Thursday, June 30, 2011

Asset Protection and Divorce

If any of you are going through the unfortunate process of a divorce, it’s important that you preserve any asset protection planning you have done with our office by having special language included in the Marital Settlement Agreement and Divorce Decree regarding your Nevada On Shore Trust. Here is some sample language that we’ve used in the past:

“It is the intent of the parties to maintain, to the extent practicable, the integrity and the enforceability of the [NAME OF NOST], an irrevocable trust, for their mutual benefit. The parties acknowledge and understand that to effectuate the provisions of this agreement it may be necessary to effectuate trustee to trustee transfers between the above referenced trust rather than to either party individually under the terms of the respective trust, including but not limited to the specific section of the trust entitled “Trustee Actions”. The parties hereby agree to jointly seek an appropriate order from the Court authorizing such distribution to themselves as trustees.”

 - Attorney Jeffrey L. Burr

Thursday, June 23, 2011

July AFR's Announced

Wednesday, June 22, 2011

New Updates to the Self-Settled Spendthrift Trust Laws:

Nevada’s self-settled spendthrift trust laws have long been considered the most favorable of the thirteen states allowing these types of trusts. (See NRS 166 for the laws pertaining to the “Nevada On-Shore Trust,” as we like to call it, or “NOST”). This is because Nevada has the shortest statute of limitations period and has no statutory exceptions allowing certain creditors such as divorcing spouses, preexisting tort creditors, etc. to pierce the trust.

On June 4, 2011, Governor Sandoval signed SB 221 into law, which makes our spendthrift trust laws even stronger. The changes to the statutes, which are discussed in further detail below, will become effective on October 1, 2011.

1. Expansion of the types of trusts that qualify

Under the new language, a charitable remainder trust, a grantor retained annuity trust, and a qualified personal residence trust all qualify as a NOST.

2. Clarification of settlor’s ability to use property owned by the NOST

If a NOST owns real or personal property, the settlor is now explicitly permitted to use that property without decreasing the protection offered by the NOST.

3. Tacking of statute of limitations period for trusts changing situs to Nevada

If a non-Nevada spendthrift trust is domiciled in a state with substantially similar spendthrift laws to Nevada’s, and the trust’s domicile is properly changed to Nevada, the statute of limitations period does not have to be restarted. The transfer date will be deemed to date back to the actual date of transfer to the trust, or the date on which the laws of the non-Nevada jurisdiction became substantially similar to those of Nevada.

This new provision will allow individuals who have established asset protection trusts in other states with less favorable laws to change the situs to Nevada without restarting the statute of limitations.

4. Trustee liability limited

Currently, Nevada law already protects an advisor to the settlor or trustee of a spendthrift trust from claims unless the claimant can prove by clear and convincing evidence that the advisor knowingly and in bad faith violated Nevada law, and that his actions directly caused damage to the claimant. The new legislation now also protects the trustee of a spendthrift trust unless the claimant can make the same showing as to the trustee.

5. “Last in, First Out”

The new laws clarify that, when a settlor makes more than one transfer to the NOST, a more recent transfer will not result in the earlier transfers becoming accessible to creditors if they would otherwise be protected due to the statute of limitations.

Additionally, any distributions made from the NOST will be considered to have come from the most recent transfer, leaving older “seasoned” transfers in the trust and protected.

6. Decanting Spendthrift Trusts

Under the new law, the trustee of a NOST may decant the trust into another spendthrift trust without affecting the statute of limitations period applicable to the assets in the original trust.

7. Limitations of actions against a spendthrift trust

Until now, it was unclear whether Nevada’s four year Statute of Limitations period for fraudulent transfers would negate the favorable two-year rule under Nevada’s spendthrift trust provisions. Now, it is clear that no action may be brought against the NOST’s trustee at law or in equity if, at the date the action is brought, an action by a creditor with respect to a transfer to the NOST would be barred.

Additionally, in order to bring an action as to a transfer to a NOST, the creditor will have to prove by clear and convincing evidence that the transfer (i) was a fraudulent transfer, or (ii) violates a legal obligation owed to the creditor under a legally enforceable contract or valid court order.

8. Unauthorized agreements by Trustee are void

The new legislation clarifies that the settlor only has rights and powers conferred specifically in the instrument, and any agreement between the settlor and trustee attempting to grant or expand those rights is void. This provision strengthens the use of the NV self-settled spendthrift trust as a completed gift trust, which will bolster its use as an estate tax savings tool for some clients.

 - Attorney Serena Baig

Monday, June 20, 2011

Mark's Theory of Large Numbers

Through years of working with people in their estate planning and financial matters, I have come to conclude that we as humans may understand that the number 1,000,000 is a fairly large number; however, when we see the number 10,000 we think that is a large number as well. We see them both as large numbers and so often do not appreciate the extent of the difference between the two. For example, if I explain that my fee for an estate plan which is designed to save $1,000,000 in taxes will cost $10,000, the prospective client will just see the fact that 10,000 is a large number and, although $10,000 spent with an expected return in tax savings of $1,000,000 seems a good return on one’s investment (i.e. 100 to 1), often the client will decline the services on the basis that $10,000 is a big number and not on the basis that it is small in comparison to the expected tax savings.

It seems our misunderstanding of the significance of large numbers carries over into our reactions to our ever-escalating federal budget deficit. There was a time when $1,000,000 seemed like a pretty significant amount of money. However, these days, when speaking of budgets, the only number that gets anyone’s attention is a number with “trillion” after it. There was a time, not long ago, when we were aghast at the prospect of a deficit of, say, $50 billion. In the month of February, our deficit exceeded $50 billion PER WEEK. But what’s the difference now, billions or trillions, it’s just another very large number that we don’t fully understand. We can see it on paper, but we cannot comprehend the difference between a billion versus a trillion. A few years ago the president challenged his cabinet to come up with savings of $100,000,000 from their budget requests. $100 million seems like a lot. But in fact, $100 million is equal to 16 hours of interest on a $1 trillion deficit (and our deficit is about $14 trillion). The federal government cutting its budget by $100 million is like a family earning $75,000 cutting its annual budget by about $1.75. It’s the equivalent of telling your spouse to buy the generic box of Cocoa Puffs instead of the name brand and calling it a year for budget balancing!

Maybe comparisons like this can help us understand a little better the difference between millions, billions and trillions. Who would have ever thought we would see S & P cut the federal government’s AAA borrowing rating from “stable” to “negative” but this is what happened today. Someone in Congress better learn to understand the significance of large numbers.

Thursday, June 9, 2011

Planning Considerations for Families with Special Needs

Part of any effective estate plan is considering the possibilities of special needs of immediate or extended family member.

Did you know:

  • One out of 9 children under the age of 18 in the US today receive special education services;
  • Out of 72.3 million families included in the 2000 Census, about 2 in every 7 reported having at least one member with a disability;
  • 20.9 million families have members with a disability;
  • Of the 20.9 million families reporting at least one member with a disability, 5.5 percent have both adults and children with a disability;
  • One in every 26 American families reported raising children with a disability;
  • One in every three families with a female householder with no husband present reported members with a disability;
  • An estimated 2.8 million families were raising at least one child aged 5 to 17 with a disability.*
* Source: “Disability and American Families: 2000”, US Census Bureau, July 2005 Report.

With data like this, it is extremely important to consider the current and future needs of potential estate beneficiaries. Often this will include the creation of an independent special needs trust or a special needs trust as a sub trust of a larger estate plan.

To distinguish a special needs trust, a first party special needs trust is one that is created with the special needs individual’s own funds and with court approval. A first party special needs trust will require a state Medicaid payback upon the death of the beneficiary. In contrast, a third party special needs trust is created with a third party’s funds (e.g. parent, grandparent) and does not require court approval nor a state Medicaid payback, as long as the trust corpus is not considered a countable resource for needs based state assistance.

Care should be taken in the preparation of any special needs trust to insure if necessary that court approval is sought. In cases where court approval is not necessary, proper planning will insure that the trust corpus does not become a countable resource for state and federal benefits that may be available for those with special needs.

Jeffrey Burr Ltd. has a full service Elder Law division that is available to assist you in proper special needs planning and is happy to answer any questions you may have.

Thursday, June 2, 2011

SPOTLIGHT Senior Expo - June 3rd

Jeffrey Burr Elder Law Services will be attending the SPOTLIGHT Senior Expo on Friday, June 3rd from 9:00 am - 1:00 pm at Spring Valley Hospital Medical Center.  We will have a table setup and available to answer any questions you may have on estate planning and elder law services.

Wednesday, June 1, 2011

Top 5 Reasons To Use An Attorney

The following posting is borrowed from the May 2011 issue of Vegas PBS Source Magazine, as written by Attorney David M. Grant:

“It can seem daunting when beginning the process of making out a last will & testament, revocable trust, and powers of attorney. As one starts down this important, yet often intimidating course, increasingly people are wondering if they can do it themselves or should they use an attorney. Here are the top 5 reasons why you should use an attorney:

1. Experience. An attorney experienced in estate planning can tell you what to expect in terms of timelines, costs, taxes, and family issues that could arise.

2. Objectivity. On your own, it can be almost impossible to remain objective since estate planning decisions are so fraught with emotion.

3. Special skill. Estate planning specialists are specially trained in what they do. They understand important legal nuances and are able to bring together complex federal and state laws to make your plan work.

4. Protection. Doing it yourself, often leads to the payment of higher taxes, expensive probate proceedings, litigation and fighting between heirs, and increased opportunities for creditors attack. Don’t be “penny wise and pound foolish.”

5. Peace of mind. Knowing your financial affairs will be handled correctly leads to a profound sense of “inner peace.”