Bernard A. Krooks JD, CPA, L.L.M, CELA, AEP (Distinguished
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PowerPoint PresentationLittman Krooks LLP
www.littmankrooks.com
House of Cards Main Title
House of Cards (Main Theme from the TV Series), track 1/1, disc
1/1
2016
Soundtracks
110.05681
© 2019
Draft estate plans that work Provide for possible contingencies
Life is fluid; estate plan should also be
Anticipate potential changes in lives of clients and beneficiaries
in the planning process Carry out the wishes of the client
Incorporate client’s goals Avoid litigation
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© 2019
Understand client’s needs and wishes first Only then, draft
documents Clarity Flexibility Proper fiduciaries Appropriate
powers
Plan for incapacity Distribution of assets upon death
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Manage assets during incapacity Power of attorney Trusts Avoid
guardianship
Preserve value of estate for beneficiaries Estate tax not a concern
for most Cost of long-term care Creditors
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Client diagnosis indicates possible loss of intellectual capacity
or physical abilities Important to get things right the first time
There may not be an opportunity to amend
People are living longer, more likely to get sick before dying
Alzheimer’s disease and dementia Other chronic illnesses
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Loss of capacity may affect client’s ability to serve as fiduciary
for others Client has been appointed as trustee or other
fiduciary Powers of appointment may no longer be able
to be exercised
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Key to proper estate plan Not enough time spent on this
Perfectly drafted estate planning documents will likely fail
without proper fiduciary
Trustee Corporate v. individual Powers Successor trustee
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Depends on a number of factors Duration of trust Value of trust
assets Type of assets in trust Beneficiaries of trust Special
needs/spendthrift
Distribution standards Discretionary distributions are more
complicated to administer
Family values statement Statement of intent/wishes
© 2019
Incapacity of Settlor Removal of trustee for incapacity How to
determine incapacity Sensitive issue for clients Difficult to
confront one’s own mortality or
incapacity Concern that a third-party will too quickly
judge them incapacitated and they will lose control of their own
assets
Failure by trustee to cooperate
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Presenter
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L.A. Clippers owned by revocable trust Donald and wife Rochelle
were co-trustees NBA imposed lifetime ban on Donald resulting
in need to sell team Trustees both agreed to sale of team Donald
later changed his mind Trust provided that any individual
deemed
incapacitated shall cease to serve as trustee Rochelle attempted to
remove Donald
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Definition of incapacity Two licensed physicians examine the
trustee
and certify in writing that he is incapacitated Regularly called
upon in their practice to
determine capacity of others Neither related by blood or marriage
to any
trustee or beneficiary Donald removed as trustee and team
sold
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Can someone other than settlor make modifications in event of
incapacity Are these powers reserved solely to the Settlor Agent
under power of attorney Guardian Trustee Trust protector Proper
hierarchy Conflict resolution provision
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Mandatory distribution of income or principal Unitrust
Special needs trust Contingent SNT
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Wholly discretionary May v. shall Beneficiary does not have an
enforceable right
to receive anything from the trust Most flexible for dealing with
future issues Helps protect trustees from lawsuits by
beneficiaries (as opposed to standards) Restatement (Second) of
Trusts §187 Abuse of discretion
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Presenter
Presentation Notes
Restatement (Second) §187 says that not subject to control of court
except where abuse of discretion
© 2019
Provides a level of entitlement to beneficiaries Income Unitrust
amount Ascertainable standard Health, education, maintenance,
support
Reduce flexibility Harder for trustee to deal with future
issues
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Caveat Emptor Boilerplate language
HEMS What does it mean PhD or adult education class on meditation
Ferrari or Ford
Discussion with client Principal invasion in case of need Eliminate
conflicting provisions Consider other resources
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Trust is silent Restatement (Third) of Trusts §50 Other resources
are generally considered but
trustee has some discretion Consider beneficiary’s income and
other
periodic receipts Drafting issue Specify whether other resources
should be
considered and which ones
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Other income v. other sources of income Convert non-income
producing property to
income-producing property Other assets Must some or all be
liquidated
Accustomed standard of living Restatement (Third) §50 At time
irrevocable trust is created
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Presenter
Presentation Notes
Comment d2 also states that amount of distributions under
accustomed standard of living standard can be adjusted for
inflation, deteriorating health, increasing financial burden
© 2019
More than 40 million Americans living with a disability Mental
Physical 12% of U.S. population As many people as entire state of
California
One in 6 children ages 3 to 17 have one or more developmental
disabilities
One in 59 children have autism 21
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government Trust assets are considered unavailable Only actual
distributions are counted Kansas/Texas
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Discretionary trust gives the trustee complete discretion to
distribute all, some, or none of the trust income or principal to
the beneficiary, as the trustee sees fit Restatement (Second) of
Trusts § 155 May v. shall
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Support trust directs the trustee to distribute trust income or
principal as necessary for the support and maintenance of the
beneficiary Restatement (Second) of Trusts § 154 Hybrid trust
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Support trusts are usually available since a beneficiary can compel
trustee to make distributions
Discretionary trusts are not usually available since a beneficiary
cannot compel trustee to make a distribution
Settlor’s intent Supplemental language expressly stated If not
specifically stated, then factual determination
must be made
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Intent of settlor will generally be followed so long as it does not
violate public policy
Best to state in trust agreement Otherwise, subject to judicial
vagaries and
very fact sensitive In support trust, beneficiary can compel
distribution Pot trust, multiple beneficiaries
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Testamentary trust for grandchildren Trustee shall apply income and
principal for
support, care, maintenance, medical expense, educational expense,
and general welfare in trustee’s sole and uncontrolled
discretion
Beneficiary could not compel distribution Support v discretionary
Intent of settlor
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Testamentary trust Sole and absolute discretion for support
and maintenance, including expenses of illness and disability
Consider other income and assets Trustee’s discretion shall be
conclusive and
shall not be questioned by anyone
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Testator intent Beneficiary cannot compel distribution Not a
support trust Undistributed income added to principal Release from
liability for trustee Size of the trust
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to pay for beneficiary’s reasonable comfort during his life
Trustee may distribute in trustee’s discretion as trustee deems
necessary for health, maintenance, and support of beneficiary
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Settlor intent Size of trust Reference to remainder beneficiaries
Beneficiary cannot compel distribution Trust assets not
available
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Court refuses to recognize the concept of a discretionary support
trust
Testamentary trust Mandatory income provision Trustee is authorized
and may distribute
principal as necessary for support, maintenance, medical expenses,
care comfort, and general welfare
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Does not say uncontrolled discretion Restatement (Second) of Trusts
§ 155
Comfort and welfare language make it less like a support
trust
Need to determine settlor’s intent Settlor intended to provide for
beneficiary’s
care
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remainder beneficiaries No supplemental language Beneficiary could
compel distributions
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Entertainment, education, travel, comfort, convenience, and
reasonable luxuries, as the trustee, in its full discretion, deems
advisable
SNT language Consider other resources Beneficiary has no power to
withdraw Trust assets not available
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Act together or separate Monitor Compensation Springing v.
immediately effective Revocation of prior powers of attorney
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Take steps to ensure POA will be honored Send to financial
institutions Execute their own form in addition to yours Hot powers
Gifting Annual exclusion Unlimited Prior pattern Gifts to
agent
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Exercise power of appointment Disclaimer Waive elective share
Replace trustee Waive arbitration Deal with IRS Hire counsel/waive
attorney client privilege
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Need to access this info/property upon incapacity or death Must act
quickly, some information gets
automatically deleted after a period of time Many bills/statements
delivered by email, not
snail mail Services exist that will locate digital assets for
a
fee
© 2019
Update list of digital assets and passwords Discuss with digital
asset fiduciary
Maintain list in accessible place Consider online storage of
list
Terms of service agreement Digital asset fiduciary Digital asset
fire drill
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Preserve autonomy Quality of life Means different things to
different people Recognize loved ones Personal hygiene
Mobility
Visitation Second marriage situation
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End of life issues Pain management Physician assisted suicide
Authority to move to another state that has
laws consistent with client’s wishes Appointment of surrogate
decision-maker Living will
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Long-term care Where to receive care Funding sources Consider
irrevocable trust to protect assets Caution re: invasion
provisions
Spousal issues Right of election Waiver of right of election
Caution re: revocable trust
Presenter
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Doyle hired Hood to prepare SNT f/b/o wife Trust to be funded upon
Doyle’s death Wife had Alzheimer’s disease Hood drafted SNT in
revocable living trust After Doyle’s death, wife entered
nursing
home Assets in SNT were considered available Trustee of SNT filed
malpractice claim Statute of limitations had expired
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Crime of the 21st century Underreported crime Approximately 1 in 15
cases are reported
Affects 1 in 10 people over age 60 Costs seniors more than $3
billion annually
Difficult cases to prosecute Victim often reluctant to testify Not
many cases make it to trial; plea bargain
© 2019
Internet and phone scams IRS Lottery winner Grandparent scams
Facebook connections to see family
Two-thirds of financial elder abuse is committed by family
members
Presenter
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Senior Safe Act Enacted on May 24, 2018 Reporting suspicions made
easier Provides immunity to investment advisors,
bankers and others who act in good faith to report elder abuse and
financial exploitation to a regulatory or law-enforcement
agency
Does not require disclosure To qualify for immunity, employees must
receive
training; balance privacy interests
New FINRA rules Requires brokers to ask clients for trusted
person to contact if abuse is suspected Client does not have to
provide; broker must ask Confidential information is not disclosed
Safe harbor rule allows for 15-day hold on
disbursements if abuse is suspected Can be extended by 10 days if
necessary No guidance on what should be done
© 2019
Ask clients and advisor if they have a TCP TCP could be the
abuser
Alerted to more accounts Incorporate into estate planning documents
Conflict if TCP is different from POA agent Should lawyer be
contacted if broker suspects
abuse or if TCP is changed Sign of exploitation Change EP documents
to avoid conflict
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Bifurcate responsibilities Caregiver background checks Work with
agency
Communication among advisors Team approach
© 2019
Role of attorneys Model rule 1.14 Attorney/client privilege If you
are complacent, are you complicit Permission in retainer agreement
to speak
to others/APS Outside services Monitor bank and investment accounts
for
unusual activity Bill-paying service for seniors
© 2019 52
House of Cards Main Title
House of Cards (Main Theme from the TV Series), track 1/1, disc
1/1
2016
Soundtracks
110.05681
Heckerling 2019Are You Building a House of Cards?
Are you Building a House of Cards?
Overview
Overview
Overview
Overview
Overview
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