Who Do You Trust?
July 8, 2010
My inspiration for today’s post comes from this recent article in the New York Times about debt relief firms, and a few questions I was asked by a prospective client.
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.
Domestic Partners Get Visitation Rights
April 30, 2010
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.
7 Fatal Problems of Joint Accounts
April 21, 2010
When fewer than half of all adult Americans have estate plans, you must ask yourself: why? One answer is that many people think they have already taken care of how their assets will pass to their heirs through joint tenancy. Joint tenancy works well if nothing out of the ordinary exists or occurs; but there are many problems that may arise. Here are just 7 of the worst things that might happen if you use joint tenancy to pass your assets on to your heirs:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
Online Accounts: Until Death Do Us Part
March 17, 2010
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.
Leaving A Legacy: Improving the World With Social Capital
March 10, 2010
Social capital is the money or time you contribute to worthy causes that improve society. A favorite saying around charitable causes is the phrase “give or get” which means members can either contribute an amount of money toward the goal or they can go out and raise that sum of money from people they know. The saying recognizes that the time expended raising money is often as important as contributing the money itself.
But the social capital I want to talk about in the context of estate planning emanates from my friend’s philosophy that “money is only a tool.”
Although it is often unexpected, when I initiate conversations with estate planning clients my goal is to begin each relationship by learning what each new client values.
Commonly, they are proud of the manner in which they have provided for their family and their intention to provide financial support after they die. However, they often worry that their descendants won’t use their inheritance wisely; and sometimes clients feel that their descendants don’t really need an inheritance anyway.
The concept of social capital solves many issues. It allows you to contribute money to causes you believe in and set up your descendants to be caretakers of the capital for the future. It benefits the descendant that doesn’t need your money by speaking from your heart to their own. It benefits the spendthrift by substituting personal responsibility for temptation.
There are 2 schools of thought about the use of social capital. Some clients are just not interested in the concept, believing they have supported their causes during their lifetime and it is their descendants’ turn to decide how to act. Others see the use of social capital as a key tool to building a legacy through strength of character. Depending on the client’s perspective there are different ways to use this tool.
One way is to purchase life insurance and name a favorite cause as the beneficiary. This allows small amounts of premium dollars to blossom into a large gift that can provide major support for a favorite cause. This works well in many situations, but it does not build responsibility in your descendants.
There are tax motivated strategies such as naming a charity as the beneficiary of a retirement account that has not yet been taxed. Leaving the descendants post-tax assets and gifting the as of yet untaxed retirement plan can yield a good income tax and estate tax result. Creating charitable remainder trusts as a technique to avoid capital gains on appreciated property is a good strategy when contemplating the sale of highly appreciated real estate or a business. These strategies share the defect of providing social capital, but not involving your descendants.
A good way to speak to your descendants is to set aside a portion of your wealth in a donor advised fund and name your descendants as the advisors to the fund. Your voice comes through because you leave your descendants the responsibility of making decisions about how, when, and to whom to give money. It encourages them to honor your legacy by becoming involved in the causes they support.
However you choose to create a philanthropic legacy, you will be speaking in a clear voice to your descendants about your values and making a difference the way you decide best suits your own perspective.
Leaving a Legacy: Your Own Voice in Your Estate Plan
March 4, 2010
(image courtesy of www.treasurechestproducts.com)
Back in December I blogged about estate planning not being about money and described the beginning of a journey to find the legacy you want to leave to your children, today I’m going to write about another part of that journey… finding your own voice.
Part of finding your legacy means looking for and putting your own voice into your documents. Recently I blogged about George Washington’s Will and the way he breathed life into his estate plan by describing the importance of his swords bequeathed to his nephews and the even more important freedoms for which they stood. Not all of us can be the father of our country, but all of us can bequeath the lessons of a lifetime and speak to our descendants through our estate plan.
Estate planning interviews that begin with how much money you have and to whom do you want to leave it are likely to end there as well. Interviews that beginning by listening to your own life’s story give you an opportunity to explore who you are, what you have done, and what is important to you.
When I was first starting out as an inexperienced estate planning attorney, I was often so in awe of my clients who were worth a lot of money that I couldn’t wait to try to impress them in return with the amount of knowledge I had and to use that knowledge to save them even more money. I was so awe struck, that I neglected to appreciate the value of who they were. If it was often a less than satisfying personal relationship for me, I slowly realized, it must have been mutually unsatisfactory for my clients as well.
I began to understand if I first learned who my clients were, I would soon appreciate what they valued, and it would become apparent how they had managed to accumulate the wealth and why they were now asking me to preserve it for their descendants.
Certainly passing along hard earned money is a priority for some clients, but poll after poll and personal experience say that what clients really want to deliver to the next generation is their own legacy. Passing on the money is easy; passing on your legacy is harder.
I have experimented with various tools for getting my clients in touch with their values for estate planning purposes. The best strategy is active listening. The hard part is that it is so easy, it doesn’t seem like I am working, I am learning. But as I learn from my clients, their voices ring in my head. As I draft their documents, who they are becomes embedded within the corners of the document creating a monument that will live at least as long as the money.
What do you value? Let me help you deliver those values to the next generation and maybe the generation after that.
What George Washington Taught Us About Estate Planning
February 17, 2010
President George Washington painted by G. Stuart, engraving by H.S. Sadd
At a recent symposium, the presenter described the almost magical way the father of our country turned his bequests of personal property into a legacy that lasted generations.
He described the portion of Washington’s Will that bequeathed his swords to his nephews. Instead of a simple listing of the items and the recipients, he wrote the following words:
“To each of my Nephews, William Augustine Washington, George Lewis, George Steptoe Washington, Bushrod Washington, & Samuel Washington, I give one of the Swords or Cutteaux of which I may die possessed; and they are to chuse in the order they are named. These swords are accompanied with an injunction not to unsheath them for the purpose of shedding blood, except it be for self defence, or in defence of their Country & its rights; and in the latter case, to keep them unsheathed, and prefer falling with them in their hands, to the relinquishment thereof.” [Emphasis Added]
With those simple words he created a lasting legacy far more important than the value of the property bequeathed. In a single sentence he defined his character and his hopes, dreams, and aspirations not only for his nephews, but for future generations yet unborn. Imagine the honored place those swords must have taken in the lives and homes of the recipients and the lessons of freedom taught future generations.
I recently sat with a long time client who was grieving over the loss of his friend of over 50 years as we discussed what to do with his friend’s personal property which consisted of a lifetime of collecting crystal and works of art. I explained his mundane choices as the executor of the estate of distributing the property to friends or relatives who treasured something from the decedent, keeping it for himself as a remembrance, or selling it. We began discussing the value and the potential liquidation value. Suddenly, the conversation turned very somber and my client slowly began telling me a story. “Mark,” he said quietly, “I don’t want any of that stuff, I have my own stuff.” He paused, lost in thought, and then continued. “He loved that stuff. I had no interest in it. But he studied the prices at retail stores and then shopped at second hand stores. He would find a piece he liked and he would carefully examine it.” My client slowly demonstrated a shopper holding up a piece with his hands and he slowly turned the imaginary piece over and around as he examined it. “He would often buy it for 20% of what it would have cost new.” Between the words and the hand gestures, by the time he finished telling the story and composed himself, I knew what he intended to do with the collection that only a few moments before he had described as “just stuff.”
Our lives make a difference. Many of us have an under developed appreciation for what we bring to the lives of those around us. Your Last Will and Testament can be written in your own voice so that the value of what you leave reflects the value of who you are. Contact me for more information about how to put your own voice into your estate plan and emulate George Washington in posterity.
You Think It’s Your Time To Go? “Not So Fast,” Says the State of Arizona
November 4, 2009
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.
Changes to Trustee Reporting Requirements Under The Arizona Trust Code
October 28, 2009
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:
- A list of the trust property and the market value of such property, if feasible.
- Liabilities
- 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.