Mark A. Bregman, Estates and Trusts Lawyer


End of the Year Notes – Gifting

Much has been written about strategies for taking advantage of the historically unprecedented $5,120,000 exclusion from gift taxes that is available for gifts during 2012.  Time is running out on the ability to make and document such gifts before the end of the year.

Of course the furor is all about what happens if the Bush era tax cuts expire and the estate tax exclusion amount goes back to $1M and the opportunity to get an additional $4.12M out of the estate and gift tax system is lost.

There are several strategies available that address the concerns, but factors to consider include

1)      Do you have sufficient wealth that you can afford to give away assets of that magnitude?

2)      After making the gift, will you have enough cash flow to be comfortable?

3)      Do you have assets to give away that are not highly appreciated; and if so, is there an alternate strategy that will work for you?

Giving away $1M does nothing to improve your tax situation.  Because of the uncertainty about what the tax laws will be, it is not clear that giving away even $3.5M will help.  This is a strategy that works best at the maximum level and at best is only neutral at the $3.5M level.  It is also a strategy that must be careful designed and carried out.

Most plans will require a formal valuation of the gift property, mindful analysis, and careful implementation.  If you need help working through the analysis, call me now.

Next week, I will explain the mechanics of the coming changes to capital gains tax and the medicare surcharge and why it is tax efficient to harvest capital gains before the end of the year.

Posted in Personal on November 19th, 2012 · Comments Off on End of the Year Notes – Gifting

Planning for After the First Death

A comprehensive estate plan includes understanding what steps will be required when you or your spouse dies.  Tax planning advantages and the intended distribution of wealth to your loved ones takes place in stages and certain opportunities will be lost unless the proper plan is in effect when the first spouse passes away.  This posting describes what steps are necessary after the first death.  Next week’s posting will describe how a comprehensive plan works through the life of a couple, the death of a spouse, and finally the death of the surviving spouse.

The estates of the first spouse to die often avoid probate.  Unless properly planned, the ease of the first transition may lull loved ones into a false sense of comfort that may surprise them upon the second death.  This may be especially true since 1/1/2011 when the new concept of “portability” was introduced allowing properly administered estates less than 10 million dollars to avoid estate taxes altogether.

Even with lack of proper planning many spouses may avoid an estate administration if the value of their estate is less than 10 million dollars.  Real property and accounts may be in joint tenancy or community property with rights of survivorship and life insurance, annuities, and retirement accounts may designate the surviving spouse as the death beneficiary and the surviving spouse may do nothing because there just doesn’t seem to be a need for it – the surviving spouse has complete access to everything and may not appreciate the need to administer those assets.

The recording of a death certificate and notification of the custodians of any policies, contracts, or accounts may be sufficient for the surviving spouse to gain control over all those assets.  Yet a gaping hole has been created unless the surviving spouse takes care to name new beneficiaries of retirement accounts that are retitled in the surviving spouse’s name (a “spousal rollover”) and have a Will or Trust which designates who inherits upon the death of the surviving spouse.  If the decedent has begun taking minimum required distributions, a minimum required distribution must be taken in the year the decedent dies, if none has already been taken.  There are substantial penalties for failing to take that minimum required distribution.  Taxes must be paid on the distributions taken either by the decedent or the beneficiary.

Failing to record a death certificate may cause delay later when trying to sell or transfer the property after a second death.

Accessing accounts after the second death when the first decedent’s name has not been removed may also cause delay and unnecessary expense.

In order to claim the benefits of “portability,” a timely estate tax return must be filed even if no tax is due.  This will be particularly important if the estate tax exemption amount returns to $1,000,000 on 1/1/2013 as is presently projected.

Failing to establish the credit shelter trust provided for in most good estate plans may be an expensive mistake.  It is a mistake of good faith if only estate taxation is considered, but other considerations such as how the children of blended families are treated or how the assets are protected from creditors are non-tax reasons to be concerned about the AB division in addition to the lawful avoidance of estate tax.

I recommend a legal checkup after any death just to be sure loved ones have good advice and guidance about how to proceed.  I like to create a customized checklist for the family of every decedent so they know when the administration of the estate is complete.

If you or a friend wants help understanding the legal process either before or after death, please call me.

Observations From the Trenches: Logical Estate Planning

Over my many years practicing law I have become a niche lawyer concentrating on estate planning. A growing part of my estate planning practice involves administration of trusts and estates. An inevitable part of trust or estate administration is resolving contested matters. Unhappily, a large number of those disputes become litigated matters instead of models of dispute resolution. Worse yet, if the patriarch or matriarch is still alive they are often heartbroken when their children cannot agree about basic issues facing the family.

As I enter my 32nd year of practicing law, I realize my clients value my common sense experience just as much as my legal technical expertise.

As a result I no longer tell people I “prepare wills and trusts” because I realize the will, trust, or power of attorney is only a tool. I seldom see disputes or problems with documents, but I often see disputes or problems because assets are not properly titled, beneficiary designations are not up to date, or the chosen role players are not adequately equipped. A better answer when I am asked what I do is to say that I am a problem solver; I am a family lawyer, I am an estate lawyer focusing on the affordable and efficient transition of wealth and values in an environment that protects loved ones from the problems that come with inheriting money.

I have become a bore to many of my clients, financial planners, and others because of my obsession of putting my clients’ financial affairs in order before they reach the point in time when they can no longer do it themselves because of death or diminished capacity or ability. It is not a simple task and I force everyone connected to the plan to stop making assumptions and actually prove to me that everything is in order.

I have banished from my office the idea that anyone can take an action that gets work off their desk without being able to explain how the step taken moves a problem one step closer to resolution. Each day, I tackle the most unpleasant problem on my desk first to be sure I can clear my head. Seldom is the least pleasant also the most difficult or most important; often it is the longest neglected or the most time critical.

To me, these thoughts have become the logical basis of my philosophy of helping clients. Taking to heart my 2 favorite mottos – “begin with the end in mind” (from Stephen Covey’s 7 Habits of Highly Effective People) and my favorite Eisenhower quote – “plans are useless but planning is indispensable,” I clearly see the mission I must accomplish for my clients.

If you have not been in to see us for awhile, call us today to ensure that your family affairs are in order. We will work together until we have a high degree of confidence that your estate plan will work as intended in as many different scenarios as we can reasonably envision. If you are not yet a client and you would like to see this planning in action, call me and I will send a “Welcome Kit” to start you on our journey together.

Confessions of an Estate Planner

Do I provide what my clients really want?

It has been suggested that estate planning lawyers rely too heavily on what they think clients want, providing services that are the easiest and most economical to give, rather than listening to what our clients really want.

As a result we give our clients hefty estate planning binders containing long documents covering every imaginable situation, and lengthy instructions that give our clients the impression that this work is too complicated for anyone other than professionals, so they need to come back to us to interpret the documents we prepared for them.  But as important as they are, revocable living trusts, pourover wills, financial durable general powers of attorney, health care powers of attorney, living wills and an assortment of related documents are all simply tools of the trade.  They should not be the end result.

I’ve met many people who tell me they have a great estate planning attorney, but I’ve met very few who can tell me why they think so.

I’ve been an attorney since 1979 and have concentrated on advanced estate planning techniques and strategies since 1998.  I have litigated contested probate cases that go awry when the planning fails.  And I have testified as an expert witness on trust matters that almost always arise because the lawyer did not adequately listen to the client’s needs and desires.  The listening failure often occurs because the lawyer failed to ask the right questions.  I’ve interviewed many clients, and I bring my unique experience to each client experience; yet I still find the most difficult part of my job is getting clients to express what they really want.

Right now I want to rededicate myself to creating estate plans that work.  To me, a good plan is one that accomplishes my client’s objectives in a cost efficient manner.  Cost efficiency means avoiding as much estate tax, administrative expenses, and legal fees as possible. It begins with the initial client meeting and isn’t finished until the assets are safely distributed as desired by my client.

I believe the process must begin by intimately knowing what my client owns and values, how each family dynamic works, and my client’s hopes, dreams, and aspirations for how these assets accumulated over a lifetime can be used to assure the comfort of my client, the future success of my client’s descendants, and the support of my client’s favorite causes.

Although a good clear set of documents is a necessary tool, establishing a strong ongoing relationship is even more important, and the linchpin to any successful plan. If you are relieved at “completing” the estate planning process merely because you sign your documents, but don’t identify your estate planning lawyer as among your most trusted advisors, I haven’t done my job.  If you sign a will or trust and then check it off your to do list to never think of it again, then I haven’t done my job.

However, if you are able to think about your estate plan without becoming melancholy, then I have done my job.  If you relish knowing you can call me whenever you have a problem, without fear of the “meter running,” then I have done my job.

These are a few of the things I believe go into a good relationship.  Now I’m interested in what you want in a good client attorney relationship.  I’m listening; please share your thoughts with me.  Your comments will help me be a better advisor for all of you.  I look forward to hearing from you online or in person.

A Brief Respite and Some Insight

Gardens at the La Posada Hotel

A few weeks ago I was able to check off an item from my Arizona historical tour “bucket list” when Sandy and I spent the night at the La Posada Hotel in Winslow Arizona.  A short block from where the hitchhiker in the Eagles’ classic Take It Easy saw the girl slow down in the flat bed Ford, this renovated Fred Harvey hotel (servicing the Santa Fe railroad that first opened in 1930 and closed in 1957 before being renovated beginning in 1997) is a delightful summer getaway if you are an Arizona history buff.  Fully refurbished in the original style with the fabulous Turquoise Room restaurant, interesting art, a plethora of old photographs, I thought about life in the thirties and how my descendants will think about life in 2010 around the turn of the next century.

We completed our day by visiting Bearizona, a drive thru wild animal park 80 miles to the west in Williams, Arizona.

During this trip I saw the old and the new stand in stark contrast, and my thoughts turned to how to structure estate plans that will also span the generations.  I wonder if La Posada’s architect, Mary Colter, was thinking about 2010 when she began designing this hotel in the 1920s.  How amazing to construct not a building but an idea; one that survived the Great Depression, the complete renovation into offices for the railroad, and an attempted demolition, only to stand once again among the crown jewels of Arizona history and the Americana of historic Route 66.

If I can help my clients create such a lasting legacy I will be proud.  The best part is that although it’s not easy to project what your descendants will be doing in 90 years, it is absolutely possible to create a plan that can last such a length of time, especially here in Arizona. Arizona’s rule against perpetuities now allows trusts to be created with a life span of 500 years!  Where were your ancestors in 1510?

Creating a trust plan that might last even 100 years may seem like a Herculean task, but it is the long range plan that gives shape to the next generation and the generation after that, and that will free us from the mundane and help us focus on our enduring values.  I think it will benefit our children to know that the money and values they inherit are not necessarily for them to spend, but for them to grow and pass on.  May each generation surpass the last, and each succeeding generation be better than the last in every way.

I look forward to helping you focus on value based planning.  If you are a current client and already have a long-term plan we’ve created together, I hope you will pass this along to someone else who you think might enjoy seeing the big picture.

Taking Time to Stop and Smell the Roses

(You may have noticed that our site was recently attacked by malware.  My team has diligently worked to remove the offending virus and added new software to protect against a recurrence of such attacks.  I hope you will enjoy our once again virus free website.)

Sandy and I recently took a rare weekend off and spent a couple of days in Del Mar where we spent some time attending an estate planning conference, but mostly we enjoyed the sunsets and the good food at Jake’s on the beach (probably our favorite place to have good food and people-watch) near downtown Del Mar.   A wonderful eclectic mix of old and young California families were picnicking and surfing.  There truly was something for everyone—as typified by Sandy wearing both a jacket and a sweater as protection against the cool ocean breezes while I reveled in my shorts, tee, and sandals thinking of the 115 degrees back in the Valley.

Watching families in Del Mar—an old established community that remains vibrant with people of every age—playing, shopping, eating, and just enjoying themselves, always reminds me of the importance of the generations and the estate planning that I do.  Although adherence to technical standards may be the sine qua non of my practice, it is the assurance of family legacies and their accumulated wealth that is the reason for what I do.

On the return trip Sunday, we took a scenic inland route up to Indio through horse and farm country far different than the opulence of the coastal communities.  The sense of hard work emanating from the scenery, the small businesses, the communities dedicated to ranching and farming reinforced my own dedication to making sure that I remember why I do what I do.  It was every bit as intoxicating as the cool ocean breezes.  Two lane country roads running through a different California than viewed from the freeway, yet co-existing with the bustle just a few miles away, is a metaphor for life and the differences each of us bring to our relationships.

I returned to work refreshed and ready to tackle the problems of the day with a renewed vigor and a fresh perspective.  Our trip was a much needed holiday for which I am truly grateful.

Posted in Personal on July 22nd, 2010 · Comments Off on Taking Time to Stop and Smell the Roses