TENANTS BY THE ENTIRETY FOR PERSONAL PROPERTY

By: Ethan R. Okura

Back in December of 2009, my father, Sanford K. Okura, wrote an excellent article titled “Tenants by the Entirety.” It explained the pros and cons of holding property as “tenants by the entirety” as opposed to holding them in revocable trust(s). At the time, tenants by the entirety protection was only available for property owned directly by married couples or registered reciprocal beneficiaries.

The main benefit of owning property as tenants by the entirety is to protect read more

INCOME TAXES and IRAs

By: Ethan R. Okura

It’s that time of year again. No, not Valentine’s Day…and I’m not even talking about President’s Day. I’m talking about Taxes! Your personal income tax return isn’t due until April 15th, and if you’re like many people, you might file for an extension so that you have until October 15th to submit it. However, it’s usually right around this time of year that taxes are on the mind, and I start getting questions about how to save on taxes. read more

Estate Planning Update 2019

By: Ethan R. Okura

Hawai‘i Herald Columnist

Happy New Year! The following is a 2019 update on important numbers used in estate planning and Medicaid planning in Hawai‘i.

How much money and property can a person have at death without paying estate taxes? At the end of 2017, Congress passed a new tax bill which the president signed into law. It doubled the previous estate and gift tax exemption from $5 million to $10 million (adjusted for inflation). Taking into account inflation, read more

WRAPPING UP YOUR ESTATE PLAN

By: Ethan R. Okura

Happy Holidays!

This is the time of the year when we make an extra effort to be thankful for all that we have. We focus on the spirit of giving and we wrap up presents for our family and loved ones.

This thought made me chuckle a little at a recent meeting with a client at what our law firm calls the “Wrap-up Meeting.” This is usually the final meeting with our client after they have signed their estate planning documents, we’ve recorded their deed(s) and made copies of their read more

RETIREMENT SAVINGS AND NEW CONTRIBUTION LIMITS – An Overview to Help You Prepare for 2019

By: Ethan R. Okura

There’s no question about it: Saving for retirement is not easy.

There are quite a few types of retirement accounts. Each has its own rules and tax benefits, although, for the most part, they tend to be similar. The amounts you can contribute, however, vary from plan to plan. The Internal Revenue Service recently announced higher limits for allowed contributions to your retirement savings. These new limits are effective January 2019, which might help some of us to save more read more

The Role of the Successor Trustee: What Am I Supposed to Do Now?

The Role of the Successor Trustee: What Am I Supposed to Do Now?

By

Ethan R. Okura

 

We have often seen this scenario:  A parent, sibling, or dear friend has finally gotten around to doing their initial estate planning. You are so happy for them. And then you find out you’ve been named as their “successor trustee.” What does that even mean? What are your responsibilities? How will you know what to do when the time comes? When exactly does that time come? What exactly is a trust in the first place? Relax. There’s an orderly process you can follow to understand your responsibilities as a successor trustee and how you can play your part to make that loved one’s transitions in and through life go smoothly.

Let’s start with, “What is a trust?” A trust is a legal agreement between the person setting up the trust, usually called the “Settlor” and the person assuming responsibility for managing the trust assets, called the “Trustee.” In the vast majority of estate plans, which involve a revocable trust—which can be cancelled or amended at any time—the person creating the trust also names herself as the initial trustee. The final group of people involved with each trust is the beneficiaries. Usually, the Settlor is also the only initial beneficiary of the trust. Then after the Settlor passes away, her spouse, children, other family members, and/or other friends and loved ones become the beneficiaries.

When the Trustee can no longer act as Trustee for himself or herself because of disability, incapacity, or death, then the Successor Trustee (or more than one “Co-Trustees”) named in the Trust document is called upon to take over.   Unfortunately, even though the Successor Trustee may be an individual in whom the Settlor had great trust and faith in being able to handle the affairs of the Trust, most Trustees have never done this before and really have no idea what to do or how to do it.   Many Settlors, as well as Trustees, may even think that the Revocable Trust will automatically take care of everything by itself, without any work involved by anyone!

The main objectives of a revocable trust based plan are:

  • Distribute the Settlor’s assets to the right people, in the right amounts, at the right times and in the right manner appropriate for each of them, without the delays and expenses of Probate Court involvement.
  • Manage the Settlor’s assets for him or her in the event of his or her disability or incapacity, and to manage those assets for the people who will later inherit them (until such time

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Aretha Franklin: Following in Prince’s Footsteps to Pay Millions in Death Taxes

Aretha Franklin: Following in Prince’s Footsteps to Pay Millions in Death Taxes

By

Ethan R. Okura

 

A little over two years ago I wrote about Prince, the music recording legend, and how he passed away without a will. I detailed some of the problems that his estate would face—and is still facing to this day—on account of not adequately preparing. As of April, 2018, Prince’s six heirs had not received one red cent, while the bank acting as executor of the estate and its team of lawyers had already collected $5.9 million in fees and expenses, and had requested at least an additional $2.9 million more be approved by the court. Considering that court documents estimate Prince’s estate may have been worth approximately $200 million, and about half of that will ultimately go to the IRS and the State of Minnesota for estate taxes, there may be very little left for each heir when all is said and done.

Well, history repeated itself last month as the Queen of Soul, Aretha Franklin, joined the ‘Chain of Fools’ and also passed away without a will or a trust. Aretha Franklin’s estate has an estimated value of $80 million. She had four sons who are named as potential beneficiaries of her estate in the documents filed in a Michigan probate court. They can ‘Say a Little Prayer’ that there won’t be any legal battles as there have been with Prince’s estate. Nevertheless, her estate will pay to the IRS taxes of about 40% of the amount over the $11.8 million in estate tax exemption available in 2018—an estimated $27.5 million in addition to court and legal fees. If I were her, I’d be ‘Rolling in the Deep’ having to pay such a large sum in taxes unnecessarily simply because of poor planning.

Aretha Franklin was very private about her financial affairs. I imagine that if she had known that she was about to pass away as a ‘Natural Woman’, and that her finances would all become a matter of public record in probate court, and in addition, that her estate would pay about $34 million in taxes, that there ‘Ain’t No Way’ she would have continued to ‘Rock Steady’ without doing appropriate estate planning. This is especially so because one of her heirs, Clarence, has special needs. One of her lawyers even tried to get her to create a will and a trust, but she never followed through.

Now that Prince’s and Aretha’s heirs and executors are trying to build a probate ‘Bridge Over Troubled Water’ to settle their estates, hopefully the heirs will still end up with a decent inheritance, and preserve the ‘R-E-S-P-E-C-T’ that these famed musicians rightfully earned during their esteemed careers.

If you also follow in their footsteps, it’s possible that your intended beneficiaries might not get the inheritance that you wanted to leave them; there can be long delays before your heirs receive anything; fights might break out among your family members; and even if you don’t have enough assets to incur an estate tax, your financial information will all become publicly available. If you have a child with special needs (or who develops disabilities later in life), she or he may end up losing government benefits she or he could otherwise qualify for when inheriting assets directly from your estate instead of protected in a special needs trust.

A 2017 study showed that 60% of adults don’t even have a will or a living trust. This figure includes 64% of Generation X, and 42% of Baby Boomers! When asked why they hadn’t even done the basics, the most common answer was, “I haven’t gotten around to it yet.” This data is on par with what we see among new clients coming to our law firm, Okura & Associates Estate Planning Attorneys. If you have been putting it off, don’t become one of these statistics. See an estate planning lawyer right away to get the process started.

 

© OKURA & ASSOCIATES, 2018

“UNDUE INFLUENCE” AND OTHER WILL PROBLEMS

“UNDUE INFLUENCE” AND OTHER WILL PROBLEMS

By:

Ethan R. Okura

 

In previous columns, I have addressed the subject of financial abuse of the elderly. This usually involves outright stealing or fraud. However, there is another form of financial abuse that is subtler, harder to identify and often doesn’t show up until after the beloved family member has passed on. This type of problem is called “undue influence.”

 

What is “Undue Influence?”

Black’s Law Dictionary defines “undue influence” in these words: “In regard to the making of a will and other such matters, undue influence is persuasion carried to the point of overpowering the will, or such a control over the person in question as prevents him from acting intelligently, understanding, and voluntarily, and in effect destroys his, and constrains him to do what he would not have done if such control had not been exercised.”

California Probate Code Section 86 and California Welfare and Institutions Code Section 15610.70 define undue influence as “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.”

What that means in plain English is that sometimes an unscrupulous person will manipulate another person who is dependent on them or otherwise vulnerable in such a way that the unscrupulous person will benefit or profit from the fact that the other person is dependent or vulnerable. In other words, it’s when someone puts inappropriate pressure on someone else to get him or her to do something that they wouldn’t do otherwise.

 

Examples of Undue Influence

Although undue influence can occur while executing a contract or a real estate transaction, it most often comes up in the contesting of a last will and testament. One of the most notorious Hawai‘i cases in recent times involved the Estate of Herbert, a case that the Hawai‘i Supreme Court decided on March 17, 1999.

In this case, an elderly woman named Ms. Herbert had written a will in September of 1988, leaving all of her assets to her local church upon her death. Ms. Herbert had a 26-year-old Canadian caregiver named Hanno Soth, who assisted her with doctor visits, taking prescription medication and even managing her finances beginning in December 1989 until her death. Hanno Soth apparently had Ms. Herbert change her will in December of 1989, leaving everything — over $1 million — to him. This happened during the two-week period when Ms. Herbert’s live-in housekeeper was out of state on a vacation. Soth later fired the housekeeper, whose last day of work happened to be three days before Ms. Herbert passed away. At trial, there was even testimony that Soth had spent the night at Ms. Herbert’s home for the first time the night she died. These are very suspicious circumstances.

Friends, neighbors, the housekeeper, and Ms. Herbert’s doctors and lawyers testified that when the new will was signed, Ms. Herbert did not have sufficient mental capacity to understand what she was signing — or to even remember the next day what she had signed. The court decided that Ms. Herbert did not have the mental capacity to change her will at that time, was mistaken about what was written in it and was unduly influenced in its execution. Thus, the caregiver, Mr. Soth, did not succeed in inheriting her assets.

Another example is more recent. It involves Princess Abigail Kawananakoa (known as “Kekau”), the closest living relative to Queen Liliuokalani. The queen was Kekau’s great-aunt. There has been a legal battle brewing between Kekau’s longtime domestic partner and now-wife, Veronica Worth, and Kekau’s former attorney, James Wright. He petitioned the court, asking that Kekau, now in her 90s, be prevented from controlling her trust after she suffered a stroke. Kekau herself sent a handwritten letter to a local news outlet insisting that it was only a minor stroke and accused her attorney of mismanagement. Her estate is worth over $200 million. You can see why many people are concerned about what happens to it. The attorney claimed to be protecting Kekau from “opportunists and interlopers,” perhaps referring to Kekau’s now-spouse, Ms. Worth.

Although Kekau’s stroke was real, whether it left her incapable of managing her affairs is the question before the courts. Although she insists that she is still competent, at least two medical experts appear to have found her lacking mental capacity. Now, the three board members of the Abigail K.K. Kawananakoa Foundation — a charitable organization that is expected to inherit large sums for the benefit of Native Hawaiians upon Kekau’s death — are also attempting to intervene in the management of Kekau’s trust in order to protect the future interests of the foundation. In this case, Kekau’s former attorney, James Wright, is claiming that he worries that Worth is exercising undue influence over Kekau to benefit from her estate. Worth, on the other hand, claims that Wright is the one trying to take advantage of Kekau’s estate. The court will ultimately settle the dispute.

In these types of cases, it’s hard to know for sure whether there actually were bad actors or just people trying to look out for the elderly person’s best interests as they perceived those interests evolving. Regardless, it’s important to communicate your wishes with multiple friends and family members early, so that they know your intentions.  It’s also important to establish a good relationship with an estate planning firm that will likely be around when you might become incapacitated so that there is a clear record of your plan and whom you trust to carry out that plan for you.

 

© OKURA & ASSOCIATES, 2018

An Ethical Will: The Importance of Passing Down Your Values, Not Just Your Assets

An Ethical Will: The Importance of Passing Down Your Values, Not Just Your Assets

By

Ethan R. Okura

 

 

Have you heard the proverb “Shirtsleeves to Shirtsleeves in Three Generations?” Or perhaps you’ve heard the saying as “Rags to Riches to Rags in Three Generations.” The ancient Chinese version of this Proverb is 富不过三代 (Fu bu guo san dai), which roughly translates to “Wealth does not sustain beyond three generations.” Various cultures throughout history have seen this same pattern. The first generation creates success and builds wealth, the second generation preserves and transfers it, and the third generation (or sometimes subsequent generations) spends it until it is all gone. Why is this pattern so universal? Is there anything we can do to change this outcome? Today we will look at this issue and how to overcome it.

At Okura & Associates, we have seen many families’ estates; some through multiple generations. The fundamental problem here is one of education, knowledge, and personal or family values. Whether the size of the estate represents a modest amount of wealth (under one million dollars including the home), or a high degree of financial success (tens of hundreds of millions of dollars), we often encounter this phenomenon in our clients’ lives.

Usually, the first generation that creates family wealth has deeply ingrained values of thrift, frugality, hard work, and tenacity. They really appreciate the value of a dollar because they know first-hand how hard it was to save up the first bit of capital that they used to create the financial success they ultimately achieved. Often, the second generation grew up without much to start with and saw their parents working hard to achieve that degree of success, benefiting from it only later in their lives, if at all. Usually, the third generation starts off life accepting the fact that the family has access to money and other resources, and they tend not to ever know financial hardship in the same way that the first or second generation did. Sometimes they are raised in a very entitled or spoiled manner.

Traditionally, Estate planning has only been concerned with the mechanics of passing on wealth to heirs while minimizing estate and gift taxes, and avoiding probate. What we have come to realize in the modern era of estate planning is that it is also important to pass on family values and knowledge. Families that have dynastic wealth surviving many generations tend to do things such as:  Bringing in the next generation to learn how to operate and ultimately take over the family business from early on; involving the children in discussions about family finances, where to spend money, and how to invest it; and discussing what charitable causes and institutions the family will support.

Although this process should start well before one’s death, it can often be helpful to prepare an Ethical Will or a Legacy Letter—a document intended to pass on one’s values, wisdom, and love to future generations. This is not a legal document intended to enforce any restrictions on the use of an inheritance or demand certain actions of family members, but rather stands as a statement of life purpose, family history, and cultural or spiritual values. Even though it doesn’t carry any legal weight, taking some time to write a thoughtful Ethical Will or Legacy Letter can help to clarify your goals, values, and vision, allowing you to better work with your lawyer about how you want to design your estate plan. Some clients use it as a guide to subsequently include restrictions in their will and trust that require children and grandchildren to be drug tested, graduate from college, and/or be working a full-time job before they are eligible to receive any inheritance from their share of the trust.

Historically, an ethical will stems from early Judeo-Christian traditions. There are examples of such in the bible and have continued as a practice to this day, especially amongst the Jewish community. A non-religious modern example comes from President Barack Obama who wrote a Legacy Letter to his daughters on January 18, 2009.

Even if each generation does its best to teach the succeeding generation the value of working hard, saving for the future, and investing wisely, the lessons don’t always stick. Sometimes the previous generation does not have the right knowledge to teach their children how to preserve wealth in a new era, even if they did have the know-how to acquire and accumulate it in decades past. Regardless, we find that those who take the time to pass down family values, and incorporate their descendants early on in the process of financial and business management tend to see their generational wealth continue a lot longer than the standard return to poverty by the third generation.

 

*For more information on Ethical Wills/Legacy Letters, see the following web pages: https://celebrationsoflife.net/ethicalwills/

https://www.everplans.com/articles/how-to-write-an-ethical-will

 

© OKURA & ASSOCIATES, 2018

How To Apply For Long-Term Care Medicaid

HOW TO APPLY FOR LONG-TERM CARE MEDICAID

By:

Ethan R. Okura

 

In last month’s column, I focused on the history of Medicaid and discussed some of the difficulties that arise when dealing with Medicaid’s many laws, rules and policies. I also told you about some of the problems that people have encountered when applying for Medicaid on their own or without proper guidance.

In this column, I’ll go over the steps you will have to take when applying for Long-Term Care Medicaid on your own.

Application

In order to qualify for LTC Medicaid, you must meet the following criteria:

  • Be a United States citizen or a “qualified alien” (permanent resident for five years).
  • Be a resident of the state of Hawai‘i.
  • Have a Social Security number.
  • Be age 65 or older, or blind or disabled.
  • Require nursing facility level of care.
  • Meet asset requirements.

Once you are certain that you meet all of the aforementioned criteria, you can submit your Medicaid application. There are a number of required and optional forms to fill out when applying for LTC Medicaid, starting with the Hawai‘i Department of Human Services’ Form 1100. This is the basic Medicaid assistance application form. When applying for long-term care, you will also have to submit all of the following forms:

  • DHS 1100B: Supplemental form for long-term care services.
  • DHS 1167: Statement of intent for applicants in long- term care facilities.
  • DHS 1169: Evaluation for placement of liens.

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