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May 1 23

Why You Need a Comprehensive Estate Plan…

by Webmaster Admin

A recent headline read “Battle Over Anne Heche’s Estate Settled” when it should have read “Yet Another Celebrity Dies Without an Estate Plan.” Anne Heche was a well-known actress who died unexpectedly following a fiery car crash in August 2022. Anne left behind two sons, one of whom is 20, the other of whom is 13, and no estate plan. 

Her case was tragic and the results were completely avoidable in many ways. Because Anne failed to create even a basic Will, her estate will distribute in accordance with the laws of intestacy in California, through a public probate process, instead of in a private manner. In addition, California statutory law will determine who will receive her estate and how they will receive it. Anne’s 20-year-old son petitioned and ultimately won the right to administer his mother’s estate, despite several claims brought by the father of Anne’s 13-year-old son.

While Anne’s older son has won this battle, the settlement of his mother’s is far from over, especially since he will undoubtedly have his work cut out for him administering his mother’s estate. Anne’s death illustrates yet another of the many reasons why it is vitally important to have an Estate Plan, regardless of your age or level of wealth, especially when young and minor children are the anticipated beneficiaries.

Anne could have avoided this result by creating a comprehensive estate plan. A comprehensive estate plan often comprises a Last Will and Testament, a probate avoidance Revocable Living Trust, along with a Financial Power of Attorney, Health Care Power of Attorney, Living Will, and a HIPAA Waiver Authorization. These legal documents are state specific and provide financial and health care protection for our clients during their lives, in order to avoid a Guardianship proceeding in the event an illness, injury, or incapacity. These legal documents also ensure that that right property, passes to the right party, at the right time, upon the passing of clients.

When a comprehensive estate plan is properly structured, assets which distribute to beneficiaries can be protected as well from the potential claims of a beneficiary’s creditors, predators, and divorcing spouses, ensuring assets stay within the family blood-line. During life, an estate plan provides specific instructions regarding who is responsible for making specific decisions, if the client is unable to make those decisions due to a temporary or permanent illness or incapacity. 

In the event of passing, the client’s estate planning legal documents specifically provide the names of the fiduciaries, including one or more executors and trustees, who are financially responsible regarding the distribution of estate and trust assets, to whom the decedent’s property will be distributed, and when and how the property will be distributed to the beneficiaries of the estate and trust.

If the client executed a Revocable Living Trust, then the terms of the Trust Agreement would allow the decedent’s estate plan to remain private, since unlike a Will, Trusts are not subject to the probate process in any state. In this case, a public fight over who would distribute Anne’s assets could have been completely avoided and have remained private.

If Anne had executed only a Will, then her Will would have been required to be admitted to probate upon her death in order for the executor to collect her assets. As a result, all of her assets, along with the terms of her Will would have been subject to public scrutiny.

However, her Will would would have allowed her to select one or more financially responsible individuals to administer her estate, rather than letting the local court decide who would administer her estate.

While Anne may have designated her oldest son to serve as her executor, who now holds that responsibility, it is entirely possible that she would have selected another family member, friend, or professional corporate fiduciary, with more maturity and experience to handle the settlement of her estate and deal with such matters. 

If Anne had created a comprehensive estate plan, she could have included provisions to protect her children, utilizing at Trust-Based Plan. Instead, all of her property will distribute outright, in one lump sum to her older son, and a Guardianship account will need to be established for her younger son, until he attains the age of majority, at which time her youngest son’s share will be distributed outright to him.

For example, a Trust-Based Estate Plan could have provided a lifetime trust for the benefit of each son, which would have provided continuing asset management, divorce protection, asset protection, and estate tax protection for them.

Because Anne failed to create any estate plan whatsoever, as noted above, her eldest son will receive his inheritance outright. As a result, that will allow him unfettered access to the funds, and will not provide him with any protection from the potential claims of his current or future creditors.

Her youngest son’s inheritance will end up in a Guardianship account administered by someone else, potentially with significant court oversight. If Anne had taken the time to create an estate plan, she could have decided how she wanted each son to receive his inheritance, and who would be responsible for distributing the assets to her sons.

By failing to create a comprehensive estate plan, Anne deprived her sons of these benefits and saddled them with many undesirable consequences at a time when they should have room to grieve their mother’s untimely death.

By creating a comprehensive estate plan, with a competent estate planning attorney, the mistakes in this case can be avoided for your own family.

Mar 1 23

Facts to Consider When Removing a Trustee

by Webmaster Admin

Estate plans often include both revocable and irrevocable trusts for a myriad of reasons. Regardless of the type of trust created, designating a responsible and suitable trustee to administer the trust is of paramount importance to the beneficiaries of the trust.

The trustee selected is the gatekeeper for the trust. This person, or trust company, is charged with the responsibility of investing the trust assets and making distributions to the individual and/or charitable beneficiaries in accordance with the terms and provisions stated in the trust agreement. 

However, what happens when the beneficiaries of a trust desire to change the original trustee selected by the grantor to serve in the fiduciary capacity as trustee? This edition of Estate Planning Matters will explore the various options that beneficiaries of a trust may use to remove and replace one or more trustees.

As with most endeavors, it often makes good sense to start with the path of least resistance. In this context, that means requesting the undesirable trustee to resign. While this type of conversation may be uncomfortable, the trustee may no longer be interested in co thinking to serve as trustee and agree to resign. In many cases, if the beneficiaries are unhappy with the trustee, they likely have let the trustee know about their dissatisfaction. 

Aa a result, the trustee may decide to resign without a judicial proceeding, especially when it no longer is feasible to satisfactorily administer the trust for the benefit of disgruntled beneficiaries. 

The outgoing trustee will be required to prepare an accounting of all trust activity, including investments, receipts, and disbursements. Once the accounting is prepared, the trustee would request the beneficiaries to review and approve the accounting, then sign a waiver absolving the trustee and discharging the trustee of their current fiduciary responsibilities as well as agree to hold the trustee harmless in the future.

If the trustee refuses to resign, then the beneficiaries need to explore other methods of removal. The parties should look to the trust agreement to determine if the grantor included a specific provision authorizing the beneficiaries to remove and replace the trustee, with or without cause. 

A competent estate planning attorney can provide both the beneficiaries and trustee with guidance to ensure that the parties to the trust consider relevant options when a change of trustee is necessary.  

More specifically, legal counsel can guide the beneficiaries through the trustee removal and replacement process, as well as to ensure that all parties follow the terms of the trust agreement. Even if the document fails to include a power to remove the trustee, the attorney may help the beneficiaries utilize other trust provisions, which often include a change of situs or appointment of a trust protector as a means to accomplish the ultimate goal of removing the trustee. 

If the trust agreement contains no provisions allowing the beneficiaries to remove and replace the trustee, and the trustee is not agreeable to voluntarily resigning, then the trust beneficiaries have several other options that can be pursued for the purpose of removing a trustee. 

In states that follow the Uniform Trust Code (“UTC”), the UTC permits the use of a Non-Judicial Settlement Agreement (“NJSA”) to resolve such situations, if the matter does not violate a material purpose of the trust. However, the use of a NJSA requires agreement by all interested parties. Determining which parties qualify as “interested parties” requires engaging a trust and estate attorney who is knowledgeable and familiar with the appropriate statutory definition to ensure all interested parties agree. 

The UTC lists several matters that the NJSA may address, although jurisdictions are not entirely consistent on whether or not matters not listed may be resolved using the NJSA. Generally, statutes allowing the use of the NJSA do not require court approval, although obtaining court approval would certainly prevent future disagreements on the matter.

If the use of a NJSA is not a viable option, the UTC states also allow modification of a noncharitable trust by consent of the parties. The comments to the UTC, reference relevant statutes, and one state court decision prohibit the removal of a trustee by consent, although the consent may be used to address other areas of contention between the beneficiary and trustee. Interestingly, even if the modification by consent violates a material purpose of the trust, if agreed upon by the grantor and all beneficiaries, it’s allowable. Some states require court approval, others do not. Modification by consent usually requires the consent of the grantor.

A well designed estate plan, designed, drafted, and implemented by a competent estate planning attorney, should include specific provisions that provide flexibility to modify a trust and evolve with changes in future circumstances. However, even if the existing plan lacks specific provisions regarding the removal of a trustee, beneficiaries have options worth exploring, based upon case and statutory law in the jurisdiction which controls the interpretation and administration of the trust. 

Whenever trust beneficiaries are considering the removal and replacement of an individual or corporate trustee, it is wise to engage a competent estate planning attorney to provide guidance and legal advice to help the beneficiaries navigate through this process. 

Feb 1 23

Lifetime and Testamentary Gifting Strategies

by Webmaster Admin

When a gift is made to a minor, defined as an individual under eighteen (18) years of age, there are unique issues to consider.

Since a minor lacks legal capacity to own assets, the Uniform Transfer to Minors Act (UTMA) was created to protect assets that are gifted to minors. The Act details when minors can receive outright control and ownership of assets managed by one or more custodians on behalf of the minor child. 

One of the primary advantages of establishing a UTMA account is that funds deposited and invested in the account are exempt from having to prepare and file a federal gift tax return for transfers by gift of up to $17,000 per child for 2023, and up to $34,000 per year for split gifts made by parents to their child. 

This gift may be in the form of cash, stocks, bonds, or other financial assets. Both income and capital gains earned on assets transferred to a UTMA is taxed at the minor’s rate. Since a minor’s income tax rate each year is usually lower than the donor’s income tax rate, this often results in income tax savings for the family. 

However, please consider that using a UTMA account for a child can make the recipient of a gift less eligible for needs based scholarship opportunities and upon the attainment of the age of majority, the assets on the account must be transferred to the recipient.

While the custodian of a UTMA account must distribute the balance of funds held in the account to the minor upon the child’s attainment of the age of majority, lifetime gifts and testamentary bequests that involve substantial assets are often best distributed using a trust-based estate plan, instead of a UTMA, which mandates the distribution of all assets held in the account, in order to protect the assets from being spent or dissipated soon after the child attains the age of majority. 

For example, a trust distribution schedule may provide as follows: 20% of the trust corpus is distributed to the beneficiary at age 30; one-half of the remaining balance is distributed at age 35; and the remainder of assets invested in the trust is distributed to the beneficiary upon the attainment of 40 years of age. The theory here is that the recipient of the gift would come into their gifted or inherited assets over a period of time, instead of in one lump sum. This would allow the child to achieve greater financial maturity, knowledge, and experience about managing, investing, and spending assets which are often transferred to them by their parents and grandparents.  

It is important to note that during the time period when assets are invested in a trust, the trustee has the full legal authority to make distributions to or for the benefit of the beneficiary of the trust for their health, education, maintenance and support. 

Please also note that trusts established for minors may contain specific provisions to protect and insulate both lifetime gifts and inheritances from divorces, lawsuits and bankruptcy creditors of a child throughout the life of a child.

Asset Protection Trusts can also be designed so that upon the passing of a beneficiary, the assets invested in the trust can distribute to the children of a beneficiary, ensuring a blood-line distribution of inherited assets trust assets, and to siblings of a beneficiary if the beneficiary passes away with no lineal descendants. 

Jan 1 23

How Powers of Attorney Can Avoid a Guardianship

by Webmaster Admin
Man asking questions

What happens if you or a loved one suffers an illness, injury, or becomes incapacitated and unable to temporarily or permanently handle financial and health care decisions?

Many people erroneously believe if an incapacitated individual is married, their spouse is immediately able to step in and handle their financial, health care, and legal affairs. Similarly, a parent has no legal authority to handle the financial and health care decisions of a child, once the child attains the age of majority – eighteen years.

Without a valid power of attorney, an interested party would have to petition the Orphans’ Court where the incapacitated person resides to raise a Guardianship proceeding. The judge would then hear testimony in order to decide who should be designated as legal guardian for the incapacitated person. These formal and public Guardianship proceedings are expensive, time-consuming, and the outcome is definitely not assured with respect to who will become appointed as guardian.  

In fact, a judge has no obligation to appoint the spouse or parent as legal guardian and may appoint a professional guardian or another person who the incapacitated person would not have wanted to serve as his or her legal guardian. For example, the judge may determine that the spouse or parent has an inherent conflict of interest since spouse and parents are often the beneficiary of the incapacitated person’s assets. Further, the judge may decide that a professional guardian or another person has more knowledge and experience handling such matters. 

Who should you select and legally designate as your Financial and Health Care Power of Attorney? 

In the vast majority of cases, clients designate their spouse  to serve as their Primary Power of Attorney, and one or more of their children as Successor Power of Attorney. 

While these selections may seem reasonable and suitable, experience has shown that based upon the circumstances and family dynamics, this order of appointment may need be best in all cases. For example, clients often need to use their Powers of Attorney when they are elderly and unable to make prudent decisions. In many cases, the spouse of an incapacitated person may also be suffering from an illness or incapacity at the same time. In such case, while a son or daughter may desire to step in and help out with bill paying, health care decision making, and managing financial investments, the adult child may quickly discover that they are unable to take control of the decision making process until they can prove that the other spouse is not able to serve as the Primary Power of Attorney.

In such cases, the Successor Power of Attorney would be required to prove that the Primary Power of Attorney is unable to discharge his or her fiduciary responsibilities. Therefore, a doctor who is familiarly with the incapacitated person would be required to write a letter stating that mom or dad is unable to handle their legal, financial, and health care decisions. 

While this process may appear simple and a straightforward, questions often arise when a person legally appointed as Primary Power of Attorney is unable to discharge his or her fiduciary responsibilities. Will the doctor write the letter? Will the letter be clear and unequivocal? Will each of the third parties you have to deal with accept the letter? Unfortunately, these issues which often arise are not easy hurdles to overcome.

One option to overcome this issue is to appoint a spouse and adult child to serve as Co-Agents under the terms of an up-to-date Financial and Health Care Power of Attorney.

Dec 1 22

Cost of Living Adjustment (COLA) for 2023

by Webmaster Admin

The Social Security Administration recently issued the 2023 Cost-of Living Adjustment (COLA). Social Security and Supplemental Security (SSI) beneficiaries will receive an 8.7% COLA for 2023. 

COLA notices are typically mailed out to retirement, survivors and disability beneficiaries, SSI recipients, and representative payees instead the month of December. 

Individuals receiving SSI benefits will see an increase of their monthly benefit to $914.00 per month (the benefit is currently $841/month). In general, in order to be eligible for Social Security Disability benefits, an adult must be unable to engage in Substantial Gainful Activity (SGA). A person who is earning more than a certain gross monthly amount is considered to be engaging in substantial gainful activity. The Social Security Administration has also adjusted SGA threshold for 2023 to $1470 per month (the SGA threshold is currently $1,350/month). 

COLA Fact Sheet

For more information on all 2023 COLA see Social Security’s 2023 COLA Fact Sheet: