Category Archives: Trusts

Take Your Time …. Hurry Up!

Posted on by under Business Succession Planning, Business Transitions, Digital Estate Planning, Estate Planning, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

A brief story: In high school trigonometry class, my math teacher used to give us frequent quizzes over basic trigonometry equations and other pre-calculus functions. I vividly recall him pacing up and down the thin aisles of desks (about 20 or 30 students), cradling his hands behind his back, and looking out over the class through his glasses while calling out  “take your time,” then “hurry up!” a few seconds later. It was a charming eccentricity if you weren’t knee deep in a math problem, or an annoying interruption if you were racking your brain to remember that math formula you had stayed up late the night before trying to learn.

The changing economic realities, increased life spans, and increasing standards of living are causing many retirees to go on the “hurry-up offense” with retirement planning. There’s a similar phenomenon in estate planning. The tolling of the New Year bells draws closer, you get married and have a child, you get divorced, a relative dies and you receive an inheritance, or you or your spouse get the dreaded grim health news from the doctor. Time to visit your estate planning attorney.

While several “hurry-up offense” estate planning tactics that can be helpful, I recommend confronting these issues when you are healthy and have some time to contemplate how you want your last affairs handled. We all know that it’s best to make big decisions when you’re calm, relaxed, and feeling great. A Will or trust, living will, and durable financial and medical powers of attorney are the estate planning building blocks that every adult needs. Cross an item off your new year’s to do list, or make a new resolution to take care of your estate planning needs this year. Need to do any digital estate planning for your computer, email, Facebook, LinkedIn, online banking, or other valuable electronic information? Have a small business you’re looking to transition, or thinking about family business succession and your kids? We can help with that too. Call or email us any time to set up a convenient appointment and start off 2012 right with the peace of mind that good planning brings.

(c) 2012, Stephen M. Johnson, Esq.

Conflicts of interest

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Gift Tax, Illiquid Assets, Income Tax, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Prenups, Probate, Small Business, Trusts, Wills

This Daily Mail article highlights a classic case of lawyers (and accountants) getting removed from a case by the judge because of conflicts of interest, in the Clark case, for each being slated for an $8 million bequest from the estate. This is a classic legal ethics question that confronts estate planning attorneys – can the lawyer accept a gift from the estate of the deceased? Short answer is “no.” If a lawyer drafts estate planning documents for family members, the relative is entitled to independent legal counsel if they so choose and the lawyer may not receive more than an intestate share of the estate (e.g. what they would’ve received if the relative had died without a will). A client can theoretically leave gifts to their lawyer or other professional advisors in a will or trust, but those gifts are automatically suspect and best practice is to only be paid your attorney’s fees and not accept gifts from a client’s estate.

If you need legal counsel with year end estate planning or if you’re an attorney who has a conflict of interest and need independent legal counsel to help, give me a call or send me an email. Merry Christmas and see you in the New Year – 2012, here we come!

(c) 2011, Stephen M. Johnson, Esq.

Time to Sell Your Small Business?

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Illiquid Assets, Kansas, LLCs, Missouri, Small Business, Trusts, Wills

Interesting NY Times article about business owners thinking of selling in the current economy. There’s a wonderful piece of old-fashioned, homespun wisdom quoted: “success is when opportunity and preparation intersect.” Successful business people have to be alert for new and emerging opportunities to capitalize on those venues and maximize their enterprise profitability. Perhaps a few business successes come down to being in the right place in the right time, serendipity, or luck, but most business people (and certainly most lawyers) would say that chance favors the prepared – you have to do your homework, which will often show you openings or opportunities that your competitors don’t see. Or as one early rising quipster put it, the comfort of being awake near dawn is “my competition is still sleeping,” so an edge or lead can be acquired. In this economy, business people and successful individuals must capitalize on every edge or lead they can find or create to distinguish themselves and get ahead.

The article’s advice reminds me of a piece of financial/investment advice I read a couple years ago in The Great Depression Ahead by (gloom and doom) economist Harry S. Dent. If I can help you in the process of selling your business or thinking about the pros and cons of the sale decision, give me a call or email me to set up a convenient appointment. If you are going to sell your business, getting the wheels of the deal in motion before December 31 is ideal for tax purposes.

(c) 2011, Stephen M. Johnson, Esq.

Estate sales

Posted on by under Estate Planning, Kansas, Missouri, Probate, Trusts, Uncategorized, Wills

Here’s a fascinating Washington Post story about an estate sale for the wife of U.S. Supreme Court Justice Potter Stewart. The estate sale offered a window into Washington social life during Justice Stewart’s career and also allowed a few aspiring lawyers to obtain some classic memorabilia, such as the Justice’s briefcase. A lawyer’s soft leather briefcase, just like his or her pen and legal pad (or computer and smart phone), is an integral part of the lawyer’s practice and professional image and reputation.

If you need help organizing an estate sale, administering the estate of a loved one or close friend, or advice on your own estate plan, give me a call or email at your convenience.

(c) 2011, Stephen M. Johnson, Esq.

Baby Boomers to Millennials: No Inheritance for You?

Posted on by under Dynasty Trusts, Estate Planning, Estate Tax, Kansas, Missouri, Trusts

Interesting article from the Los Angeles Times. Apparently many Baby Boomers are frowning on leaving an inheritance for their children, including many in the millennial generation. A U.S. Trust (Bank of America’s trust division) survey finds that 49% of millionaires in the Baby Boomer generation don’t plan to leave their children an inheritance. A variety of factors may be in play: (1) people living longer (and corresponding fear of outliving savings), (2) the economic fallout on people’s retirement savings, (3) enjoying spending the wealth that they themselves worked hard to accumulate, (4) helping support elderly parents or adult children who’ve been displaced by economic woes, (5) don’t want to spoil kids or give them a sense of entitlement, and other issues. One Baby Boomer said, “If [my kids] can’t make it on their own now, they can never make it. I’ve done my job. Now I’m going to enjoy life.”

This may also be tied to a developing trend among the very wealthy – billionaires pledging to give their fortunes to charity.  From a tax and estate planning perspective, Baby Boomers would be well advised to remember the increased gifting opportunities available during 2011 and 2012 ($26,000 combined gifts from husband and wife per donee each year, $5 million lifetime gift tax exemption). In some situations, it may also make sense for Baby Boomers to give their children inter-family loans to help with the purchase of a car, home, or business interest, or to consider various business succession options.  Additionally, leveraging trusts, especially multigenerational trusts, is a wise idea in some cases to preserve great amounts of wealth for future generations. Charitable giving is always a wonderful idea to help others and leave a legacy of generosity.

If many of these Baby Boomers disclaimed inheritances from their parents, this study would be misleading, because the bulk of the inheritance would already be waiting in trust for the millennials. If the study is accurate, it may mean that the great structural transfer of wealth between generations (estimated in the trillions) may be much ado about nothing, as Shakespeare would say. Please call me or email me if I can help you or your family with these important estate planning issues.

(c) 2011, Stephen M. Johnson, Esq.

Tips for a Surviving Spouse

Posted on by under Estate Planning, Kansas, Missouri, Probate, Trusts

Kiplinger Personal Finance provides some helpful tips for surviving spouses in the days following their loved one’s death. Among them: (1) gather financial and estate planning documents (2) assemble a financial support team (accountant, lawyer, broker, banker, etc) (3) assess cash flow (4) collect life insurance benefits (5)  meet with the family’s estate attorney to determine what probate or trust administration needs to be done (6) check with the employer about pension, 401(k) and other benefits (7) roll over the loved one’s IRA (assuming surviving spouse is the only beneficiary) (8) claim a Social Security benefit.

I would add don’t get overwhelmed by the process. Losing a loved one, especially a spouse, is emotionally draining and devastating.  Take life a day at a time.  If you can get 1 item done each day, that’s good progress. Take plenty of time to grieve. Most financial and legal matters can wait a week or two. If I can help with probate or trust administration needs, please contact me.

(C) 2011, Stephen M. Johnson, Esq. All Rights Reserved.

 

Planning for Life’s Unexpected Moments

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Illiquid Assets, Income Tax, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

CNBC has this story of a family who benefited greatly from doing basic estate planning, when the unexpected happened and the father and family patriarch died suddenly. Every adult – regardless of age, wealth level, or other factors – needs a will, a living will, and medical and financial durable powers of attorney. To live life without these basic estate planning documents is to play Russian roulette with your future and your family’s.

(c) 2011, Stephen M. Johnson, Esq. All rights reserved.

The Debt Crisis Lesson

Posted on by under Dynasty Trusts, Estate Planning, Kansas, Probate, Special Needs Trusts, Trusts, Uncategorized, Wills

As the United States Government’s spending continues to reach stratospheric levels and outpace tax revenues by over $1 trillion per year, and push against the statutory debt ceiling (the amount the U.S. Treasury is legally allowed to borrow to pay the Government’s bills), there is an important lesson for estate planners and families setting up trusts to provide for future generations.

The debt crisis lesson is be sure you have enough money in your trust to provide for the unexpected. Uniform Trust Code sec. 414(a) provides that a trust may be terminated by the court after the trustee provides notice to the beneficiaries if the amount held in trust is less than $50,000 (the UTC’s suggested amount, which adopting states are free to change), because maintaining a trust with a smaller amount would be uneconomical. My home state of Kansas, which was the first state to adopt the Uniform Trust Code in 2003, allows a court to terminate a trust containing less than $100,000. K.S.A. 58a-414(a).

Is your trust properly funded? Does it contain enough money to provide for you and your family if the unexpected occurs, or a rainy day arrives? Do yourself and your family a favor – be sure your trust is properly funded.

(c) 2011, Stephen M. Johnson, Esq. All rights reserved.

Dynasty Trusts: Multiplying Wealth Across Generations

Posted on by under Dynasty Trusts, Estate Planning, Estate Tax, Kansas, Missouri, Trusts

Bloomberg provides an excellent and accessible intro to dynasty trusts and the great features families can use to multiply wealth across generations. The article highlights some legal differences between various dynasty trust jurisdictions – such as New Jersey, Pennsylvania, and Delaware – and some unique provisions of Delaware trust law that may be especially attractive to estate planning clients and families contemplating business succession issues, including expanded protections against creditors and civil law suits (including lurking divorces).

The growth of dynasty trusts as a tool in the estate planner’s portfolio, especially for clients with significant wealth or business interests to be transferred to future generations, has been made possible by a phenomenon of states repealing their Rule Against Perpetuities statutes. A growing number of states have repealed the Rule Against Perpetuities, a relic of the old common law of property, and thus allowing perpetual or dynasty trusts. In the Kansas City area, Missouri allows dynasty trusts, but Kansas does not (having refused to repudiate the Rule Against Perpetuities). Currently, 28 states (and the District of Columbia) (56% of American states) allow dynasty trusts: Alaska, Arizona, Colorado, Delaware, Florida, Hawaii, Idaho, Illinois, Kentucky, Maine, Maryland, Michigan, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Virginia, Washington, Washington, D.C., Wisconsin, and Wyoming. Expect that number to continue to grow steadily in the future, as more states vie for trust business.

Delaware may well become the bastion of trust law, just as it’s already the bastion of corporate law, thanks to its favorable corporate law statutes and the Chancery Court’s business-friendly jurisprudence.

(c) 2011, Stephen M. Johnson, Esq. All rights reserved.

The Brave New World of Estate Planning – Trusts and Estates in 2011

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, LLCs, Missouri, Probate, Small Business, Trusts, Wills

As the 2010 holiday season descended upon America, Congress passed and President Obama signed an extension of the 2001 Bush tax cuts.  The new tax law has many provisions that last until the 2012 election, but most significant for our purposes are the new estate tax and the new gift tax.  The federal estate tax is now 35% on any estates over $5 million for a single person or $10 million for a married couple.  The new gift tax is 50% of any gift to a person of over $13,000 per year with the lifetime exclusion (the maximum amount you can give to someone other than a spouse during your lifetime) now at $5 million from its prior $1 million threshold.  Count on the 2001 Bush tax cut extension to be a big deal for President Obama and his Republican colleagues in 2012, especially with the economic cauldron of high unemployment, exploding deficits, promiscuous and unsustainable spending, a weakening dollar, states teetering on the edge of bankruptcy, and potential inflationary pressures, all boiling to a simmering storm of uncertainty and populist discontent.

Many estate planning attorneys, including many that I have talked with in the Kansas City area, find these new developments very troublesome.  Won’t it eliminate our clients? Not many people have $5 or $10 million, the argument goes.  Those that do already have relationships with private banks, investment firms, and noted law firms. Does anyone still need a trust?  Or do we simply terminate trusts and execute new I-love-you wills that leave everything to the spouse and children?  Won’t that kill our revenue streams from trust drafting and asset re-titling? Is it worth it to be an estate planning attorney any more? These are all good questions that need to be answered and I plan to answer soon in much more detail.

For now, let’s focus on what every client needs: (1) a will (2) a living will (3) a durable medical power of attorney and (4) a durable financial power of attorney.  Anyone over the age of 18 who doesn’t have these legal instruments in place risks catastrophic consequences a la Terri Schiavo and Nancy Cruzan if they get in a car accident or die leaving student loan debt (or other secured debts, like a home mortgage) for their parents (buying life insurance to pay these debts off may be wise). If you are married or have children, the stakes are even higher – your spouse might have to probate your estate and get the Court to appoint them Guardian and Conservator of your child.

Maybe you’re an individual and figure you’re fine, you don’t drive a Ferrari or have millions of dollars, so you don’t need an estate plan, right? Wrong. An estate plan doesn’t need to be expensive or complicated, but you need one, whether you’re Bill Gates or Bob Jones the college student.  Call (913-707-9220) or email me (steve@johnsonlawkc.com) if I can help.

(C) 2011, Stephen M. Johnson