I published a very good primer on directed trusts last week for Leimberg Information Services. Click here for a copy of the primer. You are welcome to reprint or email this pdf primer for other readers. For many of you I believe my discussion about using a directed trustee for investment management is important, and can greatly help prevent Madoff scams. Please contact me if you have any questions: email@example.com
This is my second blog post dealing with the increasing Brave New World of “digital assets” and how these assets fit with a person’s estate planning. Below are a few of my brief comments about cryptocurrency:
(1) In the cryptocurrency world, a person’s “private key” is the crucial element separating access to one’s cryptocurrency and its loss (likely permanent). The private key is analogous to a password. My strong point here is to keep a backup of your private key, and let trusted family members know where they can find your private key in the event you are unable to provide it (your death, disability, etc.). There are hundreds of web references to individuals having permanently lost millions of dollars in cryptocurrency due to lost private keys. Click here for an example from Wired magazine referring to a CEO who recently died; and no one can find his private key to an estimated $137 million in cryptocurrency;
(2) The above access / backup problem is particularly elusive, and difficult, as many cryptocurrency users are extremely private about this subject, often to the intentional exclusion of their family members, etc.;
(3) As a related aside, the IRS, no doubt, is interested in your cryptocurrency. IRS Notice 2014-21 is its first published guidance in the form of answers to frequently asked questions. Click here to read this notice;
(4) The above IRS Notice includes a great deal of information. Two points likely a surprise to most readers are: (i) the IRS is treating cryptocurrency transactions for income tax purposes as a “sale or exchange”. For example, if you use $50,000 of cryptocurrency to purchase an item; you will trigger gain or loss on the $50,000 depending on your cost basis in your cryptocurrency, etc. I purposely do not include more detail about this gain / loss treatment for this post; and (ii) Notice 2014-21 expressly states the IRS will treat cryptocurrency as property, not as currency. For estate tax planning purposes, this means cryptocurrency will be inludable in the owner’s estate at death, with a stepped-up (or stepped-down) cost basis based on the cryptocurrency FMV at the person’s death;
(5) Finally, I strongly recommend an express provision dealing with crypocurrency be included in a person’s estate planning documents (trustee, executor, power of attorney powers, etc.). Below is my current draft of possible language for dealing with cryptocurreny (again, this is merely my example language for this post; no reader may rely on this provision as legal or any other advice from me or my law firm):
“To handle on my behalf any of my digital asset “cryptocurrency“, defined for purposes of this DPOA [durable power of attorney] as digital assets that are exchanged electronically and based on a decentralized network or exchange, with such exchanges not requiring a reliable intermediary and managed using distributed ledger technology. In broad terms I give my agent under this DPOA the power to accept or pay on my behalf any cryptocurrency, digital asset currency, funds, or other value that substitutes for currency from one person to another person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. The above term “other value that substitutes for currency” encompasses situations in which the transmission does not involve the payment or receipt of cryptocurrency, but does include, but is not limited to, my private and public keys, blockchain and ledger information, bitcoins, bitcoin addresses, and any other cryptocurrency user or account data or information related to such transactions or to any convertible currency related thereto on my behalf. My intent also is that my reference to “cryptocurrency” under this paragraph be read together as broadly as possible in the broad context of my reference to electronic communications content and the definition of “digital assets” under O.C.G.A. Section 53-13-2 (as amended) included in paragraph (gg) below;”
Georgia is the first state in the nation to enact sweeping UDTA trust law changes, centering primarily on “directed trusts”, with these changes effective July 1, 2018 (I refer again to “UDTA” at the end of this post). These new laws are under O.C.G.A. Sections 53-12-500 thru 506. I will be providing brief posts in the near future about certain aspects of these changes. The “directed trust” is the current, progressive approach around the country for optimal trust planning.
The essence of what “directed trust” means is that the trustee of the trust, or even a named non-trustee advisor (called a “trust director” under the new Georgia law), can direct others — who each then become “directed trustees” — to handle certain aspects of the operation of the trust. For example, the trustee can direct an investment trustee to handle the investment management of the trust assets. Or, as another example, the trustee can direct an administrative trustee to handle the administration of the trust.
In other words, the trustee alone does not have to carry the burden and liability for all trust functions. This team approach using other directed trustees enables the trustee to carve up the trust responsibilities, sometimes referred to as à la carte trust administration.
Below are a handful of my initial, brief comments about directed trusts for this first blog post:
(1) I really like Georgia’s statutory endorsement of directed trusts. Especially facing inescapable, impending aging, we and our families need a team approach for the care, protection, and oversight of our assets and affairs. I am not a fan of empowering only one individual to handle all of these matters, even if that one-person is a family member. There needs to be team input, and corresponding checks and balances where the team members each have a more independent view of the team’s efforts. And, certainly in some cases, a trusted family member can be the trustee with the power to put in place these other directed trustees;
(2) My general take on these new Georgia directed trust laws is that each team member (that is, each directed trustee) is subject to a fiduciary standard and liable for breach of trust if committed in bad faith or with reckless indifference to the interests of the trust beneficiaries [see, e.g., Georgia O.C.G.A. Section 53-12-303, captioned “Relief of liability”]. In other words, each directed trustee has to act with a fiduciary duty to the trust beneficiaries. This enhances the protective benefit of the team approach;
(3) Elder financial abuse is skyrocketing. For this reason, I strongly recommend families presently develop a relationship with a trusted, competent investment advisor who can help oversee the family’s investment assets. And, as needed, that trusted investment advisor can be, or later become, the family’s directed investment trustee. This advisory oversight, coupled with the above fiduciary duty standard and the now-stricter FINRA rules that address the financial exploitation of seniors, helps provide another team-member set of eyes and ears alert to the threat of financial abuse and fraud, etc.;
(4) These new Georgia directed trust laws are modeled after UDTA (the “Uniform Directed Trust Act”). These new laws are very dense, and appear well-drafted and comprehensive. But, easy, quick, no-thought, simple reliance on uniform laws can blind the lawyer drafting the trust. Even with these progressive laws, there needs to be artful trust document drafting so as to take advantage of these directed trust provisions, but without leaving unintended gaps or ambiguities in the trust document that cause problems down the road. Of course, artful drafting has always been the case with virtually any trust document.
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 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.
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.
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.”
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.
This first paragraph is the essence of this post. One of my children is now 18 and an adult for HIPAA medical confidentiality and disclosure purposes. Without a HIPAA release, no educational institution, medical facility or other personnel of any type can disclose to me — even as a parent — information, including whether or not my child is a patient at any of the random medical facilities or hospitals I call. I could potentially be completely in the dark, and upended with worry if I were to run up against this HIPAA hurdle. Without the HIPAA release, my calling simply to ask any hospital if my child is a patient there will fall on deaf ears.
[There are some extremely limited exceptions to this HIPAA constraint, but as a practical matter we all should plan as though HIPAA applies to all health and medical information.]
Now, a more expanded discussion. My 18-year daughter leaves for out-of-state college in the fall. I will MISS her, but she — for which I am proud — is developing her own strong, competent, and independent wings. As part of her continuing pathway as an adult, I had my daughter recently sign core estate planning documents, including a basic Will, a financial power of attorney, and a health care directive. The health care directive was the primary impetus motivating me to get my daughter to sign these core documents.
In broader terms, I do not anticipate problems that will trigger having ro rely on these documents at my daughter’s youthful, healthy 18-year stage in life. But, I also am well aware of the vast, difficult hurdles and challenges I would face if something completely unanticipated were to occur and I did not have these documents. More specifically, the following HIPAA element was the tipping point as to my getting these documents in place for my daughter.
Let’s assume my daughter, at college 1,000 miles away, is admitted to a hospital due to illness or an accident (let’s hope these events never occur!). We don’t hear from her for a few days; her dorm roommates and other friends do not know her whereabouts; there have been no phone texts, no Instagram, etc. Let’s also assume we eventually learn my daughter has food poisoning to the extent she had to be hospitalized. But, where is she? No one will tell us.
However, my daughter has now designated my wife and me as agents under her health care directive. We have express authority from her for otherwise HIPAA- protected medical information. We can find out where she is much more readily and effectively, if ever necessary.
If you think this HIPAA worry is merely theoretical, then let me know if you change your mind after finding yourself in one of these worrisome, seemingly interminable, stonewall confidentiality situations. You can read a very good November 2017 WSJ piece on this same subject with reference to more examples. Click here for the WSJ link.
At a minimum, I suggest parents get a health care directive (that includes the HIPAA release) for their college-bound daughter or son before college starts. The fun college parties, beginning with fall football, start soon.
I will be glad to prepare these core documents, or you also can contact me at (470) 401-0101 if you have any questions or need additional information.
My recommendation for most decisions in life goes primarily to a time question. How much time for enjoyment does a person have, and what toe-stubs, hurdles, problems, unanticipated issues, etc., cut against this available time for enjoying life? This time-formula does not get into the question of how one finds enjoyment (e.g., work, family, vacation, sports, music, books, hobbies, etc.), but rather focuses on what potentially derails that available time.
The central point of this post is that I recently added two new provisions to my revocable living trust expressly giving the trustee the ability to delegate both (i) the administration of the trust to an “Administrative Trustee” and (ii) the investment management for a portion or all of the trust assets to an “Investment Manager”.
Administrative Trust duties include, for example, the powers:
” (a) To maintain bank accounts, brokerage accounts and other custody accounts for the custody and safekeeping of the trust property, receiving trust income, making disbursements in payment of trust expenditures and, as directed by the Trustee, making distributions to or for the benefit of the beneficiaries;
(b) To maintain the storage of stock certificates or other evidence of ownership of the assets held as part of the trust property;
(c) To maintain the books and records of each trust established under this trust agreement;
(d) To maintain an office for meetings with the Trustee and for other trust business;
(e) To originate, facilitate and review trust accountings, reports and other communications pertaining to the trusts under this trust agreement with any Trustee, Independent Trustee, Administrative Trustee, Investment Manager, beneficiary and unrelated third parties who have a reasonable need as to that information;
(f) To respond to inquiries concerning the trusts established under this trust agreement from any Trustee, Independent Trustee, Administrative Trustee, Investment Manager, beneficiary and unrelated third parties;
(g) To prepare and file (or arrange with the Trustee for preparation and filing of) income tax returns for the trust and any other reasonably necessary compliance or information returns;
(h) To execute documents as to trust account transactions; and
(i) To retain accountants, attorneys, agents and other advisors as to the performance of the Trustee’s duties.”
These new trust revisions are also in line with the evolving greater use around the country for directed and delegated trust planning. The Trustee can continue being the Trustee quarterback of the trust, with the benefit of others handling the administration and investment management. These trust revisions also are in line with what I perceive as an exponential growth over the past few years of the complexity and choice-options we face in virtually all facets of our lives.
My revisions mean that a trustee (for example, a surviving spouse) does not have to be burdened with the entire gamut of trustee responsibilities. Rather, in this example, the surviving spouse can delegate the administrative duties of the trust and/or the investment management of the trust assets, if he or she so desires.
Also, by inclusion of these delegation provisions in the trust document, an administrative trustee and an investment manager, if and when they accept these positions – by operation of these new trust revisions – become subject to a fiduciary duty as to the trust. This further provides protection of the trust assets, etc.
In addition, the delegation of the Administrative Trustee can be useful if circumstances arise where the legal situs of the trust needs optimally to be in another state (for example, moving the trust from Georgia to Delaware). This situs-change can be for tax and non-tax reasons. The delegation of investment management also can help avoid investment scams, Madoff situations, cold-call / penny stock sales pressure, or simply poor, undisciplined or lack-of-attention investment management and oversight.
Finally, I understand that one reading this post might react with: “These new provisions make trust planning too complicated, with even more planning options to consider, etc. I just want something simple.” This is an understandable response. And, there is always the available effortless option of having merely a “simple” outright estate plan, or no plan.
But, my reply to the notion of a “simple plan” or “no plan” is that these options do not avoid or eliminate the universal element that we all may face at some point in our lives. That is, upon our incapacity or death, someone will inevitably have to step in and oversee our affairs and property, etc. This is a zero-sum game. The question for all of us is (or will become) when, who and how?
Does a client wish now – prior to incapacity or death – to design an estate plan that gives the client input and control over these “when, who and how” factors? Or, does the client wait and let these decisions and responsibilities fall to someone else?
Here is an important question: Who can (and will) oversee and help safeguard your tax-deferred retirement accounts? The absence of an easy answer creates the following difficulty. 
The point underpinning this difficulty is that the tax law does not allow ownership of a tax-deferred retirement account by the account owner’s living trust. The law allows no living trust option. Without this trust option, there can be no successor trustee who oversees and manages the living trust assets in the event of the account owner’s age-related incapacity, etc. [A qualifying trust is allowable only after the individual dies; but the point of this blog post centers on the owner while still alive.]
This lack of living trust oversight creates exposure, for example, for failing to make the required annual distributions, etc., resulting in substantial tax penalties; threats of Madoff investment scams; friends and others persistently pressing for financial handouts resulting in larger distributions from the account than what otherwise is prudent, etc.
Realistically, while the retirement account owner is alive, the tax law limits ownership either (i) in the owner’s name; or (ii) in a financial institution trustee’s name, called a “trusteed IRA”, that in most cases I do not recommend. The last paragraph of this blog refers to the unsuitability typically of the trusteed IRA option.
Due to this individual ownership option, I recommend a separate, well-drafted retirement accounts power of attorney (“RPOA”), expressly covering a broad range of specific powers for the named agent, plus with the RPOA designed to help overcome the following increasingly difficult hurdle.
This hurdle is the refusal of many financial institutions to honor a broader, more general power of attorney. This is where banks, financial institutions, etc., simply balk at acting under the directive of a power of attorney.
Why the hurdle? Financial institutions are understandably concerned about their risks when dealing with an agent under a power of attorney (rather than directly with the principal), and the related significant pressure these financial institutions face for anti-terrorism transparency, and their need to avoid lawsuits among family members, etc. But, this institutional self-interest cuts against the interest of the retirement account owner.
The RPOA, therefore, helps balance these risks for both the institution and the account owner. And, although I can provide no guarantee these institutions will honor this specific, particularized RPOA, its detailed provisions arguably provide reasonable and substantive strength in support of the institution not so easily being able to deny the document. The RPOA might also support a position that a financial institution’s denial of the RPOA is unreasonable, potentially opening the door for damage claims against the institution.
As an aside to this RPOA situation, I am fully aware some financial institutions are mandating that account owners use only the institution’s power of attorney form. But, these institutional forms include overly-generous liability waivers with indemnification clauses favoring heavily the financial institution for its own protection; these institutional forms exist for the institution’s benefit, not for its customers.
As another important aside, below are the heading topics for the RPOA document I recommend:
- Applicable Jurisdiction
- Successor Designation of My Agent
- Written Acknowledgment by a Successor Agent
- Coordination With Other Powers of Attorney
- Effective Date
- Release and Indemnification of My Agent
- Third-Party Reliance on this RPOA
- Conservatorship / Guardianship
- My Intent
- Annual Minimum Distributions
- Additional Distributions
- Exclusive Power to Direct
- Roth Conversion / Medicaid Annuity Planning
- Checks on My Behalf
- Spousal Roll-Overs
- Modification / Change of Accounts
- Naming of Custodians for Minors
- No Power to Change or Revise Beneficiaries
- Investment Delegation Powers
- Tax Elections
- Incorporation by Reference of Fiduciary Powers
- Permitted Use of Certified Photocopies
Finally, back to “trusteed IRAs.” Under the controlling tax law, a trusteed IRA (i) does not allow a spousal rollover for the surviving spouse and (ii) requires that the financial institution overseeing the account must be the sole trustee. I also find most often a trusteed IRA agreement locks the financial institution in as trustee after the account owner’s death, thus barring any change by the beneficiaries of the investment management platform or removal and replacement of that institutional trustee.
 I refer to “IRA” in this blog post, but, the same discussion applies generally to corporate or self-employed (“Keogh”) pension, profit-sharing, defined-benefit, and stock bonus plans, SEPs, 403(b) plans, IRA and Roth IRA accounts, inherited IRAs, spousal rollover IRAs, 401(k) and Roth 401(k) plans, and 457 plans. It also applies to a judgment, decree or order for any retirement plan, for payment on the owner’s behalf of child support, alimony or marital property rights, referred to typically as a “qualified domestic relations order.”