Mark A. Bregman, Estates and Trusts Lawyer


New Perils of Arizona Beneficiary Deeds

I first wrote about using an Arizona beneficiary deed to avoid probate on November 13, 2012.

A recent decision of the Ninth Circuit Bankruptcy Appellate Panel reveals a major shortcoming that should affect the popularity of beneficiary deeds.  In Jones v. Mullen, BAP No. AZ-12-1644-DPaKu, the panel decided that the debtor’s interest in real property acquired because of the death of his grandmother 3 days after the debtor filed a Chapter 7 bankruptcy petition was property of the bankruptcy estate.  The bankruptcy trustee was allowed to sell the debtor’s post-petition acquired interest in the real property.  The debtor’s creditors benefitted from the decedent’s beneficiary deed rather than the intended grantee, the decedent’s grandson.

Beneficiary deeds have become so popular and widely available on the internet, many people create beneficiary deeds without consulting a lawyer or otherwise gaining an appreciation for some of the more common pitfalls.  Leaving property outright to an intended beneficiary heads the list of problems that can be avoided with planning.  This mistake could be made in a Will or a trust as well as a beneficiary deed, but most trusts and many Wills are prepared by lawyers who have the opportunity to counsel their clients and discover whether or not special circumstances exist which suggest adoption of a different plan.

Bankruptcy laws can disrupt an estate plan and cause a detrimental unintended consequence.  A well constructed estate plan considers potential obstacles such as unforeseen bankruptcy filings and poor timing and “plans” for such possibilities in ways that a beneficiary deed form cannot.

Interestingly, in Jones, the decision did not rely on the 180 day clawback rule of §541(a)(5) for inheritances, but rather reconfirmed a 24 year old case, Neuton v. B. Danning (In re Neuton), 922 F.2d 1379 (9th Cir. 1990), decided using §541(a)(1).  The controlling law in the Ninth Circuit is that a contingent interest becomes property of the bankruptcy estate upon the filing of a petition, subject to divestiture and valuation issues.  Here, when the contingency occurred, Grandma’s death, during the pendency of the bankruptcy case, the debtor was left with no recourse and the interest was sold for the benefit of the bankruptcy estate and the debtor’s creditors.

The Ninth Circuit consists of California, Oregon, Washington, Nevada, Hawaii, Alaska, Montana, Idaho and Arizona.  The result could be different in other states that don’t have the same precedent.

The Jones case is a perfect example of the old adage “that for the want of a nail, the horse was lost.”  Although a beneficiary deed may be inexpensive to create and avoids probate, it also contains none of the protections many folks want for their descendants.  If any adverse conditions exist on the date of death, the decedent’s estate plan will be frustrated.

This is just one example of how beneficiary deeds may be innocently misused.  Failure to adequately identify who takes the property if the originally named beneficiary fails to survive the grantor is another common mistake that can be avoided with careful planning and competent drafting.

In the proper circumstances, a beneficiary deed can be a time and money saving alternative to probate, but unforeseen consequences can assure that the simple idea is not a good one.  Before using a beneficiary deed, make sure you have identified not only the benefits you desire, but the risks and pitfalls not often discussed.  I can help you analyze whether a beneficiary deed is a good solution for you.  For this or any other estate planning concern, call me today.

What Do the New Estate Tax Laws Mean to You?

By now you have probably heard that on December 17, 2010, Congress increased the estate tax exemption to 5 million dollars. You may also have heard the new term “portability” thrown about; read that the estate, gift, and GST taxes have once again been “reunified” at the 5 million dollar level; and that this is a 2 year fix indexed for inflation with a return to the $1 million level in 2014.

What has gotten much less publicity is the 3.8% surtax added on investment income for couples with AGI greater than $250,000 which is part of the Health Care bill and effective in 2013.

What does this mean for you?

1. You may now need a Life Insurance Trust. I have always held that life insurance and Irrevocable Life Insurance Trusts (ILITs) are a valuable tool, and I am even more convinced of this now. In fact, ILITs are even more desirable than before if you have wealth you intend to use primarily to create a legacy for your descendants.

Decision making no longer needs to be driven by the estate tax rules. And if you are thinking of waiting you have to consider that you don’t know if you will be medically qualified for life insurance a year or 2 years from now. It’s best to act now, and we can design trusts that will shield the proceeds from taxation in your estate while giving you access to the accumulated cash surrender value if circumstances change.

Life insurance remains the single best strategy for a healthy person to create a large legacy that eliminates the stress of a volatile investment strategy. And now policy premiums can be paid in advance and avoid the complexities of Crummey letters and hanging powers, and existing policies with large cash values can be transferred to ILITs to avoid potential taxation.

2. As much as I believe in ILITs, they are not your only option for Legacy Planning: Family partnerships, GRATs and other strategies can also be structured and more economically implemented to take advantage of the temporary uptick in the exemption amounts.

3. It is open season on outright gifts and gifts to dynastic trusts now that you have the opportunity to make tax free gifts up to 5 times larger than in the past. The multiplier effect for 2 or more generations will be astonishing!

4. The 3.8% surtax also makes pushing investment assets down to lower generation members in lower tax brackets an important income tax plan for multi-generation families.

5. Achieving creditor protection using spousal limited access trusts and lifetime QTIP trusts has become a tantalizing opportunity.

6. Portability, however, is a trap for the unwary, as is the increased federal exemption that may destroy your existing estate plan if you have a blended family or other targeted planning in place. Formula gifts to charity may disappear from your plan unless you make changes.

Your legacy is important, and now is the time to consider changes to your plan and to implement those changes you have considered–but avoided–until now.

If “getting it right” is important to you (as it should be); then planning right now is indispensable. To learn more about these Legacy Planning techniques — or any other estate and tax strategies –call me today.

Government Rescinds Medicare Coverage of End-Of-Life Planning

Apparently the suspicion surrounding end-of-life planning is not as far in the past as we might have hoped. The recent Medicare regulation which would have allowed the government to pay doctors who advise patients on options for end-of-life care was rescinded only days after it was enacted.

Why such an abrupt turnaround? The reason is probably not too difficult to guess. Most people know that Medicare-covered end-of-life planning has a tempestuous history both in politics and in the media. This article in the New York Times stated that “while administration officials cited procedural reasons for changing the rule, it was clear that political concerns were also a factor.”

The alteration of the rule may be disappointing, but it shouldn’t stop you from thinking—or talking to your doctor—about your choices for your own end-of-life care. After all, this administrative change of heart does not alter the fact that having these discussions with your doctor (as well as with your health care agent and loved ones) preserve patient autonomy at a time when events may seem to spiral out of control. As National Public Radio pointed out in their article, “it remains perfectly legal for physicians to talk with patients during annual visits paid for by Medicare about how much or little care they want when facing a terminal illness.”

Media firestorms and political debate notwithstanding, your decisions about your end-of-life care are important. When you have these discussions with your doctor and loved ones, and when you have a living will or healthcare directive in place, you are far more likely to get the care you want at the end of your life, regardless of how invasive or restrained you want that care to be.

If you have reservations about what a health care directive might mean to your future medical care, or if you have any questions about this issue, please don’t hesitate to call our office. Your peace of mind is our first priority.

Is Something Rotten in the Maricopa County Probate System?

I’ve been a practicing lawyer in Scottsdale for over 30 years and I have never witnessed a fire-storm like the rage that has engulfed the probate system in the past two years.

I’d like to bring some sanity to the story and suggest a sensible solution.

If you haven’t read the horrible stories or the outrage generated by the current probate system you can catch up on the horror here, at  The stories you will read here are indeed sensational and terrible stories.  Most of them involve lawyers who are personally known to me as caring competent lawyers, and who were tangled up in difficult cases or inadequate safeguards and procedures.  The cases feature over-reaching by professionals, inability of the courts to provide adequate supervision, and victims and their families who (for various reasons) simply failed to plan.

Before you read and join in the hysteria, let me give a little bit of background: the entire probate process is an extremely emotional and technical exercise, which requires interaction between laypeople and professionals, with a system that tries to be effective for all cases—from the very small to the very large.  Lapses in the conduct of the administration in which individual cases are conducted, the frail nature of the system, and its inability to provide adequate oversight show the system at its worst.

When a reporter tells a story of a client being charged several hundred dollars to cancel magazine subscriptions you aren’t necessarily getting the entire story. You may get a quick impression of the frustration and final outcome, but you don’t get to see how the story actually unfolded.  While the fiduciary may have thought one phone call would suffice, the actual process could entail a determination of whether another family member wanted the subscription, a flurry of messages and return calls, file reviews, etc.  Suddenly what should have been a simple quick solution has mushroomed into a nightmare.  Multiply by this each step in the probate process and it is truly a catastrophic handling of the case.

But if you are outraged by these stories (and there are plenty of reasons to be outraged,) remember that you have a choice.  There are many competent, ethical lawyers out there, and many equally competent and compassionate private fiduciaries; but even the best lawyers and fiduciaries can’t help if the clients have not adequately prepared for the end of life struggle.

There simply is no substitute for an adequate estate plan.  Readers must know the difference between having just a will or a trust, or creating a whole estate plan.

Prospective clients ask whether they need a Will or a trust and what is the difference.  The real question should be “what is an estate plan?”  Just having a Will or a trust and financial and health care powers of attorney is not a complete plan.  Today, most assets can pass to beneficiaries without going through probate, but they won’t necessarily pass to the people you want, the way you want, when you want, unless you have created a thoughtful plan.  And those assets may not even get to the transfer stage if consumed during the end of life process by expenses, private fiduciaries, and lawyers.  Then when the remaining assets do pass to beneficiaries, if the plan has not been carefully constructed the assets in an inadvertent plan will be unnecessarily exposed to the creditors and spendthrift habits of the beneficiaries.

Because a Will or a trust is just a tool, the emphasis in my practice is on The Plan and how those tools will be used.  Dwight D. Eisenhower said that while plans are useless, planning is indispensable. The important work is understanding the pitfalls likely to waylay assets in the end of life process, and empowering your family and professionals to address your plans in an ethical way, so that the end result can be as close to what you intend as possible.

If you want to avoid your legacy becoming a sorrowful story of drained assets and battling distant heirs, call me today and get started on the planning process.   If you know anyone who wants the peace of mind that they have a plan that works, I welcome referrals.

What does the 2010 tax bill mean for 2011 estate taxes?

By now everyone knows that the President has signed a tax bill.  The question now on everyone’s mind is exactly what did he sign, and what does it mean to you?

  • Lower payroll taxes in 2011 and the historically low rates of taxes on dividends are good for all of us (not so good for our children and grandchildren, but that’s rant for another day).
  • A 2 year estate tax law will allow the debate to be re-opened during the 2012 Presidential election campaign, but if no new compromise is reached, the rate of taxation will return to the 2001 level of 55% on most estates, 60% on others, and the exemption amount will return to $1,000,000.
  • The estates of decedents dying in 2010 can elect either the new 2011 tax system or the 2010 tax system with a carryover basis.  This corrects a basic inequity that created a notch problem for estates greater than 1.3 million dollars, but less than 3 million dollars.
  • A maximum rate of 35% on both estates and gifts reduces the impact on many estates, but it remains an issue to be considered in planning.
  • For decedents dying in 2011 or 2012, the exemption amount is $5,000,000.
  • For the first time a concept known as “portability” has been introduced which means that a surviving spouse will pay no estate tax as long the survivor’s total estate is less than $10,000,000.  Although this seemingly simplifies planning for couples with a gross estate of more than 5 but less than 10 million dollars, it unfortunately acts as a disincentive for those families and others to complete comprehensive planning that can confer far greater legacy and tax benefits than the default plan.
  • Also for the first time since 2004, the gift tax exemption and estate tax exemption have been reunified, allowing lifetime gifts up to 5 million dollars per person.  For many families this will present unique gifting opportunities that should be completed in the next 2 years.
  • New rules for generation skipping transfers (GST) clarify how 2010 gifts can be handled; guidance that was sorely lacking and created great uncertainty for many families that wanted to make gifts in trusts for grandchildren.  Increased exemption amounts will allow significant amounts of money to reach dynasty trusts at considerable benefit for long term planning.  The gifting and GST rule changes were perhaps the most unexpected and create the greatest opportunities for future tax savings.

Without a crystal ball no one can predict what all this means for 2013 and beyond, but undoubtedly you will hear of many plans and opportunities in the weeks and months to come.  With the lowest income tax rates in a generation and the highest deficits and debts in the history of our country driven by the ever growing entitlement programs and the loss of good middle class manufacturing jobs, it is a near certainty that the new favorable system will be under attack again in 2012.

Look for news of upcoming live presentations I will be giving to answer questions and describe some forward thinking that will keep you informed of what you should or shouldn’t be concerned about in the near term.

This will be my last post for 2010.  Happy holidays to everyone and a prosperous and well planned new year!

Death and Taxes in 2010

Much has been written and discussed about the absence of an estate tax in 2010.  The debate about what Congress may do rages on and is spiced up with stories about the death of George Steinbrenner and others like the Texas billionaire Dan Duncan, but the little publicized truth is that the 1 year repeal of the estate tax actually imposes both taxes and legal fees on much more modest estates.

As part of the repeal, Congress also repealed the step-up in basis rules and substituted carryover basis rules, which means that any beneficiary who decides to sell the assets they inherited will have to pay tax on the gain—the difference between the amount the decedent originally paid for the asset and the amount the beneficiary receives for the asset.  As you may imagine, this will result in capital gains taxes on many middle class Americans.

There is a limited exception that could protect many small estates, but only if the value of the estate is under $1.3 million. You may think that you have nothing to worry about, that $1.3 million is a lot of money, but you would be surprised at how many “small” estates are actually large estates.  When you take into consideration the value of a home, retirement or savings accounts, a small investment here and a small investment there… the value adds up pretty quickly.

Every estate larger than $1.3 million that fails to file the required report is subject to a $10,000 penalty.  The report must be filed without regard to whether there is any property that benefits from the step up or not. The report must be filed with the decedent’s last income tax return due on April 15, 2011.  In addition to the report to the IRS, the estate must send a copy of the report to every beneficiary or heir that received property as a result of the death, presumably including recipients of life insurance proceeds and IRAs even though no basis adjustments would apply to those assets.

These rules are complicated.  They are not intuitive, require much attention to detail in a timely manner, and carry severe penalties for non-compliance.  The 1 year repeal of the estate tax in 2010, while a windfall for the über wealthy, will be a burden and expense on more modest estates.  If you have a family member who died in 2010 with more than $1.3 million in property (including a home, life insurance and retirement accounts) transferred as a result of the death, you have only a short time to comply and avoid the serious financial penalties.

It’s a big job, and you don’t have to do it alone.  Call me for help today.

Do You Know What You Don’t Know?

I recently came across a New York Times article that reminded me of an all too common experience I encounter in my estate planning practice. In the article author Ron Lieber recounts his experiment with 4 different Do-It-Yourself will drafting software programs and the outcome. Although Lieber goes through the pros and cons of each software program, his final conclusion is that while these programs may make you feel safe, they simply can’t give you the level of protection a trained attorney can—and in some cases these programs actually do more harm than good.

Unfortunately, I am often the bearer of this kind of bad news after the damage is done.  Lawyers consulted after a death cannot undo the damage done by an inadequate or incomplete estate plan, we can only do the necessary work to administer the estate and transfer the assets, hopefully, but not always, to the intended loved ones.  Unlike writing on a blank slate if nothing had been done, first, I must erase the unintelligible mess before I can begin.  This is generally expensive, meaning that the self help remedy defeats its own purpose by becoming more expensive than had the client consulted a competent lawyer in the first place.

The Attorney General of the state of Washington agrees with me.  In an announcement explaining the terms of a recent settlement with LegalZoom, the Attorney General expressed concern that the advertising and service offered was misleading because although it provided forms, it couldn’t provide the advice necessary for a consumer to determine if the forms were being completed properly.  The enforcement of its unauthorized practice of law rules is a major victory for unwary consumers and a lesson for us all.

Something happening in Washington may seem far away from our lives here in Arizona, but this is a serious issue that affects anybody considering an estate plan—or legal work of any kind!  I strongly urge you to look closer at the NYT’s article at the top of this post and then the announcement from the State of Washington.

It all comes back to the fact that you simply don’t know what you don’t know. Finding professional advisors whom you trust to help you determine your intent, to spend the time it takes to know you and your family, and to design an estate plan that will be efficient in terms of cost and effectiveness is of the utmost importance.

In the midst of designing an extraordinarily complex plan recently, I delivered drafts for review of multiple trusts and documents to the clients, one of whom honestly asked if they needed to hire someone to read and explain the words to them.  In the same week, a prospective probate client delivered a perfectly organized file consisting of 30 or more documents that had been prepared by a combination of document preparers and online do-it-yourself packages, all of which looked very good and which had taken a very long time to create and organize.  Unfortunately, all of those documents individually (and certainly the group as a whole) failed to achieve any of the primary purposes – it did not avoid a probate process, it did not transfer the assets to the intended persons, and it will not avoid legal fees.

What do these 2 seemingly disparate examples have in common?  Without knowing what they didn’t know, the client and the prospect were unlikely to make the right decision without relying on the expertise of a competent professional.

I believe estate planning is an important partnership.  If you teach me about your family, your finances, and your hopes, dreams, aspirations, and intentions, then I will teach you the law that must be applied to achieve the result you want to obtain.

The rest is just hard work.  Legal documents are tools to achieve a result.  Anyone can buy a hammer and saw at the local hardware store, but not everyone can build the house they want to live in.  You have spent a lifetime acquiring knowledge and skills and applying your talents to build a life; do you really want to take a chance not knowing what you don’t know?

Estate taxes, gifting, revocable and irrevocable trusts, heirs and beneficiaries, trustees and executors, estates, probate, Last Will and Testaments, power of attorneys, health care directives, and more are the language and stock in trade of good estate planning; using them correctly is difficult.  EVERY case is “fact specific” which means that your circumstances and intentions dictate how the resulting documents are drafted.  Form documents are like a broken clock that is right only twice a day.  Your family may pay a terrible price for the false sense of security of form documents.

Laws and common practice are complex and ever changing.  If you want an estate plan that works, call me.

The New Reality of Single Member Limited Liability Companies (SMLLCs)

If you’re looking for a way to protect your assets from creditors and lawsuits you should consider creating a Limited Liability Company (LLC).  An LLC is a business entity that combines the benefits of a business partnership and a corporation and protects your assets while still allowing you to retain control over them.  Desirable characteristics of LLC include that it can be formed by a single member, does not have to have a business purpose, and does not require a separate tax return or annual filings to maintain its existence.  LLCs can be a wonderful tool… but not all LLCs are created equal.

Arizona asset protection enjoys a competitive advantage over the laws of many other states because the drafters of the Arizona LLC law omitted creditor friendly portions of the Uniform Laws that allowed creditors to foreclose their charging order liens to realize on the underlying assets owned by the LLC.  This puts Arizona LLCs among the country’s elite LLCs for asset protection.  This enhanced protection is commonly known as the “charging order as the exclusive remedy,” and until recently was thought to be absolute in states like Arizona.  However, this enhanced protection is now being eroded by developing case law, and even in an LLC-friendly state such as Arizona the yellow flag of caution must be out for a Single Member LLC (SMLLC) as protection of its assets from its member’s creditors.

The Battle Between Creditors and SMLLCs

In the 2003 Colorado bankruptcy case Ashley Albright, the Court allowed a bankruptcy trustee to stand in the shoes of the debtor and control the assets of the debtor’s SMLLC.  First thought to be an aberration limited to its facts, in fact that decision was correctly decided and a warning to all SMLLCs.  The true lesson of that case is stay out of bankruptcy court if you expect to protect the assets in a SMLLC because the bankruptcy trustee steps into the place of the debtor and can control the assets inside the SMLLC if there are no other members to protect.

Then in 2005, in an Arizona bankruptcy case case, In re Ehmann, a decision since vacated when the parties settled, Judge Haines articulated a theory that if a limited partner had a passive role in the governance of a family limited partnership, the bankruptcy trustee could under some circumstances succeed to the interest of the debtor limited partner, formulating a theory about the impact of the executory nature of the limited partnership interest.  While not particularly interesting because it broke no new intellectual ground –the bankruptcy trustee always had that bundle of rights, the case is interesting and instructive because the general partner governed the limited partnership to the detriment of the bankruptcy trustee giving rise to a right to dissolve the partnership and reach the underlying assets, the case is nevertheless instructive.  The case is important because it is the vanguard case signaling that the remedy of judicial dissolution can be used by creditors in a variety of circumstances where no other remedies exist.

The next important case is the recently published Florida Olmstead case where the Florida Supreme Court failed to decide the question certified to it by the Federal District Court about the remedies available against a SMLLC, but rather held that a charging order was not the exclusive remedy against a single member limited liability company because single member limited liability companies lacked other members whose interests needed to be protected.

The Florida Supreme Court refused to interpret the state statute and instead chose to fashion a remedy designed to protect creditors against artificial barriers in collection procedures.

It has been suggested elsewhere that a strict reading of exclusive remedy statutes (such as the one in  Arizona) invites judicial activism to shape remedies as did the Florida Supreme Court which has now given it’s imprimatur to the creditor friendly theory.

Arizona-Specific SMLLCs

Although SMLLCs are good asset protection entities protecting a member’s other assets from claims by creditors of the SMLLC (commonly called inside out protection), even that protection is limited if the member has signed a guarantee or can be held directly responsible as the actor giving rise to the claim.

The importance of the omission in Arizona law of the right to foreclose the charging order means a judgment creditor is entitled to a lien against a member’s interest in an LLC, but the creditor is only entitled to receive distributions that would otherwise be made to the member.  If the LLC makes no distributions, then the creditor receives nothing except the satisfaction of making life difficult for the debtor.  In states that follow the Uniform Laws or have their version of the charging order statute, the creditor may foreclose its lien on the member’s interest and force its way into the governance of the LLC; this is not the case in Arizona.

In single member limited liability companies, this means the creditor may have an absolute right to distributions from the SMLLC, but the debtor retains control over the assets of the SMLLC and the timing of distributions.  This is a most undesirable result from the point of view of the debtor.

What Does This Mean For You?

The battle will continue over the distinction between economic rights and governance rights in SMLLCs. How much deference to a plain reading of the statute can asset protectors expect from judges in cases with difficult fact patterns will continue to present a quandary to most.  Practitioners have long argued peppercorn theories of additional members, but the modern genre of reverse piercing and judicial dissolution arguments in an increasingly hostile judicial environment require you to stand up and take notice rather than relying only on statutory constructions.  It will be increasingly important that documents are well drafted in a state with favorable laws and that the ownership and governance provisions of your operating agreements be given particularly attention to achieve your specific goals.  Most importantly specific facts must be analyzed because beginning with the best structure is the key to long term success.

If you think a custom crafted LLC will benefit you, give me a call.

Back to School – Is Your College Freshman Prepared?

Ah August! Although I was born and raised in the east, where fall was after Labor Day and the beginning of the new school year was signaled by the turning of the leaves; here in Arizona the temperatures are still in triple digits when the school year begins, and the only sign that a new school year is beginning is the incessant back to school ads that flood the airwaves.

If your baby is headed off to college for the first time then this season marks more than the usual turning of the calendar.  Aside from the cost and confusion of tuition, buying books, and arranging room and board, this rite of passage can be exciting and costly.  Many parents will experience amazement when they see how much stuff can fit into a dorm room, and how much electricity can be consumed by two new freshmen. Consider that when I entered Newman Hall in Blacksburg VA in the fall of 1968, the only plug in appliance in my room was a bedside lamp – even the essential alarm clock was a wind up Westclox!  One phone booth at the end of the hall served 120 men, and the highlight of every day was hanging out in the basement while the mail was sorted – our only communication with the outside world.

How times have changed!  In doing research for this article I was amazed to see how many online freshman checklists were available—there’s a list for everything: what clothes and amenities to pack; what furniture to bring; how to save on books; how to keep in touch with friends.  There’s even a planning calendar to help organize the brave new world of your college freshman!  However, what I did not find in all my searching was a list of the simple legal steps that are essential to keep your “baby” protected now that he is 18 and on his own in the eyes of the law.

Your son or daughter’s 18th birthday marks an important turning point in their life—and in yours.  You may still be fiscally responsible for them, but legally your child is now independent, and you will no longer legally be able to access their medical records or make emergency decisions for them without their permission. Although purchasing college health insurance may already be on the top of your “to do” list, a robust set of powers of attorney should not be overlooked. It’s time for many of the traditional “leaving the nest” conversations, but none is more important than the conversation about who will have the necessary legal authority to act on behalf of your young adult in an emergency.

In the (apparently) grand tradition of helpful college advice, I’ve created a checklist of my own to help parents of newly-minted 18 year olds ensure that their child will be legally protected while they’re off at college.  (You can read or print out the checklist for free by clicking here: Free Legal Checklist for New College Freshmen) The checklist includes such things as: make sure you are listed as an ICE (In Case of Emergency) contact in your child’s cell phone, and be sure you have a comprehensive health care power of attorney that includes a HIPAA release form so that you have access to medical information if something happens.  You may also want to consider purchasing a Docubank™ membership for your college student (the link shows you the complete services available for college bound children) after getting the proper documents prepared and signed.

At my office I provide counseling about health care, mental health, and financial powers of attorneys for college bound students, as well as a conversation about the importance of living wills—my door is always open.  Besides giving you peace of mind about being prepared and avoiding problems in the event of a medical emergency, this is also an excellent opportunity to introduce your child to the responsibilities and obligations of adulthood.

If you have a college bound student, please check out our Free Legal Checklist for New College Freshmen.  And if you know someone else with a college age student, please forward this on to them.

It’s an awesome world out there, send them out there prepared!

Posted in News and Current Events on August 18th, 2010 · Comments Off on Back to School – Is Your College Freshman Prepared?

Why Your Estate Plan Is Out of Date

Like most estate planning lawyers, all through the first decade of the 21st century, I thought we would not see a return to the $1,000,000 exemption.  As a consequence, the excellent estate plans I’ve been drafting for the past 9 years are now out of date. Under the new and unexpected tax laws these plans simply won’t provide the protection for which they were designed… unless they undergo an update process.

Now, all is not lost. The trusts my firm created are still solid trusts, and for married couples will continue to shelter the maximum amount of assets from estate taxes; but the flaw is that very little attention was paid to what happens to estates greater than $1,000,000, but less than $3,500,000 ($7,000,000 for married couples).  Most families with assets valued in that range (including retirement accounts and life insurance proceeds payable on death) needed no or very little estate tax planning.

However, it appears likely that the exemption level will remain at $1,000,000 beginning in 2011 with no relief in sight.  Even into the first quarter of 2010, most commentators thought Congress would act, but despite frequent news from Washington about the changes, knowledgeable commentators now almost unanimously believe there is no change coming in the foreseeable future.

More important than listening to pundits, however, is looking at the law; and right now the law is that everything transferred as a result of your death will be subject to a 55% estate tax.  I am ethically bound to inform you of the law as it exists and morally obligated to offer you reasonable solutions to potential problems.  Almost all of my clients believe paying 55% of the value of their assets over $1,000,000 is an unacceptable result.

That’s it in a nutshell.  You have a beautiful estate plan drafted using the best tools available at the time of the drafting, but the planning is going awry due to unexpected conditions, and you should act now to protect your assets.

What can be done?  There are numerous tactics and strategies available that can provide you some protection.  Purchasing life insurance, if you can, is one, and a more aggressive gifting program is another.  Integrating the ownership of your assets with the next generation is another good strategy.  Each of these suggestions, and all others, have an actual economic or social cost associated with them—It is up to you to decide what to do.

Clients participating in my annual maintenance program (soon to be retooled as the Family Protector Program to better describe the reason why such a program is necessary) will hear more about these solutions when you meet with me.  All others (or if you don’t want to wait) call me now for a discussion about these issues.  It will be an hour well spent.