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Family Feud: Review Estate Plans Annually

By Ann Marsh

Financial Planning Magazine

If any clients need proof of the importance of revisiting their estate plans annually, consider the case of a wealthy family that sold its retailing business to Best Buy.

A state Superior Court judge ruled in July that two estranged daughters of Len Tweten of Palm Desert, Calif., the founder of Magnolia Audio Visual, must await their father’s death before they can receive their mother’s half of the couple’s $100 million estate.

The judge ruled that the entire estate should remain, for now, with the father, who is permitted to use his half of the inheritance as he desires. He can draw income and other benefits – and pay for legal costs – from the money from his wife held in a marital trust. After his death, whatever remains of his wife’s money will pass to the daughters. Because Eileen Tweten died in 2010, when the federal government levied no estate tax, that amount will not be subject to estate tax.

The family drama drew notice because it was sparked by the anomalous tax year of 2010, when Congress let the federal estate tax lapse, requiring the court to decide if the inheritance should pass directly to the children or remain with the father until his death.

In the case, two of the Tweten’s adult children (though not their third child, an adult son) accused their father of non-compliance, forgery and the use of undue influence. While the case is noteworthy, its impact would be limited to the outstanding estate cases involving 2010 deaths. Beyond California, some states tried to avoid such battles by passing laws to clarify discrepancies, says Martin Shenkman, an estate planning lawyer in Paramus, N.J. “But to the people it does impact, the effect is going to be huge, potentially,” he says.

Attorneys for Tweten say the case underscores why clients should review their estate plans annually because tax laws change. Failing to do this might land families in court and entangle inheritances in litigation.

“Even the most skilled professionals may be there and it may not dawn on them that your estate plan may change as a result of a change in the law,” says Rodney Lee of Ervin Cohen & Jessup in Beverly Hills, Calif., one of Tweten’s attorneys in the case. “This suit has kind of torn the family in half.” Tweten’s relationship with his grandchildren is ruptured, as well, Lee says.

His attorneys say the decision demonstrates that courts will support the intent of the person who has died -although her intent remains in dispute – regardless of technical glitches related to the unusual situation of 2010.


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August 2012