About James M. Kane

James M. Kane [www.atlantakanelaw.com] is a tax lawyer licensed in Georgia, North Carolina and New York with 20+ years of experience. James handles trust, estate, and probate consulting/litigation, with approximately 30% of his work with trust / estate planning. His planning work includes design features to help avoid the hurdles and issues he sees in the litigation arena. In addition to a law degree from Emory University Law School, James has an undergraduate finance degree and a graduate Masters of Taxation degree. Prior to law school James was an IRS Revenue Agent in the Internal Revenue Service large case group. James is AV Rated Lawyer on martindale.com and is listed on superlawyers.com

What a Great Line

I am currently reading the novel A Thousand Acres (1991), by Jane Smiley.  This is essentially a modern-day version of Shakespeare’s King Lear involving a father’s disinheritance of a daughter from the family farm (a 1,000 acre farm) and the destructive effects of deeply rooted, and long denied, family issues. This novel also is a powerful depiction of estate planning discord. [There are certain tragic elements in the novel that I fortunately do not see often in estate disputes.]

One line in this novel notably jumped out at me the other evening.  It refers to one of the farmer-neighbors named Harold who, often to the humorous and bemused talk of the other neighbors, marches to the beat of his own drummer, but who also is one of the most successful farmers in the community:

Here is the line referring to Harold:

It’s just that he’s [Harold] cannier and smarter than he lets on, and in the slippage between what he looks like and what he is, there’s a lot of freedom.

This line is powerful.  In contrast to Harold, many people are much too concerned about what others think about them. These people stifle their own freedom.

A tie between the above line and this blog post is that my great joy in lawyering is helping clients respond to the currents of life from a position of strength, power, and independence. Independence particularly in terms of having control over their lives, including preventing legal issues, disputes, litigation, not bowing easily to the expectations or judgment of others, and avoiding the time- and emotionally-draining interference and overreach by others.

In one of my earlier blog posts, captioned “Helping Clients Have Power;  Blog Post 2 of 3” (click here for this earlier post), I referred to two of the saddest characters in literature: Willy Loman in the play Death of a Salesman (Arthur Miller) and George Babbitt in the novel Babbitt (Sinclair Lewis). Each of these characters demonstrates so powerfully the sad, unhappy mistake of maintaining such a persistent, engulfing concern about what others think about them. The complete antithesis of power.

Finally, one ancillary legal point.  Liberty is the environment that (fortunately) allows us to be free;  Actually exercising our freedom in the above context is our own responsibility.

Spousal Inherited IRAs; Don’t Fall Into This Trap

The point of this blog post is, generally, to make an immediate spousal rollover to the surviving spouse’s own IRA when the first spouse dies. Avoid the situation where the surviving spouse continues to hold the deceased spouse’s IRA as an inherited IRA.

In most cases the spousal inherited IRA status, caused by a delay in making the spousal IRA rollover, results in the following costly trap if the surviving spouse dies prior to making the IRA rollover.

Assume John has a large IRA that names his spouse Jane as the primary beneficiary. Their children are the secondary (contingent) beneficiaries. John is 63 years old; Jane 52.

John dies. Jane plans to roll over John’s IRA into her own IRA, with the goal of obtaining the following two significant benefits: (1) With her own rollover IRA Jane can wait until she is 70 ½ to begin taking out her required minimum distributions [“RMD”]; and (2) Jane can name their children as the primary beneficiaries of her rollover IRA.  This is an excellent plan in this case.

As to asset protection, Jane’s own rollover IRA will benefit from generous federal and state law protection for her IRA. By contrast, an inherited IRA does not get the same degree of asset protection.

Here is the crux of this blog post: Jane dies before making the rollover to her own IRA.

Absent the rollover at her death, Jane is treated as the beneficiary of John’s IRA, as an inherited IRA.  As a result of Jane’s death occurring after John’s death, John’s IRA contract controls how Jane’s inherited IRA account must be distributed, etc. This is John’s IRA account contract with the financial institution that holds his IRA account.

Depending on the governing terms of John’s IRA contract, John’s IRA likely must be payable either to Jane’s estate or to John’s heirs. As a slight consolation, the duration of the distribution payout to Jane’s estate or to John’s heirs can still be computed over Jane’s life expectancy (her actuarial life expectancy as of John’s death).

Also, absent the rollover, the annual RMD for John’s IRA (Jane’s inherited IRA] must start in the year after John’s death. There is no delay-option until Jane would have turned age 70 ½, etc. In addition, distributions to Jane’s estate or to John’s heirs will likely result in adverse income tax consequences due to the compressed tax rates for an estate, etc.

The next point also is important and frequently overlooked. In this example with Jane dying after John, John having named the children as secondary beneficiaries no longer has any effect. John’s secondary beneficiary designation was relevant only if Jane had predeceased John. With Jane’s death occurring after John’s death, John’s secondary beneficiary designation for his IRA account means nothing. The overlooked point is that there is no look-back to John’s secondary beneficiary designation as a result of Jane’s subsequent death.

One final ancillary point about the above inherited IRA: John and Jane also must each include express language in their financial powers of attorney allowing the agent to make a spousal IRA rollover. This is critical if Jane is incapable of making her IRA rollover at the time of John’s death (due to her age, disability, etc.). The power of attorney needs also to authorize and spell out the agent’s authority and the naming of the primary beneficiaries for the rollover IRA.

 

Estate Planning for Our Children

I plan over the next two weeks to get my teenage kids to sign basic Last Wills and Testament, financial powers of attorney, and health care directives. Georgia law allows a person age 14 or older to have a Will.

There are two reasons why consistently I had put off this task until now. One, and I admit a degree of nervousness as I type this sentence, is that we parents simply do not wish to contemplate or envision any possibility of our children dying or becoming incapacitated. Getting them to sign their own estate planning documents can feel like we are pushing our kids too fast, and too far along, the pathway of life (and ultimately toward death).

Two is that for many families the hourly law firm rates for estate planning make basic, core planning appear overpriced, and a task, therefore, for some other day. Also, frankly, I failed for many years up until now to take time during my busy work-load to develop and create a well-written basic Will. I simply never had a basic Will I offered to clients.

In view of my own family situation, I finally stopped and took time to design and prepare an excellent, basic Last Will and Testament. It will work perfectly for my kids, and will be effective until they later get married or accumulate assets that warrant revisiting their estate planning. Or, it will continue effectively in place even if my kids get married (but with no Will provisions for their spouses). The Will has a no-revocation provision in the event of marriage.

This basic-Will task also demonstrates that creating simplicity is not easy. I spent time designing, tinkering, and deciding on what elements are optimal for a fine, basic Will. I am pleased with the result.

This Will, among its various provisions, refers to tangible and non-tangible property, tax and expense apportionment; “electronic communications content” [internet access]; allows, in accord with Georgia law, the executor to name custodians for property under the Transfers to Minors Act if necessary; includes a “No-Contest” clause that imposes litigation fees and related costs on a contesting beneficiary who initiates an unwarranted dispute over the Will or the estate; an express acknowledgment that the individual signing the Will is not in a relationship with anyone that he or she considers is, or creates, a common law marriage in any state, as the date of execution of the Will, etc.

I also believe my kids will find their moment of signing these estate planning documents a positive, notable point of progression of their continuing maturity and developing adulthood.

I urge you to consider having your age 14 and over kids sign similar documents.  I provide these documents on a flat-fee basis.

Divorce: Attacking a Spouse’s Unilateral Trust

One spouse creates a trust during marriage. A divorce later arises. Can the trust be excluded for alimony and equitable division purposes? Here is my recent newsletter centering on a recent June 2017 Gibson Georgia Supreme Court opinion that addresses a spouse’s $3.2 million funding of two trusts without the other spouse’s knowledge.  My newsletter was published yesterday by Leimberg Information Services. You may reprint and distribute my newsletter to other readers. Click here for this newsletter.  Also, click here for more information about Leimberg Information Services.

A Belated Fathers’ Day Post to Lawyers Who Are Fathers

My wife and kids are out of town for the summer, which has given me a great deal of time alone with our two dogs to ponder the ideas leading up to this belated Fathers’ Day post. This post is directed primarily to fathers who are lawyers. But, it has universal application for all fathers.

This is a philosophical post. And, I realize it may not be of interest to some readers; if so, simply stop reading here. Another reason for this post is that I am purposely adding it digitally to the perpetual web for my wife and kids, for their access now and later.

Here is the point of this blog. Lawyers are called upon to be the Rock of Gibraltar for handling important matters that affect clients’ lives and well-being. Lawyers are often the last resort with a responsibility that allows the buck to pass to no one else. The responsibility lies fully with the lawyer. Success or failure.

A lawyer when called upon to act or protect the interests of his or her clients cannot take on that important responsibility with an “I can’t”, “yes-man”, doubtful, or weak mindset. The lawyer – in the midst of the uncertainty with any disputed issue — must stand firm and resolute, reacting to the inevitable ebb and flow of the task that includes at times hope, doubt, praise, criticism, wins, losses, elation, disappointment, diversions and fatigue.

Here is my belated Father’s Day point:

My guess is that most lawyers (including me) pass along to their children the notion of being at all times strong, at all times resolute, at all times independent, at all times possessing a strength of mind and presence to handle any situation. All beneficial characteristics that can enable a child to chart life as he or she so chooses for any situation, no matter how difficult.

But, this heavy emphasis on strength and self-reliance also carries with it a strongly unspoken denial of our children’s feelings and emotions. Ask the children or spouse of a lawyer if my above summary is off point. My guess is it accurately fits most lawyers (both mothers and fathers who are lawyers).

On the flip side, which is an epiphany for me during this summer solitude, is what we lawyers fail to give our children.

That is, blinded by wanting our children to possess lawyer-like strength and fortitude, we lawyers do not allow our children to experience more fully their own development and metabolism of how to deal with their vulnerabilities.

We effectively thwart and constrict our children’s emotional bandwidth in response to how they otherwise can (and will) evolve when faced with struggles, disappointment, emotional-pain, periodic feelings of weakness, doubt, etc. Merely expecting our children to act like junior-lawyers in response to life and their circumstances is a kind of parental fundamentalism. Not much different than parents who believe religious fundamentalism gives their children an upper edge.

So, fathers; by all means continue to help your children develop strength and fortitude. These are gifts you are giving them. However, the change I recommend (that applies to me as a father) also is to allow room for your children to experience and develop their own response to the vast array of feelings and emotions that life presents. Against the backdrop of strength and fortitude, do not expect or require a sobriety of emotion for your children.

To Your Lawyer: “Would You Buy Your Own Legal Services?”

The theme of this post is for the legal services consumer simply to ask his or her lawyer the following question: “Would you buy your own legal services from your law firm, and why?”  And, I am not suggesting there cannot be a suitable, good reply to this question. I am saying the question helps consumers consider relevant factors in assessing legal services, including my recommendations below.

Among my persistent attempts to try and compel clients to consider preventive legal and tax planning to avoid down-the-road costly disputes and legal fees, I harp on the point that a legal services consumer faces the following economic conundrum when obtaining legal services, whether preventive or litigation, etc.:

  • There is realistically no way the consumer can gauge the quality of the legal services he or she receives; and

  • Without being able to assess the quality, the consumer has no idea of what the market cost is (or should be) for the legal services.

Considering the above two factors, and because law firms typically measure lawyer performance primarily on a lawyer’s billable hours, the consumer absolutely must keep a close eye on the efficiency of how his or her lawyer provides legal services.

Among the factors you, as a client, can consider are:

(1) Does your lawyer care about your situation or case? This might sound trite, but I believe most clients are able to perceive this important factor.  In other words, you do not want to be merely a cog in the wheel of your lawyer’s busy workload.

(2) Does your lawyer push down most of the work to lower level members of the law firm? This arises when your invoice shows 3 or 4 (or more) different billing lawyers, and in most cases newer lawyers, who are charging time to your file. Essentially, you are helping pay to train these other lawyers.

There is no doubt that some work can be handled well by newer lawyers in the firm; but keep an eye on whether these other lawyers are predominantly on the steep side of the learning curve. Require a balance by limiting this push-down approach. Let someone else pay the bulk of their training. Don’t just leave this factor open-ended.

Accordingly, and especially during the what-if, strategic, and developmental stage of your legal work, ask your lawyer to handle the bulk of your work himself or herself, without merely passing it down to a multitude of lesser-experienced lawyers. The judgment and experience of a more seasoned lawyer provide the greater value for legal services, compared merely to the lower hourly-rates of newer lawyers.

(3) Does your lawyer bring other lawyers to his or her meetings and telephone conferences, essentially as the note takers? How many meetings have you attended where the note-taking lawyers essentially say or contribute nothing during the meeting? Discuss this set-up with your lawyer and ask if (and why) this is necessary for your situation.

(4) Does your lawyer use email and other modern digital technology to enhance his or her efficiency? This may possibly reflect where your lawyer falls on the scale of creative openness to change and progressive ideas. [Some lawyers still refuse to use email and have their assistants print hard copies of their emails.]

(5) Do you get trailing U.S. mail hard copies of letters and memos from your lawyer 2 or 3 days after the matter has already been addressed or completed with earlier emails, phone calls, etc.? Tell your lawyer you do not need these hard-copy mailings to the extent of the related additional time charge and expense.

(6) Ask your lawyer, as part of his or her work, to provide you with short, bulleted, talking-point emails, letters, and memos. This suggestion goes to how much of your invoice reflects the time-consuming, law-review mentality among most lawyers (including me).

That is, by our nature and competitive law school training, we lawyers prefer that every single communication we provide to clients (and to anyone) be law-review perfect.  An A+ grade product.  This A+ approach is, no doubt, a necessary and essential goal for final court papers, briefs, legal documents, contracts, trusts, etc. And, a lawyer’s mindset and thought-process at all times must be at an A+ quality level.

But, for every email, memo, or draft document, if your lawyer clocks you for final, law-review perfection you will end up with a much larger legal bill than necessary.  Tell your lawyer on the front end: “For letters, emails, memos, etc., give me only a rough outline of ideas first and we can discuss them as we progress along, etc.” Then, as necessary, your lawyer can polish to law-review perfection the final communications or other documents. This recommendation goes directly to the time-efficiency and cost-effectiveness of your legal services.

(7) Finally, my late father was a lawyer. I am a lawyer. The point here is that most lawyers handle the bulk of their own legal needs.  Few lawyers (including me) face — as a consumer — the burden of paying a legal invoice. Lawyers can, however, be empathic and place themselves in the clients’ shoes so as to help better address how a client more effectively can obtain legal services.

Just Say “No” to Financial Institution Intrusion into the Financial Power of Attorney Arena

I increasingly get calls from clients who are concerned when they run into the following situation.

The financial institution where the client maintains an account tells her she must use only that financial institution’s power of attorney form, rather than her own power of attorney.

Furthermore, if the client stands firm on using her own power of attorney, some financial institutions will thereafter attempt to mandate that she (or the agent named in her power of attorney) sign an additional institutional form that operates as an overlay for the client’s own power of attorney.  This overlay form is captioned along the line of “ABC Bank Attorney-in-Fact Agreement and Affidavit for Non-ABC Bank Power of Attorney.” This form gives the misdirected impression the client can now freely use her own power of attorney, without the institutional power of attorney form.

The above ostensible “must” also sometimes includes the institution telling the client that its legal department will have to review the client’s own power of attorney. This often is where I get the phone call from my client.  And the word “must” generally never sits well with me in many situations.

So, just say “no” to the above institutional power of attorney forms. “No” to all of the forms. Stand strong with a persistent “no” and inform the institution you will use your own power of attorney, without signing any additional institutional forms dealing with the power of attorney.

So, why do I strongly recommend against these institutional forms (including the above overlay “agreement and affidavit for non-ABC Bank power of attorney”)? Because these forms in most cases include features that are targeted to benefit the financial institution, not you.

Among the key institutional form features are:

  1. The agent must agree to indemnify the financial institution against a broad range of items;

  2. The institution’s form mandates what specific state law controls, which might be a state other than the principal’s home state.  Or, a state other than where the agent lives, etc.;

  3. The form requires an agreement to arbitration for issues that arise with the power of attorney.

Also, back to the above legal department mandate. Don’t be alarmed if the financial institution runs your power of attorney by their legal department. Just give them a pdf or photocopy for that purpose. I have had these run-thru-the-legal department situations occur numerous times with no negative consequences. And, with my clients not thereafter signing any of the institution’s forms.

And, quite frankly, if I am an agent acting for my principal under a power of attorney and my principal, if incapacitated, cannot weigh in on these institutional form requests, I (as the agent) likely do not have authority to agree to the institution’s mandate without some preexisting agreement or discussion with my principal. This is likely a reason financial institutions are now pushing these power of attorney forms on their customers as early as possible.

In order to help give you the strength to say “no”, I recommend you make sure you have an updated, comprehensive power of attorney in place that you can point to when you push-back against these financial institutions.

Also, as an important aside, in Georgia the statutory provisions for having a power of attorney under O.C.G.A. Section 10-6-140 state expressly that the Georgia statutory form power of attorney is not the exclusive method of creating the agency.

Therefore, Georgia law acknowledges use of either a Georgia statutory form power of attorney or your own format of a power of attorney. I have not seen the above financial institution mandate tested fully against the backdrop of Georgia law, but my view is an institution will be hard-pressed to succeed with its own-forms mandate against the existence of these Georgia statutes.

Finally, the New York Times had a good piece last year (May 6, 2016) about this same power of attorney push-back from financial institutions. Click here for the link.