Monday, June 19, 2017

AFR's for July

The 7520 rate is 2.2%
The AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 1.22% 1.22% 1.22% 1.22%
Mid-term 1.89% 1.88% 1.88% 1.87%
Long-term 2.60% 2.58% 2.57% 2.57%

Friday, June 16, 2017

Nevada Supreme Court Upholds Public Policy of Domestic Asset Trusts

Just a few weeks ago, the Nevada Supreme Court issued their ruling in a case involving a domestic asset protection trust (DAPT) or a self-settled spendthrift trust (SSST), which our office calls the Nevada On-Shore Trust.  The court decision can be accessed here.

This case involved a dissolution of a marriage and whether a SSST can be invaded to satisfy a judgment for child support.  In this case, Klabacka V. Nelson, the Nevada Supreme Court expressly upheld the validity of Nevada’s “self settled spendthrift trust” statute, found in Nevada Revised Statutes, Chapter 166.  In the Court decision, the requirements for establishing a SSST were reinforced:
A spendthrift trust is created ‘if by the terms of the writing (construed in the light of [NRS 166] if necessary) the creator manifests an intention to create such a trust.’  In addition to the spendthrift requirements, to create a valid SSST, NRS 166.015(2)(a) requires the settlor to name as trustee a person who is a Nevada resident.  Further, NRS 166.040(1)(b) provides that the SSST must (1) be in writing, (2) be irrevocable, (3) not require that any part of the trust’s income or principal be distributed to the settlor, and (4) not be ‘intended to hinder, delay or defraud known creditors.’
We also note that the Court’s decision specifically stated that Nevada’s SSST statute is not subject to any type of “exception creditors.”  Many states which have joined Nevada in offering DAPTs, have built into their statutes exceptions for certain types of creditors, such as child support, alimony, tort creditors, or contract creditors.  While these other states may have their own purposes and public policy in mandating certain exceptions to the protection of an SSST, the Nevada Supreme Court has made it very clear that the intent of the law in Nevada is that Nevada-based DAPTs are to be free from exception creditors.  The Klabacka case states:
“We conclude Nevada SSSTs are protected against the court-ordered child support or spousal support obligations of the settlor/beneficiary that are not known at the time the trust is created.”
This court decision adds to the commentary and writings of many practitioners in this area of the law and reinforces the claim that Nevada is the best state for establishing DAPTs/SSSTs, or the Nevada On-Shore Trust.  If you would like more information regarding the Nevada On-Shore Trust, please investigate our website or contact our office to schedule a consultation.




Friday, June 9, 2017

Nevada Passes Assembly Bill 314 Regarding Probate and Trusts

On June 2, 2017, Assembly Bill 314 was approved by the Governor and will become Nevada law on October 1, 2017.  Assembly Bill 314 has been in the works for the past two years by the Probate and Trust Section of the Nevada bar.   The new Nevada law makes positive changes to existing probate and trust law in Nevada. 

Some of the major provisions of the bill include:

  • Increasing the judgment exemption amount for Individual Retirement accounts from $500,000 to $1,000,000;
  • Allowing the court to release Testamentary Trusts from on-going court supervision;
  • Clarifying the existing no-contest laws;
  • Explaining the rights of creditors related to non-probate transfers;
  • Creating law to allow individuals over the age of 18 to authorize another person to order a burial or cremation in the event of his or her death; and
  • Amends and clarifies many important issues relating to probate and trusts.
We are excited for the passage of Assembly Bill 314 and expect the new bill will make positive changes for our clients.


Attorney – Corey J. Schmutz

Thursday, June 1, 2017

Introducing the Passport Trust

Clients that come into our office looking for asset protection in the form of a domestic asset protection trust (“DAPT”) often ask us what additional protections an offshore trust could offer them.  Some of those additional protections include a shorter statute of limitations for creditors to attack assets after the assets have been transferred into the trust, a higher standard of proof that creditors must meet to undo a transfer into an offshore trust, and the fact that the creditor must go to the foreign jurisdiction to pursue their claims.  After reviewing these benefits, many clients are anxious to set up an offshore trust, but that excitement wanes considerably when the fees for setting up an offshore trust are discussed, as well as the formalities and complexities that must be adhered to in order to obtain those extra protections.

To obtain those protections for our clients, but reduce the upfront costs in setting up an offshore trust and avoid some of the more stringent formalities of an offshore trust, our firm has created the Passport Trust ™.  The Passport Trust ™ is an asset protection vehicle that combines the flexibility and simplicity of a domestic asset protection trust (DAPT) with the advantages of an offshore jurisdiction’s additional protections against creditors, if the need arises.

A Passport Trust ™ includes “passport” provisions in the trust agreement that enable a DAPT to be redomiciled in a foreign non-US jurisdiction such as Nevis or the Cook Islands if there is ever a distress event.  Typically there will be no new waiting period for creditor claims in the new jurisdiction – the original transfer date of assets into the DAPT will be used as the transfer date for purposes of the foreign jurisdiction’s rules regarding creditor claims.

Passport Trusts ™ lower the entry cost to obtain the additional protection an offshore jurisdiction can provide by allowing you to begin with a NOST and ‘start the clock’ on the waiting period for protection from creditor claims and later convert to an offshore trust, if necessary, for the best of both worlds.

The Passport Trust™ begins as a DAPT with all the protections that Nevada’s self-settled spendthrift law provides, but includes a special passport provision that enables the Trustee to move the trust’s domicile to a foreign jurisdiction.  In conjunction with this passport provision, application will be made to a foreign trust company upon the creation of the DAPT to pre-approve the DAPT for re-domiciliation.  The foreign trust company shares in the due diligence regarding the creation of the trust.  As a result of their early involvement, the foreign trust company agrees to serve as a special trustee, dormant and waiting with ‘open arms’ to receive the trust assets if a distress event occurs.


To find out more about the “Passport Trust” and how it might be a part of your integrated estate plan, please contact our office.

Tuesday, May 23, 2017

Where There's a Will, There's a Way

Nevada law provides for two ways of creating a valid and binding Last Will and Testament.  The first method is by drafting a will, in writing, that is signed by the testator or by an attending person at the testator’s direction, which is attested to by at least two competent witnesses who subscribe their names to the will in the presence of the testator.  The second method is often referred to as a “holographic will,” wherein the signature, date and material provisions of a will are written by the hand of the testator.  For a holographic will, there is no requirement that it be witnessed or notarized.

When a document meant to be a Will does not comply with the requirements for either a witnessed or holographic Will, a court may not enforce the directions provided about who beneficiaries are and what they should receive.  Instead, a court may substitute Nevada’s default rules governing disposition of a person’s estate, which may be completely different from a testator’s wishes.

To ensure that your estate is distributed according to your wishes, it is important to seek professional legal assistance in drafting a Last Will and Testament or other testamentary documents.  Be wary of download-able forms, templates, or non-legal professionals who attempt to provide low-cost alternatives for drafting Wills or Trusts, as these ‘low cost’ alternatives tend to be the much more expensive option in the long run, as families and loved ones have to pay extra attorney's fees and court costs if these documents are not drafted properly.


To review a Will you have already created, or discuss the requirements of what constitutes a valid Last Will and Testament under the laws of Nevada, contact an attorney at JEFFREY BURR today.

-Attorney Rebecca J. Haines

Wednesday, May 17, 2017

Enforcement of No-Contest Clauses

Most wills and trusts, in my experience, contain no-contest clauses, which say something like: if a beneficiary contests the terms of my will or trust they get nothing. Most clients like this language. They think it protects them from a beneficiary who comes swinging out of the corner so-to-speak and tries to claim more than what was left to him or her. The problem is that sometimes the no-contest clause protects a will or trust, but sometimes it doesn’t.


Nevada law states that no-contest clauses will be enforced with certain exceptions. It will not be enforced if a beneficiary seeks (1) to enforce the terms of the will or trust, (2) to enforce his or her legal rights under the will or trust, or (3) to have a court construe or determine the legal effect of the will or trust. Also, a no-contest clause will not be enforced in certain circumstances if legal action is brought in good faith and based on probable cause. These exceptions combined with the overarching principle that law abhors forfeitures can at times render a no-contest clause seemingly meaningless. So if you suspect you will have problems with your beneficiaries, please consider consulting with an attorney at Jeffrey Burr, Ltd. about planning around your particular circumstance.


Wednesday, May 10, 2017

Amending Your Trust

The main component of the estate plan for most people is a revocable living trust that they establish during their lifetime. When you create a revocable living trust, you can only plan for the present and for the near foreseeable future.  However, an unanticipated change in circumstances in your life may necessitate the amending of your revocable living trust.  Simple examples are when you wish to change the successor trustee or provide for a specific bequest to a new beneficiary or change the amount of a monetary bequest going to a beneficiary.  In these situations, how do you amend the trust?

First of all, oral changes to a trust agreement will never be legally enforceable (i.e. trustor tells someone that his car should go to a child or grandchild.)  The reason for the unenforceability of oral amendments is that once the trustor is deceased, he or she is not there to verify (or deny) the purported oral amendment.  If this was not the rule, anyone could allege that the trustor orally changed the trust before he or she died, and there would be no way to prove or disprove this. In order to determine how to properly amend your trust, the provisions of the revocable living trust agreement must be closely examined. The agreement will specifically state how the trust can be amended.  Oftentimes the trust agreement will provide that any amendment to the trust must be in writing, dated, signed by the trustor and delivered to the trustee.  It is essential that the terms of the trust regarding amendment be strictly adhered to.  Even when amendments are made in writing, there can be problems. People will sometimes attempt to amend their trust by marking out some provision and handwriting something in its place. They may even date and initial the change.  However, if the trust agreement requires that the amendment be signed by the trustor and it is not re-signed, the amendment fails to satisfy the amendment conditions as set forth in the trust agreement.  This, of course, can have serious ramifications, including the possible failure of the trustor’s intentions being carried out once he or she has died. The successor trustee or an interested party could petition the court to take jurisdiction of the trust and determine what the intent of the now deceased trustor was.  This seems to be a failure, however, since one of the main advantages of a revocable living trust is to avoid court involvement and the accompanying costs and fees.  Also the court may construe the trust contrary to what the true intent of the deceased trustor really was.

Accordingly, it is best to always consult a qualified estate planning attorney to assist you in the proper amendment of your trust. 


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