Irrevocable Trusts are No Longer Carved in Stone

For my continuing legal education (CLE), I attended recently the 2023 University of Miami Heckerling Institute on Estate Planning. It is always a great week of very informative presentations. [I am the ultimate nerd who attends every presentation and who writes notes throughout every presentation. Although I generally do not refer again to the notes, the note-taking process helps burn numerous points into mind.]

One of the key presentation points at Heckerling that continues to resound more loudly each year is the notion of how — in some cases essentially easily — one now can change or rewrite an otherwise existing irrevocable trust by decanting, or distributions in further trust, non-judicial settlement agreements, etc. In my view, the idea of an irrevocable trust substantively no longer has powerful relevance. By contrast, in my first year of law practice many years ago, following my first meeting then in which our client signed an “irrevocable” trust document, I felt as though that document had at that moment become carved in stone.

Bottom line. And consistent with a recommendation from one of the Heckerling speakers, you should consider including a provision in your trust document that helps protect against eliminating beneficiaries as a result of a decanting, non-judicial settlement agreement, etc., such as my own sample language below:

Except as to an exercise of the powers of appointment under Article XX of this trust agreement, no statutory powers in any jurisdiction, including but not limited to decanting or by non-judicial settlement agreement, nor by operation of any other provisions included hereinafter, may be exercised in any manner with the result of removing or eliminating any individual’s beneficial interest under this trust agreement, whether or not such interest is at such time vested or contingent.

You can email me at james@ktlawllc.com or text me at our law firm central phone number (470) 401-0100.

For 2022 I am Adding Simpler Estate Planning to My Law Practice

This blog post is to inform my readers that, beginning this year 2022, I am reducing substantially my trust and estate litigation practice. I am returning to a greater concentration on trust and estate planning, including flat-fee options for less costly, more-basic estate plans for certain clients who do not need the most complex planning available, and its inevitable higher fees. I will still handle complex planning, particularly for trusts, but will recommend simpler estate plans when appropriate.

Below are some observations that touch on my decision to return more fully to the above planning:

One. I admit I enjoy litigation, almost too much. [Ask my wife.] I love the aggressive warfare, complexity, strategy, the uncertainty, and the Sun Tzu “The Art of War” psychological aspects of the challenge. I thoroughly enjoy fighting opposing lawyers. But, after the past 15-years of intense litigation, I would like to see what life is like (both at the office and at home) without the effects on me of this constant warfare (and how the absence of this persistent aggression might play into a novel, interesting chapter both in my personal and professional life). I realize also I am simply not capable of handling litigation without my enjoyment of a heavy expenditure of aggression.

Two. Now that I have a few years (5 years) experience as a smaller-firm lawyer, it finally dawned on me that my previous 20+ years in the large law firm environment, at least for me, fueled a kind of intellectual pride that prevented me from being open to the notion of recommending simpler planning for clients, at least as an option. In a large firm setting, lawyers are understandably very proud of the elevated status and scope of their legal knowledge, and a large firm gives them an excellent platform in which to implement the most complex planning available, with the concomitant collection of larger fees. Simplicity does not invite accolades within a large law firm, and can be perceived as signalling laziness or lack of intellectual sophistication, etc. In other words, for many years for my estate planning work I had a great deal of pride in being able to demonstrate to my clients and my law partners the depth and complexity of my legal knowledge. This complex approach worked very well for the right kind of clients; but, not all clients need this vast level of unbridled complexity.

Three. The most important observation, however, is that it is the depth and complexity of a lawyer’s knowledge that can, or should, enable the lawyer to recommend simpler options, if simpler options are suitable for a particular client. A simpler option, in certain instances, may well be in the best interest of the client, but not in the best pecuniary interest of the lawyer. I also have said for years that an estate plan in which I am able to throw in every conceivable, complex feature and option is, in my experience, easier work than having to exercise judgment for designing and implementing a simpler plan. A simpler plan, ideally, requires that a lawyer be very well versed with the most complex planning so as to exercise good judgment as to when, and how, simpler options are suitable for a client.

Four. I will continue to keep up with all the latest estate and trust developments, including my yearly CLE attendance at the highly-informative University of Miami Law School “Heckerling Institute on Estate Planning”, so as to stay fully in the loop with the latest, complex planning options.

POSTSCRIPT re Colin Kaepernick Netflix Series 1.10.22

Postscript re the Netflix series “Colin in Black & White”: Kaepernick’s compelling statement below in this series (he was given up for adoption only days old) is a perfect example of why we each need to see the humanity in everyone, regardless of their political views, race, religion, etc. What is the pain within their unique lifetime that may have propelled them along a trajectory that someone later judges as unacceptable or wrong? Every single person, even the lowest of thugs and criminals, is seeking a level,of bliss in their lives. Sometimes their pain and hurdles end up too heavily stacked against them, and is blinding. This also is where we need to PRACTICE trying to be more compassionate. BTW, Kaepernick speaks to this point from a perspective of adaptive strength; not simply rudderless whining. The photo and caption below are from the Netflix series

The Colin Kaepernick Netflix Series. Excellent. Excellent. (for the reasons below)

This is not a political commentary on whether one agrees or disagrees with Colin Kaepernick’s response to the NFL debacle (although I am not a critic of Kaepernick). I am watching his Netflix series and find it phenomenal for the following broader reasons. It is titled “Colin in Black and White”. Click here for the link. Click here also for my earlier 2017 blog post in which I referred to Colin Kaepernick.

My point is that this Netflix series conveys very powerfully the question every individual faces in life (and in work). That is, how independent is one going to be versus how much will he or she follow what others want (or direct) them to do. This is, in my view, the most important question one must contemplate in life, and it is a contemplation that warrants repeated revisiting depending on the person’s evolving stage in life, considerations of the upside and downside of these decisions, temperament, consequences, etc.

My point also is not to indulge the reader with what my own long-winded views are in this regard. It is not my view that is important; but, rather how this universal question sits and is addressed by each individual. I will say generally that I am not one who has readily during my entire lifetime followed or acquiesced to the dictates and preferences of others. I certainly consider their suggestions, responses, etc., with an open mind. But, I then have relied fully on my own decisions. Some have backfired, no doubt. There are others who relish the idea of going-along-to-get-along. I do not fault these others; but simply realize that approach is not in my makeup.

Back to the Netflix series. I highly recommend everyone watch it regardless of any narrower focus on the Kaepernick-NFL situation. In my view, this series demonstrates the nuance and persistent nature of the above broader question that we all face throughout the entirety of our lives.

It is very easy (I assume) in life merely to do what others desire or impose. But, my guess is most people do not sleep well under such conditions. Even those decisions that backfired for me provide me with quality sleep resting on the notion that I followed my path, and with an enjoyable spirit, take full responsibility for that path. This ownership of our own pathway is, in my view, the broader reward and the essence of what Kaepernick conveys in the Netflix series. Finally, I will say that Colin Kaepernick in this series displays a level of courage to himself and his values that I believe warrants great respect and acknowledgment.

A Third 2021 Heckerling Estate Planning Take-Away: “Conduit Trusts”

This is my third 2021 Heckerling Institute take-away. It centers on Natalie Choate’s fine (as usual) presentation about the SECURE Act and its effect on 10-year conduit trust planning as part of one’s estate planning. A conduit trust is a “see-through” trust that receives a deceased participant’s periodic qualified retirement account distributions (such as from an IRA), with the conduit trust thereafter passing along that retirement account withdrawal from the trust to the trust beneficiaries.

The particular narrow focus of this blog post is how the retirement account distribution from the trust is thereafter taxed for income tax purposes to the recipient trust beneficiaries. This gets into the income tax DNI rules (distributable net income) and a goal of sprinkling these trust distributions to and among the trust beneficiaries so as to take advantage of their respective (in many cases lower) own personal income tax rates, etc.

In short, prior to the SECURE Act most conduit trust provisions were designed to include separate trust shares for each named beneficiary. However, in my view, the new SECURE Act 10-year limitation now points optimally to avoiding this separate trust result. In its place is a more desirable single conduit pot-trust from which — from the one trust — the periodic retirement account distributions can be sprinkled, as necessary, by the Trustee among a class of trust beneficiaries, such as a decedent participant’s children. This sprinkle element gets back to the above point about the potentially lower individual tax rates among the beneficiaries.

This blog post addresses how one might best be able to sprinkle out these periodic distributions so as to take advantage of the recipient beneficiaries’ lower income tax rates. This post also assumes the reader has some background experience with conduit trusts.

Specifically, a conduit trust now under the SECURE Act ideally needs to allow the Trustee to sprinkle the trust’s retirement account withdrawal to and among any one or more of the trust beneficiaries with each beneficiary’s share of DNI based on the distribution the beneficiary actually receives; not otherwise based on proportionate separate trust shares.

For example, assume there are five children named as the class of the conduit trust trust beneficiaries. Two children currently need distributions during 2021 to help with living expenses while at college. The younger three children do not yet need distributions. Assume in 2021 the Trustee withdraws $200,000 from the retirement account and, thereafter (as a conduit), distributes $75,000 from the conduit trust to Child One and $125,000 to Child Two.

The question arises as to how the $200,000 total DNI is allocated for 2021 for each of these two recipient children. The DNI answer is not simply that a trust beneficiary is allocated a portion of the trust DNI simply based on how much the beneficiary receives. Rather, the DNI allocation method must be a purposeful goal of the conduit trust design. In this instance, purposely avoiding separate trust treatment.

Keep in mind a conduit trust also must pass-along all withdrawn amounts from the qualified retirement accounts — during the same taxable year — on to the trust beneficiaries. In the above example, to Child One and Child Two who presently need the trust distributions. These retirement account distributions for a conduit trust also cannot accumulate in the trust itself. But keep in mind any continuing income-tax-free growth and accumulation continues to the extent the retirement account itself remains in place with no withdrawal by the Trustee (under the SECURE Act 10-year payout rule).

Back to the DNI element for a conduit trust. The ideal DNI treatment is for Child One in the above example to be treated as receiving (and taxed at her own income tax rate) $75,000 of the DNI, with Child Two receiving and taxed on $125,000 of the DNI. This DNI allocation goal is logical; but must be the result of the purposeful design of the conduit trust. Keep in mind DNI effectively shifts the income tax obligation to the recipient trust befeficiarues at their lower marginal income tax rates. The trust, in this example, does not pay any income tax on the $200,000 DNI at its otherwise higher, compressed income tax rates.

Without the above purposeful DNI design and result, there is a risk the above two children who actually received the $75,000 and $125,000 trust distributions are otherwise treated as having received and taxed each only on $40,000 DNI. This is based on 2/5 of the $200,000 trust income [as to two beneficiaries compared to the total five beneficiaries].

This would likely be a costly, inequitable result, if Child One is taxable for income tax purposes only on $40,000 of her $75,000 distribution; Child Two taxable only on $40,000 of her $125,000. Here is the costly result: the conduit trust itself would be taxable — at its higher compressed income tax rates — on the $120,000 DNI that is not deemed to have been distributed out to anyone in this example. The trustee also may likely have to withdraw additional taxable retirement account funds in order to pay this trust income tax liability. A circular challenge.

For my own benefit, and hopefully for the benefit of readers, I ask you to review my conduit trust provision below that, if included in a conduit trust (along with other necessary conduit trust provisions), may help avoid the above inequitable DNI result. Let me also just say that in this new SECURE Act environment this DNI question is a very important, new planning issue that we practitioners must now grapple with and address.

Below is the sample DNI trust provision:

” 7.11 There is no requirement under the preceding distribution provisions of this Article XXIV that the Trustee must make equal distributions to each member of the class of beneficiaries named in the preceding section 7.10.  As to any periodic conduit trust distribution to any one or more of the class of beneficiaries under this Article XXIV (whether equal, unequal, or in no amount as to any one or more of such beneficiaries), my intent is that each such beneficiary’s respective receipt of a distribution, if any, be treated as distributable net income (“DNI”) to that particular recipient beneficiary proportionate to the distribution amount he or she actually receives with the result that only the recipient beneficiaries as to periodic distributions hereunder are treated as receiving a proportionate share of DNI based on his or her actual pro-rata receipt of the total distributions.”

The Novel “Madame Bovary”; A 160-year Marvel by Gustave Flaubert

Just finished my first-time read of the novel “Madame Bovary” by Gustave Flaubert (the Marx-Aveling translation). Wow! Flaubert highlights what I believe is one of the most important universal questions we all repeatedly need to ask ourselves. For example, the question of the vastness and richness of life, and the potential experience and response to our lives well beyond merely: “Good little Daddy gets up and makes breakfast; “Good little Daddy goes to work”; “Good little Daddy comes home and reads the evening paper, and is a great family man”; repeat, repeat, repeat, etc.

Below is a related excerpt from The New Yorker magazine (11.5.17) from a Professor Roxana Robinson, on teaching Madame Bovary to her students each year at Hunter College:

“At the start, Flaubert encourages us to judge her [Madame Emma Bovary]. But by the end he asks us to consider what it means to sacrifice everything for a dream. He asks us to consider human dreams and their worth. He asks who among us are heroes. He asks us to consider the human body, which is such an intimate partner in our lives. How Emma’s body, so strong and vigorous in her pursuit of love, finally compels a dreadful reckoning over which she has no control.”

The 80% Rule to Avoid Letting Others Get Under Your Skin

Bottom line, we all can be happier if we disregard 80% of what anyone else tells us. If you stop and consider carefully the words that typically come your way from others, most of them consist merely of argument, bias, preferences, or ungrounded (often unsolicited) recommendations and conclusions that some other person feels compelled to send your way. Lawyers, in particular, have to listen to a lot of argumentative, biased blather from opposing parties, etc.

Related to the above point, as I was driving to my office today I thought about how far too many individuals (e.g., assume Person A) allow others (Person B) to hook them and get under their skin too easily, with a feeling that Person A, thereafter, has an obligation to respond to or convince Person B as to why Person B is wrong, etc. On the other hand, and under the 80% rule I stated above, my view is that Person A is wasting otherwise valuable time that does not need to be wasted on Person B, or on responding to about 80% of what Person B said. Just simply let about 80% of what you hear go in one ear and out the other.

I frequently remind my girls about the above 80% point. I also periodically suggest that they consider (i) not accepting others’ framing of a perspective for any situation; but, rather for them (my girls) to step back and first take a moment to consider their own framing of the situation; (ii) then, next, listen to what the other person says to determine whether to accept any part of what that other person is saying that might be accurate, instructive or helpful; or, in some cases, simply disregard entirely all of what the other person is saying. In all cases, I suggest one should be civil, kind, and empathic. Just don’t buy into all that someone else says.

And, finally, readers I hope you apply these same recommendations to this blog post. I understand fully that not everyone will, or has to, agree with my comments, or even 80% of my commentary.

The Misdirected Framing of a Defense Argument in the Arbery Case

The blog post points ultimately below to my continuing, strong criticism of Gregory McMichael, Travis McMichael, and William Bryan’s inevitable defensive attempts to turn the table on Ahmaud Arbery and make Arbery out as the aggressor, against whom Travis McMichael was the victim who had to defend himself by fatally shooting Arbery three times with a 12-gauge shotgun.

I am not going to repeat details of this McMichael / Bryan killing here that are more than abundantly available in the media and on the web. The point I wish to make is to urge readers not to allow themselves to get pulled into this “Arbery-aggressor” argument. In my opinion, it is a misdirected framing of an argument the defense attorneys hope they can spin as a winning theme for the McMichaels and Bryan.

In short, and based on my review of the recent Arbery probable cause court hearing videos, the McMichaels / Bryan attorneys are (not a surprise) beginning to advance their self-defense argument, as follows: That is, just moments before Arbery’s death, Arbery “squared up” in a fighting stance and attacked Travis McMichael, who was standing by the side of his pickup truck brandishing a 12-gauge shotgun. Travis McMichael felt he was in threat of bodily harm and shot Arbery in self-defense. Travis McMichael’s attorney refers specifically to this defensive argument in his Closing Arguments during the recent probable cause hearing. Click here for a YouTube video of the Closing Arguments (listen, in particular, to the first 60 seconds).

Don’t fall for this misdirected framing of a defense by the McMichaels / Bryan attorneys. This defense is deja vu of the argument that enabled George Zimmerman in 2012 to walk free from his killing of Trayvon Martin.

I strongly criticized the 2012 Zimmerman acquittal because, in my opinion, when Zimmerman moved forward in order to hunt for Martin as part of Zimmerman’s attempt to investigate and find Martin, etc., all bets should have ended at that point for any “self-defense” or “stand-your-ground” argument for Zimmerman. In my view, when Zimmerman took it upon himself to make a move toward Martin to find him, etc., Zimmerman became the aggressor with no basis thereafter for a self-defense or stand-your-ground argument. Below is a simple example in line with my argument that Zimmerman became the aggressor.

Assume my wife and I are walking down the sidewalk at night. Some guy walks past my wife and me and appears purposely to bump into me with such force that I fall down on the ground. The guy keeps walking away from us. But, I reverse my direction, brandish my handgun, and chase down the guy; he “squares up” and moves in my direction aggressively to hit me; I shoot and kill him with my gun.

Now, in this example, one might argue this guy was the aggressor when he bumped into me, or when he “squared up” toward me, etc. However, I am the first aggressor relevant to my use of the gun. I am, therefore, the aggressor with the gun. My killing of the guy, in this example, likely would not have occurred (i) as he was walking away from my wife and me in the opposite direction, and (ii) I intentionally changed my direction and went after the guy while brandishing (and ultimately using) my gun.

I believe the example above with my wife and me is sufficient to convey my point contrary to the McMichaels / Bryan defensive framing of the issue. The McMichaels / Bryan were the first (and only) aggressors with the guns. It is entirely unreasonable to try and cast Arbery as the aggressor for purposes of the underpinning of the defense lawyers’ self-defense argument.

Finally, as a broader notion, assume you have a 25-year old son. Your son has been chased for approximately four minutes by three grown men using two vehicles. Your son becomes essentially trapped by the three men, and is likely so exhausted he can no longer run. One of the men is out of the truck brandishing a shotgun at your son.

As yourself these two questions: (i) what in that moment do you believe your son would have done?, and (ii) what in that moment should your son have done? In answering the second question, and now that we know Arbery is dead, can you realistically — with full conviction not affected by hindsight — state that in that moment your son should have simply put his hands up and surrendered?

As an aside, I certainly believe your son should put up his hands in any situation where the police are the pursuers. But, key to the Arbery case is that the McMichaels and Bryan were not police, were not dressed in law enforcement uniforms, were chasing Arbery in pick-up trucks; and were brandishing weapons; they, likely from Arbery’s perspective, appearing to be taking no survivors in their aggressive, exhaustive, two-vehicle corralling of him. Click here for my previous Arbery post about this vehicle corralling.

My ending point: Your framework for how you view this Arbery case should start at a point well before the defense lawyers’ efforts to have you too narrowly see this case only as a self-defense “squaring up” moment before Arbery’s death.

Ahmaud Arbery’s Death: The Tragic Four-Minute “Citizens Arrest” Chase (revised 5.26.20)

This post centers on Gregory McMichael, Travis McMichael, and William Bryan’s apparent four-minute vehicle chase in Georgia that ended in the tragic death of Ahmaud Arbery; and, in my opinion, that fails to any extent to fall within Georgia’s “citizens arrest” statute. I will soon write a second blog post with more details about the inapplicability of this citizens arrest statute.

My underpinning for today’s blog post is a recent May 16, 2020 video in the web version of the New York Times, captioned “Ahmaud Arbery’s Final Minutes: What Videos and 911 Calls Show”. Click here for a link to this NYT video. This video is a reconstruction of the 12 minutes prior to Arbery’s death, based on the construction site security camera, cell phone information, and 911 call data.

Below are the points I wish to make with this blog post.

One. This NYT video shows, quite shockingly and extremely painfully, how Ahmaud Arbery apparently was chased by one vehicle driven by Gregory and Travis McMichael, and by a second vehicle driven by William Bryan, before being trapped by all three men and ending with Arbery’s tragic death.

More specifically, the McMichaels and Bryan appear — in this NYT video reconstruction for a period of approximately four minutes — to have used their two vehicles to chase and trap Arbery. Arbery — running on foot from the two vehicles — apparently changed his direction twice in unsuccessfully avoiding getting overtaken and trapped. This apparent four-minute vehicle chase is not information I was aware of until seeing this NYT video.

What also jumped out to me powerfully from this video is that the McMichaels and Bryan appear to have twice turned their vehicles around along the roadway in their ongoing four-minute trapping of Arbery. The first of two reversals by the McMichaels is when Gregory McMichael apparently jumped from his truck cab into the bed of his truck and began wielding a .357 handgun as the chase for Arbery continued. In this NYT video William Bryan was apparently the first in this chase to reverse the direction of his vehicle as he continued to pursue Arbery, followed with a similar reversal by the McMichaels.

Two. My second point here is my own subjective perspective. It stems from my having lived in Atlanta my entire life. And, my observation in Georgia of the still-present deep level of racial prejudice, especially by many in the age 60+ range. And, no better than the overt racial views I observed in Georgia as a child during the 1960s is what I perceive at present to be a quiet, unspoken, “wink-wink”, still-deeply-seeded racial prejudice in Georgia. These are individuals who either are too cowardly to be candid and forthright in acknowledging their racial prejudice, or who have no interest in facing squarely a need to stop and challenge themselves about why and whether they are willing to contemplate a more-evolved perspective.

Three. This last point goes to the appearance of recent Facebook posts and web references in which individuals are placing the criticism and blame of this tragic killing on Ahmaud Arbery. To the contrary, I consider blame directed at Arbery to be nothing more than a premature, knee-jerk attempt to support a preconceived, racially-biased conclusion against Arbery.

So, please take a moment to ponder what your innermost race-factor reactions are to this Arbery killing, especially the apparent four-minute chase factor in the above NYT video. Ask yourself if you are jumping immediately to conclusions against Arbery, such as “Arbery had tattoos and looked like someone who is a criminal”; “Arbery had an afro [or dreads, etc.]”; “Why was Arbery running if he didn’t do anything wrong?”; “Arbery should not have walked into that house construction site”; or, “Why did Arbery resist if he was not doing anything wrong?”, etc. Or, is your reaction a passive acceptance simply that “This is what happens when a black man tries to run. Arbery should not have run.”

My forthcoming blog post will show, quite persuasively from my view as a lawyer, zero support for the McMichaels and Bryan being able to rely on the Georgia “citizens arrest” statute as a winning defense for their actions. These three men possibly may have thought they were properly making a citizens arrest, but whatever they thought likely was powerfully, and tragically, motivated by their own preconceived and prejudicial attitudes and beliefs about blacks, especially a black man running.

Revision today 5.26.20 — This NYC Central Park incident just in today illustrates very well the embedded racial bias we as a society collectively need to acknowledge and address, directly and with a receptive spirit. Click here for the update.

Here is the 5.12.20 Trump tax returns U.S. Supreme Court oral argument link

I listened yesterday to the lawyers ‘ recent May 12, 2020 oral argument before the U.S. Supreme Court in the Congressional House’s subpoena attempts to obtain Trump’s tax returns and various other business records. The subpoenas were not served directly on Trump himself. The subpoenas are for tax returns and business records held by certain other third-parties for time periods prior to Trump’s election as president.  This subpoena question is an extremely novel, and complex, separation of powers question.

Click here for the link to the U.S. Supreme Court webpage that includes the audio of the oral argument, as well as a pdf transcript of the argument.

I certainly have some thoughts from my lawyer perspective that touch on both sides of this subpoena issue.  But, more important than my own view, is this opportunity for you to listen to the oral arguments yourself.  Let me just say that the issue is not merely a simple, conclusory “What’s the problem? Just force them to turn over the records”.  In my view, whatever conclusion the Supreme Court makes in response to this case will be constitutionally monumental.  Your grandchildren will, no doubt, seriously study this case in their law school constitutional law classes.