Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

A Member of the Law Professor Blogs Network

Thursday, December 18, 2014

Trust Protectors

Trust1When a trustee is not enough to quell concerns over turning over control of assets through an irrevocable trust, a trust protector can help. Choosing a trusted person that can address changes in circumstances by altering trust terms and keep an eye on the trustee can calm concerns over how the trust assets will be handeled. The trust protector's role can be customized based on the oversight powers conferred.

See E. Hans Lundsten, Joseph Marion, III, David Riedel & Christina Scola, Will Your Estate Plan Benefit From a Trust Protector?, JD Supra, Dec. 10, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 18, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 17, 2014

Possible Extension for Charitable IRA Rollovers

Charity 3

Congress could retroactively extend a tax break on charitable donations from individual retirement accounts that expired at the end of last year.  The provision would allow account owners and beneficiaries over the age of 70 ½ to donate up to $100,000 in IRA assets without reporting the withdrawal as taxable income, effectively getting a deduction for the gift.  For many who plan to give to charity, “this gets you the biggest bang for your buck.”

The charitable IRA provision may also aid taxpayers in avoiding or reducing taxes on Social Security benefits and avoid higher Medicare Parts B and D premiums, which kick in when adjusted gross income exceeds $85,000 for individuals and $170,000 for couples. 

Experts expect Congress to revive the provision, as it has several times in recent years.  “There is a history of retroactive extensions.  My bet is that it will probably pass,” says Ed Slott, an IRA expert. 

After enacting the charitable IRA rollover tax break for 2006 and 2007, Congress has extended it three times, each for two years.  Experts expect the same pattern will hold this year, though Congress seemed poised to pass only a one-year extension.  However, if Congress does not resurrect the tax break, IRA owners who itemize will still get a tax break in the form of a deduction.  IRA owners must take their RMDs by year’s end or face a 50 percent tax on the amount they should have withdrawn. 

See Anne Tergesen, Charitable IRA Rollovers Could Get Reprieve, The Wall Street Journal, Dec. 13, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

December 17, 2014 in Estate Planning - Generally, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Workers' Comp Worth 23 Years of Benefits to Widow Affirmed

GavelAfter her husband died from injuries caused by a 30 feet workplace fall, Doloreza Taluri, was awarded permanent partial disability benefits of $959, 175. The award was calculated based on 1,225 weeks of benefits. The employer of Taluri's husband, Arberia L.L.C., challenged the award because Mr. Taluri only survived for 4.5 hours after his fall and argued that the benefits should be limited to one week.

In Arberia v. Industrial Commission of Ohio, an Ohio appeals court upheld the benefits because Mr. Taluri was entitled to the benefits before he died, the calculation was based on medical evidence, and the amount of time Mr. Taluri actually survived the injury was irrelevant.

See Sheena Harrison, Widow of Ohio Construction Worker Due 23 Years' Worth of Comp Benefits: Court, Business Insurance, Dec. 10, 2014.

December 17, 2014 in New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 16, 2014

Wasting Away Your Savings

Burning money

If you have put some of your hard-earned money into a savings account, do not get too comfortable as you could find yourself blowing it all.  Below are the worst possible things you can do with your savings:

  1. Play the Lottery. While this may be obvious, many people spend the money they could be putting into savings on lottery tickets. 
  2. Buy a Viatical Settlement. Purchasing the beneficiary position of someone else’s life insurance policy is called a viatical.  This is similar to buying a zero coupon bond with an uncertain maturity date, and you could do better buying some more traditional investments.
  3. Purchase a Timeshare. Timeshares may seem great, however, they are terribly expensive.  There are also annual maintenance fees that you are responsible for paying and there is no refund if your trip is cancelled due to bad weather.
  4. Pay Off Your Partner’s Debts.  Helping out a loved one with his or her debt problem could change the structure of the relationship. 

See Steve Stewart, The Top 5 Worst Possible Things You Can Do With Your Savings, Pittsburgh Post Gazette, Dec. 13, 2014.

December 16, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Safely Spending In Retirement

Money money money

According to researchers at Texas Tech University’s Personal Finance Planning Department, retirees are withdrawing money from their retirement accounts at staggeringly slow rates or not at all.  By doing this, retirees are foregoing a standard of living they could afford on long-standing economic principles. 

Retirees with median wealth have a “consumption gap” of about 8 percent on average, which is a gap between what they are spending and what they could spend.  Retirees with higher levels of wealth have a consumption gap as high as 45 percent.  “This is an example of what economists call ‘precautionary saving.’  People feel a need to hold on to wealth to deal with uncertainty about future spending needs.  The problem is that it comes at a real cost in terms of foregone consumption.”

So, what can retirees do to make themselves more comfortable spending down their assets?  First, retirees could withdraw more by waiting to claim Social Security until age 70.  This would produce the highest possible monthly Social Security benefit. 

Secondly, long-term care insurance is an option to address fears of unexpected health and care costs in retirement.  “If people could be convinced to buy long-term care insurance, and secure enough guaranteed lifetime income in the form of optimized Social Security, pensions and purchasing single premium immediate annuities so that they would have enough income to cover basic living expenses, they would feel much more secure about spending more money in retirement.”

Finally, calculate a safe withdrawal rate.  Knowing how much you can safely withdraw from your retirement accounts will also give retirees more comfort. 

See Robert Powell, Six Ways to Safely Spend More in Retirement, USA Today, Dec. 13, 2014.

December 16, 2014 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Monday, December 15, 2014

Keys to Retirement Planning

Retirement planning

According to statistics, the average credit card debt per person is over $5.500.  Individuals who do not have a handle on the big picture of their personal financial world should understand the steps of financial planning and get started today.

The first and most important step of financial planning is organization.  By organizing your finances and understanding money flows, you can be much closer to your financial goals in life.  Excel spreadsheets are great organization tools.  However, using something a little more sophisticated such as Mint or Quicken may become necessary as your financial life evolves.

There are so many different ways to approach organization, but the “how” is nowhere near as important as the “when.”  The best time to begin organizing is now.  Whatever method you choose, once you create a system, enter financial information dating twelve months back.  This enables you to evaluate your spending patterns and look at investment accounts from a top-down perspective.  This is a great time to adjust your allocation for a more efficient portfolio.

After you organize everything in an efficient manner, you need to maintain this organization over time, which requires discipline.  Make sure to balance your checkbook every month and keep your information up-to-date when you receive the credit card and investment statements.  Sort through your information and know what is happening with your cash flow and investments.  Do not be tempted to pull out of the market after a big loss or start buying in the market when there is a huge run-up.

See Jim Blankenship, Successful Retirement Planning Requires 3 Steps, USA Today, Dec. 14, 2014.

December 15, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Understanding Estate Planning


While founders have vision, comprehend risk and reward, and are good at making decisions, they unfortunately do not understand the importance of having an estate plan. 

Because an estate plan is more than just a document that disposes of assets at death, maybe it is time to reframe the objective into terms a client can understand.  Just as a business plan is a road map to long-term success, an estate plan is a road map to achieving peace of mind.  Since there is no escaping death and taxes, we might as well help our clients plan for both. 

A great estate plan, like a great business plan, will provide a road map to success.  In order to create a plan, a client and his advisors should understand the client’s current personal and financial situation.  There are several basic documents that should be included in almost all plans: (1) a financial power of attorney; (2) a health care power of attorney; (3) a health care directive or living will; (4) a will detailing how assets should be distributed; and (5) beneficiary designation forms. 

Once your client understands the importance of planning, you must bring all the elements together into a working plan.  Your objective is to help the client develop, review and execute basic estate planning documents. 

See Lorri Ann Dunsmore, A Different Kind of Business Plan, Wealth Management, Dec. 10, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 15, 2014 in Estate Administration, Estate Planning - Generally, Non-Probate Assets, Wills | Permalink | Comments (0) | TrackBack (0)

Questioning the Status Quo of Retirement Planning

RetirementA main focus of retirement planning is deferring taxes, but the results of a recent study raises questions on whether accelerating taxes on retirement accounts may sometimes be a beneficial move. The Vanguard study revealed that many 401(k) and IRA account holders are not using distributions from the accounts for income. Even though a Roth conversion can accelerate tax consequences, it can also have estate planning benefits for inheriting beneficiaries since the accounts do not have required minimum distributions.

See Mark Miller, When Paying Taxes on Retirement Accounts Makes Sense, Wealth Management, Dec. 12, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 15, 2014 in Estate Planning - Generally, Income Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, December 12, 2014

Decreasing 401(k) Fees

401(k)According to a new study by BrightScope Inc. and the Investment Company Institute, the fees associated with 401(k) plans are falling.  In looking at plans that existed from 2009 to 2012, the total costs decreased on average by around 10 basis points, with the largest decline coming in plans with less than $1 million in plan assets.  Researchers pointed to several key factors as to why costs are coming down.

“The decrease can be attributed to the rising awareness by both plan sponsors and plan participants of fees and their effect on 401(k) savings.”  The scale of plans is also a factor, since bigger plans can spread the costs among a larger base. 

A final factor is increased use of index funds, which tend to have even lower fees.  “By 2012, nearly a quarter of the assets in 401(k) plans were invested in index funds.  That’s up from 17 percent in 2006 and 23 percent in 2012.” 

See Ryan W. Neal, 401(k) Fees Are Coming Down, Wealth Management, Dec. 9, 2014.

December 12, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Charitable Planning With Insurance Policies

BagPrior to the increase in the gift and estate tax exemptions, the focus on reducing tax consequences was higher than in the present financial climate. The increased exclusions have reduced the drive for tax focused estate planning for the many estates that now fall below the exclusion. While this change has reduced the incentives for charitable planning to reduce estate tax, it has created a new trend, which is to donate life insurance policies to charity. This trend was created because the same tax incentives that fueled large charitable giving contributions also fueled the desire to create life insurance policies to cover the estate tax cost. This type of charitable planning can create beneficial results, but experts also caution that some insurance policy based donations can create independent tax consequences and should be considered carefully.

See Warren S. Hersch, Charitable Planning in 2015: Weighing the Pros and Cons, Life Health Pro, Dec. 11, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 12, 2014 in Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)