In Michigan, like most states, a pet is not considered a human and, therefore, is not an Heir or Devisee under estate planning documents such as Wills and Trusts.  However, a pet may very well be an important part of the family.  In a recent seminar (22nd Annual Drafting Estate Planning Documents-ICLE), one of the speakers indicated that 600,000 pets are euthanized a year because of the death of an owner and lack of a caregiver.  This is not necessary so long as the beloved pet is included when you prepare your estate plan.

Read More...

My second read of the “Fiscal Cliff Bill” raises the interesting question concerning the Credit-Shelter Trust.  For decades people getting their estate plans done have utilized a vehicle known as the Marital Bypass Trust; the A-B Trust; the Credit-Shelter Trust or some other name which means that the husband and wife each create their own Revocable Living Trust.  Upon the demise of the first to die, a Trust is created for the benefit of the children to use up that individuals exclusion amount with the remaining going to the surviving spouse.  Or some similar version of this.  

In 2010, when Congress dealt with a two year extension of the Economic Growth and Tax Relief Reconciliation Act of 2001, they added portability.  Estate planning attorneys had a difficult time recommending a client’s plan for portability since the provision had a two year life span with the automatic sunset/expiration at the end of December of 2012.  What has been referred to as the “Fiscal Cliff Bill” turned those provisions permanent.  Therefore, we now have provisions allowing estate planners to plan accordingly.

Portability means that, when there is a married couple and the first spouse dies and fails to use up his or her full exclusion amount (this year that is $5.25 million), that amount is transferred to the benefit of the surviving spouse.  So, in short, a married couple will be allowed a lifetime exclusion amount of $10.5 million, whether or not they pass together.  This, therefore, eliminates the tax based need for a Credit-Shelter Trust as mentioned above.  

Before we declare the demise of the Credit-Shelter Trust, we should first look at some non-tax purposes that this vehicle has.  This is why many estate planners refer to a Credit-Shelter Trust as a “Family Trust”, quite frankly with the permanent portability mentioned above, it is no longer appropriate to refer to it as a Credit-Shelter Trust, so we will use the phrase “Family Trust” for the remainder of this discussion.  A Family Trust is an excellent vehicle to do many non-tax things, such as: 1.    Assuring those assets cannot be squandered by the surviving spouse or the surviving spouse’s new mate;
2.    It can help protect the assets from creditors of the beneficiaries;
3.    It can help protect the assets from subsequent divorce proceedings of the beneficiaries;
4.    Assures that the assets in the Family Trust are distributed according to the specific wishes of the first spouse to pass; 5.    Allows distribution to the beneficiaries of a first dying spouse while allowing the surviving spouse to receive income while he or she is still alive;
6.    To freeze the value of certain assets outside of the estate of the surviving spouse to avoid the inclusion of future appreciation; 7.    Avoids administrative complications;
8.    Is useful in a blended family scenario;

So, while the Family Trust may no longer be as useful in the tax scenario, it has many possible uses for non-tax estate planning needs.  

With the lessening of the Credit-Shelter Trust, we may also find an increase in the use of Joint Trusts for families.  Depending on the non-tax needs of the estate plan, I expect to see many more estate planners using Joint Trusts because one of the reasons for doing separate Marital Trusts was to take advantage of the Credit-Shelter provisions that are eliminated with portability.  

Therefore, I do not believe that the permanency of portability requires all those with Marital Bypass Trusts to rush to their attorneys to get them redone.  However, when you are creating an estate plan or having your current estate plan reviewed, I encourage you to have these issues discussed.

Read More...

I finally had an opportunity to read the actual “Fiscal Cliff” bill which is H.R.8 “American Tax Payer Relief Act of 2012”.  As I write this blog, the Act has not yet been signed by the President, however, he has promised to do so.  It does many things; however, I will limit this brief article to the affect on wills, trusts, and estate taxes.  

We must first start with 2001, when President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001.  That Act did much for reducing taxes and, eventually, eliminating estate tax, however it had a sunset provision, causing it to expire at the end of 2010.

Read More...

Even if you haven’t thought about your estate plan today, I am certain that you have checked your email, made an online bill payment, or logged into your Facebook, Twitter, or LinkedIn account.  That’s just how the world works these days.  But would it surprise you to learn that new legislation is making these “digital assets” a part of your Probate Estate, too?

Read More...

Early versions of Obama-Care had older folks making end-of-life decisions with a government-payed counselor on the way into a medical facility.  The time to make decisions concerning Patient Advocates and Advance Directives is not on your way into a hospital but rather when you are of a sound, clear thinking mind without the numerous stresses that occur while being admitted into a medical facility.  

In addition, by waiting too long you allow yourself to be manipulated by family members, accountants and lawyers.  Take the case of Heiress Huguette Clark.  At 98 and with $400 million she finally prepared her first Will, naming her nieces and nephews as the primary beneficiaries.  Amazingly, within only 6 weeks, she prepared a new Will naming a Non-Profit Organization formed by her attorney and her accountant as the primary beneficiary.  

It appears that she was convinced that her nieces and nephews did not care.  Although because she was laid up for a period of time she communicated primarily through her attorney and accountant.  The nieces and nephews are claiming that there were numerous attempts to communicate through her attorney, however, her attorney never relayed the communications  thus, the allegations are, that she was fully manipulated by her paid counselors.  

With this case being reported by numerous newspapers both on the internet and in print, it strikes me that Huguette Clark in her prime was no one to fool with.  I seriously doubt any accountant or attorney would have been able to manipulate her as easily as is suggested.  

I cannot emphasize enough the importance of determining when you have a clear and sharp mind, who your Estate Plan is including, who will be handling your financial affairs, and who will be handling your personal matters.

Read More...