Trusts (beginner level)

Women Managing the Farm

Conference-KansasBreakout Session 1

TRUSTS: Basic Estate Planning 101

Let’s start at the beginning.

Tim J. Larson, J.D., P.A.

7570 W. 21st St. N.

Building 1026, Suite C

Wichita, KS 67205

316-729-0100

[email protected]

mailto:[email protected]

Estate Planning for FarmFamilies - Business Succession

Estate Planning – The Basics Everyone Should Know

What is Estate Planning?

How does property pass after a death?

Will you be incapacitated or need assistance or long term care?

How will taxes affect your family?

What are the most common mistakes, goals and concerns clients face in Estate Planning? What solutions are available?

Estate Planning for FarmFamilies - Business Succession

Let’s explore the basics of forms of ownership, death beneficiary designations, probate, wills, trusts, powers of attorney, guardianships and conservatorships.

©Tim J. Larson, J.D., P.A.


IN YOUR NAME ONLY COURT ORDER

4 Ways to TransferProperty

First Way

JOINT TENANCYSURVIVINGTENANT(S)

POD, TOD,BENEFICIARY

DESIGNATIONS

PAYS OR TRANSFERSTO BENEFICIARY(S)

LIVING TRUSTFULLY FUNDED

SUCCESSORTRUSTEE

CONTROLS ANDDISTRIBUTES

Second Way

Third Way

Fourth Way

Preparation:Educate Yourself

©Tim J. Larson J.D., P.A.

Probate

With a Will

Distributed according to your will document

Requires a Court Order

Without a Will

Distributed according to Kansas Law

Requires a Court Order


Probate Options

Small Estate Affidavit

Informal Administration

Decree of Descent

Simplified Administration

Formal Administration


Problems with the First 3 ways

The first 3 ways of transferring property all have drawbacks.

Let’s look at some of them


Disadvantages of Probate

Time Delays

Minimum of 6 months

Often 18 months or longer

Loss of Control

Avoidable Costs

Public Record

Gives disgruntled heirs a forum or “invitation to litigate.”


Disadvantages of Joint Tenancy


4 Ways to Transfer Property

First Way

JOINT TENANCYSURVIVING

TENANT(S)

POD, TOD,

BENEFICIARY

DESIGNATIONS

PAYS OR TRANSFERS

TO BENEFICIARY(S)

Second Way

Third Way

Fourth Way


Disadvantages of Joint Tenancy

If JTROS, last person standing takes all

Loss of step-up in basis at death

Joint tenant subject to other tenant’s creditors

Must obtain permission of all joint tenants and their spouses to sell


Disadvantages of POD, TOD & BEN. DESIG.


4 Ways to TransferProperty

First Way

JOINT TENANCYSURVIVING

TENANT(S)

POD, TOD,

BENEFICIARY

DESIGNATIONS

PAYS OR TRANSFERS

TO BENEFICIARY(S)

Second Way

Third Way

Fourth Way


Disadvantages ofBeneficiary Designations

No orderly process for administrative matters

If a beneficiary is deceased, often a different result than what was intended

In the event of incapacity, a Trustee can more easily deal with assets than a POA


4th Way

LIVING TRUST(FULLY FUNDED)

SUCCESSORTRUSTEE

CONTROLS ANDDISTRIBUTES


ADVANTAGES OF A LIVING TRUST

Avoids Probate

Provides for administration with privacy

Centralized management of assets

Avoids incapacity issues

Avoids ancillary probate when real estate is owned in other states

Control Issues Addressed


Does my Estate have to be a certain size to justify having a Living Trust?


Factors To Consider

Size of Estate is just One Factor (and not necessarily the most important)

Type of Property and Where it is Located Real estate in multiple states

Business Interests, Succession Planning

Control Issues Young Children

Spendthrift child

Special Needs Child

Child with substance abuse or other addictions

Factors to Consider

Other Factors Spouses have separate property

2nd or Subsequent Marriage

Prenuptial Agreements

Disinheriting a Family Member

Loans or financial assistance may have been provided to one or more children.• Address how that is to be taken into consideration.

• Forgiven, or

• Treated as an Advancement


Factors to Consider

Who is involved in the farming operation?

One or more children work on the farm

One or more children do not work on the farm

One or more grandchildren may be involved

One or more grandchildren may never be involved

©Tim J. Larson, J.D., P.A.s

Factors to Consider

What is fair?

Believe it or not, if all family members were asked what their perception of “fair” is-no one has the same concept or perception.

“Sometimes there is nothing so unfair as the equal treatment of unequals.”



Powers of Attorney

Principal Agent


Powers of Attorney

Principal

Designates Agent

Grants Authority

Can be General or Limited Authority

Agent

Fiduciary Duty

Authority may be limited by terms of document


Powers of Attorney

Durable Survives Incapacity


Powers of Attorney

Specific and Limited

Broad and General

Medical/Health Care

K.S.A. 58-654 (a)

General Powers (a) A principal may delegateto an attorney in fact (agent) in a power ofattorney general powers to act in a fiduciarycapacity on the principal’s behalf withrespect to all lawful subjects and purposesor with respect to one or more expresssubjects or purposes. A power of attorneywith general powers may be durable ornondurable.


K.S.A. 58-654 (b)

If the power of attorney states that generalpowers are granted to the attorney in factand further states in substance that itgrants power to the attorney in fact to actwith respect to all lawful subjects andpurposes or that it grants general powersfor general purposes or does not by itsterms limit the power to the specific subjector purposes set out in the instrument,


K.S.A. 58-654 (b)

(cont.)then the authority of the attorney infact acting under the power of attorneyshall extend to and include each and everyaction or power which an adult who is notdisabled may carry out through an agentspecifically authorized in the premises, withrespect to any and all matters whatsoever,except as provided in subsections (f) and(g).


K.S.A. 58-654 (f)

Any power of attorney, whether or not itgrants general powers for all subjects andpurposes or with respect to expresssubjects or purposes, shall be construed togrant power or authority to an attorney infact to carry out any of the actionsdescribed in this subsection only if theactions are expressly enumerated andauthorized in the power of attorney.


K.S.A. 58-654 (f) continued

Any power of attorney may grant poweror authority to carry out any of thefollowing actions if the actions areexpressly authorized in the power ofattorney:


K.S.A. 58-654 (f) 1-4

(1) To execute, amend or revoke any trustagreement;

(2) to fund with the principal’s assets anytrust not created by the principal;

(3) To make or revoke a gift of the principal’sproperty in trust or otherwise;

(4) to disclaim a gift or devise of property toor for the benefit of the principal;


K.S.A. 58-654 (f) 5

(5) to create or change survivorshipinterests in the principal’s property or inproperty in which the principal may havean interest. The inclusion of the authorityset out in this paragraph shall not benecessary in order to grant to an attorneyin fact acting under a power of attorneygranting general powers with respect to alllawful subjects and purposes the authorityto . . .


K.S.A. 58-654 (f) 5

(5 cont. to withdraw funds or otherproperty from any account, contract orother similar arrangement held in thenames of the principal and one or moreother persons with any financial institution,brokerage company or other depository tothe same extent that the principal would beauthorized to do if the principal werepresent, not disabled and seeking to act inthe principal’s own behalf;


K.S.A. 58-654(f) 6 & 7

(6) to designate or change the designation of beneficiaries to receive any property, benefit or contract right on the principal’s death;

(7) to give or withhold consent to an autopsy or postmortem examination;


K.S.A. 58-654 (f) 8 & 9

(8) to make a gift of, or decline to make agift of, the principal’s bodyparts under therevised uniform anatomical gift act, K.S.A.2009 Supp. 65-3220 through 65-3244, andamendments thereto; (Important to addressin POA)

(9) to nominate a guardian or conservator forthe principal; and if so stated in the power ofattorney, the attorney in fact may nominatesuch attorney in fact’s self as such;


K.S.A. 58-654 (f) 10

(10) to give consent on behalf of theprincipal to the sale, gift, transfer,mortgage or other alienation of theprincipal’s homestead or interest therein if:

(A) The principal’s spouse, personally or throughsuch spouse’s attorney in fact, has also consentedto such alienation;

(B) the power of attorney specifically describesthe homestead by reference to a legal descriptionand the street address of the property; and


K.S.A. 58-654 (f) 10 (cont.)

(C) the principal’s spouse, in a written document dulyacknowledged by the spouse, has states such spouse’sconsent that the attorney in fact may alienate theinterests, in whole or in part , of the principal in thedescribed homestead and, further, the spouse agreesthat the consent of the attorney in fact will constitutethe consent of the principal required by Article 15,Section 9 if the Kansas Constitution. Nothing hereinshall be construed as a limitation or abridgement ofthe right of the spouse of the principal to consent orwithhold such spouse’s consent to the alienation of thespouse’s homestead, or any rights therein, underArticle 15, section 9 of the Kansas Constitution.


K.S.A. 58-654 (f) 11-13

(11) to designate one or more substitute oradditional attorneys in fact;

(12) to delegate any or all powers granted ina power of attorney pursuant to subsection(a) of K.S.A. 58-660, an amendmentsthereto; or

(13) to pay reasonable expenses incurred forthe funeral and burial or other disposition ofthe body of the principal.


K.S.A. 654 (g)

(g) No power of attorney, whether or notit delegates general powers, may delegateor grant power or authority to an attorneyin fact (agent) to do or carry out any ofthe following actions for the principal:


K.S.A. 58-654 (g)

(1) To make, publish, declare, amend orrevoke a will for the principal;


K.S.A. 58-654 (g)

(2) to make, execute, modify or revoke adeclaration under K.S.A. 65-28,101 et seq.,and amendments thereto, for the principal tomake, execute, modify or revoke a do notresuscitate directive under K.S.A. 65-4941,and amendments thereto, for the principal orto make execute, modify or revoke a durablepower of attorney for health care decisionspursuant to K.S.A. 58-625, et seq., andamendments thereto, for the principal;


K.S.A. 58-654 (g)

(3) to require the principal, against the principal’s will, to take any action or to refrain from taking any action; . . .

THIS IS WHY WE SOMETIMES HAVE GUARDIANSHIPS AND CONSERVATORSHIPS EVEN WHEN THERE IS A POWER OF ATTORNEY.


Health Care Powers

K.S.A. 58-625 A durable power of attorney forhealth care decisions is a power of attorney bywhich a principal designates another as theprincipal's agent in writing and the writing containsthe words "this power of attorney for health caredecisions shall not be affected by subsequentdisability or incapacity of the principal" or "thispower of attorney for health care decisions shallbecome effective upon the disability or incapacity ofthe principal," or similar words showing the intent ofthe principal that the authority conferred shall beexercisable notwithstanding the principal'ssubsequent disability or incapacity.


Health Care Powers

K.S.A. 58-627 (a) If, following execution of adurable power of attorney for health caredecisions, a court of the principal's domicileappoints a guardian charged with theresponsibility for the principal's person, theguardian has the same power to revoke oramend the durable power of attorney thatthe principal would have had if the principalwere not disabled or incapacitated.


Health Care Powers

K.S.A. 58-627 (b)A principal may nominate,by a durable power of attorney for healthcare decisions, a conservator or guardian forconsideration by the court if protectiveproceedings for the principal's person orestate are thereafter commenced. The courtshall make its appointment in accordancewith the principal's most recent nominationin a durable power of attorney for healthcare decisions except for good cause ordisqualification.


Health Care Powers

K.S.A. 58-629 (a) A durable power of attorney for health care decisions may convey to the agent the authority to:

(1) Consent, refuse consent, or withdraw consent to any care, treatment, service or procedure to maintain, diagnose or treat a physical or mental condition, and to make decisions about organ donation, autopsy, and disposition of the body;


Health Care Powers

K.S.A. 58-629 (a) (2) make all necessaryarrangements for the principal at anyhospital, psychiatric hospital or psychiatrictreatment facility, hospice, nursing home orsimilar institution; to employ or dischargehealth care personnel to include physicians,psychiatrists, psychologists, dentists, nurses,therapists or any other person who islicensed, certified, or otherwise authorized orpermitted by the laws of this state toadminister health care as the agent shalldeem necessary for the physical, mental andemotional well being of the principal; and


Health Care Powers

K.S.A. 58-629 (a) (3) request, receive andreview any information, verbal or written,regarding the principal's personal affairs orphysical or mental health including medicaland hospital records and to execute anyreleases of other documents that may berequired in order to obtain suchinformation.


Health Care Powers

(b) The powers of the agent herein shall belimited to the extent set out in writing in thedurable power of attorney for health caredecisions, and shall not include the power torevoke or invalidate a previously existingdeclaration by the principal in accordancewith the natural death act. No agent powersconveyed pursuant to this section shall beeffective until the occurrence of theprincipal's impairment as determined by theprincipal's attending physician . . . unless thedurable power of attorney for health caredecisions specifically provides otherwise.


Health Care Powers

K.S.A. 58-629 (b) (cont.) Nothing in this actshall be construed as prohibiting an agentfrom providing treatment by spiritual meansthrough prayer alone and care consistenttherewith, in lieu of medical care andtreatment, in accordance with the tenetsand practices of any church or religiousdenomination of which the principal is amember.



Guardianships and Conservatorships

Court Process Living Probate

Proposed Ward and Conservatee

Guardian ad Litem appointed

Trial over competency

Annual reports and accountings

Living Probate-Court Involvement Required

When a petition is filed, the Court must issue Orders as follows:

(1) An order fixing the date, time and place of the trial on the petition. Such trial, in the court's discretion, may be conducted in a courtroom, a treatment facility or at some other suitable place. The time fixed in the order shall in no event be earlier than seven days or later than 21 days after the date of the filing of the petition.



(2) An order requiring that the proposed ward or proposed conservatee appear at the time and place of the trial unless the court makes a finding prior to the trial that the presence of the proposed ward or proposed conservatee will be injurious to the person's health or welfare, or that the proposed ward's or proposed conservatee's impairment is such that the person could not meaningfully participate in the proceedings. . .



(2 cont.). . . if the proposed ward orproposed conservatee files with the courtat least one day prior to the date of thetrial a written notice stating the person'sdesire to be present at the trial, the courtshall order that the proposed ward orproposed conservatee must be present atthe trial.



(3) An order appointing an attorney(Guardian ad litem) to represent theproposed ward or proposed conservatee.The court shall give preference, in theappointment of this attorney, to anyattorney who has represented theproposed ward or proposed conservatee inother matters if the court has knowledge ofthat prior representation, or to an attorneywhom the proposed ward or proposedconservatee has requested.



(4) An order fixing the date, time and a place that is inthe best interests of the proposed ward or proposedconservatee, at which the proposed ward or proposedconservatee shall have the opportunity to consult withthe court appointed attorney. This consultation shall bescheduled to occur not later than five days prior to thescheduled trial on the petition, provided that if anexamination and evaluation as provided for in K.S.A. 59-3604, and amendments thereto, is ordered, then thisconsultation shall be scheduled to occur prior to the timeat which that examination and evaluation is scheduled tooccur.



Upon the filing of a petition as provided for inK.S.A. 59-3058, and amendments thereto,alleging that the proposed ward or proposedconservatee is an adult with an impairment inneed of a guardian or conservator, the courtshall order the proposed ward or proposedconservatee to submit to an examination andevaluation. . .



(Examination-cont.) to be conducted througha general hospital, psychiatric hospital,community mental health center, communitydevelopmental disability organization, or bya private physician, psychiatrist, psychologistor other professional appointed by the courtwho is qualified to evaluate the proposedward's or proposed conservatee's allegedimpairment.



Notice - The court may order that a copy ofthis notice shall be served on such otherpersons as the court determines and in suchmanner as the court directs. . .(SPOUSE,SIBLINGS, CHILDREN, PARENTS,GRANDCHILDREN, ETC.) This notice shall bepersonally served on the proposed ward orproposed conservatee as soon as possible, butin no case later than 10 days prior to the dateof the trial and immediate return thereof shallbe made to the court by the person servingthis notice.


Kansas Natural Death ActK.S.A 65-28,101 et seq.

The United State Supreme Court and KansasLegislature find that adult persons have thefundamental right to control the decisionsrelating to the rendering of their own medicalcare, including the decision to have life-sustaining procedures withheld or withdrawnin instances of a terminal condition.


Life Sustaining Procedure

"Life-sustaining procedure" means any medicalprocedure or intervention which, when appliedto a qualified patient, would serve only toprolong the dying process and where, in thejudgment of the attending physician, deathwill occur whether or not such procedure orintervention is utilized. "Life-sustainingprocedure" shall not include the administrationof medication or the performance of anymedical procedure deemed necessary toprovide comfort care or to alleviate pain.


Comfort Care-Defined

I am to be kept clean, warm, and comfortable,with such administration of medication, nutrients,hydration, oxygen, pain-killing medication and theperformance of any medical procedure as may benecessary to make me as comfortable and pain-free aspossible. In no event shall any of the above be usedfor the sole purpose of prolonging life.

Pain-killing medication or procedures may beadministered liberally, without the concern for thepossibility of addiction, physical deterioration, or eventhat death may be somewhat hastened. However, theadministration of pain killers is not to intentionallyinduce, hasten or encourage death.


Living Wills: a/k/a Advanced

Directives or Declaration

(a) Any adult person may execute adeclaration directing the withholding orwithdrawal of life-sustaining procedures ina terminal condition. The declaration madepursuant to this act shall be: (1) In writing;(2) signed by the person making thedeclaration, or by another person in thedeclarant's presence and by the declarant'sexpressed direction; (3) dated; and


Living Wills: a/k/a Advanced

Directives or Declarations

(cont.) (4)(A) signed in the presence of two ormore witnesses at least 18 years of age neitherof whom shall be the person who signed thedeclaration on behalf of and at the direction ofthe person making the declaration, related to thedeclarant by blood or marriage, entitled to anyportion of the estate of the declarant accordingto the laws of intestate succession of this state orunder any will of the declarant or codicil thereto,or directly financially responsible for declarant'smedical care; or (B) acknowledged before anotary public.


Manner of Making Anatomical Gift

K.S.A. 65-3224 (a) A donor may make an anatomical gift:

(1) By authorizing a statement or symbol indicating that the donor has made an anatomical gift to be imprinted on the donor's driver's license or identification card;

(2) in a will;

(3) during a terminal illness or injury of the donor, by any form of communication addressed to at least two adults, at least one of whom is a disinterested witness; or

(4) as provided in subsection (b).


Manner of Making Anatomical Gift

(b) A donor or other person authorized tomake an anatomical gift under K.S.A. 2009Supp. 65-3223, and amendments thereto,may make a gift by a donor card or otherrecord signed by the donor or other personmaking the gift or by authorizing that astatement or symbol indicating that thedonor has made an anatomical gift beincluded on a donor registry.


Who May Make Anatomical Gift - K.S.A. 65-3228

An anatomical gift of a decedent's body or partfor purpose of transplantation, therapy,research or education may be made by anymember of the following classes of personswho is reasonably available, in the order ofpriority listed:

(1) An agent of the decedent at the time ofdeath who could have made an anatomical giftunder K.S.A. 2009 Supp. 65-3223 (2), andamendments thereto, immediately before thedecedent's death;


Revised Uniform Anatomical Gift Act - K.S.A. 65-3228

(cont.)

(2) the spouse of the decedent;

(3) adult children of the decedent;

(4) parents of the decedent;

(5) adult siblings of the decedent;

(6) adult grandchildren of the decedent;

(7) grandparents of the decedent;

(8) the persons who were acting as theguardians of the person of the decedent at the time of death;


Revised Uniform Anatomical Gift Act - K.S.A. 65-3228

(9) an adult who exhibited specialcare and concern for the decedentand who was familiar with thedecedent's personal values; and

(10) any other person having theauthority to dispose of thedecedent's body.



This concludes Session 1.

We hope this presentation has helped you determine your own direction.