Helping a Loved One Who Struggles with Addiction—Your Family Trust

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 Trusts:

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. 

Does a Dynasty Trust Make Sense for Your Family?

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. 

Avoid Living Probate: How to Keep Guardians and Conservators Out of Your Estate

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:

1. 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.

Do It Now: Name a Guardian for Your Minor Child

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).

1. How well the child and potential guardian know and enjoy each other

2. Parenting style, moral values, educational level, health practices, religious/spiritual beliefs

3. Location - if the guardian lives far away, your child would have to move from a familiar school, friends, and neighborhood

4. 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.

WARNING:

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.

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.

Passing to the Next Generation— A Powerful Exercise

 “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. 

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.

3 Famous Pet Trust Cases—Lessons Learned

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.

5 Tragic Mistakes People Make When Leaving Assets to Their Pets

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.

Why You Need an Estate Plan To Compliment Your Financial Plan

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.

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.