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.