Digital Assets. Leaving Without Them.

For most of us our lives are deeply tied to digital content and access, both in our work and leisure. My law practice is virtually paperless, and has been for the past few years.  In another progressive move, the Georgia legislature during 2018 enacted the “Revised Uniform Fiduciary Access to Digital Assets Act”.  This is under O.C.G.A. Section 53-13-1 et seq.  In short, these laws set forth the authority, manner, and powers that enable your agent to act on your behalf as to your digital assets. An agent is a  guardian, conservator, trustee, executor, etc.  In other words, if I were to drop dead today, what happens to my digital world, and who will have the ability to pick up the pieces?

The purpose of this blog post is not to provide an extensive discussion of Georgia’s new digital assets law.  Others have already prepared numerous, excellent posts and articles. Click here for a comprehensive Fall 2018 Georgia State University Law Review article on this subject.

The point of my blog post is to share the following provision that I designed for inclusion in a revocable living trust in response to this new law.  This trust language might be helpful to readers as a real world example of how this digital assets factor might fit with one’s estate planning.  I also invite readers to give me their comments about this illustrative provision. The topic of “digital assets” is exponentially changing and expanding all across the country (and world) as well as in the courts.  In my view, there is not yet clear-cut, consensus on the optimal way to address this new-world topic. My approach, therefore, is to provide a provision that is as broad as desired, and flexible, to take into account these continuing, exponential changes in our digital world.

I also realize fully that one might possibly, and simply,  cross-reference the above new Georgia statutes in a trust or other document without the need also for including more-expanded digital assets language in the document beyond the mere cross-reference. But, until (and if) all states eventually enact these uniform digital assets laws, I am not comfortable merely adding a statutory cross-reference in the document, without more; especially if the document may later need to operate in jurisdictions other than Georgia.

Below is my revocable trust document provision (which I have to disclose to readers cannot be relied on by  readers of this blog post as legal advice from me for any reader’s own situation).  I provide this provision only as food for thought:

6.2            This section defines my electronic communications content with my intent that this definition be construed as broadly at my death as possible to take into account my digital assets and electronic communications content as defined herein and in O.C.G.A. Section 53-13-2 (as amended), as well as changes in the digital and electronic-communications technology that will continue to occur after the date of my execution of this trust agreement; provided, however, that any direction at the time of my death as to my digital assets and electronic communications content that I have implemented using an online-tool (as to such digital assets and electronic communications) shall override any contrary provisions under this trust agreement. Except as may limited by my online-tool designation otherwise, my electronic communications content under this section 6.2 includes the digital content as to any computer software, account or digital app that I access on a computer where such digital information is stored on my computer or on the digital web, or for which I have user-name / password access, including, but not limited to, any of my accounts, webpages, URLs, and domain names (as examples: account login information and passwords, account profiles, photos, posts, passwords, crypto currency blockchain network, wallet, and key data, emails, texts (including phone texts), financial account information, email account information, blogs, bulletin boards, Facebook, iTunes, Instagram, Snapchat, all other social networks, and to obtain any administrative or  user-profile information pertaining to any of the above accounts (digital or hard copies, or otherwise), summaries, data files, statements, photos, videos, audio files, texts, e-mails and attachments to such e-mails, within these accounts). More broadly, my digital content also includes all digital files stored on my digital devices, including but not limited to, desktop computers, laptops, tablets, peripherals, storage devices, mobile telephones, smartphones, password apps and any similar digital device that currently exist or may exist following my execution of this trust agreement, my emails that I send and receive, email accounts, digital music, digital photographs, digital videos, software licenses, social network accounts, file-sharing accounts, financial accounts, domain registrations, DNS service accounts, web hosting accounts, tax preparation service accounts and data, online stores, affiliate programs, other online accounts, and similar digital items that currently exist or may exist, or such other comparable items that come into existence as technology develops, regardless of whether I own the physical device on which the digital item or data is stored; provided, however, my digital assets and electronic communications content shall not include any underlying assets or liabilities referenced by, or accessible with, such digital content unless the asset or liability exists exclusively and solely in digital form only as a digital electronic record, such as, but not limited to, crypto currency, photos, audio files, videos, music playlists, emails, iTunes content, Kindle reading and audio files, etc.

6.3            As to my electronic communications content, in order to facilitate the Trustee’s administration of this trust agreement, including after my death the administration of my estate, I give both my Trustee and my duly-appointed executor access to my electronic communications content as may be reasonably necessary from time to time for the administration of this trust agreement and my estate.

6.4            Following my death, and after taking into account the preceding provisions of this trust agreement, the remaining property under this trust agreement (including any distributable interests in my electronic communications content) is for purposes of the following trust provisions referred to as my “Trust Remainder“.

Note that I designed the above provisions so that any digital content that is an asset or liability (see above definition on this point) becomes part of the trust remainder  to be distributed by the trustee under the following provisions of the trust document. Typically, I am more comfortable having the trustee designated for handling these items rather than making a specific bequest of any such digital assets or liabilities to an individual beneficiary.

Ponder also, for instance, if a person, to others’ great surprise, dies with $10 million of crypto currency. Where does that unanticipated digital asset fit with the estate planning? Under my trust remainder language above, this crypto currency would be available, for example, for a QTIP marital deduction trust under the terms of the revocable trust,  etc., to be addressed and held in the hands of the trustee with greater oversight, flexibility, and so forth.

 

 

Whoops. The No-Contest Clause Backfired!

This blog post is in response to a recent April 2019 California case dealing with disgruntled siblings and an “in terrorem” (or no-contest) clause in their late mother’s revocable trust document.  I use the California case to make the following broader comments for this blog post and tie my comments to a Georgia point.

An in terrorem clause (no-contest clause) in a Will or trust document is to prevent beneficiaries from raising issues as to the Will or trust in order, in most cases, to try and increase their share. The provisions under Georgia law for no-contest clauses are under O.C.G.A. Section 53-4-68 (for Wills) and Section 53-12-22 (for trusts).

An example of a no-contest clause in a Will is:

“If any beneficiary, alone or along with any other person or persons, directly or indirectly, contests or initiates proceedings to contest this Will in any court with a challenge to its validity of all or any part of my Will or in any manner, attacks or seeks to impair or invalidate any of the provisions of my Will or prevent any provision of my Will from being carried out in accordance with its terms, that contesting beneficiary shall be deemed to have predeceased me and as a result shall forfeit his or her interest under this Will in its entirety with his or her forfeited share passing to my other children, per stripes, as though the contesting beneficiary and his or her descendants all predeceased me.”

This blog post is not for the purpose of an extensive discussion about the design and use of a no-contest clause.  But, rather, it helps illustrate that no-contest clauses are not just simply boilerplate provisions that one can, or should, without careful thought merely cut-and-paste into a Will or trust.

Below are a couple broader comments as to no-contest clauses:

I start with reference to a recent 2019 California court opinion dealing with a no-contest clause. This case has an extremely interesting and surprising twist that one of the litigious sisters likely never expected, to her detriment. This case is Key v. Tyler, 2019 Cal. App. LEXIS 358 (April 19, 2019).  Click here for a copy.  The core facts are that three adult sisters are beneficiaries of their deceased parents’ 1999 family trust.  The family trust essentially provides for an equal split among the three sisters after their parents’ deaths. As of January 2006, the family trust was worth over $72 million.  Lawyer-sister Tyler was the trustee.

A 2007 amendment to the 1999 family trust surfaced after the mother’s 2011 death (the mother was the second parent to die). After their mother’s death, sister Key asserted that her lawyer-sister Tyler had unduly influenced their mother in 2007 to amend the 1999 family trust. The 2007 trust amendment was apparently orchestrated by Tyler and resulted in Tyler increasing her own trust share substantially in excess of her other two sisters (including Key). The 1999 family trust and 2007 amendment each included a no-contest clause.

Sister Key, after the mother’s death, filed a California court action and asserted the 2007 trust amendment was the result of undue influence over their mother by lawyer-sister Tyler . The California court agreed with sister Key, with the result that the 2007 trust amendment was essentially disregarded. Although this California opinion is rich with an abundance of procedural details, factors, concepts, and other elements in this sister- v.-sister litigation, I make only the following three comments stemming from this California case (my knowledge of the facts in this case are based solely on information in the court opinion):

One. This point centers on the 1999 family trust and the 2007 trust amendment, each having a no-contest clause.  One might reasonably ask:  With the trust document having a no-contest clause, how was sister Key (the non-lawyer sister) able to attack the 2007 trust amendment, without triggering the clause against herself (Key)?

The reason is that California law, as with some other states (but not Georgia), has an exception to the challenge to a Will or trust with a no-contest clause, if the person making the challenge can show probable cause at the time of filing the challenge, such as probable cause of undue influence, or mental incapacity, etc.

In other words, without probable cause a person cannot simply file a challenge to a no-contest clause Will or trust and hope during the discovery phase of the litigation to luck-up or stumble across evidence of undue influence, or mental incapacity, etc.  Probable cause up front reduces fishing-game litigation. Absent probable cause, the person making the challenge to the Will or trust also risks losing, with the result of being penalized by the no-contest clause.

Two. This next move in this litigation by sister Key is what greatly sparked my interest in this California case.  Here it is:  After sister Key successfully challenged and obtained the set-aside of their mother’s 2007 trust amendment, Key then filed a petition to enforce — against her lawyer-sister Tyler — the no-contest clause as to the 1999 family trust. This is the backfire.

Here the reader might say “Wait a minute, it was sister Key who challenged the 2007 trust amendment.  Lawyer-sister Tyler never asserted any challenge.  So, why now is lawyer-sister Tyler facing loss of her inheritance based on her (Tyler’s) violation of the no-contest clause? “

There are two primary reasons.  First, the California court concluded sister Key had sufficient probable cause of undue influence to file her challenge to the 2007 amendment, even with the no-contest clause.  The probable cause exception under California law provided an exception for Key to the trust amendment’s no-contest clause.  Second, and this is the part of the California court opinion that really grabs my interest.  The court, in concluding sister Key can seek to enforce the no-contest clause against Tyler, states:

“By [lawyer-sister] Tyler obtaining the 2007 Amendment through undue influence and then defending that amendment in court, Tyler sought to ‘impair’ and ‘invalidate’ the provisions of the original Trust that the 2007 Amendment purported to replace.  The No-Contest Clause therefore disinherits Tyler if it is enforceable against her.”

2019 Cal. App. LEXIS, *29.

I assume lawyer-sister Tyler was completely blindsided by now finding herself the subject of a possible no-contest clause violation, and never for a moment considered that her court fight as trustee to defend and uphold the 2007 trust amendment would (or could) be the basis of Tyler herself violating the no-contest clause. Tyler now stands to lose her share of the trust if the court ultimately concludes Tyler violated the no-contest clause [the court has not yet arrived at a conclusion].

Three. This final point ties my Georgia discussion to the above California case. Georgia does not have a probable cause exception that allows a beneficiary with probable cause to challenge a no-contest clause Will or trust. My view is that Georgia (and all other states) needs a probable cause exception.  This is up to the legislature.

Here also is my concern, merely as an example, of there being no probable cause exception in Georgia.  Assume a family friend, business associate, or even a lawyer, becomes a close friend of an elderly widow or widower.  And that person persuades the elderly person to change his or her Will to include him or her as a substantial beneficiary (or gets the elderly person to add his or her church or other charitable institution as a substantial beneficiary). Assume also that person persuades the elderly person to include a strong, no-contest clause in their Will or trust.

This could be a tragedy and, in my view, would prevent another beneficiary or family member from challenging a Will or trust that now benefits the family friend, business associate, or lawyer, even if the challenging beneficiary has probable cause. The person influencing the elderly person, therefore, shields himself or herself by influencing the person to include the no-contest clause.

My final general point is to make sure you know what documents your elderly parents have in place, and whether they are making changes, influenced by others, etc. Don’t end up with no options to challenge their situation where someone influences your parents to include him or her in the Will or trust, and also influences your parents to include a strong no-contest clause.  This person may likely end up with your inheritance,  unscathed.

One last comment for readers who wish to read the attached California court opinion.  That is, the court opinion provides a great deal of discussion about this California sister case being a SLAPP case [“Strategic Litigation Against Public Participation”]. SLAPP is essentially a procedural speed-up option available for certain litigation cases, that I also find is an extremely interesting, evolving court development.  I will write a blog post soon about what SLAPP is and why I find it a compelling and positive development in litigation.  [California has a much broader range of SLAPP options compared to Georgia.]

I Revamped My View on Core Estate Planning

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Privilege of the Proverbial “Finger”

Being a lawyer makes me hyper-attentive to whether anyone’s rights are being denied or limited, and what that person must do to exert the necessary power to address a situation (e.g., through persuasion, litigation, preventive planning, etc.).  In these circumstances, one has to utilize purposeful power to right the situation, rather than merely hoping for some pleasant, affable, go-along / get-along resolution.

With my blog easily at my disposal, and both as a lawyer and individual, I cannot sit back silently in the midst of what I consider to be completely misdirected attacks against Colin Kaepernick and other NFL players voicing their protests.   I refer further below to  a racial epiphany I had a couple years ago relevant to these NFL protests.

I have enjoyed the benefit of white, male privilege my entire life. I grew up in north Fulton county Atlanta. My father was a successful lawyer; he and his three brothers attended college in the 1930s [Vanderbilt, Davidson, and MIT]. All three were Phi Beta Kappa graduates.  My father graduated number one in his Vanderbilt law school class.  He was the only law student in his class who, immediately upon graduation during the depths of the depression, secured a lawyer job (with attorney Bill Sutherland of the then-Atlanta law firm Sutherland, Tuttle & Brennan), and on and on.  Most importantly, during my entire life I have had the liberty essentially to give anyone the proverbial finger, without any thought or fear as to how I am, or may be, perceived.

Here is the epiphany I experienced two years ago.  My wife, kids and I had dinner with a family whose kids go to the same private school as my kids. We are longtime friends. Our friends are black. The father – we’ll call him  “Mark” — and I were having after-dinner drinks. Mark is a successful executive at a large Fortune 500 company.

As Mark and I talked over drinks, I commented — because I was growing my hair longer — that if I were a black guy I would probably have the most militant afro possible.

Mark responded by stating that, as a black man, he cannot sport the afro I referred to (not that he even wanted one). Mark said that having a large afro would create an extended array of additional problems for him.  Possibly more night-time police stops while driving or being characterized as some kind of radical Black Panther, etc. Mark acknowledged that he has to toe the line so as not to create these potential racial misperceptions, and that he has to teach his children to be aware of these same misperceptions.

My reply to Mark was that this burden he and other blacks carry is a consideration I had never in my life had to worry about (or even think about).  For example, I can drive anywhere I wish at night and sport whatever clothing or hairstyle I choose without fear of being misperceived (and even if I am, there will likely be no consequences). I can walk anywhere, or into any store or mall, without people clutching their handbags, or purposely crossing the street to avoid me, etc.  I can disagree with anyone I choose.

Up to that night, it had never occurred to me that Mark and his family face any social differences or prejudices compared to others in our network of school friends and families. I simply assumed we all had arrived at the same status in our lives as to  our children, our own college education, successful jobs, comfortable homes, our children’s private school education, social status, etc. The point is I had never even considered or thought about any disparity among our families.

For the first time I realized that even my good friend Mark — although outwardly as successful as (and likely more so) any of our mutual network of family and friends — has to bear a burden of racial bias completely foreign to me.  With this revelation, I realized Mark cannot avoid this ever-present element of race-tainted perceptions of himself and his family members. Nor can Mark use the proverbial finger (or even exhibit the spirit of the finger) as freely as I can. I perceive Mark’s situation as a powerfully insidious and persistent form of inequality and denial of liberty, in a way possibly not yet perceived, let alone understood or acknowledged, by many white males.

Now back to the NFL players. My assumption is that they – in continuing the protests on behalf of themselves and those who are mislabeled and misperceived because of race – understand (and feel) this inequality. And, I believe it is a misdirected fallacy among many critics of these NFL players who express the notion that the NFL players should be thankful and grateful for their money, fame, and success and, accordingly, toe the status-quo line without protest.

My view is that these NFL players, by using the power that the money, fame, and success gives them, are able to more directly and openly draw attention to this racial disparity in a way that now has triggered the closer attention this issue deserves. These players are no longer merely toeing the line, nor should they.

One further comment from my view as a lawyer. Our greatest liberty in the U.S. is the right to protest, dissent and disagree openly. Merely stating someone is disrespecting the flag by kneeling during the national anthem is a knee-jerk platitude that diverts attention away from considering why the NFL players are protesting; and, how we all might be more receptive to try and better understand the rationale and underpinning of these NFL player protests.  My view is that our flag — and the freedoms and rights it so importantly symbolizes – is an icon consistent with why these players can (and may) choose to kneel in protest.

My hope with this blog post is that my white male readers can at least consider the tremendous privilege we have; and, in view of that privilege, be willing to imagine themselves for a moment in the place of these NFL players who, in my opinion, are unselfishly courageous in helping shed more light on these racial issues.

As Edmund Burke aptly said, “The only thing necessary for the triumph of evil is for good men to do nothing.”

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.

It’s Irritating. Estate Planning is Vastly Complicated.

This blog gives you some brief thoughts about how to begin thinking about this topic.

In my daily lawyer world of trust/estate planning, disputes, problems, and litigation, I remain frustrated that the system of estate planning is way too complicated. Most people, inevitably captive to this system, understandably find it so daunting that inaction becomes the most comfortable and common reaction.

This complexity does not stem only from tax planning concerns. But keep in mind, these tax concerns now actually are affecting a larger number of clients as we move closer to a Canadian capital-gain-at-death system. Income tax savings at death with creative use of the FMV stepped-up cost basis is becoming a top priority for estate planning.

Even if tax concerns were off the table, for all of us there is the ever-present risk of what happens to our property if in getting older we end up with age-related incapacity, and when we die.

Will we lose our property to someone taking advantage of us, a greedy caretaker, remote family member, an old-age second marriage, elderly investment scams, nursing home expense, identity theft, etc.?

And for many of us after our death, the universal question will arise about whether we protected our surviving spouse.

Will someone dupe our spouse into an elderly marriage and dissipate the assets? Scam him or her? Pad the investments with oversold penny stocks? Put excess pressure on our spouse to make early gifts and give financial handouts to others? For our children, what happens to our property in the event of their divorce, their own elderly years, etc.?

Here are five threshold points to consider:

One. Have you identified individuals you absolutely can trust to step-in and handle your property and affairs in the event of your incapacity or death?  This is the number one difficult question, as it requires your subjective conclusion in making these choices. Also this question is unavoidable. Someone will in all cases take up this oversight role. Optimally you make the choice as part of your planning, rather than later someone else or a court making the choice;

Two. How will the above trusted individuals step-in on your behalf in the event of your old-age or incapacity? This point goes to you having a revocable living trust in place now, and a comprehensive financial power of attorney document;

Three. Who do you trust to handle your financial management?  I have finance undergrad and MBA degrees and believe strongly this trust factor is number one in making this choice. I remain appalled at the hype we all read and hear every day for questionable investment seminars, scams, and get-rich schemes;

Four. Do you have the necessary built-in bells and whistles adaptive down the road for optimal estate, gift and income tax savings? This also gets into what I mentioned above about the ever-increasing income tax exposure as a result of death; and

Five. Have you provided protection (using a trust set-up) for your children for the property you leave them in the event they later get into a nasty divorce? This loss of property occurs far too frequently due to divorce property division and alimony. Your children’s divorce exposure can be reduced dramatically with effective trust planning. And, in my opinion with better effectiveness than simply a prenuptial agreement.

Bottom line, there are no good, alternative options for clients who avoid getting into this irritating, complex planning. This complexity is a reality, simply boiling down to a cost-benefit equation. Who pays the time and expense of your planning?  And, is this time and expense something you deal with now or let your family address later at your incapacity or death?

Rethinking: “That’s the way we’ve always done it” and a Surviving Spouse’s Elective-Share [Estate Planning]

The provisions in this Will for my husband are in lieu of any statutory share, including, but not limited to, any forced share, minor’s allowance, surviving spouse allowance, year’s support, or otherwise.

The above provision for 40+ years has been included in most Last Wills and Testament. It centers on the law in most states that generally does not allow a spouse to cut the other spouse out as an estate beneficiary. Even if a spouse is purposely left out of a Will, the surviving spouse under most state laws has a right to a portion or all of the deceased spouse’s estate. This surviving spouse right is called, for example, an “elective share” or “widow’s allowance”. Georgia law refers to this surviving spouse right as “year’s support”.  A court generally has to approve the surviving spouse’s request for an elective share, and the request allows the court to consider objections from other estate beneficiaries and creditors.

The above in-lieu-of provision has the effect of forcing a surviving spouse to decide and choose (i) whether to take whatever is provided for him under the deceased spouse’s Will or (ii) to seek a state-law elective share. My point is that this forcing-of-a-choice is no longer a preference in many cases. For reasons I do not cover in this blog post, this forced-choice approach has been used most often to protect against an inadvertent loss of the marital deduction for estate tax purposes. An elective share typically does not qualify for an estate marital deduction.

Practitioners need to rethink whether to include this longstanding forced-choice provision in a Will. Here are the four points to consider:

·       One. For most clients the marital deduction is not a material concern due to the inflation-adjusted $5.43 million estate exemption. And, with good tax counsel a surviving spouse can avoid chilling the marital deduction even without this in-lieu-of provision, if the marital deduction is essential.

·       Two. The elective  share in many cases is an award of property to the surviving spouse that is superior to unsecured creditor estate claims, such as if the first spouse dies with a substantial amount of unpaid bills and credit card debt (including unpaid property taxes in some cases). In other words, the elective share property can pass to the surviving spouse without the property being otherwise used to pay the deceased spouse’s unsecured debts.

·       Three.  This is important.  If for some reason the court does not allow the full amount of the elective share sought by the surviving spouse, without this in-lieu of provision the surviving spouse still retains the fallback of getting property under the provisions of the deceased spouse’s Will. By contrast, the in-lieu-of provision can have the adverse result of a surviving spouse failing to obtain the elective share and, having made the choice, losing his benefits under the Will.   Remember, the in-lieu-of provision mandates a choice.

·       Four. In some situations this elective share approach can help protect against Medicaid estate recovery, again, as property passing to the surviving spouse is generally superior to debts.