Thursday, April 28, 2016
It is common for people to put off making important estate planning decisions. “A 2015 survey by CNBC showed that 38 percent of individuals with investable assets of $1 million or more have not consulted with a financial professional to establish an estate plan.” This article discusses some of the common reasons why people avoid estate planning. Advisers should convince clients to set up an estate planning by outlining the benefits to them. There are a myriad of issues that the financial adviser will need to go over with the client which are discussed in this article. It discusses some of the key elements of the estate plan that the adviser should help their clients identify. This article also describes the process of creating and updating an estate plan. An estate plan is a good way to make sure that clients are able to fulfill their wishes and provide for their loved ones.
See Robert Warner, A Guide To Helping Clients Complete Their Estate Plans, Wealth Management, April 28, 2016.
Special thanks to Jim Hillhouse for bringing this article to my attention.
One difficult situation that a financial adviser might face is watching a client pass away and then seeing the beneficiaries of the estate undo years of financial planning. This article discusses why it is important for advisers to establish relationships with their client’s beneficiaries. Estate planning involves more than just the transfer of money or management of assets. It involves personal connections with clients and beneficiaries. In this column the author recounts his own experience with losing an account after a client passed away. He discusses some of the changes he made to the way he does business after his experience with losing business. Building relationships with beneficiaries is a good way to promote the long term success of an adviser.
See Scott Huff, Rethinking Estate Planning as Building Beneficiary Relationships, Wealth Management, April 27, 2016.
A California judge ruled on Wednesday that the trial over Sumner Redstone’s advance healthcare directive will remain open to the public. The lawsuit brought by Mr. Redstone’s ex-girlfriend, Manuela Herzer, centers around the 92-year-old billionaire’s mental competency. Herzer claims that Mr. Redstone lacked the mental capacity to remove her from his advance healthcare directive, and she is asking to be reinstated as the person in charge of the media mogul’s healthcare. This case is set to be tried on May 6. Los Angeles Superior Court Judge David Cowan did leave open the possibility that some testimony could still be shielded from the public. Mr. Redstone’s medical records will have to be carefully examined and the information entered into evidence will be limited.
See Lisa Richwine, Judge rejects Redstone bid to close part of competency trial, Mediacorp News Group, April 28, 2016.
Nevada has become, in recent years, a popular destination for those seeking to set up a trust. This is due to the very friendly laws that have been enacted that provide a wide range of options to choose from. Listed below are a few of the most popular trust related features that can be found in the state:
- Asset protection trusts in Nevada are allowed even when the trust is self-settled. This gives a person the ability to transfer their assets to a trust with a spendthrift provision in order to protect the property from creditors. In addition, the time span needed to gain full protection of the asset is only two years which make it much lower than almost all other states.
- For those looking to use a trust protector few states are better than Nevada. The laws governing the use of a protector are detailed and make their decision binding on others as well as allowing a laundry list of powers to be granted by the settlor.
- If you are looking to avoid taxes then Nevada is the place to be. The state has no income tax with the gift and death taxes being abolished as well with the benefits being extended to out of staters as well.
See Neil E. Schoenblum, 8 Reasons Nevada Is A Leading Trust Situs, Law 360, April 18, 2016.
Tuesday, April 26, 2016
The IRS has released four private letter rulings that will grant an extension to the 60-day rollover period. Typically retirement account distributions may be rolled over into another IRA within 60 days. This article discusses some of the facts that brought on these private letter rulings. One of the rulings dealt with a situation involving funds that were not qualified to act as an IRA custodian. The other ruling involve a Trust company that resigned as IRA Trustee. In each of these cases the IRS granted relief under the authority provided by Internal Revenue Code Section 408(d)(3)(1). “The Secretary of the Treasury may waive the 60-day requirement under Sections 408(d)(3)(A) and 408(d)(3)(D) when the failure to waive such requirement would be against equity or good conscience, including casualty, disaster or other events beyond the reasonable control of the individual IRA owner who’s subject to the 60-day rollover requirement.”
See Michael J. Jones, IRS Grants 60-Day Rollover Extensions For Silent Distributions, Wealth Management, April 26, 2016.
An IRS ruling recently held that a surviving spouse was the beneficiary of two marital trusts that were established under the late spouses revocable trust agreement. One of these trusts was exempt from the generation-skipping transfer tax (GST) while the other was not. “The provisions of each marital trust provided for the surviving spouse to receive all income during life and granted to the surviving spouse a testamentary general power of appointment (POA) over the assets in the GST taxable trust.” This article discusses Revenue Procedure 2001-38 which sets forth a rule “that a qualified terminable interest property (QTIP) election is treated as null and void when the election isn’t necessary to reduce the estate tax liability to zero.” They held that a release of a general Power of Attorney (POA) created a taxable gift under IRC Section 2514(b).
See Andrew M. Nerney and Andrew B. Seiken, IRS Rules on Tax Consequences Associated With Early Termination of a Generation-Skipping Taxable Marital Trust, Wealth Management, April 25, 2016.
Special thanks to Jim Hillhouse for bringing this article to my attention.
Monday, April 25, 2016
The Internal Revenue Service (IRS) has announced that a wide array of investments will be able to qualify as program related. Private foundations will now be able to use a wide variety of financial tools to achieve their charitable goals. “Last week, the U.S. Treasury Department and the Internal Revenue Service finalized regulations easing the way for private foundations to make program-related investments.” This article provides important information about how the new regulations will apply. Private foundations will now be given more options than what they had in the past. The hope is that these new regulatory announcements will help encourage more charitable giving by making the tax regulations more accommodating. The public policy goal is to create an incentive for these private foundations to stay in business.
See Michael S. Fischer, IRS Oks Program-Related Investments for Foundation, Think Advisor, April 25, 2016.
Financial planning for retirement can be difficult, and it can be even more troublesome when dealing with the expenses of a spouse moving into a nursing home facility. This article discusses the Medical Assistance qualified annuity which is a planning tool that can be useful to someone whose spouse is already in a nursing home facility. This is a means-tested program in order for the institutionalized spouse to become eligible they may be required to spend down excess resources. “A Medical Assistance qualified annuity is an immediate annuity that is basically a contract between an individual and an insurance company by which the individual pays a sum of money and the insurance company sends the individual a fixed monthly check for the rest of that individual’s life or for a period of time less than that individual’s life.”
See Julian Gray and Frank Petrich, Elder Law Guys: Planning finances when spouse moves to nursing facility, Pittsburgh Post-Gazette, April 25, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
Sunday, April 24, 2016
Keeping a small family business alive through the generations is a difficult task. “Only about a third of family-owned businesses survive into the second generation, 12 percent make it into the third, and a mere 3 percent to the fourth, according to the Family Business Institute.” Succession planning is a hot area of estate planning and family ownership adds layers of complexity to the process. Families should obtain the assistance of an independent third party who can assess the value of the business and develop a way to divide it up fairly. It is important for family members to begin communicating with each other as early as possible to develop a strategy for working together. There will be difficulties as visions and goals diverge and disagreements break out. Succession planning involves a difficult and complex process that requires a lot of work and commitment.
See Lewis Braham, Keeping It in the Family, Bloomberg, April 21, 2016.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Friday, April 22, 2016
There are more baby boomers who are reaching retirement age and living trusts have become a hot estate planning commodity. This article discusses the need for consumers to be wary of living trust mills that market themselves as estate planning specialists but instead churn out boilerplate documents for a high fee. The living trust is a complex legal document and attempting to go with a one-size-fits all approach will typically not go over well. Living trust mills typically make contact with consumer by phone or mail and many people get drawn into the process. People should be very careful about avoiding these types of products. It is a good idea to meet with an experienced and competent estate planning professional who can guide consumers through the process of creating a personal living trust.
See Mark Huffman, Consumers cautioned about ‘living trust mills’, Consumer Affairs, April 22, 2016.