Monday, May 07, 2012 Estate Planning for the Blended Family: The Intersection of the Head and the Heart
By L. Paul Hood, Jr., Esq. & Emily Bouchard
A prospective new client contacts you about working with him and his partner. Within minutes you learn that they are unmarried with each having children from prior relationships as well as one of their own together. Do you experience a thrill of excitement at having such a complex and fascinating potential couple to work with, or does this scenario strike fear in your heart? If you’re like most of the estate planners we work with, fear would be your first response. Are you aware that your prospective client is most likely afraid as well, but for different reasons?
In Estate Planning for the Blended Family (Self-Counsel Press 2012), we identify and discuss 11 fears that clients can have when it comes to the estate planning process. These fears include everything from confronting fear of death, to fear of the estate planning process itself. On the other side of the equation, the biggest concern for the estate planner (or should be if it’s not already) is the likelihood of conflict of interests within the blended family system.
The reality is that estate planners need to be able to manage their own emotions, as well as those of their clients, around these fears and potential conflicts. It’s not enough to understand the intricacies of estate planning vehicles to avoid taxes and transfer assets efficiently – it’s also necessary to make sure you are addressing the core concerns (and yes, fears) that are part of the process. These fears prevent people from doing estate planning, or cause them to procrastinate. Fears lead to avoidance strategies that cause costly and unnecessary delays in estate planning. More often than not, people tend to avoid the conversations that could move the process along smoothly due to a lack of awareness about how to have the conversations effectively.
Estate planning for the blended family client can present some of the most challenging work that an estate planner ever does. One of the reasons why this is so is that most professionals in the field of estate planning aren’t sufficiently trained or experienced in the “human side” of the process, which is the “heart” of estate planning. Most attorneys, accountants, and financial advisors are trained in the “head” side of estate planning. The key to successfully navigating the often treacherous waters of estate planning for the blended family is properly balancing the head and heart.
On Tuesday, May 8th, the first in a series of three teleconferences on Blended Family Estate Planning will commence. This 90-minute presentation will dive into the key issues of the initial consultation and successful engagement of couples with a blended family. Participants learn how to address emotionally charged issues and fears that keep the planning process from moving forward, as well has how to move when a client shuts you down or shuts you out. Specifics related to property ownership and distribution will be addressed along with who should be considered for key fiduciary roles. The training provides a comprehensive introduction to estate planning for the blended family, and in so doing, marries the “head” and the “heart” of estate planning.
In the second session to be held on Tuesday, May 15th, attention is focused on the lifetime planning options that are available or advisable to blended family couples.
And last, but certainly not least, in the final session to be held on Tuesday, May 22nd, the various issues that are attendant to testamentary estate planning for blended family clients are addressed, as well as some post-death administration issues.
To sign up for this timely and important series and to receive a complimentary copy of our book, which includes a CD with forms, visit www.ultimateestateplanner.com.
If you have any questions, please feel free to contact Emily or Paul at estateplanning@blended-families.com. You can also contact The Ultimate Estate Planner, Inc. at 1-866-754-6477.
Emily Bouchard and L. Paul Hood, Jr. © 2012
Monday, April 30, 2012 LISI.com - Practice Pointers on the Core Concern of Blended Family Estate Planning: Joint or Separate Representation
Reproduced with Permission by and Courtesy of Leimberg Information Services, Inc. (LISI). For information about how to subscribe to LISI, click here.
“Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.
There are pluses and minuses to couples sharing everything regarding their estate planning together, and when it comes to couples with blended families, the minuses can outweigh the pluses substantially. While there is great value in working together in approaching estate planning, it is important to be aware of the cautions against representing both partners in estate planning, especially when it is the second or third marriage or partnership for one of the members of the couple.
When couples who have children from prior relationships contact you about possibly representing them, the first question that should go through your mind is: “Should I represent this couple together or should I only represent one of the partners in the couple?”
The pros and cons of joint representation of blended family couples is the subject of L. Paul Hood, Jr. and Emily Bouchard’s commentary. Paul and Emily have written a book on the subject titled Estate Planning for the Blended Family, (Self-Counsel Press 2012) that will be released at the end of April. Their book will be available on all of the major online bookstore, and order information can be obtained through the following link: http://blended-families.com/estateplanning/
LISI members should also look for their three-part series on blended family estate planning that they are presenting on May 8, 15 and 22 for Phil Kavesh’s The Ultimate Estate Planner, Inc. The information on how to register for their upcoming teleconference series can be obtained either by clicking the following link: Estate Planning for the Blended Family 3-Part Teleconference Series.
L. Paul Hood, Jr. received his J.D. from Louisiana State University Law Center in 1986 and Master of Laws in Taxation from Georgetown University Law Center in 1988. Paul is a frequent speaker, is widely quoted and his articles have appeared in a number of publications, including BNA Tax Management Memorandum, CCH Journal of Practical Estate Planning, Estate Planning, Valuation Strategies, Digest of Federal Tax Articles, Loyola Law Review, Louisiana Bar Journal, Tax Ideas and Charitable Gift Planning News. Presently, He has spoken at programs sponsored by a number of law schools, including Duke, Georgetown, NYU, Tulane, Loyola (N.O.) and LSU, as well as many other professional organizations, including AICPA and NACVA. From 1996-2004, Paul served on the Louisiana Board of Tax Appeals, a three member board that has jurisdiction over all Louisiana state tax matters. Paul Hood can be reached directly at paul@paulhoodservices.com
Emily Bouchard is a family, wealth, and money coach, and the managing partner of Wealth Legacy Group (WLG), specializing in the emotional impact of wealth in people’s lives. She has been working with inheritors in high net worth families since 2004 with a specialty in step and blended family issues. She is also the director of www.Blended-Families.com and has appeared on the Today Show and NPR, and has been featured in publications such as New York Times and Newsweek. Along with coaching individuals, couples, and families, she consults with advisors in responding effectively to their client’s emotional needs related to estate planning. Her book, co-authored with Paul Hood, from Self Counsel Press on Estate Planning for the Blended Family is due out later this month. Emily can be reached at 360.991.9558 or by e-mail to emily@wealthlegacygroup.net.
Here is their commentary:
EXECUTIVE SUMMARY:
Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.
There are pluses and minuses to couples sharing everything regarding their estate planning together, and when it comes to couples with blended families, the minuses can outweigh the pluses substantially. While there is great value in working together in approaching estate planning, it is important to be aware of the cautions against representing both partners in estate planning, especially when it is the second or third marriage or partnership for one of the members of the couple.
When couples who have children from prior relationships contact you about possibly representing them, the first question that should go through your mind is: “Should I represent this couple together or should I only represent one of the partners in the couple?”
COMMENT:
Advantages of One Strategy versus the Other
Obviously, most professionals want what is in the client’s best interest. And there are advantages to both separate and joint representation.
Some advantages of joint representation for couples on blended families include:
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It is a way to build greater trust and more open communication between the two of them, and possibly with all of the children in their lives.
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It is more cost-effective, since they only have to pay one set of estate planners.
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It can be more efficient for them, as they can work together and divvy up tasks as they prepare to meet with you.
Some pro’s of having separate representation for clients with blended families include:
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Each may have more freedom to speak up about their specific concerns and desires without having to necessarily compromise with their partner.
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The best interests of the individual you represent are the only interests guiding you, and this is an important consideration since there can often be competing agendas, and potential conflicts of interest, often between a step parent and their step children.
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How suited the couple is for joint representation can be discovered in an introductory session with you, which we see also is advantageous for you, even if it is complimentary. No one wants a problem client, as they are more likely to sue you and less likely to pay you. Even in these uncertain economic times, sometimes the best decision that an estate planner can make is to not take on certain people as clients. Taking the time to determine the best route to go up front makes a lot of sense, even if you give a bit of your time away for free.
Without healthy communication between the couple, joint representation could be disastrous. Paul witnessed this first hand with a couple, he in his early sixties, and she in her early fifties. Outwardly, they looked like a routine couple coming in for estate planning, and Paul agreed to represent the couple together, despite lingering concerns about how much was left unsaid at their introductory session, particularly about the abilities of each of their children, who should serve as their successor trustees, and how much to leave to all the children in their lives. However, shortly after the meeting, things quickly disintegrated between the partners, so much so that the couple ultimately divorced, in part over the significant differences in their estate planning goals and plans.
To make sure that he complied with the legal rules of ethics, Paul withdrew from representing both of them, and so they had to start over with two new attorneys. There were so many differences between the partners that they would have been better served by each having a separate set of estate planners from the start. The husband wanted their oldest son to serve as executor, while the wife was adamant that her younger daughter was the most capable. He felt strongly that her “baby” wasn’t ready or capable enough to handle her step-brothers and she wouldn’t command the boys’ respect or cooperation; his wife was just as adamant that his “baby” was neither incompetent nor unable to handle the enormity of the responsibilities. This couldn’t have been the reason for the divorce, but it was apparently just the straw that broke the camel’s back on a life-long tortured marriage, and it all came tumbling down.
Emily got to witness the other side of the equation, where joint representation created an opening for results beyond what anyone could have imagined. The advisory team at a well-known bank referred a client couple to Emily after then went two years without signing their estate planning documents. Their stand-off was a result of a blended family situation, where the husband had two children from a prior marriage and his second wife had two children with him. He wanted the estate equalized at the time of his death and to be assured that all four of his children received the same amounts.
She saw things very differently, since his children were not the same as theirs together, being able to benefit (or not as the case may be) from their bio-mother’s estate. As a result, she wanted her two children to receive the bulk of her estate, including that which she would be the beneficiary of if she were to outlive her husband (which was very likely since she was significantly younger than him). After four months of family dynamics coaching, they learned some communication strategies that allowed them to address over 30 years of long standing hurts and resentments. As a result of some in-depth, facilitated conversations, they not only came up with an innovative approach to their estate planning that honored both of their concerns, they also expressed feeling closer as a couple. They then worked effectively with their team at the bank and found an estate planning attorney who specialized in blended family issues who was able to easily incorporate their wishes into their documents.
Signposts for Joint or Separate Representation
In order to make the decision of joint or separate representation a bit more straightforward, there are some signposts that strongly indicate the need for considering separate representation:
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If one partner is childless but the other has children. These people are not in similar circumstances if only one of them has descendants. Most people want to leave their estates to their children; it’s only natural. However, childless people don’t have such a tie. The risk here is where the stated goal of the parent partner is to leave everything to his or her children may be changed if the parent partner is the first to die.
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There is a significant disparity in wealth or income in the couple. While not always definitive, an income or wealth disparity between the partners can signal an economic imbalance in the couple that could adversely affect the estate planning of the partner who has less.
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One of them is economically dependent on the other. This signpost alone is usually not necessarily of the need to have separate representation. However, it together with the presence of other signposts discussed in this recording can be a strong signal of the need for separate representation.
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One of them does all of the talking or appears to exert strong influence over the other. As an estate planner, you should take note of this sort of situation and take steps to delve into what appears to be a problem in communication between the two of them. The one who is being strongly influenced (or oppressed) will certainly know but may lack the self-will or the perceived freedom to point it out.
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Length of the relationship. Generally speaking, the shorter the relationship, the stronger the suggestion of separate representation.
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The number of past relationships one, or both of them, have had. Generally speaking, the greater the number of past relationships, the stronger the suggestion of separate representation.
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The two of them were separately represented in a pre-nuptial agreement or property agreement. If it was important enough to have been separately represented in an earlier agreement, it is probably still important enough to maintain separate representation with respect to estate planning.
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There is a significant age disparity between the couple. Generally speaking, the greater the age disparity between the couple, the greater is the need to consider separate representation.
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If one of them has a significant secret from the other partner like another child, other assets or another lover. Secrets can have an insidious impact on relationships and can really put your estate planners in a difficult spot when the secret comes to light. Obviously, clients who are inclined to hold on to secrets aren’t going to be forthcoming, so you’ll have to ascertain this indirectly by reading between the lines and finding points of aggravation where you have violated the boundaries that the secret holding client has set around that secret information.
Ways to Address These Concerns with Potential Couple Clients
These are not easy points to consider and, the more uncomfortable they make the couple as you bring them forward, the stronger the indication that you all should slow things down. Give them sound legal reasons for why you think they need to seriously consider separate representation, if that’s what their particular circumstances call for at the time of your initial meeting. You can assure them that there are ways that they can stay in communication and connection around their planning even as they are represented separately.
Once they are clear about why you are recommending separate estate planners, you can then breakdown the different details to be determined together, such as medical/durable powers of attorney, and show them that they can still share with each other their thinking, and explore the pros and cons of their pending decisions. You can also note that when conflicts of interest arise, couples who can find places to align with each other, instead of needing 100% agreement, are able to feel more connected as they make their individual decisions.
With regards to alignment, in Emily’s earlier story about the couple with “yours and ours”, the husband was able to let go of needing 100% equality. They were able to come up with a strategy that honored the wife’s contribution to their marriage in a monetary fashion. They both agreed that her earning potential was about one sixth of his, and they calculated a percentage that seemed to fairly represent both of their views. This percentage was then taken into consideration in the difference that their two children together would receive over and above what his two would get. They were in alignment around the new approach and were able to get there by both letting go of their attachment to having their original views seen as right. In his estate, should he outlive his wife, all four children received the same amounts. She was able to be in alignment with that decision, even though it wasn’t her first choice.
Conclusion
If you determine that separate representation is the best option for a couple, communicate how you see it professionally and with a sense of truly taking care of both of their needs and concerns. Frame your assessment in ways that show them why this in their best interest and that it is not personal but is based on sound advice.
HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!
CONTRIBUTORS: L. Paul Hood, Jr., J.D., & Emily Bouchard
CITE AS: LISI Estate Planning Newsletter #1954, (April 26, 2012) at http://www.leimbergservices.com/
© Copyright 2012 Paul Hood. Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.
This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.
Sources: Leimberg Information Services, Inc. & Robert S. Keebler, CPA, MST, AEP
Wednesday, February 29, 2012 February 29th: Fun Facts About Leap Day
Today is February 29th, 2012. LEAP DAY! We thought that it'd be fun to share some fun facts about Leap Day with all of you, thanks to this entry on Yahoo! Work + Money. Enjoy!
2012 is a leap year, meaning that February, the shortest month, has an extra day, bringing the year to 366 days. This notable event comes only every four years. Which means you have an extra 24 hours. So what will you do with yourself? How about heading to Disneyland for 24 hours straight, catching a movie, or spending the day skiing?
Lookups on the Web are taking a leap, including "leap day activities," along with the quadrennial questions: "what is leap year," "why is there a leap year" and "history of leap year." Here, your guide to the day.
When is it? An extra day is added to the month of February every four years. This year, Leap Day is on Wednesday, February 29.
Why we need Leap Day: Usually, our year is 365 days long. Except that it's not: A full cycle of seasons is actually 365 days, 5 hours, 49 minutes, and 16 seconds long, or about 365.25 days. Over time, the extra quarter of a day adds up, and without Leap Day, the calendar would be one day out of sync with the seasons. After 30 years, it would be about a week off, and after 100 years, it would be nearly a month off.
Bing Quock, the assistant director of Morrison Planetarium at the California Academy of Sciences, explains, "Leap Day is added as a correction to the calendar so that it stays in sync with the seasons ... that way, the seasons start on the same day from year to year to year."
The history of Leap Year: Leap Year has been around for 2,000 years, since Julius Caesar created the 365-day calendar, although Caesar's astronomer, Sosigenes, get s credit for adding an extra day in February every four years.
How to celebrate: Fans of Disney parks will be lining up to take advantage of "One More Disney Day" at Disneyland in California and at Magic Kingdom in Florida, which will be open for 24 hours, from February 29 at 6 a.m. until 6 a.m. March 1. Michele Himmelberg, a spokesperson for Disney, said it's the first time in recent memory that theme parks on both coasts will be open to mark the quadrennial event. She confirmed the rides will run all night. Hey, come in your PJs.
Leap Year babies probably have the biggest reason to rejoice -- since they see their birthdate only once every four years. Yahoo! searches are in a festive mood with lookups on "leap year birthdays," "leap year birthday cards," and "leap year party ideas." Good news for ski bums born on February 29: Show your Leap Year birthday date and get a free stay at Mammoth ski resorts.
If you prefer to mark the extra day on your couch, there's always "Leap Day," the movie. The 2010 romantic comedy stars Amy Adams and is based on an Irish tradition that a man must say yes to a woman who proposes to him on Leap Day. Some NBC shows have already run their Leap Day-themed episodes, which included "30 Rock's" alternative-universe idea that Leap Day is celebrated like an actual holiday and even has a mascot, "Leap Day William" (Jim Carrey), who stars in a "Groundhog Day"-type movie with Andie MacDowell. Its message: Take a leap.
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Source: Yahoo! Work + Money Blog by Claudine Zap
Photo Credit: ABCnews.com
Thursday, January 26, 2012 Interview on Dynasty Trusts with Guest Expert, Steven J. Oshins, Esq. 
Steven J. Oshins, Esq. is a nationally renowned estate planning and asset protection attorney based in Las Vegas, Nevada, with clients all over the United States. Steve was the author of Nevada’s 365-year Dynasty Trust law and often works jointly with estate planning attorneys from other states on setting up dynasty trusts and other advanced level estate planning and asset protection techniques.
We recently had the opportunity to interview Steve on the topic of Dynasty Trusts.
UEP: Would you please start by describing how the Dynasty Trust works?
Steve Oshins: Let me begin by clarifying that I’m talking about the Dynasty Trust in the context of a lifetime irrevocable trust. This is very similar to the Personal Asset TrustSM that your law firm drafts inside the Living Trust, except the Dynasty Trust is irrevocable and funded during life rather than revocable and funded after death.
A Dynasty Trust leverages a person’s gift and generation-skipping transfer tax exemptions for as many generations as applicable state law permits. Whereas most attorneys draft trusts to provide for mandatory distributions to the grantor’s children at staggered ages, a Dynasty Trust is drafted to encourage the trustees of the trust to keep the assets in trust for the benefit of the beneficiaries and to allow the beneficiaries to use the trust property rather than receive it outright where it will be subject to estate taxes, creditors and divorcing spouses.
A true Dynasty Trust is one which is set up under the laws of a state that has modified its rule against perpetuities to allow the trust to continue perpetually or, such as Nevada, that has modified its perpetuities laws to provide for a much longer term than that permitted in the majority of jurisdictions.
If the client does not reside in one of these favorable Dynasty Trust jurisdictions yet is not satisfied with the traditional perpetuities term in that client’s home state, then the client can utilize another state’s law by using a co-trustee in that more favorable state. The co-trustee can be an individual, a trust company or a bank. In order to provide for continuity, it is preferable to use a trust company or bank.
UEP: Now that you have described the Dynasty Trust concept, how do you use the Dynasty Trust as an irrevocable life insurance trust?
Steve Oshins: In my practice, I use a Dynasty Life Insurance Trust in nearly every instance in which most attorneys would use a traditional irrevocable life insurance trust. Essentially, if the amount of life insurance death benefit is sufficient to cause an estate tax and thus should be purchased by an irrevocable life insurance trust in order to keep it out of the taxable estate, then it is clearly enough value to justify the slightly more expensive Dynasty Life Insurance Trust.
Put another way, if saving estate taxes at the first generational level is valuable to the client’s family, then it certainly is similarly important to also save estate taxes on the life insurance death benefit at the next generational level and each successive generational level thereafter. The combination of the leveraged life insurance death benefit with the leveraged estate tax savings creates a huge fund for the client’s descendants.
An estate planning attorney or life insurance agent who presents the Dynasty Life Insurance Trust concept to a prospective client stands to outdo any competition for that client’s business. If I were the client and one advisor told me to use a Dynasty Trust and another advised me only to use a single generation life insurance trust, I would certainly hire the one who gave me the Dynasty Trust advice since I would have more confidence in the advisor who is looking out for my family’s long-term future.
UEP: I agree with your analysis. Can you describe the funding of the Dynasty Trust when purchasing life insurance?
Steve Oshins: Absolutely. There are a number of ways to fund the Dynasty Trust to pay the insurance premiums. The most common way to fund it is with annual exclusion gifts. This is often called a “Crummey trust”, named after a 1968 case called Crummey v. Commissioner.
A Crummey trust is funded with gifts in which the trust provides that certain beneficiaries are given an immediate withdrawal power over those gifts. By giving the beneficiaries this power, the gifts qualify for the annual exclusion and thus do not use any of the settlor’s million dollar gift tax exemption. As of right now, each settlor is allowed to gift up to $13,000 per year per beneficiary under the settlor’s annual exclusion. If the settlor’s spouse elects to gift-split on a timely filed gift tax return, the allowable annual gifting amount is doubled.
Even though no gift tax exemption is used, this is not the rule for generation-skipping transfer tax (“GST tax”) purposes. For GST tax purposes, the settlor must apply some of his GST tax exemption to 100% of the gifts. This is because the annual exclusion rules are different for GST tax purposes.
UEP: In the first installment of this interview, we talked about the benefits of utilizing a lifetime irrevocable Dynasty Trust in order to protect gifted assets from estate taxes, as well as from beneficiaries’ creditors and divorcing spouses. Are the Dynasty Trust assets always protected from all creditors, or does it depend upon the terms of the Dynasty Trust?
Steve Oshins: It depends upon the terms of the Dynasty Trust. For example, some attorneys draft Dynasty Trusts with mandatory income distributions to the trust beneficiaries. This makes the income distributions attachable by the creditors of the beneficiaries and thus should not be recommended to clients who are concerned with creditor protection.
Many Dynasty Trust “forms” follow this mandatory distribution philosophy which is why it is important for an experienced attorney to draft the trust. Because attorneys are generally taught to work within the confines of their forms, less experienced drafting attorneys often don’t recognize that better provisions can be drafted into a Dynasty Trust.
UEP: You have talked in the past about two different ways to draft a stronger Dynasty Trust. You have referred to them in the past as the “best way” and the “second best way”. Please start by describing the best way to draft a Dynasty Trust for creditor protection purposes.
Steve Oshins: There are two basic options. With both of these options, the Dynasty Trust can be drafted as a Beneficiary Controlled Trust, which is a term that I use to describe a trust that is controlled by the primary beneficiary of the trust.
The best way to draft a Beneficiary Controlled Dynasty Trust for creditor protection purposes is to draft the trust as a purely Discretionary Trust. For maximum creditor and divorce protection, an independent trustee is used to make discretionary distributions and other tax sensitive decisions. The primary beneficiary can be given the power to remove and replace the independent trustee, with or without cause. Additionally, the primary beneficiary can be the investment trustee and thus can make all investment decisions over the trust assets.
Because of this drafting approach, the primary beneficiary has the control over and use of the trust property as though he owned it free of trust even though the trust assets are protected from estate taxes and from the beneficiary's creditors, including divorcing spouses. This co-trusteeship, although slightly more complex than having just one trustee, provides the ultimate combination of control, estate tax savings and creditor protection.
UEP: That is a great approach and one that our clients should all consider. Now please describe the “second best” approach that you can use to provide creditor protection.
Steve Oshins: The second approach is to draft the Dynasty Trust as a Support Trust. With this option, the primary beneficiary can be the sole trustee so long as his distribution powers are limited to an ascertainable standard. The ascertainable standard approved by the tax code (without causing the trust assets to be included in the beneficiary’s taxable estate) is one which allows distributions for the beneficiary’s health, education, maintenance and support.
Although a Support Trust is simpler to administer than a purely Discretionary Trust, certain creditors of the beneficiaries of a Support Trust may access the trust assets, so it is less protective from creditors than is a Discretionary Trust. One such creditor that can often pierce through a Support Trust is a divorcing spouse of a beneficiary which is why the Discretionary Trust is the superior option. The creditors that can pierce through a Support Trust can do so either by specific state statute or as determined judicially.
The reason the Discretionary Trust doesn’t have this problem is that it doesn’t need to rely solely on its spendthrift provision to obtain its creditor protection. Rather, its assets are protected because of the full discretion given to the distribution trustee. Because the distribution trustee has full discretion over distribution decisions, the Dynasty Trust beneficiaries do not have a property interest over the trust assets and thus the creditors of those beneficiaries cannot obtain a property interest.
UEP: We’ve talked about the benefits of passing assets using a Dynasty Trust and how to draft the Dynasty Trust for maximum protection from estate taxes, creditors and divorcing spouses.
One of the most effective - - and often overlooked - - uses of a Dynasty Trust involves the transfer of a hot business or investment opportunity. Would you please describe this technique for our readers?
Steve Oshins: I call this technique “Opportunity Shifting”. It is the ideal strategy to use when your client has a hot business or investment opportunity because the client, by shifting the opportunity to a Dynasty Trust, can protect it from estate taxes, creditors and divorcing spouses for multiple generations.
The Opportunity Shifting technique is very simple. We have our client ask his parent or grandparent to set up and fund a Dynasty Trust for the benefit of our client and his family. Our client is the investment trustee and can select the distribution trustee. As investment trustee, our client uses the money gifted from his parent or grandparent to start the new business opportunity as an asset owned by the Dynasty Trust.
UEP: This sounds very simple and straightforward. Why isn’t everybody doing it?
Steve Oshins: That’s the big question. In fact, the Opportunity Shifting technique is so simple that it is shocking that there aren’t more estate planners and asset protection planners creating these for their clients every day. I suspect that planners just don’t think about it. But once they hear about it, it is so obvious and so easy to implement that they start using it all the time.
UEP: Does this Opportunity Shifting technique work for an existing business or investment, or must it be a new business or investment opportunity?
Steve Oshins: It must be a new business or investment opportunity. Otherwise, the IRS will treat the beneficiary as having made a gift to a trust for his own benefit which would cause the trust to be included in that beneficiary’s taxable estate and would open the trust assets up to the beneficiary’s creditors and divorcing spouses.
It is very important not to shift an asset to the trust if the asset already has value. If the business or investment already has value, then, rather than Opportunity Shifting, the beneficiary may instead be able to sell the business or investment to the Dynasty Trust for cash or for a promissory note.
UEP: I understand that the Opportunity Shifting concept is very useful as a divorce protection technique. Please explain how this can be used in that context.
Steve Oshins: Not even considering the significant estate tax reasons for Opportunity Shifting, divorce protection in and of itself is a great reason to have such a trust. Even if the client has a prenuptial or postnuptial agreement, the client’s assets are at risk if the agreement is found to be too one-sided or was signed under coercion.
Using the Opportunity Shifting technique, the client can avoid increasing his net worth and his marital estate that is potentially divisible upon a divorce. Even if the client resides in a community property jurisdiction, not only are the Opportunity Shifting Dynasty Trust assets not community property, but they’re not even separate property. Rather, the assets are trust-owned property which is not subject to a divorce if the Dynasty Trust is properly drafted. For this reason, every successful entrepreneur should have an Opportunity Shifting Dynasty Trust.
UEP: We want to thank you for taking the time to provide our readers such important information! We know you are very busy with your practice and assisting numerous advisors and attorneys with their clients, so we appreciate your time.
Steve Oshins: You’re welcome! It is my pleasure to be here with you today.
UEP: If you would like to get some additional training on Dynasty Trust, as well as take a look at some of the educational teleconferences that Steve has done for us that is still available for purchase, please click here. You can also download a free resource from Steve by visiting our Free Resources page. Also, stay tuned for some great sales tools that we will be rolling out with Steve very soon!
This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.
Photo Credit: oshins.com
Saturday, January 07, 2012 New Website Launched!
We are pleased to announce the launch of our newly designed website. We think that the navigation and ease of finding things are among the many improvements to the site.
There are still many areas of the website that we will be building up and improving over the course of the next few months. Here's just a preview of what you can expect to find in the near future:
In the meantime, please take a moment to browse through our website. If you find any problems or issues with the website, please feel free to e-mail us so that we can address any issues right away. Also, please be advised that any previous links to teleconferences or pages to download handout materials from our previous website are no longer available. If you need to access a certain page and cannot locate it, please contact us and we will be more than happy to help you.
A special thanks to the help of folks over at Amicus Creative and the hard work of The Ultimate Estate Planner, Inc. staff for getting this website launched in such a short period of time!
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