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Olivia Newton John

Olivia Newton-John had an Estate Plan that carried out all her wishes.

Olivia Newton-John had an Estate Plan that carried out all her wishes.

Olivia Newton-John had an Estate Plan that carried out all her wishes.The Australian singer and actress was worth $60million (£56million) at the time of her death on August 8, 2022 but spent her last years giving as much as she could to charity.

Olivia Newton-John would have celebrated her 74th birthday on September 26. The Cambridge-born star earned millions for her efforts in music and entertainment, and a staggering final act of charity saw Newton-John’s family splitting their inheritance with her charities.

Newton-John was first diagnosed with breast cancer in 1992 – in a tragic twist, her diagnosis came the same weekend her father died of cancer.

The Xanadu singer underwent extensive treatment including a partial mastectomy and was given the all-clear.

But in 2013, Newton-John was told she had breast cancer a second time and once again she beat the disease, getting another all-clear after treatment.

Shortly after her second diagnosis, the singer founded the Olivia Newton-John Cancer & Wellness Centre, which reportedly cost $189million (£156million), at a Melbourne hospital.

In 2015 she founded the Olivia Newton-John Cancer Research Institute and in 2020 launched the Olivia Newton-John Foundation Fund which sponsors research in herbal cancer treatments.

Unfortunately, in 2017 the star was diagnosed with stage four breast cancer.

She started selling off parts of her impressive real estate portfolio which spanned multiple countries with all of the proceeds going towards her charities.

She reportedly sold her incredible Australian abode for $4.6million (£3.8million). Newton-John had originally purchased the 187-acre property in the eighties and rebuilt her home in the early nineties.

Over her decades at the home, the star allegedly planted 10,000 trees on the property and sold it with the intent that someone equally involved and loving of wildlife would continue her work.

Newton-John also reportedly wanted to sell her Californian horse ranch, believed to be listed for $5.4million (£4.46million), but later decided to rather live out her last days at the home and transferred the ownership to her husband John Easterling, 70.

The Physical singer had married actor Matt Lattanzi in 1984 and although they would split up just over a decade later, their marriage did produce their only child Chloe Rose Lattanzi, now 36.

Newton-John got married to John Easterling, 70, in 2008, who is reportedly expected to inherit her fortune alongside Chloe.

Newton-John first rose to fame in the music industry, releasing her first single in 1966 and, seven years later, her hit Let Me Be There hit number one on the Billboard Hot 100.

Her debut album in 1971, If Not For You, held an array of tracks that peaked in Australia, North America and the United Kingdom

Over her career, Newton-John released over 25 albums and her successful singing career soon translated into Hollywood stardom.

The singer was already a well-known face on Australian television by the star of the seventies.

In 1964, while still in high school, Newton-John’s acting prowess shone through as she starred in her school’s production of The Admirable Crichton and became the runner-up for the Young Sun’s Drama Award for best schoolgirl actress.

Following this award, Newton-John often appeared in Australian shows and telefilms, with her fame catapulting when she won the televised talent contest Sing, Sing, Sing in 1965.

In 1970 the singer was a part of the group Toomorrow which starred in a science fiction movie musical named after the group.

Unfortunately, most of the group’s projects failed and they ultimately disbanded.

After Toomorrow, Newton-John embarked on her successful solo music career and returned to film in 1978 for what would become the role of a lifetime.

Newton-John starred alongside John Travolta for the first time in Grease. The dream team appeared on screen again in 1983’s romantic comedy Two of a Kind.

Although she starred in less than 20 films during her life, her role as Sandy Olsson seemed to be enough to cement her star as a prominent actress.

Alongside her lucrative musical and acting careers, Newton-John was also a successful author of her memoir Don’t Stop Believin’ and some healthy eating cookbooks.

Read more related articles here:

Olivia Newton-John’s $100 million dying wish

Olivia Newton-John’s legacy: Her net worth, philanthropic efforts and beyond

Also, read one of our previous Blogs here:

The Queen’s clothes and jewels: Who inherits her enormous collection?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Healthcare Proxy

Be Leery of Generic Health Care Proxy Forms.

Be Leery of Generic Health Care Proxy Forms.

If you go to the hospital, you may be presented with a health care proxy form to sign on being admitted. While it might seem easy to sign a generic health care proxy form, having a document that is specifically tailored to your needs is very important.

A health care proxy form, also known as an advance medical directive, allows you to appoint someone else to act as your agent to make medical decisions for you when you are unable to make them yourself. It should also include a Living Will that states what your wishes are for end of life care.

An advance medical directive takes effect only when you require medical treatment and a physician determines that you are unable to communicate your wishes concerning what that treatment should be. Appointing someone to serve as your agent helps ensure that your wishes will be carried out when a crisis occurs.

While an advance medical directive serves to appoint an agent to speak for you, you can also use it to give the agent guidance about your medical wishes. The following are some issues that can be addressed in an advance medical directive:

  • The name of the person authorized to act for you. It is good to appoint an alternate as well in case your primary agent is unable to assist you.
  • If you are terminally ill, in a coma, or have brain damage with no hope of recovery, you can explain the kind of treatment you do not want. For example, do you want to be kept alive by machines if you are in a persistent vegetative state?
  • Under what circumstances you want pain medication to be administered.
  • Whether you want to donate your organs.
  • Whether you want to be cremated or buried and where and how your remains should be disposed of.

Whatever choices you make, you should take time to consider your health care wishes before drafting an advance medical directive. For this reason, signing a generic hospital form is not a good idea, as such a form will not take your individual wishes into account. Instead, you should work with an estate planning attorney to have a proper advance medial directive prepared that reflects your personal wishes. In addition, if you already have an advance medical directive as a part of your estate plan, the generic form will revoke your more personal advance medical directive.

Read  more related articles here:

Be Cautious of Generic Health Care Proxy Forms

All You Need To Know About Naming A Health Care Proxy

Also, read one of our previous Blogs here:

Why Do I Need an Advanced Healthcare Directive?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

QTIP Trust

QTIP Trusts: What They Are, And How They Work.

QTIP Trusts: What They Are, And How They Work.

What Is a Qualified Terminable Interest Property (QTIP) Trust?

A qualified terminable interest property (QTIP) trust enables the grantor to provide for a surviving spouse and maintain control of how the trust’s assets are distributed once the surviving spouse dies. Income generated from the trust, and sometimes the principal, is given to the surviving spouse to ensure that the spouse is taken care of for the rest of their life.

KEY TAKEAWAYS

  • A qualified terminable interest property (QTIP) trust allows an individual, called the grantor, to leave assets for a surviving spouse and determine how the trust’s assets are split up after the surviving spouse dies.
  • Under a QTIP trust, income is paid to a surviving spouse while the balance of the funds is held in trust until that spouse’s death. At that point, the remainder is paid to the beneficiaries specified by the grantor.
  • QTIP trusts are used in estate planning and are especially helpful when beneficiaries exist from a previous marriage, but the grantor dies before a subsequent spouse does.
  • In QTIP trust, estate tax is not assessed at the point of the first spouse’s death but is determined after the second spouse has passed.
  • A QTIP trust is established by making a QTIP trust election on the executor’s tax return.

How Qualified Terminable Interest Property (QTIP) Trusts Work

This type of irrevocable trust is commonly used by individuals who have children from another marriage. QTIP trusts enable the grantor to look after their spouse and ensure that the assets from the trust are passed on after that spouse dies to beneficiaries of their choice. Beneficiaries could be children from the grantor’s first marriage, other family members, or friends.

Aside from providing the living spouse with a source of funds, a QTIP trust can also help limit applicable death and gift taxes. The property within the QTIP trust providing income to a surviving spouse qualifies for marital deductions, meaning the value of the trust is not taxable after the first spouse’s death. Instead, the property becomes taxable after the second spouse’s death, with liability transferring to the named beneficiaries of the assets within the trust.

Additionally, QTIPs can assert control over how the funds are handled should the surviving spouse die, as the spouse never assumes the power of appointment over the principal. This can prevent these assets from transferring to the living spouse’s new spouse should they remarry.

  • QTIP trusts are reported on tax returns using IRD Form 706.1

Qualified Terminable Interest Property Trustee Appointments

A minimum of one trustee must be appointed to manage the trust, though there may be multiple named simultaneously. The trustee or trustees will be responsible for controlling the trust and have authority over the management of the assets.

Examples of possible trustees include, but are not limited to, the surviving spouse, a financial institution, an attorney, and other family members or friends.

Spousal Payments and QTIP Trusts

The surviving spouse named within a QTIP trust typically receives payments from the trust based on the income the trust generates, similar to stock dividends. Payments can be made from the principal if the grantor allows it when the trust is created.

Payments will be made to the spouse for the rest of their life. Upon death, the payments cease, as they are not transferable to another person. The assets in the trust then become the property of the listed beneficiaries.

QTIP Trust vs. Marital Trust

 QTIP  Marital Trust
Irrevocable Irrevocable
Only names the spouse as beneficiary Only names the spouse as beneficiary
Unlimited marital deduction Unlimited marital deduction
Defers taxes until spouse’s death Defers taxes until spouse’s death
Control does not pass to spouse Control passes to spouse
Income from assets or principal paid to spouse Surviving spouse controls asset distribution

Each type of trust can help you achieve similar estate planning goals. However, the key differences lie in how the assets in the trust are controlled. For example, a QTIP lets the grantor dictate how assets within the trust are distributed to their spouse and requires that distributions be made at least annually.

A marital trust allows the surviving spouse to dictate how the assets are distributed—it doesn’t require distributions, and that spouse can even add new beneficiaries. A marital trust has more flexibility as this type does not require the surviving spouse to take annual distributions. The surviving spouse of a marital gift trust can also appoint new beneficiaries following the death of the original grantor.

As the surviving spouse is never the true property owner, a lien cannot be put against the property within the trust or the trust itself.

Benefits of a QTIP

While QTIPs are similar to marital trusts, there are benefits in certain situations.

  • You control where the assets end up: You control who your assets pass to after both you and your spouse die. This means that no matter what your spouse does after you pass on, any assets left in the trust are passed on to the secondary beneficiaries you name. These could be your children, grandchildren, or children from a previous marriage.
  • QTIPs protect all assets and income: As your spouse ages, they may be unable to make the sound financial decisions they once could. Dictating how income or principal is distributed and used protects the assets for all beneficiaries you name. Your assets cannot be accessed by thieves, or scammers, be accidentally signed away or be used in ways you didn’t intend for them to be used.

How Does a QTIP Trust Work?

A QTIP trust is an irrevocable trust that pays income generated from the assets to a spouse. When that spouse dies, the assets pass to the beneficiaries named by the grantor.

What Is the Difference Between a QTIP and Marital Trust?

The two are similar, except that a QTIP cannot be changed by the surviving spouse and requires that at least one annual distribution occur.

What Are the Requirements of a QTIP Trust?

A QTIP is required to pay all of its income to the spouse beneficiary. There can also be no other beneficiaries until that spouse passes away.

The Bottom Line

Qualified Terminable Interest Trusts are designed to be a method of ensuring you can leave assets to your spouse and other named beneficiaries while the terms you want are enforced throughout the trust’s existence.

QTIPs may not be suitable for everyone or every situation. For example, if you’re not concerned with how your estate is distributed after your spouse dies, you might not need a QTIP. But if you’re leaving an estate to your spouse when you die and want any remaining assets and income to go to specific people after your spouse passes on, a QTIP is an excellent way to ensure your wishes are followed.

Read more related articles here:

How Does a QTIP Trust Work?

What is a QTIP trust and how does it work?

Also, read one of previous blogs here:

What Is a Marital Trust?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Protect Inheritance

I Want to Leave An Inheritance to My Child, But Not Their Spouse.

I Want to Leave An Inheritance to My Child, But Not Their Spouse.

It’s natural for parents to want to protect their children, even their adult children. While many parents love their children’s spouses, when they are estate planning their #1 priority is protecting their children, and not necessarily their child’s spouse.

Parents who have worked hard to earn a home, some treasured items and savings, and want to pass that legacy to their children after their death and to keep that legacy in the family for their grandchildren. While often money that is inherited during a marriage is considered marital property, with proper estate planning you can ensure that your legacy is left to your children and their children, and not to their spouse due to a potential future divorce or death.

3 Ways To Ensure Your Child’s Inheritance Stays In the Family

1. Inheritance Through A Trust 
If you leave money to your children through an irrevocable trust, technically the trust owns the money – not the beneficiary. An irrevocable trust can protect your assets and require the trust executor to follow your exact wishes for the distribution of your assets, even if your child dies or becomes divorced.

2. Gift Your Child While You Are Still Living 
Recent changes in the tax code make it easier to gift money to your heirs before you die. In 2020 the annual exclusion is $15,000 – which means you can gift anyone up to $15,000 per year without triggering gift taxes That number could rise in the future as inflation impacts the value of the U.S. dollar.

3. Generation-Skipping Transfer Trust or GST
A GST skips a generation, and assets are passed down to the grantor’s grandchildren, not the grantor’s children. A Generation-skipping trust avoids having your estate taxed twice — when your children inherit, and when your grandchildren later inherit your assets. GST allows you to give your grandchildren or great-grandchildren up to $11.40 million — the same as the estate tax exemption — in a generation-skipping trust and only the estate tax applies, or $22.80 million if you’re married.

Ideally, your child can sign a prenuptial or postnuptial agreement to negotiate that their future inheritance is separate from marital property. If you want to secure your adult child’s inheritance after you are gone, it can be stressful for your child to say that their future inheritance as not a part of marital property and will not be shared with their present or future spouse.

An experienced estate planning attorney can help you determine the best options to protect your family and secure their futures after you are gone, and ensure that their inheritance is not considered marital property.

Read more related articles here:

Can I Leave Money to My Kids But Not Their Spouses?

How to Leave Money to Your Kids – But Not Their Spouses

Also, read one of our previous blogs here:

CAN A TRUST PROTECT YOUR CHILD’S INHERITANCE?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

 

personal services contracts

Personal Services Contracts in Florida.

Personal Services Contracts in Florida.

When people are looking to protect assets from the costs of long-term care in Florida, one popular option is the concept of a personal services contract. This article discusses legal ways to protect assets in the event your elder needs long-term care Medicaid. Long-term care Medicaid can help pay for the cost of care at home, in assisted living, or in a nursing home.The goal in creating eligibility for long-term Medicaid generally involves legally reducing the assets to $2,000.00 for a single person or around $140,000 for a couple.  In creating Medicaid, we cannot give money away as this creates a Medicaid transfer penalty. So if we cannot give money away, how can we create Medicaid eligibility while protecting assets? One legal way to do this is to pay a caregiver for future services for the elder in advance.  This is generally referred to as a personal services contract.A personal service contract is an agreement between a caregiver (who can be a family member) and the elder to provide him or her with personal care services for his or her lifetime. This is a lump sum transfer of assets to the caregiver(s) in exchange for their contractual promise of care. As long as the transaction is for fair market value and is legally binding, the government cannot disqualify the applicant for Medicaid long-term care benefits as the transfer is not a gift, it is a payment for services.  Remember that we cannot give away money (or other assets) to receive Medicaid eligibility, but the applicant is allowed to hire someone to help them out within reasonable parameters.  Personal services contracts have been used for years in Florida and have been tested in the Florida appellate court as a valid tool for valid Medicaid “spend down” planning.The services provided by the caregiver generally includes bill payments, talking to doctors, grooming needs, visitation, hospital advocacy, etc., that the nursing home or assisted living facility does not generally provide. The caregiver is essentially getting paid to help the elder receive better care than he or she would receive without an advocate in such a facility.

The payment amount is calculated by the elder’s life expectancy, the amount of work expected and the hourly rate.  A typical example of this calculation is as follows:

Mom is 85 years old and in the nursing home. She has $50,000 in her bank accounts. We want to create eligibility for Medicaid and she has a caregiver who is able and willing to assist her.  Mom’s life expectancy according to the Florida Department of Children and Families is 6.62 years.  If the caregiver is able to work ten (10) hours per week advocating for Mom, which we would deem reasonable under the circumstances, we could pay the caregiver $35/hour (or less).  With this calculation, we would be able to pay a caregiver around $120,484 for his or her expected services (10 hours/week x 52 weeks/year x $35/hour x 6.62 years = $120,484.00). Since Mom only has $50,000 in assets, we could legally pay the caregiver a $50,000 lump sum to create Medicaid eligiblity and reduce her assets to less than $2,000. In this example, this is all done with assistance and guidance from a good elder law attorney.

There are a few items to note in this example:

  • It may be reasonable to pay a caregiver $35/hour in some, maybe not all cases, depending on the work the caregiver provides. The caregiver may be acting in more than just a caregiver role. For instance, the caregiver may provide physical service (checking in on the patient/elder, helping with hygiene issues) while also may provide some things that are closer to a guardianship role (such as bill paying and other legal responsibilities). So we may be able to justify a higher hourly rate in some circumstances, which is very important
  • Personal services contract are very exact and would only be done under certain circumstances with attorney consultation
  • The caregiver will have income tax issues in getting a lump-sum payment
  • The caregiver may need to get consent from Mom’s family/other children as this may disrupt Mom’s estate plan
  • The Personal Services Contract, and all spend down, is documented to the Department of Children and Families, so this is all disclosed to Medicaid as part of the application process
  • The Department of Children and Families reviews the contract, pay rate and the hours as a part of the Medicaid application
  • Each situation is different so an elder law attorney will review all options for correct Medicaid “spend down” planning

We typically look to personal services contracts as a part of spend down planning for single people. Medicaid rules are different between a married couple and a single person, so there may be other (i.e., better) legal ways to protect assets for a married couple.

Explain This Again?

The use of a personal services contract is most likely used in “crisis Medicaid planning,” where the elder is already in a nursing home or the elder needs imminent long-term care Medicaid (such as in-home or assisted living Medicaid). In the above example, Mom is in the nursing home and will be private paying for care when her Medicare/health insurance ends (if she had a 3 day qualifying hospital stay before going to rehabilitation).  Mom has money that would otherwise disappear to the cost of long-term care as the nursing home costs over $10,000/month on private pay. Since her money will be spent very quickly without Medicaid paying for long-term care, the family will want to discuss how to best spend Mom’s money to get Medicaid qualification (for Medicaid to pay for her care faster). The personal services contract will help legally spend her funds down to less than $2,000, so she will qualify for Medicaid sooner with an elder law attorney’s assistance.

Read more related articles here:

Personal Service Contracts. Medicaidplanning.org

37.104 Personal services contracts.

Also, read one of our previous Blogs at:

Personal Care Agreements

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Lisa Marie Presley

Lisa Marie Presley’s Estate: A Legal View on Challenges Ahead

Lisa Marie Presley’s Death Highlights Estate Challenges of Multigenerational Fame

Lisa Marie Presley’s Estate: A Legal View on Challenges Ahead. Nothing educates the public about estate law (and, sometimes, probate litigation) like the death of a celebrity. The passing of Lisa Marie Presley is likely no exception. High-profile deaths often shine a light on the sometimes complex post-death proceedings to shuttle a person’s wealth to his or her heirs or beneficiaries — assuming the estate is solvent when all is said and done and there is something to distribute. This process is referred to as “post-death administration” and, often, with famous decedents, it is marred by complications such as pending lawsuits and claims by creditors. By all accounts, it appears Ms. Presley’s estate will encounter the same fate.

Ms. Presley’s untimely death presents complex estate administration issues that will need to be sorted out in the coming months and, likely, years. What typically happens, or should happen, when a person dies is for her representative (i.e. executor or trustee) to marshal all of her assets, pay her debts (including applicable federal estate taxes), and then distribute any balance to her heirs or beneficiaries. This process is meant to be simple and streamlined but, in reality, can take years.

Although Ms. Presley’s passing is very recent, publicly-available information indicates her estate administration may teeter on the complicated side. The reasons for this include the fact that Ms. Presley is what one would call a “legacy celebrity.” Her fame didn’t simply start and end with her. She inherited more than wealth from her father, who was none other than the King of Rock and Roll. Simply being the daughter of Elvis Presley gave Ms. Presley icon status, arguably in perpetuity. Adding to her legacy status is the fact that Ms. Presley’s mother, Pricilla Presley, is a famous actress. The fact that Lisa Marie Presley herself acted and released albums added additional layers of fame. Of course, we would be remiss if we didn’t mention Ms. Presley’s (albeit brief) marriage to Michael Jackson, the King of Pop. Most go through life not even coming remotely close to being associated with any sort of musical juggernaut, and yet, Ms. Presley was closely linked to two of the most talented musical giants of all time. While all that fame should and typically does come with a lot of wealth, sadly, in Ms. Presley’s case, that may not be the reality for her heirs.

All of that messy litigation raises at least one burning question: What will Ms. Presley’s three daughters inherit from her? In other words, how much of that Elvis Presley legacy is still left to be passed down to his granddaughters, two of whom are still minors? We know that Ms. Presley personally owned Graceland and her father’s personal effects, so there is a possibility that her daughters will inherit Ms. Presley’s interest in those assets. That is assuming those assets are not consumed by their liabilities. Ms. Presley’s heirs may also inherit any intellectual property rights that Ms. Presley owned and monetized. Finally, Ms. Presley’s untimely death may generate future revenue for her heirs in the form of post-mortem book deals and movies.

Read more related articles at:

All Shook Up: What’s Left in Lisa Marie Presley’s Estate?

These Are All the Plans for Graceland After Lisa Marie Presley’s Death

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Senior Benefits

Are You Missing Out on Benefits? Find Programs You Can Use!

Are You Missing Out on Benefits? Find Programs You Can Use!

BenefitsCheckUp, the National Council on Aging’s online resource, helps elders identify the federal and state assistance programs for which they are qualified. The database is free to access, and the National Council on Aging ensures personal information people enter into the website remains confidential.

The resource provides older people not only with individualized reports of the assistance programs that cover them, but also the details they may need on each program before applying, including contact information for the agencies administering the assistance.

How to Obtain an Eligibility Results Report

To get personalized Eligibility Results detailing the benefits programs to which you may apply, enter your information into the database on the BenefitsCheckUp website, starting with your ZIP code. Then select the programs that interest you, which offer support on any number of services, including:

  • Health care and medication
  • Food and nutrition
  • Housing and utilities
  • Aging in place and in-home care
  • Income
  • Disability services
  • Long-term care, such as skilled nursing facilities
  • Discounts and activities
  • Tax help
  • Crisis, legal, and general assistance
  • Veterans’ programs

Once you enter details such as your date of birth and marital status, BenefitsCheckUp generates a report outlining the specific programs accessible to you, and identifies what other information each program requires.

The Eligibility Results reports have several user-friendly features:

  • If you make errors filling in details or want to provide additional information, the website allows you to go back and revise your answers.
  • After the website creates an individualized Eligibility Results report, you can save it as a PDF and email it to yourself or a loved one.

Family and Caregivers Can Use BenefitsCheckUp to Assist Their Loved Ones

Family members or caregivers of older adults can also use BenefitsCheckUp to help their loved ones learn about benefits programs. They can enter an individual’s information into the website on their behalf and get a report, which they can use to support their loved ones in applying for state or federal benefits.

This easy-to-use resource can help older adults and their families alleviate the stress associated with applying to state and federal benefits programs.

Read more related articles here:

Older Americans miss out on billions of dollars in benefits as inflation takes a toll

Millions of Older Adults Are Missing Out on Benefits

Also, read one of our previous Blogs here:

Elder Law Estate Planning for the Future

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Succession Plan

My Lawyer Retired-What Happens to my Estate Planning Documents Now? 

My Lawyer Retired-What Happens to my Estate Planning Documents Now?

What happens to your Will or estate plan if your estate planning attorney dies, retires, quits practicing, or is otherwise not available when you or your family need estate legal services in the future?

Clients mistakenly believe that their estate legal program will fall apart if the attorney who prepared and implemented the plan is not around at a later date.

People who put an estate legal program in place typically have either a Will-based plan or a Living Trust-based plan.

Over the years, many people have gone to “other” attorneys or firms to get their Will done. Later, when they need to change their Will (perhaps change the heirs; or change the executor) they go to another attorney to either make the changes, or, when someone dies, to handle the probate,When new services are provided,  the previous attorney or firm does not have to be located or communicated with. It is often easy to make the transition.

When someone creates a Living Trust-based estate planning program, they often mistakenly believe that legal documents must be updated every time they buy or sell property, or even open an investment account. That assumption is incorrect. The key is, simply, to buy the new property, or open the investment account, in the name of the trust. And when the Settlor of a trust dies, note that many Living Trusts are settled with no attorney involvement whatsoever. So if the attorney who helped you implement your Trust-based plan is not around when you need to name new beneficiaries, or settle the trust when you die, it’s OK.

It is not unlike when you lose the services of your doctor, your CPA, or your financial advisor. You simply find someone else that you know, like, and trust to pick up where you left off with the other professional service provider.

Read more related articles here:

What Happens if Your Estate Planning Attorney Dies Before You?

Why Should A Solo Practitioner Do Succession Planning?

Also, read one of our previous blogs here:

Succession Planning vs. Estate Planning – Why They Are Both Important

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

POA-Healthcare Proxy

Avoid Disagreements Between Your Power of Attorney Holder and Health Care Proxy

Avoid Disagreements Between Your Power of Attorney Holder and Health Care Proxy

A durable power of attorney and a health care proxy are two important but different estate planning documents.  Both allow other people to make decisions for you in the event you are incapacitated.  Because the individuals chosen will have to coordinate care with your income and resources, it is important to pick two people who can  get along.A power of attorney allows a person you appoint – your agent or “attorney-in-fact” – to act in your place for financial purposes when and if you ever become incapacitated.  A health care proxy (sometimes called a health care power of attorney or advance directive) is a document that gives an agent the authority to make health care decisions for you if you are unable to communicate such decisions.

While the health care proxy is the one who makes the health care decisions, the person who holds the power of attorney is the one who needs to pay for the health care.  If the two agents disagree, it can spell trouble.  For example, suppose your health care agent decides that you need 24-hour care at home, but your power of attorney thinks a nursing home is the best option and refuses to pay for the at-home care.  Any disagreements would have to be settled by a court, taking  time and draining your family’s resources in the process.

The easiest way to avoid conflicts is to choose the same person to do both jobs.  But this may not always be feasible – for example, perhaps the person you would choose as health care proxy is not good with finances.  If you pick different people for both roles, then you should think about picking two people who can get along and work together.  You should also talk to both agents about your wishes for medical care so that they both understand what you want.

The next easiest way is anticipate and plan for the conflict by giving someone the power to settle disputes.  This person should be named in the papers and could be anyone other than the named agents.  The person should be authorized to consult with all the stakeholders (the family members, etc.) and then given specific authority to direct that in the case of dispute, one agent or the other will prevail.  Many disputes are probably avoided by knowing that this power exists: one need not see the dog to have second thoughts when the sign shouts to beware the canine.

Finally, it’s useful for everyone to consider what might happen when dementia or some other disorder takes over for the person giving and getting authority.  Especially when one spouse appoints another, age will be a factor to consider.  Careful writers will consider including  language to override protests in health care proxies (in Virginia, to avoid civil commitment hearings, Virginia Code § 54.1-2986.2.), and including alternate agents and the procedure for removal of impaired agents.

If you have questions about whom to name for these roles, or you haven’t yet executed these all-important documents, address these issues, and then talk with your attorney.  You and your family will be happy you did.

Read more related articles at:

When a Health Care Proxy and Power of Attorney Disagree

Living Wills, Health Care Proxies, & Advance Health Care Directives

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pot trusts

What Is A Pot Trust In Estate Planning?

What Is A Pot Trust In Estate Planning?

Pot trusts (also called discretionary or sprinkling trusts) are a type of trust where the trustee is allowed to disperse funds according to the needs of the beneficiaries. Family pot trusts are created by parents for their children, usually in case something were to happen to them. Unlike many trusts where the trustee must follow strict instructions from the creator of the trust, family pot trusts allow parents to grant almost unlimited flexibility for the trustee to give funds to their children as needed, sometimes only to one beneficiary. Parents may want their children to receive different amounts from the trust as expenses arise such as medical bills or college tuition.  Family pot trusts have great advantages for flexibly allocating trust assets, but they come with the disadvantage of possibly allowing a trustee to manage the trust against the interests of the trust creator. Given the level of discretion given to the trustee, it is extremely important to choose the right trustee and define the intentions of the parents. Also, the trust typically does not end until the youngest child reaches the age of 18 or another age set by the trust. So, older children who might need the money in the trust might not be able to access it until late in life.

About Dynasty Trusts.

Dynasty trusts are now more en vogue than ever due to the highest federal gift, estate and generation-skipping transfer (GST) tax exemption amounts in history. In addition, more states have modified or abolished the common law rule against perpetuities, and the modernization of trust law under the Uniform Trust Code (UTC) now allows for a variety of ways to modify irrevocable trusts. Consider that trusts funded in 2022 with the $12.06 million of available exemption stand to grow to over $30 million in just 20 years when compounding at a modest 5% rate of return. This means that trusts established and funded with that amount today are likely to last more than just one generation, warranting a perpetual trust structure. Many states’ laws now allow for such dynastic trusts, permitting assets to be held in trust without running afoul of the maximum duration for trusts under common law. The cherry on top is that in UTC jurisdictions, clients need not shy away from a perpetual trust for fear of creating a static vehicle that can’t be modified for unanticipated changes in family circumstances. Moreover, decanting, modification agreements and nonjudicial settlement agreements are now available in many states, adding newfound flexibility to planning with long-term trusts.

Separate Share Trusts

For many years, the default trust design was to divide trust assets immediately into either per stirpital or per capita shares to be held in separate share trusts for descendants. This was especially true with lifetime trusts that give the trustee complete discretion in making income and principal distributions. This tried-and-true method of drafting addresses the majority of clients’ goals in: (1) treating children equally in the initial division of trust assets, and (2) protecting the beneficiaries’ inheritances from the claims of creditors. And yet, while this common approach to trust structuring does address most clients’ main objectives in architecting their estate plans, rarely do clients understand that the immediate splitting of the trust estate into separate trusts can result in disparate treatment of beneficiaries just one generation lower.

Take, for example, a situation in which one child proves to be more of a spendthrift than their siblings or another very common situation in which one child chooses to have more children than their siblings. In either scenario, a client’s grandchildren may inherit disproportionate fractions of the assets the grandparents left in trust for the family based solely on decisions made by their parents. Rarely, if ever, however, does a client endeavor to treat their grandchildren differently, yet clients aren’t always advised of this consequence when defaulting to a separate share trust structure. A hyperbolic example is a family with two children in which one child has 10 children, and the other child has one child. In this example—assuming all else is equal—the one grandchild ends up with 10 times what their cousins inherit in traditional per stirpital planning. Each generation only compounds this problem.

This potential issue with the separate share trust design is only magnified under the current landscape where trusts are funded with historically high amounts, given the increased federal gift and GST tax exemptions available under the Tax Cuts and Jobs Act, which is still in effect until it sunsets at the end of 2025. It’s therefore incumbent on practitioners to discuss the potential impact of separate share trusts when working with clients to address their estate-planning goals and educate them on what alternatives may be available in architecting the client’s dynasty trust.

The Long-Term Pot Trust

A single share or pot trust is held for the benefit of a group of beneficiaries rather than for only one primary beneficiary. A typical pot trust may include a large class of beneficiaries, such as the descendants of a client’s maternal and paternal grandmothers, to preserve the flexibility for the dynasty trust to serve as a “family bank,” benefiting more than just the client’s nuclear family should the trust assets be of exceptional size or should family circumstances change. If the trust is structured such that the trustee maintains full discretion over trust distributions, the inclusion of additional family members as merely permissible beneficiaries may be that much more desirable as this design merely provides the opportunity—but not the requirement—to benefit other family members should a need arise.

This highlights one of the most attractive features of the pot trust structure: the flexibility to defer decisions on hard-to-answer questions until later on down the road. One of the most challenging questions for clients to answer can be whom they ultimately want to benefit from the trust assets. It’s nearly impossible to imagine or foresee how family circumstances may change and evolve decades into the future, and yet trusts funded with high exemption amounts today have the potential to continue for several generations. Asking clients to choose up front as to the total pool of beneficiaries to be included now may not be prudent or desirable for many clients. As such, the best recommendation may be to offer up a structure that allows the client to defer that decision until the client or a trustee is better equipped to make such a choice after seeing how trust assets perform over time and how the client’s family matures.

Benefits of Pot Trusts

One of the key benefits of a pot trust is that it allows the flexibility to defer decisions on hard-to-answer questions until later. But there are other benefits to consider.

A pot trust allows the trustee to distinguish among beneficiaries just as the settlor likely did during life. One beneficiary may have the skills and temperament to thrive in an Ivy League setting, while another beneficiary may be much better suited to art or design school. One beneficiary may have substantial health needs while another is fit as a fiddle. While some parents may ultimately try to equalize overall distributions between these two beneficiaries, our experience tells us that most parents don’t keep score this way, focusing instead on giving each beneficiary what they need. Removing the temptation to equalize allows the trustee significantly better chances of responding to each beneficiary’s actual needs and interests.

Families with dynastic intent who want to see their wealth grow and support not only children and grandchildren but also descendants further down the line often may find the pot trust a better option. In working with what we call “100-Year Families,” we notice that pot trusts lend themselves to more effective management by bringing members from different branches of the family tree who have different life experiences and goals into the management of the trust. A grandchild who participates on a trust advisory board with members from both older and younger generations will likely develop strong relationships with their family members, which will, in turn, lead to decision making that fosters multigenerational benefit from the trust. Involving younger family members in the management of the trust also keeps the trust relevant and meaningful over the years.

Income tax planning is another benefit of a pot trust structure. If the trustee can pick from a large group of beneficiaries, they can make distributions that shift taxable income to lower bracket taxpayers. They might also decide to make distributions in kind to reduce tax recognition. In the aggregate, these tax savings should result in more wealth to reinvest, increasing the family’s overall wealth.

Overall costs of administering a single share instead of separate shares should be lower. Record keeping, accounting, costs associated with managing real estate and back-office costs will be incrementally higher with five or six shares than with only one share. Pot trusts allow trustees to take advantage of economies of scale, saving costs in performing basic trustee functions.

Duty of Impartiality

Balancing the needs of many beneficiaries will be more difficult than managing the needs of a single beneficiary with a separate share.

The biggest concern is the duty to act impartially in administering assets held for multiple beneficiaries with different needs, tolerance and risks. Without a specific waiver of this duty in the trust document, a provision that would require careful discussion with the settlor, the conflict exists even if the trustee has absolute discretion over distributions. This duty (and the related duty of acting in good faith) doesn’t mean that overall distributions among beneficiaries should result in equitable distributions. Instead, it means that the trustee can’t make decisions based on personal favoritism or animosity toward a beneficiary. A trustee shouldn’t make “better” distributions to a beneficiary who simply has more access to the trustee or is more aggressive than other beneficiaries. This may be more complicated with multiple beneficiaries, but it’s no less or more important than in a separate share trust.

Trustees should always communicate with their beneficiaries, but this is especially true while administering pot trusts. To satisfy the duty of impartiality (and the related duty of acting in good faith), a trustee must take reasonable steps to discover a beneficiary’s needs, and consistent communication with the beneficiaries of a pot trust is vital in that respect. Conversely, the trustee has a duty to keep beneficiaries informed, including the reasons discretionary distributions have been or will be made. Regular discussions with beneficiaries along with written reports or emails summarizing discussions and decisions sent to all or at least a fairly representative group of beneficiaries will offset the worry a trustee feels in making discretionary decisions for a pot trust. Creating a family advisory board or a committee of trustees composed of a fairly representative group of beneficiaries may help achieve the trust’s purpose (as discussed above); it may further reduce the risk a single trustee may feel in making discretionary decisions.

Perhaps the most helpful tool for a trustee with discretionary authority is a letter or statement of wishes from the settlor. The trustee’s duty to comply with the terms of the trust and their duty of impartiality require the trustee to discern the purposes of the trust from the trust document and other contextual information about the trust’s objectives. That can be exceedingly difficult once the settlor can’t answer questions from the trustee. Although letters and statements of wishes are precatory in nature, they guide the settlor on various matters, including the special issues discussed above, giving trustees much needed information to consider in making discretionary decisions.

Unique Investment Assets

Certain assets are better suited to the unified ownership structure provided by a pot trust: for example, a vacation home that multiple individuals use across generations in a family. Owning such an asset in a pot trust allows the trustees to coordinate use, maintenance and improvements without requiring the cooperation or consent of numerous family members.

Holding personal use real estate in separate trusts for different family members, by contrast, raises issues of fairness and coordination. Although ownership of the property could be unified by titling it in the name of a limited liability company (LLC) with the various trusts as members, the LLC manager would be in the unenviable position of allocating usage of the home and seeking pro rata reimbursement for expenses from different trusts, whose trustees and beneficiaries may have greatly differing opinions regarding the property, its use and upkeep and even whether it should be retained or sold. Unless the LLC is funded with significant liquid assets, its member trusts will occasionally be required to make additional capital contributions to maintain and improve the property. If one beneficiary never or rarely uses the property, they (or their trustee) are unlikely to agree to an expensive renovation. Even if the LLC operating agreement contemplates that a majority or supermajority vote can compel all members to make additional capital contributions, doing so may cause resentment and family conflict. While the overall economics may be identical in the pot trust and separate trust scenarios, pot trust ownership discourages the perspective of “mine” versus “yours” money among family members, which is likely to give rise to intrafamily tension.

Not all assets are well-suited to a pot trust ownership structure, however. Consider a closely held operating business in which some, but not all, family member beneficiaries participate in running the business. While a settlor might be tempted to transfer such a business into a pot trust to ensure continuity and consolidation of ownership, there’s significant potential for conflict between beneficiaries involved in the business’ operation and those who aren’t. The family business managers may prefer to boost their compensation rather than increase income or appreciation that benefits the trust because trust assets must be shared among a larger class of beneficiaries.

General Investment Considerations

Even in the absence of unusual assets, different investment approaches may be appropriate for pot trusts and separate trusts. The larger size of a single pot trust might seem to permit a higher risk investment strategy, and its larger purchasing power may open up investment opportunities unavailable to smaller trusts. However, the fiduciaries of a pot trust must consider the circumstances of all beneficiaries, and it may be difficult to appropriately balance the risk appetites of beneficiaries of different generations and life situations. Separate trusts permit a more individualized investment approach. In either case, the trust instrument should be drafted to reflect the settlor’s wishes regarding investment strategy.

The Best of Both Worlds

Pot trusts offer flexibility that can’t be found in separate share trusts. They: (1) allow planning for families with young children whose needs and interests aren’t yet clear, (2) reduce the risk of inequity for future generations based on access by earlier generations, (3) reduce the costs of administration, and (4) provide opportunities for involving multiple generations in trust management. They also offer unique investment advantages for various assets. However, separate share trusts may still be a better choice based on a specific client’s facts and circumstances, particularly when primary beneficiaries are older and have clearer needs, a relationship with a primary beneficiary is difficult and keeping things separate will likely reduce family tension, particularly when multigenerational planning isn’t as important.

Like so many estate-planning decisions, those around multigenerational trust structure require careful discussion with clients, particularly because pot trusts can be designed to split into separate shares on a certain event (for example, the young beneficiary’s reaching a certain age) or at any point the trustee determines separate shares make more sense. The trustee can divide the entire pot or bifurcate a particular percentage in creating separate shares. These options allow clients to have their cake and eat it too. As a result, divisible pot trusts deserve to be considered more often than the current default regime of per stirpes.

Read more related articles here:

Pot Trusts: Why They’re the Fairest (Trust Structure) of Them All

How Does a Pot Trust Work?

Also, read one of our previous blogs here:

How Does the Generation-Skipping Transfer Tax Work in Estate Planning?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

 

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