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.

Your will. Do you know where it is? How about what is says?

Do you know where your will is located? A recent client was sure she knew where her husband's will was stored, but when she went to the file drawer it was not there. It's a good idea to tell someone else where the will is located and be sure you know yourself.

Sashsa Golden recently did an excellent post on outdated estate planning documents on her blog Massachusetts Elder Law Blog - read it here.  She makes some good points about reading your will on a regular basis. Family and financial changes may make parts of the will obsolete or against your wishes. Check yours.

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.

Estate Planning Primer

Paul Sullivan of the New York Times recently wrote an article containing concise explanations of basic estate planning ideas and why you should plan now.

Check the article out here.

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.

Family-Owned Businesses Owners not Preparing for the Future

According to a new study “Protecting the Family Fortune,” issued June 11, the very rich are avoiding estate planning, just like the rest of us. The study, the first of its kind, surveyed 242 second and third generation ultra-high-net-worth business owners. The study's objectives were to examine the success of family-run businesses in transitioning from one generation to the next and to uncover wealth planning issues left unaddressed.

First Steps Taken

• 75% of participants successfully moved control of the family business beyond the first generation to the second generation
• 25 % of businesses were in their third generation
• 78% expected the family to maintain control of the business for the foreseeable future
• All had sufficient assets outside the business so they shouldn't have to depend on the business' cash flow

Gaps Remain

Over 69% had not implemented an effective succession plan, especially in the areas of estate tax mitigation and asset protection. Most of the participants have some form of succession plan in place, which is consistent with the fact that 78 % would like to keep the business in the family for the next generation. However, only 38 % of participants are actually implementing their succession plans. Additionally, the plans focus on management/ownership succession; only a small percentage deal with wealth transfer tax issues. That's surprising because 90% report wanting to minimize their tax bill on the transfer of the family business. Plus, the majority of participants did not have up-to-date personal estate plans. 22 % had no personal estate plan at all!

Lack of planning to mitigate taxes can place a huge financial burden on the heirs and the business. But, business owners who focus on tax mitigation can achieve great success using advanced estate-planning strategies such as estate freezes and discounts or even relatively simple techniques like buying sufficient life insurance outside the estate to pay any estate tax due.

Why?

Are business owners being advised wisely? Are they reluctant to give up control? Do they need the advice of a business valuation or other specialists?

Often, there's no clear quarterback among advisors for family businesses. The business owner works with an accountant, a financial advisor, an estate-planning lawyer and sometimes a family business consultant. Unfortunately, these advisors may be working at cross-purposes with no one advisor coordinating the effort. The result is conflicting advice that doesn't necessarily serve the business owner's overall interests. What's needed is a more holistic approach. Hopefully, studies like this one will begin the dialogue among advisors and with business owners to develop a team approach that serves the business owner's needs in a coordinated manner.

In the meantime if you are a business owner, it's time to take charge. Call a team meeting of your advisors to discuss your overall goals.

Source for Post: "Succession Plans - Business Owners' Blind Spot" Trusts & Estates Wealth Watch News, June 25, 2008, by David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn. office of Wiggin and Dana LLP

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.

Estate Planning and Divorce

Leanna Hammill, an estate planning attorney in Massachusetts has an excellent series of posts on how divorce affects your estate plan and what you should do about it. In summary, Leanna suggests (and I agree) that you should:

Before the divorce is final, meet with your estate planning attorney to:

• Examine any powers of attorney (POA) in which you have named your current spouse and revise them to designate someone else as your agent. Also, check to make sure any entity that has a copy of the old POA is notified of the change and is provided a copy of the new POA. This is very important because most couples draft the POA to be effective immediately, which means your now about-to-be-ex-spouse has access to your bank accounts and other assets, even if those assets are titled in your name only
• Likewise, examine any health care proxies or powers of attorney for health care. Revise them to name an alternate agent and make sure those who have copies are notified of the change and provided new copies
• Examine your current will and any trusts and design a new plan for distribution of your assets and protection of your children

When the divorce is final (as soon as possible), meet with your estate planner again to:

• Sign your new estate planning documents
• Review and revise all beneficiary designations on IRA accounts, investment accounts, life insurance policies, etc.

In addition to Leanna's suggestions, it's also important to advise your business partners of your pending divorce and review relevant provisions of your partnership or operating agreement. Most LLCs and partnerships have documents that address what happens to your interest upon divorce.

Consulting your estate planning attorney before the divorce is final can help you plan for your divorce and ensure that things you fight for in your divorce settlement are protected. If you are in the midst of a divorce or are thinking of filing for divorce and need help with your estate plan, feel free to contact my office to schedule a consultation.

Read Leanna's posts here and here.

Business Succession Planning, Estate Planning, Trusts