of the lender’s gift tax annual exclusion and to maximize wealth transfer planning. 

The IRS requires that the lender charge interest on an intra-family loan at the applicable federal rate (AFR).  This rate is set each month by the IRS, and has been trending downward since early 2019.  The August 2019 AFR for a mid-term loan (with up to a 9 year term) is very low – 1.85%.  In fact, quite surprisingly, the mid-term AFR (1.85%) is lower than the short-term AFR (1.89%) which means the loan can be for a longer term with a lower rate. 

A low interest rate makes intra-family loans an appealing estate tax planning strategy.  If you are considering a loan to your children or grandchildren, this may be a good time to make one.  In addition, if you have an existing outstanding loan, this may be a good time to refinance it. But be careful, and get good advice.  The loan must be documented by a Promissory Note and the lender must charge interest at the AFR.  Otherwise the IRS may view it as a taxable gift. 

If I Had a Million Dollars….

Dale Ann Kaiser receiving the Trust’s lottery winnings at the Massachusetts Lottery Commission.

Estate planning attorneys are often the recipients of bad news – news of death, illness, disability and divorce.  But playing this role also means we get to hear our clients’ good news too – news of new babies, college graduations, and well-planned inheritances.  A client recently called with some fun, exciting news that we had never heard before.  Larry* had won the Massachusetts lottery, and he had won big – a $1,000,000 prize. 

Larry called because he had some legitimate concerns about how to handle the lottery money.  He and his wife had already decided that they would take the lump sum payment, rather than a twenty year annuity.  That meant that his take home winnings, less income tax withholding, would leave them with about $460,000.  They intended to use the money to pay off some debts and contribute to retirement savings.  They were very concerned about anonymity.  They didn’t want anyone – including their adult children and close family – to know about the winnings.  They feared they would demand money.

We helped Larry solve this problem.  We established a Trust to receive the lottery winnings.  The Trust was a declaration and had no donor.  Dale Kaiser was named as Trustee.  The name of the Trust did not identify Larry.  The Trust received the money and then immediately distributed it outright to Larry.  He could then use it as he planned.  The Trust ensured Larry total anonymity. 

In early June, as Trustee, Dale went to the Massachusetts Lottery Commission to get the lottery proceeds check payable to the Trust.  A couple days later, the Trust distributed the winnings to Larry.  It was an exciting week at the Kaiser Law Group!

*Not our client’s real name.

Estate Planning is a Family Affair: The Legal Documents your young adult children should have

Every summer we have the opportunity to meet with several newly minted 18 year olds before they head off to college for the first time.   These super responsible young adults come to us – often at the urging of their parents who are our clients – to sign some basic and very important estate plan documents that will enable a parent to make important life decisions for them in an emergency.

We had our first meeting this week with the daughter of a client who came in to sign her Health Care Proxy, Living Will, HIPAA release, and Durable Power of Attorney before she headed off on her summer and college adventures.  These meetings are especially fun ones for us estate planning lawyers.  We get to meet some responsible young adults and relive (if only for a few short minutes) the excitement of pre-college preparation and anticipation. 

If you have a young adult child heading off into the real world this fall, we recommend that he or she sign estate plan documents.  When a child turns 18 and becomes a young adult, his or her parents no longer have the legal ability to make medical and financial decisions for the child.   Yet, in an emergency the young adult may need the parent to step in to make decisions.  Without legal authority in place, the parent may not be allowed to do that.  To be sure the parent is able to help, the young adult child should in advance sign the following documents:

Health Care Proxy – In this document, the child authorizes the parent to make health care decisions on his or her behalf.

Living Will – In this document, the child expresses his or her wishes about health care, particularly end-of-life health care, so that a parent has the ability to make end-of-life decisions on the child’s behalf.

HIPAA Release – In this document, the child releases his or health care information to the parent get access to the child’s health care information.

Durable Power of Attorney – In this document, the child authorizes the parent to make financial decisions on his or her behalf.  This will enable the parent to assist a child in financial matters, such as paying bills, opening or closing bank accounts, negotiating leases, and dealing with health insurance companies.

Although most young adults will name a parent in these documents, it is not required.  The young adult child can name another trustworthy adult – a guardian, aunt or uncle, grandparent, or older sibling.

Entering the real world for the first time can be complicated.  We’re happy to help your family get these documents in place.  It’s fast, easy and inexpensive.  And we’ll have the pleasure of meeting your young adult children!

The Estate Planning Prize Buried in your Breakfast Cereal

The story of the Kellogg brothers – inventors of Kellogg’s Corn Flakes – offers a surprisingly interesting lesson about Estate and Charitable Planning.  Their story is told by historian Howard Markel in “The Kelloggs: The Battling Brothers of Battle Creek”. 

“The Kelloggs” is about food history, business, and family dynamics, but also about the brother’s estate plans and charitable foundations.

John Harvey Kellogg was a medical doctor who founded the Battle Creek Sanitarium in 1886.  The Sanitarium (or “San” for short), located in Battle Creek, Michigan, was a health and wellness resort spa at which John Harvey treated patients and preached his views on health and wellness.  He believed that a healthy breakfast was essential to good health and required his patients to eat his own Toasted Corn Flakes while at the San.  John Harvey was a physician, author, and preacher who became the father of the modern wellness movement. 

The younger Will Keith (W.K.) Kellogg started his career as John Harvey’s business manager but later used his business acumen to commercialize and distribute Toasted Corn Flakes across the country.  He founded the Battle Creek Toasted Corn Flake Company, later the Kellogg Company.  He was a successful businessman who revolutionized American food production and the way we eat.

The brothers spent most of their lives at odds with one another – personally and in business.  They spent years litigating who owned the rights to their Toasted Corn Flakes.  (W.K. won, for the most part.)  As a result, both men died unhappy, but wealthy (W.K. considerably more so) and left the bulk of their estates to charities.  Their charitable goals and success at achieving those goals were very different.

Upon his death in 1943, John Harvey left his entire estate to his foundation, the Race Betterment Foundation, which was devoted to promoting eugenics, the science of improving the population’s genetics.  Within twenty years of John Harvey’s death his Foundation’s endowment was depleted because of its controversial and questionable charitable goals as well as trustee misuse.

W.K. had far greater charitable success.  In 1931, he founded the W.K. Kellogg Foundation, a charitable foundation devoted to promoting the welfare, health and education of children.  He was motivated largely by personal tragedy.  His young grandson had fallen out of a window as a toddler, suffered a severe head injury, and required lifelong care.

In 1934, W.K. endowed the Foundation with more than $66 million in Kellogg company stock and other assets.  He left the bulk of his remaining estate to the Foundation at his death in 1951.   The W.K. Kellogg Foundation still exists today with an endowment of over $9.5 billion, one of the largest charitable foundations in existence.  It continues its mission to help vulnerable children, and its headquarters remain in Battle Creek. 

To learn more about how to achieve your charitable goals in your estate plan, consult with a good estate planning attorney. 

The Kaiser Law Group Legal Team

As we at the Kaiser Law Group plan for 2020 and beyond, we decided it was time to update our firm photos.  We want our photos and images to project our goals and visions for our firm.  We strive to work together as a team to offer collaborative and seamless estate planning and administration services to our clients in a kind and thoughtful manner.  We think this photo of our legal team shows our commitment to that goal, and we hope you agree. 

Dale Ann Kaiser (middle) established the Kaiser Law Group in 1998 to offer her clients superior legal services with personal attention.  Rachel Ziegler (right) joined Dale in 2008 to help support and grow the practice with a team approach.  Davina Lewis (left) joined in 2017 to work with Dale and Rachel.  We work collaboratively on all estate planning and administration matters to provide efficient and high quality legal services. 

Not pictured are Leisha Fontecchio and Megan Lenzi who provide important paralegal and administrative support and are integral members of our team.  They were invited to join the photo, but are surprisingly camera shy.

The Estate of David Rockefeller and the “Rockefeller Beetles”

David Rockefeller, former chairman of Chase Manhattan Bank and patriarch of the Rockefeller family, died in 2017.  He was the grandson of Standard Oil founder John D. Rockefeller and at the time of his death his estate was estimated to be valued at over $3 billion.  His wealth consisted of interests in family trusts, real estate, a massive art collection, and more. 

In addition, Rockefeller had a unique hobby.  He collected beetles – the bugs, not the cars.  He’d been doing so since he was a young boy and had amassed a collection of over 150,000 beetles, more than 10,000 different species.  The collection was one of the largest of its kind and included big, colorful, iridescent beetles as well as lots of the small, brown, creepy kinds.  It was housed in a special room in Rockefeller’s Manhattan townhouse during his lifetime.

At his death, in his estate plan, Rockefeller gave the beetles to Harvard’s Museum of Comparative Zoology.   He also gave $250,000 to install and maintain the collection.  The “Rockefeller Beetles” exhibit at the museum opened in late 2018 and currently displays a portion of the collection.  I had the pleasure of visiting the museum recently and stumbling across this unexpected new exhibit.

My visit got me thinking about Rockefeller’s estate plan and the implications of his unique charitable gift.  If Rockefeller included the gift of the beetles to Harvard in his estate plan, the beetles would be includible in his sizeable estate for estate tax purposes, but the estate would take a charitable deduction on his estate tax return for the charitable gift.  If Rockefeller had not included the gift of the beetles to Harvard in his estate plan, but his heirs chose to donate them to the museum after his death, the beetles would have been includible in his estate, passed to his heirs, and generated estate tax, but his heirs would be able to take a charitable deduction on their income tax returns. 

Either way, the beetles had to be valued.  The Executor of Rockefeller’s estate would have had to report the value of the beetles on his estate tax return.  So, I wonder, how do you value beetles?  Hire a beetle appraiser?  Research recent sales of other beetle or bug collections?  Put them on the market and see what museums or personal collectors offer to pay?  Would Harvard value them?  I don’t know and I don’t think there is a lot of precedent.  I would love to find out what the estate attorney did and how the beetles were valued and reported on Rockefeller’s estate tax return. 

If you find yourself in Harvard Square this spring or summer, consider a quick stop to view the Rockefeller Beetles.  If nothing else, you will learn something quite unique about one of America’s wealthiest men.  And if you are squeamish, consider my 8 year old daughter’s advice and go before lunch.