DIY Powers of Attorney – Not a Good Idea

The internet has become an unprecedented tool for legal research and empowerment. For example, I write here to advance public awareness of estate planning law through the power of the internet, after all. Nevertheless, too much information also can lead to a dearth of actual information, or at least a lack of good useful information.

Beware of the simple estate planning tools you find online, as confirmed in a recent Elder Law Answers post.

Off-the-shelf and stock power of attorney forms not only can be ineffective, but they also can prove a liability and a detriment to your plans. Such forms may purport to cover every conceivable situation only to find that they do not satisfy the statutory substance or format required by your state.

Moreover, anyone who has had an encounter of the first kind with any aspect of a bureaucratic system (you’ve finished your taxes, right?) knows that one-size-fits-all forms have their limitations.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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Young Facebook Billionaires Find Estate Planning Fix

Not too long ago the taxation and accounting world had a new star in Mark Zuckerberg, the wunderkind behind Facebook. Why? Because his unparalleled control over the company was about to create the biggest tax bill ever when the company went public and his stock became publically valued.

Indeed, the taxation and accounting world can be rather morbid in that regard, but at least for Zuckerberg there is some good news that has come out of the woodwork. Tax or no taxes, he has saved a great deal through forethought and proper estate planning.

Certainly it’s unique to meet anyone who begins their estate planning at age 25 but Mark Zuckerberg and his partner in business, Dustin Moskovitz, did just that. As reported in a recent article from Deborah Jacobs at Forbes, the pair had the foresight to set up their private stock up with a certain form of trust before the true boom in value. As a result, they locked in that lower value and locked out those incredible taxes.

As Jacobs estimates in her article, the pair shifted more than $185 million into what’s often known as a zeroed-out GRAT. In somewhat more plain English this device was a Grantor Retained Annuity Trust in which the rate of appreciation exceeds the rate of interest, thereby securing the excess amount (like all that created from going public) from taxation for the beneficiaries of the GRAT.

Sometimes the young do have something to teach their elders, and in this case the crew over at Facebook serves as an incredible example of what has been an incredible technique.

For more information and math on Zuckerberg and his partners check out the original article. Also, if you’re interested in learning more about GRATs, then there’s no time like the present to investigate whether you should create your own.

Note: Not only is the GRAT most advantageous when an economy is set to rebound, but the process itself is in the sights of many new budget and taxation plans by the current administration. (Translation: This opportunity might not be around much longer!)

At Idaho Estate Planning we have a network of resources to help you care for yourself and/or your loved ones. Let’s work together and initiate a plan that works for your individual circumstances. Remember, good planning is no accident.

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Beyond Science Fiction, Test Tube Babies and Estate Planning

When science moves too fast for the law it can create some pretty strange situations. For instance, beyond a doubt, the strangest (and most commonplace) example is posthumous birth. How can the law accommodate new fertility and tissue-preserving techniques?

Well, it’s really not all that able to, nor does it want to, and as pointed out in a recent article in Trusts & Estates.

If you’re old enough to get past the fable of the stork and his precious cargo for expectant mothers around the world, then you’re also old enough to understand much of the logic behind the laws supporting inheritance. For example, when people become parents of children, more often than not, they wish to legally pass on certain inheritances.

To a certain extent, this involves the assumption that you were there (in every sense of the word) for the act that created the child. However, modern science has given us the ability to manipulate genetic material and create human children from cryogenically preserved sperm, in vitro fertilization, and other fertility procedures. Taking it a step further, modern science has allowed for the birth of a child from the genetic material of a parent who is no longer alive.

While that may be a gift in the face of fatal disease and treatments that cause inferility, it’s also a huge burden on tax and inheritance law that can’t quite wrap itself around the concept. For example, how do you determine the standing of a child conceived and born after probate? Is that child even a “child” of the deceased?

The case of Capato v. Astrue, as discussed in the original article, represents something of a happy ending to the dilemma. In that case, the children (twins) were held to be children of the deceased, and so entitled to his social security surviving child benefits. Nevertheless, the case hinged on that very distinction between genetic offspring and “child.”

The distinction, in most cases, is decided by the Uniform Parentage Act (UPA) Section 707. As summarized in the Trusts & Estate article, that section provides that if a person dies before his genetic material is used in conception, the decedent isn’t a “parent” of the resulting child unless the decedent expressly consented to be a parent of such a child.

What does that mean? It means you need to plan for children that you and your spouse, in a certain sense, won’t have together. It also means that if you’ve planned enough to preserve your reproductive tissues and abilities, then it is necessary to plan for those possible children, and explicitly so.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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USA Is Tax Haven For Multinational Families

Globalization has been an incredible force for a number of reasons, some good and some not so good. For instance, for the first time there are individuals and families that are, first and foremost, citizens of the world before they are citizens of any given country or tax authority. How can you be both?

As a recent Bloomberg article points out, this is a growing concern. For many families hoping to pass on wealth, the solution is a careful system of offshore and U.S. based trusts or entities. As far as wealth transfer and taxation laws are concerned, there are two junctures. The first is the point at which wealth leaves one individual. The second is the point when wealth is accepted by another. Interestingly, at each of these points of wealth transfer, taxation is triggered when both occur under the same set of laws.

In the U.S. this means the transferor gets a gift tax or an inheritance tax on whatever falls under U.S. jurisdiction, and the transferee may get hit with anything from income to capital gains to real estate taxes, and even their own estate taxes down the line once they bequeath the assets.

Being a citizen of the world often means that a failure to plan will subject you and yours to any number of taxes, perhaps in multiple jurisdictions. However, careful planning also can yield some serious advantages.

Determining what is best from a tax standpoint for you, your family and your international assets can be a high-wire act.

Be sure to read the original article for additional information and ideas.

Ultimately, as is usually the case, it really boils down to your unique situation and the various borders you, your family, and your assets casually touch and cross. If you are not careful, those borders (and their taxing authorities) can come back to bite you.

Understanding the complexities of Tax Planning is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Business Planning and Estate Planning

Planning for your estate is, more often than not, also an activity of coming to understand your estate and the nature of the things you own. If you’re a small business owner, it’s often more important to come to terms with the nature of your business and your ownership in it earlier rather than later.

As pointed out in a recent article over at BusinessWeek, ownership is an integral concept to think through at the point of start-up, but it’s important to remember to think in the long-term, too.

The shape that you give a business will, in the many ways discussed in the article, shape the way it is perceived and received by potential investors. Likewise, though, the initial allocation of rights and ownership will shape both the long-term capabilities of the business and the nature of the business assets that figure into your estate.

The many complications and folds take time to understand, and often rely entirely on the individual circumstances, and for that reason it’s important to form a thoughtful plan, or risk losing sight of the long-term goals of the business and for your assets.

To form a business, then, is a balancing act. While you balance between profit and loss, you also need to balance between present and future, to include between present business and future wealth transfers.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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Inherited Wealth – A Blessing Or A Curse?

If you are setting up an inheritance for the next generation, or if you yourself may be an inheritor, here’s an important (if depressing) fact to consider: more often than not, immediate wealth is easily (and quickly) squandered.

A recent Wall Street Journal article points out the trend, and whatever your present relation to the estate planning process, it’s an important fact to consider.

When you think of squandered wealth it’s all too easy to come up with stories of professional athletes and 15-minutes-of-fame pop-stars. Regardless, famous people are no better and no worse than the rest of us. In reality, this problem can affect anyone with some sudden influx of wealth, perhaps especially an inheritor.

In fact, there are some objective numbers to support this assertion. According to the latest available data from the Federal Reserve’s Survey of Consumer Finances, more than nine million households in the U.S. reported getting an inheritance of at least $100,000. And, looking to the future, the Center for Retirement Research at Boston College estimates that baby boomers – those 78 million people born from 1946 through 1964 – are expected to inherit some $8.4 trillion during their lifetimes. In turn, these boomers are just as likely to hope to pass it down immediately. These handoffs make for a large margin of error, both as individuals and as a society.

As an inheritor, the challenge is to be the “exception” and that will take work. As an estate planner, giving up wealth here and now, there is still work to be done and it is all the more pressing! Properly planning and transferring wealth to your loved ones is about planning for the entire process – the long-run – and the future well being of your family.

It’s important to know and understand the ways you can plan to protect your inheritors, and there are many tools available once you understand this goal. Often, you’re protecting your inheritors from themselves.

When it is all said and done, it’s the family you’re planning for in the first place. Therefore, in order to plan properly, first you need to understand your family. Proper planning ought to include discussing these issues with your family and then making the final decisions. Communication is key. We’ve said it before, proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. Let’s work together to implement an estate plan that works for you. Remember, good planning is no accident.

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The Power of Estate Planning – 351 Years Later

Wills and trusts are actually some pretty powerful devices, not just arcane legal concepts. As you consider formulating your will or using a trust, or as you actually put one to paper and sign it into being, it’s important to remember the unforseen consequences. Consider the case of William Payne.

For a recent lesson on the power of, and the potentially powerful problems caused by, far-sighted estate planning, consider this story regarding the dying wish of William Payne. It was 351 years ago, and with only eight days left to live, Bill Payne put to paper his will and the spectacular bequest of some 35 acres of seafront property to the benefit of the schoolchildren of Ipswich, Massachussetts. In his will, Payne specifically ordered that such land ought never be sold or wasted.

The years rolled on and a village of summer cottages sprang up, with the rent money going to the public fund for the schools. Then, the years rolled on some more and the present trustees hope to undo the will and convert the property and those homey cottages into condominiums. As you might expect, this has raised the ire of citizens, lawyers, and historians alike.

It’s a complicated story, more so than I’ve related here, but there are a few important facts. First and foremost, William Payne put something to paper that lasted 351 years and benefitted generations of people – an entire town and maybe an entire state – and he did so with careful consideration, a plan, and a pen. Second, the more ambitious the plans for an estate or an assets, all the more reason for a carefully considered plan.

The future has a funny way of unmaking the past, it seems. Nevertheless, if something is important enough to plan for it, then it’s important enough to consider all the way through. This is true, even when you aren’t looking 351 years in the future.

At Idaho Estate Planning we educate our clients on implementing and maintaining an effective estate plan. Our Life Plan™ Members also participate in a yearly review of the assets contained in their estate plan and any changes made through the previous year. If you have been considering putting your estate plan together, we have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. The best time to plan is always now! Remember, good planning is no accident.

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Obama Administration Wants to Limit Trusts

The calm before the storm: That would be an accurate characterization of how 2012 is shaping up, especially when it comes to estate planning. Our regular readers will likely remember why.

Nevertheless, along with the estate and gift taxes, there are a few more laws to watch as they worm through Capitol Hill. As a result, 2012 may be the last truly advantageous year for certain trusts like Grantor Retained Annuity Trusts (GRATs) and a somewhat lesser known vehicle, the Intentionally Defective Grantor Trust (IDGT).

A recent Forbes article cast the spotlight on the IDGT, so I thought I’d do the same here.

An IDGT lives up to the name, or at least it does when formed properly. In essence, the trust is set up by a Grantor (i.e., the Trustmaker) who then sells assets to the trust in exchange for a note at a very low interest rate. This is not uncommon with many trusts, but since it’s defective it also places the interest rate burden back on the grantor. Result: The Grantor gets an initial market value on their sale, which is likely to be low, and then continues to pay for those assets. Sounds a little weird, but stick with me.

Here’s what the Grantor is betting: The asset sold is presently legitimately “undervalued” right now, but is expected to greatly increase in value if the economy returns to full swing. As a consequence, the undervalued asset appreciates at a greater rate than the very low interest rate and thereby locks that value into the trust for beneficiaries, and keeps that added value from ballooning the size of an estate instead. Moreover, since the assets were sold in the first place, the use of such a trust won’t waste the valuable lifetime gift tax exemption.

Not everyone likes this strategy, however.

The threat, at the moment, to GRATs and IDGTs is the most recent budget proposal put forward by President Obama. Accordingly, the seeds are thereby sown and we can only expect much more (negative) attention to be drawn to these estate planning tools in the future.

For more information you can take a look at the original article or you can learn more about the budget challenge to IDGTs and GRATs here.

Understanding the complexities of GRATs and IDGTs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Trusts – Better Robust Than Bust

Trusts are like pocket knives, in a way. Even a fairly basic pocket knife can make your life immensely easier, especially in a pinch, but a particularly well built and expansive pocket knife is an actual survival tool.

When it comes to trusts, however, why settle for a basic trust when a robust trust can provide essential protection for your loved ones?

While surfing my news sources I discovered yet another, renewed, lesson in the robust set of provisions that can be crafted into a single trust, here. In addition, this article illustrates the difficult space between divorce and the trust, and that’s one more area where a robust trust can make all the difference.

Depending on how you’ve structured it, a trust can last for varying lengths of time and offer the beneficiary/child various ways of accessing those funds. You might use this to teach lessons, for example, but don’t forget that you’re not always planning for the budding child but also the future adult. Unfortunately, that future adult may have creditors who could attempt an attack on the trust funds.

More likely, however, is that a divorce and an ex-spouse will come into play, perhaps also children and child-support. How the courts treat your trust depends on numerous factors best considered at the formation and worthy of your consideration at that time.

For more ideas (and at least one promising court case) read the original article. In the end, as with so many planning devices, everything hinges entirely on you, your family, and your unique circumstances.

When it is all said and done, it’s the family you’re planning for in the first place. Therefore, in order to plan properly, first you need to understand your family. Proper planning ought to include discussing these issues with your family and then making the final decisions. Communication is key. We’ve said it before, proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. Let’s work together to implement an estate plan that works for you. Remember, good planning is no accident.

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A Charitable Gift Delayed is Not a Gift Denied

It’s pretty impressive to top the Chronicle of Philanthropy’s list of America’s 50 most generous donors, but it just defies the imagination to make the list 5 years after passing away. Still, that’s the story of 2011 and the late Ms. Margaret Cargill.

This fact was swiftly picked up here, in a recent Forbes article, and as it turns out the reason for such successful giving can be traced back to some complicated estate planning and finance work.

Cargill is a name that, depending upon your exposure to agribusiness, is either an utter unknown in the discussion of wealth (the media is infatuated with Mark Zuckerberg these days) or an utter no-brainer. And Cargill is synonymous with massive agribusiness, having topped the list of America’s Largest Private Companies for all but two of the last 24 years. The late Margaret Cargill was heir to the fortune.

At her death, Ms. Cargill left all of her shares of Cargill stock to be split between two charity foundations, the Anne Ray Charitable Trust and her own Margaret A. Cargill Foundation. But don’t forget, Cargill is a private company, albeit a large one, and that makes the stock rather difficult to value and liquidate.

The trust and the foundation sat idly by until a fortuitous moment when Cargill sold its shares in another company, a public company called the Mosaic Company, which gave them the opportunity to exchange private Cargill stock for public stock that could be liquidated to the tidy sum of $6 billion (that process hasn’t quite finished up, but they’re counting it for 2011 anyhow).

It’s important to remember these kinds of limitations when it comes to assets in either estate planning or charitable giving. Ms. Cargill’s wealth was essentially locked up in private stock and so, despite the inefficiencies of doing so, that is what she gave when it came time to bequeath and give that wealth away to charity.

Luckily, however, Ms. Cargill did her charity work through the powerful intermediaries of charitable trusts and foundations, which were in a position to make such gifts work.

At least there’s next year for Paul Allen, George Soros, and Michael Bloomberg, the next three (living) names on the list of millionaire donors, but 2011 belongs to Ms. Cargill.

At Idaho Estate Planning we are the experts you need to know and trust. Work with us and we’ll put together a plan that works for you and your loved ones. Remember, good planning is no accident.

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