Stone Law Offices, Ltd.

What’s the Latest News on Rapper Nipsey Hussle's Estate?

“The late rapper’s loved ones are expected to inherit $1 million each.”

Seven months after he was fatally shot outside of his clothing boutique, rapper Nipsey Hussle's family has officially been given the sole custody of his 10-year-old daughter, Emani.

BET’s article “Nipsey Hussle’s Family And Lauren London Granted Joint Guardianship Over His Estate” reports that Nipsey’s sister, Samantha Smith, first tried to get a guardianship over Emani this past spring.

According to media sources, a judge has appointed Nipsey’s immediate family, including his siblings, Smith, Sam “Blacc Sam” Asghedom, and his mother, Angelique Smith, as Emani’s guardians. The girl is from a previous relationship between the late rapper and a woman named Tanisha Foster, whom Nipsey’s family felt was “unfit” to properly parent her.

In addition, the judge awarded Lauren London guardianship over the couple’s three-year-old son’s estate. The boy is her only child with the late rapper. The report stated that London filed for guardianship of Kross in July, four months after Nipsey died.

London will now have a legal say in the management of her longtime partner’s estate, as it concerns their son. Both Emani and Kross are expected to inherit $1 million each, when they reach the age of majority.

Because a minor can’t inherit an estate outright, a guardianship is requested or ordered by a probate judge. It’s a legal process put into place to protect those who are unable to care for their own well-being due to infancy, incapacity or disability. A court will appoint a legal guardian to care for an individual, known as a ward, who is in need of special protection. It’s common for a guardianship to be set up in situations, like that of Russell’s children.

The Victory Lap rapper’s older brother, Sam “Blacc Sam” Asghedom, has been overseeing the estate since the Grammy-nominated artist’s death.

Asghedom filed a petition with the court to take control over the estate last summer, so he could handle business dealings and make certain that his brother’s legacy stays intact. His request was granted by the judge, and he was appointed as the executor of his late brother’s estate in August 2019.

Russell’s sibling wrote in his filing, “[Nipsey’s] passing has created significant media attention, which, in turn has presented potential time-sensitive business opportunities based on [Nipsey Hussle]’s likeness, right of publicity and other intellectual property based on the media attention surrounding [Nipsey Hussle]’s exceptional life story and musical career.”

How Can Life Insurance Help Me with my Post-Divorce Estate Planning?

“With nearly half of all marriages ending in divorce, it’s not uncommon to have clients who are either going through divorce proceedings, living as a single parent after a divorce, or have been married more than once–with or without stepchildren.”

Divorce can be extremely stressful, but in addition, the challenges divorce brings to estate planning can be an added worry. In many instances, a frequently overlooked strategy can provide real solutions for divorcees and blended families. That’s life insurance. Using life insurance to address some of these issues, can help you create an estate plan that really fits your needs, goals and unique family circumstances.

Insurance News Net’s article “5 Ways Life Insurance Eases Post-Divorce Estate Planning” provides us with five ways life insurance can help you in the event of a divorce:

Have money for divorce-related expenses. If the divorce is contested or includes child custody issues, the proceedings be quite long, maybe months or years. As a result, your attorney’s fees could be hefty. Those with an established permanent life insurance policy can take withdrawals or loans from the policy’s cash value to help pay expenses. If the policy is designed effectively, you won’t have to liquidate other assets or take money from your estate designated for beneficiaries.

Protect your income post-divorce. Your income can change significantly after a divorce, especially if one spouse was a stay-at-home parent. They may get alimony payments to help make up the difference, but if the payor unexpectedly dies, the lost income can create a lot of stress and financial hardship for those left behind. Permanent life insurance on the paying spouse can help provide coverage and replace income lost, if they pass away.

Preserve your estate post-divorce. Life insurance can also provide funds to pay off existing debt held by the deceased spouse. This also can eliminate the need to liquidate other assets from the estate that would have gone to the surviving spouse or other heirs. Take withdrawals or loans from the policy–tax-free, if the policy is set up correctly–and you can effectively plan your legacy, even if your ex-spouse hasn’t been financially responsible.

Ensure that children get a fair inheritance. If you have children from a previous marriage, it may make sense to provide for them through life insurance, rather than passing their assets to a new spouse first. In the alternative, you can provide for your new spouse through life insurance and leave the estate to the children outright or in a trust. With either option, dividing how you leave assets to biological children and a new spouse in a blended family, can eliminate stress and bad feelings, especially if the new spouse has children of their own.

Help fund college or other expenses for your child’s children. Protecting the lives of both parents with permanent life insurance allows you to make certain that the expenses for the children are addressed. Therefore, if the former spouse is responsible for paying medical expenses, college expenses, or other costs for the children, life insurance can provide needed funds, if that spouse passes. Permanent life insurance with cash value can also provide funds during the insured spouse’s lifetime (if cash isn’t readily available) to pay college tuition or help adult children repay student loan debt.

You should also look at permanent instead of term insurance. Term insurance may be less expensive, but permanent insurance can accumulate cash value that can be drawn from the policy, while the spouse is still alive, as well as providing a death benefit. You may want to also see about adding riders to customize your policy. With a permanent life insurance policy and a long-term care rider, you have the ability to accelerate the policy’s benefit while you’re alive to pay for long-term care costs. This can put to rest some of the concerns for divorcees, about who will take care of them if they can’t take care of themselves.

A carefully planned permanent life insurance policy can help you protect yourself, your income and your estate throughout your lifetime, even if you experience divorce.

What is a Special Needs Trust?

“Special needs lawyers can work with clients to set up individualized special needs trusts.”

Supplemental Security Income and Medicaid are critical sources of support for those with disabilities, both in benefits and services.

To be eligible, a disabled person must satisfy restrictive income and resource limitations.

That’s why many families ask elder law and estate planning attorneys about the two types of special needs trusts.

Moberly Monitor’s recent article, “Things to know, things to do when considering a special needs trust,” explains that with planning and opening a special needs trust, family members can hold assets for the benefit of a family member, without risking critical benefits and services.

If properly thought out, families can continue to support their loved one with a disability long after they’ve passed away.

After meeting the needs of their disabled family member, the resources are kept for further distribution within the family. Distributions from a special needs trust can be made to help with living and health care needs.

To establish a special needs trust, meet with an attorney with experience in this area of law. They work with clients to set up individualized special needs trusts frequently.

Pooled trust organizations can provide another option, especially in serving lower to more moderate-income families, where assets may be less and yet still affect eligibility for vital governmental benefits and services.

Talk to an elder law attorney to discuss what public benefits are being received, how a special needs trust works and other tax and financial considerations. With your attorney’s counsel, you can make the best decision on whether a special needs trust is needed or if another option is better, based on your family’s circumstances.

What Are the Rules About an Inheritance Received During Marriage?

“An issue that frequently arises is the treatment of an inheritance received by a spouse during the marriage. The basic rule is that any property received via gift or inheritance during the marriage is exempt from equitable distribution.”

A good add-on to that sentence is something like, “provided that it is kept separate from marital assets.” To say it another way, when an inheritance or any other exempt asset (like a premarital asset) is “commingled” with marital assets, it can lose its exempt status.

Trust Advisor’s recent article asks, “Do I Have To Divide The Inheritance I Received During My Marriage?” As the article explains, this is the basic rule, but it’s not iron-clad.

A few courts say that an inheritance was exempt, even when it was left for only a short time in a joint account. This can happen after a parent’s death. The proceeds of a life insurance policy that an adult child beneficiary receives, are put into the family account to save time in a stressful situation. You may be too distraught to deal with this issue when the insurance check arrives, so you or your spouse might deposit it into a joint account. However, in one case, the wife took the check and opened an investment account with the money. That insurance money deposited in the investment account was never touched, but the wife still wanted half of it when the couple divorced a few years later. However, in that case, the judge ruled that the proceeds from the insurance policy were the husband’s separate property.

The law generally says that assets exempt from equitable distribution (like insurance proceeds) may become subject to equitable distribution, if the recipient intends them to become marital assets. The comingling of these assets with marital assets may make them subject to a division in a divorce. However, if there’s no intent for the assets to become martial property, the assets may remain the recipient spouse’s property.

Courts will look at “donative intent,” which asks if the spouse had the intent to gift the inheritance to the marriage, making it a marital asset. Courts may look at a commingled inheritance for donative intent, but also examine other factors. This can include the proximity in time between the inheritance and the divorce. Therefore, if a spouse deposited an inheritance into a joint account a year before the divorce, she could argue that there should be a disproportionate distribution in her favor or that she should get back the whole amount. Of course, the longer amount of time between the inheritance and the divorce, the more difficult this argument becomes.

Be sure to speak with your estate planning attorney about the specific laws in your state. If there is a hint of trouble in the marriage, it might be wiser to simply open a new account for the inheritance.

What Do I Need in My Estate Plan in Addition to a Will?

“This time of year, families gather to celebrate the season, offering an opportunity to air your plans for the inevitable.”

American Legion’s recent article, “Planning beyond the will” says that it’s important that your estate planning papers are synced with your wishes and the current law, but you should also look at some items outside of the fundamental documents:

Beneficiary designations. This includes life insurance policies, IRAs, current and former employer retirement plans and annuities. A beneficiary designation supersedes any instructions in a will or trust. As a result, it’s important that your designations reflect your current wishes and are synched with the rest of your estate plan.

Property title. Be sure that you know how your property is titled. If the family home is titled as joint tenants with rights of survivorship, then it will pass seamlessly to the surviving owner. There are also potential income-tax implications. Ask your estate planning attorney about this and the best way to address title concerns.

Personal property plans. This could be as simple as giving your trustee or executor the authority to make decisions, designating instructions with respect to specific property in your will or trust, or incorporating a personal property memo into your plan. The guidance you give can alleviate major problems, when you’re no longer around to settle disputes.

A continuity book. In the military, it’s common that just as you’re getting used to your responsibilities, it’s time to PCS (Permanent Change of Station) or switch jobs. Many leaders require a continuity book that helps bridge that knowledge gap, so your successor has an idea of what to do. You can adopt this practice in your personal affairs. This can include an inventory of your assets, liabilities and insurance policies. This “continuity book” should also include your social media account passwords, key contacts, funeral wishes and the location of your key estate planning documents. This is an important resource for trustees and executors, as they assume their duties.

Enjoy the holidays, and this year, work on making sure that your family spends many more happy holidays together.

Do I Need Life Insurance After I Get Divorced?

“In a divorce, both beneficiaries and policy ownership should be modified to account for the change in marital status and its implications.”

One of the messy tasks in a divorce is working through life insurance, and it’s frequently forgotten.

Investopedia’s article, “How Life Insurance Works in a Divorce,” explains that addressing life insurance is a critical issue in the divorce process, especially for divorcing couples with children. Maintaining life insurance protects the financial interests of both parties and their dependent children. This involves making the necessary beneficiary changes, accounting for the cash value in whole or universal life policies, protecting child support and alimony income, and—most importantly—making certain that any children involved are financially protected.

Most married couples with life insurance list their spouse as the primary beneficiary. Life insurance protects a family from financial devastation, if you die and your income is lost. For a married person, naming your spouse as your beneficiary makes certain that he or she can continue to pay the mortgage, put food on the table and possibly bring up the children without your income. Life insurance is especially critical, if you provide the majority of the income.

In a divorce, especially an acrimonious one, odds are good that you’ll no longer want your ex-spouse profiting from your death. If there are no children are involved, most life insurance policies let you change the beneficiary at any time.

Some life insurance policies, such as many whole life and universal life policies, accumulate cash value over time. Each month when you make your premium payment, some of the money is deposited into a fund that grows with interest. This is the policy's cash value, and it’s your money. Any time while the policy is active, you can forgo the death benefit and take the cash value. This is called “cashing out” your life insurance policy.

Since the cash value from a life insurance policy is part of your net worth, you should list the policy, including its cash value, as a marital asset to be divided. Frequently, when marital assets are divided evenly, half the cash value from the policy goes to each spouse.

Protecting child support or alimony income is really important for the spouse who takes primary custody of the children after the divorce. These child support funds are for feeding and clothing the children and saving for college. If the noncustodial parent isn’t around anymore, this income goes away and it could put the custodial parent in a bind. If you have custody of the children, the best way to protect yourself from this situation, is to keep a life insurance policy on your ex-spouse with a benefit amount high enough to replace your child support or alimony income at least until the last child is 18. Being the custodial parent, if your ex is irresponsible or untrustworthy, you may just purchase the policy and pay the premium yourself, since coverage stops if payments lapse.

If your ex-spouse is no longer in the picture (whether by death or lack of responsibility), and your children rely only on you for financial support, if you die, they’d have nothing. Without your income, your children have no way to support themselves or save for college. A guardian, either a relative or someone appointed by a judge, will take care of your children, but there are still many unknowns in this situation. If divorce makes you a single parent, you need enough life insurance on yourself to protect your children to see them through, until they reach 21.

What Estate Planning Do I Need with a New Baby?

“Becoming a parent means taking on a whole new level of responsibility. After all, you've now got a new life in your hands and your child is dependent on you for everything.”

Congratulations, you’re a new mom or dad. There’s a lot to think about, but there is a vital task that should be a priority. That is making an estate plan. People usually don't worry about estate planning, when they're young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set him or her up for a secure future.

Motley Fool’s recent article, “If You're a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they've protected their child, no matter what the future holds.

1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will, is to name a guardian for your children. If you designate a guardian, you will select the person you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you'll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death.
4. Look at a Trust. If you die prior to your children turning 18, they can't directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children, after they've passed away.

When you have a new baby, working on your estate planning probably isn't a big priority. However, it's worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

How Do I Set Up a Living Trust?

“Setting up a living trust is largely the same, regardless of where you live in the U.S.”

For those who want to spare heirs the hassle and cost of the probate process, you may consider transferring your assets to a living trust.

Yahoo! Finance’s recent article, “How to Create a Living Trust in Tennessee” explains that creating a living trust is mostly the same, regardless of where you live in the U.S.

Let’s look at the basic steps you’ll need to take, with the help of a qualified estate planning attorney:

1. List the assets that should go into the trust. There are some assets, such as 401(k) plans and IRAs, which must be in an individual’s name. Other items like bank accounts, securities and life insurance policies can but don’t need to, provided you set up payable-on-death accounts or designate your beneficiaries. Usually real estate and business interests are shielded with living trusts.
2. Select the right type of living trust. If you use a revocable trust, you can remove assets or cancel the trust. With an irrevocable trust, you don’t have this luxury. If you’re not married, you can create a single trust. If you’re married, a Tennessee Community Property Trust will hold what you own jointly without having to split property or say who owns what. However, this type of trust isn’t a good option, if you’re in a later marriage with separate assets and children from previous relationships.
3. Name a trustee. The trustee will manage the trust. With revocable trusts, you can also be the trustee, or in the case of a joint trust, you and your spouse can be co-trustees. If you name yourself, name a successor trustee for when you pass away.
4. Create a trust agreement. It’s best to hire an estate planning attorney to create the trust, because it must be done correctly and legally. If the trust is found to be invalid, there may be penalties, taxes and added costs.
5. Sign and notarize the trust document.
6. Transfer property into the trust. The law states that the trust won’t be effective, unless and until property is retitled in the name of the trust.

Trusts and their rules can be complicated. Use an experienced estate planning attorney to do it right.

Do I Have to Pay Taxes on My Inheritance?

“An inheritance is not subject to income taxes.”

For all practical purposes, the U.S. government doesn’t have an inheritance tax. The inheritances of cash or property aren’t taxed as income. As of 2019, the estate tax is only imposed on estates above $11.4 million for singles, or twice that for couples.

Investopedia’s recent article asks “Are Estate Distributions Taxable?” The article explains that the only exception is for income taxes due on withdrawals from retirement accounts that are ordinarily subject to taxes, like traditional IRA accounts.

However, some states do tax inheritances, and to date, those states include Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. None of those states applies the tax to the spouse or children of the deceased. When imposed, the taxes range from about 5% to about 15% of the inheritance.

If an estate executor doesn’t pay income tax before he or she distributes the inheritance, the IRS may impose limited beneficiary taxes on those who inherit.

Right now, the federal estate tax applies only to inheritances above $11.4 million per individual. Estates, just like individuals, are required to file income tax forms. They may also owe taxes in the form of interest payments on accounts.

The estate can pay the taxes due or distribute the taxable income to the heirs. In certain cases, this actually saves the beneficiary money because the entire estate may be in a higher tax bracket than the individual who’s getting just a portion of the inheritance.

An exemption to the estate tax for inheritances up to $5 million was instituted about nine years ago in 2010 and 2011 (but there were special rules for decedents dying in 2010). This exemption has been reaffirmed, and the limits have been raised in subsequent laws passed by Congress. The current rules exempts from estate taxes the first $11.4 million inherited by an individual, and twice that amount if the inheritance is distributed to a couple.

It’s believed that approximately 2,000 Americans a year are liable for the inheritance tax under that tax exemption law. These individuals usually work with estate planning attorneys and accountants who are skilled at finding strategies to avoid or minimize the estate tax they owe. One way of avoiding any estate tax, is to give away some of the estate in advance to family members. Your attorney may also discuss the use of an irrevocable life insurance trust.

What Can I Do with Unspent Money in a 529 Plan?

“Despite the burgeoning cost of higher education these days, you might still find yourself with unspent money in a 529 plan after your child has graduated from college. As you may know, if you withdraw the money for non-qualified education purposes, you have to pay taxes plus an additional 10% penalty on the earnings withdrawn from the account.”

Los Altos Online’s recent article, “How to use up leftover money in a 529 college savings plan,” says there several ways to use unspent money in a 529 plan, while avoiding the taxes and/or penalties. Here are some options to consider.

Graduate school. If your child is interested in an advanced degree, the money can be used tax free, just as it was for college. Any school that gets financial aid qualifies.

Another child. You can change the beneficiary of the 529 plan to another qualifying family member, without any tax implications. If you have other children, the funds can be used to pay for their qualified expenses—even if you have other 529 plans for them. Money in 529 plans can now also be used for elementary and secondary education.

Another relative. You can change the beneficiary to parents, aunts, uncles, nieces, nephews, stepparents and even first cousins. There’s no deadline for using the funds, so you can keep it as a gift for a future grandchild. However, avoid skipping a generation, because that could trigger a tax penalty.

Your own or your spouse’s career. If you’re interested in changing your career or just want to get a new degree in retirement, using leftover 529 funds will let you avoid using other savings.

Estate planning. You can choose to give a 529 account to an heir. You keep control of the account until you pass away and can continue to make annual tax-free contributions up to the gift-tax exclusion amount, provided the account value doesn’t exceed the state’s maximum limit. After you die, the value isn’t counted as part of your estate for estate taxes.

Offset any scholarships. You can withdraw any amount from the 529 plan, up to the value of all scholarships and the 10% penalty is waived, even if you apply years after the scholarship was earned. The earnings are taxable, but because distributions include both earnings and contributions, only part of this will be taxed.

Give the money to your child or spend it yourself. You could just pay the taxes and the 10% penalty and use the money as you please. The earnings are taxed at your child’s rate.