Don’t Let Your Kids Get Caught in a Bureaucratic Snare this Summer

The extent to which we all have to jump through more hoops in life has expanded substantially over the past 15 years or so. You can easily test this idea by trying to use a financial power of attorney document at a financial institution, or better yet try to deal with someone’s IRA account using a power of attorney. Or, what if your child has to be hospitalized while out of town without you? Try to deal expediently with the HIPAA medical confidentiality rules, etc.

This post includes a sample “John Doe” authorization document (referring to Georgia law) for minor children who might travel this summer (or stay with relatives or friends) without their parents immediately at hand.  Click here for the sample pdf document. The hope, of course, is that no situations develop that require this document. But, taking a few minutes now to put the document in place could potentially help you and keep your away-from-home children from being caught in a snare (that you could have helped prevent).

The legal ethics rules require that I inform you that my blog is for marketing purposes and readers cannot rely on this blog post, nor on the pdf sample document, as legal advice from me or KaneTreadwell Law.   I recommend strongly you consult a lawyer for assistance with this pdf document if you wish to put it in place for your particular situation.

Here also is one of my previous blog posts on planning for our age-18 and over children, especially those off at college.  Click here.

Have a great summer.

I Revamped My View on Core Estate Planning

I try persistently in all aspects of my life and lawyering to test and challenge my assumptions and ideas.  Particularly in my law practice, I am open to self-criticism in order to expand my ideas and effectiveness as a lawyer.  I know fairly accurately what I do well;  I am more interested in learning and pondering what I do not do well, or what areas of change or improvement might work better for my clients, etc.

I spent years in the large law firm environment providing complex, trust-design planning for clients. I commented often at that time that putting clients in the most complex estate planning was easier than discerning more specifically what the particular client might not need. It was proper (and easier) in many cases to recommend for a wealthier client the broadest range of planning options, with much less need to stop, consider, and pick-and-choose, what might not be needed for the client. These are clients typically in the top 5-percent of net-worth, etc.

And for these wealthier clients, there were (and are) tax and non-tax benefits of placing those clients in the most complex planning available, including lifetime trusts, full GST (generation skipping planning, etc.), QTIP marital trusts, reverse QTIP trusts, defective grantor trusts, etc.

However, for the bulk of other clients not in the top 5-percent range, I now do not believe simply applying the all-complex approach is suitable. Furthermore, the more complex planning brings with it comparably more responsibility for the client to make sure he or she has named suitable advisors who will carry out the complex planning, including particularly the experience, skill, competency and trust of the named trustees, etc.

Bottom line, in all cases I do not recommend lifetime trusts for a client’s children when both parents die, unless there are specific circumstances that warrant the extended trust planning. What I recommend in many cases are lifetime trusts for the parents with thereafter an outright distribution to the children at age 30, but with the parents’ estate planning documents including — if later necessary — the power to make distributions in further (continuing) trust at the second parent’s death.

This later-trust feature provides an option to establish extended trusts for the children at that later time, if a child is under threat of divorce, lawsuit judgments, failed businesses, personal guarantee issues, etc. The key point is this trust decision can be made at that later time.

This later-trust feature also gives the children the responsibility of their own estate planning upon the death of their parents depending on the circumstances at that time. I, as a parent, believe that giving our children the power of independence and autonomy is a gift that goes well beyond a dollar valuation.

This simpler approach, however, of not using lifetime trusts for children does not eliminate a client’s need to review and consider the use of advisors and the naming of trustees.  Some of us also have personalities that result in a “I can do it all myself” perspective that can cut against a more open mind to the selection and use of advisors / trustees.

Why, if I speak above about a simpler approach to estate planning, do I suggest the selection and use of advisors / trustees?  The reason for each of us, whether later as a result of age-related disabilities or death, ultimately will not be able to “do it all” ourselves as to the functions where advisors / trustees can be significantly helpful. This ultimate need for assistance from others will arise regardless of the complexity, simplicity, or absence of our estate planning.

As to the selection of advisors, there are an abundance of individuals (attorneys, accountants, investment advisors) who, frankly, are not that good at their work. In my opinion, they are more focused on making the sale rather than on their services. There also are advisors, in my view, who are smart, but at the same time, to put it bluntly, stupid. These are not mutually exclusive terms.

And, although the question of trustee selection often centers on the naming of successor trustees who will step in later (if necessary), I strongly suggest that clients (e.g., parents) begin today developing relationships with both advisors and trustees. Begin observing now an ongoing demonstration of an advisor or trustee’s competence and trustworthiness.

Of immediate importance for this client advisor-review process are investment advisors and CPAs.  Lawyer  relationships are also important;  but for most clients the hope is they will use a lawyer only sporadically.  By contrast, the ongoing threat of investment losses and schemes (e.g., Madoff scams, elder financial abuse), in my view, can wreck a family.  Having someone you trust to help oversee your investments is essential. CPAs are also crucial in helping to avoid costly, cumulative tax return and compliance problems.

What Powerful Writing; I Just Read “Ulysses” by James Joyce

I enjoy my lawyer world in which words are extremely versatile, powerful, and often play out on the tipping scale of success or failure (both in litigation and non-litigation).

Compare, as a simple example, the two sentences: “The respondent’s assertions frustrate the permissive mandate of Code Section 2056″ versus “The respondent’s assertions obstruct the permissive mandate of Code Section 2056.”  I am not suggesting one sentence singled out alone necessarily makes a difference;  but the greater weight of an abundance of words used effectively in persuasive writing can, in my view, greatly help move the reader both intellectually and emotionally in your desired direction. Stop for a moment and ponder your own reaction to the above “frustrate” versus “obstruct” distinction, and how the words shade the nuance and impact of the sentence.

I also enjoy reading for pleasure and often react with virtual awe in response to certain writers’ use of words and language.  My recent reading of James Joyce’s Ulysses has stunned me with its powerful effect.  I don’t think “stunned” is an overstatement. I have had Ulysses on my tentative reading list for years;  but kept putting it off. I was aware from hearing and reading comments from others that Ulysses would not be an easy task to complete.  It was not easy.

For this brief blog post, I attempt below to state why I reacted so favorably to Ulysses. But, and this next point sounds like new-age mumble-jumble, my attempt below to express these reasons falls way short of my overall joy and reaction to Ulysses. Also, I fully admit I am no scholar or expert on Ulysses or James Joyce. I am merely a reader. One other preface point I make here is that the entire Ulysses novel takes place only within one day:  June 16, 1904, in Dublin.

Here are my eight brief points:

One. This also sounds new-age; but as I was reading Ulysses, and now after finishing it, I find myself in a kind of foggy, joyful awe. I tell my friends that Ulysses is a miraculous work. It has powerfully affected me in a way that I believe is a permanent, positive change.

Two.  This positive change is that Joyce, by depicting in Ulysses only one day in the life of his characters — June 16, 1904 — describes that life in a way that makes me now more aware of appreciating, and continuing to ponder, the vast richness that our daily lives make available to us. Each day is a tremendous event in life that, if we are attuned to life, has a depth and richness we tend to forget when we persistently ponder yesterday and tomorrow.

My above comment also is not along the line that we should be grateful for each day.  There is nothing necessarily wrong about the platitude of being grateful, but that is not my point. Rather, each day has its own richness and fullness that can contribute to our joyful experience of life, regardless of whether the day might appear quite mundane on its surface.

Three.  The way in which Joyce displays this one June 16th day is the miracle. To preface my point here, think for a moment about what happens when you attend a dinner party.

Sure, there are various objective visual and auditory activities going on around you. The plates and forks are clinking with a steady drone. The new Lady Gaga / Bradley Cooper music is loud. The speakers don’t have as much bass as you like. You hear the kids’ TV in the other room. Susan is drinking from her new wine glasses; John is ranting about some recent political event; Mary looks older and tired as though she possibly had a long sleepless night with her new baby, etc. The sauce has a too-strong butter odor. The napkins are too thick and too rough. The lighting is very pleasant.

But, in addition to these objective / auditory activities, we persistently have a lot of other stuff going on at the same time, such as our own internal dialogue; our self-talk; mental perceptions, unspoken criticisms, judgments and thoughts about what we are seeing and hearing; our interspersed dream-like visual imagery and sounds about the past and the future; our fantasy-day dreams connected at times to what we are seeing within our surroundings (that can veer off in any number of directions, with sudden starts, stops, changes in direction, etc.).

What Joyce does in Ulysses is capture all of the above in the one-day June 16 context of his characters. I am almost certain I will again be able to read other fiction; but, as of now, Joyce presented this Ulysses novel in what I believe is the fullest, most accurate and realistic depiction of our external and internal, meandering lives.  Other fiction I will later read, I anticipate, might seem too one dimensional.  I feel as though Joyce spoiled me for other novels.

Four.  I admit I almost quit reading Ulysses at about the half-way mark. But, many readers who had already made the journey (that I found on Google book sites) recommended readers stick with the book to its end. It will be worth it, they all said.  I almost quit because briefly I felt (prematurely) like the novel was not headed in a direction that struck me;  no story;  no plot.  I could not keep up with all the details.  But, then, almost by an imperceptible degree, I began having a great feeling in general about life and about the characters in Ulysses.  Simple, daily life.  I told my wife that this feeling hit me about half-way through the book, and has stayed with me ever since.

Five.  Go back to the dinner party example above. There is a lot of stuff going on externally and internally. There is no way you can fully take all of it in. You will listen and observe only some of the external and internal stimuli. At most any dinner party you will not pay close attention to some of the activity. It is impossible to take it all in. You and the other dinner party guests will tune into some subjects and comments; you also effectively will simply let other items go by with a bare hearing or perception of the content.

Because Ulysses includes a similar vast litany of external and internal stimuli during the course of one single day, don’t expect that you will take in or be perceptive to each and every detail you read.  Rather, take it in as you would at the above dinner party.  Some items will stand out during your reading; some will not.  This is how life runs its course; in this case life on June 16, 1904. Straining to retain and digest every facet of Ulysses will ruin the reading experience. You do not need to retain and digest every facet of the day in Ulysses.

Six.  Joyce is a master with words. His writing and crafting of Ulysses strikes me as pure genius. If I had to recommend to someone a portion of Ulysses merely as one small sample of Joyce’s fine writing, it might be the start of the beach scene in Chapter 13. The intro section stopped me in my tracks. The writing is so good that I had to return and reread the opening section of Chapter 13 twice before I could move on to the end of the chapter. Click here for a Google link to Chapter 13.

Seven.  At the halfway point of reading the hard copy of Ulysses, I purchased the audible.com audio version. I continued to read some hard-copy portions, but also used this great audio version. The audio narration is superlative. Click here for this audible.com version of Ulysses. I also googled Cliff Notes for a couple of the chapters that gave me a good background understanding of those particularly difficult chapters. Three or so of the chapters I reread twice before moving on due to the powerful, weighty effect those chapters had on me.

Eight.  Reading Ulysses is worth it. I am more than delighted I completed this laborious reading journey.  My life (again, this sounds new-age-like) has been permanently changed for the better, and I have a much greater appreciation for the miraculous nuance of each single day.

The 2017 Gibson Opinion. Divorce? Squirreling Away Assets in Trust?

This blog post is about whether the 2017 Georgia Supreme Court opinion in Gibson now opens the door wider for one spouse more easily – while married — to squirrel away his or her assets in a trust, and then later use that trust as a shield in a divorce proceeding. It does not.

In Gibson,the husband during his marriage funded two trusts with $3.2 million of property; the husband prevailed in keeping the $3.2 million out of his divorce proceeding without the trust assets being subject to equitable division. This is $3.2 million that otherwise would likely have been marital property in the divorce, absent the trust planning. Click here for a copy of Gibson v. Gibson, 801 S.E.2d 40, 301 Ga. 622 (2017).

The key factual distinction laying the foundation for the husband to prevail in Gibson was the lower trial court’s conclusion that the husband retained no interest in the trusts, including no interest as a trustee or beneficiary.  As I touch on again below, my experience is that most spouses who unilaterally create and fund a trust during marriage do retain interests in the trust, albeit as part of the purposeful, stealth design of certain opaque, highly-technical trust provisions.

Back to the Gibson opinion. My sense in talking with other lawyers is that some have an over-optimism leading them to conclude Gibson opens the door wider now enabling one spouse to keep his or her trust out of the divorce arena. For the reasons I state below, I disagree. The backdrop to this misplaced optimism is the following portion of the Gibson opinion:

This is not an issue of first impression for our Court, which has permitted property placed in certain types of trusts to be exempt from equitable division.  . .  . Therefore, property that has been conveyed to a third party is not subject to equitable division absent a showing of fraudulent transfer. See id. If a spouse places property in a trust of which he is the sole beneficiary, that property may be subject to equitable division. See Speed v. Speed , 263 Ga. 166, 430 S.E.2d 348 (1993). But if a spouse is not the sole beneficiary of a trust, the corpus of the trust is not subject to the other spouse’s claim of distribution. See McGinn v. McGinn, 273 Ga. 292, 292, 540 S.E.2d 604 (2001).

Excerpt from the Gibson opinion (I added the bolding and underlining).

The optimists read Gibson (and the “sole beneficiary” excerpt above) to support the notion that a spouse who funds a trust – where that spouse is not a sole beneficiary of the trust –  can now exclude the trust from claims in a divorce. This is a misreading of the above Gibson reference to sole beneficiary.

This sole beneficiary reference is merely a passing remark by the Georgia Supreme Court (what lawyers call obiter dictum) in stating the Gibson case was not a case of first impression on the question of how a trust created during marriage fares later in a divorce action. This sole beneficiary element also was not a fact for consideration as to the Gibson husband’s trusts and not part of the holding in Gibson.  [I have not seen the Gibson trust documents.]

Here are my broader Gibson points for this blog post:

One. I am called upon from time to time to assist divorce lawyers with attacking a trust in a divorce proceeding. My job is to help attack the trust and keep it in the divorce proceeding. My attack at times is directed at the deficiency and shortcomings in the trust document itself, where the drafter failed to cross the “t”s and dot the “i”s. My attack also gets into the various quasi-hidden, stealth trust powers purposely built into the design and framework of the trust that do not easily – merely on the face of the trust document – alert a non-trust lawyer to the existence of continuing powers and potential benefits the spouse retained in the trust (such as powers of appointment held by a friend or other family member; powers to decant the trust to another trust; using someone other than the spouse as the purported settlor of the trust document giving the diversionary appearance the spouse did not create the trust, etc.).

One might ask “Why would a spouse hold these stealth ties to the trust?” The answer, in my experience, is that it is a rare instance where one spouse creates and funds a trust during marriage without making sure he or she still possesses indirect options either to get back the property after the divorce situation ends or ultimately later control the property for that spouse’s own benefit.  Thus, arguably most unilateral trusts are not third-party trusts.  I use the term unilateral for when one spouse puts this trust planning in place without the knowledge of the other spouse.

Two. Whether a trust is or is not a third-party trust is not merely an easy simple ‘yes’ / ‘no’ question. The status and nature of any trust depends in most cases (divorce and non-divorce cases) on the effect of the opaque, stealth technical provisions in the trust document, as part of the purposeful design of the trust. This opaque-stealth question, in my opinion, is where the heart of the fight lies when dealing with a trust in a divorce setting.

Three.  When the trust at issue in a divorce is a third party trust (as in Gibson), that trust under the Gibson opinion will still be subject to a fraudulent transfer analysis in the divorce proceeding, as is the case with virtually any other third-party transfer of property prior to divorce.

The procedural rub is that the law requires, as generally in any fraudulent transfer attack, that the opposing party (the non-trust spouse in a divorce) bears the burden of proof for the fraudulent transfer attack.

Four. But, by contrast, I read Gibson as not changing the existing law or theories in divorce proceedings for trusts that are not third-party trusts. Those trusts are still subject to attack, but without the non-trust spouse bearing the burden of proof under a fraudulent transfer attack.  Here the burden is on the spouse who created the trust — during the marriage – to prove the trust is not marital property.

RE-POST: “In 48 Hours, I Had to Practice What I Preach”

My July 2008 blog still ranks as the most popular of all my blog posts (in terms of responses from readers and the blog click data, etc.). My 2008 blog post was in response to my personal situation at that time where a preliminary medical diagnosis – fortunately – was wrong.  But, at the urgent time I thought I could possibly die in a couple days.  I also had two children under age 10 at that time. Thus, my title of the July 2008 blog was: “In 48 Hours, I Had to Practice What I Preach”.

I am re-posting below my earlier 2008 blog, in its entirety.  The post includes ten related take-away “lesson” references. Also, as an important aside, as we and our parents, etc., all get older, the Thomas Mann excerpt in the post below from his novel The Magic Mountain remains one of the most comforting and satisfying responses to life and aging that I have found.

Here is my July 2008 post:

“Many of us in the service industry are like the proverbial cobbler (yes, including lawyers): we provide shoes with the best fit and finish for our clients, but we leave ourselves and our families poorly shod, or worse yet, barefoot.

This is an unusually personal newsletter about a recent 48-hour period in my life; it began with the complete blindside of a Friday night hospital ER diagnosis (tentatively very chilling) and a much more optimistic Monday morning follow-up.  During this long 48-hour period, my wife and I were suspended within vast uncertainty.

At that time, we believed the 48 hour-period could potentially have been my last chance to get my affairs in order. The situation caught us completely off-guard, with many loose ends in my own personal “I’ll-get-to-it-later” family matters.

I now am back in full swing and the 48-hour period is behind me; my sense of urgency no longer exists. This 48-hour period, however, strongly impressed upon me the need to stop procrastinating and get my own family affairs in order.

Although we lawyers like to believe we are the unshakeable rock of Gibraltar for our clients, I was in near-panic during this 48-hour period as I organized various topics and notes of final instructions for my life. This, quite frankly, was due to a level of worry and concern over my unfinished family business that I hope never to experience again, especially when facing my own mortality.

I share the following relevant aspects of my recent experience so as to motivate you, if you are by chance a procrastinator, to avoid a similar 48-hour surprise, or in the worst case, a situation with zero lead time.

Your Current Estate Planning Documents are Your Final Versions

As a trust and estate lawyer, I experienced briefly during the 48 hours an imagined level of after-death embarrassment; embarrassment that my wife might end up with problematic documents.  Even though I insist on updated estate planning documents for my clients, my personal estate planning documents were much more out-of-date than they should be.

Lesson No. 1 — The 48-hour period made me experience first-hand the reality of a completely unexpected event, that can effectively freeze the status of whatever estate planning documents we have in place — or fail to have in place.

No Guardian Designation for My Children

During the 48-hour period, my wife and I also discovered we did not have the updated guardian provisions that we desired for our children. This omission could potentially have been much worse than that kitchen faucet I kept promising to replace but never got around to.

Insurance Records

The permanent and term life insurance I have on my life for my family’s benefit includes certain options to allow additional payments beyond my normal premium amount without additional insurability underwriting (thus, a related increase in death benefits at my original preferred premium rate), a conversion option to a universal policy, a disability waiver if I am disabled, and the ability to extend the coverage beyond the guaranteed term.

Lesson No. 2 — I have all these excellent insurance policy options, but had failed to inform my wife about them and about the circumstances where she and my children could benefit from triggering the various options.

During the 48-hour period, I made sure my wife had the name and phone number of our insurance advisor, and made her promise that she would rely on our advisor‘s advice for assistance with our insurance situation, if needed.

Internet Access Information

The simplicity of this next point belies its importance.  My wife and I both handle a great deal of our affairs by internet. I really had to scurry around during the 48 hours to provide my wife with all of my known internet accounts: all access passwords, and other relevant information about automatic bill-pay schedules, etc.

Lesson No. 3 — My wife’s potential ability to step in and seamlessly handle all of my online business matters (banking, internet bill-pay, renewals, etc.) would have been seriously hampered, if not impossible, without the knowledge of what family business I handle over the internet, the corresponding URLs and, most importantly, the passwords.  I now keep this data in a safe place for my wife’s access, if ever necessary.

As an aside, to my wife’s credit she handles the bulk of our family bill-paying, banking, insurance, and so forth.  She is much less the procrastinator than I (but come to think of it, I don’t know where she goes online, nor what her passwords are).

Lesson No. 4 — Find out about your family’s internet business access.

Social Security Benefit Information

From a bundle of non-specific files, I dug up a copy of my latest annual Social Security earnings statement in order to remind my wife that she and my children would be entitled to survivor benefits.

Lesson No. 5 — The Social Security Administration can provide you with an annual statement of your earnings history and the projected benefits your survivors will receive.

Read the earnings statement carefully and make sure the annual earnings information is correct, as federal law applies a 3-year statute of limitations for making corrections.

Misc. Loose Ends

This seems humorous now that I am out of harm’s way, but during the 48 hours I also noted various important items for my wife’s attention, such as making sure the air filters in our furnaces are replaced every two months; making sure the homeowners and property tax payments are made on time for our small cabin in rural NC;  and making sure our annual LLC registrations are current (that I had been handling by internet).

Lesson No. 6 — Jot down this small-but-still-important stuff.

Names of Our Team Members

In the past my wife and I alone handled virtually all of our family legal and business affairs. Over the years, however, I have become smarter on this point and put into practice the benefit of having a quality team of advisors who are available to assist my family in my absence (such as for tax return preparation, investments, insurance, etc.).

Lesson No. 7 — I made sure my wife had the names and contact information for all the members of our  team.

Last But Not Least: the Name of a Good Lawyer

This next point, due to my ability over the years to be my own family’s lawyer for most matters, was a very important discussion with my wife during the 48-hour period.

Lesson No. 8 — The variation in lawyers’ judgment and expertise is as wide-ranging as is human nature; lawyers are not fungible.  I wanted to make sure my wife would have a successor lawyer in whom she has complete confidence and can feel comfortable asking questions or seeking assistance.  Because my situation is now back to normal, I can keep this name filed-away in with my personal records (to which my wife now has access).

No More Ill-Fitting Shoes

I now have made great progress in mending my cobbler ways and providing my family with the best shoes possible (figuratively speaking), sooner rather than later.  I never want to experience this 48-hour scramble again in such ill-fitted shoes.

Finally, a Comforting Consolation

Until this 48-hour incident I had not been in a hospital since my teenage years for wisdom teeth removal; I had virtually no first-hand experience with illness and hospitals.

Lesson No. 9 — Even though the 48-hour period was difficult due to my lack of preparedness for the above matters, I found my mind and spirit both adapted well – much better than I expected — to this emergency medical experience.

This adaptation is a surprising consolation and, I believe fortunately, is the way our minds self-protect us in these moments of unexpected urgency. This positive note reminds me of the following passage from Thomas Mann’s novel The Magic Mountain, that goes to the heart of this consolation:

The pity the well person felt for the sick – a pity that almost amounted to awe, because the well person could not imagine how he himself could possibly bear such suffering – was very greatly exaggerated. The sick person had no real right to it. It was, in fact, the result of an error in thinking, a sort of hallucination; in that the well man attributed to the sick his own emotional equipment, and imagined that the sick man was, as it were, a well man who had to bear the agonies of his state. Illness so adjusted its man that it and he could come to terms; there were sensory appeasements, short circuits, a merciful narcosis; nature came to the rescue with measures of spiritual and moral adaptation and relief, which the sound person  .   .   .  failed to take into account.

Excerpt  from  Thomas  Mann, The Magic Mountain 466-67 (H. T. Lowe-Porter, trans., The Modern Library Edition 1992)(1927).

Lesson No. 10 —  This is an important point.  Sufficient advance planning can help us more easily not have to contemplate or worry as much about the future. We have the future covered, so to speak. And, with the future covered, we can enjoy our lives, family, work, hobbies, much more freely in a relaxed, present state of mind.

Thank you for your indulgence.  And, finally, thank you for allowing me to share my personal experience.  I hope it might be of value to you.”

 

JOB POSTING: We Are Looking for a Paralegal/Legal Assistant

Our law firm is looking for a paralegal/legal assistant to support four attorneys in our Buckhead office.  Our offices are located in the Monarch Plaza on Peachtree Road in Atlanta, directly across from Lenox Square.

We are looking for a professional, detail-oriented individual with the following characteristics:

  • Positive attitude.
  • Organized.
  • Proficient in the use of MS Office (Word, Excel and Outlook).
  • Must be able to work independently, without continuous, ongoing supervision.
  • Must be a team player.

Law firm experience is preferred. Candidates must be available 35-40 hours per week.

The position includes a mix of paralegal and administrative tasks.  The daily responsibilities for this position include generally:

  • Dealing directly with clients and attorneys.
  • E-filing court documents (state and federal).
  • Working with our attorneys for the preparation and drafting of correspondence, revising pleadings and discovery documents.
  • Assisting the attorneys with discovery, document production, trial preparation and hearings.
  • Calendaring and litigation-docket scheduling.
  • Assisting with electronic discovery.
  • Office and law firm administrative tasks such as filing, answering telephone calls, maintaining, and organizing both physical and electronic files, and initiating and setting up cases.
  • Maintaining invoices, bank account balances, handling payments to vendors and third-parties.
  • Acting as a Notary Public (or eligible to apply and obtain a notary).
  • Entering time entries for attorneys; generating and maintaining monthly invoices.

Please email your resume to attorney Cheryl R. Treadwell at cheryl@ktlawllc.com

I Am Proud of Georgia (trust / estate law revisions)

Georgia’s newly enacted revisions to certain trust and estate law provisions bring Georgia up to speed with many other states with similar provisions.  The changes are effective July 1, 2018.  This is a good move for Georgia.  Click here for a link to the legislative bill with the numerous changes.

As an important first aside, I will blog later on how these changes add even greater benefit to my favorite trust – the inter-vivos QTIP marital trust (created during the lifetime of the spouses).  I also will provide other short blog posts from time to time with certain commentary about these law changes.

For today’s post, I include the following discussion about how long trusts can now last under Georgia law:

360-Year Trusts. The allowable duration for a trust changes from 90 years to 360 years.  This is referred to under trust law as the “rule of perpetuities”, and applies generally as a duration limitation for non-charitable trusts.  A trust can now operate for 360 years before the rule of perpetuities law mandates its termination.

However, as a practical matter, I do not think 360 years in and of itself is significant. But, now having a period longer than the previous 90-year limitation helps make sure a trust can run long enough to cover (at a minimum) the trust creator’s (settlor’s) grandchildren’s entire lives.

In other words, making sure the grandchildren get the asset protection benefit of the continuing trust for their entire lifetimes (rather than the trust having to terminate in 90 years, possibly before the deaths of the grandchildren; thus, the earlier termination removing the protective effect of the trust set-up for their benefit).

The reason I think the entire 360-year period is not significant is that the number of downstream descendants a settlor will have if his or her trust lasts 360 years will be geometrically expanded beyond anyone’s realistic ability to keep up with all the descendants. I have seen various projections indicating, on average for example, a person will have approximately 115,000 descendants in 350 years. This adds another level to the notion of “laughing heirs”.

The Delaware Tax Trap.  This point relates to the new 360-year change.  The Delaware Tax Trap is a complex part of trust tax law.  It essentially triggers potentially punitive gift and GST tax results if a trust is changed where the duration of the trust is extended longer than the trust’s initial governing rule of perpetuities.

For example, assume I created an irrevocable trust in 1980 (when the law allowed a 90-year duration which means the trust essentially must end in 2070).  Is this trust now subject to the Georgia 360-year rule?  [There are some extensions to this 90-year period that get into the notion of “lives in being”; but I do not get into that point for this blog. You also can read one of my earlier blog posts on a creative potential use of the Delaware Tax Trap.  Click here for my earlier post.]

Under this Delaware Tax Trap rule, the tax law provides that if I extend the duration of my existing 1980 trust beyond its then-applicable 90-year period, the result is that I am deemed for gift and GST tax purposes to have withdrawn the trust property and re-contributed the property to the extended-duration trust.  In other words, I am treated as making a gift to the extended trust. This Delaware Tax Trap is a very esoteric tax law concept as a practical matter, but is an issue that most trust tax lawyers have many times grappled with (and debated) in great detail as part of their trust planning.

Below is my key comment for this blog post about Georgia and the Delaware Tax Trap.

The legislative act for these Georgia revisions to its trust and estate laws states “All laws and parts of laws in conflict with this Act are repealed.” Does this mean the prior 90-year limitation disappears with no continuing effect for an existing trust?

I am merely raising the above question and have not yet fully examined the scope of an answer.  Nor does a simple, quick answer jump out at me at this time.  More broadly, the question becomes: “How best do trust lawyers deal with this new extended 360-year rule of perpetuities both for existing trusts and in creating new trusts?”

This 360-year rule of perpetuities question needs to be on every trust checklist.