Warren Buffet Instructs Fiduciaries To Retain Berkshire Stock

Warren Buffet, the CEO of Berkshire Hathaway, is worth $82.2 billion. His estate plan provides for his children in a manner consistent with his philosophy: Leave your children enough to do anything, but not enough to do nothing. The bulk of his fortune will go to charity when he dies. The 89-year-old has already given $34 billion to the Melinda and Bill Gates Foundation. 


Ninety-nine percent of Buffet's wealth is in Berkshire stock. In the just-released 2020 annual report, he directs his trustees and executors to retain the stock, and to ignore their fiduciary responsibility to diversify investments. He writes: "Today, my will specifically directs its executors - as well as the trustees who will succeed them in administering my estate after the will is closed - not to sell any Berkshire shares... My will also absolves both the executors and the trustees from liability for maintaining what obviously will be an extreme concentration of assets."
  

Even with today's plunging stock market, it's reasonable to assume that Berkshire will rebound and return to its stellar historical performance. It has quite a track record: From 1965 to 2019, the S+P overall return was 19,784%. That looks positively shabby compared to Berkshire's return for the same period: 2,744,062%. Buffet's beneficiaries are unlikely to complain so long as the stock does well. But if Berkshire stock declines significantly after his death, beneficiaries may not care that Buffet let his fiduciaries off the hook, and may go ahead and sue anyway. 


A Feb. 29 New York Times article ("Is An Investment Sage's Estate Plan Imprudent?") draws parallels between Buffet and the late Charles Dumont, whose fortune was entirely in Kodak stock. Like Buffet, Dumont directed his trustees to retain Kodak, saying his trustees were not to be held responsible for any decline in value. And decline it did, dramatically, for the half-century it was held in trust. The trustee was taken to court for violation of fiduciary duty, and in 2004 the New York Surrogate Court found the trustee personally liable for $21 million in losses. (Luckily for the trustee, an appeals court later reversed the ruling.)


The takeaway here is this: whether you are a personal representative and trustee for a zillionaire or for a person of ordinary means, you must be mindful of all your fiduciary duties, including the duty to diversify. For a list of all that is required of you, click here. 

Jeffrey Epstein: Heinous Life, Estate Planning Lessons From His Death

This is not the forum to discuss the lurid details of the Jeffrey Epstein case. Others are doing a thorough job of that. However, there is one aspect of the saga with direct relevance to our readers: how trusts can be a boon to those who value their privacy.

You know the basic facts from the headlines: Epstein signed a will and a trust on August 2, just two days before he reportedly committed suicide in his Manhattan jail cell. The will was filed in the U.S. Virgin Islands, where Epstein had an estate. The will designates his trust - called the 1953 Trust in recognition of his birth year - as the recipient of all his assets. 

Other than that, we don't know much. And that appears to be the goal of the plan.

A will is public record. A trust is not, which means it has a higher level of protection from public scrutiny. Think about it: Despite the public furor and fascination with this story, despite reporters poking around in all corners of Epstein's life and death, we still don't know what his trust says. We don't know if all, some, or none of his assets, estimated at around $577 million, were transferred into the trust by the time of his death. We don't know who the trustees are. We don't know who the beneficiaries are. What we DO know is that the existence of the trust, a private document, will likely make it more difficult for his accusers to discover where Epstein's assets are and to collect on their civil cases. It could take years for the cases to work their way through the courts.

The average person's life and fortune are nothing like Epstein's was.  Still, there are a variety of legitimate reasons many of us value our privacy as much as Epstein valued his. Perhaps you just do not want anyone poking around in your family's affairs, learning who got what. Maybe you are cutting out an heir and don't want to make it too easy for that person to track down your dispositions. Maybe you don't want to leave a trail of legal breadcrumbs that could lead scam artists - never ones to let a little thing like death stand in the way of a good scheme - to target your beneficiaries. 

Epstein's life was nothing to admire, but in death he has provided us with a valuable estate planning lesson: If you are concerned about privacy, a living trust may be a good strategy for you. Talk it over with your estate planning lawyer. 

You can read Epstein's will here.

Rocker Tom Petty's Estate Plan Is Free-Fallin'

It is always wise to seek experienced legal guidance when you are setting up your estate plan. Wording you may think is obvious may not be as clear to others as it is to you. Any ambiguity in your plan can create chaos for family members. For the family of late musician/songwriter Tom Petty, an ambiguous phrase has created a legal quagmire that can be described by the title of one of his hits: it's Free-Fallin'.


A Rock n' Roll Hall of Fame inductee, Petty died from an accidental drug overdose in 2017. He left behind a wife, Dana, and two daughters from his prior marriage, Adria and Kim. He also left behind a music catalog worth millions. In his trust, Petty instructs Dana to create a limited liability corporation to hold his musical properties. However, the wording is unclear as to how and to what extent he wished his wife and daughters to manage it. The trust states:  


"With respect to the creation of the Artistic Property Entity, the Trustee is directed to create the governing documents of the Artistic Property Entity such that those of the Spouse, ADRIA and KIM who are living at the time of creation of the Artistic Property Entity shall be entitled to participate equally in the management of the Artistic Property Entity, even though their respective economic interests in the Artistic Property Entity are not equal."


At issue is the phrase, "participate equally in the management..." Precisely what does it mean? Petty's widow and children are interpreting it differently, to their own respective advantage. For Adria and Kim, equal participation means they get 2 of the 3 LLC's management votes, thus giving them control over the LLC and the ability to outvote their stepmother. In a lawsuit they allege that their stepmother is resisting their rightful attempts to manage the posthumous release of their father's work. According to an article in Billboard, the sisters want to be actively involved in "marketing, promotional and artistic considerations." Their lawsuit claims that their stepmother has failed to transfer their father's musical property into the LLC, and demands that she do so immediately. 


Petty's widow does not see it that way. She has filed her own lawsuit. She alleges that a more accurate reading of the trust suggests that her late husband wanted her and his daughters to make decisions unanimously. Obviously that interpretation is favorable to Dana, because it would prevent her decisions from being overruled by her stepdaughters. In her lawsuit she states that her stepdaughters, particularly Kim, have "demonstrated their resentment over their father's love of Petitioner and her role in his life." Dana has requested that a manager be appointed to oversee "significant decisions" on the estate, and notes that Adria's erratic behavior, which includes sending threatening emails to the members of Petty's band and blocking the release of recordings, has jeopardized her business dealings.


A hearing has been set for both motions on June 11. The ruling could mark the end of this dispute, but that is unlikely. The situation is a volatile mix involving a vitally important but ambiguous phrase in Petty's estate plan; a stepmother; children from a prior marriage; and lots of money. Chances are the parties won't be playing in harmony anytime soon.

Living Trust Basics

The living trust, also known as the intervivos trust or revocable trust, is a useful and popular estate planning tool in Florida, and rightly so. In this post I tell you about key advantages of this versatile legal instrument. I'll also tell you about some common misconceptions.

The Advantages

Advantage: Avoid probate

In Florida, probate can be a long, drawn-out process, incurring both legal fees and court fees. If your personal representative (executor) is not local, it becomes an even bigger hassle. Some probates can take months, but others can literally take years. A living trust can streamline the process, allowing your heirs to receive their distributions more quickly.

Advantage: Avoid 2nd probate for out-of-state property

If you own real estate in another state, titling that property in the name of your living trust will eliminate the need for a secondary probate in that state.

Advantage: Privacy 

If you pass away and have a will, the will must be filed with the probate court. If you have left no valid death instrument - no will or no trust - a probate will still have to be opened up for your estate. As soon as your estate is in probate, it becomes public record, meaning anyone can examine the details of your estate plan. And that makes it easier for anyone unhappy with your plan -  a disgruntled, estranged child, for example - to launch a legal challenge. Fighting that challenge will cost your estate, leaving less money for your heirs.

Advantage: Greater control over distributions

You may not want certain heirs to get their inheritances in one lump sum. With a living trust, you can place certain controls and conditions on your heirs' inheritance. For example, you may want a younger beneficiary to get his/her distribution upon attaining a certain age, or a spendthrift beneficiary to receive only a limited amount of money in staggered distributions. Another way to exert this control is to have your estate pass under your will, go through probate, and leave the inheritance in a trust known as a testamentary trust under your last will and testament. Obviously, using a living trust is a more straightforward method to accomplish your goal. 

Advantage: Financial institutions more likely to honor your trust than your power of attorney

Your durable power of attorney authorizes someone to manage your financial affairs. In Florida, there is no one statutory power of attorney form. The document is only required to meet certain basic legal requirements, and financial institutions can be extremely picky about the document. It is not uncommon for an attorney-in-fact trying to do business for an incapacitated loved one to be turned away by a bank or brokerage because the power of attorney doesn't meet that institution's specific, unique requirements. If you have a living trust, the equation changes. Financial institutions are unlikely to reject the successor trustee your trust authorizes to handle your finances. 

Advantage: Retain full control until incapacity

In Florida, you may not create a "springing" power of attorney. That means that the person you designate as your agent under your power of attorney has immediate authority to act on your behalf, even if you are not incapacitated. This does not prevent you from acting, but it gives your agent legal authority equal to yours. 

Usually, with a married couple, that is not a problem. But many people are uncomfortable giving someone other than the spouse the authority to handle their affairs while they are still competent. With a living trust, you can be the sole trustee, and your successor trustee can take over for you only after documenting your incapacity. (Spouses usually designate one another as co-trustees, so both have equal authority to act. A third party, usually a child, is designated to take over when neither husband or wife can handle the finances.) 

The Misconceptions

Misconception: Creditor protection

As noted above, a living trust has many virtues. However, putting assets into your living trust does not protect them from creditors. 

Misconception: Living trust assets are not considered when applying for Medicaid benefits for long-term care

An asset in your living trust is available to you, and therefore is considered a countable asset if you apply for Medicaid for long-term care. Only an irrevocable trust can remove assets from consideration by Medicaid.

Misconception: Trustees have to be paid 

Successor trustees can be paid a fee, but if you are like most people, you will probably name a family member to serve as your successor trustee. Most family members decline to receive fees. If you do name a professional, third-party to serve as successor trustee, naturally there will be a fee for services. If you have a good reason to want a third-party successor trustee - for example, you have children who can't get along - those fees are money well spent for your peace of mind.

Misconception: You lose control over your assets

No! You can buy assets, sell assets, and do anything you would normally do.

Misconception: It's costly to set up and a hassle to maintain

You will have to re-title your assets in the name of your trust, but for most people this is not a big deal. (Note: some assets, such as IRAs, should not be placed in your trust. Your estate planning attorney will advise you about this.) You don't have to get any special tax numbers; you will file your taxes as you always have. And although the initial cost to set up a living trust exceeds the cost of setting up a will, it saves money at the back end in legal and administrative fees.

Misconception: Any lawyer can set up a living trust

Wrong. This is a complex instrument, and the devil is in the details. Since your trust will speak for you after you are gone, there can be no ambiguity. Every "t" must be crossed and "i" dotted! Beware trust mills, non-lawyers doing estate planning, online or preprinted forms, and attorneys not experienced in estate planning. Relying on an experienced estate planning attorney can give you the assurance that you and your family will get the protections you seek.

Check out my website for more on living trusts.

When the trustee and beneficiaries are siblings, everyone needs to know the ground rules to stay on good terms!

Consider this scenario: A parent passes away and one of the decedent's children, a beneficiary of the trust, takes over because he was named trustee of the parent's trust. His siblings are also beneficiaries. Since no one in the family is familiar with the legal and financial technicalities of trust administration, this is uncharted territory for everyone. And buried in that new territory? Land mines that can imperil the bonds between siblings, even those who have gotten along well until now.

Beneficiaries may begin to wonder just what the trustee is doing, what to expect, and of course, when they'll see their money. And because the trustee is "just" a sister or brother, beneficiaries may be inclined to inquire excessively or make outsize demands. On the other side, the trustee/beneficiary may be caught up in the nuts and bolts of handling the trust, and consider his siblings' requests as intrusive or an insinuation that he is not trustworthy. Resentment can build on both sides. In the worst-case scenario, one or more beneficiaries may even resort to a lawsuit in order to have the trustee removed. Most families never recover from this kind of rift. I have seen it happen.

Fortunately, an incendiary situation like this can usually be avoided if all family members understand, in advance, the legal rights and obligations of beneficiaries and trustees. It can help a great deal when the trustee retains an attorney experienced with trust administration. But even if the trustee feels he can handle it and goes it alone, families that want to remain on good terms are well-advised to become familiar with the fundamental ground rules of trust administration.

What are the ground rules?    

• First, the trustee is legally obligated to keep beneficiaries informed. Timely and effective communication goes a long way to neutralizing doubts and misunderstandings. Good communication begins with the trustee alerting beneficiaries that trust administration has commenced. The trustee must also provide all beneficiaries with a copy of the trust and any amendments, as well as a complete list of trust assets. I strongly recommend that all beneficiaries carefully read each of these items. 

• Beneficiaries are entitled to a full accounting of the trust's transactions on an annual basis, although a trustee may do so more often if he/she wishes. The annual accounting must show all trust transactions: expenses of the trust, and all income and growth of trust assets. Note that a federal tax return is not a substitute for the annual accounting, since the return does not provide all the information to which beneficiaries are entitled.  

• The trustee must never co-mingle trust assets with his own assets. Even if a trustee has no intent to defraud, it gives the appearance of impropriety. A trustee can be no less vigilant about this just because the decedent was a parent and co-beneficiaries are siblings. Trust assets require their own checking accounts, brokerage accounts, even their own safety deposit boxes. Keep a clean paper trail. 

• Beneficiaries should respect the fact that the trustee is legally bound to carry out the terms and provisions of the trust, which are the wishes of the deceased parent. The trustee cannot and should not make exceptions simply because his co-beneficiaries are siblings. If you are a beneficiary with financial problems asking your trustee sibling for a loan from trust funds, expect to be refused (unless the terms of the trust provide for it). Chances are you have put your trustee sibling in a very uncomfortable position. In refusing, your sibling has made the right decision. Don't resent a sibling trustee for honoring his/her legal obligations.
  

• A trustee must not sell assets to the trust or buy assets from the trust. Conflicts of interest must be avoided. For example, we had a case recently where a beneficiary complained that her sister, the trustee of their late father's estate, had sold the father's car to her own daughter for less than fair market value. (This conceivably could be done, but only if all the beneficiaries agreed to it, in advance.) 

• A trustee must never "borrow" funds from the trust for his/her own use, even with the intention of paying back the money. A trustee who is a beneficiary may not favor himself/herself over the other beneficiaries.

• Beneficiaries must realize that the trustee can, at his/her own discretion, use trust funds to hire professionals to help with administering the trust. Professionals may include bookkeepers, accountants, attorneys, etc. Depending on the provisions of the trust, the trustee may be entitled to reasonable compensation. Most family members serve gratis, but there can be exceptions.

The above are by no means all of a trustee's duties, but just an overview of the most important ones related to trustee-beneficiary communications. Again, I urge all beneficiaries, not just the trustee, to read and understand the trust instrument. Knowing everyone's rights and obligations will help preserve family harmony.  Also, while trust administration does not require the services of an attorney as probate does, it is often prudent for the trustee to use the services of a trust administration lawyer. This lets the beneficiaries know that the trustee is getting solid legal advice, and diminishes the chances of a sibling  accusing the trustee of being unfair, arbitrary, etc.

Florida digital assets law: update

I discussed estate planning for digital assets in November 2014, noting the obstacles fiduciaries often confront when trying to access a disabled or deceased person's digital assets. Because of  federal privacy laws and a hodgepodge of digital companies' own terms of service, getting access to such assets can be frustrating, and often, futile. 

Digital assets include on-line bank accounts and brokerage accounts, Ebay stores, domain names, etc. They also include accounts that may not have actual monetary value, such as an online photo book or email account. An American Bar Association article on this issue published this month notes that 168 million emails are sent, 695,000 Facebook status updates are posted, 100 people join LinkedIn, 320 new Twitter accounts are created, 600 digital videos are added to YouTube, and 6,600 photos are added to Flickr - every second.

The gap between today's digital reality and today's laws are clearly demonstrated by Bill and Kristi Anderson's experience, which I mentioned in my November post. Their son Jake, a Minnesota college student, was found dead of hypothermia after leaving a party in 2013. His parents, trying desperately to understand the circumstances of their son's death, have been trying since that time to access his phone records. They have had no success, even though his phone was in their name. The Andersons recently appeared before Minnesota lawmakers to argue their case. You can read their story here. 

In our state, the Florida Bar Real Property, Probate and Trust Law Section is currently taking steps to make Florida the first state to adopt the most recent version of the National Uniform Fiduciary Access to Digital Assets Act. Adopting the act would give fiduciaries in Florida the same access to digital assets as they have to physical assets. J. Eric Virgil, the head of the Digital Assets committee, calls the current situation "chaos," adding, “We’re not changing any property laws at all, only giving access to fiduciaries. We’re not trying to do anything to how people own their digital assets, just how people access those digital assets.” You can read more about the proposed legislation here.

In the meantime, the best you can do is make a list of your digital assets, logins and passwords, put it in a safe place, and let your trustee, personal representative and/or agent under your durable power of attorney know where it is. Keep checking this blog for updates on the progress of the proposed legislation.  

James Brown's complicated life led to complicated estate problems

He was the Godfather of Soul, the Founding Father of Funk. James Brown had fortune, fame, frequent run-ins with the law, and a family life  more convoluted than most. So perhaps it's not surprising that the late entertainer's estate problems have been every bit as complicated and torturous as his life.

When Brown died he was married - maybe - to his back-up singer Tomi Rae Hynie. He had filed previously for annulment of the marriage, claiming Hynie was still married to another man when she tied the knot with Brown. However, Brown dropped the action when Hynie signed a form stating she would never claim to be his common-law wife. She also signed a prenuptial agreement waiving all rights to his estate. Brown had other marriages in his past, too, several of which produced the six children he recognized. 

Update Jan. 23, 2015: A South Carolina judge has ruled that Brown and Hynie were married at the time of Brown's death, making her his legal heir. However, that does not necessarily mean she will inherit any of the estate, since she waived her rights in a pre-nupital agreement.

Prior to marrying Tomi Rae and the birth of their son, James II, Brown executed a will. Signed on August 1, 2000, it earmarked the bulk of his estate -- estimates of its value vary from $5 million to nearly $90 million - to be placed in a trust to fund education for needy children. (Brown himself had not made it past seventh grade.) He left $2 million to his grandchildren, to be used for their education, and left his personal property to be divided among his six children. There was no mention of Tomi Rae. He appointed as his executors (called personal representatives in Florida) his attorney, his accountant, and a retired judge. Brown also left an audiotape explaining his wishes. 

Brown, a South Carolina resident, died in 2006 from congestive heart failure, and a flurry of lawsuits followed soon after. Tomi Rae claimed that she was James' widow, and that she and her son were entitled to some of the estate assets. Other children sued the estate for a bigger piece of the pie, claiming that the singer's judgment was hampered by drug use and that he had been unduly influenced by the executors, who were mismanaging funds. 

By 2008 the legal situation was so out of hand that South Carolina's Attorney General stepped in, saying it was his office's duty to protect charitable trusts like the one that Brown's estate plan sought to establish. The Attorney General formulated a plan to distribute the assets as follows: half to the charitable trust; one quarter to Hymie; and one quarter to Brown's children. A new executor was appointed, too.

The morass dragged on and in 2013 the Attorney General's plan was struck down by the South Carolina Supreme Court, ruling that the Attorney General had overstepped his legal authority, and that there was no evidence to support the conclusion that the will was anything but a true expression of Brown's wishes. The Attorney General's actions would "undermine any confidence citizens may have in their ability to do with their personal assets as they wish..." the court concluded. The court also questioned the ethics of the original three executors, but did not find that sufficient reason to invalidate the will.

So what did the Supreme Court decision resolve? To date, not much. More lawsuits are pending. The lower court has not yet complied with the State Supreme Court's ruling to appoint new executors. Several children want the Attorney General's prior plan reinstated. Even Brown's body is in limbo, temporarily located at a mausoleum on the property of one of his children. It had been his wish to be interred at his home on Beech Island in South Carolina, which his adult children want to turn into a tourist attraction. But until the estate is settled, Brown's body remains where it is. The estate is continuing to make money from the singer's music, but the only ones benefiting from the debacle are, you guessed it, the lawyers.

Although there is no way to make anyone's estate 100% lawsuit-proof, there are additional steps that Brown, given his unique situation, could have taken. Had he been my client, I would have advised him to revise his will after his marriage to Hynie and after the birth of his son. Mindful of his history of drug use, I would have counseled him to have his capacity confirmed by a mental health professional just before the execution of his will.

Thankfully, most of us lead lives far more conventional than Brown's. Most of us don't leave millions behind, either. Still, with today's divorces, remarriages and blended families, creating a sound estate plan that avoids legal challenges requires thoughtful planning. When it comes to matters involving family and money - in any amount - one must always be mindful of Murphy's Law, to wit, if anything can go wrong, it probably will. That is why it is essential for your estate plan to have every i dotted, every t crossed. Your estate plan must speak for you, unambiguously, when you can no longer speak for yourself.

Take HIPAA seriously - your doctors do

Just how serious is the medical community about HIPAA, the Health Insurance Portability and Accountability Act? According to an article in The New York Times of August 10, privacy concerns are responsible for the increasing disappearance of the traditional baby photos from obstetricians' offices. The article states: "Baby photos are a type of protected health information, no less than a medical chart, birth date or Social Security number... Even if a parent sends in the photo, it is considered private unless the parent also sends written authorization for its posting, which almost no one does." Read the  article in its entirety here. 

HIPAA is not just about babies, though. As a patient, you should take HIPAA as seriously as your health care providers do, and incorporate it into your legal planning. Here are some tips: 

Durable Power of Attorney: A HIPAA release must be part of your durable power of attorney if it is a "springing" power. That will enable your agent to obtain proof of your incapacity from your health care providers, so that he/she can manage your affairs. (NOTE: The Florida Power of Attorney Law changed on Oct. 1, 2011. A Springing Power of Attorney executed before that date continues to be honored. However, for documents signed on and after Oct. 1, 2011, only the Immediate Power of Attorney is valid in Florida.) 

Revocable Trust: Most revocable trusts also require medical certification of your incapacity in order for your successor trustee to take over your affairs for you. Therefore, a HIPAA release should also be part of this document. 

Health Care Power of Attorney: While this document enables one or more people to make your medical decisions if you cannot, it does not automatically approve the release of all privileged health care information to that individual(s). Therefore, your health care power of attorney should also include a HIPAA release. The release may be incorporated into the document, or included in a separate document. In my experience, Many Floridians are relying on old, pre-HIPAA documents, unaware of how their families may be impacted by the change in the law.

Our Certified Elder Law/Estate Planning attorneys can review your documents for HIPPA compliance and make sure you and your family are protected. Contact us here. 

Don't let your estate plan turn out like a National Enquirer story!

Families can be torn apart by conflicts over inheritances. Stepfamilies are particularly vulnerable to estate battles, but even blood relatives can be... well, out for blood. In the Pope family,   mother and son have been at each others' throats for nearly two decades.

The name Pope probably rings a bell if you live in South Florida, for it was here that Generoso Pope Jr. ran the National Enquirer tabloid. When Pope died 1988, the paper was sold for in excess of $400 million. That's was ground zero for the estate battle.

As reported in Forbes by Danielle and Andres Mayoras, Pope's estate plan appointed his widow, Lois, as co-trustee of a marital trust. His estate plan provided for the income of the trust to go to her, and for the remainder to be distributed to the couple's four children following her death.

One of the children, Paul, who like his siblings received $20 million upon his father's death, has reportedly been pressuring his mother to give him millions more since his father's death. The tug-of-war between mother and son has led to a series of lawsuits and over-the-top recriminations. In 2006 Lois sued her son for reneging on a a promissory note to her. Paul counter-sued, alleging the trust was being mismanaged in order to generate maximum income for his mother's lavish lifestyle, rather than focusing on growth of the principal which, of course, he and his siblings are to eventually inherit. He has also alleged that not all his father's assets have been placed in the trust and that some assets are being hidden in offshore accounts, among other places. Paul told the New York Post in May of this year: “It is time for the people that were in charge of my father’s estate...to disclose all of the assets, not just the ones they reported. I can’t believe the only assets my father had were the company and his home. It just doesn’t add up.”

The conflict became so intense at one point that Lois Pope had her son arrested, claiming he was stalking her. The restraining order said: "Paul Pope's cruel behavior is causing Lois Pope to suffer substantial emotional distress and to genuinely fear for her safety." Not to be outdone, Paul alleged that in an effort to intimidate him, his mother took out kidnapping insurance on his children. She said she purchased the insurance only at Paul's request. 

The saga rises to National Enquirer standards of sensationalism and scandal. Yet as removed as the story seems from most people's lives, it offers some universal truths that anyone structuring his/her estate plan would do well to consider: Regardless of how modest your funds, be wary about putting one family member in charge of another family member's money. Even if a person is the logical choice for trustee and seemingly does everything properly, it is usually a combustible situation. Residual beneficiaries can end up feeling wronged or even worse, suing. So choose your trustees wisely when planning your estate. Taxes and other considerations are important, but avoiding family discord is really job one. An experienced Florida estate planning lawyer will help you thoroughly analyze your family situation and finances, help you maintain objectivity, and recommend choices that are most likely to promote family harmony when you are gone, as well as during your lifetime if you become disabled.

Your child with autism: Legal planning to secure his future

April is National Autism Awareness month.  A 2011-2012 survey by the Centers for Disease Control estimates that 1 in 50 schoolchildren falls somewhere on the spectrum. If your child is affected with autism and is unlikely to be able to manage his own finances and affairs when he reaches adulthood, you should seek the advice of an experienced elder law attorney. Your elder law attorney - ignore the word "elder" for a moment - will help you set up the financial and legal framework that will secure your child's future and give you, his siblings and the rest of the family peace of mind.

The core of that legal framework is a Special Needs Trust. Here's how it works: You place property (cash, stocks, bonds, real estate, etc.) in the trust. A trustee you select will manage the trust for the benefit of the child. The child can have no ownership interest in the assets. The trust can be funded during your lifetime, or at your death. Because the money is held in the trust, not directly in your child's name, the funds will not be used by the government when it asses your child's eligibility for benefits, such as Medicaid or SSI. The trust provisions must state that the money is to be spent only for supplemental services and items, NOT on services and items provided by government benefits. For example, trust funds could be used to provide your child with a personal attendant, specialized home furnishings or equipment, supplemental therapies, transportation, etc.

Grandparents and other family members may also contribute to the trust, and you should make it clear to well-meaning relatives that contributing to the trust is the ONLY way to assist financially, since giving money directly to the child could jeopardize his government benefits.

Some parents create the special needs trust prior to their own demise, and prior to their child attaining the age of majority, naming themselves as trustees and selecting one or more of the child's siblings to serve as successor trustee(s) of the trust. Setting up the trust in advance thus gives grandparents and other family members a place to park funds for the child's benefit now or upon their own death. Frequently grandparents would like to have the ability to leave funds to a special needs grandchild, but if there is no special needs trust in place, they will simply "cut out" that grandchild.

If the trust is properly drafted and administered, the state and the federal government will have no claim to the assets and upon the death of the beneficiary, and the remaining trust assets can then be distributed to persons or entities of your choice, be it surviving siblings, a charity, etc.

The above is a third-party trust, and is the most frequently used legal tool to protect a child with special needs, but there is  another possibility: a pooled trust. A pooled trust is set up and run by various nonprofit organizations. As the name suggests, monies from various families are put into one general fund administered by the organization. Pooled trusts are always operated by a nonprofit entity. The advantages of a pooled trust may include:

• Reduced administrative fees.
• A better rate of return.
• Access to professional financial management.
• Access to professional legal management familiar with the rules governing disbursement of funds, thus ensuring your loved one's access to public benefits is not jeopardized.
• If there are limited funds, creating an individual Special Needs Trust can be economically impractical, given the costs of setting it up and maintaining it. A pooled trust can be a cost-effective way to set aside funds for a special needs individual.

However, a pooled trust also has a big disadvantage: When the beneficiary passes away, any funds remaining in the pooled trust will not be returned to the family, but instead will be used to reimburse the government for what it has expended on the beneficiary. 

For more information on the Karp Law Firm's Special Needs Trust, click here.

Minor children? Here are the steps you need to take to protect them

The importance of life insurance for parents with young children cannot be overstated. However, insurance is just one part of the story. To ensure your child's financial security, you need to properly plan for how the proceeds will be distributed to your child, as well as for how your child's personal needs will be met. That's where estate planning comes in.

Most couples name one another as the beneficiaries of their life insurance policies. Children may be named as primary beneficiaries, or contingent beneficiaries after the spouse. Either way, your minor children are not permitted to receive the death benefit until they are 18 years old. Of course, if your experience is anything like mine, you would be hard-pressed to find an 18-year-old with the maturity and knowledge to handle a windfall responsibly.

Although your life insurance proceeds will not go through Florida Probate, the Florida Probate Court will have to be involved if you pass away without naming someone as trustee to will manage the monies for your child. A guardianship would have to be commenced, allowing the court to name someone to serve as the guardian of your child's money. However, the money will still be released to your child when he/she turns 18.

There is a better solution: Create a Trust for the benefit of your children. The Trust may be created within your Will, or within your Revocable Living Trust. You name a Trustee who will be responsible for managing the monies in the Trust for your children's benefit. You then name the Trust as the beneficiary or contingent beneficiary of your insurance policy; then, the proceeds will be paid into the Trust if you pass away (assuming the primary beneficiary is the Trust, or the primary beneficiary predeceases you and the Trust was the contingent beneficiary). This arrangement ensures that your child does not automatically get access to the funds when he turns 18.

You may state in your Trust at what age, and how, he receives the balance. Many of my clients want their children to receive the balance at age 25 or 30, or perhaps half at 25 and the rest at 30. Other clients prefer to make the Trust totally discretionary, managed by someone in whom they have great faith, and allowing that person to decide when the child should receive the money. This is a prudent tactic, particularly if your beneficiaries are very young children. After counseling thousands of parents over the years, one thing is clear: No parent can be certain of how his youngster will turn out. Without exception, my clients have done the best they can, yet some have children who have turned out to be criminals, or diagnosed with severe mental illness. Other clients have children who have turned out to be exceptionally independent and mature at a young age. As Anne Frank wrote, "Parents can only give good advice or put them on the right paths, but the final forming of a person's character lies in their own hands."

The Trustee should obviously be someone who you trust implicitly and ideally is familiar with your child's needs and understands your values. The person need not be the most financially sophisticated person, but should  know when and how to utilize professional help, be it lawyers, financial advisors, accountants, etc.

Also, the Trustee need not be the person with whom you want your child to reside in the event of your death. Frequently parents are more comfortable having the jobs to different people. The person you name as the "Guardian of the Child's  Person" must be designated in your Will. Obviously, the guardian will usually be the child's other parent, but you should name backups. The Probate Court gets final say on the guardian, based on the best interest of the child, but will give great weight to your proposed designee.

In the event that your designated Trustee or Guardian is able to serve, you should name a Successor Trustee(s) and a Successor Guardian(s).

As you can see, estate planning is for young families as much as older people, albeit for different reasons. While young parents may not have accumulated significant assets, to put it bluntly, they are usually worth more dead than alive in purely financial terms. And it goes without saying that there is nothing as valuable, or worth protecting, than our children. Contact our Florida estate planning attorneys for expert assistance.

Whitney's world unveiled in death

The toxicology report has been released: Now the entire world knows what happened to megastar Whitney Houston in that Beverly Hills hotel room on Feb. 11. And with the late singer's reliance on a Will as her estate planning vehicle, her family's privacy is further eroded. Why someone with her celebrity and financial status would go that estate planning route is perplexing. 

A Will must be filed with the Probate Court. So on March 6, the late singer's 19-page Will was filed in the Fulton County, Georgia Probate Court, and became part of the public record. Houston's Will establishes a Trust upon her death. That Trust, called a Testamentary Trust, is for the sole benefit of Houston's daughter, Bobbi Kristina, age 19. Houston's brother and sister-in-law are Trustees. Bobbi Kristina will get her inheritance in stages, with the balance of whatever is in the Trust released to her on her 30th birthday. The Trustees may also provide monies to her for expenses like tuition, establishing a business or purchasing a home.

What's puzzling is that all the same provisions, and all the same protections for her daughter, could have been included in a Living Trust created during Houston's lifetime. A properly prepared Living Trust would have kept her estate out of Probate Court, and away from the public's prying eyes.

Then there's also the issue of Houston's ex-husband, Bobby Brown. Houston did not update her Will following her 2007 divorce from Brown. Had she died with no living children, Brown would have received an inheritance.  Was this intentional? It's likely we will never know.

It's a tragedy that someone so young and talented has passed away in this manner. The sensationalism and scrutiny that follows the celebrity's  death is not pretty, either, but we can at least learn from it. See an experienced Estate Planning Attorney/Elder Law Attorney to ensure that your plan is sound, and keep it updated as your life's circumstances change. 

"The Descendants" shows challenges for trustees

I saw "The Descendants" this weekend, a new film starring George Clooney. The film has an estate planning subplot that masterfully portrays how difficult it can be to satisfy all family members when an estate planning pie must be divided and distributed. 

Matt King, played by Clooney, is the sole trustee of a breathtakingly beautiful plot of virgin land in Hawaii. The property has been in his family for generations. Because of the law of perpetuities preventing a trust being "controlled from the grave" forever, the trust must be dissolved soon. King has to decide what to do with the land. On the one hand, he wants to honor what he believes the grantors wanted -- keeping the land pristine. On the other hand, he faces enormous pressure from the beneficiaries, his cousins, who need the cash and want the land sold to developers.

I don't want to spoil the end for you, but I can tell you this: The situation depicted in the film is spot-on realistic. Whenever you have a family entity that must be distributed among family members, there's ample potential for family conflict. Rare is the family trustee who can be objective and implement the provisions of the trust without getting rattled by the demands and complaints of family members awaiting their piece of the pie. That's why under certain circumstances, appointing a third-party trustee makes a lot of sense. If your family is going to hate someone, at least in won't be a sibling, aunt or nephew, or in the case of this film, cousin.

Similar problems come up when my estate planning clients have a family business and want to equitably distribute their estate. For example, let's say Mom and Dad own a dry cleaning business and have two sons. One of the sons has worked in the business most of his life; the other has never taken an interest in it. If Mom and Dad direct the business to be sold, that effectively puts the first son out of a job. If the business is not sold, how can Mom and Dad be fair to each son and ensure that the estate is equally divided?  There are several options,  one of which is purchasing life insurance to compensate the uninvolved son for the value of the business the other son is inheriting.  

Whenever there is a family entity that is going to flow into an estate, questions need to be answered well in advance about who is going to get what piece of the pie, when, and how. These are complex issues with enormous ramifications for family relationships, as "The Descendants" illustrates. Consult with an experienced Florida estate planning-elder law attorney.

Choosing a Third Party PR or Trustee can eliminate family battles

My wife is a big fan of historical dramas. She saw every episode of The Tudors. The Borgias, too. As I watched with her, it struck me that at their heart, these are tales of family members fighting to pass on or receive family inheritances, be they political, financial or social. (There were no estate planning attorneys around in those days, I guess.)

Most families' troubles pale in comparison to the deadly intrigues of the Tudors and Borgias. But that's cold comfort for a person whose children don't get along and who is worried about how to handle his estate planning.  If your adult sons can't sit together peacefully at a holiday get-together, there's little reason to expect your passing will unite them. In fact, the stress of a parent's passing  tends to have the opposite effect.

In my experience, more and  more seniors are realizing the value of designating in their Will a third-party Personal Representative, or designating in their Trust a third-party Successor Trustee. The third party can be a bank, a trust company, a lawyer, an accountant, or a trusted party like a longtime family friend. That individual or party will do what is required after your passing, objectively and above any family fray that may ensue. If you have children who do not get along particularly well, they will not have to deal with one another on these delicate matters, but with the third party. Consider the third party like a referee in a boxing ring. He knows the rules, and runs the match.

In fact, a third party personal representatives or trustee can be useful in any family situation you think has the potential to get ugly. An example is if you are in a second marriage and have an inkling that your spouse and/or your children from a prior marriage may not be happy about your dispositions.

Feel free to contact my office to schedule a consultation to discuss how to handle these delicate situations. Our estate planning/elder law attorneys have assisted many families perplexed over these issues, and can advise you. As an Accredited Investment Fiduciary as well as an Elder Law Attorney, I too can serve as a Successor Trustee or Personal Representative.   

Living Trust can protect your assets as you age

As we grow older, our ability to make sound money decisions may diminish. Last month's Morningstar financial conference addressed this issue. Harvard Economics Professor David Laibson pointed out the need for seniors to protect their assets not just from financial predators, but from themselves in the event of cognitive decline. With half of those over the age of 80 experiencing significant cognitive impairment, every senior needs to take this issue seriously.

A Living Trust (also known as a Revocable, or Intervivos Trust) is an effective precaution for seniors who want to safeguard their assets. A properly drafted and funded Living Trust  holds your assets (with the exception of a few types of assets that should remain outside your Trust). You appoint a Trustee to manage the assets. You may be the initial Trustee, and designate a Successor Trustee to take over if disability strikes. Or you may appoint someone else to be the Trustee from the get-go. Your Trustee can be a trustworthy individual or a corporate Trustee. In any event, if you become incapable of managing your money and your financial well-being is imperiled, your Trustee is authorized to step in on your behalf.

There are additional benefits to using a Living Trust as a cornerstone of your estate plan, for example, probate avoidance.  Read more about the benefits of a Florida Living Trust.

Getting organized is a gift to heirs

Our friends at the North Carolina Estate Planning Blog have brought to our attention a new service that cany help personal representatives and successor trustees track down a decedent's financial information. The service, called Knowtification, automatically generates inquiry letters to financial institutions to determine what assets, if any, the decedent had at that institution.

Of course, this service is not a substitute for good record-keeping! If you are planning your estate, one of the kindest things you can do for your heirs as well as the individual(s) who will be handling your estate is to get your financial information updated, keep it updated, and let key people know where it can be found. This will make life easier for those you leave behind, and can also save money that undoubtedly you'd prefer to go to your heirs.