Issue 7.10

Creating a durable power of attorney can be helpful to your family in the event you become incapacitated.  An accident, health crisis, or diseases of age may render you unable to manage your affairs, such as paying bills, managing investments, and making important financial decisions.  A “durable” power of attorney allows the person you choose ahead of time to act for you.  This person is called your “agent.  Your agent has authority to act for you during any time that you are incapacitated. 

Making a durable power of attorney gives your agent the authority to act for you but only according to the terms of the power of attorney.  Your agent must act in your best financial interest at all times and in accordance with your wishes in accordance with your power of attorney document. 

A durable power of attorney can give your agent broad powers over your property.  Broad powers are usually necessary to be sure that your agent has the flexibility and power to deal with the many issues that might come up in managing your affairs.  Because an agent’s powers are often so comprehensive, some worry that the agent might abuse those powers.  If that is a concern, you should consider the use of special power of attorney known as a “springing” durable power of attorney.  A springing durable power of attorney restricts your agent from acting on your behalf until you are determined to be incapacitated.  At that time, and only at that time, your agent’s authority “springs” into existence.  In your springing durable power of attorney, you set the standard for how your incapacity is to be established, such as by the written statement of your physician, by two physicians, or by a trusted family member or advisor, for examples.  Describing how your incapacity is to be established avoids costly and public court proceedings to determine your incapacity.  An attorney can help you decide which form makes the best sense for your circumstances. 

Great care should be taken in choosing your agent.  That person should know your general intentions concerning your property, and be financially secure, competent, trustworthy, and willing to take on the burden of your affairs.  If you do become incapacitated without having created a durable power of attorney and you have financial affairs that need to be addressed, your family will have to petition the court to determine your incapacity and appoint a conservator to manage your property.  Because of that unwanted possibility, most estate plans should include a durable power of attorney.

Sean Sullivan is a shareholder with the firm of Brindley Sullivan, PC, 249 E. Tabernacle, Ste. 102, St. George, UT 84770, (435) 673-9220.

Issue 3.10

Parents of adult children with drug and alcohol addictions struggle with how to handle that child’s inheritance in their will or trust.  Most parents worry that an inheritance will enable their addicted child to further indulge in their addiction, wasting their inheritance and furthering their child’s destructive behavior.  But disinheriting the child often seems like a drastic step that will have unintended emotional and financial consequences.  Disinheriting a child may provoke a legal challenge from that child who was disinherited.

Sometimes disinheriting a child is the answer, however.  If the relationship between parent and child has been strained to the breaking point, doing so might make sense.  When disinheriting an addicted child, parents should prepare for the potential of a future legal contest by having reliable witnesses who will testify as to the parents’ mental capacity.  Also, the parents should make their documents perfectly clear that they intend to disinherit the child.  A “no contest” provision in their will and trust should also be included.

Another option is to create a trust that holds that child’s share for that child’s lifetime, or until the child can show they have overcome their addiction.  Trusts can be customized for the circumstances and personality of the beneficiary.  The trust may say that no funds will be paid out as long as the addiction continues.  The trust can require testing before any distributions are made.  It may include incentives for the addicted child to find and keep a job by matching money earned.  It may include provisions to require attendance at AA meetings or other addiction treatment groups.

A real key is naming the right trustee to watch over the affairs of the child.  The trustee will need to be strong in dealing with the child and holding to the terms of the trust.  Naming two family members as trustees often times works better than naming one because together they can present a united stand.  Co-trustees will be able to sure-up each other under the potential stress of working with the addicted child.

There is no perfect solution when dealing with the inheritance of an addicted child.  The family simply has to make the best of an already tough situation.  Proper planning will give your family the direction and instructions to deal with it the best they can.

Sean Sullivan is a shareholder with the firm of Brindley Sullivan, PC 382 S. Bluff, Ste. 150, St. George, UT 84770, (435) 673-9220.

Issue 49.09

If you are remarried, there are six basic considerations in planning your estate which should be addressed.  Consider the following:

1.  Children of previous marriages will occasionally throw up roadblocks if they feel that an outsider threatens “their” inheritance.  You should assume your children feel this threat, even if they give you no signs of their feelings.  If you intend to leave any of your estate to your new spouse, you should consider telling your children what your plan is.  Doing so will give you a chance to reason with the children, and for them to voice any concern they may have.  If your children know what to expect, they will be less likely to challenge your estate plan upon your death.  Good communication is critical.  

2. Prenuptial agreements or postnuptial agreements are highly recommended if you want to preserve your assets for your children.  They will also protect each of you from your respective step-children.  Some clients avoid mentioning the subject of a prenuptial or postnuptial agreement because they don’t want to appear selfish or distrustful.  It helps to know that such agreements are used simply to clarify the treatment of your property both during your marriage, and at your respective deaths.  It’s also generally a better approach to establish what property is “mine, yours or ours” for the benefit of each other, and to give a clear outline to your children of your intentions concerning your property. 

3. Insurance policies, pension and retirement plan beneficiary designations need to be reviewed.  Is the beneficiary or ownership correct?  If you are naming children as beneficiaries of a retirement plan, your new spouse needs to consent to that designation under federal law. 

4. You will need someone to handle both medical and financial issues if you are disabled.  You should decide now who will act as your agent to make those decisions for you.  Consider whether a child or your new spouse would be best to make those critical decisions.

5. If you have retirement income, check with your pension representative about the rights to survivor income if you should pass away before your new spouse.  The same thing can be said about social security benefits.

6. If you have custody of minor children from a prior marriage, you should consider who should act as the guardian of those children when you can’t care for them.

Sean Sullivan is an attorney and shareholder in the firm of Brindley Sullivan, PC, in St. George, Utah, and may be reached at (435) 673-9220.

Issue 35.09

Creating a durable power of attorney can be helpful to your family in the event you become incapacitated.  An accident, health crisis, or diseases of age may render you unable to manage your affairs.  Someone will need to pay bills, manage investments, and make important financial decisions for you.  A “durable” power of attorney allows the person you choose to act for you.  That person is called your “agent.”  Your agent has authority to act for you during the time that you are incapacitated. 

Making a durable power of attorney gives your agent the authority to act for you but only according to the terms of the power of attorney.  Your agent must act in your best financial interest at all times and in accordance with your wishes as stated in your power of attorney document. 

A durable power of attorney can give your agent broad powers over your property.  Broad powers are usually necessary to be sure that your agent has the flexibility and power to deal with the many issues that might come up in managing your affairs.  Because an agent’s powers are often so comprehensive, some worry that the agent might abuse them.  If that is a concern, you should consider the use of special power of attorney known as a “springing” durable power of attorney.  A springing durable power of attorney restricts your agent from acting on your behalf until you are determined to be incapacitated.  At that time, and only at that time, your agent’s authority “springs” into existence.  In your springing durable power of attorney, you set the standard for how your incapacity is to be established, such as by the written statement of your physician, by two physicians, or by a trusted family member or advisor, as examples. 

Describing how your incapacity is to be established avoids costly and public court proceedings to determine your incapacity.  I can help you decide which form makes the best sense for your circumstancesGreat care should be taken in choosing your agent.  That person should know your general intentions concerning your property and be financially secure, competent, trustworthy, and willing to take on the burden of your affairs.  If you do become incapacitated without having created a durable power of attorney and you have financial affairs that need to be addressed, your family will have to petition the court to determine your incapacity and appoint a conservator to manage your property.  Because of that unwanted possibility, most estate plans should include a durable power of attorney.

Sean Sullivan is a shareholder with the firm of Brindley Sullivan, PC, 382 S. Bluff, Ste. 150, St. George, UT 84770, (435) 673-9220.

Issue 29.09

5.  Dislike for Attorneys or Formal Documents.  There are places situations some people want to avoid: the dentist’s office, a used car lot, and the attorney’s office, are examples.  However, there is no better time to meet with an attorney than when making your estate plan.  This is your chance to control the legal system by making your estate plan documents solve legal problems that might otherwise arise.  If you don’t take your opportunity to do so, then the legal system will control your estate and what you wanted to have happen might in fact have little to do with what actually happens to your estate.

6.  Lack of Ability to Plan for the Future.  Many people feel inadequate and unable to plan for the future.  However, going through the process of thinking about their property and what to do with it helps them evaluate and conserve them with greater understanding.  Isn’t it interesting that we work, save, and plan all our lives on how to make and keep our money, but we won’t spend the bit of time it takes to determine how it should be distributed at our deaths. 

7.  Reluctance to Place Confidence in Others.  Deciding who can help us and be trusted tends to delay a good many people.  I have limited my practice to work almost exclusively in estate planning and distribution matters.  In deciding who to have help you, you should feel free to interview your attorney before he begins working for you to be sure he has the experience and insight sufficient to help you in the estate planning legal world.  After all, you are his or her boss.  You are paying him or her to do work for you.  You have the right to make sure they know what they are doing.

If you are ready for your free consultation, call my office at (435) 673-9220, or write to me at 382 South Bluff, Ste. 150, St. George, Utah, 84770. 

Issue 27.09

Surveys show that over half of the American population will die without a Will.  Why do so many leave their estate in someone else’s hands to determine how it will be distributed?  Below are some of the most common excuses.  If you are one of those putting-off this important opportunity, you should identify and get past the excuse that is holding you back.

1.  Refusing To Accept That We Will Die.  We can all agree that we will die, and we can all agree that we don’t like to think about it.  Preparing your estate plan brings the fact of your mortality into keen focus, which can be uncomfortable.  However, ignoring death is not an answer.  And since we have no control over when death will occur, we should not take for granted that we have time on our side to set our affairs in order. 

2.  Procrastination.  People who procrastinate typically are perfectionists.  They wait until the perfect time or situation to begin the task to be performed.  And of course that “perfect” situation is hiding somewhere far down the road.  You need to recognize that there is no better time than now to address our estate planning needs.  Clearly the best thing for those we love is to prepare our estate plan now so it will be in place when it is needed. 

3.  Too Small Of An Estate.  Often we look at what we own and think there is not enough to fight over or fuss about.  The reality is that modest estates often need the same well-thought-out plans as larger estates.  Also, the beneficiaries of modest estates don’t want to spend what is there on fixing problems that could have been handled much more affordably by a good estate plan.  In addition, it is often overlooked that the very cause of death may actually create sizeable value through life insurance or accidental death benefits.

4.  Too Expensive.  Many people believe that the cost of an estate plan will be too much.  However, a properly prepared estate plan is often the bargain of a lifetime when compared to estate settlement costs if questions or disputes arise as to what is to be done with your property.  I always meet with clients for a free initial consultation to see what they need so they don’t pay for unnecessary services.  Some people attempt to write their own will to save money, but in my experience self-written wills are most often more troublesome because of unclear instructions and questions that are certain to cause problems for the family.  An experienced estate planning attorney should be used to find and solve questions in advance. 

Next time:  More excuses for putting off estate planning.

Issue 25 & 26

On occasion I meet with clients who think that only the estates of people who die without a will have to be probated.  That mistake is based in large part due to the formalities of signing a will.  The fact that wills are witnessed and notarized makes some believe it should avoid any court probate proceeding.  However, even if a person signs a will in the presence of witnesses and a notary, a will must still be probated to become “official.” 

The following example shows why validly executed wills still require probate.  Imagine that you are a banker.  A woman brings in her husband’s death certificate and her husband’s original will and puts them on your desk.  “Here are my husband’s death certificate and his original will,” she says, “on page three of the will, it says that I get all of his property and that I am his personal representative.  I want you to turn over his accounts to me.” 

How do you know that the will she is placing in front of you is the last will of her husband?  What if the husband had executed a later will disinheriting his wife - and, of course, she is showing you the prior will that still has her as a beneficiary?  How do you know whether or not somebody objects to the wife being the personal representative of the estate?  How do you know whether the will was validly signed or whether it was fraudulently made?  You simply can’t know the answers to these questions based on her representations alone – and as a banker you aren’t willing to take the risk. 

So, one main purpose of probating a will is to have the court declare that a will is the last and valid will of the decedent.  As part of that proceeding, the court will appoint the personal representative of the estate and issue “Letters Testamentary” to the personal representative.  The “Letters Testamentary” document shows third parties that the court has approved the appointment of the personal representative.  With Letters Testamentary in hand, the appointed personal representative can then gather, manage, and dispose of the assets in the estate as directed in the will. 

Although making a will does not keep you out of a probate proceeding, it does streamline the probate process.  The simplified probate proceeding significantly reduces the time, attorney’s fees, and costs your family will spend on probate costs.  Having a will also puts you in the driver’s seat to choose your beneficiaries, the division of your estate, your personal representative, and the guardians and conservators for your minor children, if any.  If avoiding probate is one of your estate planning objectives, using a revocable trust is the tool of choice instead of a will.

Sean Sullivan is a shareholder in the firm Brindley Sullivan, PC, who will meet with you for your first consultation without charge.  Call (435) 673-9220 to arrange a time to meet with him.

Issue 21.09

Entering into a premarital agreement may be one of the best ways to show that you love your fiancé.  That may sound strange.  But the communication about your respective financial situations and what you expect to pass on to your respective children can bring you closer together and help you have a happier, more peaceful relationship. 

Some perceive premarital agreements as a hurdle to entering marriage.  They may believe that bringing up the topic demonstrates a lack of trust.  However, premarital agreements help you learn more about each other, make each other feel more comfortable about issues that are of concern, and certainly clarify how you will handle your money and your estates when you pass away. 

All of us, regardless of our ages and financial standing, have money concerns to talk about with our partner, and if we avoid doing that and wait until there are problems, it may be too late.  Whether you have been married before, you have children by a prior marriage, or you have assets or not, it’s important to communicate and consider a premarital agreement to assist you to clarify your intentions concerning your property. 

Premarital agreements become especially important for those getting married and have children by a prior marriage.  Often people have assets that they are bringing into the marriage or children from a prior marriage.  Without a premarital agreement, it’s quite possible that those children by their prior marriage could be inadvertently disinherited upon your death.  Preparing a premarital agreement is good estate planning.

If you don’t want to enter into a premarital agreement, there are some things that you still should do.  First, prepare an inventory of everything you own and everything you owe as of your wedding day.  You can do this without even sharing it with your spouse, although sharing with your spouse and having them sign it is ideal to show that they have reviewed it.  Then any property you want to keep separate and not treat as marital property should be held as your absolute separate property.  For example, if you sell any of your separate property, deposit the proceeds into an account in just your name, and don’t use the proceeds for the benefit of the marriage. 

You may be tempted to use your separate property account for expenses of the marriage, like a down payment or improvement to a house or an investment in a business.  Just realize that every time you tap your separate property for a marital purpose, you make it look more like marital property, and questions begin to arise as to whether you intended to keep it separate or to be treated as a gift to your spouse.

By discussing these issues before your marriage, or even after your marriage but before they become a problem, will strengthen your relationship and prevent conflicts and disagreements between your surviving spouse and your children at your death about whose property is whose.

Sean Sullivan is an attorney and  shareholder of the firm of Brindley Sullivan, PC, located at 382 S. Bluff, Ste. 150, St. George, UT 84770, (435) 673-9220.

There are many reasons you might want a Trust.  One reason is to avoid probate.  Probate is the court procedure to appoint a personal representative, determine who gets your property, and oversee its distribution.  This can be a slow and costly process even with a modest and uncomplicated estate.  If you transfer your assets to a Trust during your lifetime, when you die they belong to your Trust, not to you.  So they don’t have to be probated to be given to the people you have named in your Trust.  This keeps the courts out of your family affairs, and keeps your estate plan private and confidential.

You may want a Trust to avoid the potential for double probate if you own real estate in more than one state.  Each state in which you own real estate will require probate in each of those states.  If you own real property in different states, you can put all of that property in your Trust so there will be no need to probate the property when you die.  The Trust will continue to own the property at your death, so there will be no reason for the different states to become involved in how the property is distributed.

You may want a Trust to provide for minor children.  If you leave assets to minor children in a Will, they get full access to that property when they reach the age of majority.  In most states, that age is 18.  An 18 year old may not be ready to manage inherited money.  With a Trust, you decide what age a child is to receive their share - 18, 25, 35, 70, or any other age.

You may want a Trust to provide for a disabled child, or a child who should not receive money outright due to alcohol or drug abuse.  Using a Trust, you can name another person to be the Trustee of that child’s money to make sure the money is used for that child’s benefit. 

You may want a Trust to avoid paying estate taxes.   Trust can be used to exempt some of your assets from the estate tax.  You can also receive immediate tax benefits by setting up a Trust that provides income to you for your lifetime, but makes a gift to charity at your death.  Doing so provides income and estate tax benefits for you and your family.

You may want a Trust to avoid having your heirs challenge your Will.  A Trust can provide extra protection to keep that from happening.  To prove a Will is invalid, the challenger has to show that you were incompetent at the time the Will was executed.  But since you interact with your Trust throughout your life, and move assets into and out of your Trust from time to time, it is more difficult to prove your Trust is invalid.  If you set up a Trust, it is tougher on the challenger to claim that you were incapacitated not only when the Trust was set up, but also during every transaction that you carried on during your lifetime.  For this reason, your Trust is easier to defend than a Will.

Your Free Consultation is available by calling Sean Sullivan, a shareholder with the firm of Brindley Sullivan, PC, 382 S. Bluff St., Ste. 150, St. George, UT 84770, (435) 673-9220.

Your selection of your trustee for your trust is one of the most important decisions when developing an estate plan.  Even if your trust is well drafted, if it is not correctly administered your goals and intentions may not be carried out.  The qualifications you should look for in a good trustee are the following: 

* They will act in the best interests of the beneficiaries

* They know what the beneficiaries need and want

* They are well versed in the subject matter of the trust

* They have the time and ability to serve as trustee

* They have no conflict of interest or have the ability to serve without letting bias influence them

* They are located near the beneficiary

* They are competent in financial & tax matters

* They have appropriate prior experience

Here are some thoughts on who you might select as your trustee:

Family member - Surviving spouses often serve as trustees for marital as well as family trusts.  Many people are more comfortable when they know the trust assets are managed by a member of their own family.  Management by a family member also often eliminates fees that would be charged by a professional trustee.  However, most such persons do not have the necessary qualifications and experience and may be prone to conflicts of interest, but this can be overcome if they are willing to hire legal and accounting experts to assist them.

Friends - A close friend may have a good understanding of what your wishes are but may lack the requisite experience and may not have either the time or energy needed to do a good job.

Lawyers and accountants - People often turn to their lawyer or accountant when choosing a trustee.  A lawyer or accountant who has been a close advisor and friend may be a good choice, provided that person has the necessary skills and experience.  They will charge for their services in their role as trustee.

Corporate trustee - Bank trust departments and independent trust companies are in the business of providing professional trust services to the public.  They have the experience, the expertise and the staff to handle trust management.  They can also be expected to take care of the necessary accounting and tax functions required of most trusts.  The fees charged by corporate trustees may include a percentage of the trust assets as well as annual administration fees and an annual minimum fee.  Ask about the fees before selecting a corporate trustee.  The family members also need to be satisfied that the corporate trustee will work closely to understand their needs.

Because the future is always uncertain, it is wise to build safeguards into the trust so that any problems arising at a later date can be effectively managed.  You should name several successor trustees in case the first trustee is unable or unwilling to continue to fulfill their obligations as trustee.  If a corporate trustee is selected, your trust should provide that the family retains the ability to replace the corporate trustee with another one of the family’s choosing so that if problems arise with the first corporate Trustee, the family has options.  

Sean Sullivan is a shareholder with the firm of Brindley Sullivan, PC 382 S. Bluff, Ste. 150, St. George, UT 84770, (435) 673-9220.