FP516: Module 8 - Estate Planning for Special Situations

Inadvertent reasons for not planning

"most people don't plan to fail, they just fail to plan." - people have never contemplated what would happen if they become incapacitated - people find it unpleasant to contemplate their own incapacity or death - people believe in their own lasting health and immortality - procrastination

Substituted judgment

Family members are authorized to make medical decisions for the incapacitated patient because of their closeness to the patient and their general knowledge of the patient's feelings and value system. This applies in situations where a patient's specific wishes are not known. Under this doctrine, those making the medical decisions are required to make the decision that the patient would have made if she were currently able. In addition to court decisions, a number of states have statutes that permit decision-making for patients whose condition is covered by the statute but who have not executed written directives. Family members and others, in a stated order of priority, may direct the ending of life-sustaining treatment. However, by not planning ahead, patient loses the opportunity to determine who will make these vital decisions for them.

planning for transfers of death in a nontraditional family

It's important for unmarried partners to have a will in place or make other arrangements to ensure that property passes to the surviving partner at death, if that is what the partners want. one possible disadvantage of using a will is that there is the possibility of a will contest

Preplanning for an incompetent person's personal care and financial affairs

A conservatorship has a pervasive effect on the right of a person to manage and control his own property. Because of this pervasive effect and weaknesses, voluntary alternative techniques should be explored to provide management of financial affairs in the event a person becomes incompetent. People at all ages should prepare the necessary documents to address that situation. Several techniques may be used to provide a management of a person's property in advance of capacity. Some of these techniques are usually used in management of property of adults, and some are specifically for minors: - a joint convenience checking account - a durable power of attorney - a funded revocable living trust - a contingent (standby) revocable living trust in combination with a DPOA - a supplemental needs trust

Do Not Resuscitate (DNR) orders

may be based on hospital policies in the absence of specific state law Staff-developed protocols that set forth procedures on how to make DNR decisions, resolve disputes, and protect a patient's rights in such emergency situations. Alternatively, state statutes may allow a person to authorize such an order while competent, that subsequently must be communicated to the health care provider. A patient's living will or other medical declaration can include this order for emergency resuscitation.

Durable powers

means that the agent's power will continue to be in effect even after the principal becomes incapacitated

Impact of divorce and second marriages on retirement benefits

retirement benefits can be divided at divorce just like any other asset In the event of a divorce, the simplest way to deal with retirement benefits is for each spouse to keep their own IRA and pension plan benefits and make up the different in other assets. However, when only 1 spouse has been employed outside the home, or when there has been a great disparity in incomes of the spouses where both were employed outside the home, one spouse may want to assert a right to part of the retirement funds of the other spouse. Dividing retirement assets are done using a QDRO (Qualified Domestic Relations Order). It's a court order or decree under state law recognizing a claimant's right to receive all or some of the benefits from a qualified plan to satisfy the participant's obligation to pay child support, alimony, or marital property rights. QDRO describes what the plan administrator is to do with the alternate payee's interest in the plan (interest may be distributed directly to alternate payee, to an IRA owned by the alternate payee, or segregated until the participant spouse reaches retirement age and then paid out periodically to the alternate payee. A QDRO cannot require the plan administrator to provide a benefit or an option (ex. increase or accelerate benefits) that the plan does not provide. Before choosing an option, alternate payee should consider the federal tax law consequences of each option. A distribution to a nonspousal beneficiary to comply with a QDRO is taxable to a participant. Tax consequences are the same for a distribution to a spouse or former spouse to comply with a court order not under a QDRO.

Joint Convenience Checking account

can be used to ensure that the incompetent person's bills are paid and funds are available for daily needs establishing such an account is simple - just complete the paperwork required by the bank to place a new joint cosigner on the account

nondurable powers

cannot be used in preplanning for incapacity because the authority of the attorney-in-fact ceases when the principal is no longer legally competent to personally perform the act involved

Wealth transfers by or to Noncitizens

citizenship status and/or residency status of a transferor and transferee is relevant because US citizens are entitled to use the transfer tax exclusion amounts. A person's domicile, rather than residency, determines whether the person is a US resident. Domicile is not necessarily where a person resides, but is the place from which a person has no intention to depart. In determining whether a transfer from a taxpayer spouse to a noncitizen spouse is entitled to a federal gift or estate tax marital deduction, only the citizenship status of the RECIPIENT (donee or beneficiary) spouse is relevant. Statement is true regardless of the citizenship or residency status of the taxpayer spouse.

Types of nontraditional relationships

domestic partnerships and civil unions couples who are cohabitating in less formal relationships *these couples are considered non-spouses and generally are not recognized as next of kin or as family members who are authorized to make medical or end-of-life decisions for their partner

Advantages of an institutional fiduciary

a fiduciary must treat all beneficiaries impartially and institutional fiduciary is more likely to be impartial than an individual family member fiduciary avoidance of conflicts of interest or the influence of interest on decision-making is more likely an institutional fiduciary in the event of a family dispute, an institutional fiduciary will be a neutral party. A fiduciary may have to make choices that might be injurious to the harmony of family relationships if the fiduciary were a family member Institutional fiduciaries ensure longevity, especially where it is required for a trust or a contentious estate. It is difficult to protect beneficiaries against human frailties such as death, emotional instability, senility, or physical disability. Because of these possibilities, an institutional fiduciary is much more likely to be able to serve effectively long enough to perform the required tasks, even if the tasks last for generations, as with a trust.

Applicable credit amount for noncitizen taxpayer

a nonresident alien MAY NOT CLAIM the applicable credit amount to offset federal gift tax on lifetime transfers Generally, the max applicable credit amount for a nonresident alien is $13k. However, several nations have death tax treaties with the US that could affect the amount of the applicable credit.

Annual gift tax exclusion for a noncitizen spouse

a nonresident alien donor is entitled to the regular federal gift tax annual exclusion under the same rules as a US citizen (except for the super annual exclusion)

Issues of third parties relying on a Durable Power of Attorney document

a potential problem with a POA is the possible refusal of the institution or person with whom the attorney-in-fact needs to transact business to rely on the validity of the power Some states have recently passed legislation requiring third parties to rely on powers that satisfy conditions set forth in the statute. These statutes also impose penalties on third parties who refuse to rely on such powers and indemnify third parties who reasonably rely on such powers.

Revoking powers of attorney

a principal who is legally competent may revoke a power of attorney; He must void the original document and retrieve and destroy all copies of the power that may have been distributed. In writing, the principal must notify all third parties that might reasonably be expected to rely on the power that he has revoked the power as of a specified date and must specifically identify the attorney-in-fact and the date the power was executed.

Durable Power of Attorney for Health care/ Medical Proxy (DPOAHC)

always springing in effect That is, as long as the principal is able to give informed consent regarding health care decisions, the medical community will look to the principal to do so. It is only when the principal is unable to give this consent, that the surrogate decision maker will be authorized to act.

Cohabitation agreements aka Palimony agreement

executed by domestic partners and cohabitants similar to a pre-nuptial agreement except it's for nonspouses it covers the ownership of the couple's property and income during the existence of the relationship, as well as the distribution of their property if the relationship terminates or one of the partners dies. recognized by most states but as with prenup, both partners must make full disclosure before entering into an agreemenrt

Conservatorship

fiduciary relationship created by law for the purpose of enabling one person (the conservator) to manage the property of another (the ward) conservator must act prudently on behalf of the ward at all times in making investments, as well as in managing the ward's property in general Unlike a trustee, however, a conservator does not take title of the ward's property. Rather, title to the ward's property remains in the ward, and the conservator takes custody only as an officer of the court and under the authority granted to him by the local judge. Conservator must then make annual filings and reports with the court summarizing the performance of the investments or expenses paid on behalf of the ward.

Guardianship

fiduciary relationship created by the law to enable one person (the guardian) to manage the personal care and well-being of another (the ward) Like a conservatorship, a guardianship involves a formal court proceeding wherein a proper guardian is named or appointed by the local court. Also, like a conservator, a guardian must account annually to the court until released from her fiduciary duties by the judge.

Lifetime tax planning techniques for unmarried cohabitants

gifting with annual exclusion - because cohabitants are not married, a gift tax liability will be incurred on any transfer exceeding the gift tax annual exclusion. As long as the lifetime gifts to each donee do not exceed the annual exclusion, the donor will be able to reduce the size of his gross estate without using any of the gift tax applicable credit amount and without having any of the gifts added back to the estate as adjusted taxable gifts. One drawback of gifting is once it's complete, it's irrevocable. converting a solely owned property into TIC property - because of the contribution rule for estate tax purposes, there seems to be little reason to create a joint tenancy with rights of survivorship, other than to avoid probate upon the death of the first tenant.

Informed consent

law of informed consent prohibits giving medical treatment without the patient's consent US Supreme Court has recognized that a competent person has a constitutionally protected liberty interest in refusing unwanted medical treatment. Even though a person's family or doctors may sometimes oppose a patient's medical choice, the patient's right to decide is paramount. Thus, a patient who is capable of understanding the consequences of his decisions is not required to do what the patient's family or physicians think is best.

Charitable deduction allowed for noncitizen taxpayer

unless a tax treaty allows otherwise, a nonresident alien may take a federal gift tax charitable deduction ONLY for transfers to a domestic entity or for use in the US

Need for property agreement for unmarried cohabitants

unmarried cohabitants have greater need for a property agreement because of the legal ambiguities that surround nontraditional couples and the absence of the statutory protections that are available to married couples a property agreement provides a means for settling disputes over issues of entitlement of property gained before or during the relationship when the relationship ends and may avoid the possibility of an emotionally and financially taxing legal battle

techniques for avoiding a will contest in a cohabitant's will

use of a no-contest clause in the will, may help reduce the chance of a successful will contest by unhappy family members will substitutes like JTWROS (considering potential gift taxes), revocable trust naming partner as beneficiary at death, naming partner as beneficiary of retirement plans and life insurances

Guardian/Conservator

when a person is incompetent, someone must provide for the care of the person, her property, or both If the fiduciary is responsible for the incompetent person's daily care, she is a guardian; if the fiduciary is responsible for the care of the incompetent person's property and financial affairs, she is a conservator. Duties and powers are usually set forth by state law. Duration of a guardian or conservator's responsibility varies greatly. It may be short-lived in the case of an elderly ward. However, the duration may be for many years if the ward is young. When someone if being selected to act as a conservator for a child or an incompetent adult, the deciding factors are basically same as those for a trustee. However, when someone is to act as a guardian for minor children until they are the age of majority and to provide for their day-to-day care, an individual, rather than an institution, is the best choice.

Combination fiduciaries

where a family member may be capable of assuming fiduciary responsibilities but is untrained in probate and tax problems, co-fiduciaries - an individual and an institutional fiduciary - may be appropriate The individual fiduciary can provide the needed care and sensitivity, while the institutional fiduciary can provide additional investment or business expertise, offer probate, and tax expertise, and ensure longevity. An alternative is to name an individual fiduciary who is capable of assuming fiduciary responsibilities and authorize that person to secure the services of skilled advisers and investment personnel on an hourly or annual retainer basis when appropriate or needed.

planning for children in nontraditional relationships

it's important to ensure that the surviving spouse has sufficient assets to support any children the partners may have one partner may choose to adopt the children of the other to ensure that the custodial arrangements desired by the deceased partner are recognized children born outside of a legalized spousal relationship should be specifically recognized in the estate planning process, and any trust, will or insurance policy should identify each child by name to avoid doubt about which child is the beneficiary

How to name a guardian or conservator?

- through court proceeding - it's possible to separately name a guardian or conservator outside of a court proceeding; many estate planning attorneys recommend naming a guardian as a part of a Durable Power of Attorney. Such a provision also typically provides for the naming of a successor guardian if the first guardian cannot or will not serve when necessary.

Disadvantages of court-ordered arrangements

- arrangement may be dehumanizing - arrangement may be uncertain, time consuming and costly - arrangement may be inflexible as to powers granted - arrangements may be unsuitable in some cases - arrangements may be uncertain as to who will care for the person or manage the person's property - arrangements may be an expensive way to manage property

calculated reasons for not pre-planning

- some don't plan because of the upfront costs of planning (ex. costs of consulting with a planner and drafting and executing the document(s) needed). - others decide against the use of preplanning techniques because they believe that it may be easier to get third parties to recognize the authority of a court-appointed fiduciary than to get them to recognize the authority of someone appointed in a self-executed document. - others decide not to preplan because the possibility of hurting the feelings of a family member or friend by choosing someone else to manage their affairs outweighs their perceived need for implementing a plan with the appropriate documents.

Several considerations in choosing between a conservator and guardian between the person's own parent or a sibling

- the appointing individual should consider the age of both possible family member (ex. a parent who is older or disabled may not be the best choice because of physical or emotional limitations) - if a sibling is currently married or expected to be married when the eventuality occurs, the feelings of the sibling's spouse in taking on the responsibility of raising someone else's children should be considered. - if guardian named is not the same person as the trustee of any trusts established on behalf of a minor child, the guardian and the trustee should know each other and not be on adversarial terms. *The guardian's age is not necessarily crucial. The guardian's maturity and financial and emotional stability are more important. *Although a conservatorship is not legally the same as guardianship, the conservator and guardian of the ward are often the same person, in practice, the two proceedings have many similarities.

Main advantages of court-ordered arrangements (conservatorship and guardianship)

- they provide continuing care and supervision of a minor or incapacitated person's living arrangements and daily activities and a means to protect and productively manage a ward's property when other arrangements are not available - oversight, supervision and enforcement powers of the court to protect the ward in the event the conservator proves to be untrustworthy or self-motivated

Trustee

A person may decide that it is best to have property held in a trust for a beneficiary, rather than transferring the property outright to that person or persons. Trustee is the person named in the trust agreement to carry out the objectives of the trust. A trustee can be an individual or an institutional fiduciary. A trustee's responsibilities often last for one or more generations. Because of the long period of time involved, careful considerations should be given to the selection of a trustee and/or co-trustees. Furthermore, this fact makes it even more imperative to name successor trustees and/or to provide a means by which a successor trustee can be appointed either by a resigning trustee or by the trust beneficiaries.

Appointing an Attorney-in-fact as a DPOAHC vs DPOA for property management

As a financial planner, discuss these different skill sets with clients and make sure they have taken them into account before executing either a DPOA or a DPOAHC. The attributes of the individual selected as the surrogate in the DPOAHC should be different than those considered when naming a surrogate for the DPOA for property management. As an example, caregiving abilities of the surrogate in the DPOAHC are more critical than those of the DPOA surrogate. Alternatively, the financial skills of the DPOA surrogate are more crucial. Unfortunately, both sets of skills may not be apparent in the same person, although usually the principal appoints a family member (typically the spouse) with little consideration of either skill set. Of the two docs, the health care power is likely more important, especially if, as is often the case with some married couples, all the financial assets are owned in JTWROS which reflects 100% ownership in the asset by each spouse so that one spouse may easily act on behalf of the other with respect to the JTWROS property in the event of a financial emergency.

Two types of assets to consider when reviewing Medicaid eligiblity

Countable assets, which are counted when determining the ability to pay for the care. This includes the first $500,000 in equity in a recipient's principal residence and commerical, actuarially sound immediate payment annuities through payments are considered for the income level requirements. Attempts to spend down the assets or transfer the assets to others are subject to a 5-year look back period. If assets are transferred for less than their fair market value within the look-back period, there can be a waiting period before Medicaid benefits begin. Exempt assets, which are not counted.

Common Types of Fiduciaries

Executor (Personal Representative) Trustee Guardian/Conservator

Federal tax impact of non-citizen spouse

IRS allows citizen spouses to include half of any property that is held in JTWROS or TE at death in the gross estate of the first spouse to die. However, this right is not available when the surviving spouse is not a U.S. citizen. The full amount of the asset must be included in the gross estate of the first spouse to die unless the surviving alien spouse can prove contribution toward acquisition of property.

Countable assets for married individuals

If a client is married, it's important to remember that the residence is not a countable asset. The first $500k equity in a recipient's principal residence is considered exempt if the home was titled in the name of and occupied by the applicant or the applicant's spouse. Real estate assets other than the couple's primary residence are countable. healthy spouse is usually entitled to half of the assets for his own use, making only one-half of the assets countable

Preplanning for Medical care and disposition of the remains

If a person has made medical decisions in advance or has appointed an agent to act for him in advance of incapacity, the patient's choice of medical care prevails.

results of not preplanning for funeral arrangements and disposition of remains

Law in many states specifies that a person's next of kin has the right to make decisions regarding a decedent's funeral arrangements and disposition of remains if decedent has not done any preplanning of these issues. However, this does not guarantee that the decedent's burial wishes will be honored.

Nature of Incompetency

People of any age may be unable to effectively manage their lives and personal care of property and financial affairs. A person is incompetent to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his personal care or personal affairs. A person may be incompetent if that person is: - a minor OR - an adult but has a diminished capacity (typically due to mental illness or deficiency, physical illness, or disability, or advanced age).

Mandatory vs Discretionary powers of a fiduciary

Powers may be mandatory or discretionary. A mandatory power directs the fiduciary to perform a certain act and imposes a duty on the fiduciary to perform the act. This is to assure the creator of the document that his wishes will be carried out. An example of a mandatory power is the power of a personal representative of an estate to collect, prudently manage and protect, and distribute estate assets as required by applicable intestacy statutes or will provisions. Duties are mandatory, and thus, any breach of duty may be a cause for legal action against the fiduciary and can result in removal of the fiduciary, if the circumstances warrant. A discretionary power allows the fiduciary to use his judgment as to whether the power should be used. As long as the fiduciary acts in good faith, the fiduciary will not be found to have abused a discretionary power when challenged by a beneficiary regarding the fiduciary's action or inaction in a particular circumstance.

Impact of remarriage on estate planning

Spouses may own significantly more property and have higher incomes than they did at their first marriages, so they may find it desirable to enter into a marital property agreement (prenuptial agreement) to clarify their respective property rights in the event of a death or divorce. If spouses fail to enter into a marital property agreement, they should take steps to ensure that their property passes as they wish at their death. A spouse who wants to disinherit the second spouse may want to use transfer methods (ex. JWROS or Trust) other than a will to do so, because a spouse who is disinherited in a will may have the right to elect against the will and receive a statutory share. In 2nd marriages, one or both spouses often have children from a previous marriage. A spouse with children from a previous marriage may want to ensure that his children will be taken care of when he dies and that the second spouse won't have the opportunity to pass his assets to someone else. A QTIP trust might be appropriate in this case because it allows the surviving spouse to receive a lifetime income from the trust but also allows the decedent spouse to designate who will receive the trust assets when the surviving spouse dies. A spouse in a second marriage may want to make provisions for the children of the other spouse (stepchildren). In some states, stepchildren may not be treated the same as children for purposes of inheritance, so it may be necessary to specifically name the stepchild in the will, as opposed to simply leaving to "my children." It may also be possible to legally adopt the stepchildren to ensure that they are treated the same as the spouse's natural children for inheritance purposes.

Marital deduction for transfers by or to non-citizens

The unlimited gift tax marital deduction is available only for qualifying transfers to a RECIPIENT spouse who is a US citizen.

Medicaid planning

To be eligible for Medicaid nursing home assistance, an applicant must pass both the Medical and financial tests. Each state has its own asset and income level requirements for Medicaid eligibility. To meet the medical test, applicant must be in need of skilled nursing care, or be mentally impaired with Alzheimer's or dementia. If skilled nursing services are not required, eligibility is met if assistance is required with at least two of the ADL. Planning for long term care using Medicaid is best attempted with the advice of a specialist, such as a Medicaid planning adviser or a qualified elder law attorney. Pitfalls in planning asset transfers without fully understanding the state's Medicaid rules can be disastrous for the client and the client's spouse and family.

Contingent (standby) trust and a General durable POA

To implement this strategy, a person must simultaneously execute a revocable living trust document and a springing durable POA. This strategy may be preferable to some people because the extra paperwork burden occurs at a later time when using a funded revocable living trust. This allows the assets in the trust to avoid probate so long as the trust is fully funded before the grantor's death. This also is a self-settled trust and may or may not be funded until grantor becomes incapacitated. Because there are little or no assets to manage before the grantor's incapacity, someone other than the grantor is named as trustee. Then, a springing durable POA is often used with a contingent/standby trust. When the principal becomes incompetent, the attornety-in-fact, by the power granted in the power of attorney document, must proceed with funding the trust by changing the ownership of the principal's assets from the principal to the trustee. This takes a lot of paperwork and time. Trustee or co-trustees manage property that has been transferred to the trust by the attorney-in-fact according to the specific terms of the trust document. There are no tax consequences of creating a standby trust before the time that assets are transferred to it. However, once it has been funded, the federal tax implications are the same as those for a funded revocable living trust.

Impact of divorce on estate planning

Typically, married couples have named each other as beneficiary on assets such as retirement accounts and life insurance policies, and they may have titled their assets as JTWROS or TE. So after divorce, they may need to designate new beneficiaries and retitle their property to reflect their new marital status. Married couples often have wills or trusts leaving assets to each other at death. If so, they will probably want to redo those documents after their divorce to reflect the new marital status

Marital deduction for non-citizen spouse using a QDOT (Qualified Domestic Trust)

Unlimited estate tax marital deduction is available only for qualifying transfers to a recipient spouse who is a U.S. citizen or to a QDOT for a noncitizen spouse. If the surviving alien spouse becomes a US citizen before the decedent's estate tax return is filed, the unlimited marital deduction is allowable under the usual rules and a QDOT is not necessary.

Planning for incapacity or health care

an unmarried partner is typically not recognized as a family member under law both partners should implement DPOHC, authorizing the other partner to make decisions for them in the event of incapacity or terminal illness and execute advance medical directives, such as living wills documents should specifically cover issues such as right to make funeral and burial arrangements and to donate the deceased partner's organs, because, in the absence of other provisions, state law often gives surviving family members right to make these decisions.

Super annual gift tax exclusion

applies to gifts to an alien spouse; and applies only where the property transferred conforms to both (1) the annual exclusion rule), and (2) the marital deduction rule replaces, and is NOT an addition to, the gift tax annual exclusion each year, donor spouse can exclude up to a base amount of $159k (2021) of transfers TO ALIEN SPOUSE.

Institutional fiduciaries

as the size and complexity of a trust or estate increases, an institutional fiduciary becomes more and more appropriate an individual fiduciary often may not have the financial and managerial sophistication needed, the ability to exercise independent judgment, or be able to offer the variety of services that an institutional trustee can provide If a fiduciary is to keep the best interests of the beneficiaries in mind, the fiduciary must have the time to devote to the required tasks. In handling a large trust or estate, the duties may be so time consuming that an individual fiduciary will have to neglect his personal business interests. Bank and trust companies are supervised by state and federal authorities. These companies are in the business of collecting, managing and investing securities or other assets. Furthermore, such companies have evolved systems and procedures that will protect the trust or estate while relieving the family of the many details that would otherwise be the responsibility of an individual family fiduciary.

Springing powers

become effective only when the principal becomes incapacitated If this is what the principal desires, the document should specify such. If the document is silent, the powers are immediate. Two questions principal should ask when using springing powers: - what is the measure or definition of the principal's incapacity that activates the power of attorney? Standard should be one that is readily measurable in medical terms or by careful observation. Also, the standard can be customized to meet the needs and desires of the principal. - who should determine when the principal is incapacitated according to the written standard set forth in the power? Several individuals should share this power and responsibility, and at least one of them should be a physician.

Death time tax planning strategies for unmarried cohabitants

bequeathing property to other cohabitant - although a testamentary bequest does not decrease the size of the client's gross estate, this bequest is appropriate when the client wishes to retain control of the property until death. Because a will is a revocable instrument, the owner of the property is free to amend the terms of the will should the relationship deteriorate, thus preserving the property of the owner. Making charitable bequests - appropriate for cohabitants who are charitably inclined. If deceased had an estate that exceeds the applicable exclusion amount, the net estate taxes would be reduced. The applicable credit amount available to the estate of the decedent would absorb the estate tax liability on the applicable exclusion amount bequest to the cohabitant, while the estate tax charitable deduction would negate tax liability on the bequest to the charitable organization.

Living wills

best evidence of wishes of an incompetent patient intended to state a person's directions concerning medical treatment at the end of life in the event that he becomes terminally or incurably ill or injured, and/or is in a persistent vegetative state and is capable of granting or withholding his consent key to a good living will is a clear statement of what procedures a patient will or will not consent to and under what circumstances

General Durable Power of Attorney

creates an agency relationship between one person (the principal) and another person (the attorney in fact or agent) scope of authority granted to the attorney-in-fact by the written document may be limited (the power to perform only on or a few specific acts, such as selling a specific property) or broad (the power to perform almost any act the principal could perform, except executing a will) actions taken by the attorney-in-fact pursuant to the terms of the instrument are legally binding on the principal the document should name successor attorneys-in-fact in the event that the primary attorney-in-fact is unwilling or unable to act authority of the attorney-in-fact under a power of attorney, whether durable or not, ceases at the principal's death

Desirable attributions of a fiduciary

in selecting a fiduciary, the following attributes should be taken into consideration, although some attributes will be more relevant for some type of fiduciaries than for others: - *legal and personal competence*: this means the fiduciary should be a US citizen and satisfy state requirements, such as age (at least 18 or 21), mental competence, and residency within the state; she must have the intellectual and emotional capacity to make quick and/or well-considered decisions. - *Familiarity with assets and beneficiaries*: for factors such as ages, health conditions, income needs, and likes and dislikes of the beneficiaries may be helpful, especially to a beneficiary who is entitled to make discretionary distributions to a beneficiary. - *Sensitivity and discreetness* - *Specialized knowledge and expertise* - *Availability* - *Loyalty and Integrity* - *Impartiality and absence of a conflict of interest* - *Financial security*

Fiduciary Arrangements

individual as fiduciary institutional fiduciary a combination - co-fiduciaries of an individual and an institutional fiduciary

individual fiduciaries

most appropriate in situations where: - estate or trust is small and simple - a family is close and the individual fiduciary will have the interest of the beneficiaries at heart and will have the expertise, experience, and time to properly carry out her duties an individual fiduciary, generally, is more likely to be more concerned about giving individual attention to the needs and circumstances of the people involved, and to be familiar with the extent and location of assets and the specifics about beneficiaries than is an institutional trustee.

Supplemental Needs Trust

non-self-settled trust because it's established and funded by a grantor for the benefit of another individual However, the assets in this trust are not used directly for the beneficiary's support. Instead, they are used at the absolute discretion of the trustee to purchase supplemental items for the beneficiary. The reason they are not used for the support is that the beneficiary is applying for or receiving government benefits such as Medicaid and/or Supplemental Security Income (SSI), and use of the trust assets for support might endanger the beneficiary's eligibility for such benefits. Such benefits usually require an applicant to have a very low amount of income and assets.

Federal Generation-Skipping Transfer Tax for noncitizen individuals

noncitizens are subject to GSTT if assets are transferred to a skip person and located in the US on the same basis as a US citizen However, tax treaties with the nonresident alien's country of residence, if any, can affect liability for this tax.

Gift splitting involving a non citizen spouse

not permitted if either spouse is a noncitizen

Duties and Powers of a fiduciary

once a decision has been made as to who should serve as a fiduciary, a decision must be made as to the extent of the fiduciary's powers this usually involves examining the powers granted to such a fiduciary under applicable state law (both statutory and case law) and then deciding what additional powers, if any, should be granted under the document creating the fiduciary relationship. Most states have adopted statutes that provide a comprehensive list of powers granted to fiduciaries unless limited by language or provisions in the controlling document that express a clear intention to deny those powers. Usually a document establishing a fiduciary relationship will either repeat the statutory provisions or cite the particular statute and affirm that the powers found therein will be the fiduciary's powers.

Planning alternatives for funeral arrangements and disposition of remains

some states allow a person to execute a document directing the disposition of his remains or authorizing another person to make those arrangements for her burial instructions are usually included in the estate planning docs, either as a stand-alone document or in a living will if a state does not provide for the designation of an agent or other plan for leaving instructions for a person's funeral arrangements and disposition of his remains, a person may preplan his final arrangements. If a person plans for and pays for certain services in advance, the family and friends may be less likely to modify the arrangements because any modification will require additional expenditures for services that have already been paid for.

Fiduciary

someone occupying a position of special interest and authority *an estate plan involves a selection of many fiduciaries such as trustees, guardians, conservators, executors, and agents under power of attorney they often hold legal title to property for the benefit of others and are subject to strict law governing their behavior

The assets of a supplemental trust are not considered an available resource to the benefit recipient if the following criteria are met:

the beneficiary/recipient must not have authority to compel distributions, or to exert any power consistent with ownership over the trust property Trust assets must be available only for the beneficiary's supplemental needs, not his support. Trust may only have one lifetime beneficiary Trust must be irrevocable.

Executor

the person responsible for accomplishing the tasks in a person's will, if he has one, or if not, is determined by the probate laws of the state where the person died can be named in a will or appointed by the court to administer the affairs of a decedent's state PR's responsibilities last from nine months to 3 years. However, if the estate remains open for tax or other reasons, or because of a will contest, the PR's duties could continue for many years.

Funded Revocable Living trust

to implement this strategy, the grantor creates a revocable trust that is immediately funded by the grantor. Use of a funded revocable living trust allows the assets in the trust to avoid probate and may also allow for the management of the property after the grantor's death. This is a self-settled trust because the grantor funds it with her own assets grantor, who usually is also the trustee, changes the ownership on all appropriate property by making the revocable living trust the holder of the property The trust document specifies what will happen if and when the grantor becomes incapacitated or dies. A grantor who becomes incapacitated is removed as trustee or co-trustee. At that time, the remaining co-trustee and/or successor trustee will have full authority to manage trust property according to provisions in the trust document. Because trust is revocable, there's no completed gift and thus no gift tax consequence of creating and funding such a trust. For income tax purposes, the fact that the trust is revocable makes it a grantor trust in which all income is taxable to the grantor. Finally, the total date-of-death value of the trust is includible in the grantor's gross estate for estate tax purposes because the trust is revocable.

Impact of divorce on tax planning

transfers between spouses under property settlements incident to a divorce are INCOME TAX FREE and GIFT TAX FREE transfers between spouses in settlement of support obligations are also exempt from gift tax

What issues should a comprehensive property agreement should address?

who has the responsibility for debts incurred during the cohabitation relationship? what contract consideration makes the agreement legally valid? which assets belong to each cohabitant, and does either cohabitant have rights to the property or income of the other cohabitant? how are assets acquired during the relationship to be titled? how is the cohabitant's residence to be treated at the death of one of the cohabitants? who has responsibility for the care of any children? is the cohabitation relationship to be considered a common-law marriage? what circumstances will terminate the agreement? what means are to be used to settle disputes between cohabitants?