Louisiana Estate Planning and Elder Law

Remarriage and Your Estate Plan

Congratulations - you're getting remarried!  It's important to take time to celebrate such an exciting event, but it's also a good time to review your estate plan.  Even though you may have assembled a solid estate plan during your first marriage, stepchildren and financial changes make a new estate plan a must.  To ensure that your interests are taken care of when you remarry, consider the following:

• Take an inventory of your assets and debts, and decide how to handle finances. For example, is one spouse selling a home?  Will that spouse contribute to the current or new home?
• Decide what you want to happen when you die. Are there certain assets you want to remain with your children from the first marriage? Is a trust necessary to protect your children?
• Change your beneficiary designations!  Can't stress this enough. It's not automatic.  Your divorce decree may limit your options.
• Consider a prenuptial agreement.
• Consult an estate planning attorney.  Even if you have minimal assets, it makes sense to sit down with a professional and discuss the issues.

Source for Post: Elder Law Answers. Read it here.

Special Needs Trust Issues: Commingling Funds

A recent case from Rhode Island portrays how easy it can be for untrustworthy people to steal from a trust created to benefit a child with special needs.  Matthew Goodness was born with cerebral palsy and later obtained a deferred annuity as a partial settlement of a lawsuit.  The payments started on Matthew’s 18th birthday.  They were deposited into a trust for special needs created by his parents, Mary and Francis Goodness, for his sole benefit.  His parents were assigned as the co-trustees of the trust, and Fleet Bank (now Bank of America) was appointed as successor trustee.

By the time Matthew started receiving the annuity payments, his parents were separated and seeking a divorce.  Mary and Francis began withdrawing money from Matthew’s trust and putting the funds into their separate personal bank accounts.  While Mary used trust fund money to buy groceries and pay rent, Francis spent the funds he took on beer.  Although Matthew’s essential living expenses were paid for, neither parent coordinated his care with the other.  Eventually both Mary and Francis asked the court to remove the other as a co-trustee.  After a hearing, the Rhode Island Superior Court ousted both Mary and Francis as trustees and appointed Bank of America as the successor.  The court concluded that both parents “(1) breached their duty of loyalty to the Trust; (2) impermissibly comingled Trust funds with their personal funds; (3) wasted and depleted Trust fund assets; and (4) breached their fiduciary duty to the Trust.”

The Goodness case serves as a drastic example in commingling trust funds with personal assets, and should alert reliable parents who are the trustees of a special needs trust.  Trustees have a “fiduciary duty” to administer a trust in the best interests of the beneficiary. Key to successfully managing a trust of any nature is the separation of trust assets from the beneficiary’s and the trustee’s personal property. One who takes funds designated for the beneficiary and uses them for himself without approval is not only violating his fiduciary duty, but also stealing.  Common solutions to this problem are to appoint an independent trustee to serve alongside a family member trustee or establish a committee of trust advisors to monitor the trustee.  The trustee must remember to keep the best interests of the beneficiary at heart and to work with a qualified special needs planner to monitor and supervise the trust.

To read the opinion, click here.

Source for Post: Academy of Special Needs Planners

Wills & Trusts: When to Distribute to the Children

Setting up a living trust or drafting a will including a trust involves making choices about how to regulate your children’s inheritance.  There are several things to consider:  your children’s ages, the size of the inheritance and your degree of concern. Generally speaking there are three options:

• An outright distribution, free of trust, to a child who is at least 18 years of age or older;
• A distribution to a trust for the child with defined provisions and a termination of the trust at a specified age; or
• A trust for the life time of a child.                                                            

The first option may be chosen, for example, if your children are age 30 or older and are free of health, marital, tax and liability issues. You may decide that an outright distribution to the child/children is best and, in addition, set up trusts for grandchildren if the child/children predeceases.  The second scenario may be the optimum choice if, for example, you leave minor children as heirs. The inheritance may be placed into a trust where distributions can be made to their guardian till they reach a specific age.  Once this specific age, i.e. 25, is reached, the remaining principal can be disbursed.  This trust can be set up to allow a trustee to make distributions for important events that come up such as a college education, a wedding or the purchase of a new car.  The third option, a life time trust, may be selected if the inheritance is such a large amount that you wish to have a trustee distribute the funds to the child/children over their life time. This is the most restrictive of the three.

All of your children are unique, and you can choose to arrange different terms for distributing inheritance for each child.  These matters are important and you have a variety of options. Discuss them with your estate planning attorney to decide what is best for you and your children.

Source for Post: California Estate Planning Blog

Minor Children & Your Estate Plan

Another reminder of the dangers of not have an estate plan in place if you have minor children. This one from The California Estate Planning Blog.  One of their authors writes (and is right):

I am constantly amazed at how many parents do not have an estate plan in place to protect their minor children.

It's one thing not to be overly concerned when your children are older, but if you have minor children in your home, life insurance policies, real estate and the usual extended family with grandparents, aunts, uncles -- there is almost nothing more important that consulting with an estate planning attorney to find out what you need to do to protect your minor children in case you and your spouse pass away.

If something happens to both Mom and Dad, there are guardianship issues, money issues and other issues that immediately come up. You want to make it easy for your family and friends by providing clear instructions on who should be the guardian, the executor, the trustee and the like. You don't want to make it any harder should your children be facing the loss of both Mom and Dad unexpectedly.

I could go on and on, but consulting with an attorney to draft up wills, trusts, and other related documents is a definite must do.

Hat tip to: The California Estate Planning Blog.

Another Tip for Tough Times: You may have a tax break on your 529 plan

Your 529 plan allows you to invest tax-free for college expenses. The flip side is that if your plan has lost money, you may be able to deduct the losses from your adjusted gross income. This is an obscure tax break with many caveats, so consult your CPA.

Read more about the strategy here.

The Silver Lining to the Market Meltdown

The Wall Street Journal has an excellent article on why now is a good time to transfer wealth to your heirs. They write:

The economy is a mess, home prices are reeling, and stocks have plunged. But for those likely to become ensnared in the estate tax, there's a silver lining: These troubled times offer some of the best opportunities in years to transfer wealth to younger generations, without triggering much or any inheritance tax along the way.

Read the article here.

Have a Backup Plan

Special Needs Answers reports on a recent Wisconsin case that highlights the importance of having back-up guardians in place in case the original guardian can no longer serve. They report:

Paul V., a 27-year-old man who has been severely disabled since birth, was placed under guardianship in Illinois, with the court naming his grandparents, whom he lived with, and a bank as guardians. Subsequently, Paul's mother, Vicki B., petitioned for and was granted guardianship in Wisconsin without disclosing that Paul already had guardians in Illinois. In 2003, a Department of Human Services in Wisconsin filed a petition to be named Paul's guardian because his mother and grandmother were in the process of pleading guilty to federal mail fraud charges. His mother and grandmother agreed to the appointment, but did not discuss with the court provisions for a successor guardianship so that Paul would not have to rely on a state guardian for the rest of his life.

Paul's aunt, Kristin, then petitioned the court to remove the Department as guardian and appoint her as successor guardian. The Department objected, arguing that under state law, a petitioner for successor guardianship must be an "interested party." Since Paul's original guardians had left no instructions for the court requesting that Kristin or another close family member have the potential to become a successor guardian, Kristen was unable to prove to the court that she was an interested party. Therefore, the court did not grant her petition, and Paul remained a ward of the state.

This case illustrates an important point: don't take anything for granted. Even in Paul's case, where his original guardians were clearly unable to care for him properly, they could have given input to the court on behalf of others who could have done a better job. This situation can also occur when a guardian passes away while still performing his or her duties. In these cases, simply inserting a brief request in your will naming your choice for a successor guardian could make that person "interested," and, therefore, eligible to care for your loved one after you are gone.

Backups are also a good idea when naming executors and trustees. Don't leave it up to a judge. Include backup planning in your estate plan.

Attaching Strings to Your Trust

You've worked hard most of your life to amass a tidy estate. Should your children get it without strings attached? For many people, the answer is "No". It makes sense to try and protect your children and their inheritance from their mistakes and the claims of others, but go too far and you can start a family feud. Here are some tips from Kiplinger.com.

• Be realistic. Don't make the conditions too complicated and avoid micromanaging. Providing that your children attend college is one thing; saying who they can marry is going too far.
• Stagger the payouts. 18 is too young for most children to inherit. Consider staggering the payouts at, say, ages 25, 30 and 35.
• Set benchmarks. For example, in the case of a child with a substance abuse problem, direct the trustee to approve payouts based on an objective mechanism, like a periodic drug test.
• Include an emergency plan. For example, provide for a distribution in the event a child is hospitalized and not covered by insurance.
• Be transparent. Tell your family why you chose the trust provisions.

Source for Post: Kiplinger.com

Read the full article.

Secure the Future of the Family Business - Draft a “Family Constitution”

Recently, two brothers, a sister and their parents - the owners of a $38 million manufacturing company, which manufactures specialty fuel tanks for construction and other equipment – held a weekend meeting in a quiet retreat near their Stow, Ohio headquarters. The family’s goal was to come up with a plan for the future of their company by drafting a family constitution. Over the weekend, they established standards for employment for family members and determined in broad terms how stock would be passed from generation to generation.

The family constitution spells out the family's history and commitment to the company, and it establishes policies that guide the relationship between the business and the family. Family constitutions do not replace estate plans, legal documents and trusts; they deal more concretely with the goals of the business. The sooner the better for drafting a family constitution; they need to be written before they are needed - while there is a feeling of trust and little conflict.

Some areas that should be addressed:

• The family's vision and commitment to the company
• The family values in their relations with customers, employees, suppliers, partners, and the community
• The desired behavior of family members who are employees
• Guidelines for hiring and retaining talented employees, including prerequisites for employment of family members, including education and experience
• Guidelines addressing who can own stock, which classes of stock, and how shares can be transferred
• A dividends and family benefits policy that advises shareholders on reasonable expectations for returns on invested capital

Source for Post: BusinessWeek "
A Guide for Family Businesses" 
By Ernesto Poza

Read the article here.

Writing a Memorandum of Intent for Your Special Needs Child

Raising children is difficult in the best of circumstances. You’ve spent years learning every like and dislike of your special needs child and then it hits you – who will know this when I’m gone?

The answer is a Memorandum of Intent, which is a letter that you write to the guardian of your child. In it you can express things that might be considered too small or that change too frequently to include in your will or trust. Listed below are just a few of the items that might be included in a Memorandum of Intent:

• Healthcare and therapeutic needs
• Contact information for family friends, doctors, therapists, pharmacists, teachers, etc.
• Insights into your child’s personality - specifically the things that are unique
• Preferences for education, camp, child-rearing and religious upbringing
• Food preferences and any allergies
• Items or practices that might provide comfort
• Item or practices to avoid
• Holidays and traditions celebrated by your family

A memorandum of intent will provide for your child’s emotional well-being. It is the compilation of a level of knowledge that you would only know by spending everyday with someone you love. This thoughtful information will help ease the transition for all involved when you are no longer available to care for your child.

Source for Post: The Academy of Special Needs Planners. Read the article here.