(Photo courtesy of The Guardian)

A typical Thursday night finds me meeting with other lawyers and discussing ideas useful in our respective practices.  Although always trying to find new ideas to help clients, these meetings, reminiscent of old style writer’s salons, are particularly useful because of the opportunity to exchange views in an open setting.  No idea is too simple or outlandish and all opinions are welcome.  It is a refreshing opportunity to be the one asking the stupid question and being amply rewarded with a wealth of knowledge and experience.  The food and drink is usually good, but no match for the companionship.

Recently we were discussing provisions for naming and removing successor trustees and the differences between granting the right to trustees, protectors, and beneficiaries.  I was particularly interested in what powers could be used in what situations with or without running afoul of grantor trust rules that cause assets in an irrevocable trust to be included in the taxable estate of the grantor or beneficiary.

These are important discussions, but often buried in the “black box” of our trusts because the clients lose interest after answering the questions of control, use, and taxes.  My role is to understand the client’s intentions and providing the most flexible rules that still meet the client’s objectives.

Our discussions frequently involve the relatively new “decanting” power under Arizona law, which allows a trustee of an irrevocable trust to make a new trust and add or exclude beneficiaries under certain circumstances.

This evening the point was made that for asset protection purposes attorneys should ensure that there is a power to exclude beneficiaries, and the discussion then quickly turned to whether that was a power best granted to a trustee or a protector in the context of which office could best wield the power in conjunction with a beneficiary’s right to remove and replace the trustee or protector without inadvertently creating a general power of appointment—which would cause estate tax inclusion in the estate of the person wielding the power.

The flash of knowledge that struck me was that although the power to exclude beneficiaries was crucial to a thoughtful asset protection trust, it would almost certainly not sit well with most of my clients that their successor trustee could exclude their chosen beneficiaries, except under very limited circumstances.

That in turn led to the idea of how to design a trust which would grant the power, but include adequate guidelines as to when the power could be exercised, so as to enhance the protection beneficiaries will have from their creditors yet reassure the grantor that the power will not be used to subvert the client’s intentions.

The trusts I create contain many instances of this type of analysis to ensure that my clients are always on the leading edge of what is possible.

If you found this article interesting, please share it with a friend or make a comment.  If you would like to find out more about purposeful planning, please call me.

Like most estate planning lawyers, all through the first decade of the 21st century, I thought we would not see a return to the $1,000,000 exemption.  As a consequence, the excellent estate plans I’ve been drafting for the past 9 years are now out of date. Under the new and unexpected tax laws these plans simply won’t provide the protection for which they were designed… unless they undergo an update process.

Now, all is not lost. The trusts my firm created are still solid trusts, and for married couples will continue to shelter the maximum amount of assets from estate taxes; but the flaw is that very little attention was paid to what happens to estates greater than $1,000,000, but less than $3,500,000 ($7,000,000 for married couples).  Most families with assets valued in that range (including retirement accounts and life insurance proceeds payable on death) needed no or very little estate tax planning.

However, it appears likely that the exemption level will remain at $1,000,000 beginning in 2011 with no relief in sight.  Even into the first quarter of 2010, most commentators thought Congress would act, but despite frequent news from Washington about the changes, knowledgeable commentators now almost unanimously believe there is no change coming in the foreseeable future.

More important than listening to pundits, however, is looking at the law; and right now the law is that everything transferred as a result of your death will be subject to a 55% estate tax.  I am ethically bound to inform you of the law as it exists and morally obligated to offer you reasonable solutions to potential problems.  Almost all of my clients believe paying 55% of the value of their assets over $1,000,000 is an unacceptable result.

That’s it in a nutshell.  You have a beautiful estate plan drafted using the best tools available at the time of the drafting, but the planning is going awry due to unexpected conditions, and you should act now to protect your assets.

What can be done?  There are numerous tactics and strategies available that can provide you some protection.  Purchasing life insurance, if you can, is one, and a more aggressive gifting program is another.  Integrating the ownership of your assets with the next generation is another good strategy.  Each of these suggestions, and all others, have an actual economic or social cost associated with them—It is up to you to decide what to do.

Clients participating in my annual maintenance program (soon to be retooled as the Family Protector Program to better describe the reason why such a program is necessary) will hear more about these solutions when you meet with me.  All others (or if you don’t want to wait) call me now for a discussion about these issues.  It will be an hour well spent.

(Photo Courtesy of HalfDark, www.gettyimages.com)

Do you think you can create your own estate plan?  In the right circumstances, the answer may be yes… But how do you determine what are the right circumstances?  A recent US News and World Report article on do-it-yourself planning gives both sides of the argument.

There is a growing recognition that not enough people have estate planning documents and many wills, trusts, and powers of attorney are sold through the internet and by non-attorneys.  These DIY plans have the benefit of being inexpensive, but often fail to provide for your loved ones in the manner you intended.

I am frequently contacted after a death by a family member whose loved one paid for the least expensive plan only to discover that the plan didn’t work for any number of different reasons.  When contemplating an estate plan, lawyers owe a specific duty of competence to their clients (as well as other duties arising from the special attorney client relationship)—a DIY program or “fill in the blanks” document feels no such duty, and often neither do the people or companies who sell them.

When hiring an attorney, the documents themselves are the least expensive part of the relationship.  The client is purchasing the lawyer’s knowledge and experience applied to the client’s unique circumstances.  And although many clients believe they have a simple plan, in truth everybody has unique issues that require examination, and every client benefits from the personal relationship and the lawyer’s attention to detail.

I recently probated an estate wherein the family believed all the assets were titled either in joint tenancy with rights of survivorship or with POD designations that would avoid probate, but one single substantial bank account was improperly titled. As a result an expensive and time consuming probate procedure frustrated the family’s intentions of a quick and inexpensive administration procedure.

In two other recent cases I was able to avoid a probate despite the family having been advised that a probate was necessary to sell real property inherited from an ancestor.  In one case a less expensive Affidavit for the Collection or Transfer of Real Property was appropriate despite the title company demands.  In the other I was able to use a filing and recording proceeding so a foreign personal representative could act, even though the family had been told an Arizona probate proceeding was necessary.

Another increasingly common and painful occurrence that DIY plans aren’t likely to point out is family disputes over life insurance that occur because the decedent’s beneficiary designation is out of date due to (re)marriage, divorce, or birth or additional beneficiaries. Poorly thought out beneficiary designations for retirement accounts, or property left to minors or disabled descendants without adequate consideration for how the property is to be administered are altogether too common. Making the assumption that everything is in order and cutting corners on the review process is what dooms many estate plans.

Unfortunately, there is no bright line test for when a DIY plan can succeed.  There is just no substitute for good legal advice. So please, be careful out there!   I concentrate on creating estate plans that work using the least expensive alternatives, but without cutting corners.  If you think I can help your family, or that you would benefit from a consultation, call me.

As a former consumer debtor lawyer who represented many good families through bankruptcy proceedings in the 1980s and 1990s, I have an intense dislike for the predators preying on the most vulnerable members of our economy – those who have lost their jobs and their hope for the future, and who will try anything to avoid further soiling their already shattered self image.  The article describes the feeding frenzy of entrepreneurs taking advantage of this class of consumers desperate for a solution out of their current travails.  It brings to mind the late night television infomercials promising get rich quick schemes where the only ones getting rich are the ones selling the schemes.

What does all this have to do with estate planning?

A competent estate planner likes inquisitive clients, and especially likes clients who question credentials, experience, and pricing.  It helps the lawyer “sharpen the saw,” identify what is important to the client, and to remain relevant in an ever changing world.

Your estate planner should have good answers to all your questions including how much will it cost, how long will it take, why he or she should hire you, and what the client should do if you are not around when they need you.  If you are going to share personal and financial details with your lawyer you need to have confidence and trust in that person, and a good estate planner knows this.

A skeptical client should want to know about the lawyer sitting across the table from him or her before divulging personal information.  In today’s electronic age, a prospective client can a have a wealth of information before the meeting even begins: the lawyer’s web site and other public information such as Martindale Hubbell listing and rating, State Bar information, reported cases, and other commercial listings.  All of these let the prospective client garner a lot of information, but there is no substitute for asking questions and observing the lawyer’s verbal and non-verbal communication skills.  You must like and trust the lawyer in whom you will repose trust – trust in the lawyer’s skill, knowledge, experience, talent, honesty, and demeanor.  Hiring an estate planner is an important personal decision.

I recently had a conversation with a financial advisor. The purpose of the meeting in her words was for her to find out about my practice.  Near the end of the conversation I asked her to tell me some of her most common frustrations with the lawyers she worked with and how I could improve on their performance if we were to work together.  She was taken aback by my candor and thought talking about her relationships with other lawyers was improper, but I think bluntness is essential for good communication.  Unless I found out why she was looking for more lawyers to work with, I might repeat the same mistakes.  I ask all my clients who come to me with documents drawn by other local lawyers the same question – I want to find out up front if I can do better or if the best advice is to go back or keep looking.

A good estate plan is a living plan.  It is not documents.  A good estate plan is one that sparks a thoughtful discussion of ideas centered on the client’s values, assets, family, desires, and intentions.  An estate plan is a priceless investment and you deserve an estate planner that has spent the time to understand the importance of that process and can communicate ideas that address your innermost concerns in a manner that comforts you.

What does all this have to do with the debt relief firms that cost a lot of money but end up leaving their customers worse off than before they started?  Simply that it brought home to me that estate planners don’t have customers, they have clients, and an attorney-client relationship must be built on trust.

If you want an estate planner who welcomes your questions and takes into consideration your family and your values as well as your assets, call our firm.  As an additional incentive—mention this post to Lisa, my experienced client coordinator, and I will waive the customary $500.00 initial meeting fee.

Is your estate planner a trusted advisor or a guerilla problem solver? Does he see you as a person or merely a bank account?

All too often lawyers or others billing themselves as “estate planners” perceive that you want the lowest cost, lowest maintenance product available so you can feel comforted that you have an estate plan.

This attitude has developed over time because many people believe an estate plan is a simple document to prevent the government from taking money that rightfully belongs to their children, when actually—if done correctly—it can be a comprehensive tool for passing on values and leaving a legacy for future generations.

I believe this is what estate planning has always been, but recently the advent of word processing and the internet has made it too easy for non-lawyers to peddle slick material by the ream, instead of providing you with personal attention and actual content and value.  The internet is great for disseminating information on a wide variety of topics, but it is also the domain of predators who will sell you a boiler plate documents without any input from you other than your names.  These documents may not even adhere to Arizona laws, and they come with voluminous instructions on what to do to make your plan effective.

If you have specialized legal training that qualifies you to understand what you are buying, how to make it work, and how to fix it if it doesn’t work, then the “estate plan in a box” may be for you; but if you have worked a lifetime gaining knowledge and experience in a different chosen field then you can appreciate the importance of using professionals to help you through what could be, if not the most important, certainly the longest lasting decision you will ever make.

Thus my leading question:  Does your estate planner really know you?

In my practice I begin with a list of 20 important concerns and ask you to prioritize them so that your estate plan reflects your personal intentions.

I continue with 18 specific questions about your family to help me become familiar with your unique situation.

And if the situation calls for it, I follow up with a detailed fact finder that allows you to describe your values and explain how you developed the attitudes and values you have and how to pass these along to your descendants.

I use the information I have gathered to weave a rich tapestry of an estate plan, with a trust that will be a tax efficient and purposeful.  My staff will work with you to re-title assets and confirm that all your assets are integrated into your plan so that the administration of your estate proceeds in an orderly and compassionate fashion.

I have more than 30 years experience as a lawyer and am well versed on estate tax planning, treatment of IRAs and other qualified retirement plans, and I study emerging strategies that may or may not use life insurance depending on your needs.  I can help sharpen your focus on how best to employ your resources to accomplish your hopes, dreams, and aspirations.

If you believe you are more than the money you have, we should meet.

Contact me today (or leave a comment with your e-mail address) and I will send you, without any further obligation, my list of 20 concerns, my 18 family questions, and my “You’re More Than Money” questionnaire.

Who would you like to have with you when you are ill or injured in the hospital?  Most likely you would hope to have your partner of many years there with you to hold your hand when things get rough.  Although many of us take for granted that we would be allowed that luxury, until just recently unmarried couples had no assurance that their partner would be allowed to visit them in the hospital—especially if a “recognized” family member such as a parent or sibling chose to refuse access.

In February 2009, Phoenix passed an important milestone when the City Council adopted an ordinance that gives domestic partners, same sex or not, the right to register as domestic partners and establish the right to hospital visitation until the registration is officially revoked.

Before this ordinance, and in other parts of the state, even if the domestic partners had executed health care powers of attorney and HIPAA releases, the family could still exclude the partner from visitation.  Now however, if the domestic partners reside in Phoenix and have registered, they will have established a paramount right to visitation.  Area hospitals outside Phoenix are not bound by the registration and as of now the only other Arizona city with a domestic partners registry is Tucson.  Mesa’s city council is trying to adopt a similar provision, but opposition forces are organizing against the effort.

The registration conveys no other rights, but might be useful in establishing the credentials necessary to obtain benefits where such benefits are offered.

It appears more opposite sex couples than same sex couples are taking advantage of Phoenix’ ordinance, but the ordinance is hailed as a progressive step toward the recognition of human rights across sexual preference boundaries.

Estate planning for unmarried couples is crucial if property rights are to be inherited and disruption to the survivor’s lifestyle is to be avoided.  Traditional tools such as rights of survivorship, POD/TOD, beneficiary deeds, Wills, trusts, and powers of attorney can all effectively be used to provide an estate plan, but the impact on the decedent’s family and the survivor must be carefully considered.  Even small estates must be carefully planned if disputes are to be avoided.

1. No creditor protection is available when property passes by joint tenancy.  Creditors come in many shapes and sizes these days.  Jury verdicts in even the most common accidents easily exceed insurance limits.  Aging survivors are more susceptible to lapses of concentration while driving or otherwise.  All of the survivor’s assets are exposed to creditors when assets are in joint tenancy.  A trust based plan can provide creditor protection to your spouse or your descendants.  This valuable protection can not be purchased at any price if you miss this planning opportunity.
2. Defeats an Estate Plan. Property in joint tenancy passes to the joint tenant even if your Will indicates a different result.  Heirs other than the joint tenant get nothing.  If the joint tenant tries to distribute property to other heirs there will be a gift tax consequence.
3. No estate tax protection for post-death appreciation is available if joint tenancy is used.  Although the asset will pass to your spouse estate tax free; upon the death of the survivor the entire estate is exposed to estate taxes and the tax exemption normally available to the first decedent will be lost.  If your estate (including life insurance) is likely to exceed the Applicable Exclusion Amount (scheduled to return to only $1,000,000 in 2011) then you have unnecessarily benefitted the government at the expense of your descendants.  However, if a “credit shelter” trust plan is utilized, the decedent’s estate, will escape taxation no matter how much it appreciates before the death of the surviving spouse.
4. Reduced protection from accumulated capital gains. Individually owned or community property receives a “step up” basis to fair value at the date of death and your heirs can sell the property and pay no capital gains.  If property is held as joint tenants, the joint tenant avoids probate, but receives the favorable “step up” basis treatment on only one-half of the property.
5. Lack of control. A joint tenant has no control over what happens to the property after death.  A surviving joint tenant can sell or transfer the property, or can pass it to the survivor’s choice of heirs, including subsequent spouses.  Joint tenancy deprives you of the assurance that your property stays in your bloodline.  Without any further planning, property owned by a surviving joint tenant will pass automatically to the heirs of the survivor.  If the survivor’s heirs are not the same as the decedent’s heirs, an undesirable result may occur.
6. Guarantees public probate proceedings. Although there will be no probate administration when the first joint tenant dies, then (unless the survivor creates a new plan) a public probate proceeding will be necessary to complete the transfer of the property upon the death of the survivor.
7. May subject you to expensive and potentially devastating results. Joint tenancy property is fair game for your joint tenant’s creditors.  Although you may have an opportunity to prove your property was placed into joint tenancy for convenience and that the property really does not belong to the debtor, you are exposed to the expense and uncertainty of litigation.

Don’t let any of these fatal problems befall your family.  Call our office today to discuss other, more reliable options for passing on your assets.

(Image courtesy of treehugger.com)

In my last blog post I promised to give some concrete examples of why an updated trust is better than one that simply keeps the “status quo”.  I will forgo the obvious examples such as inheriting money or growing your assets so that your original plan will no longer work.  I’ll also skip over the obvious changes in family circumstances which make your existing plan unpalatable.  These are reasons you already know. This blog post will concentrate instead on the not so obvious reasons to update.

One of the most important (and most common) reasons to update from your Chevrolet trust to a Cadillac trust is a second marriage.  A subtle problem may exist when you are in a second marriage and plan to leave your assets to your surviving spouse to use, and then hope that spouse passes them along to your descendants.

A typical estate plan provides for the surviving spouse to be the income beneficiary of a credit shelter trust with the remainder passing to your children. If your estate exceeds the minimum estate tax exemption then the remainder passes to a marital deduction trust, either a limited access trust commonly called a QTIP or outright to the survivor’s trust, depending upon your family circumstances.  However in many second marriages, the plan is for the amount that can pass without being subject to estate tax to pass directly to your descendants upon your death.  This is fairly common when the spouse may be close in age to your children.  Such plans usually satisfy the belief that it would be unfair to make your children wait for their inheritance, yet the inheritance is still shared between your spouse and your descendants.

The way most plans are written, the formula operates to leave as much to your descendants as will not increase the tax.  When that number is $1,000,000, in a $2,000,000 estate the surviving spouse would get half and the descendants would share the other half.  But as the exemption amount increased to 3.5 million dollars, the surviving spouse would get nothing – not the intended result.  Now the reverse is true, this year there is no estate tax and that plan would completely disinherit the spouse no matter how large the estate, but next year, the descendants will share only 1 million dollars no matter how large the estate.

I believe in “modeling” or “back testing” the results to be sure you will achieve the desired result, and it pays to model or back test frequently if a sound estate plan is important to you.

Unintended consequences can arise in many ways, this is just one graphic example.

Call today and arrange for me to review your documents and back test them against your assets and your intentions.  You will be glad you did!

It happened again.  After telling the audience at a recent seminar that trusts really are living documents that need to be updated periodically, I was approached by several attendees afterward asking if I really meant their trust needed to be updated. After all, they only want to make minor changes; they don’t need anything big; their trust was created by a very good attorney.

That’s when I told them that any trust needs to be reviewed regularly, no matter how good the attorney or the trust. People change, lives change, and laws change—and any of these changes could affect your trust. In fact, I recommend that my own clients review their trusts annually and update their trusts every 2 to 3 years, if for no other reason than because I am a better attorney today than I was yesterday and can do more to protect them and their families.

People are often surprised when I tell them that the cost of updating their trust can be as much as they paid for their entire trust several years ago. They don’t understand why an “update” is so involved and expensive.  This reaction led me to an epiphany.

These folks understand “update” differently.  When a client hears “update,” they think minor modifications: changes to the people named, the trustees, or distributions. These “modifications” are like getting the oil changed and the tires rotated on your car.  They are items that need regular maintenance.

An “update”, however, is much more comprehensive; it includes changes that take into consideration:

• Tax law changes,
• State law and asset protection changes,
• Changes affecting how the trustees manage and distribute your money,
• Incorporation of new ideas,
• Plugging holes in old legal thinking that plagued older documents, and
• The most current thinking of over 1,000 lawyers

An “update” is trading in your worn out used car for a newer model that performs better.  The standard provisions have been re-engineered to perform better.  “Updating” your trust in my office means you are getting the best protection for your family, and your hopes, dreams, and aspirations.

As a trust based estate planner I aspire to show you the benefits of making modifications when necessary, and updating when the benefits of using modern language insure the result you desire and deserve.

If you are happy with your old car and just need an oil change or new tires, don’t buy a new car; but if a new car appeals to you, it will be a good value. Is the cost too much?  Absolutely not, but sticker shock is a powerful emotion.

Can I “sell” a Chevrolet for the same price as a Cadillac?  No, and I don’t want to; a Chevrolet might be right for your family and your budget – it will provide a reliable result if you have no special circumstances, hopes, or aspirations.  However, I don’t often advocate in favor of a Chevrolet because experience teaches me that in an alarming number of cases the Chevy will fail when you need it most—after you die.  No one wants an out of warranty repair bill.

My personal satisfaction and passion comes from making sure you understand the choice you are making.  As long as you see both the Chevrolet and the Cadillac for what they are and choose the one that provides you the best value, we will both be happy.

In my next post I’ll give some concrete examples describing why my constantly improving Cadillac trust is a better value than your current vintage Chevrolet trust.

Does your estate plan include a digital Will?

Last night while I was having dinner with a friend who also works in the legal world, talk turned to the digital age, and one of our dinner partners remarked about how interesting it was that our friend had recently moved and had acquired modern technology like digital cable TV.  The punch line was that when asked if he was online, he replied he had something better, a secretary who was online.

Not many people I meet in my practice have personal secretaries any more.  Almost all of them are “online.”  Whether you use the internet for email, online banking, bill paying, photo or data storage, medical information, or social networking, it is likely that you have a myriad of usernames and passwords that ought to be regularly changed.

What happens to those online accounts when you die?

Andrea Coombes recently wrote an interesting article Don’t Take Your Passwords to the Grave that describes some of the common risks associated with estate plans that do not adequately address internet accounts.

A somewhat more well known problem was documented in 2005 in A Corporal’s Death on Law.com which described the problems the parents of a deceased soldier had accessing their son’s email account to retrieve his son’s contacts and preserve a record of his correspondence.

To add to the mix, social networking sites such as Twitter, Facebook, MySpace, LinkedIn, etc, sometimes have their own policies regarding what happens to a user account when the owner passes away.

You can protect against the loss of the electronic paper trail as a result of your death by leaving behind a list of accounts, usernames and passwords.  You can download my suggested form for this purpose at www.bregmanandburt.com.  But because of the confusing privacy rules, this may not be enough.  Your trust, Will, and powers of attorney should all include provisions addressing who owns or can access your online accounts after your death.  You also have the option of creating an “online will” to deal with your online assets such as accounts and passwords.

If you use the internet and your estate plan does not contain these important provisions, seek the help of a competent estate planner who understands the digital world.  I welcome your call to review your estate plan or discuss these issues with you.