This month's newsletter is a heads-up for clients and professional advisors, for the benefit of their clients. At the risk of preaching to the choir, here goes:
#1 - Tax Laws Have Changed. All readers are aware of the current uncertainties about the federal estate tax. Kiplingers' latest tax letter indicates that there is not likely to be any action with respect to those who die in 2010. Without Congressional action, the exemption goes down to $1.0 million and a maximum rate of 55%, effective January 1, 2011. Predictions are that the $3.5 million exemption of 2009 will be restored, rates will be subject to Congressional negotiation and there is a possibility that the exemption will be indexed to inflation.
Unfortunately, many people seem to be frozen in the headlights with respect to estate taxes. Assuming that death in 2010 is not imminent (with a potential free pass), there is really no good reason for putting off a review of trusts or wills, especially since many of these documents contain ambiguities about allocation of assets between A and B Trusts.
#2. Family Situation Has Changed. If estate plan documents were made more than ten years ago, it is very likely that some aspects of the family have changed. At a minimum, everyone is older! Maturing grandchildren and aging children often present obvious reasons for changes. Does a child's bequest need to be protected from creditors or divorce? Does the inheritance of a child or grandchild need to be deferred to provide retirement income or protection?
Are the Successor Trustees or Personal Representatives properly designated? Maturing children can take over instead of siblings or friends. A disinterested Trustee or Personal Representative may be needed to resolve potential disputes.
Special needs sometimes arise for children or grandchildren because of accident or disability. There are almost as many reason for family changes as there are families.
#3. Health Needs Have Changed. Health issues can require special provisions. The possibility of long term care (nursing homes) needs to be considered. Is an individual or spouse in need of assisted living facilities? If so, is Veterans Assistance a possibility? Remember that customary estate planning does not work for Medicaid Eligibility. Signs of dementia, Alzheimers or Parkinsons are themselves a reason to review estate planning documents and take precautionary action.
#4. Powers of Attorney and HIPAA Compliance Need to Be Checked. Patient Advocates previously designated may be unwilling to serve or may have moved out of the area. Individuals who spend significant portions of the year in several states may need multiple Medical Powers of Attorney. In many cases, Medical Powers of Attorney were executed before the federal HIPAA laws went into effect in 2003, and HIPAA compliant authorization for access to medical records need to be addressed.
General Durable Powers of Attorney may need to be changed, expanded and updated. Documents executed in middle age are probably not adequate or appropriate for people over 70.
#5. Is Your Trust Up To Date? Trust provisions are often out of date as it relates to allocation of trust assets between a Marital Trust and a Family Trust, in the case of married clients. Often Trusts have not been funded, defeating one of the principal reasons for revocable trusts - avoidance of probate.
Joint Trusts are special candidates for review. A married client with a sick husband recently was aghast to find out that their Joint Trust became irrevocable at her husband's death. Therefore, she would have lost complete control over their assets had the Trust not been amended by both husband and wife. In this instance, neither of them had any recollection or idea of the consequences of their existing trust document.
Second marriages pose special problems in estate planning. Often a husband and wife have not faced up to the normal emotional relationships with step-children, especially after the death of one spouse.
The passing of one's spouse is a particular reason for reviewing changes in trusts. We often see trusts signed by husband and wife with the persuasive influence of one spouse on the other. The death of the dominating spouse often brings about a complete change of mind and attitude on the part of the survivor. Sometimes attitudes of this nature are suppressed by a reticent spouse during marriage, only to come to the surface after the death of the dominant spouse.
Conclusion. I will add a sixth point of consideration because of the amount of trust litigation that we see. That item is the matter of trust administration. Often family members are not experienced in trust administration, do not keep good records and sometimes do not follow the terms of the trust. We strongly recommend that clients consider administration issues and rely on professional counsel, legal and accounting, to avoid the delay, expense and hard feelings from intra-family disputes and litigation. We can assist in a review and update of your estate plan, as well as professional assistance in trust administration. Please call Jim Modrall, Priscilla Hirt, or any of the attorneys listed below.
Donald A. Brandt, Joseph C. Fisher, Thomas R. Alward, Matthew D. Vermetten, Thomas A. Pezzetti, Jr., Susan Jill Rice, Gary D. Popovits, H. Douglas Shepherd, Laura E. Garneau, David H. Rowe, or Nicole R. Graf at (231) 941-9660
BRANDT, FISHER, ALWARD & PEZZETTI, P.C.
This newsletter is provided for informational purposes and should not be acted upon without professional advice.
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