Estate Planning Seminar at Pleasant Grove Library

I’ll be presenting a seminar on DIY — Do It Yourself — Estate Planning at the Pleasant Grove Library on Wednesday, March 8, 2017 at 7 PM. Come an enjoy the discussion. The address is 30 E Center St, Pleasant Grove.

If you have a question about wills, trusts, and other aspects of estate planning, maybe I can answer it.

Some Things I Learned Answering Questions on a Forum for Asking Legal Questions

Yikes_2016-03-07_0843So I sometimes forget that everybody’s smart, just on different subjects. For example, I don’t know much about physics. My teachers tried, but my head could only hold so much gravity and speed of light and such. Well, today I was online in an online forum where non-lawyers posed legal questions to attorneys. These were real life people experiencing real life problems that involved the law in some way or the other.

Now let me be crystal clear: I don’t think these people are dumb. To repeat: we are all “smart,” just on different things. I happen to know a lot about the law, but boy am I at a loss about some other subjects (heck, even about some legal subjects). With that, here are a few things I learned while answering questions:

  1. Many, if not most people, don’t realize that estate taxes are no longer a concern for most of us. Did you know that you and your spouse must be worth almost $11 million before the tax man comes knocking? Yes, you may need to do some planning to make sure you take full advantage of that $11 million threshold, but still.
  2. Many people don’t realize that the First Amendment doesn’t protect them from employers, friends, parents, and the like from infringing on their free speech rights. No, the First Amendment protects us from the government infringing on our rights. And even then the right is not absolute.
  3. More than a few people confuse a living will with a plain old will, also known as a last will and testament. A living will is a document that tells your family and doctor whether you want life support and such should you become incapacity and unable to speak for yourself. A will or last will and testament is what you use to appoint guardians for your children and to give your property away when you die. You can read more here.
  4. A lot of people–especially people down on their luck financially–aren’t aware of the legal resources available to them that are free or at a reduced cost, nor are they aware of the state agencies that might be of help to them–child protective or family services, for example. For the record, in Wyoming you can go to the Wyoming State Bar to find free or reduced-rate legal services. In Utah, you should go here.  In Wyoming, you can find child and family services here.  In Utah, you’ll find them here.
  5. Finally, too many people are way too quick to pull the trigger; that is, they get angry and immediately shout “Medic!!!” I mean, “Lawyer!!!” To those I say, try to work out your problems by yourself and amicably first, especially if it’s family, then resort to the law. But the corollary to that is, if the proper response is legal, then hire an attorney. Trust me on that one.

Now where do I go to find out how fast the speed of light was back in the days of horse and buggy?

Quote for the Day

What is decanting and how does it relate to trusts?

The term “decanting” sounds mysterious, but in reality, decanting is simply a form of trust modification initiated by a trustee. The trustee accomplishes the modification by moving assets from one trust to a new trust with different terms. Estate planning attorneys draft trusts designed to last for generations based on assumptions about the beneficiaries that may bear no semblance to reality. Decanting then stems from the desire to make changes to an otherwise irrevocable trust.

Gerry W. Beyer and Melissa J. Willms, “Decanting is not just for sommeliers,” Estate Planning Studies, July 2014

Quote for the Day

“Decanting is the act of distributing the assets of an old trust to a new one with more desirable terms. It provides an easy method for correcting errors or ambiguities, adapting a trust to changes in a settlor’s objectives or changes in a beneficiary’s circumstances, taking advantage of new planning opportunities or adding flexibility to a trust.”

Peter J. Melcher, Robert S. Keebler & Steven J. Oshins, “A Guide to Trust Decanting,” Estate Planing & Taxation, (2015)

Trust Protectors: They Can Come In Handy When Your (Trust) Intentions are in a Pinch

What do I mean by “pinch”? Well, let’s say that you’ve created a trust, with yourself as the initial trustee. You know what you want to do with your trust, who you want to benefit, what you what to happen and what you don’t want to happen–that drug addled nephew, for example doesn’t get anything until he shapes up.

You’ve got big plans, and you think you’ve made your intentions clear, both in the trust and to the person or persons who will succeed you as trustee should you die or become incapacitated.

And then you die. And your successor trustee takes over. And as time moves on and one, your trustee begins to deviate from the path you clearly explained to him years ago. And he does this some more and some more, until he’s way off the path that leads to the fulfillment of your dreams for your beneficiaries. What do do?

Well, you could come back as a ghost and scare him straight, but that’s a long shot, right? Or your beneficiaries could all get together and petition the court to remove the trustee, but that can be a long, drawn-out, expensive, and often futile process. Though more receptive to the idea of modifying a trust or removing a trustee, courts have been and still can be reluctant to do so.

IMG_1996Enter the trust protector–that is, if you named a trust protector in your trust document. What’s trust protector, you ask? According to Lawrence A. Frolick, a law professor at the University of Pittsburgh School of Law, trust protectors

are best conceived as a means for a settlor [or grantor or trust maker] to attempt to ensure that the intent behind the establishment of the trust remains fulfilled in the future. Settlors [grantors, trust makers] appoint a protector to create and alter-ego who can supervise the trust and act to ensure that the purpose of the trust, as envisioned by the settlor [grantor, trust maker] is carried out even if the trustee must be replaced or the terms of the trust must be modified. The settlor [grantor, trust maker] by appointing a protector, overcomes the judicial reluctance to modify trusts . . . (Trust Protectors: Why They Have Become “The Next Bit Thing,” Real Property, Trust and Estate Law Journal, pg. 268-269, 50:2, Fall 2015; see here for an abstract of the article)

Now, trust protectors aren’t necessary for every trust, especially those that will close their doors once the grantor’s children reach an age appropriate to receive their final distributions free of trust–if that’s the grantor’s plan. However, for those of you who want their trust and their trustee to carry out their intentions for years and years into the future, a trust protector makes all kinds of sense. Think of it: A trustee, even the best trustee, will probably do a better job if she knows someone with the power to remove her will continue to be looking over her shoulder for years to come.

Not a bad idea.

Decanting is Not Just for Wine: “Revoking” an Irrevocable Trust

My how things have changed, or at least, how my understanding of things have changed. I graduated from law school in 1980 thinking that irrevocable meant just that. Once a trust became irrevocable–generally upon the death of the settlor–its terms turned to stone, fixed and barely movable. The only way to turn that stone back into something more malleable was a cumbersome process in which the trustee needed to secure the agreement of all the beneficiaries and then the court, before implementing any change to the trust. Again, that was my understanding at the time. I’m guessing it might be yours as well.

If trust law was ever that way in the past, it is certainly not that way today. The Uniform Trust Code (UTC) and various state “decanting” statutes have insured that. The UTC, implemented by a number of states, including both Wyoming and Utah, allows for judicial modification of trusts in a variety of circumstances, including “modification to achieve settlor’s tax objectives” and “modification or termination because of unanticipated circumstances.” But for our purposes here, I’m more interested in decanting, a process for modifying a trust somewhat analogous to decanting wine.

decanting

With wine, decanting involves pouring wine from one container to another in order to separate the wine from any sediment in the bottle, sediment that can ruin the taste. The process also infuses the wine with oxygen as the liquid passes from one container to another. Apparently–I don’t drink–pouring old wine into new bottles can improve the drinking experience.

With trusts, decanting involves “pouring” the old, irrevocable trust into a newer, more flexible trust, a trust better fitted to the needs of the parties to the trust at the time of the decanting. Maybe the decanting will result in the trustee having more flexible powers to better administer the trust. Maybe it will lead to better state and federal tax benefits. Maybe asset protection is the goal. For these reasons and more, trustees (often encouraged by beneficiaries) are looking to decanting as a way to deal with circumstances and issues unforeseen by the settlor of the original trust.

Decanting is not a new idea. Some argue that it has been allowed under the common law for a long time–at least since 1940–on the theory that if a trustee has discretionary authority to make distributions to a beneficiary from a trust, that trustee also has authority to make distributions in “further trust,” that is, into a new trust. But common law can be finicky and is subject to the whims of the local judiciary, so it’s with some relief that at least 22 states have enacted decanting statutes, codifying what was once only in the casebooks.

Wyoming’s decanting statute (Utah doesn’t have one), enacted in 2013, is short but illustrative:

§ 4-10-816. Specific powers of trustee 

(a) Without limiting the authority conferred by W.S. 4-10-815, [a statute that essentially frees the trustee from court supervision] a trustee may:

. . .

(xxviii) On distribution of trust income or principal pursuant to authority in the trust instrument to make discretionary distributions to a trust beneficiary, whether or not the discretionary distributions are pursuant to an ascertainable standard, make distributions of all or any portion of trust income or principal in further trust. (emphasis supplied)

Notice that there’s no mention of court supervision. No, this is a specific power granted trustees by statute, so the trustee can act on his or her own. That’s not to say that the court should never be involved. In fact, if the new trust contains provisions that might raise the hackles of one or more beneficiaries, the trustee would be wise to seek the court’s  blessing.

Now there are limitations to decanting, and it’s not something to do willy nilly. That said, if you’re a trustee or beneficiary of an irrevocable trust and if the old trust creaks and sways under the weight of today’s needs and demands, maybe it’s worth looking at decanting as a way to resolve those issues.

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