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When to Tell “What’s in the Will?”

By Charles Gross | Published October 7, 2014

Most parents are reluctant to discuss with their adult children what’s in their estate plan. For some it’s a reminder of our mortality, others are concerned it may create bickering about who is getting what.
However, there can be significant advantages in an open discussion. One advantage is it can allow children to plan their lives, having some idea what they might inherit or whether they need to plan to be able to take care of their parents financially. In other cases children may have some good ideas for their parents and future planning.
Another reason is to work out potential disputes ahead of time. For example, when it comes to the family farm it can avoid future squabbles if children are told in advance what to expect. In some cases it can allow them to say what they want and allow their parents to make changes before they pass. The same can be true for collectibles or other items of a personal nature.
An open discussion can also improve quality of life for children before the parents pass. When both parties are open about their circumstances the parents may discover the best thing they can do is pass money to their children before they themselves pass. Gifting to children can ease financial concerns and allow children to more fully enjoy their lives. A relatively small annual gift can go a long way to ease financial stress.
Each family is different, but in most cases an honest discussion with adult children will benefit all parties.

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“Lady Bird” or Beneficiary Deeds

By Charles Gross | Published September 15, 2014

Most clients seek to avoid having their assets at death pass through the supervision of probate court. They are concerned about fees imposed by the court, attorney’s fees and delays in distribution of assets. Fortunately, most of these concerns are exaggerated or unrealistic, but irregardless a direct transfer of assets on death is often the best choice.
Historically assets such as life insurance, annuities and bank accounts were transferred at death simply by naming a beneficiary. Clients with real estate assets were not so fortunate, and unless they had a trust, real estate went through the probate court’s supervision.
More recently “lady bird” or “beneficiary” deeds have been recognized as a valid and effective method of transferring real estate directly on death. Through such deeds clients are allowed to retain all rights of ownership (such as the right to sell or mortgage the property) during their lifetimes. At death, title to the property passes to the named individual(s) or trust by simply recording a death certificate.

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Powers of Attorney – Will They Work?

By Charles Gross | Published September 10, 2014

A recent New York Times article was titled, “Power of Attorney is Not Always a Solution.” It related the story of a woman who was given a power of attorney by her brother who was later afflicted by dementia. When she tried to use the power of attorney, banks were reluctant to accept her power since her name listed on the document was her legal first name, but not the one she used as an adult.
Another problem with powers of attorney is that, although they typically have no expiration date, many financial institutions are reluctant to recognize them if they are over five (5) years old.
A bank’s reluctance to accept a power of attorney has a valid basis, as a power of attorney can be used to commit fraud. Banks have been sued for allowing access to accounts and they are in a protected position by refusing to release money.
Another option can be the use of a revocable trust with provisions for Successor Trustees. Banks are more comfortable that the trust was executed when the grantor had sufficient capacity.
These issues are a reminder to draftsman and clients that documents need to be both accurate and up to date.

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Letter of Wishes

By Charles Gross | Published July 7, 2014

Dear Trustee…

When drafting estate planning documents the dispositional portion, where we actually say what we want, tends to be impersonal and broadly worded.  Providing a trustee with latitude is often a wise decision, as circumstances can change and trustees need leeway to respond to different events.

A “letter of wishes” provides an opportunity to supplement the trust verbiage and give the trustee an insight into the priorities of the grantor.  The letters are non-binding, but can be helpful in providing the trustee with justification to fund things like a group vacation, or a family’s second home; items not normally provided for in typical estate plans.

The letters are typically not disclosed to beneficiaries, although may be, as directed by the grantor.

In a trust that may last for several generations, a letter of instruction can be helpful to trustees who never knew the grantor and may not appreciate or understand their priorities without such guidance.  It is also that last chance to provide guidance for your children or other beneficiaries.

Posted in Beneficiary Designations, Estate Planning | Tagged |

Successor Trustee

By Charles Gross | Published December 19, 2013

SUCCESSOR TRUSTEE

Many clients wonder who should be selected as their successor trustee, or if they have a will, the personal representative. The following assumes there is no person who is an appropriate choice and therefore they will be looking for a corporate trustee, typically a bank trust department.
When looking for a corporate trustee, I suggest a meeting with the trustee to ensure your expectations can be achieved. Several issues should be discussed including fees, where the trust officer servicing the account will be located (in some cases they can be in other states which can be inconvenient for beneficiaries), the investment philosophy and track record of returns on investment.
If the beneficiary has special needs you should inquire as to their experience in this area.
I would also inquire as to the turnover in the department. Some banks will provide an officer who will stay with the account for many years and learn the needs of the beneficiaries while others use the department as a training ground with frequent turnover.
Doing your homework in selecting a corporate trustee can be an important decision that justifies spending the time to make a wise decision.

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Prenuptials and Estate Planning

By Charles Gross | Published November 25, 2013

PRENUPTIALS AND ESTATE PLANNING

Prenuptial agreements are often considered in the context of a potential divorce. However, they should also be considered as part of an estate plan.
Prenuptials typically cover three areas: protection of separate property, division of property and inheritance rights.
A prenuptial can protect pre-marital or inherited assets from becoming mixed with assets and property accumulated during the marriage that would otherwise be divided up as part of an estate after death. Therefore, it is important to coordinate a prenuptial with wills and trusts. A prenuptial can override a prior will or trust or build a case to contest other documents.
If there is no will, prenuptial or trust in place, a surviving spouse has the right to claim a substantial portion of the deceased spouse’s estate, depending on its value.
Anyone contemplating marriage that has significant assets, or expects a sizeable inheritance, should be sure to coordinate a prenuptial with the rest of their estate.

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Home Mortgage Relief

By Charles Gross | Published November 4, 2013

Usually if something seems too good to be true, it is. However, under a new Streamlined Modification Initiative, announced by the Federal Housing Finance Agency, mortgage service officers are required to offer borrowers who are 3 to 24 months delinquent a plan to avoid foreclosure.
Notice of eligibility will be coming by mail, so if you qualify, don’t throw this offer in the trash. You can be approved without even showing financial hardship.
If you receive a mailing about the “Streamlined” program you will also receive information about the Home Affordable Modification Program (“HAMP”). The HAMP program might be advisable as the payment is based on 31 percent of gross monthly income.
The good news is, sometimes there is news that seems too good to be true; this is one of them.

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Dividing the Vacation Home

By Charles Gross | Published September 25, 2013

A common problem is the summer cottage loved by generations of a family. The problem (among others) is how to pass this to future generations. Not only are there more people to share decision making, there are more, or fewer, able to shoulder responsibility for maintenance and expenses.
Adding to the complexity are son and/or daughter in laws that may not have the same attachment to the property as their spouses.
In many cases the next generation would like to hang on to the cottage, but cannot make the financial obligations it entails. Fortunately there are some planning options which may allow the children to enjoy the property for another generation.
Use of a limited liability company
Use of an LLC can allow the current owners to maintain control while passing ownership (through the LLC) to their children. This is done by drafting the LLC operating agreement to allow a minority interest (such as the parents) to maintain control. In situations where there are estate tax issues this can allow interests to be transferred at discounted values.
The LLC operating agreement can provide guidelines for payment of expenses, who is in charge and various exit strategies.
Revocable Trust
A simple revocable trust can also hold title to the property. It can provide guidance much the way the LLC does. The trust can sell the property if children cannot get along or decide owning the property is no longer feasible.
It is also important to provide an escape hatch if things don’t work as planned. Children should be able to sell their interest, but it can be provided that the purchasers get favorable terms in order to facilitate keeping it in the family.
Please contact our office if you would like assistance in this type of planning.

Posted in Estate Planning, Limited Liability Companies, Real Estate | Tagged |

Limited Liability Companies

By Charles Gross | Published June 11, 2013

 Clients starting a new business face several choices regarding the appropriate entity.  Corporations and partnerships are the traditional options, however since the mid 1990’s a popular option is a hybrid of the two, a limited liability company (LLC).

The LLC combines the limited liability aspects of a corporation with the pass through of taxation benefits of a partnership.

A unique and valuable option with the LLC is the ability of the owner of a minority interest to control the LLC through provisions in the operating agreement.  This option can allow families to pass valuable assets to family members at significant discounts while still retaining control.

As a general rule an LLC operating agreement can be drafted in any way the owners choose, thus providing flexibility to meet the needs of all parties.

Although an LLC may be the right choice, other options should be considered.  An S-corporation can provide many of the same attributes, but avoid the self employment tax.  Anyone making the choice of an entity should consult their tax advisor along with their attorney.

Posted in Business | Tagged , , |

Planning for your beneficiaries

By Charles Gross | Published May 22, 2013

Historically, when people passed away they left their assets (in the most common scenario) to their children in equal shares.  Since most people didn’t have much this made perfect sense.  Several things have happened to make this a plan worth re-thinking.

First, the current generation that is likely to pass in the next 15 years has a lot of money.  They benefited from long uninterrupted careers with one company, employer pensions, relatively low educational expenses for their children and a favorable stock market and interest rates.  As a result many in this generation have substantial home equity and savings.

Baby boomers, those born in the 20 years post WWII, benefited from most of the aforementioned factors, but those born later were far less likely to enjoy pensions or uninterrupted employment.

The next group, Generation X, now in their late 30’s and early 40’s suffered more than prior generations during the recent financial crisis.  Many lost all or significant home equity and substantial stock market losses; since rather than pensions, their future is based on 401k accounts.

The next group may have even more problems as they are saddled with student loan debt and a job market that is unlikely to provide many years of uninterrupted employment.

As a consequence of the foregoing, an estate plan that retains money for its beneficiaries in trust, providing income annually and principal on an as needed basis has become a well-received option.  Such a plan is not for everyone, but for those with substantial assets, children with poor money management skills, or concerns about their children’s marriages, a plan with some brakes on the distribution may be something that provides benefits to those we love long after we are gone.

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