Most families lead far-flung and busy lives, meaning the only time they see one another face-to-face is around the dinner table during a handful of major holidays. The estate planning process is an opportunity to bring everyone together outside of those scheduled occasions—even if a child or grandchild has to attend via video chat.
You come into the world a blank slate, and as you grow, you gain wisdom. You've planned your estate to leave physical assets to beneficiaries, so now think about leaving them something that’s just as important but less tangible: the hard-won wisdom you’ve accumulated over your life.
Substance addiction is by no means rare, impacting as many as one in seven Americans. Because of its prevalence, navigating a loved one’s addiction is a relatively common topic in everyday life. But you should also consider it when working on your estate planning. Whether the addiction is alcoholism, drug abuse, or behavioral like gambling, we all want our loved ones to be safe and experience a successful recovery. A properly created estate plan can help.
The idea that money from a trust could end up fueling those addictive behaviors can be a particularly troubling one. Luckily, it’s possible to frame your estate planning efforts in such a way that you’ll ensure your wealth has only a positive impact on your loved one during their difficult moments.
Funding For Treatment:
One of the ways your trust can have a positive influence on your loved one’s life is by helping fund their addiction treatment. If a loved one is already struggling with addiction issues, you can explicitly designate your trust funds for use in his or her voluntary recovery efforts. In extreme cases where an intervention of some sort is required to keep the family member safe, you can provide your trustee with guidance to help other family members with the beneficiary’s best interest by encouraging involuntary treatment until the problem is stabilized and the loved one begins recovery.
Incentive features can be included in your estate planning to help improve the behavior of the person in question. For example, the loved one who has an addiction can be required to maintain steady employment or voluntarily seek treatment in order to obtain additional benefits of the trust (such as money for a vacation or new car). Although this might seem controlling, this type of incentive structure can also help with treatment and recovery by giving a loved one something to work towards. This approach is probably best paired with funding for treatment (discussed above), so there are resources to help with treatment and then benefits that can help to motivate a beneficiary.
Lifetime Discretionary Trusts:
Giving your heirs their inheritance as a lump sum could end up enabling addiction or make successful treatment more difficult. Luckily, there’s a better way. Lifetime discretionary trusts provide structure for an heir’s inheritance. If someone in your life is (or might eventually) struggle with addiction, you can rest easy when you know the inheritance you leave can’t be accessed early or make harmful addiction problem worse.
Of course, you want to balance this lifetime protection of the money with the ability of your loved one to actually obtain money out of the trust. That’s where the critical consideration of who to appoint as a trustee comes in. Your trustee will have discretion to give money directly to your beneficiary or pay on your loved one’s behalf (such as a payment directly to an inpatient treatment center or payment of an insurance premium). When dealing with addiction, your trustee will need to have a firm grasp of what appropriate usage of the trust’s funds looks like. Appointing a trustee is always an important task, but it’s made even more significant when that person will be responsible for keeping potentially harmful sums of money out of the addicted person’s hands.
Navigating a loved one’s addiction is more than enough stress already without having to worry about further enablement through assets contained in your trust. Let us take some of the burden off your shoulders by helping you build an estate plan that positively impacts your loved one and doesn’t contribute to the problem at hand. That way, you can go back to focusing your efforts on the solution. Contact our office today to see how we can help.
If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
Earlier this year, NBA team owner Gail Miller made headlines when she announced that she was effectively no longer the owner of the Utah Jazz or the Vivint Smart Home Arena. These assets, she said, were being placed into a family trust, therefore raising interest in an estate planning tool previously known only to the very wealthy—the dynasty trust.
Dynasty Trusts Explained:
A dynasty trust (also called a “legacy trust”) is a special irrevocable trust that is intended to survive for many generations. The beneficiaries may receive limited payments from the trust, but asset ownership remains with the trust for the period that state law allows it to remain in effect. In some states, a legal rule known as the Rule Against Perpetuities forces the trust to end 21 years after the death of the last known beneficiary. However, some states have revoked this limitation so, in theory, a dynasty trust can last forever.
Advantages and Disadvantages:
Wealthy families often use dynasty trusts as a way of keeping the money “in the family” for many generations. Rather than distribute assets over the life of a beneficiary, dynasty trusts consolidate the ownership and management of family wealth. The design of these trusts makes them exempt from estate taxes and the generation-skipping transfer tax, at least under current laws, so that wealth has a better ability to grow over time, rather than having as much as a 40-50% haircut at the death of each generation.
However, these benefits also come at the expense of other advantages. For example, since dynasty trusts are irrevocable and rely on a complex interplay of tax rules and state law; changes to them are much more difficult, or even potentially impossible as a practical matter, compared to non-dynasty trusts. Because change is very difficult or even impossible as a practical matter, the design of the dynasty trust needs to anticipate all changes in family structure (e.g. a divorce, a child's adoption) and assets (e.g. stock valuation, land appraisals), even decades before any such changes occur.
Is a Dynasty Trust Right for Your Family?
This trust usually makes the most sense for very wealthy families whose fortunes would be subject to large estate taxes. For multiple generations, it can defend estates from taxes, divorces, creditors or ill-advised spending habits. That said, if you desire to give your descendants more flexibility with their inheritance, a dynasty trust may not be right for you. To learn more about the pros and cons of this and other estate planning strategies, contact our office today.
If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
While most proactive individuals know the importance of having a well-rounded estate plan, it is typically considered as something that will take effect after they have passed away. But in fact, there are many ways in which comprehensive estate planning can have a positive impact on your life while you are still around to reap the benefits.
Planning for Incapacity:
Most people who reach old age come to a point at which they are no longer able to handle all their affairs on their own. In many cases this incapacity is due to dementia or other cognitive impairments associated with the elderly. At that point, the decisions they’ve made with their estate planning attorney can have major repercussions on their lifestyle and the handling of their wealth.
Take Alex for example. Long before Alex retired from his long and successful career as an IT manager at a large corporation, he put a cursory estate plan in place with a will detailing who would get which of his assets upon his death. But, Alex didn’t update his plan as he aged. In his late seventies, he developed Alzheimer's and it became unclear to his family how to proceed with his medical care and wealth management. Since Alex did not formally choose an individual to be in control of his affairs in the event of incapacity, it falls upon the court to appoint a guardian or conservator. Unfortunately, that’s where things get complicated.
What is guardianship?
Guardianship goes by a few other names, so it’s important to get familiar with various terms used to indicate similar and somewhat overlapping concepts. The other terms you may hear include “conservatorship,” “plenary guardianship,” and “living probate.”
It’s important to note that these terms are used in slightly different manners from state-to-state, with some states using “guardian” and “conservator” interchangeably. Others maintain the distinction of a guardian being a person who makes decisions about medical care and living arrangements, whereas a conservator makes decisions about property and assets. In either case, the guardian or conservator is essentially a substitute decision maker that’s authorized by the court to make decisions on behalf of the incapacitated person.
3 Reasons You Should Avoid It:
In the process of living probate, the court tries to settle on solutions that will fit the incapacitated individual’s best interests. However, there is a much better way. Here are just a few of the reasons guardianship and conservatorship are not ideal fallbacks:
1. Cost To put it simply, living probate is expensive. The legal fees associated with court-appointed attorneys representing incapacitated individuals can chip away at their estates very quickly. Living probate also brings your affairs into the public sector.
2. Privacy Alex may not have wanted his family to have to experience the financial and emotional costs of his living probate court proceedings, but he may also have felt less than enthusiastic about his personal affairs being discussed in a public forum.
3. Clarity In addition to being costly and a compromise of privacy, living probate is also full of guesswork. If Alex had assigned powers of attorney and established long-term care provisions in his estate plan, his affairs would be handled exactly as he wished in the event of his incapacity. When the court is involved, they usually apply default rules of state law, which means the legislature is essentially making some choices for you and your family.
How to Structure Your Estate Plan:
What does an individual like Alex need to do to avoid the chance of his family having to go through living probate? There are a few specific steps we can take to make in planning your estate to ensure your affairs never end up in a court-appointed guardian’s hands:
Powers of Attorney:
A complete estate plan includes named powers of attorney who will fulfill the roles of guardians and conservators in the event of your incapacity. The difference is that these individuals will be chosen by you rather than by the court. There are several different types of powers of attorney for specific purposes, such as a healthcare power of attorney or a general durable power of attorney, the latter of which controls the management of your finances.
2. Long Term Care Planning
Although you may never need long-term care, building a strategy for it into your estate plan will allow you to relax knowing that you’ll receive long-term care according to your wishes if that becomes necessary. This type of planning also helps protect the assets in your estate plan from being used up on medical expenses before going to your beneficiaries.
Avoiding guardianship and conservatorship through living probate is a relatively pain-free process if handled well ahead of time. Get in touch with us today to go over the parts of your estate plan that may need amending to give you and your family the best possible outcomes. We are here to help and can quickly get your estate plan in optimal shape.
If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
We know it’s hard. Thinking about someone else raising your children stops us all in our tracks. It feels crushing and too horrific to consider. But you must. If you don’t, a stranger will determine who raises your children if something happens to you—your child’s guardian could be a relative you despise or even a stranger you’ve never met.
Due to the importance of choosing an appropriate Guardian, and our experience seeing firsthand the difficulties people go through determining who to name—we have created a step-by-step Guide: How To Choose Your Child’s Guardian. To obtain your free copy, click here.
No one will ever be you or parent exactly like you, but there is someone who could muddle through and provide for your children’s general welfare, education, and medical needs. Parents with minor children need to name someone to raise them (a guardian) in the event both parents should die before the child becomes an adult. While the likelihood of that happening is slim, the consequences of not naming a guardian are more than intense.
If no guardian is named in your will, a judge—a stranger who does not know you, your child, or your relatives and friends - will decide who will raise your child. Anyone can ask to be considered, and the judge will select the person she deems most appropriate. Families tend to fight over children, especially if there’s money involved - and worse - no one may be willing to take your child; if that happens, the judge will place your child in foster care. On the other hand, if you name a guardian, the judge will likely support your choice.
How to Choose a Guardian:
Your child’s guardian can be a relative or friend. Here are factors our clients have considered when selecting guardians (and back up guardians).
How well the child and potential guardian know and enjoy each other
Parenting style, moral values, educational level, health practices, religious/spiritual beliefs
Location - if the guardian lives far away, your child would have to move from a familiar school, friends, and neighborhood
The child’s age and the age and health of the guardian-candidates:
Grandparents may have the time, and they may or may not have the energy to keep up with a toddler or teenager
An older guardian may become ill and/or even die before the child is grown, so there would be a double loss
A younger guardian, especially a sibling, may be concentrating on finishing college or starting a career.
5. Emotional Preparedness:
a. Someone who is single or who doesn't want children may resent having to care for your children.
b. Someone with a houseful of their own children may or may not want more around.
Serving as guardian and raising your child is a big deal; don’t spring such a responsibility on anyone. Ask your top candidates if they would be willing to serve, and name at least one alternate in case the first choice becomes unable to serve.
Who’s in Charge of the Money?
Raising your child should not be a financial burden for the guardian, and a candidate’s lack of finances should not be the deciding factor. You will need to provide enough money (from assets and/or life insurance) to provide for your child. Some parents also earmark funds to help the guardian buy a larger car or add onto their existing home, so there’s plenty of room for extra children.
Factors to consider:
1. Naming a seperate person to handle this money can be a good idea. That person would be a guardian of the estate or a trustee, but not guardian of the children.
2. However, having the same person raise the child and handle the money can make things simpler because the guardian would not have to ask someone for the money.
3. But the best person to raise the child may not be the best person to handle the money and it may be tempting for them to use this money for their own purposes.
Compromise Will Likely be Necessary:
Naming a guardian is a difficult decision for most parents. Keep in mind that this person will probably not raise your child because odds are that at least one parent will survive until the child is grown. By naming a guardian, however, you are being responsible and planning for a bad—but avoidable—situation arises. It’s important to realize that no one besides you will be the perfect parent for your child, so typically this means making compromises in some areas. Select the person you think will muddle through the best.
Let’s Continue this Conversation:
We know it’s not easy, but don’t let that stop you. We’re happy to talk this through with you and legally document your wishes. Know that you can change your mind and select a different guardian anytime you’d like. You are a parent and your job is to provide for and protect your children, so let’s do this—together. To get started, download your free copy of our Guide: Choosing Your Child’s Guardian. Next, contact our office to schedule your free consultation and we’ll get your children protected.
“Every one of us receives and passes on an inheritance. The inheritance may not be an accumulation of earthly possessions or acquired riches, but whether we realize it or not, our choices, words, actions, and values will impact someone and form the heritage we hand down.”
— Ben Hardesty
Successful estate planning is about far more than simply passing your wealth to the next generation—it’s also about passing on your values. No matter which financial or legal structures you choose to contain and manage your assets, these instruments only preserve your wealth until it reaches the hands of your beneficiaries. What happens then? Your values enabled you to accumulate wealth and persevere despite all obstacles and long odds. If your children and grandchildren don’t share and cherish those values, they could lose their inheritance as quickly as they received it.
But our values can be hard to capture in language. They seem second nature to us only because we live them every day. Here’s an exercise to help you identify your (perhaps) rarely-spoken moral code and communicate it to the next generation.
The Science of Surfacing Your Subconscious Values:
In Chapter 3 of his bestselling book, Getting Things Done: The Art of Stress-Free Productivity, productivity author David Allen discusses what he calls vertical project planning—that is, identifying the “why’s” and“what’s” of any project before engaging with its details. To reveal the standards that you have regarding any task, just finish the following sentence:
“I would give others totally free rein to do this as long as they…”
For instance, if you’re planning a dinner celebration for your dad’s 70th birthday, you could fill in the blanks as follows:
…So long as they created a budget for the party and got buy-in from both of my sisters to contribute;
…So long as they made sure to double check the guest list with mom;
…So long as they booked a restaurant within 30 minutes from my parents’ home.
As it pertains to communicating values, we could reword it like this:
“I would give a total stranger free rein to guide the people I care about most about how to live a great and moral life as long as they…”
…So long as they make sure to communicate my core values of creativity, compassion and integrity;
…So long as they give many concrete examples of these standards being met and not met to demonstrate exactly what I mean;
…So long as there’s some mechanism to remind my family of these values in an ongoing way, so that they don’t forget;
…So long as they make inheritance from the trust I establish conditional on whether my beneficiaries live these values.
Estate planning is ultimately not only about passing along your tangible wealth and deciding how to distribute assets. It’s an opportunity to ensure your legacy into the next generation and beyond. Clarifying your values and working to effectively pass them along can be a profoundly liberating experience.
Things don’t always go according to plan. Sometimes, pet owners can get a bit creative when providing for their pets. Let’s look now at 3 famous cases involving pet trusts and distill important lessons from them.
David Harper and Red:
David Harper, a wealthy, reclusive bachelor in Ottawa, Canada, wasn’t exactly famous during his life. In his death, however, he made headlines by reportedly leaving his entire $1.1 million-dollar estate to his tabby cat, Red. Just to make sure his wishes were carried out, Harper bequeathed the fortune to the United Church of Canada under the stipulation that they take care of Red for him! The ploy worked.
Lesson learned: You can be as creative as you desire in your approach to making sure your pets receive proper care after you’re gone.
Maria Assunta and Tommaso:
In a four-legged and furry version of the classic rags-to-riches story, wealthy Italian widow Maria Assunta rescued a stray cat from the streets of Rome and gave him a proper home and name: Tommaso. As Assunta’s health failed, she tried for several years to find an animal organization to entrust Tommaso. When no suitable organization was found, Assunta left the estate valued at $13 million directly to the cat in her will and named her own nurse as caretaker. She passed away in 2011 at the ripe old age of 94, knowing her beloved Tommaso would be well taken care of.
Lesson learned: The best way to ensure the care of your pet is in writing, with a proper estate plan.
Patricia O’Neill and Kalu:
Patricia O’Neill, daughter of British nobility and ex-spouse of Olympian Frank O’Neill, had designated a fortune worth $70 million to her chimpanzee, Kalu and other pets, in her will - or so she thought. It was discovered in 2010 that the heiress herself was virtually broke, thanks to the shady dealings of a dishonest financial advisor. This story provides perhaps the most famous example of a pet trust gone dry while the owner is still living.
Lessons learned: You can only give away what you have. If caring for your pets after your death is important to you, make sure your financial plan is in line with your estate plan and that you’ve taken appropriate steps to oversee your advisors.
To summarize, establishing a pet trust is the best way to ensure that your beloved pets receive the care they deserve after you pass on. If you want to ensure that your family—including your pet animals—are cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
A pet trust is an excellent way to make sure your beloved pet will receive proper care after you pass on. The problem, of course, is that you won’t be there to see that your wishes are carried out. It’s critical to set up a pet trust correctly to ensure there are no loopholes or unforeseen situations that could make your plans go awry. Here are 5 tragic mistakes people often make when leaving their assets to their pets.
1. Appropriating more than the pet could ever need:
The gossip stories about such-and-such celebrity who left his or her entire fortune to a pet are the exception rather than the rule. Leaving millions of dollars, houses, and cars to your pet is not only unreasonable, but it’s more likely to be contested in court by family members who might feel neglected. To avoid this pitfall, leave a reasonable sum of money that will give your pet the same quality of life that she enjoys now.
2. Providing vague or unenforceable instructions:
Too many pets don’t receive the care their owners intended because they weren’t specific enough in their instructions or because they did not use a trust to make the instructions legally binding. Luckily, a pet trust can clarify your instructions and make them legally valid.
If you leave money to a caretaker without a pet trust in place, hoping it will be used for the pet’s care for example, nothing stops the caretaker from living very well on the pet’s money. But when you use a pet trust to designate how much the caretaker receives and how much goes for the pet’s care, you’ve provided a legal structure to protect your furry family member. You can be as specific about your wishes as you’d like, from how much is to be spent on food, veterinary care, and grooming. You can even include detailed care instructions, such as how often the dog should be walked.
3. Failing to keep information updated:
Bill sets up a pet trust for his dog Sadie, but what happens if Sadie passes away? If Bill gets a new dog and names her Gypsy, but he doesn’t update this information before he dies, Gypsy could easily wind up in a shelter or euthanized because she’s not mentioned in the trust. This is a common yet tragic mistake that can be easily avoided by performing regular reviews with your estate planning attorney to ensure that your estate plan works for your entire family.
4. Not having a contingency plan:
You might have a trusted friend or loved one designated as a caretaker in your pet trust, but what happens if that person is unable or unwilling to take that role when the time comes? If you haven’t named a contingent caretaker, your pet might not receive the care you intended. Always have a “Plan B” in place, and spell it out in the trust.
5. Not engaging a professional to help:
Too many people make the mistake of trying to set up a pet trust themselves, assuming that a form downloaded from a do-it-yourself legal website will automatically work in their circumstances. Only an experienced estate planning attorney should help you set it up to help ensure that everything works exactly the way you want.
When attempting to leave assets to your pet, the good news is that with professional help, all these mistakes are preventable. Talk with us today about your options for setting up a new pet trust or adding a pet trust to your current estate plan. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
If you want to leave a robust financial legacy for your family, a financial plan alone is like trying to guide a boat with just one oar. It’s only part of the big picture for your overall monetary health. A well-informed financial plan is worth your time for several reasons, but let’s look at how financial and estate planning can work in tandem to create the best possible future for you and your family in the years to come.
What’s included in a financial plan:
Financial planners take stock of an individual’s fiscal landscape and come up with approaches to maximize his or her overall financial well-being. Take Emily for instance, an energetic project manager in her late-twenties. She’s found a successful career track after graduating with her bachelor’s and now has the steady income necessary to start daydreaming about buying a house with bay windows like the one she passes on her morning commute.
But before she can take such a big leap, Emily tracks down a skilled financial planner who will take an honest look at her foreseeable cash flow and her spending and saving habits. People from all walks of life use thehelp of financial planners to make sure they’re in good shape for making big purchases, saving for their children’s education, and ensuring a comfortable retirement. This also includes developing an investment portfolio, which the financial planner monitors and manages.
But financial planning only goes so far. To have a comprehensive approach, Emily also must also consider her estate and the wills and trusts she should put in place so her assets go where she wants them to in the long run. That’s where a trusts and estates attorney comes in.
What’s included in an estate plan:
Estate planning attorneys are lawyers who give sound advice about what will happen to a person’s assets if he or she becomes mentally incapacitated or when he or she dies. While this may not sound like the sunniest of topics, knowing that what you pass on to your family will be legally protected lets you focus on enjoying the best things in life without worrying about your loved ones’ futures. Estate planning includes defining how you want your loved ones to benefit from the financial legacy you leave behind, implementing tactics to protect your assets from creditors down the road, providing a framework so your loved ones can make medical decisions on your behalf when you can’t, developing strategies to help you reduce estate taxes, and more.
And at the end of the day, your attorney is a teacher. He or she should be equipped to clearly explain your legal options. Even though estate planning can be highly technical, your professional bond with your attorney can and should feel like a friendly partnership since it involves taking an honest look at many personal wishes and priorities. There is no one-size-fits-all estate plan, so choose an attorney whom you trust and enjoy working with and who is responsive to questions and needs.
Remember Emily? While financial planning helped, her get from point A to point B with some pretty big money milestones, she now knows she needs an estates and trusts attorney to make sure her wishes are carried out and her money stays in the right hands—her family’s.
How these two efforts work together:
There are several ways these two components of your financial wellness work in harmony. Asking your financial planner and estate planning attorney to collaborate is common practice, so don’t be concerned that what you’re asking is outside their regular scope of work. Knowing who else advises you will help both parties get the information they need do their jobs at peak effectiveness. For example, your estate planning attorney may prepare a living trust for you, but your financial planner may help you transfer certain assets into that trust.
What are you waiting for?
If you already have a financial planner and are thinking about working with a trusts and estates attorney, you’re in an excellent position. We can often collaborate with your advisor to begin working on your estate plan. This might save you time and money, as we’ll get up to speed with the help of your financial planner.
The right time to plan your estate is right now. The sooner you put yourself and your family able to rest easy knowing a solid plan is in place, the better. And now that you know your financial plan is a wonderful start—but not a complete solution—you’re ready to take the first step on the path to total financial security.
Not long ago, pet trusts were thought of as little more than eccentric things that famous people did for their pets when they had too much money. These days, pet trusts are considered mainstream. For example: in May 2016, Minnesota became the 50th (and final) state to recognize pet trusts. But not every pet trust is enacted exactly per the owner’s wishes. Let’s look at 3 famous pet trust cases and consider the lessons we can take away from them so your furry family member can be protected through your plan.
Leona Helmsley and Trouble:
Achieving notoriety in the 1980s as the “Queen of Mean,” famed hotelier and convicted tax evader Leona Helmsley passed away in 2007. True to form, her will left two of her grandchildren bereft and awarded her Maltese dog Trouble a trust fund valued at $12 million. The probate judge didn’t think much of Helmsley’s logic, however, knocking Trouble’s portion down to a paltry $2 million, awarding $6 million to the two ignored grandchildren and giving the remainder of the trust to charity. Furthermore, when Trouble died, she was supposed to be buried in the family mausoleum, but instead she was cremated when the cemetery refused to accept a dog.
Lessons learned: Leaving an extravagant sum to a pet may not be honored in a lawsuit and can cause family conflict. It’s best to leave a reasonable amount to provide for the care and lifestyle your pet is used to, for the rest of his or her life. If you are looking to disinherit one or more family members, make sure to specifically talk with your attorney so you can have a game plan to make the disinheritance as legally solid as possible.
Michael Jackson and Bubbles:
Most Michael Jackson fans will remember his pet chimpanzee Bubbles, who was the King of Pop’s constant companion. Jackson reportedly left Bubbles $2 million. After the singer’s death, Bubbles’ whereabouts became a point of speculation amid allegations that Jackson had abused the pet while he was alive. The good news is that Bubbles is alive and well, living out his years in a shelter in Florida. The bad news is that if he was left $2 million, he never received it; and he is being supported by public donations.
Lessons learned: Always be clear about your intentions and work with your attorney to put them in writing so your furry family member is cared for and doesn’t wind up in a shelter.
Karla Liebenstein and Gunther III (and IV):
Liebenstein, a German countess, left her entire fortune to her German Shepherd, Gunther III, valued at approximately $65 million. Tragically, Gunther III passed away a week later. However, the dog’s inheritance passed on to his son, Gunther IV; the fortune also increased in value over time to more than $373 million, making Gunther IV the richest pet in the world.
Lesson learned: It’s possible for pet trust benefits to be passed generationally, so make sure your estate plan reflects your actual wishes and intentions.
If your estate plan has not already made arrangements for your beloved pet, we’re here to help. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
You finally crossed “getting your estate plan done” off your list, and you’ve (rightly) breathed a huge sigh of relief. By tackling this challenge, you’ve not only established protections for your loved ones and legacy, but you’ve also freed up some important “mental space” that had previously been preoccupied.
Once you create the documents that make up your estate plan, your estate planning attorney will prepare a binder containing all pertinent documentation. This estate planning binder is critical because it provides key information regarding your intentions after you pass away or if you become incapacitated. Once your trust is fully funded, your binder should also contain information about your assets. This makes administration easier for your family. This binder should be stored safely, reviewed regularly, and updated when necessary to avoid confusion when your loved ones need to refer to it.
Before we get into the nuts and bolts about how to complete this review process – to help you stay in control now that you’re there – let’s first take a step back and clarify a point that confuses many clients. Your estate plans and your financial plans for the future are two completely different things. They are both obviously important, and they both should be kept in a safe place and reviewed often. However, the estate planning binder has special importance because it contains your wishes and instructions for what should happen if you become incapacitated and when you die…as well as who should be in charge of what—at those times. But this binder is not the same thing as your financial plan. Your financial plan is a comprehensive plan of the assets you have now (and the assets you may need in the future) to help you achieve your goals in life.
Where to Keep Your Estate Planning Binder:
Your estate planning binder should be kept in a safe place along with your other important financial information. We recommend keeping it secured in a safe deposit box at your local bank or in a fireproof strong box, if you keep the documents at home. You can make photocopies or scans of the documentation for your own use if you wish to refer to them more frequently or have them as a backup. Remember though, the original documents have legal significance, so don’t create a situation where your family is forced to attempt to rely on copies - you need to safeguard your originals!
Who Should Have Access to the Binder:
You obviously have discretion regarding who can access your personal financial information. However, strongly consider retaining direct access yourself until circumstances require someone else to step in to take control. If you keep the binder in a safe deposit box, for example, you could keep a spare key in your home or office and notify your attorney, next of kin, or successor trustee as to the key’s location in case they need to use it. Talk to your bank about what limited access rights to the safe deposit box might be available.
How Often to Review Or Update Your Binder:
Your financial situation is likely to change over time – and perhaps more critically, other powerful and unexpected life events can shift your priorities and necessitate an adjustment to your plan.
For instance, the death of a spouse or life partner, a new marriage, an illness or accident that affects your child’s future, a sudden job loss or the surprising success of a business venture that you’ve plugged away at for years, or even a spiritual epiphany can reshuffle what’s important to you.
These events can also limit or constrain what’s possible for your future. Without renegotiating these commitments in a conscious way, you’ll likely feel intangible unease about them. The moral is that your binder should be reviewed periodically and updated to reflect the changes that happen in your life.
As a rule of thumb, we recommend reviewing your estate plan as follows:
1. A quick review once a year
2. A thorough review every 3-5 years to ensure the documents reflect your current finances and intentions
3. Any time you experience a significant increase or decrease in income or wealth
4. Any time you experience a major life change, such as a birth, marriage, or death in the family
5. Any time you consider a change in who you want to benefit from your estate plan
Keeping your estate planning binder secure and up to date will reduce confusion and likelihood of disputes when others need to enact your wishes for your estate. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
As we build wealth, we naturally desire to pass that financial stability to our offspring. With the grandkids, especially, we often share a special bond that makes us want to provide well for their future. However, that bond can become a weakness if proper precautions aren’t set in place. If you’re planning to include the grandchildren in your will, here are five potential dangers to watch for, and ways you can avoid them.
1. Including no age stipulation:
We have no idea how old the grandchildren will be when we pass on. If they are under 18, or if they are financially immature when you die, they could receive a large inheritance before they know how to handle it, and it could be easily wasted.
Avoiding this pitfall: Create a long-term trust for your grandchildren that provides continued management of assets regardless of their age when you pass away.
2. Too much, too soon:
Even if your grandkids are legally old enough to receive an inheritance when you pass on, if they haven’t learned enough about handling large sums of money properly, the inheritance could still be quickly squandered.
Avoiding this pitfall: Outright or lump-sum distributions are usually not advisable. Luckily, there are many options available, from staggered distributions to leaving their inheritance in a lifetime, “beneficiary-controlled” trust. An experienced estate planning attorney can help you decide the best way to leave your assets.
3. Not communicating how you’d like them to use the inheritance:
You might trust your grandchildren implicitly to handle their inheritance, but if you have specific intentions for what you want that inheritance to do for them (e.g., put them through college, buy them a house, help them start a business, or something else entirely), you can’t expect it to happen if you don’t communicate it to them in your will or trust.
Avoiding this pitfall: Stipulate specific things or activities that the money should be used for in your estate plan. Clarify your intentions and wishes.
4. Being ambiguous in your language:
Money can make people act in unusual ways. If there is any ambiguity in your will or trust as to how much you’re leaving each grandchild, and in what capacity, the door could be opened for greedy relatives to contest your plan.
Avoiding this pitfall: Be crystal clear in every detail concerning your grandchildren’s inheritance. An experienced estate planning attorney can help you clarify any ambiguous points in your will or trust.
5. Touching your retirement:
Many misguided grandparents make the mistake of forfeiting some or all of their retirement money to the kids or grandkids, especially when a family member is going through some sort of financial crisis. Trying to get the money back when you need might be difficult to impossible.
Avoiding this pitfall: Resist the temptation to jeopardize your future by trying to “fix it” for your grandchildren. If you want to help them now, consider giving them part of their inheritance in advance, or setting up a trust for them. But, always make sure any lifetime giving you make doesn’t leave you high and dry.
If you’re planning to put your grandchildren in your will or trust, we’re here to help with every detail you need to consider. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
If you’re thinking about giving your children their inheritance early, you’re not alone. A recent Merrill Lynch study suggests that these days, nearly two-thirds of people over the age of 50 would rather pass their assets to the children early than make them wait until the will is read. It can be especially satisfying to fund our children’s dreams while we’re alive to enjoy them, and there’s no real financial penalty for doing so, if the arrangement is structured correctly. Here are four important factors to take consider when planning to give an early inheritance.
1. Keep the tax codes in mind:
The IRS doesn’t care whether you give away your money now or later. The lifetime estate tax exemption as of 2016 is $5.45 million per individual, regardless of when the funds are transferred. So, whether you give up to $5.45 million away now or wait until you die with that amount, your estate will not owe any federal estate tax (although, remember, the law is always subject to change). You can even give up to $14,000 per person (child, grandchild, or anyone else) per year without any gift tax issues at all. You might hear these $14,000 gifts referred to as “annual exclusion” gifts. There are also ways to make tax-free gifts for educational expenses or medical care, but special rules apply to these gifts. Your estate planner can help you successfully navigate the maze of tax issues to ensure you and your children receive the greatest benefit from your giving.
2. Gifts that keep on giving:
One way to make your children’s inheritance go even farther is to give it as an appreciable asset. For example, helping one of your children buy a home could increase the value of your gift considerably as the home appreciates in value. Likewise, if you have stock in a company that is likely to prosper, gifting some of the stock to your children could result in greater wealth for them in the future.
3. One size does not fit all:
Don’t feel pressured to follow the exact same path for all your children in the name of equal treatment. One of your children might prefer to wait to receive her inheritance, for example, while another might need the money now to start a business. Give yourself the latitude to do what is best for each child individually; just be willing to communicate your reasoning to the family to reduce the possibility of misunderstanding or resentment.
4. Don’t touch your own retirement:
If the immediate need is great for one or more of your children, resist the urge to tap into your retirement accounts to help them out. Make sure your own future is secure before investing in theirs. It may sound selfish in the short term, but it’s better than possibly having to lean on your kids for financial help later when your retirement is depleted.
Giving your kids an early inheritance is not only feasible, but it also can be highly fulfilling and rewarding for all involved. That said, it’s best to involve a trusted financial advisor and an experienced estate planning attorney to help you navigate tax issues and come up with the best strategy for transferring your assets. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.
If you've been appointed an executor or a successor trustee of a loved one’s estate, and that person dies, your grief—not to mention your to-do list—can be quite overwhelming. For example, you may need to plan the funeral, coordinate with out of town relatives coming to visit, and finding an estate planning attorney to help you to administer the estate. Regardless of the additional tasks on hand, it is most crucial that you take care of yourself during such an emotionally taxing time.
To give you an idea of some of the first steps that should be taken after a loved one passes, here is a quick checklist of initial tasks that should be completed. I know it can be difficult, but some of these items are deadline specific, so make sure that you reach out sooner than later:
1. Secure the deceased's personal property (vehicle, home, business, etc.).
2. Notify the post office.
3. If the deceased wrote an ethical will, share that with the appropriate parties in a venue set aside for the occasion. You may even want to print it and make copies for some individuals.
4. Get copies of the death certificate. You'll need them for some upcoming tasks.
5. Notify the Social Security office.
6. Take care of any Medicare details that need attention.
7. Contact the deceased's employer to find out about benefits dispensation.
8. Stop health insurance and notify relevant insurance companies. Terminate any policies no longer necessary. You may need to wait to actually cancel the policies until after you’ve “formally” taken over the estate, but you can often get the necessary paperwork started before that time.
9. Get ready to meet with a qualified probate and trust administration attorney. Depending on the circumstances, a probate may be necessary. Even if a probate is not needed, there is work that needs to be The deceased’s will and trust. If the original of the deceased’s will or trust can’t be located, contact us as soon as possible and bring any copies you do have.
A list of the deceased’s bills and debts. It’s often easier to bring the statements or the actual credit cards into the office rather than try to write out a list, but do whatever is easiest for you.
A list of the deceased’s financial advisors, insurance agent, tax professional, and other professional advisors.
A list of the deceased’s surviving family members, including their contact information when available. Even if they’re not named in the trust, the attorney will need to know about everyone in the family.
10. Cancel your loved one's driver's license, passport, voter's registration, and club memberships.
11. Close out email and social media accounts, and shut down websites no longer needed. Depending on circumstances, to take these steps, you may need to wait until you’ve “formally” taken over the estate, but you can often learn the procedures and be ready to take action.
12. Contact your tax preparer.
You may be thinking about handling all the paperwork yourself. It’s a tempting thought—why not keep things as simple as possible? However, a “DIY” approach to this process might cost you and your family dearly. Read on to understand why.
Consequences of Mishandling an Estate: Examples from Real Life
Example #1: Failing to disclose assets to the IRS. Lacy Doyle, a prominent art consultant in New York City, inherited a large estate when her father passed away in 2003. He allegedly left her $4 million, but she only disclosed fewer than $1 million in assets when she filed the court documents for the estate. Per the New York Daily News: “She opened an ‘undeclared Swiss bank account for the purpose of depositing the secret inheritance from her father’ in 2006 — using a fake foreign foundation name to conceal her identity… [she also] didn't report her interest in the hidden accounts — nor the income they generated — from 2004 to 2009.” As a result of these alleged shenanigans and Doyle’s failure to report the accounts to the IRS, she was arrested, and she now faces a six-year prison sentence.
Example #2: Misusing power of attorney. Another famous case of an improperly handled estate involved the son of famous New York socialite, Brooke Astor. Her son, Anthony Marshall, was convicted of misusing his power of attorney and other crimes. Per a fascinating Washington Post obituary: “In 2009, Mr. Marshall was convicted of grand larceny and other charges related to the attempted looting of his mother’s assets while she suffered from Alzheimer’s disease. He received a sentence of one to three years in prison but, afflicted by congestive heart failure and Parkinson’s disease, was medically paroled in August 2013 after serving eight weeks.”
Some Key Takeaways
1. Seek professional counsel to avoid even the appearance of impropriety when handling an estate.
2. Bear in mind that errors of omission and accident can be costly – even if your intent was good. An executor who makes distributions from an estate too soon can get into serious trouble, for instance. An executor’s personal assets can wind up in jeopardy if his or her actions cause an estate to become insolvent.
3. Even if you’re well organized and knowledgeable about probate and estate law, it’s surprisingly hard to anticipate what can go wrong. There are many ways to end up in hot water when you’re handling the estate or trust of a loved one.
We’re here to help you steer clear of the obstacles and free you to focus on yourself and your family during this difficult time. Contact us for assistance. We can help you manage estate and trust related concerns as well as point you towards other useful resources.
If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.V
These four celebrity estate planning fiascos offer lessons about how to handle your own planning and legacies.
Pablo Picasso – The great artist died in 1973 at 91 without a will, a status referred to as “intestate.” Of course, Picasso isn't the first, or the last, celebrity to die intestate. However, after he died, his six heirs fought for six years over the wealth of assets he left behind. One lesson for us all: Make sure you have your estate planning documents in place before you go.
Heath Ledger – It was a huge surprise, and disappointment, to millions of adoring fans when Heath Ledger died in 2008 at the age of 28. He did leave a will. Unfortunately, he didn't update the will after the birth of his daughter. Fortunately for his daughter, the family decided to include her in the inheritance, which proves that sometimes people do the right thing. But what if his family had insisted instead on the terms of Heath’s will? One lesson for us: When there’s a big change in your family situation (or when you have a life changing epiphany about your core values and legacy), update your plans accordingly. Do not assume that just because you’re young and healthy that you will have lots of time to get things in order. Do not assume that, since you have a plan in place, it will automatically update to match your current desires and needs.
Philip Seymour Hoffman – Actor Philip Seymour Hoffman didn't want his children to grow up as “trust-fund babies.” Fair enough, but he decided to leave his inheritance with his girlfriend, counting on her to care for his children on his behalf. The problem: there was no guarantee that would happen. Since the two weren't married, Hoffman's estate was hit with a huge tax. One lesson for us: A trust that includes your guidance about the proper use of the funds is better than hoping for the best with one that leaves your wishes undefined.
Tom Clancy – Author Tom Clancy left behind a huge fortune, but his estate planning documents weren't clear about some of the important details. These issues led to drama for family members. One lesson for us: the more complicated your family, your assets, and your business dealings are, the more accurate, precise, and proactive you need to be in working with us on your estate plan.
Whether you’re just starting to explore the need for estate planning or you’re a seasoned veteran with a well-worn trust binder, we should all remember a few key points:
1. Have estate planning documents in place, even if you’re young and healthy and think you’ll have plenty of time to get things in order later.
2. When there’s a change in your family situation (marriage, birth, or death) or if you’ve changed your mind about something, update your plans accordingly. Do not assume that since you have a plan in place, it will automatically update to match your current desires and needs.
3. Provide guidance to your family about how you would like them to use their inheritance. Do not rely on hope or verbal instructions. The best place for guidance is in your trust or in an intent letter that can help your trustee manage your trust.
4. If you’re well-off or have complex assets, you need to work with your estate planning attorney in a more proactive way to avoid potential missteps while still achieving your goals.
If your life or the law has changed since you signed your trust, it needs to be updated. Updates can be made by way of an amendment or a complete restatement. An amendment updates a specific part of the trust; whereas, a restatement, updates the entire trust.
You might think that an amendment would cost less than a restatement, but that’s not necessarily true. Let’s briefly discuss which option is best for you.
Amendments v. Restatements: Which Is Better?
Imagine a recipe card you’ve used for years. If one or two provisions have been crossed out and replaced, the card may still be readable. However, if many provisions have been altered, the recipe is likely confusing. If your loved ones can’t read your instructions and determine whether to add a cup of flour or of sugar, your recipe won’t work. You’ve got a fifty-fifty chance for a great dish—or a complete disaster.
The same can be said about revocable trust. Making one or two amendments is generally acceptable, but when revisions are numerous or comprehensive, your instructions may become confusing and you may be better served with a restatement.
Although amendments are generally used to make smaller changes and restatements are used for larger ones, there’s no bright line rule when it comes to amending or restating a revocable trust. A general guideline to follow is that anytime you’re making more than two changes, restatements are likely better as they:
1.Foster ease of understanding and administration;
2.Tend to avoid ambiguity;
3.Reduce the amount of paperwork to retain and provide to financial institutions / parties;
4.Decrease the risk of misplacement;
5.Prevent beneficiaries from discovering prior terms; &
6.Provide an opportunity to provide other relevant updates, such as changes in the law
In many cases, a restatement may actually be more cost effective than amendments. This is especially true today as computer software allows estate planning attorneys to create and retain documents easily and efficiently. Fortunately, today, you pay for legal counseling, not typing.
Have Questions About Updating Your Trust? We Can Provide Answers:
Before deciding whether to amend or restate, it’s important to determine whether previous changes have inadvertently altered your intent or might adversely affect how the trust is administered. We’ll help make your instructions clear.
Have questions? If you do, that’s normal. We can provide you with answers. Whatever your circumstances, rest assured that we can help you to determine the best way to update your trust.
A resume is really just a snapshot of your experience, skill set, and education. It provides prospective employers insight into who you are and how you will perform. Imagine not updating that resume for 5, 10, or even 15 years.
Would it accurately reflect who you are? Would it do what you want it to do? Likely not.
Estate plans are similar in that they need to be updated on a regular basis to reflect changes in your life so they can do what you want them to do.
Outdated estate plans—like outdated resumes—simply don’t work.
Take a Moment to Reflect:
Think back for a moment. Consider all of the changes in your life. What’s changed since you signed your will, trust, and other estate planning documents? If something has changed that affects you, your trusted helpers, or your beneficiaries, your estate plan probably needs to reflect that change.
Here are examples of changes that are significant enough to warrant an estate plan review and, likely, updates:
4. Divorce or separation
8. Health challenges
9. Financial status changes—whether good or bad
10. Tax law changes
11. Move to a new state
12. Family circumstances changes—whether good or bad
13. Business circumstances changes—whether good or bad
If you’re like most people, if updating your estate plan is on the calendar, you’ll make it happen. Just as you update your resume on a regular basis and just like you meet with the doctor, dentist, CPA, or financial advisor on a regular basis, you need to meet with your estate planning attorney on a regular basis as well.
Our office can help to ensure that your estate plan reflects your current needs and those of the people you love. Updating is the best way to make sure your estate plan will actually do what you want it to do.
We all need a “do over” from time to time. Life changes, the law changes, and professionals learn to do things in better ways. Change is a fact of life - and the law. Unfortunately, many folks think they’re stuck with an irrevocable trust. After all, if the trust can be revoked, why call it “irrevocable”? Good question.
Fortunately, irrevocable trusts can be changed and one way to make that change is to decant the original trust. Decanting is a “do over.” Funds from an existing trust (with less favorable terms) are distributed to a new trust (with more favorable terms).
As the name may suggest, decanting a trust is similar to decanting wine: you take wine from one bottle and transfer it to another (decanter)—leaving the unwanted wine sediment / trust terms in the original bottle / document. Just like pouring wine from one bottle to another, decanting is relatively straight-forward and consists of these four steps:
1. Determine Whether Your State Has a Decanting Statute.
Nearly half of US states currently have decanting laws. If yours does, determine whether the trustee is permitted to make the specific changes desired. If so, omit step 2 and move directly to step 3.
If your state does not have a decanting statute, the answer isn’t as clear cut. While attempting to decant a trust in a state without a statute certainly can be done, it’s risky. Consider step 2.
2. Move the Trust.
If the trust’s current jurisdiction does not have a decanting statute or the existing statute is either not user friendly or does not allow for the desired modifications, it’s time to review the trust and determine if it can be moved to another jurisdiction.
If so, we can make that happen, including adding a trustee or co-trustee, and taking advantage of that jurisdiction’s laws. If not, we can petition the local court to move the trust.
3. Decant the Trust.
We’ll prepare whatever documents are necessary to decant the trust by “pouring” the assets into a trust with more favorable terms. All statutory requirements must be followed and state decanting statutes referenced.
4. Transfer the Assets.
The final step is simply transferring assets from the old trust into the new trust. While this can be effectuated in many different ways, the most common are by deed, assignment, change of owner / beneficiary forms, and the creation of new accounts.
Get the Most from Your Trust
Although irrevocable trusts are commonly thought of as documents which cannot be revoked or changed, that isn’t quite true. If you feel stuck with a less than optional trust, we’d love to review the trust and your goals to determine whether decanting or other trust modification would help.
It wasn’t very long ago that we had only paper for financial and tax records. We could simply point to a file cabinet or drawer and tell someone, “Everything is in there when the time comes.” Now we have computers and the internet, and so much of our lives are online. Unless we include our digital assets and social media in our estate planning, our family or administrator may not be able to find critical documents.
For example, if you scan documents or receive financial statements electronically, someone else may not even know these exist. If you use a program like Quicken or QuickBooks and tax preparation software, those records are on your computer. Facebook pages, blogs, email accounts and photos stored digitally on a computer or an online account would certainly have special meaning to your family.
Much of this information is password protected. Unless we make arrangements in advance, family members or administrators may not be able to access these and the information could be lost forever.
Estate planning for digital assets and social media accounts is similar to estate planning for other assets. You need to make a list of what you have and where it is located, name someone (with computer and social media know-how) to step in for you, provide that person with access, and provide some direction for what you want to happen to these assets.
Listing your digital assets by category (hardware, software, social media/online presence, online accounts) will help make the task less daunting. Next to each one, add user names, passwords, PIN numbers and the site’s domain name. Keep this list in a safe place and tell your successor where it is. (Do not store it unprotected on your computer; if it were stolen, the thief would have all of your passwords. If you store it on your computer, passwords protect the file and give that information to your successor.)
Think about what you want to happen to these assets. For example, if you have a website or blog and you want it to continue, you need to leave instructions for keeping it up or having someone take it over and continue it. If a site is currently producing or could produce income (e-books, photography, videos, blogs), make sure your successor knows this. If there are things on your computer or hard drive that you want to pass on (scanned family photos, ancestry research, a book you have been writing), put them in a “Do Not Delete” folder and include it on your inventory list.
Closing down accounts that are no longer needed will help to protect your family from identity theft after you are gone. The person you name as your successor will need a death certificate to do this. Consider naming this person as a co-trustee or co-executor with responsibilities limited to this area to give them legal authority to act for you.
Yes, this will take some time and thought. But, just like “other” estate planning, the more we can do now to put things in order, the easier it will be for our families later.
If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.