October 03, 2018
Author: Ronald T. Charlebois, Esq.
Organization: Stark Reagan, PC
Definition of “Estate Planning”
The controlled accumulation, conservation and distribution of an estate at death (as well as during lifetime) in an orderly manner that minimizes taxes, probate costs and other related expenses, but consistent with the client’s intended goals and objectives. In other words, to enhance or maintain the financial security of the clients and their families and/or other intended beneficiaries.
Definition of “Estate”
For estate planning purposes, the estate is generally all of the client’s property, or interests in property, whether real, personal or digital.
Estate Planning Goals - In General
At a minimum, a comprehensive estate plan for all of a client’s remaining assets should cover at death (or at disability, as applicable) one or more of the following goals:
1. Direct distributions per thoughtful and comprehensive planning (as opposed to accepting intestate or probate distribution rules or other unfortunate consequences of an unplanned estate);
2. Manage (control) financial matters after death or disability (without probate);
3. Eliminate or reduce taxes, administration expenses and costs;
4. Provide personal directions and related information for the support of surviving dependents;
5. Identify and focus on long-term personal and business planning goals; and
6. Provide peace of mind.
In order to effectuate any of the goals for the individual, it is important to identify the objects of his/her affection and the nature and extent of all assets, and assist in preparing a rational scheme for the conservation and disposition of assets.
IMPEDIMENTS TO PROPER ESTATE PLANNING
Failure to Plan
If your client doesn’t create an estate plan and dies without a will that clearly lays out a dispositive scheme, then the applicable intestacy state statutes (i.e., that address the death of an individual without a valid will) set out a standardized line of intestate succession based on spousal relationships and blood relationship to the decedent (with adopted children generally treated as biological children of the decedent). Of course such rigid limitations (which applied to earlier cultures and not modern planning) will probably not fit the decedent’s intended and desired dispositive scheme. See Michigan Intestate Succession Chart attached hereto as Exhibit “A.”
The intestate-succession statutes are easily displaced by the most basic instrument of all estate plans – the last will and testament. Thus, a valid will is an excellent and perhaps necessary starting point to document the client’s “testate” (by will) choices as to the disposition of his or her probate property and other matters.
A separate reason to have a valid will is the ability in Michigan to include your choices of who will be fiduciaries for your probate estate as well as to who will be given physical custody of any surviving minor children who are orphaned. Informing parents with a young child that his or her orphaned child(ren) will be raised by a person determined by the probate court (based on what is in the “best interest of the child”) should create enough incentive for the parent to execute a will. Even if the estate may have nominal value, the testator’s right to designate his or her choice of who will be the guardian for his or her minor children (or special needs family members) in the event no parent is then living will cause most clients to consider the serious consequences of failing to plan.
Once a valid will has been executed the statutes of intestate succession are largely replaced
Outdated Plans or Overlooked Provisions; Forced Share
Even with a valid will and other estate planning documents in place, there must be periodic review to assure that the client’s most recent intentions are included and that changes in circumstances are properly addressed. The birth of new children, remarriages, unexpected illness or disability of family members, needs to remove/replace prior selections of personal representative, trustees, guardians or designated fiduciaries, and major law changes that could affect the tax (or nontax) objections of an existing estate plan.
The existing estate plan document may overlook or fail to provide for a residuary clause, simultaneous death provisions, contingency beneficiaries designations, contingency fiduciary appointments.
In Michigan there is also statutory protection for a surviving spouse for a deceased spouse who dies with a valid will but has not been updated to provide for the surviving spouse. In that event there are statutory protections for the omitted spouse (or child, as applicable) that him or her to elect against the provisions of a valid but outdated will to take his or her intestate share (as well as certain statutory allowance for surviving spouses) who elect to take against the provisions of a valid will.
Psychological Impediments
Dealing with death and one’s own mortality is difficult for most individuals. Many people are uncomfortable dealing with the transfer of assets after death as that would force him or her to acknowledge this inevitability. Many clients are more comfortable to remain in denial.
Planners should make every reasonable effort to get past this obstacle (e.g., suggesting that estate planning is purely precautionary and it is prudent to prepare). However, getting deeply involved in any psychological encounter with the client for which you are not trained is not advisable.
Procrastination
This may be due to the confrontation with their own mortality, but the delay could also be for the reason that the task is so large and complicated that they become overwhelmed and do nothing. The estate planner may need to breakdown the more challenging pieces of the estate plan into separate and manageable steps. A client should be willing to work with a competent planner who is willing to take responsibility for completing the estate plan using an orderly approach throughout the process.
GETTING THE ESTATE PLANNING PROCESS STARTED
Initial Stage
The first identifiable stage is obtaining pertinent factual data. This could be done at the initial data-gathering interview or by delivering forms to be filled-in prior to a personal meeting. Use appropriate caution on a case by case basis since the personal data and financial gathering forms, graphs, family tree sketches, and related checklists and questionnaires you send the client in preparation for a estate planning meeting should not intimidate or overwhelm or create a reason for a delaying his or her meeting with you. In any event the time and effort spent to gather all relevant facts and information about the client, including any existing estate plan documents, is invaluable. In addition to objective information, the estate planner must also elicit from the client his or her concerns, potential impediments, personal needs and objectives regarding property as well as his or her feelings for family and nonfamily members that may be possible beneficiaries and/or fiduciaries. That is best obtained at the client interview stage.
Client Interview
Assuming the factual information has been collected, the initial client meeting should cover in layman’s language (i) what is estate planning, (ii) the significance of estate planning, (iii) how federal estate and gift may affect estate planning, (iv) how assets generally will pass at death and (v) the importance of coordinating the disposition of assets with his or her overall personal tax and nontax objections. Avoid the use of technical or professional terminology. In responding to these explanations, the client must be given time to describe his or her intentions well as to lay out any existing problems or special concerns. It is your task to uncover problems and suggest potential options that are available under current law. A client’s reactions to these suggestions will often assist the planner in making an evaluation. Always be aware that the estate plan is the client’s plan. Even though the ultimate decisions he or she makes regarding these arrangements depend in large part on your explanations, it is absolutely critical that he or she knows at all times what they are doing and why.
Development and Implementation of Estate Plan
This entails drafting and submitting to the client the proposed estate plan documents for his or her careful review. At this stage it is important that the client is engaged in this review. A separate PowerPoint and/or other summary or explanations of his or her proposed disposition of assets during life and at death should accompany the drafts. Request that the client mark down and pass along any questions, comments, or changes that come to mind as he or she reviews these documents. The execution of final drafts should be completed following a final review of the client choices to confirm that of the alternate planning options, the client has knowingly selected and approved a comprehensive solution consistent with his or her wishes and that provides to the extent possible the most benefits in the areas of estate, gift and income tax. Once the plan is implemented, it should be reviewed periodically to make sure it continues to meet the client's objectives as they evolve.
OWNERSHIP OF PROPERTY
Real Property
• Land, or interest in land, and anything, including improvements permanently attached or affixed to the land.
• Includes buildings and fixtures, trees and crops.
Personal Property
Anything that is not “real property” is personal property. Divided into two categories:
• Tangible Personal Property. Can be felt, seen and touched. Has intrinsic value without reference to anything other than itself.
• Intangible Personal Property. An asset that generally cannot be perceived by the senses.
Physical object that it represents usually has greater intrinsic value. Intellectual property (items such as patents, trademarks, and copyrights), bonds and lease are all common examples of intangible assets.
Digital Assets
The move to adopt workable definitions and related property rights for this emerging third category has gained momentum in various states. The State of Michigan has yet to establish statutory rights and duties of a personal representative after a owner’s death (or an attorney-in-fact under a valid Power of Attorney upon an owner’s incapacity) to access, transfer or terminate his/her online assets. However, legislation was introduced introduced on October 17, 2012 [HB 5983 (2011-2012)], to amend MCL 700.3715 to give a personal representative the power to “take control of, conduct, continue, or terminate any accounts of the decedent on any social networking website, microblogging or short message service website, or any electronic mail service website.” Furthermore, the National Conference of Commissioners on Uniform State Laws released in 2013 a draft of the Fiduciary Access to Digital Assets Act and a draft based on that Act has been introduced in Delaware. Until uniform legislation is approved and passed in all states and a useable body of law has developed, we are left to struggle to fill the void. The following is my attempts to set forth the steps needed to obtain and perhaps control digital property in the event of death or incapacity of a client. In all cases please seek assistance from a person who may be more technologically savvy in handling digital property and prepare to petition the probate court as applicable:
• Have the client identify what digital assets and digital accounts that need to be managed. Digital property can typically be separated into three categories: financial, professional and social. Anything saved in a digital format should be included.
• Have the client identify where the digital assets are stored. Cold be on a desktop computer, smartphone, thumb drive or a cloud-based storage arrangement.
• Have the client prepare and maintain a complete list of passwords and user names. May not be the best practice but may be only option. List should obviously be kept in secured location such as a safe deposit box (or maybe a trusted individual). Some sites exist to store this information in virtual safe deposit boxes and offer to provide information readily upon owner’s death. However, there are risks that such sites may not employ adequate security precautions or possible cease doing business.
• Have the client’s documents authorize the client’s fiduciaries to have access to digital accounts. Some of the wording from the proposed change to Michigan law quoted above could be used for this purpose. Also, attached as Exhibit “B”is sample digital property language for use in a Will. No matter how explicit and broad the authority is made, the ability of the client’s agent to access the information with a court order may solely depend on the policy of the applicable company as well as federal privacy laws prohibiting releases of digital content.
• When all else fails consider obtaining an order form the probate court to require access or other relief from the applicable company and remember federal laws prohibiting unauthorized releases of digital content and concerns regarding consumer privacy may block all efforts to control digital assets,
OWNERSHIP OF PROPERTY
Types of Property
Outright Ownership
An interest in property that belongs exclusively to an estate owner with unconditional power to dispose of it during lifetime as well to bequeath it to anyone at death, without conditions or limitation. A fee simple estate is the largest and most complete interest in real estate that one can own.
Different Forms of Michigan Concurrent Ownership/Joint Tenancy
a. Tenancies in common.
(i) Co-ownership of property is similar to having outright title. Each tenantin- common has a separate, undivided interest in the property that is inheritable at death and freely transferable by any co-tenant through a deed or by will.
(ii) Where the conveyancing language is not precise, the statutory rule of construction in Michigan is to favor a tenancy in common.
(ii) Probate administration not avoided on death of an individual co-tenant.
b. Life Estate/Remainder; Ladybird Deed.
Ownership split between a life estate and a remainder interest. For example, widow owns house as fee simple owner. Widow transfer her fee simple interest in home to her herself for life with a vested remainder interest to her sole child. Widow retains exclusive rights to the home while alive with property transferred in fee simple to her child (if surviving) upon her death. A variation of splitting title into a life estate and remainder interest is the socalled Ladybird Deed.” This form of transfer makes it possible to convey an interest in real estate at grantor’s death but specifically reserve to the grantor an enhanced life estate with the unrestricted power to convey the real estate during the grantor's lifetime. Upon the death of the grantor, the grantee succeeds to the real estate assuming the grantor has not exercised the power to convey. This results in avoiding probate on the death of the grantor and the grantor retains control over transfer of the property during his or her lifetime.
c. Joint Tenancy.
(i) Survivorship right is the distinguishing feature. Upon death of a joint tenant, the decedent's rights in the property terminate by operation of law and the surviving joint tenant takes the whole estate. Probate administration avoided on death of an individual co-tenant if at least one co-owner survives.
(ii) Joint tenants who are not designated “joint tenants with rights of survivorship” but only as “joint tenants” may completely terminate (i.e. partition) this form of ownership by unilaterally conveying his or her interest to a third party. The tenancy then becomes a tenancy in common.
d. Joint Tenancy With Full Right of Survivorship.
(i) Life estate portion fully alienable but co-tenant cannot unilaterally terminate the right of survivorship. In Albo v. Allen, 434 Mich 271 (1990), the Michigan Supreme Court held that title to property held as a “joint tenancy with right of survivorship” creates joint life estates with dual contingent remainders. The contingent remainder of one co-tenant cannot be destroyed by any act of the other. The joint life estate may be transferred or partitioned without affecting the contingent remainders. However, complete ownership terminates only upon the death of all but one of the joint owners or upon the mutual consent of all co-owners. No complete partition rights exist under Michigan law with this type of joint ownership
EXAMPLE: Assume Co-Tenant A and Co-Tenant B own Michigan real estate as joint tenants with rights of survivorship. Co-Tenant A transfer his interest as life estate to C. Co-Tenant A’s then dies and is survived by C and Co-Tenant B. Co-Tenant B contingent remainder is not affected by the life estate assigned by Co-Tenant A. Thus, upon the death of one joint tenant (Co-Tenant A) the surviving tenant (Co-Tenant B) takes the whole estate. C’s life estate ended and has no rights as against the title taken by Co-Tenant B.
(ii) Advantages of Jointly Held Property:
1. Creates a sense of family security and convenience;
2. For husband and wife, minimizes, and often eliminates federal estate taxes (“FET”) on the first death;
3. Avoids probate administration for death of individual joint owner if at least one co-owner survives; inexpensive; no lawyer is necessary; and
4. Possible creditor protection.
(iii) Disadvantages and Improper Uses of Jointly Held Property:
Many misconceptions exist about the nature of joint ownership of property. Excessive use or unfamiliarity with real estate and tax laws may create unexpected tax and non-tax problems. Some of these problems include the following:
1. Joint tenancies are not a substitute for a Will. Cannot be certain all property will be jointly owned and a simultaneous death of joint tenants is a possibility.
2. Jointly owned property passes to the survivor by operation of law and the provisions of the decedent's testamentary documents are ineffective. Outright distribution to the survivor may not be advisable in view of the need for asset control, management and protection.
3. By owning jointly owned property as husband and wife, the death of first spouse will result in total loss of control over property and the surviving spouse could dispose of the formerly jointly held property to anyone. This loss of control could result in an ultimate disposition of the property fully at odds with the dispositive plan of the first to die.
4. Jointly held property passes outside of probate and may not be available to pay decedent's estate taxes or other administrative expenses to settle his or her estate.
5. Possible double federal estate taxation if joint ownership is between individuals other than spouses. That is, the entire property is taxed in the estate of the first to die (except to the extent the survivor can rebut the presumption of full inclusion). On the death of survivor, the full amount of the remaining value of the property will be included in the survivor's gross estate and taxed a second time. Under the provisions of Section 2013, survivor's estate may be entitled to a credit for the FET paid as a result of the death of the first joint tenant.
6. Simultaneous death of nonspousal joint tenants may cause the full value of property includible in the estate of the sole contributor (if full inclusion is not rebutted) and 50% of the value includible in the estate of the noncontributing survivor under the Uniform Simultaneous Death Act which requires that the property be treated as if it were a tenancy-in-common without survivorship rights.
7. Finally, and possibly most seriously, the use of joint ownership for a married couple with over $5,340,000 million in total assets could prevent the maximum utilization of an important estate tax planning arrangement whereby as much as $10, 680,000 million of the total estates in 2014 could be left to their surviving children (or others) free from any FET. The potential problem may be fully or partially mitigated by the availability of “portability” with regard to the available exemption equivalent provided by the unified credit.
e. Tenancy by the Entireties.
(i) Joint ownership only by husband and wife.
(ii) May be terminated by mutual consent, divorce or death of a spouse.
(iii) Creditor protection for non-liable surviving spouse.
f. Nominal Joint Interest.
(i) Possibly intended by grantor to serve as trust substitute (no intention to make survivor absolute owner). For example, surviving parent creates a joint deed with one child with belief that all children will be co-owners thereof on his/her death. Child named as joint tenant on deed takes absolute title upon death of parent and refuses to recognize any equitable rights of siblings as was intended.
(ii) Possibly intended by grantor to serve as trust substitute.
(iii) Simple arrangement may create complicated issues.
Other Forms of Ownership
a. Totten Trust.
Person deposits money into a bank account in his own name as trustee for another (“donee”). Trust is revocable until death. If person dies without revoking Totten trust provision, donee receives the bank account.
b. Payable on Death (POD) accounts.
A bank account with this designation is very similar to Totten trust arrangement.
c. Transferable on Death (TOD) account.
Similar to a POD account except used with stocks, mutual funds and other accounts holding securities.
TRANSFERS OF PROPERTY - LIFETIME
By Owner
During lifetime, a property owner can generally transfer interests owned either by a sale or by a gift (either outright or in trust). Titling property in joint name, which may be a taxable gift depending on the reacquisition rights of donor, is another possible transfer method.
By use of UTMA
A gift to a minor may be made to an UTMA account for the benefit of the named beneficiary and avoid the need for a conservatorship on behalf of the minor. Under the UTMA (and the former Uniform Gifts to Minors Act (UGMA), gifts of securities and other forms of property may be made to a minor. MCL 554.533.
By Durable Power of Attorney
If a person (the “principal”) is disabled, a durable power of attorney executed prior to such disability could provide a smooth transition for another person (the “agent”) to manage the affairs of the principal for and on his behalf. This could include making any gifts either outright, in trust or in custodianship, to the principal’s spouse and/or to any one or more of the principal’s children. Usually the gift to any individual in any one calendar year would not be allowed to exceed the applicable annual gift tax exclusion under federal estate and gift tax law ($14,000 in 2014). There could be an overall limitation that any and all gifts can be made only if the agent first determines that the proposed gift will not jeopardized principal’s (and principal’s spouse’s) accustomed standard of living, including their expected future health, support and maintenance expenses.
A properly drafted durable power of attorney will offer complete protection from the delays, expenses and inconvenience associated with probate court proceedings. Obviously, the person selected to act as the principal’s agent should be someone that the principal trusts and has total confidence that the agent will handle his affairs the way he would want them to be handled.
TRANSFERS OF PROPERTY - AT DEATH
By Contract
a. Beneficiary Designations - Life Insurance or Annuity Proceeds.
Life insurance is usually a significant portion of the client’s estate. It is usually acquired by a client for the purposes of: (i) replacing earnings upon his or her death, (ii) paying a debt that will become due or will be payable upon his or her death, or (iii) funding the death taxes and administration expenses incurred upon death. The client, as the insured, will generally own title or ownership to his life insurance policies although the foregoing purposes may be readily achieved if someone other than the insured owns the policy. Assuming there is a designated beneficiary, the death proceeds will pass to the designated beneficiary outside of probate even in the absence of a trust. The current designations for the policies owned by the client should be reviewed during the estate planning conference.
Typically, the trustee of revocable trust is the designated beneficiary of the death proceeds. If married, the surviving spouse may be the primary beneficiary and the trust the secondary beneficiary. Also used to fund trust for the benefit of children of one spouse in a blended family situation. Having the life insurance benefits payable to the revocable trust upon death ensures that the distributions of life insurance benefits are controlled and coordinated with the client’s testamentary plan.
b. IRAs and Qualified Plans.
The process of addressing both the client’s retirement benefit needs and tax planning requires accurate and timely advice in order to accomplish his/her objectives. Due to complexities and significant risks of taking inappropriate action, the planner must have sufficient expertise in these areas, or arrange for someone with expertise to consult with client, before deciding who is to be named the primary and secondary beneficiary when the new (or updated) beneficiary designation form is to be completed. Having no beneficiary designation may also have adverse income tax consequences. In addition to the non-tax issues such as control of assets following death, a proper analysis would at the very least include:
(i) List of the institutions where the client and spouse have IRA accounts or the employer for which a qualified plan is maintained.
(ii) For each IRA or qualified plan, ascertain the current balances and earnings information, and review beneficiary designations, if any.
(iii) Review all governing documents to determine the nature and extent of the default death benefits treatment prescribed in plan; also check whether the plan offers a choice of payment options (lump sum or annuity) or allows for only one type of payment.
(iv) Consider value to client of ERISA’s asset protection features covering qualified plans and Michigan’s supplemental protection.
By Form of Ownership
Property also transfers by form of ownership similar to a contact (e.g., property owned jointly with right of survivorship passes to the survivor or survivors by operation of law when a joint tenant dies). A deed conveying fee simple title could be executed during life by owner and held by an escrow agent subject to the direction of the owner until owner’s death and at that time the escrow agent delivers the deed to the intended recipient.
The payable on death (“POD”) accounts established at financial institutions becomes payable to the named individual at the death of the individual who established the account. Affords depositor sole control and access to the account during lifetime and avoids probate process.
By Last Will And Testament
a. Typical Contents of Will (other than bequests). Tax allocation language (coordinating with trust language). Designation of personal representative. Powers of personal representative.
Guardian and conservator appointments for minors. Reference to external gift list and/or letter of instruction. Exercise (or nonexercise) of any power of appointment given to client.
b. Traditional “Pour-Over Will” to Revocable Trust.
A long established practice used by estate planners is to create a funded revocable trust to accomplish the designation of all property owned by the decedent (other than joint owned property), but a Last Will and Testament is still needed to catch any of decedent’s property that falls through the crack and does not get retitled as a trust asset.
c. Joint or Mutual Will.
Under Michigan law a joint will does not create a presumption of a contract to not to revoke the will. MCLA 700.2514. Even if those cases where the applicable document specifically attempts to block any revocation, the courts may be reluctant to uphold some no-revocation documents. Joint wills, or contracts to make a will, may have a role in controlling the estate of couples with children from prior marriages or relationships especially since it may become one of the viable alternatives in a “no trust” scenario.
d. Simple Will – Without Trust.
Usually created for individuals with modest estates with outright distributions planned at death; represents the simplest and most basic form of estate planning. There may now be real economic savings or logic with the “simple” will even in the modest estate. A simple will is certainly far better than no will at all. Concerns do exist as to whether or not a trust is justified. From this standpoint please note:
1. Michigan has seen a drop in individual wealth,
2. the State has no inheritance tax,
3. the applicable federal exclusion amount creates a a high threshold for any FET consequences (less than 0.2% of Americans are expected to be subject to FET consequences) with estate planners challenged to redirect their skills away complex FET planning methods such as the A-B Trust to provide more relevant and simpler methods so clients who are well below the FET threshold only receive services that provide the highest value,
4. State probate costs are relatively reasonable or deferred (see subparagraph
e immediately below) and there are situations where probate could be a better option,
5. in many instances the clients are likely to not fully follow-up on funding instructions thereby weakening the argument that having a revocable trust avoids probate,
6. Other probate has certain advantages, including:
- supervision of personal representative’s action,
- dispute-resolution forum for estate issues,
- inventory and and valuation of decedent’s assets and liabilities will be performed, and
- proof if legal title to real property is expedited.
7. Disadvantages of probate include:
- lack of privacy,
- property distribution may be time-consuming (depending a number of factors including complexity of the estate, disputes and the the jurisdiction,
- lack of flexibility to carry out probate due to rigid statutory procedures,
- inability to address particular issues (e.g. elder care and special needs situations)
- personal representatives and attorney fees are generated, and
- property owned in non-domiciliary states may be subject to ancillary administration.
Acknowledging various needs for a revocable trust will always exist regardless of economic standing, should there be a philosophical shift that makes planners reduce the dependence on recommending a revocable trust for most of the approximately 99% of the population who will die without taxable estates? How many could be served by an estate planning package limited to a simple stand-by Will with non-probate testamentary dispositions governed by Deeds, TOD accounts and designation of beneficiary forms as well as separate Durable Power of Attorneys for Financial and Health Care needs? With tax features such as the traditional A-B revocable trust no longer relevant to many clients, planners should hopefully spend more time addressing the unique nontax needs of clients in a more understandable and efficient manner.
e. Will with Testamentary Trust.
Has not been in favor for over a generation or longer but may now have some value if there is no specific reason to establish a trust other than to save probate and administration costs or where the client is not likely to follow-through with re-titling (weigh the costs of drafting a trust and maintenance expenses against present value of potential probate costs plus returns on the elimination of trust costs).
Transfers By Revocable Living Trust
Trust is a fiduciary relationship in which property is held by one or more trustees for the benefit of one or more persons called beneficiaries. The person creating the trust is called a settlor or a grantor. Living or revocable trusts are designed to streamline administration of estate by avoiding probate. A revocable living trust should be utilized to allow the grantor full and liberal use of his or her funds and properties during his or her lifetime and avoid probate at death with full control as to the ultimate disposition.
At settlor’s death the trust is irrevocable. Spendthrift provisions would then limit the ability of a beneficiary to squander the funds or prevent creditors of the settlor’s beneficiaries from reaching the funds.
Although it is usually stated that all assets should be owned by or pass to the trust, there are certain circumstances where certain property should not be transfer to a trust (e.g., client’s homestead. where it could then be a countable asset for Medicaid eligibility purposes) and other areas to exercise caution (e.g., designation of trust as beneficiary of death benefits in a tax qualified retirement plans).
In transferring or re-titling, title should be taken in the name of the trust as described in the trust document. The wording does not have to be exact, but should be in substantially the form indicated.
Nevertheless, the effectiveness of the revocable trust to avoid guardianship in the event of grantor’s disability during life and to avoid probate at death only results from completing the process of properly and fully transferring grantor’s assets to himself/herself as trustee (“funding” the trust) as well as coordination with non-trust assets. Proper attention to the instructions contained in the attorney’s trust funding letter or memorandum provided with the client’s estate plan documents will help clarify the division of responsibilities between attorney and client to achieve this goal.
ANCILLARY ARRANGEMENTS
Durable Power of Attorney for Health Care
a. If a person becomes “disabled” (trigged in these case by the signed statement of two physicians that he or she is unable to participate in medical decisions), a durable power of attorney does not usually contain the statutory authority to delegate an individual’s medical care decisions to another person. Therefore, you would also need a patient advocate designation to designate the individual or individuals who would make medical decisions on his behalf should he be unable to make them himself. While the primary purpose of the patient advocate designation is to indicate who has the ability to make medical decisions, it may also include provisions as to how those decisions should be made (i.e., nonresuscitation and/or pull the plug directions).
b. The patient advocate designation provides peace of mind in several ways. First, the individual can be assured that a person he trusts is making his medical care decisions. Second, the type and extent of care which he feels is in his best interest is made known in the designation and the person you select is obligated to act in his best interest. Third, family members will not be placed into conflict over what to tell the doctors and hospital. The decision-maker and the extent of medical care have already been clearly expressed by him in his patient advocate designation.
HIPPA Release of Medical Records and Heath Care Information
Taking its name from the Health Insurance Portability and Accountability Act of 1996, as amended, this document will identify the person or persons who will have the immediate right to information from client’s medical files and records. This should allow full and unconditional access to the client’s health care information without needed for the statutory patient advocate arrangement to be activated.
CONCLUSION
Traditional notions of estate planning remain despite changes in tax law. There will always be a need for complex estate planning but for most planners complex plans are less important as in the past. How services are to be provided in the current tax environment and market is the issue. Traditional estate planners must now be innovative and willing to challenge longstanding assumptions if they desire to still provide value to clients. While the practice has changes opportunities still remain; listening to clients and addressing their needs should replace the one-sided sermon on the benefits of rigidly adhering to the A-B trust format. With fewer concerns about federal estate and gift taxes, many clients will need general income tax planning strategies, especially those nearing retirement or considering changing residency to avoid or reduce state income taxes. Business succession planning will still require competent estate planning advice to achieve a coordinated result. An aging population, increases in life expectancies and insufficient personal resources to pay for the rising costs of medical services and medications, there is a great demand for “elder law” services beyond just Medicaid planning. Another identifiable expertise is the “special needs planning” principally for children with disabilities. All of us need to have a greater awareness of the unique aspects of estate planning outside of transfer taxes; we should effectively address all relevant needs and solutions with clients in a way that is more meaningful to them.