Wednesday, March 22, 2017

Management of Trust Assets-Uniform Prudent Investor Act

Most individuals who establish a revocable trust during their lifetime also name themselves as the initial trustee of their trust.  In such a case, the trustee has complete discretion as to the investment and management of the trust assets.  For example, such a trustee can be very aggressive in his or her investment philosophy and invest in high risk, very speculative assets.   Also, the trustee can have an unbalanced trust investment portfolio such as investments consisting of only one stock or in one sector.  However, once the person who established the trust is no longer the acting trustee, the third party, successor trustee does not have such discretion.  Most states, including Nevada, have adopted the Uniform Prudent Investor Act.  Under this act, a third-party trustee must invest and manage the trust property as a prudent investor would, considering the terms, purposes, requirements for distribution, and other circumstances of the trust.  In satisfying this prudent investor standard, the trustee shall exercise reasonable care, skill and caution.  Also, a trustee who has special skills or expertise such as a stockbroker or hedge fund manager has a duty to utilize those special skills and expertise.  Within a reasonable time after accepting a trusteeship or receiving trust property, the trustee is required to review the trust property and make and carry out decisions concerning the retention and disposition of assets in order to bring the trust portfolio into compliance with the purposes, terms, requirements for distribution and other circumstances of the trust and the Uniform Prudent Investor Act. Some of the circumstances the trustee shall consider in investing and managing trust property are:

      (a) General economic conditions;
(b) The possible effect of inflation or deflation;
(c) The expected tax consequences of decisions or strategies;
(d) The role that each investment or course of action plays within the overall trust portfolio;
(e) The expected total return from income and the appreciation of capital;
(f) Other resources of the beneficiaries;
(g) Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
(h) An asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.


A trustee is required to diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.  Also, a trustee is required to administer a trust in accordance with the terms of the trust even if such terms are in conflict with the Uniform Prudent Investor Act.  For example, a person may wish their trust assets to remain as stock in a publicly traded corporation that the individual or a family member founded or worked for.  In such a situation, it is important that the trust terms are properly drawn to allow the trustee such discretion.   

Wednesday, February 15, 2017

Fix Your Trust?

I received a mailer last week from a law office claiming that with a simple free workshop they could FIX MY TRUST.  They pointed out a few reasons that my trust might not reflect my needs:

·         -           Removing A/B Trust provisions.
·         Protect my spouse from “gold-diggers” after I’m gone.
·         Incapacity/guardianship planning.
·         Protect my children’s future inheritance from creditors and divorce.
·        Protect my future grandchildren’s interest from being controlled and spent by their parent who may be my son-in-law or daughter-in-law.
·         Out-of-state documents.

As much as I appreciate this other law office’s concern – they haven’t read my trust, so how do they know it’s broken?  I realize that I’m just being defensive since I’m in the same line of business.  In truth, the above items of concern are the same things that we talk about with clients when they establish or revise their documents.  I thought it would be good to respond to each of these items so that our thousands of loyal readers have confidence that the trusts that we draft do not leave our office with intended deficiencies.

·         A/B Trust:  We’ve been contacting our clients about this problem for years!!  Due to the increased federal estate tax exemption amount, the administration of a married couple’s trust at the first spouse’s death can be greatly simplified by removing the A/B Trust which no longer provides any tax benefit and which probably results in a tax detriment.

·         Gold-diggers:  It’s possible to utilize features of trust design to protect the surviving spouse so that he/she won’t lose the trust assets in a subsequent marriage, divorce, or relationship.  This does require a little more effort in administration upon the death of the first spouse by imposing a type of irrevocable trust, but they can have plenty of flexibility and more importantly provides great protection to the surviving spouse.

·         Incapacity/Guardianship:  Guardianship has been getting a lot of bad press lately in Nevada.  First of all, the law has been changed and your guardian can now be an out-of-state resident.  The most important thing that one can do to avoid guardianship in Nevada is to be sure that your revocable trust is up-to-date and that you have recent and updated powers of attorney which name individuals who are all willing and able to serve as Trustees and agents upon incapacity.

·         Protecting Kids and Grandkids:  There are a lot of different ways to protect the later beneficiaries of your trust.  From requiring the trust to remain in place during their lifetime, to simpler instructions requiring prenuptial agreements and separate property trusts for receiving inheritance.  These are all options that we discuss with our clients, and we are always happy to review these options and help revise our clients’ choices when needed.

·         Out-of-State Documents:  It is very important to have out-of-state documents reviewed.  Frequently I find that a trust drafted out-of-state can be left alone so long as the client still feels that the arrangements for the beneficiaries are satisfactory.  But we do often recommend that Wills and powers of attorney should be replaced with Nevada prescribed forms.  However, state income tax could be one important reason to revise a trust and think through the selection of Successor Trustees to avoid unneeded state-level income tax upon the death/deaths of the person(s) establishing the trust.

If any of these listed items are of concern to you, please contact your attorney at Jeffrey Burr, Ltd. to schedule a meeting to discuss these issues as they relate to your existing and personalized plan.

Friday, February 10, 2017

What Is A Special Needs Trust?

Planning for a family member with special needs can be overwhelming.  There are many factors to consider when creating an estate plan to protect a family member with special needs.  One tool congress has created under Federal statute is special type of trust for disabled individuals called a special needs trust.

The special needs trust protects disabled individuals who receive means tested government benefits such as SSI and Medicaid.  In general, if a person who is receiving SSI or Medicaid benefits inherits assets from another person, the receipt of those assets disqualify the disabled individual from those government benefits that may be vital to the disabled beneficiaries well-being.  A properly drafted special needs trust, however, allows the disabled beneficiary to receive an inheritance but retain his or her government benefits. 
Unfortunately, there are many traps with special needs trust. Special needs trusts must be created for the “sole” benefit of the disabled individual and also have many restrictions regarding distributions. If the trust is drafted or administered improperly, the inherited assets will be counted as a resource of the disabled beneficiary  disqualifying them from their government benefits. 

When used properly, a special needs trust can greatly enhance the life of a disabled beneficiary and offer them protection during his or her lifetime.  Should you have any questions about special needs trusts, please contact our office.

Tuesday, January 31, 2017

Even if the Estate Tax is Repealed, a Trust is Still the Best Option

One of President Trump’s most prominent items on his ‘to do’ list as the Nation’s 45th President was to repeal the estate tax (also called the death tax) to stimulate economic growth and “Make America Great Again!”  Whether or not President Trump manages to repeal the estate tax, however, Trusts remain the best estate planning tools for the following reasons:

  1. Protect Minor Beneficiaries
    1. If a beneficiary under the age of 18 is named in a will, or is a default beneficiary under state intestacy laws (which is the estate plan the State of Nevada provides for anyone who has not made their own), that minor will be entitled to their entire share on their 18th birthday.  I don’t know about the 18 year olds you know, but if I had received a big check at 18 I’d probably have nothing to show for it 10 years later except maybe a closet full of way too many clothes and cautionary tales for my children. To protect your minor beneficiaries, whether it be children or grandchildren, put their inheritance in a trust.  In a trust, provisions specific to your situation and family may be drafted to perhaps delay an outright distribution until age 25 or 30.  Provisions could also be added that would enable a trustee to pay for school, medical costs, a first car, or even a down payment on a house to assist that beneficiary with accomplishing worthwhile goals, rather than setting them up for failure with a blank check at 18.
  2. Protect All Beneficiaries
    1. Trusts can not only protect a beneficiary when he or she is a minor, but also from creditors and others, such as financial scammers, spouses during marriage, ex-spouses after marriage, caregivers, and anyone else who might try to get a piece of someone else’s inheritance.

More reasons why Trusts remain the best estate planning tools for estate planning will be forthcoming in my next Blog – stay tuned!

-Attorney Rebecca J. Haines


Tuesday, January 10, 2017

Selecting a Trustee

As you prepare to meet with your estate planning attorney, you will undoubtedly agonize over questions like these: Who will take care of my kids when I die? How will I leave my assets? How will I treat my son, Bobby, whom I haven’t heard from in years? Who takes care of me when I’m incapacitated? Etc., etc....

But one of the most important questions-that isn’t often treated that way-is: who will be my trustee? Too often trustees are selected by default, like choosing a brother or sister just because they are family or the oldest child just because he or she is the oldest-as if being trustee is based on primogeniture. Too often little consideration is given to this important decision, and your beneficiaries and family are left to deal with it.

See, even the best lawyer, asked to draft a “bullet-proof” trust, can’t protect against the unfit or, even worse, rogue trustee. So to help make sure that all the consideration you’ve given to how each piece of your property will be distributed isn’t for naught, select the right trustee. The one who has the acumen and fortitude to carry out your wishes. The one who will serve as the right manager of your assets. The one who understands what his or her expectations are.

To help you make that decision, here is a list of some of the qualifications your trustee should have:

1. Investment knowledge. This includes knowledge of the financial markets, and knowledge of the beneficiaries’ needs.
2. Tax and accounting skills. Trustees will need to make tax decisions for the trust, which will impact the beneficiaries. Also, trustees are often required to give the beneficiaries annual accountings.
3. People skills. Trustees should have the ability to deal with the beneficiaries and all their particularities and demands.
4. Managerial Skills. Trustees should be able to multi-task and manage advisers (i.e., lawyers, accountants, and investment advisers).
5. Integrity. Most importantly, trustees should have the utmost integrity.

Contact any one of our qualified attorneys at the law office of Jeffrey Burr to discuss choosing the right trustee for you.

Wednesday, January 4, 2017

Alicia McKenna Celebrates 20 Years with Jeffrey Burr

Congratulations Alicia on your 20 year anniversary with Jeffrey Burr.  You are the foundation of our Trust Administration department and are so lucky to have you! Here's to many more years.

Jeff Burr and Alicia McKenna

Monday, December 5, 2016

'Tis the Season

As we near the end of 2016 and Christmas approaches, our thoughts turn to those less fortunate.  Many of our clients express their desire to give to those in need and the various charitable institutions whose missions are to help those who cannot help themselves. However, some clients are unsure of how much to give, which charities to give to, and how they can make sure that the donation they make actually benefits those in need. 

A website designed to assist donors in choosing charities outlines four questions to ask of a charity before deciding whether to donate:
  • Does the charity match your passion?
  • Is the charity fiscally responsible, ethical and effective?
  • Do you trust it enough to give without strings attached?
  • Does the charity have strong leadership?

Even with that guidance, choosing a charity (or charities) to donate to, how much to give to each charity, or when to make a gift can be difficult. Why not make one donation to one fund (which allows for an immediate charitable income tax deduction and which can be added to over time), which can grow tax free, enable you to make charitable contributions or gifts to multiple charities over time, and utilize the experience of experts to help you determine what charities you would like to give to, and leave a philanthropic legacy for your loved ones?  All these things can be accomplished by using a popular charitable vehicle called a Donor Advised Fund, or “DAF.”

A DAF is basically an account set up at a financial institution or charity that allows donors to make a grant which qualifies for an immediate income tax deduction, but which can be distributed to multiple charities over a period of time.  The money contributed to a DAF can be invested and grow tax free, and multiple family members may be advisors to the fund to recommend different charitable contributions.  The experts at the institution which holds the DAF can help you and your family choose qualified charities and assist in the philanthropic process.

To discuss a DAF, and how a DAF might become part of your family’s philanthropic legacy, please contact an attorney at JEFFREY BURR, LTD. today.

-Attorney Rebecca J. Haines