Ah August! Although I was born and raised in the east, where fall was after Labor Day and the beginning of the new school year was signaled by the turning of the leaves; here in Arizona the temperatures are still in triple digits when the school year begins, and the only sign that a new school year is beginning is the incessant back to school ads that flood the airwaves.

If your baby is headed off to college for the first time then this season marks more than the usual turning of the calendar.  Aside from the cost and confusion of tuition, buying books, and arranging room and board, this rite of passage can be exciting and costly.  Many parents will experience amazement when they see how much stuff can fit into a dorm room, and how much electricity can be consumed by two new freshmen. Consider that when I entered Newman Hall in Blacksburg VA in the fall of 1968, the only plug in appliance in my room was a bedside lamp – even the essential alarm clock was a wind up Westclox!  One phone booth at the end of the hall served 120 men, and the highlight of every day was hanging out in the basement while the mail was sorted – our only communication with the outside world.

How times have changed!  In doing research for this article I was amazed to see how many online freshman checklists were available—there’s a list for everything: what clothes and amenities to pack; what furniture to bring; how to save on books; how to keep in touch with friends.  There’s even a planning calendar to help organize the brave new world of your college freshman!  However, what I did not find in all my searching was a list of the simple legal steps that are essential to keep your “baby” protected now that he is 18 and on his own in the eyes of the law.

Your son or daughter’s 18th birthday marks an important turning point in their life—and in yours.  You may still be fiscally responsible for them, but legally your child is now independent, and you will no longer legally be able to access their medical records or make emergency decisions for them without their permission. Although purchasing college health insurance may already be on the top of your “to do” list, a robust set of powers of attorney should not be overlooked. It’s time for many of the traditional “leaving the nest” conversations, but none is more important than the conversation about who will have the necessary legal authority to act on behalf of your young adult in an emergency.

In the (apparently) grand tradition of helpful college advice, I’ve created a checklist of my own to help parents of newly-minted 18 year olds ensure that their child will be legally protected while they’re off at college.  (You can read or print out the checklist for free by clicking here: Free Legal Checklist for New College Freshmen) The checklist includes such things as: make sure you are listed as an ICE (In Case of Emergency) contact in your child’s cell phone, and be sure you have a comprehensive health care power of attorney that includes a HIPAA release form so that you have access to medical information if something happens.  You may also want to consider purchasing a Docubank™ membership for your college student (the link shows you the complete services available for college bound children) after getting the proper documents prepared and signed.

At my office I provide counseling about health care, mental health, and financial powers of attorneys for college bound students, as well as a conversation about the importance of living wills—my door is always open.  Besides giving you peace of mind about being prepared and avoiding problems in the event of a medical emergency, this is also an excellent opportunity to introduce your child to the responsibilities and obligations of adulthood.

If you have a college bound student, please check out our Free Legal Checklist for New College Freshmen.  And if you know someone else with a college age student, please forward this on to them.

It’s an awesome world out there, send them out there prepared!

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.

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.

Pablo Picasso's "Death of Casagemas"

On July 13, 2009 Arizona governor Janet Brewer signed HB 2616 into law.  The law, hailed by the right to life movement as a great victory, intrudes on your right to privacy and injects the state into the midst of the dying decision of every Arizonan without a living will that expresses the intention to die with dignity.

The law requires every petition for the appointment of a guardian for an incapacitated person to contain a statement that the authority may include the authority to withhold or withdraw life sustaining treatment, including artificial food and fluid.

The law forbids any surrogate without written authority from the patient or a court order from consenting to or approving the permanent withdrawal of artificial administration of food and fluid.
The law provides an automatic stay of not less than 5 days to allow the entry of any order allowing food and fluid to be withheld or withdrawn to be appealed

The law creates a presumption that the absence of a living will means the patient in an irreversible coma or persistent vegetative state did not intend to have food and fluids withheld or withdrawn and the patient intended that all procedures, including medically invasive procedures, be administered in an attempt to prolong the patient’s life.  The law provides stringent guidelines for rebutting the presumption.

Personally, I do not believe the state or any strangers should be involved in any medical decisions, including the most difficult and emotional decisions facing loved ones when the patient is dying.  I believe in the right to privacy, including the right to exercise life and death decisions for your spouse, parent, or child, when that decision is supported by overwhelming medical evidence.  I think your doctors are a better source of information than your government.

However, I respect your right to disagree, and now the state of Arizona gives you a clear choice:  If you do not want food and fluid to be artificially administered once you are in an irreversible coma or persistent vegetative state, you should be certain you have a living will that clearly announces your intentions and a valid health care power of attorney appointing the people you want to direct your medical care if you are unable to do so.

If you fail to create a living will, you and your loved ones may endure the pain and suffering of the full weight of the judicial system oppressing you at your most vulnerable moment.

Protection or meddling?  You decide.

Living Wills, health care powers of attorney, and HIPAA declarations are part of every estate plan prepared by our firm.  We will explain to you the effect of each document and assure that your choice will be plainly heard when needed.

If you are currently or soon may be serving as the trustee of an irrevocable trust you should be aware that the Arizona Trust Code (ATC), which became effective January 1, 2009, imposes certain new obligations on trustees of irrevocable trusts.

Prior to January 1, 2009, ARS §14-7303 required the trustee to provide beneficiaries reports of the trust activity only upon request of a beneficiary.  Who qualified as a beneficiary entitled to request information was ambiguous, but current income beneficiaries were clearly within the class of beneficiaries entitled to information.

Now the ATC defines both qualified and permissible beneficiaries to distinguish who must receive information and who may receive information.  Generally qualified beneficiaries are current income beneficiaries and those who become entitled to principal or income upon the death of the current income beneficiary.

Unless the trust agreement provides otherwise, the trustee of an irrevocable trust must provide a report to the qualified beneficiaries, permissible beneficiaries, and other beneficiaries who request it.

The report must be provided at least annually.  The first reporting period ends December 31, 2009.

The report must contain the following information:

1. A list of the trust property and the market value of such property, if feasible.
2. Liabilities
3. Receipts and disbursements.

The report need not be prepared according to generally accepted accounting principles (GAAP).  There are no guidelines on what form the report must take, but a modified form loosely based on the form used to file a judicial accounting will probably be sufficient.  The outline for such a report is as follows:

Schedule A = Opening inventory.  A listing of the assets and their respective values.
Schedule B = List of outstanding debts.
Schedule C = List of all receipts
Schedule D = List of all expenditures
Schedule E = Summary of all other schedules ending with an ending balance.

An alternate format could be as simple as providing copies of account statements for the year (raw data).

If assets are held other than insured brokerage or bank accounts, a short narrative report describing the assets and their characteristics is probably appropriate.