Cava Faulkner

Signed into law on March 11th, President Biden’s $1.9 trillion American Rescue Plan Act of 2021 (ARP) is the largest direct-to-taxpayer stimulus legislation ever passed, and it came just in time to save millions of Americans whose unemployment benefits were about to expire. In addition to extending unemployment relief, the ARP provides individual taxpayers and small business owners with a number of other vital financial benefits aimed at helping the country rebound from last year’s economic downturn.

Of these benefits, you’ve likely already seen one of the ARP’s leading elements—the $1,400 direct stimulus payments, which went to taxpayers, children, and nonchild dependents with incomes of less than $75,000 for individuals and $150,000 for joint filers. But beyond the stimulus, the ARP comes with numerous other provisions that can seriously boost your family’s finances for 2021.

To highlight the ways the ARP can impact your family’s wallet, here we’ll break down six of the legislation’s key elements. To learn about all the full array of benefits provided by the ARP, meet with us, as your Personal Family Lawyer®.

1. Child Tax Credit

If you have minor children, the ARP enhances the Child Tax Credit (CTC) in some major ways. Not only does it significantly increase the amount of the credit, but it also changes the way you can receive the money.

Under the current CTC, parents can receive a maximum tax credit of $2,000 for each qualifying child under age 17, with $1,400 of that credit being refundable. The ARP increases that credit to $3,000 a year for each child aged 6 to 17 and $3,600 for each child under 6—and both amounts are fully refundable.

Parents who qualify for the full amount of $3,000 or $3,600 per child include single filers earning less than $75,000, and joint filers earning less than $150,000 annually. After this, the credit begins to phase out. However, parents who file singly and earn less than $200,000 ($400,000 for joint filers) could still claim the original $2,000 credit.

In addition to increasing the credit, the ARP also changes the way parents can access the money. Instead of applying the full amount of the credit to your income taxes at the end of the year and possibly getting a refund, you can now opt to receive the credit up front in monthly payments of $250 per qualifying child or $300 for children under age 6.

This means you can get half of the credit in the form of monthly cash payments and claim the other half when you file your 2021 taxes in April 2022. If you opt for the monthly payments, the IRS expects to send those out starting in July 2021 and lasting through December 2021. The ARP directs the Treasury Department to create an online portal that allows parents to opt out of advance payments and report any changes in income, marital status, or number of eligible children.

Note that these increases are only in effect for 2021 and will revert back to the original amounts in 2022. However, there’s currently support in both Congress and the White House for making them permanent. Check our weekly blog and IRS.gov for updates to the legislation.

2. Child and Dependent Care Tax Credit

In order to provide financial assistance to those families who pay for child care or care of an adult dependent, such as an elderly parent, the ARP increases the Child and Dependent Care Tax Credit for 2021—and for the first time, it makes the credit refundable.

For 2021, the ARP provides a tax credit for the expenses associated with the care of qualifying dependents (kids 12 or younger or a disabled adult) for a total of up to $4,000 for one dependent and $8,000 for two or more dependents. This is an increase from the max credit amounts for 2020, which are $3,000 for a single dependent and $6,000 for multiple dependents.

The IRS allows you to claim a fairly wide range of qualified expenses for such care, including the following:

• Daycare
• Babysitters, as well as housekeepers, cooks, and maids who take care of the child
• Day camps and summer camps (overnight camps are not eligible)
• Before and after-school programs
• Nursery school or preschool
• Nurses and aides who provide care for a disabled dependent

The ARP also makes more people eligible for the credit by raising the income limit for the full credit from $15,000 to $125,000 per year. Those making between $125,000 and $400,000 are eligible for a partial credit.

As an added bonus, the credit is fully refundable for 2021, so you could get a refund for the credit even if your tax bill is zero. However, as with the changes to the Child Tax Credit, these updates are only available in 2021, unless additional legislation is passed.

There are special rules for divorced couples looking to claim the Child and Dependent Care Tax Credit, so if that’s you, meet with usor a financial advisor for support.

3. Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a refundable tax credit for low- and middle-income workers that’s frequently overlooked—and the ARP makes the credit more valuable for many taxpayers in 2021 than ever before. The amount you can claim for the EITC depends on your annual income and the number of kids you have, but people without kids can qualify, too.

For 2021, the ARP revises a number of EITC rules, and makes an increased credit available to more childless taxpayers. While in past years, childless filers could only qualify for a relatively small credit, for 2021 the ARP boosts the maximum EITC for those without children from around $540 to just over $1,500.

The legislation also reduces the minimum age for a childless taxpayer to qualify, from 25 to 19, and it also eliminates the maximum age of 65 for the credit, so seniors of any age can qualify, as long as they meet the income requirements. The above changes from the ARP are only for 2021, but the law makes some permanent changes to the EITC as well.

In prior years, you couldn’t qualify for the EITC if you had more than $3,650 in investment income for the year. But thanks to the ARP, starting in 2021, you can have up to $10,000 of such “disqualified” income without losing the EITC, and for 2022 and beyond, this limit will remain and be adjusted for inflation.

Below are the maximum EITC amounts for 2021, along with the maximum income you can earn before losing the credit altogether.

2021 Earned Income Tax Credit

Additionally, just for 2021, you can calculate your EITC using either your 2019 earned income or your 2021 earned income and use whichever number gets you the bigger credit. And don’t worry—if you go with the 2019 number, it has no effect on any of your other 2021 tax calculations. For example, if some or all of your income is from self-employment, using your 2019 income to calculate your 2021 EITC won’t increase your 2021 self-employment tax.

Finally, no matter the year, the EITC is fully refundable. This means you can collect the money even if you don’t owe any federal income tax. That said, calculating the credit can be quite complicated, so if you need a referral to a CPA to support you, please feel free to contact us for our favorite referrals.

Next week, we’ll cover the remaining three ways the American Rescue Plan can boost your family’s finances in 2021.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

As the host of the wildly popular The Joy of Painting TV series on PBS, Bob Ross became a pop-culture icon, who was equally famous for his giant head of hair, soothing baritone voice, and folksy demeanor as he was for his iconic landscape paintings. And like so many other artists, Bob’s artwork and image would become even more popular following Bob’s death in 1995.

Bob’s philosophy in both painting and life was that there “were no mistakes in life… just happy little accidents.” Sadly, as detailed in the recent Netflix documentary Bob Ross: Happy Accidents, Betrayal & Greed, Bob’s failure to coordinate his business agreements with his estate plan was anything but happy, leaving his only son largely unable to benefit from his father’s fame and fortune.

As we’ll discuss in this series, Bob’s planning failures have led to an ugly court battle between his former business partners and his family, who were fighting for control of the lucrative intellectual property rights to the Bob Ross brand. And while Bob’s son Steve ultimately lost his fight to benefit from the business empire built on his father’s persona and painting skills, we’ll explain the steps you can take to ensure that your loved ones don’t suffer the same fate and are able to fully benefit from all of your business assets following your death.

After meeting Bob at one of his early in-person painting classes, husband and wife duo Walter and Annette Kowalski convinced Bob to go into business with them, launching Bob Ross Inc. (BRI) in 1985. According to the Daily Beast, the corporation, which was formed in Virginia, initially consisted of four equal partners: Bob Ross and his wife Jane Ross, along with Walter and Annette.

With the Kowalski’s financial backing, BRI’s initial business model had Bob teaching a series of in-person painting classes up and down the U.S. east coast at which they sold painting supplies and art instruction manuals. But after signing on with PBS for The Joy of Painting series and launching their own line of Bob Ross-brand painting and art supplies, business began to take off.

From 1986 through 1994, BRI registered several trademarks using Bob Ross’ name and likeness, and the company also signed several licensing agreements with third parties, all with Bob’s consent. All four individuals—Bob, Jane, Walter, and Annette—were technically equal partners in the corporation, but it was widely acknowledged that Bob was the one in charge, as well as the one with the talent and the face of the brand.

In fact, when The Joy of Painting became one of PBS’s top-ranked shows at the close of the 1980s, the frizzy-headed artist grew into a bona-fide celebrity. Bob made appearances on popular talk shows of the day like Regis and Kathy Lee and Donahue, and Bob was also a featured star at the Grand Ole Opry in Nashville. At the peak of his fame, Bob even had plans to launch his own musical based on his TV show.

The success of the show and Bob’s fame boosted sales of Bob Ross art supplies, which branched out to include books and videos in addition to the paints and brushes adorned with Bob’s name and likeness. BRI eventually started offering painting workshops around the U.S., with teachers trained in Bob’s method doing the instruction.

All of this translated to significant financial success for the company. Based on records made public during the lawsuits over Bob’s estate, BRI was bringing in roughly a half-million dollars each year for the four partners to share, according to the Daily Beast. But the good times wouldn’t last.

Things started to go downhill in 1992 when Bob’s wife Jane passed away from cancer. Following her death, the structure of BRI required that Jane’s share in the company be divided equally among the surviving three partners. As a result, Bob was reduced to owning just one-third of the company that bore his name and likeness. This was likely not understood by the Ross’s when they signed their partnership agreements.

Shortly after Jane’s death, Bob developed lymphoma. In 1994, while battling cancer, the Kowalskis offered Bob a deal. They reportedly faxed him an agreement that would give them all of Bob’s intellectual property rights as well as all of his artistic works. In return, the Kowalskis would pay Ross or his surviving heirs 10% of BRI’s profits,  but only for the next 10 years.  After 10 years was up, the Kowalskis would own all income from Bob Ross, Inc—forever.

Not surprisingly, Bob refused to sign the agreement, and he was reportedly infuriated that the Kowalskis would even ask him to sign such a one-sided deal. In an attempt to protect his rights to his business and intellectual property assets, Bob made several last-minute changes to his estate plan. The most notable change was made to Bob’s trust just two months before his death.

In the amendment to the Bob Ross Trust, Bob added a clause that specified that all intellectual property rights to Bob’s “name, likeness, voice, and visual, written, or otherwise recorded work” would pass to his son, Steve, and Bob’s half-brother, Jimmie Cox. Specifically, Bob assigned 51% of the interest to all of his intellectual property to Jimmie and 49% to Steve.

Oddly, though Bob’s estate plan specifically left his intellectual property to Steve and Jimmie, Jimmie apparently never shared this fact with Steve, who would only learn of the changes to his father’s estate plan some two decades later.

Bob Ross died on July 4, 1995, at age 52. Upon his death, his estate was valued at $1.3 million, half of which was his one-third share in BRI. Unable to gain full control over Bob’s share of BRI while Bob was alive, the Kowalski’s decided to sue Bob’s estate after his death. In addition to seeking all of his intellectual property rights in their lawsuit, the Kowalski’s also wanted all of Bob’s finished paintings—and even all of Bob’s art tools and paints down to his easel and brushes.

The Kowalski’s lawsuit was so expansive and their legal tactics so brutal that one of Bob’s old friends took to calling their efforts “Grand Theft Bob.” In the end, Kowalski’s legal strategy was designed to gain complete control of Bob’s afterlife, despite Bob’s clear wishes to the contrary.

Without the financial means to sustain a prolonged legal battle, the estate’s executor, Jimmie Cox, settled with the Kowalskis in 1997. The settlement agreement was accompanied by an assignment of all of Bob’s intellectual property rights, which stated that “To the extent, if any, any such rights or incidents of ownership are somehow vested in Estate, Estate hereby conveys, transfers and assigns all such rights and incidents of ownership and ownership itself to BRI.”

Additionally, both the estate and the Bob Ross Trust also signed separate mutual releases with BRI which state that the parties and their heirs, assigns, successors in interest, etc., “do, now and forever, absolutely and irrevocably, hereby release each other in and from any and all claims, suits, liabilities, complaints, losses, damages, and charges of every kind and character arising prior to the date of execution hereof.”

As with so many other artists, Bob Ross’s fame reached its zenith in the years following his death. Although The Joy of Painting’s last episode aired in 1995, as the years went by, more and more people would discover the iconic artist’s work and persona via the Internet. And when Annette and Walt Kowalski handed control of BRI to their daughter Joan in 2012, the Bob Ross brand would reach dizzying new heights.

Things really began to take off in 2015, when Joan was approached by the licensing company Janson Media, which wanted to add The Joy of Painting to a new online streaming platform called Twitch. With 403 episodes to pull from, Twitch launched a Bob Ross marathon, and the Bob Ross brand soon reached millions of new fans.

Joan discussed the Bob Ross reboot with the online journal Vocativ in 2015: “Twitch. TV woke up the world,” said Joan. “They made everybody remember their childhood again even though we’ve always been here… We are freakin’ out.”

Following the Twitch broadcast, Joan was approached by another brand-management firm known as Firefly, and that’s when the money really started pouring in. Today, you can find everything from Bob Ross bobbleheads and Bob Ross chia pets to Bob Ross Christmas ornaments and even action figures. Both Netflix and Twitch stream The Joy Of Painting series, and there’s a Bob Ross sleep app available through the Calm meditation app platform.

All of these licensing opportunities translated to major money for BRI. According to the Daily Beast, in 2012, when Joan took over, BRI brought less than $200 in licensing revenue outside of its paint products. But by 2016, that figure had grown to  $460,000, and by 2017, Bob Ross-branded products were bringing more than a million dollars in licensing fees to BRI each year.

Although shortly before his death, Bob amended his estate plan to transfer all of his intellectual property rights to his son, Steve, and half-brother, Jimmie Cox, Steve claimed that he never knew his father made such a move. In fact, it would be more than 20 years after his father’s death before Steve claims he found out about the clause in his father’s trust.

Based on this knowledge, Steve sued BRI, alleging that all of the licensing deals and products that used his father’s name and likeness were unauthorized. In his lawsuit, Steve demanded compensation for the years of unauthorized use of the intellectual property rights Steve claims to own based on his father’s estate plan.

Sadly for Steve, the court didn’t agree with his claim. In 2019, the court ruled that Bob Ross’s trust could not have assigned the intellectual property rights to Steve and Jimmie because the Trust did not own those rights to begin with. Specifically, the court stated in its ruling, “Plaintiff would not own the intellectual property at issue because the Trust never owned it. Similarly, because Bob Ross gave BRI his right to publicity during his lifetime, it could not have transferred to his son on his death.”

In other words, it didn’t matter that the Bob Ross Trust left Steve his father’s intellectual property rights because the Trust never owned those rights. Instead, the court found Bob had transferred all of his intellectual property to BRI during his lifetime via oral contracts. Therefore, the amendment to Bob’s trust was irrelevant, since Bob Ross had already given all of the rights to his intellectual property to BRI.

Although Steve thought he could win an appeal of his case, he didn’t have the money to continue to fight BRI, so he ended up settling with the Kowalski family. In exchange for a modest payment, Steve gave up his claims to his father’s intellectual property. However, in the settlement, Steve did win the right to move forward with a business using his own name.

Since then, Steve has launched his own business teaching painting workshops in the very same studio where his father began his career more than 25 years earlier. Steve was joined in his new venture by his father’s old friend Dana Jester, and they held their first workshop together in September 2019, when several dozen artists gathered to learn from the two most talented masters of the Bob Ross painting technique still alive today.

In the end, although Bob Ross clearly intended to leave his intellectual property rights to his son, because Bob failed to coordinate his business agreements with his estate plan, his son Steve will never share in the fortune that has been made by the vast business empire built on his father’s name, likeness, and persona.

Fortunately, you can easily prevent your loved ones from suffering the same fate as Steve using proper estate planning. Next week in part two of this series, we’ll discuss how you can use estate planning to ensure that all of your business assets, including any intellectual property you own, are protected and passed on to your family following your death or incapacity.

Until then, if you have a business, intellectual property, or any other type of asset that you want to include in your estate plan, meet with us as your Personal Family Lawyer®. With our support and guidance, we can ensure that your loved ones will always be provided for and stay out of court and out of conflict no matter what happens to you.

This article is a service of Christine Faulkner, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

When you think about those loved ones who’ve passed away, you probably don’t think very much—or even at all—about the “things” they’ve left you. And when they do leave something behind, what you likely cherish most about the object are the memories and feelings it evokes, not the thing itself.

For the founder and CEO of New Law Business Model, Alexis Katz, the most treasured memento her late father left her wasn’t even something he intended to be special—it was just a random voicemail on her cellphone. And the message wasn’t meant to be anything sentimental.

His message simply said, “Lex, it’s your dad. Call me back.”

Following his death, Alexis loved listening to that message to hear her father’s voice. Of all the assets he left behind, that voicemail was what she cherished most.

Until one day, she went to listen to the message and discovered it had been erased—and her father’s voice was lost to her forever. She still recalls that day as one of her worst ever, yet like most painful events, it taught her an important lesson.

Losing that voicemail ultimately inspired Alexis to build a new feature into her family-centered model of estate planning, known as Family Wealth Legacy Passages. This feature, which is included in every plan we create, allows you to preserve and pass on something that’s inherently more valuable than any tangible asset you might leave your loved ones.

We recognize that estate planning isn’t just about preserving and passing on your financial wealth and property when you die. When done right, planning allows you to share your family’s stories, values, and life lessons, so your legacy carries on long after you—and your money—are gone.

Family Wealth Legacy Passages is a process that’s designed to not only ensure these intangible assets never get lost, but also to make the process of documenting them as easy and convenient as possible. In this process, we guide you to create a customized recording in which you share your most insightful memories and life lessons, not just for your children and grandchildren, but for generations to come. My favorite part about this process is that most of our clients tell us that going through it helps them surface things they would have never thought about regarding how they want to parent differently or things they want to share now, during life, not just leave behind a lasting legacy of love.

To help inspire you, we’ve developed a series of helpful questions and prompts, which makes the process not only easy, but enjoyable. And this isn’t something you have to do on your own, which you’d probably never get around to doing, despite your best intentions. Instead, Family Wealth Legacy Passages is something we include as an integral part of our planning services—and it’s included at no extra charge with each plan we create.

In the end, your family’s most precious wealth is not money, but the memories you make, the values you instill, and the lessons you hand down. And left to chance, these assets are likely to be lost forever just like Alexis’s voicemail from her father.

Our customized estate planning services will preserve and pass on not just your financial wealth, but your most treasured family values as well.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

Being asked by a family member or close friend to serve as trustee for their trust upon their death can be an incredible honor. At the same time, however, serving as a trustee can be a massive responsibility—and the role is not for everyone.

In fact, depending on the type of trust, the assets held by the trust, the specific terms of the trust, and the beneficiaries named, the job can require you to fulfill a wide range of complex (and potentially unpleasant) duties over the course of many years. What’s more, trustees are both ethically and legally required to properly execute those duties or face liability.

Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly. Indeed, sometimes the best thing you can do for everyone involved is to politely decline the job. Remember, you don’t have to take it. That said, depending on who nominated you, declining to serve may not be an easy or practical option. Or you might enjoy the opportunity to be a trustee, so long as you understand what it entails.

It’s best to make your decision about serving as trustee with eyes wide open. Here’s a brief look at what the job will likely entail, along with some situations where you might want to seriously think twice about agreeing.

As mentioned earlier, a trustee’s duties can vary tremendously depending on the size of the estate, the type of trust, and the trust’s specific instructions. That said, every trust comes with a few core requirements, primarily revolving around accounting for, managing, and distributing the trust’s assets to its named beneficiaries.

Regardless of the type of trust or the assets it holds, some of a trustee’s key responsibilities include:

• Identifying and protecting the trust assets
• Determining what the trust’s terms actually require you to do
• Managing the trust assets for the term specified and distributing them properly
• Filing income and estate taxes for the trust
• Communicating regularly with beneficiaries
• Being scrupulously honest, highly organized, and keeping detailed records
• Closing the trust when the trust terms specify

Ultimately, trustees have a fiduciary duty to properly manage the trust in the best interest of all the trust beneficiaries. Consult with us for more in-depth details regarding the duties and responsibilities a specific trust will require of you as trustee.

Fortunately, you’re not expected to go it alone: Trustees are encouraged to seek assistance from outside professionals to fulfill their duties. Remember, you do NOT need experience in law, finance, or taxes to serve as trustee. And while you won’t be able to profit from the job, you are able to be paid for your role as trustee.

That said, many trustees, especially family members, choose not to accept any payment beyond what’s required to cover the trust expenses. Yet, this all depends on your personal situation and relationship with the trust’s creator and beneficiaries, and of course, the nature of the assets in the trust. In either case, however, you won’t have to use your own funds to get the job done.

Given the sense of loyalty and filial responsibility that’s often involved, it might feel difficult to turn the trustee role down. But for a number of reasons, saying “no thanks” can sometimes be the best decision, not only for you, but for all parties involved.

Of course, this is an entirely personal decision and one you’ll ultimately have to make for yourself after considering all of the factors. That said, here are a few red flags that can signal the role might be better fulfilled by someone other than you:

• Your job, family, and/or health situation is such that you won’t be able to give the job the time and attention it deserves. Some trusts can require far more work than others, and if the role would seriously impede your own life, you might consider declining.
• You don’t get along with the beneficiaries. If there are underlying conflicts or bad blood with the people you’ll be required to serve, this could make the job incredibly difficult and unpleasant for everyone.
• The trust’s terms are vague and/or unclear, leaving you in the position to make difficult decisions you don’t feel qualified to make. Such grey areas are especially troublesome when it comes to distributing trust assets to young adult beneficiaries, who might not be the most responsible with their spending and/or lifestyle.
• It’s not clear exactly what assets the trust creator (grantor) owned, and/or the estate is highly unorganized. Tracking down and managing unorganized and/or poorly funded assets can be a massive undertaking—and potential liability.
• Lawsuits are likely or already underway. As trustee, it’s your duty to defend the trust against lawsuits, and just doing this can be a huge expenditure of your time and energy. What’s more, if a lawsuit against the trust is successful, it could seriously reduce the trust’s value, making your job infinitely more challenging.

Given the serious nature of a trustee’s responsibilities, you can meet with us for help deciding whether or not to accept the job. We can offer a clear, unbiased assessment of what will be required of you based on the specific trust’s terms, assets, and beneficiaries.

And if you do decide to accept the trustee role, we can guide you step-by-step through the entire process, ensuring you effectively fulfill all of the grantor’s wishes with minimal risk. Serving as trustee can be a lot of work, but if you go into the job with eyes wide open and have the proper guidance, it can be an immensely rewarding experience. Contact us today to learn more.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.