Archive for Wills
ESTATE PLANNING FOR SAME-SEX COUPLES IN 2014
The Heckerling Institute on Estate Planning, held every January, is the nation’s leading conference for estate planners. This year’s most-discussed topic was big changes in planning for same-sex couples.
The discourse focused on last year’s major decision of United States v. Windsor. In Windsor, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) which defined “marriage” and “spouse” for federal purposes as only applicable to heterosexual couples. The result is that a marriage between any two persons now will be recognized under federal law if it is recognized under the law of the state where it occurred.
The practical result is that same-sex married couples now have access to federal estate and tax planning tools. This includes use of the marital deduction, portability, disclaimers, joint income tax returns, grantor trusts, spousal rollover of qualified retirement accounts, joint ownership of property, split gifting to maximize annual gift tax exemption, marriage settlement agreements, and GST transfer planning (i.e., reverse QTIP).
On the other hand, same-sex married couples will feel the impact of the “Marriage Penalty” on their tax rates, mortgage interest deductions, and more, just like heterosexual married couples.
Although the Windsor decision has clearly brought about significant change, it did not invalidate DOMA as a whole. Instead, it left intact Section 2 of DOMA, which allows the states, U.S. territories, and Indian Tribes to refuse to recognize same-sex marriages performed in other states, territories, or tribes. As a result, the lack of uniformity of laws among the states will continue to create issues for same-sex couples to navigate with the assistance of tax and estate planning professionals.
The focus at Heckerling was on the tax and financial implications of these new laws. Stay tuned for our “Relationship Series” where we will focus on the more personal and human side of planning in different relationships.
HOW TO TALK TO YOUR LOVED ONES ABOUT ESTATE PLANNING
We have heard many excuses to avoid discussing wills, trusts, and everything else relating to estate planning. The most common stem from concerns that it is too personal or sensitive a subject. Some even believe that talking about their potential demise will cause it to happen. However, having a conversation about estate planning with your loved ones is an opportunity for you to explain your wishes, discourage future discord through transparency, and open the door to better planning through better understanding. Here are some tips on where to begin:
Timing is Key: Consider your audience and when and how to approach them. If the person you want to talk to is busy or does not respond well to surprises, you may want to schedule your conversation. On the other hand, it may be best to broach the subject unannounced on an occasion you know you will provide time to discuss it without distraction, such as on a long drive or walk.
Start with a Story: You may find it easier to begin with a current event or a friend’s experience rather than diving straight into more personal concerns. Relating a story about how someone else’s estate plan – or lack thereof – affected his loved ones may also help you convey why the conversation is important to you.
Break it Up: Depending on your individual circumstances, and the personalities of your loved ones, it may be better to plan to have more than one conversation. To facilitate a true discussion where all parties feel they are heard and understood, consider addressing each topic, or even each family member, on separate occasions.
After you get the conversation started, let us help you define your wishes and learn about your options. Attending one of our monthly estate planning workshops is both a great way to keep the discussion going and the first step in our estate planning process.
For more great tips on initiating an estate planning conversation, click here for the Forbes slideshow that inspired us.
“UNDUE INFLUENCE” AND THE CARETAKER CHILD
We often see a middle-aged “child” becoming the caretaker for an elderly parent. Sometimes siblings are grateful that such care is being provided. However, many times those same siblings become very unhappy if the caretaker child is left with a bigger slice of the inheritance pie, or worse yet, has become joint owner with mom on a bank account before mom’s death, so that 100% of those funds go to the caretaker child rather than being split equally under mom’s will. A lawsuit invariably follows against the caregiver child.
The question is whether we have a “dutiful” child whose sacrifices to care for an elderly parent were rewarded by a voluntary gift from mom or a “scheming” child who utilizes the close relationship to “unduly influence” mom to get the bulk of her assets. Undue influence is presumed when (i) a person with a confidential (close) relationship with the decedent, (ii) is active in procuring or securing the preparation or execution of a devise (will or other gift) and (iii) is a substantial beneficiary of that devise.
The problem, as was recognized in the recent Florida case of Estate of Kester v. Rocco, is that any child who is truly caring for a frail, elderly parent will most likely (i) have a close relationship with mom; (ii) help mom choose an attorney, drive mom to the attorney, and discuss mom’s plan; and (iii) receive a large part of mom’s assets under her plan, therefore meeting the undue influence test. However, the court in Estate of Kester said that undue influence should not be presumed when the only evidence presented was that the caregiver child had a close relationship with and often assisted his aging parent.
Although the guidelines aren’t perfectly clear, this recent case provides help for all those dutiful, caring children who want to take care of their elderly parent without worrying that they will be a target for their ungrateful siblings.
LEGISLATIVE UPDATE: BETTER PROTECTION AGAINST UNETHICAL LAWYERS
Florida attorneys have long been prohibited by our ethical rules from soliciting or accepting gifts from clients, including drafting a will or trust that names the attorney (or his close relative) as a beneficiary. The concern is that an attorney who is asking for or receiving a gift from a client has a personal stake and thus will not be able to properly advise the client regarding the transaction (what we call a “conflict of interest”). There is also the possibility that an attorney could exploit his relationship as a trusted advisor to obtain a gift from his client.
In the past, case law enforced this ethical rule by allowing an improper gift to an attorney to be challenged and, if certain things were proved, voided. There is now a new statute, effective October 1, 2013, which makes such improper gifts automatically void. This should provide better protection for clients (and their families) by decreasing the amount of time and money necessary to contest an improper gift. The statute also provides that the winner of such a contest will recover the costs and fees paid to bring the lawsuit.
Of course, both the ethical rule and the new law make exceptions for a gift from an attorney’s spouse and other close family members. Additionally, even an unrelated client can make a gift to an attorney under the right conditions. To read the full text of the statute click here.
More Estate Administration Mistakes: 5.3 Million Dollar Verdict Against Trustee!
Just a few weeks ago, we cautioned our readers against do-it-yourself estate administration due to the great responsibility that comes with being a trustee or personal representative. A recent case confirming a judgment of more than $5.3 million against a trustee shows just how serious the courts are about the duties that come with these roles.
The trustee in that case was slammed by both the trial court and the appeals court for the mistakes he made. The most obvious error, and the one pointed out by the angry beneficiaries (the deceased trustmaker’s wife and children), was that the trustee paid himself $1.2 million in trustee fees … without telling the beneficiaries. However, the court also used the trial as an opportunity to examine all of the trustee’s past actions. It found other mistakes adding up to millions of dollars in damages to the beneficiaries. These included failure to fulfill basic trustee duties such as providing timely and accurate trust accountings.
The lesson to be learned is that it is crucial to be aware of, and properly perform, your duties as a trustee or personal representative. If not, you likely will not fare well in court. The trustee here could and should have avoided the lawsuit and enormous judgment by obeying the legal requirements placed on him as trustee. For the full appellate court opinion, click here.