Parkland, Florida Shooter Could Inherit Over $400,000; Public Defenders Ask to Withdraw

The public defenders for the Parkland, Florida shooter suspect, Nikolas Cruz, have asked to withdraw from his defense as their client stands to inherit over $400,000 from his mother’s life insurance policy. Lynda Cruz, the mother of the Parkland shooter, passed away from pneumonia in November 2017, just a few months before the shooting. Based on Florida state law, public defenders are not allowed to work for defendants that can afford their own attorney.

The public defenders disclosed the possibility that Cruz would receive an insurance payout last year, but said at the time that it would likely amount to about $30,000. In the new filing, the defendants said neither they nor Cruz were aware the actual amount would be higher.

Because some of the victim’s families have sued Cruz in civil court, a judge could rule that he would not receive the insurance policy pay out and instead have it awarded to them.

Check out the article by Thomas Barrabi, Parkland, Florida Shooter Could Inherit $432,000; Public Defenders Ask to Withdraw.

Luke Perry was Buried in Eco-Friendly Mushroom Burial Suit

According to Sophie, the daughter of the late Beverly Hills 90210 actor Luke Perry, her father was buried in an eco-friendly “mushroom suit.” She says that being buried in the suit rather than a traditional casket was one of the star’s last wishes.

As Sophie explains, when Perry discovered the suits, he “was more excited by this than I have ever seen him.” The burial suits are made by Coeio, a “green burial company,” according to its website. The eco-friendly suits, which cost $1,500, help to “return your body to the earth without harming the environment,” the company claims. According to People magazine, the suits have “built-in mushrooms and other microorganisms” that help to speed up the body’s decomposition process.

Check out the article by Madeline Farber, Luke Perry was Buried in Eco-Friendly ‘Mushroom Burial Suit,’ Late Actor’s Daughter Says, Fox News, May 4, 2019.

Estate Planning for Art Collectors

Last month I had the pleasure of attending the 36th Annual Magic City Art Connection in Linn Park and it was nothing short of amazing. Even though the park was covered with dancing, paintings, music, and sculptures from artists from all over the country, I especially appreciated the work from painters and sculptures here in the local Birmingham area. It wasn’t until a few years ago that I realized how many talented artists were right here in our backyard.

All of this excitement over art brings up an interesting situation to consider: how do you incorporate your art collection into your estate plan? Sure, you likely don’t have an authentic Picasso or Michelangelo, but you may have art that’s been passed down through your family; or maybe you want to start an art collection. Whether you collect paintings, audio recordings, or photography, your plan should include instructions on how to dispose of your most sentimental possessions. Below are a few estate planning considerations for art collectors.

Value of My Art?

When it comes to your estate plan, a primary consideration must be the monetary value of your art. This isn’t always the first thing collectors think about because their passion lies in the art itself, not the monetary value of the art. After all, we collect art because of an appreciation for a certain subject or medium, not the money. However, art collectors (especially high net worth collectors) must remember that their art will be among the many things considered when their estate is valued, which may have various tax consequences.

One way to get started on valuing your assets is to contact an art appraiser. Also, gather bills of sale for your art. This will be useful when the art changes hands in the future. This will also be helpful in determining the whether your art will appreciate or depreciate over time.

Disposing of Art in Estate Plan

Another consideration for art collectors is deciding how to dispose of their art in their estate plan. There are three main ways to dispose of art in your estate plan:

Selling Your Art and Distributing Proceeds to Beneficiaries – This is a very common choice for art collectors. One of the benefits of selling art is that the art will be included in the value of your estate, which may lessen or eliminate capital gains taxes that you would otherwise face if you sold the art during your lifetime.

Donating Your Art to a Charitable Organization – Donating your art to a charitable organization or a museum is an excellent way to dispose of your art. It can also be one of the more simple options. Donating your art through your estate plan will create a tax deduction based on the value of your art. Give while you’re living and you can take an income tax deduction, also based on the value of the piece or collection at the time of the donation. Depending on when and how you decide to donate your art, donors are often able to work out other details with the donees, including where the art may be placed in the museum.

Devising Your Art to Your Loved Ones – Another common option is to keep the art within the family by gifting it to your heirs in your estate plan. You could gift it directly to your beneficiaries in your plan, but a more secure way of transferring your art to your beneficiaries and controlling how they are handled is to transfer the collection to a trust you create while living. This trust can also be useful for tax purposes.

Speak With Your Family

Though estate planning may not be a very fun conversation to have with your family, it is very important to have, especially if you have an art collection. It is highly possible that your family may not feel the same way about your art as you do, which may have an impact on deciding who to give your art to and how to dispose of it at your death. Incorporating your art into your estate plan may be almost as complex as the art itself. If you have questions about how to incorporate your art in your plan, don’t hesitate to contact us today.

Three Documents You Need for Healthcare Decision-Making

Dealing with a family member who’s incapacitated can be a very difficult and emotional experience. One thing that makes it even more stressful is having to make difficult decisions when that family member is no longer able to do so on their own due to being incapacitated. When multiple family members are involved this often leads to quarreling and drama over these decisions. In the absence of your documented wishes on your healthcare treatment, your family and loved-ones are left to speculate what treatment and healthcare decisions you would make if you could speak for yourself. That’s why its important to plan before you become incapacitated.

There are three essential legal documents for making health care decisions that must be in place prior to becoming incapacitated:

  1. Advanced Directive. This legal document, also called Medical Power of Attorney or Medical or Health Care Proxy, gives your agent the authority to make health care decisions for you if you cannot do so because you have become incapacitated.
  2. Living Will. This legal document allows you to state your wishes for end-of-life medical care, in case you become unable to communicate your decisions.
  3. HIPAA Authorization. Federal and state laws dictate who can receive medical information without the written consent of the patient.  This legal document gives your doctor or other health care provider the authority to disclose your medical information to the agent selected by you.

If you or any of your family members need assistance with preparing any of these documents feel free to give us a call at (205) 578-1597.

Requirements for a Valid Last Will & Testament in Alabama

While having a last will and testament is great and essential to every estate plan, it won’t be worth the paper its written on if it isn’t validly executed. Every state has different requirements that a last will and testament must meet in order to ensure that the will is validly executed, but for the most part, every state has many of the same requirements and formalities. If these requirements aren’t met, the will can’t be legally enforced. Below are the requirements for a valid last will and testament in Alabama.

Age & Capacity

In order to execute a last will and testament, a person must be at least 18 years of age. The person must also be of sound mind. To be of sound mind means to be aware of what property you have in your estate, what you want to do with your property, and you must be able to comprehend how your property will be distributed based on your will. A common mistake made by many is waiting until a sick family member is suffering from some form of dementia before urging them to execute a will. This is never a good idea as it will almost always call the person’s capacity into question, which may provide an opening for the will to be contested.

Writing and Signature Requirements

A last will and testament in Alabama must be in writing and signed by the testator (the person writing the will), or at the testator’s direction and in his or her presence. The will also has to be witnessed and signed by at least two people. These witnesses must either see the testator sign the will or witness the testator acknowledge his or her signature on the will. Historically, a person who had an interest in the assets in the will would be disqualified as a witness to the execution of the will. That is no longer the case.

A “Self-proving” Will?

If the above requirements are met, the will has been validly and legally executed in Alabama. However, when the will has to be enforced by a probate court one of the witnesses will have to appear at the probate court in order for the will to be enforced by the court. If a will is self-proving then this step can be skipped.

A “self-proving” will is one that comes with a sworn statement from the testator, who acknowledges that the document is his last will and testament and that he or she is 18 years of age or older, of sound mind, and that he or she is executing the will voluntarily. The witnesses of the will must affirm that the testator voluntarily signed the will, and to the best of their knowledge the testator was at least 18 years old, of sound mind, and was under no duress when signing the will. These sworn statements can be made in front of a notary public. For this reason, most wills are notarized in addition to the previously-mentioned requirements.

If you’d like to know more about the requirements of a valid last will and testament, or if you’d like to have a last will written, contact our office today at (205) 578-1597.

Guardianships and Powers of Attorney: What’s the Difference?

The terms “guardianship” and “power of attorney” are mostly heard when dealing with a family member or loved one who’s incapacitated. But what’s the difference between the two? Are they the same thing? Who needs a guardianship and who needs a power of attorney? When should I get a power of attorney vs a guardianship?

A guardianship is a legal process that gives one person the ability to make decisions for another person. These can be obtained for either an incapacitated adult or a minor child. A Power of Attorney is also a legal tool that gives one person (the agent) the ability to make decisions for another person (the principal). It is a legal document that is usually drafted by an attorney. Historically, a power of attorney became ineffective when the principal became incapacitated. However, most individuals who use powers of attorney for estate planning purposes opt for a “durable” power of attorney. A durable power of attorney remains effective even after the principal has become incapacitated. A person becomes incapacitated when they are unable to make their own financial and healthcare decisions.

So what’s the difference?

A Guardianship can be established when an individual is no longer able to make their own business and financial decisions. Guardianships in Alabama can only be obtained through the court system, and a judge decides who the guardian will be. Generally, a guardianship is used when there are no less restrictive means to make decisions on behalf of an individual.

A Power of Attorney, on the other hand, is created while an individual still has the ability to make his or her own business and financial decisions. The principal can decide who will be his or her agent, when the power of attorney will become effective, and what matters his or her agent can address on their behalf. The principal must, however, have a sound mind when executing this document. If you become incapacitated before you’ve had a chance to have a power of attorney drafted and you happen to need certain business and/or financial decisions made on your behalf, then someone will have to be appointed as a guardian by a court.

The main difference between the guardianship and a power of attorney is that a guardianship takes away the right of the individual to make decisions, while a power of attorney permits another to make decisions in conjunction with the individuals’ choices. There are times when it is necessary to remove the right to make poor decisions.

If I have a power of attorney will I still have to have a guardian appointed for me?

The answer depends on whether the Power of Attorney document is sufficient to meet all the needs of the incapacitated person. You might need a guardianship when a Power of Attorney is limited or not sufficient and doesn’t address certain matters that can be handled on behalf of a principal. In this case, you would need a Guardianship over the person in order to make decisions for them.

Another reason you might need a guardianship is when you have a Power of Attorney, and you need to protect an incapacitated person from being taken advantage of. A Power of Attorney allows another individual to make decisions on behalf of another person jointly. A guardianship goes one step further and takes away an incapacitated person’s rights to make individual decisions on their own.

Contact the Law Office of Rodney Davis, PLLC at (205) 578-1597 to speak with a lawyer who handles guardianships and powers of attorney. Our office can help you determine whether your Power of Attorney document is sufficient and whether you might also need a Guardianship.

More Real Estate Investment Opportunities Coming to Birmingham Area

Birmingham Initiative Seeks to Provide New Opportunities for Real Estate Investors In Opportunity Zones

The Tax Cuts and Jobs Act, signed into law by President Trump in December 2017, created Opportunity Zones to spur investment in distressed communities and in rural low income and urban areas throughout the country. New investments in Opportunity Zones can receive preferential tax treatment. The opportunity zones are delineated by local government officials and approved by the Treasury Department.

Pursuant to the Act, 24 opportunity zones were nominated in the Birmingham area by Governor Kay Ivey and certified by the Department of Treasury in 2018. These 24 opportunity zones cover 77 of Birmingham’s 99 neighborhoods. According to a recent article in the Birmingham Times, Birmingham Mayor Randall Woodfin recently announced the creation of the BIG Partnership, a new initiative that seeks to further advance and incentivize investment in the communities within Birmingham’s opportunity zones. The recent article on the announcement can be found here.

Among the many projects to be provided by the new initiative will be an educational campaign that will educate local residents on the opportunity zones.

To learn more about Birmingham’s opportunity zones and how we can help you get started in real estate investment, contact us today.

Thanksgiving and Estate Planning

Thanksgiving is one of America’s most beloved holidays–the cranberry sauce, the turkey, the pies, the rare reunion with family members you love and miss. One of the things that makes Thanksgiving so enjoyable is the planning. Thanksgiving gatherings generally don’t come together on their own. It takes family members deciding in advance who will roast the turkey, who will prepare the desserts, who will bring the beverages, etc.

Thanksgiving is just one example of how important it is to plan ahead in order to ensure success. Estate planning is no different. Planning your estate is important to make sure your assets are handled the way you would want them to be handled in any situation.

Coincidentally, Thanksgiving dinner provides a perfect opportunity for families to discuss their estate planning goals while everyone is together under the same roof. Many adults unfortunately delay having a conversation about estate planning with their families for many reasons. However, there are many benefits of having a conversation on estate planning with your family during holidays such as Thanksgiving.

Having the conversation provides an opportunity to form an understanding between you and your family on your goals and wishes for your assets and affairs. It also helps to reduce any confusion that there may be between you and your family, which may reduce the chances of disputes forming later down the road. Decisions don’t necessarily have to be made in the meeting. Sometimes it enough to simply achieve an understanding between you and your family on certain matters.

Many business owners and wealthy families, for example, use major holidays such as Thanksgiving to discuss business and philanthropy.  If there’s a family business, family members may want to use that meeting to update the rest of the family on business performance or the succession plan for that business.

Having a conversation on estate planning during the Thanksgiving holiday is a great start to ensure a successful estate plan. That conversation should, however, transition to the office of a trusted adviser who can answer any questions or concerns you may have about your estate, as well as assist you with preparing a secure estate plan.

Contact our office today to discuss your estate planning goals. 

What to Do With an Inherited IRA

What to Do With an Inherited IRA

Inheriting an IRA may seem like a good thing, but there can be tax consequences if you aren’t careful. If you inherit an IRA, you should check with an attorney or financial advisor as soon as possible to find out your options.

IRAs are personal savings plans that allow you to set aside money for retirement and get a tax deduction for doing so. Earnings in a traditional IRA generally are not taxed until distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. Earnings in a Roth IRA are not taxed, nor do you have to start taking distributions at any point, but contributions to a Roth IRA are not tax deductible. Any amount remaining in an IRA upon death can be paid to a beneficiary or beneficiaries.

Spouse as beneficiary

If you inherit your spouse’s IRA, you can treat the IRA as your own. You can either put the IRA in your name or roll it over into a new IRA. The Internal Revenue Service will treat the IRA as if you have always owned it. If you are not yet 70 ½ years old, you can wait until you reach that age to begin taking minimum withdrawals. If you are over 70 ½ and were 10 or more years younger than your spouse, you can use a longer joint-life expectancy table to calculate withdrawals, which means lower minimum withdrawal amounts. If you inherit a Roth IRA, you do not need to take any distributions.

You can leave the account in your spouse’s name, but in that case you will need to begin taking withdrawals when your spouse would have turned 70 ½ or, if your spouse was already 70 ½, then a year after his or her death. If you want to drain the account, you can use the “five-year rule.” This allows you to do whatever you want with the account, but you must completely empty the account (and pay the taxes) by the end of the fifth year after your spouse’s death.

Non-spouse as beneficiary

The rules for a child or grandchild (or other non-spouse) who inherits an IRA are somewhat different than those for a spouse. You can choose to take distributions over your lifetime and to pass what is left onto future generations (called the “stretch” option). The required minimum distributions will be calculated based on your life expectancy. This allows the money to grow tax-deferred over the course of your life and to be passed on to your beneficiaries, if you wish. If you want to do this, you must retitle the IRA into an inherited IRA and take your first distribution by December 31 of the calendar year following the year the decedent died.

If you choose not to stretch the IRA, you will have to withdraw it all within five years of the original IRA owner’s death. This can lead to a large tax bill–unless the IRA is a Roth, in which case the distributions are tax-free.

Trust as beneficiary

If the IRA names a trust as the beneficiary, the trust may not be able to take advantage of the opportunity to stretch withdrawals across decades. Stretching an IRA may still be an option, however, if the trust is considered a “see-through” or conduit trust. If you have inherited an IRA in a trust, contact your attorney to find out your options.

Estate tax

If the decedent’s estate was subject to an estate tax, the IRA beneficiary may be able to get an income tax deduction for the estate taxes paid on the IRA.

For information on how to include an IRA in your estate plan, click here.

Be Careful About Putting Only One Spouse’s Name on a Reverse Mortgage

Be Careful About Putting Only One Spouse’s Name on a Reverse Mortgage

A recent case involving basketball star Caldwell Jones demonstrates the danger in having only one spouse’s name on a reverse mortgage. A federal appeals court has ruled that an insurance company may foreclose on a reverse mortgage after the death of the borrower, Mr. Jones, even though Mr. Jones’ widow is still living in the house. While there are protections in place for non-borrowing spouses, many spouses are still facing foreclosure and eviction.

A reverse mortgage allows homeowners to use the equity in their home to take out a loan, but borrowers must be 62 years or older to qualify for this type of mortgage. If one spouse is under age 62, the younger spouse has to be left off the loan in order for the couple to qualify for a reverse mortgage. Some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way. But couples often did this without realizing the potentially catastrophic implications. If only one spouse’s name was on the mortgage and that spouse died, the surviving spouse would be required to either repay the loan in full or face eviction.

In order to protect non-borrowing spouses, the federal government revised its guidelines for reverse mortgages taken out after August 4, 2014 to allow spouses to stay in the house as long as they meet certain criteria, including proving ownership within 90 days of the borrowers death. In 2015, the federal government allowed lenders to defer foreclosure on a widow or widower and assign the mortgage to the federal government. Advocacy groups looking at reverse mortgage foreclosures have found that despite these new regulations, lenders are still foreclosing on non-borrowing spouses. Of the 591 non-borrowing spouses who have sought help to avoid foreclosure, only 317 received assistance.

These regulations did not help Mr. Jones’ wife, Vanessa. Mr. Jones, who blocked more than 2,200 shots during his 17-year professional basketball career, obtained a reverse mortgage in 2014 on the Georgia home he lived in with his wife. The contract defined the “borrower” to be “Caldwell Jones, Jr., a married man.” Ms. Jones did not put her name on the reverse mortgage because she was under age 62 at the time of the mortgage. Mr. Jones died later that year, and when Ms. Jones did not repay the loan, the insurer began foreclosure proceedings.

Ms. Jones sued the insurer in federal court to prevent the foreclosure, arguing that federal law prohibited the insurer from foreclosing on the house while she lived in it. Under a provision in federal law, the federal government “may not insure” a reverse mortgage unless the “homeowner” does not have to repay the loan until the homeowner either dies or sells the mortgaged property and defines “homeowner” to include the borrower’s spouse.

On appeal, the 11th Circuit Court of Appeals (Estate of Caldwell Jones, Jr. v. Live Well Financial (U.S. Ct. App., 11th Cir., No. 17-14677, Sept. 5, 2018)) ruled that the federal law in question only covers what the federal government can insure and does not govern the insurer’s right to foreclose. The court agrees with Ms. Jones that the law is intended to safeguard widows and implies that the federal government should not have insured the loan in the first place, but finds that federal law does not cover the insurer’s private right to demand immediate payment and pursue foreclosure.

When purchasing a reverse mortgage, it is always safer to put both spouse’s names on the mortgage. If one spouse is underage when the mortgage is originally taken out, that spouse can be added to the mortgage when he or she reaches age 65. If you have a reverse mortgage with only one spouse on it, contact an elder law attorney to find out the best way to protect the non-borrowing spouse.