Orlando Estate & Elder Law

Be Wary of Probate Scare Tactics - It Could Be a Scam

Many seniors in the U.S. fall victim to living trust scammers who scare and intimidate their victims into purchasing worthless, unnecessary trusts. Seniors need to know what to look out for to avoid being victims.

Going through probate can be burdensome on an estate. The estate tax can devastate the wealth of estates. Both of these are true statements. However, it does not follow from those statements that everyone should seek to keep their estates out of probate and use estate planning tools designed to get around the estate tax.

Most smaller and less complicated estates will have little difficulty with probate. Estates valued at less than $5.45 million are not subject to the estate tax, which is the overwhelming majority of estates in the U.S. Despite these facts many so-called living trust companies try to scare seniors into purchasing their products.

These companies pressure seniors by inflating the horrors of probate and the estate tax. Seniors who purchase these products often find out later that they are worthless and do not perform as claimed.

Recently, Business in Savannah offered some advice to seniors about avoiding these scams in "Seniors vulnerable to scams on trusts."

The advice includes:

• If you do not understand the terminology of a document, do not sign it.
• Pressure tactics such as limited-time offers and numerous phone calls are a sign of a scam.
• If a living trust company tells you that it is affiliated with a national organization, verify the affiliation independently.
• If you do sign something and have second thoughts, by law you have three days to cancel a living trust deal if you purchased it outside of the company's regular business office.

Seniors who are worried about the estate tax or probate should take matters into their own hands by contacting an experienced estate planning attorney and getting real advice.  If you have any questions about whether or not a trust is right for you, please contact my office for a consultation.

Reference: Business In Savannah (Feb. 24, 2016) "Seniors vulnerable to scams on trusts."

Living Trust Tips for Central Floridians

People looking to avoid probate are often advised to create living trusts. The trusts can be excellent instruments and it is important to know what assets to put into them and what assets to leave out.

Probate avoidance is an important goal in many estate plans. While there are many techniques and legal instruments that can be used for the purpose, living trusts are the most popular instrument to avoid probate because of their flexibility and ease of use.

Despite that ease of use, people often get tripped up. They are totally unaware of what must be done so the trust works as intended.

The Wills, Trusts & Estates Prof Blog recently offered some advice about this important step in "Tips To Estate Planners To Avoid Probate With Living Trusts."

The tips include:

• Trusts can only be used to avoid probate when assets are transferred to the trust. That means that ownership must be transferred from the individual to the trust.
• Some property might be exempt from probate by state laws. Accordingly, it is a good idea to check the laws in your state. For example, if cars are exempt from probate in your state, then there is no need to transfer ownership of them to a trust.
• Retirement accounts do not need to be transferred to the trust. By law they will pass to the named beneficiary. Just make sure that the beneficiary designation is up to date.
• Get advice on trust creation from your estate planning attorney and accountant to ensure all relevant issues are addressed.

Please contact my office for a consultation to talk about the issues related to your own estate plan and goals.

Reference: Wills, Trusts & Estates Prof Blog (Jan. 9, 2016) "Tips To Estate Planners To Avoid Probate With Living Trusts."

Sting and Warren Buffett Sing the Same Tune

From shirtsleeves to shirtsleeves in three generations, goes the early 20th-century American proverb. Then there's the 19th-century British version: Clogs to clogs in three generations. And from Italy, date uncertain: From the stable to the stars and back again. You'll find similar sentiments in almost every language, all expressing the same thought: It's nearly impossible to pass on family wealth and have it last beyond your grandkids. Statistics back up the folklore. Studies have found that 70% of the time, family assets are lost from one generation to the next, and assets are gone 90% of the time by the third generation. That's because a crucial element of successful inheritances is often neglected. Traditionally, the focus has been on the givers of wealth, but it should rather be on the receivers. Investing assets wisely and crafting a good estate plan are crucial to success, but so is preparing the heirs. "Estate planning is a process to transfer wealth, but it doesn't help the family develop an infrastructure to sustain it, or keep the family unified from one generation to the next," says Debbie Dalton, a Bay Village, Ohio, resident, whose family is learning how to successfully steward the wealth that her father, a chemical engineer, amassed as founder of cryogenic equipment maker Chart Industries.

The recent article in Kiplinger's Personal Finance, "5 Strategies to Keep Your Heirs From Blowing Their Inheritance," explains that preparing the next generation has a lot to do with financial literacy. In addition, it means passing down and putting into practice values that will sustain your family as well as your fortune. A successful inheritance requires parenting and money management – regardless the eventual estate size.

There are a number of challenges that come with a family windfall. Inheritors can lack self-esteem if they suspect that their success stems from their inherited wealth instead of their own efforts. Or they may feel guilty and have trouble accepting good fortune that wasn't earned, and their emotional development can be delayed if they never have to face important life challenges. They can get bored, which puts them at risk for substance abuse or other self-destructive behaviors. Lastly, heirs can get frazzled with too many options or be paralyzed by a fear of losing their wealth.

It's no wonder that rich folks like Warren Buffett and Sting have said they will "spare" their children from inheriting fortunes. They're going to give most of theirs away or spend it. Buffett said the ideal inheritance for kids is "enough money so that they would feel they could do anything, but not so much that they could do nothing." Sting told Britain's Daily Mail last year, "I certainly don't want to leave them trust funds that are albatrosses round their necks." But that attitude is rare among wealthy parents. Most parents don't want to disinherit their kids, but they want a game plan that will not only keep the family assets intact but also keep the kids grounded, healthy, and productive. There are programs to help prepare the next generation for the riches they'll inherit that are more than just money managers' advice.

Get over the money taboo. Family finances are often an unpopular topic of discussion, particularly when the parents think that family wealth might spoil their kids. Young people without preparation who suddenly come into a trust fund when they turn 21 or if both parents die in an accident can go totally out of control, just like some lottery winners. (The same goes for spouses.)

Heirs who are not ready frequently believe that their parents thought they were incapable of handling the information or couldn't be trusted with it. Be up front about the wealth you have and your plans for it.

Embark on a mission. Make sure your legacy is about more than money. Try writing a mission statement, and have family members write down the values they want to emphasize in their lives, such as education, philanthropy or self-sufficiency. This helps the family identify the long-term purpose of their wealth.

Raise money smart kids. Teach kids from an early age about budgeting and saving. Get kids a piggy bank with three slots or three separate piggy banks—one for spending, one for saving and one for giving. Tell grandparents who like to give cash to make them in multiples of three. In addition, allow older kids to budget an allowance to cover their expenses. That means looking at the monthly average spent on his or her car insurance, cell phone, and other "essentials." Give them an allowance to pay those bills. Without a budget, kids won't learn to prioritize or make decisions about money.

Give Your Kids "Financial Training Wheels." Don't wait and withhold all access to the family fortune in order to preserve it. Seed an investment account when children are in their late teens and let them make investment decisions and agree to match a percentage of the returns earned over a specific time period. The child can withdraw money from the account, but the parent can't add to the principal, which will teach them about investing and spending. It will also show them the power of compound growth as well as the opportunity cost of robbing a nest egg.

Assemble a good team. In addition to an experienced estate planning attorney, bring in mentors for the next generation, such as board directors and other successful businesspeople. This de facto advisory board is nice when your kids' friends and classmates start asking them for contributions to investment schemes or business start-ups. They want to help their friends, but the best way is to defer… so if the committee says "yes," they're a champ. But if it's "no," then it's not his fault.

You'll have the best chance of preserving both your wealth and your family with a multigenerational effort that starts when your kids are born, not when you die.

An experienced estate planning attorney can help guide you throughout.  Please get in touch with me if you would like a consultation about your estate, no matter how large or small.

Reference: Kiplinger's Personal Finance (November 2015) "5 Strategies to Keep Your Heirs From Blowing Their Inheritance"

Which Type of Trust is Right for Me?

Trusts can be a great way to update an estate plan, whether within a will or as a separate estate-planning tool. Trusts have a reputation for being something that most people don't have to worry about, with most seeing a trust as a vehicle for the ultra-rich to protect their assets from taxes and other financial threats. In reality, though, trusts are tools that just about anyone can use to achieve worthwhile financial goals. Still, the legal complexity of the estate planning world has left many people uncertain about what a trust is, let alone how to use it. Let's take a closer look at trusts to try to answer the question of what they are and how they can help you and your family.

In “What Is a Trust, and Why Should I Have One?” Fox Business explains that in legal terms, a trust lets an individual separate the legal ownership of property from the beneficial enjoyment of that property. A trust places the responsibility for managing and preserving trust property on an individual or entity (“the trustee”). The beneficiaries receive the trust assets based on the terms of the trust. There are many trusts available to serve many different goals. The article discusses some of these trusts and how people use them.

Revocable trusts are also known as living trusts. The creators of this trust can ensure the proper management of their assets during their lifetime and after they pass. A revocable trust can be changed at any time by the creator. However, instructions in the trust document tell the trustees how to act after the creator’s death. Revocable trusts are used in estate planning to pass assets to heirs in private and to avoid probate, which can reduce costs and stress.

Testamentary trusts. These are created in a person's will and they don't keep the assets out of probate. A court proceeding is required to fund the testamentary trust. Testamentary trusts provide flexibility.

Irrevocable trusts can be used to make gifts that allow subsequent protection from creditors and estate taxation. These trusts are typically created to hold high-value life insurance policies and keep the insurance proceeds out of the taxable estate of the insured person. The trust language can state that any trust money used for the beneficiary won't run into issues with Medicaid and Supplemental Security Income.

Charitable trusts, as the name implies, allows an individual to make a gift to charity but retain an interest in the donated property. Charitable remainder trusts will let you keep an income stream that continues for a specific time or for the rest of your life—the charity will receive any remaining funds at your death. These trusts provide income tax benefits from the value of the donation, even though you still receive income from the trust assets.

Other trusts are used for estate planning purposes, such as credit shelter trusts. These are used to preserve the estate tax exemption of a deceased spouse for future use. A Qualified Terminable Interest Property trust, or QTIP, gives a spouse access to funds while preserving their eventual distribution to children or other heirs. Finally, a Qualified Personal Residence Trust, or QPRT, lets you transfer an interest in your home to family members while you are still alive in a way that reduces gift and estate taxes.

All of these trusts have the same benefit: guaranteeing that your assets will be used to meet your wishes and provide income for you and your loved ones. If you still have questions or are just curious, consider a consultation to see if you can benefit from establishing a trust for yourself or your family.

Reference: Fox Business (September 7, 2015) “What Is a Trust, and Why Should I Have One?”

Your Wanted Information on QTIP Trusts, Didn't You?

The facts of life include remarriage. Almost 42 million adults in the U.S. have been married more than once, up from 22 million in 1980, according to the Pew Research Center. For older Americans, remarriage can pose estate planning problems. Even for couples who share children, potential remarriage might be a concern. And even if remarriage isn't a concern, your surviving spouse may need help protecting assets from scam artists. So how can you provide for a surviving spouse yet still leave your wealth to children from a prior marriage?

Let’s say that Betty and Bob have kids and grandkids. Bob is worried that he'll die first and pass on his wealth to Betty, who might remarry and his kids would get nothing. Investor’s Business Daily explores this issue in “Cut Taxes, Send Assets To Loved Ones After Your Death.” One solution is to create a Qualified Terminable Interest Property, or QTIP trust, so that when the first spouse passes away, the assets pass to the trust.

A QTIP typically doesn’t have estate taxes. The surviving spouse must be a U.S. citizen and must be entitled to all of the trust income, which has to be paid out at least once a year during the survivor's lifetime. No one else can receive trust distributions during that time. At the same time, the trust creator can give the trustee some flexibility: the distributions of principal to the survivor might be allowed to pay living expenses and essential medical bills. However, the surviving spouse may not control the QTIP assets.

Here’s another example: What if Carl marries Ella and each has children from a prior marriage. Carl passes and leaves most of his wealth to a QTIP trust for Ella, so that she will have cash flow for life. She’s not allowed to name new beneficiaries who'll get the QTIP assets after she dies. The QTIP assets will pass to the beneficiaries that Carl named, and those assets will be taxed in Ella's estate. Both spouses can create QTIP trusts.

The trust creator has to authorize his or her personal representative to finalize your QTIP election after your death, and federal and state elections may have to be made to get full estate tax deferral. An estate planning attorney knows all about this. It’s important that your family understands the QTIP’s goals to alleviate conflict after your death. The QTIP allows your spouse to have lifetime distributions to maintain his or her lifestyle, and your children will inherit your wealth without having to worry that a stepparent will spend it all after your death.

But a QTIP trust may be a source of conflict, as the surviving spouse may want the trust fund to be invested for income, and the survivor can actually demand that the trustee sell assets that don't produce revenue. The children will likely want the QTIP assets invested for growth. You need to select a trustee who can negotiate peace among beneficiaries. Tax deferral may also mean inheritance deferral, because if your spouse lives a long time after your death, your children will have to wait for a QTIP payout. Consider making some assets available for immediate bequests to descendants, or to provide for them with life insurance that will pay at your death.

If you would like some guidance in navigating these choices and putting  your own plan in place, please visit my website or schedule an initial consultation.

Reference: Investor’s Business Daily (September 4, 2015) “Cut Taxes, Send Assets To Loved Ones After Your Death”

Planning For Your Pet … Ruby's Favorite Topic

We love our pets. Nearly two-thirds of all Americans have a pet, and among those who do, nearly 70% have a dog; 50% have a cat; 11% have fish; 8% have birds; and 7% have horses, rodents or reptiles. Nearly 90% of all pet owners consider their pets to be part of their family, and in some cases, their pets are their only family. Many pet owners, however, are unaware or uninformed as to what might happen to their pets should they die or become incapacitated. Traditionally, a legal obstacle to leaving money to care for pets, both during life and after death, was common law. Pets had been treated historically as personal property and therefore could not own property in their name – nor could they be beneficiaries of a trust. That began to change in 1990 when the Uniform Probate Code was amended to recognize the creation of Pet Trusts, and states began to enact pet trust laws that govern in the event of an owner’s death or disability.

The Naples Daily News recently published an article, “Pet Trusts Gaining Popularity.” The article describes how the state of Florida enacted laws that authorized the establishment of pet trusts in 2003. These rules allow for people to provide for the care and maintenance for the lifetime of their pets.

Now almost every state recognizes these trusts (which vary in each state). A named trustee will typically be responsible for the investment, management and distribution of the trust assets. Another individual is named to avoid conflict of interest as the pet’s caregiver. The trust will include details for caregivers, medical needs, and the final arrangements for the pet’s death.

However, Internal Revenue Code typically doesn’t recognize pet trusts, as an animal isn’t a “person” by definition. The trust wouldn’t work because it doesn’t have a legal "beneficiary.” Nonetheless, the IRS does recognize pet trusts for tax purposes.

If the trust is validly established under state law, the assets passed to a pet trust are included in the decedent’s gross taxable estate. But no part of the assets qualifies for a charitable deduction—even if the remainder beneficiary after the passing of the pet is a qualifying charity.

Please come in and speak to me if you are concerned about your pet and how estate taxes and other expenses attributable to the trust will need to be considered when drafting a pet trust. Planning for your pets can be an important part of your estate planning process. Make sure that all members of your family—including your pets—are cared for in your estate plan.

Reference: Naples Daily News (August 17, 2015) “Pet Trusts Gaining Popularity”

Are Trusts Always a Good Idea?

To some estate planning attorneys, trusts are the default option. Their wealthy clients generally pass assets to heirs that way. Trusts can keep inherited wealth safe; assets left outright to individuals may be vulnerable to estate tax and divorce and creditors and scam artists. That said, trusts might not always be the best choice for wealth transfer. "I agree with the use of trusts, when appropriate, for significant asset inheritances," says Gil Armour, a financial advisor with SagePoint Financial in San Diego. "However, I have always been a fan of simplicity. An outright inheritance to an individual is much quicker, simpler, and doesn't require ongoing trust tax returns. Virtually every one of my clients has specified individuals as the primary beneficiary for their retirement accounts. They are confident that their spouse or adult child will manage the assets in a responsible fashion."

The website financialplanning.com posted a recent article, titled “Should Estate Plans Rely on Trusts?”, which explains that some folks use a living trust as a contingent beneficiary, typically when there are minor children. The trust will assign a guardian for the children until they are older. There are several reasons for using a trust as an estate planning tool, rather just using a will. Assets held in trust avoid probate at death, which is important in situations with property in multiple states. If a person passes away with property in a few states, probate in each state might be mandated.

Implementing a trust provides control for assets in the event of incapacity. A co-trustee or successor trustee will take over the management of the trust assets. Another nice thing about a trust is that it gives you maximum privacy, where a will is public record and open to all.

Trust language can be drafted to reduce or eliminate estate taxes, as well as to protect from divorce settlements and creditors. In addition, a trust can protect dependents with special needs. Ask your estate planning attorney about a special needs trust for your child with special needs—or about the other types of trusts that might benefit your circumstances.

An individual can use trusts in one of two ways. Some people will grant title assets to a trust while alive, and then the living trust terms will stipulate the distribution of trust assets at the grantor’s death. Other folks don’t have a standalone living trust; instead, they use a testamentary trust which is funded through a will.

Please set up a consultation and we can help you decide which way is right for you.

Reference: financialplanning.com (August 13, 2015)“Should Estate Plans Rely on Trusts?”

When Should I Trust a Trust?

While families are working on their financial plan, saving for retirement, buying a new house, or updating their insurance policies, all too often, estate planning is put on the back burner. Just as life happens, so does death. An unexpected death can result in a situation where the estate plan in place does not apply to the current situation, specifically when the age of the beneficiaries was not considered and minor children inherit money and property.

The Marietta Daily Journal’s article, titled “Using Trusts to Pass Inheritance to Minor Children”, explains that when a minor child inherits money or property, the probate judge will appoint a guardian to manage their assets. Typically, this property guardian isn’t the child’s parents or legal guardian, as it might been seen as a conflict of interest. One major issue that a property guardian may have to deal with occurs when the child reaches age 18 and receives their inheritance. Most 18-year-olds can’t handle a significant amount of wealth.

When you select a minor child as your beneficiary, consider placing those assets in a trust to keep him or her from spending foolishly. Trusts are simply a vehicle by which a person (the settlor or donor) transfers assets to a beneficiary (or beneficiaries). They receive the assets according to the trust document. A trustee manages the trust assets and enforces the terms of the trust.

Trusts also can transfer assets in installments or at a later date. For example, if an individual is too young or immature to deal with an inheritance. Trust assets can be set up to only be used for the health, education, maintenance and support of the beneficiary until a specified age so that the beneficiary can benefit for some time.

In addition, creating a trust and properly funding it before death will let families or individuals distribute property without a lengthy probate process. Estate planning attorneys can structure a trust to fit your family situation so that your wishes for the distribution of assets will be carried out efficiently.

Trusts are designed to help families address issues such as reducing estate taxes, avoiding probate court, or transferring assets. To structure a trust for your specific situation, why not schedule a consultation?

Reference: Marietta Daily Journal (August 14, 2015) “Using Trusts to Pass Inheritance to Minor Children”

Mistakes You Need to Stop Making Right Now Here in Central Florida

Estate planning tends to get pushed to the back burner, as more pressing financial tasks take center stage. But neglecting estate planning is a huge mistake. Estate planning may involve hiring an attorney or financial advisor, but plenty of people make the mistake of going about estate planning on their own. Some 38% of those with investable assets over $1 million haven't used a professional to help with their estate planning, according to a CNBC survey. "Most people don't want to think about dying," said Ryan Wibberly, CEO of CIC Wealth based in Gaithersburg, Md. "Part of your financial planning needs to include a discussion about the next generation and wealth transfer."

The Street’s “Mistakes You Need to Stop Making,” warns that this aversion to facing our mortality results in leaving a mess to our potentially vulnerable loved ones.

Here are a few mistakes to avoids, according to the article.

Mistake 1: Not Signing a Will

Even those who are proactive in their planning sometimes forget to dot the I’s and cross the T’s—some people, for example, write a will but never actually sign it! This becomes a priority only after a health crisis or another life change. That's risky! It’s really important to have a signed will in place before something urgent arises.

Mistake 2: Tax Faux-Pas

Federal estate tax laws exempt taxes on estates with assets under $5.43 million per person, but some people with assets less than the threshold think they're exempt from estate planning. Not so! There are a number of other benefits for estate planning. This includes avoiding financial disputes about the inheritance, protecting assets from creditors and lawsuits, and donating to charity. In addition, state estate tax is part of the process, too. Your state might have a much smaller estate tax exemption limit.

Mistake 3: Negligence/Being Out-of-Date

Failing to keep your estate plan up-to-date is another dangerous mistake. Make sure that you do a review with your estate planning attorney any time a major life event happens, for example, divorce, a death in the family or the birth of a grandchild.

For a local example, is your durable power of attorney compliant with the current statute?  To make sure you avoid estate planning mistakes of all varieties, contact my office for a consultation.

Reference: The Street (August 14, 2015) “Mistakes You Need to Stop Making”

Estate Planning Starts at 18 - Yes, 18!

Bobbi Kristina Brown’s tragic death offers a number of poignant end-of-life lessons for parents, young adults, and seniors alike. First and foremost, health and legal experts say Brown’s death spotlights the need for establishing written advance medical directives as early as age 18. These include the designation of a healthcare proxy, a living will, and a “HIPAA Release,” clearing the way for a healthcare agent to communicate with providers about the care of a patient who is in a coma or otherwise incapacitated. Such planning is typically viewed as a concern for older Americans, but younger people — like Brown — can also find themselves unable to communicate their end-of-life wishes as a result of accidents, brain injuries, infections, or other illnesses.

Last week’s NewsMax article, titled “End-of-Life Lessons of Bobbi Kristina's Tragic Death,” suggests that parents of college-bound freshman (18 and older) should think about having a healthcare designation, a living will, HIPPA release, and durable power of attorney prepared for the ‘new’ adult so that parents can act on behalf of their kids if the unforeseen occurs.

Bobbi Kristina was only 22 and the only child of the late Whitney Houston and Bobby Brown. She passed away after a very public six-month family fight over how to treat the comatose Brown, after she was found face-down in a bathtub in the Atlanta townhome she shared with her boyfriend Nick Gordon.

This story illustrates the difficulties families deal with when confronted with complex healthcare decisions. The article emphasizes the need to create advance medical directives to help family members of patients. These end-of-life instructions should be in a legal document, prepared by an estate planning attorney so that it satisfies the requirements of state law. The directives should include:

• A Healthcare      Designation. This is a very critical part of an      advance directive, as a “healthcare surrogate designation” or “healthcare proxy” names      an individual you authorized to make medical decisions for you, if you are      unable to do so on your own. This friend or relative is given what is also      called “durable healthcare power of attorney (POA).” This allows them to      speak on your behalf.
• A HIPPA      Release. This allows your agent to communicate with your healthcare providers about your care.
• A Living  Will. This formal statement communicates your   wishes for medical care should you end up in a “persistent vegetative      state” with little or no chance of recovery, and you can’t communicate   your wishes. Talk to an estate planning attorney as every state has its      own regulations for living wills.
• Treatment      Restrictions. You should spell out exactly the      circumstances under which you would want to have life-sustaining care or when you want to pass, many times with only medication for pain. Distribute   copies to your doctor, family members, and (if appropriate) close friends.      The article lists several specific treatments you might want to address:

• A Do       Not Resuscitate (DNR) Order. This states that you do       not want providers to perform extraordinary measures (like CPR) if your       heart or breathing stops.
• Mechanical       Ventilation. State when and for how long you would       want a mechanical respirator to take over your breathing.
• Nutritional       Assistance. Discuss your feelings about nutrition  if you could only be fed through an intravenous or stomach tube.
• Dialysis.       Kidney failure can be the first step toward death in   terminal patients. State parameters around which you would want this treatment.
• Brain       Death. State what you would want if your  brain function was deemed minimal or immeasurable.
• Organ       Donation. Make your wishes known if you want to donate  your organs and tissues for transplantation.

It’s no shock that end-of-life planning is a difficult topic to discuss. Just 26.3% of Americans have completed advance directives, according to a 2013 study. But as the Bobbi Kristina Brown case shows, it’s important and never too early to discuss this topic with spouses, family members, partners, adult children, and parents.

Please allow me to help with this delicate and important decision-making process.

Reference: NewsMax (July 31, 2015)“End-of-Life Lessons of Bobbi Kristina's Tragic Death”