As we near the end of the third quarter of 2014 I ask myself, where has the year gone? It seems it was just yesterday that I was indolently celebrating the New Year. Now, I have come to realize that we are coming into the last few months of 2014, and with that, the holiday season is impending. Fearing that I may be perceived as one of those people who begins their Christmas countdown months too early, I am reluctant to say that Christmas is in fact around the corner, and the time to begin shopping for gifts is uncomfortably near. In the spirit of this gift-giving discussion, I wish to remind those of you who are benevolently inclined or who are looking to transfer assets free of gift tax that in addition to budgeting for the latest and greatest toys and gadgets for your young children and grandchildren (toys and gadgets that we only dreamed of as kids), you must also budget for your annual exclusion gifts.
Internal Revenue Code section 2503(b) provides in relevant part:
In 2014, the $10,000 figure above, which is indexed for inflation, increased to $14,000. Thus, in 2014 taxpayers can gift up to $14,000 per donee, and married couples can gift twice this amount, or $28,000. This can be a useful tool to transfer value out of ones estate free of gift taxes. And, if a taxpayer has many donees to which he or she is prone to make gifts, the annual exclusion can be especially effective. So again, for those of you who are altruistically disposed, before you get caught up in the holiday cheer and before the year-end comes and goes, be sure to budget you annual exclusion gifts.
In some unfortunate cases, a trustee of a trust may fail to follow the terms of the trust or may take actions inconsistent with their fiduciary duty as a trustee. Fortunately, Nevada law provides several remedies when a trustee beaches his or her fiduciary duty to the beneficiaries:
NRS 163.115 allows a beneficiary or co-trustee to maintain a court proceeding if a trustee (1) commits or (2) threatens to commit a breach of trust. The beneficiary or co-trustee can ask the court to apply the following remedies to correct or rectify any breach of trust:
These tools allow beneficiaries and co-trustee to request the court’s help to remedy any bad actions taken by existing trustees. The tools also provide peace-of-mind to clients who are creating new trusts or have existing trusts as the courts can take action against any future trustee who does not follow the terms of their trust. These laws and many other laws in the state of Nevada help protect you if your trusted trustee has gone bad.
Donald Sterling and the Los Angeles Clippers have been in and out of the news for several months now. There was some conclusion last week when Mrs. Shelly Sterling was successful in her attempt to take control of the Sterling Family Trust as sole Trustee. This opens the door to Mrs. Sterling being able complete the sale of the Los Angeles Clippers basketball franchise to Steve Ballmer. As an estate planning attorney it is a little bit exciting to have news relevant to our practice.
I obviously haven’t read the Sterling trust, but most trusts allow for a Trustee to be removed upon evidence of incapacity. Our trust’s standard incapacity language requires one doctor’s note regarding a Trustee’s physical or mental incapacity. In the case of the Sterling Family Trust, both Shelly and Donald must have both been Co-Trustees despite their separation. According to news stories that I’ve read, Mrs. Shelly Sterling obtained notes from Donald Sterling’s physician(s) that he was incapacitated and demonstrating symptoms of Alzheimer’s disease. After obtaining these doctors’ notes, Shelly took the position that she could serve as sole Trustee of the Family Trust and was therefore able to control the sale of the Clippers.
The question before the court was apparently whether Shelly Sterling was properly in place as the sole Trustee after obtaining the doctors’ notes. The judge found the doctors’ notes credible and the judge also found that Shelly Sterling was acting in good faith and that she was not secretly trying to take over control of the team and the family trust.
So what are we to learn from the Sterling situation? Well, in the context of estate planning, it may be worth reviewing your own trust and what the incapacity section requires for another person to take over as Trustee. There’s a delicate balance required. You want to allow a Successor or Co-Trustee to take control without too much effort and without great delay, but you also don’t want to make it so easy that someone can take control without determining that there is true incapacity. We usually discuss this incapacity clause with our clients and let them decide whether one doctor’s note is sufficient or if they want to require two doctors’ notes. An interesting alternative is to require a majority or unanimous decision of an “incapacity panel” made up of family members and perhaps a primary physician. This allows some discretion by the panel (usually made up of family members) to remove a Trustee without the formality of a doctor’s note and this could also allow for easy reinstatement of a Trustee if there was only temporary incapacity.
According to a recent news article, the vast majority of the recent population growth in Clark County, Nevada, is from an influx of baby boomers relocating from different states. This trend is expected to continue as baby boomers reach retirement. A baby boomer is commonly defined as a person born during the post World War Two baby boom period of 1946 to 1964. Most baby boomers have established estate plans consisting of revocable trusts, last wills and testaments, powers of attorney and living wills. The potential problem is that these documents were prepared pursuant to the state law where they were residing at the time. State law governing these type of documents can vary substantially. For example, Nevada is a community property state, one of only nine (9) community states in the nation. A person can also incorporate certain Nevada trustee powers in his or her revocable trust by reference. However, almost all revocable trust agreements provide that the law of the state in which the person establishing the trust is residing at the time of the establishment of the trust controls the administration of the trust.
Another potential problem is powers of attorneys and living wills that have been prepared to conform to non-Nevada law. A health care power of attorney in which you appoint someone to make healthcare decisions for you and set forth a statement of desires regarding your health care, is particularly sensitive to state law. The same is true for a living will that states your intentions regarding life-sustaining treatment such as hydration and nutrition when you have an incurable or terminal condition. (In fact, a living will is called a “Directive To Physicians” in Nevada.) Some states are very liberal regarding your health care options and some states are very conservative. If you have a health care power of attorney and a living will that was prepared in conformity with say, Michigan law or some other non-Nevada state law, a Nevada health care provider may not accept them. Needless to say, this can have very serious ramifications for you and your family.
The answer is a simple estate plan check-up. The Jeffrey Burr Law office provides a free one-half hour consultation during which an estate planning attorney can review your current estate plan documents. All estate planning attorneys at the Jeffrey Burr Law office are certified public accountants or hold advanced degrees in taxation. Although a periodic estate plan check-up is always a good idea because of changes in circumstances or changes in Nevada or federal law, an estate plan check-up is especially important to someone moving to Nevada.
The other day I was meeting with a client who stated – “I have a silly question, but I need to ask it. Can I provide for my dog in my estate plan?” I explained to this client that this question is one that is often asked by many clients with pets. And why shouldn’t it be asked when most pet owners view their pets as members of their family and as such want to ensure that their faithful companions’ needs are met if the owner does in fact pass away before the pet.
The answer to my client’s question is that she can provide for her dog through her estate plan. Nevada law provides that a person can create what is more commonly known as a “pet trust” (see NRS 163.0075). In order for a person to create a pet trust, the pet owner will need to decide how the trust will be funded, who will be the trustee, and who will be the caretaker of the pet. In addition, the pet owner will need to provide direction as to how the trustee or caretaker will manage the pet and the funds for the benefit of the pet. It may be helpful to provide specific instructions in the trust agreement as to the pet’s specific needs such as a certain brand of food to be fed to the pet or a particular veterinarian to be consulted for the pet’s care.
The benefit of creating a pet trust is that the trust is enforceable by law thereby providing pet owners with peace of mind knowing their pets will be cared for according to their instructions. If you should have any further questions regarding pet trusts, please feel free to contact the law office of JEFFREY BURR at (702) 433-4455 for a free half-hour consultation.
I often get asked if there is a minimum estate value before estate planning is required. The term estate planning is often associated with planning to minimize estate taxes and to plan to pass large amounts of wealth to future generations. Although sometimes this is the case, with the recent changes in estate tax laws most clients do not require estate tax planning and most clients are not passing large amounts to future generations. The typical family has a house, a modest savings and maybe some life insurance. Estate planning is not just for the wealthy, everyone should have some type of estate plan regardless of the size of the estate.
For the majority of our clients, estate planning focuses on two goals: The first goal is protect the client and their family in the case of incapacity. When someone in the family becomes incapacitated, whether through an accident or through a disease such as dementia, it is essential to have legal documents in place that provide a mechanism for another person to be able to step into the shoes of the incapacitated person and have the legal authority to make both health care and financial decisions for that person (someone to pay the bills and make medical decisions). In the absence of these legal documents, the family may be required to spend thousands of dollars to obtain a court-appointed guardian over the incapacitated person to accomplish these same tasks. Guardianship proceedings are not only expensive but are supervised by the court and require constant court supervision and annual accountings. Guardianship can usually be avoided by preparing simple power of attorney documents prior to incapacity.
The second goal of estate planning is to provide for a distribution of the clients assets to their desired beneficiaries in the event of their passing. Often times this entails a plan to delay a full distribution to children until they reach a mature age or to protect the children from creditors or divorce. Another major part of an estate distribution is to avoid having to go to probate court. Like a guardianship proceeding, a probate proceeding is very costly and time consuming because every step of the process is supervised by the court. With careful planning by an estate planning attorney, assets can be distributed to beneficiaries in a manner that will both protect the beneficiaries (sometimes from themselves) and avoid the high costs of probate.
Returning to the original questions of how big an estate must be before estate planning is required? Estate planning is not just for the wealthy; every person should have some estate planning documents. Each client has a unique estate and a diverse family makeup. Should you have any questions as to whether you or your family are in need of estate planning, feel free to call our office for a free half-hour consultation.
Attorney – Corey J. Schmutz
Under Nevada law, a transfer of property under a Will, or any such transfer, that is the product of undue influence will be deemed void. In voiding such transfers, Nevada desires to protect alleged donors who lack the “mental vigor” to protect themselves from imposition or exploitation.
Undue influence can occur at many different levels and in many different circumstances. In fact, in some instances Nevada law presumes undue influence exists. For instance, a presumption of undue influence arises when a transfer is made to a person who is in a “fiduciary relationship” with the donor. In situations such as these, when the presumption is raised, the fiduciary-beneficiary must rebut the presumption by clear and convincing evidence.
As an aside, there are three (3) primary evidentiary burdens under the law, which can be ranked in a hierarchy from easiest to satisfy to most difficult to satisfy. Beginning with the easiest to satisfy, we have the “preponderance of the evidence” standard. Next is the “clear and convincing evidence” standard. And finally we have the “beyond a reasonable doubt” standard, which is the most difficult evidentiary burden to satisfy and is typically only applicable in criminal cases.
Thus, as noted above, when there is a fiduciary relationship between the donor and the beneficiary, the beneficiary must prove by clear and convincing evidence – a standard that is not as lax as the preponderance of the evidence standard but not as strict as the beyond a reasonable doubt standard – that the transfer was not the product of undue influence.
However, there are other situations in which undue influence can be shown. In these situations (where no fiduciary relationship exists), Nevada law was not clear as to the evidentiary burden needed to prove undue influence. This was the case until November of 2013 when the Supreme Court of Nevada issued its ruling in In re Estate of Bethuremwherein the Court held that a Will contestant must establish the existence of undue influence by a preponderance of the evidence. To satisfy this standard, a Will contestant need only show that the transfer of property under the Will was “more likely than not” the result of undue influence. The effect of this ruling is that it essentially makes it easier for Will contestants to establish undue influence, and it affords greater protection to those mentally weak donors who may be subject to imposition or exploitation.
An attorney cannot reveal information relating to the representation of a client unless the client gives informed consent or the disclosure is impliedly authorized in order to carry out the representation of the client. This duty of non-disclosure is often referred to as the attorney-client privilege. But what happens to this privilege when the client dies? For example, an attorney assists a client in his or her estate planning, specifically the preparation and execution of the client’s revocable trust agreement, last will and testament and related estate planning documents. During the course of the representation, disclosures are made by the client to the attorney regarding the assets and liabilities of the client, the family dynamics, and the intent of the client. Does the confidentiality of this information survive the death of the client and continue on? The short answer is yes, with certain exceptions.
The general rule in Nevada is that the attorney-client privilege survives the death of a client. However, the personal representative of the estate of the deceased client is entitled to any information from the attorney as a matter of necessity since the personal representative is charged with duties that include the carrying out the terms of the last will and testament, preserving and safeguarding the assets of the estate, and filing a written inventory of the estate assets. Essentially, the personal representative steps into the shoes of the deceased client. The attorney-client privilege passes to the personal representative of the estate of the deceased client and can be asserted by the personal representative.
The attorney-client privilege also passes to the successor trustee of the revocable trust of the deceased client and can be asserted by the successor trustee. The successor trustee is again entitled to any information from the attorney as a matter of necessity. Also under Nevada law, a beneficiary of a trust is entitled to a copy of the relevant portions of a trust agreement regarding his or her bequest in most cases.
One very common exception is when the validity of the terms of the last will and testament or of a revocable trust is challenged. For example, a party brings an action alleging that the last will and testament or the revocable trust is invalid because the decedent was unduly influenced in the making of the will or trust. There is no privilege as to a communication relevant to an issue between parties who claim through the same deceased client. A related exception is that there is no privilege as to a communication relevant to an issue concerning an attested document such as a last will and testament to which the attorney is an attesting witness. These exceptions are practical necessities to enable a party to establish the validity or invalidity of a will or trust of a decedent.
In summary, an estate planning client can rest assured that information furnished to an attorney remains confidential after his or her death with certain, practical exceptions.
It is hard to believe that we are already at the end of 2013. It has been an exciting year for estate planning. In the first week of 2013, congress passed new legislation making the estate laws tax permanent. In many cases, the new laws have allowed for many families to simplify their estate plan.
As the year comes to a close, it is a good time to complete a quick tune-up of your estate plan to make sure you are ready for the New Year. Here is a short tune-up list to cover some of the basics:
We hope that each of you have a happy New Year!
Corey J. Schmutz, Esq.
The main component of the estate plan for most people is a revocable living trust that they establish during their lifetime. When you create a revocable living trust, you can only plan for the present and for the near foreseeable future. However, an unanticipated change in circumstances in your life may necessitate the amending of your revocable living trust. Simple examples are when you wish to change the successor trustee or provide for a specific bequest to a new beneficiary or change the amount of a monetary bequest going to a beneficiary. In these situations, how do you amend the trust?
First of all, oral changes to a trust agreement will never be legally enforceable (i.e. trustor tells someone that his car should go to a child or grandchild.) The reason for the unenforceability of oral amendments is that once the trustor is deceased, he or she is not there to verify (or deny) the purported oral amendment. If this was not the rule, anyone could allege that the trustor orally changed the trust before he or she died, and there would be no way to prove or disprove this.
In order to determine how to properly amend your trust, the provisions of the revocable living trust agreement must be closely examined. The agreement will specifically state how the trust can be amended. Oftentimes the trust agreement will provide that any amendment to the trust must be in writing, dated, signed by the trustor and delivered to the trustee. It is essential that the terms of the trust regarding amendment be strictly adhered to. Even when amendments are made in writing, there can be problems. People will sometimes attempt to amend their trust by marking out some provision and handwriting something in its place. They may even date and initial the change. However, if the trust agreement requires that the amendment be signed by the trustor and it is not re-signed, the amendment fails to satisfy the amendment conditions as set forth in the trust agreement. This, of course, can have serious ramifications, including the possible failure of the trustor’s intentions being carried out once he or she has died. The successor trustee or an interested party could petition the court to take jurisdiction of the trust and determine what the intent of the now deceased trustor was. This seems to be a failure, however, since one of the main advantages of a revocable living trust is to avoid court involvement and the accompanying costs and fees. Also the court may construe the trust contrary to what the true intent of the deceased trustor really was.
Accordingly, it is best to always consult a qualified estate planning attorney such as those at the Law Offices of JEFFREY BURR to assist you in the proper amendment of your trust.
"*" indicates required fields