Avoiding the Left Hook

A little creative storytelling never hurt anyone, right? When it comes to your attorney, you may be hurting your chances for a successful claim or defense.

Imagine your attorney as the boxer you send into the ring to fight on your behalf. Your attorney has trained and prepared for your big rumble. She uses evidence to knock the other fighter on their heels. She bobs and weaves to avoid the devastating blows that will be thrown throughout your case. Now imagine half way through the match, you send your fighter into the ring blindfolded. There is no way for her to see the punches coming, and before the referee can call it, your fighter is TKO'd with a solid barrage of left hooks. What are those left hooks? The information you chose not to disclose to your attorney and she is blindfolded because she had no way of preparing for the left hook.

Keep in mind; you have hired the attorney to represent you in your legal matter. That means she is bound by a legal duty to effectively navigate the legal ring with your interests in mind. Within the attorney-client relationship, you are protected by attorney- client privilege, which means that communications between you and your attorney, related to your representation, are confidential. The idea behind this protection is to reinforce your confidence in your attorney and your attorney’s confidence in you. Family law, by its very nature, opens up our homes and lays bare the intimate details of our bedrooms. This can be scary even for the most unabashed among us. Your attorney’s job is to leave judgment to the judge, and your job is to tell your attorney the relevant facts and details. Your attorney has trained to wade through the details to find the items that will help or hurt your case. They can extract those items that will build a strong defense or counter argument when those details look like they will TKO your claim. The fact is: your attorney can’t prepare for what she doesn't know about. So don't be shy, spill the beans and give your case a fighting chance.

Keo'vonne W.

"Turn Your Dream Into Your Legacy"

You're Gonna Need a Bigger Tool Box

When most people think of trusts they often times think of a gilded estate-planning tool for the ultra wealthy, but a trust can be a great way of protecting the assets of the average person. This week we’ll discuss, what can be the most useful estate-planning tactic in your toolbox.

To keep the discussion stream lined this week will cover trust basics and the three kinds of Marital Trusts.

What is a Trust and how does it work?

A trust is a legal arrangement in which a person (can be more than one person or a business entity) entrusts a third party with power (and/or property) for some determined time for the benefit of another person or parties.

- The person who creates the trust by giving away the power or property to the third party is the settlor/Trustor/grantor.

- The third party with whom the power or property is entrusted is called the trustee.

- The person the trustee is holding power or property for, is the beneficiary.

Ex. John (settlor) designates Martha as trustee of his estate, until John’s daughter Sara (beneficiary) reaches the age of 21.

A trust documents the designation of power and property and names the beneficiaries. The trust document must reflect a clear intention of the settlor to create a trust, the property that is the subject of the trust must be clearly identified, and the beneficiaries must be identifiable.

Revocable vs. Irrevocable

What is the difference between a Revocable Trust and an Irrevocable Trust?

A Revocable trust may be revoked (changed or terminated) at any time during the life of the person who created the trust, ie the settlor. A revocable trust becomes irrevocable when the Trustor passes away.

            - Assets held in a revocable trust are still subject to creditors because the settlor still has access and control over the assets.

An Irrevocable trust may not be revoked (changed or terminated) at any time after it is created.

            - Assets held in an irrevocable trust are insulated from creditors because the settlor no longer has power over the assets. Assets held in an irrevocable trust are considered property of the trust.

Marital Trusts

No that we've covered what a Trust is, how it functions; and defined revocable and irrevocable, we will take a trip into the wonderful world of Marital Trusts.

As the name implies, a Marital Trust, aka an “A Trust” is established for the benefit of a settlor’s spouse and their children. There are three types of Marital Trusts: 1) Qualified Terminable Interest Property (QTIP) Trust, 2) Power Of Appointment Trust, 3) The Estate Trust.

It is critical to note that All U.S. residents can use the Unlimited Marital Deduction, which allows for property to be transferred to a spouse before or after death. The spouse must be a U.S. citizen in order to take advantage of this deduction.

At the first death assets are passed tax-free to the second spouse, then to the children at the death of the second spouse. The second transfer, the one made to the children of the marital couple, is subject to tax if there is not a Tax Credit Trust aka a “B Trust” set up. In general these trusts will operate together to maximize savings.

Pros

-Makes sure that the marital children inherit even if the surviving spouse remarries. Ordinarily the new spouse would be able to lay claim to the estate according to state statute.

- Great way for married couples to take advantage of tax breaks. 

Cons

- Must be used in conjunction with a “B Trust” to minimize taxation at the second spouse’s death.

Noteworthy Tidbit:

If the surviving spouse is not a U.S. citizen, he will inherit subject to all permissible estate and transfer taxes after the first $145,000. A well-drafted Qualified Domestic Trust aka “QDOT” will qualify for the marital tax deduction and can insulate a large portion of the assets used for the the benefit of a non-US citizen. (QDOTs will be explained in another post- but you should know that they exist)

1) Qualified Terminable Interest Property (QTIP) Trust-

Creates a life-long interest in the asset of the trust in the second spouse, but prevents him from passing the money on to subsequent spouse. Normally a settlor may not take advantage of the unlimited marital tax deduction if the surviving spouse is able to lose an interest in the property.

For example, if wife leaves her husband a property that belongs to him so long as he doesn’t get married. Whether or not he gets married is not relevant, but rather the fact that the act of getting married can cut off his interest in the property according to the terms of the wife’s trust. Wife would not be able to take advantage of the tax deduction in order to avoid taxation on the property. However the husband’s interest will be qualified for the tax deduction is wife grants him a life estate. That is he owns the home until he dies. When husband dies, his life estate ends and then the home becomes property of the estate and subject to the terms of the trust that give the home to the children rather than new wife.

Pros

-Gives the settlor power to prevent the estate assets from going to a new spouse.

                 -- The settlor can grant the surviving spouse some                                  power to alter distributions.

-Delays taxation until the death of the second spouse.

-Also may be used to ensure that children of the second marriage are provided for from the marital assets of the second marriage.

Cons

- Taxation at second death

- Limits the surviving spouse's power to name new beneficiaries or exclude existing beneficiaries.

2) Power Of Appointment Trust

This trust is similar to the QTIP trust because it gives the surviving spouse a life interest, that is the right to use the assets during her lifetime and then whatever assets remain at the death of the surviving spouse, are distributed. However, the key difference here is that the surviving spouse has the general power of appointment and may alter the distributions made at their death.

Pros

-Ultimately gives surviving spouse power over final distributions of the assets.

- Most liberal grant of power to the surviving spouse when comparing marital trusts. 

Cons

- Marital assets could end up in the hands of a new spouse.

 3) (Marital) Estate Trust

Does not necessarily give the surviving spouse rights to the entire marital estate during lifetime. It is usually used to make discretionary distributions to the surviving spouse. Discretionary distributions are distributions made at the discretion of the trustee (usually not the surviving spouse). This can be the most restrictive type of marital trust. Even if all of the assets are not available to the surviving spouse during her lifetime, any assets that remain in the marital trust must become the property of the surviving spouse’s estate. This is different from the QTIP trust, which prevented the remaining marital assets from becoming a part of the surviving spouse’s estate and instead streamed them directly to the marital children.

Pros

Can be used to provide for a spouse with a gambling or drug problem. Ensures the spouse will be taken care of but not use the trust assets recklessly.

Cons

Can be very restrictive.

Noteworthy Tidbits

Used alone, Martial Trusts do not completely eliminate taxes, but rather delay when the estate is taxed. This is desirable if the first spouse to pass is the primary breadwinner, the surviving spouse gets to enjoy the assets of the estate free from taxes. Taxes are levied against the estate when the second spouse dies and has little impact on the quality of life of the surviving spouse.

Marital Trusts are typically set up in conjunction with a B Trust also called a Tax Credit Trust, which we will discuss next week.

 The subject of Trusts is a vast but we will tackle a variety of trusts that can exist outside of a marital estate next week.   If there is a term or explanation in this post that is still unclear please ask for clarification by posting your inquiry in the comments section or emailing us at Info@KeovonneWilsonLegal.com

Keo'vonne W.

"Turn Your Dream Into Your Legacy"

The Who's Who of Estate Planning

When I lived in Brooklyn, I would wander down to a nearby park to play chess. The well worn tables were usually occupied by some of the most incredible chess players I'd ever met.  I was beat several times by a 14 year old chess master, but every time I played I became better at protecting my King.  This is a lesson that is useful in estate planning and thankfully I'm a better lawyer than I am a chess player. Let's imagine that the people involved in your estate plan are your chess pieces. They each have a particular duty, power or role. For the most part, their purpose is to defend your assets, ie your King. While the king himself isn't a powerful player, he is the reason all the other pieces are on the board; this is essentially how your assets function. 

In the world of estate planning, as in the game of chess, there are quite a few moving pieces. And as with chess, you can not protect your most valuable assets unless you know who's who and how they function. 

Testator

The testator is a person who makes a will. A woman who makes a will may be referred to as a testatrix.

 

Beneficiary

 When used in reference to estate planning, a beneficiary is someone who receives money, property, profits, and other property as a result of a trust, will, life insurance policy , or other method of gift giving.

            The following terms are sometimes used to distinguish between types of beneficiary.

            Devisees are the beneficiaries of a will who receive real property ( home, office building, apartment complex,  other forms of real estate)

            Legatees are the beneficiaries will who receive personal property ( jewelry, art, collections)

Noteworthy Tidbit

-The terms beneficiary is generally adequate and covers all types of gifts. 
-Personal property is generally anything that you can move around or hold.
  

Trustor – also called Grantor, Settlor, or Donor

 A Trustor is the person or organization that creates a Trust by setting sets aside gifts of funds, property and other assets for others (beneficiaries). They plainly express their intention designate someone (sometimes themselves) to maintain the assets until a designated time or event in which the assets will be dispersed to the beneficiaries.The Trustor may serve as trustee.

 

Trustee

  A trustee is the person that holds, manages, and or maintains the property held in a trust for the benefit of the Beneficiaries. She has the duty to distribute the property at a predetermined time or event. As the name indicates the trustee should be someone who is trustworthy and have the ability to manage the trust assets. A trustee owes a duty of loyalty to the Beneficiaries of the trust, which means she must act in the best interest of the beneficiaries at all times.

The Trustor may serve as trustee of the assets until she dies or at some predetermined date or event.

 

A successor trustee becomes trustee if the originally named trustee is unable to serve as the trustee. A trustee may be unable to serve due to incapacity, death, or unwillingness to serve as trustee. A successor trustee is usually chosen by the settlor and named in the trust document.

Co- trustees exist when there is more than one trustee for the same trust.

 

Below is a list of rights and duties a trustee may have. This list is not a complete list of duties and a Trustor may limit and designate more narrow or broad duties.

- Invest the trust assets

- Sell trust property

- Keep an accurate accounting of the trust assets

- Bring a lawsuit on behalf of the trust

- Defend the trust in a legal suit

- Distribute trust assets to beneficiaries

- Must remain unbiased when dealing with beneficiaries.

- May not use the trust assets for his own benefit (Even if he is a named beneficiary of the trust, he still has a duty to act in the best interest of all of the beneficiaries and must do so impartially. He may be removed by legal action if found to be acting in a way that             is not loyal to the trust beneficiaries)

 

Executor (also known as a Personal Representative)

 The executor is the person who wraps up the affairs of the deceased testator (will maker). He is designated in the Will and usually is tasked with submitting the will for probate. The executor is obligated to act to satisfy the testators wishes as spelled out in the will. She is also responsible for paying any remaining debts and taxes on the behalf of the testator. An executor must be over the age of 18 years old.

 

Administrator (also may be known as a Personal Preventative)

An administrator acts in the same way as an Executor but represents the interests of someone who dies without a will. She is usually a spouse or trusted family member of the person who has died. She may be appointed by the court in the case where there is no clear designation or where a named executor refuses to serve.

 

Guardian

A guardian serves as a sort of trustee, but rather than manage assets, he manages people. A guardian is responsible for the well being and care of a person. A guardian is usually chosen and named in a will document when the testator has minor children, but a guardian may care for an adult who is incapacitated. He may also petition for guardianship. If a guardian is not chosen in a will or estate document, a judge may appoint one.

 

Ward

 The ward is the person the guardian is caring for.

 

Conservator

 A conservator is appointed by the court to manage the financial affairs of an underage child or an incapacitated adult. The conservator may be the same person serving as the guardian.

 

Protected person

The protected person is the person whose estate the conservator has legal power over.

 

 Noteworthy Tidbit

- What’s the Difference? The Guardian has power over the person; the Conservator has power over the estate of the protected person.

 

- A Guardianship or Conservatorship may be ended if the ward/protected person can show to the court that they no longer need the protection and care of the guardian or conservator.

 

 

Trust Protector

 The trust protector is an uninterested third party, usually an attorney, financial advisor or bank, that makes sure that the trust is being taken care of the way the Trustor intended. He is usually not called to duty until someone, usually a disgruntled beneficiary, calls the Trustee’s behavior into question. The trust protector may remove a Trustee who is violating his duty of loyalty and replace him or act as Trustee until she finds a suitable successor trustee. Trust protectors are usually entitled to payment.

 

Next week's article will cover trusts. If there is a term or explanation in this post that is still unclear please ask for clarification by posting your inquiry in the comments section or emailing us at Info@KeovonneWilsonLegal.com

Keo'vonne W.

"Turn Your Dream Into Your Legacy"

Power of Attorney and other Super Powers

Healthcare Power of Attorney, Financial Power of Attorney and Do Not Resuscitate Orders (commonly called DNR).

 This entry is the second in a series that attempts to demystify trust and estate planning documents and tools. This week we will cover Healthcare Power Of Attorney, Financial Power Of Attorney and Do Not Resuscitate Orders. Below are explanations that cover the legal aspects of the documents and include how medical providers deal with these documents.

HEALTHCARE POWER OF ATTORNEY

What is a Healthcare Power Of Attorney? A Healthcare Power Of Attorney, let’s shorten it to HPOA from here on out, is a document that allows you, the grantor (as in the person granting the power to another) to select someone you trust to act as you agent in matters of your medical healthcare. In other words, this document formally gives power to another to make medical decisions on your behalf.

How is this different from a Will? A Will may allow someone to make decisions concerning your healthcare when you pass, but the HPOA allows someone to act on your behalf in the instance when you are incapacitated, even if only temporary.

What are the benefits of a HPOA? It can prevent delay in medical treatment. Without one, someone will have to go to the local courthouse to ask for the right to act as your guardian.

But doesn’t my spouse automatically have the power to make medical decisions on my behalf if I am incapacitated? Generally, a spouse will make medical decisions, but there are cases where a spouse’s powers have been contested. One very famous case was the Terri Schiavo Case. Terri was kept on life support while her husband and parents battled in court to decide who had the right to determine what happened to the Mrs. Schiavo while she remained in a vegetative state for fifteen years. (We will talk more about the Schiavo case when discussing the Living Will.) An explicit designation through an HPOA, along with a frank discussion loved ones, can take some of the conflict out of end- of- life or incapacity scenarios.

 How do healthcare practitioners use an HPOA? Glad you asked. I asked an Emergency Healthcare physician and he told me that in the case where a family member does not agree with another family member on the method of care or treatment, the HPOA becomes the final word to the doctors. The person listed as the agent has the final say and the doctor will follow their orders. Without a HPOA, doctors will not go through with a contested treatment. Healthcare providers are also very reluctant to take a person off of life preserving treatment without proof of HPOA, especially when contested.

 Will my agent have access to my medical records? Yes, with the addition of a HIPAA authorization in your HPOA, your agent will have access to your medical records and the ability to direct the use of those records by healthcare providers.

 Can my healthcare agent be sued for acting on my behalf?

No, your healthcare agent is presumed by the court to have the authority to make decisions on your behalf without being personally responsible for the legal ramifications, so long as she is acting in good faith.

 Example: You name your best friend your agent in your HPOA. After an accident you are left in a vegetative with a very low chance of recovery. Prior to your accident you explained to your dear friend clearly that you did not want to be artificially kept alive for longer than three months in this condition prior to your accident. Following your wishes, after three months in a vegetative state, your friend follows your wishes to remove all artificial health aids and you pass. Your family may not sue your friend emotional distress following your death.

 Who needs an HPOA? Anyone susceptible to death (i.e. everyone). Same sex partners in states that do not acknowledge same sex marriages my find this document particularly helpful. There are horror stories of partners being shut out of the end-of-life-decision-making process by disapproving family members or being denied hospital room access because the hospital does not consider them a “family member”. Arizona prohibits common law marriage (and only acknowledges to some degree those valid in other states) so unmarried/ cohabitating partners should strongly consider a HPOA.

FINANCIAL POWER OF ATTORNEY

What is a Financial Power of Attorney? A Financial Power of Attorney (from here we'll refer to it as FPOA is a document in which you, the grantor, give another person the power to make financial decisions on your behalf.

What powers does an FPOA give my agent? Your agent may enter a safe deposit box rented or held by you, deposit and withdraw from your bank accounts, pay bills, pay the cost of healthcare and treatment. They can also purchase, lease, sell, assign, convey, mortgage, abandon, and improve upon property. Agents may borrow money, use a credit card, and sue on your behalf. The list goes on and in general includes anything you can do financially. 

Do I need this if I have a trust? Yes, The FPOA gives your agent the power to cover those items not included in your trust. There are some items that are traditionally left out of a trust, such as IRA and Life insurance benefits.

How should I store the FPOA? As with all of your wills and estate planning documents, you should make sure of the following:

 1) The agent (person you've granted the power to) should know that you've named them as your agent.

2) The agent should know where the FPOA documents are kept, have access to a copy, and/or have a copy of the FPOA.

3) You also have the option of leaving a copy with your attorney with instructions to deliver the FPOA upon the occurrence of certain events.

What about my agent’s ability to be sued? A carefully crafted FPOA should make mention of the grantor’s intention to ratify the acts of the person acting on their behalf. Ratification is the idea that the grantor intends for the agent to act on their behalf, so that their actions are considered the actions of the grantor, not their own and they are protected from being held responsible for any acts done in good faith.

Tip: It is a lot of power, so it is important to choose carefully.

Durable Powers- durable powers are those powers that survive the grantors incapacity. Non-durable powers terminate if the grantor becomes incapacitated and the agent will not be able to act on the grantor's behalf. If your intention is to ensure that your agent is able to act on your behalf in any medical situation, it important to make sure that your document grants Durable Powers.

Tip: Stuff happens; make sure you review your Powers of Attorney and all estate planning documents after major life events and every few years. You may get married, discontinue a friendship or simply change your mind about how much you trust a designated agent.

DO NOT RESUSCITATE ORDERS

What is a Do Not Resuscitate Order? A Do Not Resuscitate Orders, commonly called DNR, is a legal document that is used to tell emergency medical responders and other healthcare providers that the patient does not want to be resuscitated if breathing stops or their heart stops beating.

How does it work? It tells healthcare providers NOT to perform CPR (Cardiopulmonary Resuscitation) in the event the heart stops or the patient stops breathing?

Who would want a DNR? DNRs are only created after careful consideration by those who facing the end of life due to terminal illness and or old age.

Who may draft a DNR? Only a doctor may issue a DNR after talking with a patient. A family member or the agent designated by a Healthcare Power of Attorney of the patient my work request a DNR from a doctor if the patient is already incapacitated.

Does it prevent all medical attention? No, a DNR will not prevent healthcare providers from administering pain medications and or nutrition unless otherwise stated.

Can a DNR be revoked by the patient? Absolutely. An emergency healthcare physician described a common occurrence where an injured person who has a DNR and is still lucid is brought into a hospital. Patients may, and oftentimes do, explain that they have a DNR but want CPR in the event they stop breathing or experience heart failure.  The DNR is effectively rendered ineffective.

Can a family member revoke the DNR? No, a family member may not override a valid DNR.

Tip: It is a good idea to discuss the existence of a DNR with loved ones and/or your agent named in your Healthcare Power Of Attorney. This conversation can spare your loved ones surprise and some heartache when your DNR takes effect.

A very special thanks to Dr. JohnAllen Houston for answering my questions about the medical perspective on estate planning documents. He provided very thoughtful commentary on how emergency healthcare providers view these documents and how they must ethically and legally respond to these documents or the lack thereof.

The next installation will cover the “Who's Who” of estate planning. After writing this entry I realized how many specifically named roles and designations there are in estate planning. This entry included grantor and agent. Next week’s will cover Testator, Beneficiary, Trustee, Trustor, Grantor, Executor, Guardian, Conservators and a few more. If there is a term or explanation in this post that is still unclear please ask for clarification by posting your inquiry in the comments section or emailing us at Info@KeovonneWilsonLegal.com

Keo'vonne W.

"Turn Your Dream Into Your Legacy"