Once Upon a Legacy: Story-Based Estate Planning

The Promises of the New Transfer Tax Rules?

2012-01-27T07:45:00.000-07:00

“…I now ask you to give me the benefit of the doubt when I tell you that we are right smack in the middle of the most dynamic and exciting period for estate planners in the history of the republic. The combination of opportunities that currently exists to enable our clients to move substantial wealth to or for the benefit of their children, grandchildren and more remote descendants, has never been seen before. We’re in the eye of the perfect storm of estate planning.” The Perfect Storm, by Charles A. Redd, Trusts and Estates, January 2012.

And I completely agree! And in my agreeing, I will throw in my usual caution: this window of opportunity is not for amateurs.

For most of last year, the commentators and pundits have had a field day talking about Portability under the new transfer tax law. There was a blog article some months ago, one of many, by a CPA firm that seemed to be all atwitter about how friendly this is for the taxpayer. They were celebrating that now one could leave his entire estate outright to his surviving spouse and at her later death there’d still be no tax because the survivor gets the benefit of both spouses' exemptions.

Maybe!

There are some very dangerous pitfalls in this new law, to say nothing of the fact that the whole thing goes away and reverts to pre 2006 rules at the end of this year! That alone will be a complete devastation for people who’ve not considered that likelihood and have avoided tax planning because there was a $5,000,000 exemption plus portability which implies there is no longer a need to “use it or lose it.” For portability to actually work, there are filing requirements that people will be unaware of and won’t think to ask about because they believe they owe no tax. And second marriages can completely destroy the portability concept as the surviving spouse may have it pictured.

While this law is definitely a boon for those who are wary enough to plan carefully, it is a trap for the unwary.

Taxes aside, there are many reasons to engage in quality estate planning such as asset protection and wealth reception. And there are planning strategies that take advantage of the benefits of the new law while providing protection if it doesn’t last.

Beneficiary access trusts, (carrying many different looks such as Build-Up Equity Retirement Trusts, and Beneficiary Deemed Owner Trusts, and Marital Deduction Trusts, to name a few), should be considered. They are advanced concepts and require a skilled planning professional, but they offer the ability to retain the use of assets and income while avoiding the inclusion of the asset in the taxpayer’s estate and also providing a good measure of asset protection from creditors and predators.

Portability and other concerns can all be dealt with inside of these trusts, and if the law reverts to a much lower exemption, clients have the benefit of a significantly reduced taxable estate and didn’t miss the great opportunity of taking advantage of the higher exemption amount before it went away.

As an example, consider two trusts: one for Husband and one for Wife. Each is funded by property gifted by the other and when properly drafted, each taxable estate will not include the property in either trust.

There you have it in a nutshell: flexibility in uncertain times if we take advantage of today’s opportunities.

MOST ESTATE PLANS DON’T WORK

2011-12-15T14:24:00.000-07:00

You’ve heard that before—from me! If your estate plan does what you expect it to do at the time it is called upon, it’s a plan that worked. Again, most plans don’t work. Why is that?

One of the main contributors to the truth of that statement is the lack of an ongoing maintenance program. Many estate planners don’t offer one – traditionally, none of us did; some contemporary planners do, to one extent or another. I offer a variety of maintenance programs, some extremely inexpensive and some more costly. Typically, we custom tailor the plan to meet individual clients’ needs.

A maintenance program is that part of a modern estate plan that meets this goal: “We want to meet on a regular, prearranged schedule with our planning attorney to make sure our plan is
• up to date,
• reflects changes in our circumstances,
• reflects changes in planning techniques,
• demonstrates visually that all of our assets are and remain properly titled into the plan, and
• as our lives and our goals move, our plan reflects those different ideas.”

It is essential that an ongoing relationship exist and sustain between the clients and the attorney. Otherwise, the best it can offer is to be “reactive.” (Fix me, I’m broken)

That’s a mouthful. But the result of a failure to do this is an estate plan that didn’t ( or won't) work. Consider this very simple, yet frequently occurring example. Bob and Carole have a trust that is properly funded (assets are properly titled in the trust). They take a short vacation to Taos, New Mexico and fall in love with an available condo up on Taos Mountain. They buy it. They don’t have their trust book with them and the local title company is confused about how to title the new condo. So, Bob and Carole take title in their own name and remind themselves to call me when they get home. They forget.

Years later, they get to experience a probate. Did the plan work? At the first death, a joint tenancy asset may cause unexpected surprises both in terms of estate tax obligations that would have been avoided had the condo been in the trust, and title being in held in a way that, depending on personal circumstances, could be seriously detrimental, including the possible loss of entitlement benefits.

With your own planning attorney, don’t accept his or her telling you that the only maintenance needed is for the client to remember to initiate a call to the attorney when “something comes up.” That nearly guarantees that your estate plan won’t work.

My Designated Difficult One

2011-11-20T16:42:00.002-07:00

Of course none of us has a child that “ …just marches to a different drummer.” But if we did, we’d be much like a great many families. Often, we tend to characterize him as unfixable, someone we just have to accept and live with (or without). We gave up on him years ago…that’s just who he is, unfortunately.

But not everyone. Some people recognize her unique attributes. In some cases, perhaps, she's the only kid that really “gets” the family dynamics, the one who seems to always understand what’s truly going on in this clan and chooses to opt out of the mold; not the family, but the mold. She sees what’s good and what’s not-so-much, and chooses her own path, often to the great benefit of herself and everyone else.

If we’ve given up on him, how do we treat him in our estate planning? That can play out all the way from ignoring his differences or even his existence, to making sure he can’t hurt himself with his inheritance.

More and more families are discovering for themselves the relationship they really want and can have with this particular child by exploring through story telling. This is exactly the way Bill and Carole, our hypothetical client couple, learned the beauty and the uniqueness of Mattie, their autistic son.

When we take the time to delve deeply into Mom's and Dad’s stories, we help them discern the unique attributes of their DDO, as John A. Warnick likes to call her (our Designated Difficult One http://johnawarnick.typepad.com/seedlings/). As John says,

“Step back and ask yourself: “what message am I missing and what opportunity to grow is our family forfeiting because I’m not willing to listen and learn from my (DDO)?"

Don’t draw a circle that shuts me out---draw a circle that takes me in.

Is Anyone’s Voice in This Plan?

2011-10-27T16:23:00.005-06:00

[this is a longer, teaching post. Hope you see value here]
One of the more important concepts in modern estate and business planning is that your plan needs to be uniquely yours—not an off the shelf, one size fits all thing.

There have been a number of recent studies showing that very thing: when asked, most children will say they’d much prefer to have received Mom’s voice and other memories of her than the monetary and physical inheritance they received.

How do you go about leaving your self along with your stuff? You do that by inserting your own voice into your written plan and making sure it is a paramount feature of the Trust.

I have a colleague who was writing an estate plan for a very wealthy client, a guy with children, grandchildren and a family history he was proud of. When he had reviewed the final trust documents, he said: “You know, I have the strong suspicion that if I were to tear off the first page of this trust and then the last page, I’d have the very same trust as all of your other clients.”

Is that what we want in this day and age, or do we want our children to read the trust and smile as they hear you speaking to them on those pages?

Beside saying, “I want my children to hear my voice,” there are other important reasons to make yourself heard through your trust. Why, for example, in your trust did you make one child a trustee and not the other? If there is a reason for that, and if the fact of your doing it might lead to anger or hurt feelings, is there something you’d want to tell the kids as to why you chose that road?

If your trust distributes your treasures a certain way, is there something you’d like to have told the grandkids about your choices?

If one child has married into significant wealth and the other two are living very meagerly, might you choose to distribute your money among them differently? And, if you did that, might you want to have explained your feelings and reasons to them?

There is a need to insert your own voice throughout the pieces of paper, and in my practice it’s a critical and essential part of what we do.

Believe it or not, this isn’t a new concept. But somehow, in the hustle and bustle of business and making money and over the past couple of hundred years, it has sort of disappeared. Some of us, though, have been resurrecting it for about the last 6 or 7 years.

I have a copy of George Washington’s handwritten will—it’s about 35 pages in his own handwriting. But in the middle of it, he has written a short paragraph. Apparently, he’d acquired about five swords over his lifetime—probably from his military service. Anyway, he willed one sword to each of five nephews. And in that paragraph he included this:

“These Swords are accompanied with an injunction not to unsheathe them for the purpose of shedding blood, except it be for self defence or in defence of their Country and its rights; and in the latter case, to keep them unsheathed, and prefer falling with them in their hands to the relinquishment thereof.”

Think about the importance to the nephews of the personal voice of Uncle George; how do you think it impacted the value of the gift? Certainly if they knew their uncle, there would be no question but what that was him speaking to them.

So we will do the same thing. I’ll ask you some questions designed to learn some of your own personal life stories. You may think the particular questions have little or nothing to do with your estate planning—but you’ll be amazed at what we both will learn about you and what’s important to you.

I may ask you about some really difficult challenges you’ve seen your spouse or kids overcome and how you felt about their efforts; or maybe some special talents or gifts you think they have been given and the great potential you see in them. Things like that.

We will record the conversation and burn it to a CD. You’ll get copies and, as an incidental benefit, you’ll be free to distribute them out to your children, grandchildren and other loved ones. What a gift! Your legacy, your stories , told in your own voice which they will have long after you’re gone.

You’ll listen to your CD and so will I. We’ll both make notes about what we may want to put into your trust and we’ll end up with some concise, specific text that may be word for word what you said on the CD or it may be a paraphrase written by you or by me.

At various places within your trust documents, we’ll insert this text inside of a sort of “text box” or, as some call it, a dialogue box.

When you actually see your personal words or thoughts written in your “legal document,” your trust, you’ll completely understand the importance of hearing your voice through your estate plan.

I’d Like Some Cake, Please

2011-10-17T10:53:00.000-06:00

Carole and Bill Nelson, our hypothetical clients, have just learned that Carole’s grandmother has passed away leaving a small ranch to Carole and her sister, Janet Figneuton, outright, free and clear. The ranch is leased to neighboring ranchers as pasture and Janet and Carole will be absentee landlords. They don’t plan to actually operate the ranch as a going concern, but will continue as landlords employing a ranch or property manager to run the place, handling the day to day concerns.

But, Bill and Carole, and now Janet and her husband Charlie are worried that upon the death of one or both of the sisters, there could be a big mess. Spouses, children, spouses of children and possibly others will become unwitting partners with each other. What does that look like? It doesn’t look pretty. Everyone will have different interests and goals. Some may want to convert the ranch to cash, some may want to preserve it forever for the family’s recreational use, some may want to break off their own parcels and become cowboys on their own.

The ranch will add about $2,500,000 each to Janet’s and Carole’s estate for transfer tax calculations if they were to die today. Currently, the property provides an annual income stream of about $200,000 per year which will now be divided between the sisters.

The primary concern of both families, the Nelsons and the Figneutons, is to solidify their own goals for the family’s use of the ranch, and to reduce their taxable estates while not losing the income stream. Can this be done? It can with some creative and careful design work.

Carole can create a trust for her own benefit, transferring her undivided ½ interest to the trust and retaining the right to the income for life. This is possible in a state that permits a “self settled trust,” one in which the trust creator is also the beneficiary and often the trustee. In Carole’s home state, Colorado, that is a yet unresolved question, although there is an old case that seems to permit it.

It can also work in a state that doesn’t permit a self settled trust if the income distribution to Carole is wholly discretionary with the trustee and that trustee is not Carole. By using an adverse, or even an independent trustee as those concepts are defined by the Tax Code, and with Carole having no right to demand a distribution of any type, the trust is not self settled. Of course, if the trustee is not required to make a distribution to Carole, Carole risks a trustee that will do just that. There are other strategies and techniques that can be applied depending on what the sisters decide they want to accomplish. (And it is also worth noting that the law of each state may be different in terms of what it will allow and not allow regarding this concept. No planning attorney will undertake this without some careful research.)

Janet will create her own trust that basically does the same thing, but carefully drafted to avoid any “reciprocal trust issues.” While that is a subject for another article, it is worth noting that with wholly discretionary trustees, the reciprocal trust doctrine loses some of its steam.

You can’t have your cake and eat it too, but this planning strategy comes tantalizingly close. It is an advanced planning design and certainly won’t fit everyone’s comfort zone. But Bill and Carole along with Janet and Charlie are giving it some serious thought.

Stories from Children

2011-09-27T15:46:00.000-06:00

Here is a story written by an 11 year old young lady. I’m personally very impressed with how well done it is. A wonderful example of storytelling by young children – don’t you think it’s worth exploring? I happen to have some interview questions just for asking children to tell their stories.

This little girl’s great grandpa is a client and good friend of mine. Enjoy her story. Incidentally, this is word for word and punctuation for punctuation from her own writing. If mom and dad, or great grandpa and great grandma are new clients for planning, this child’s story goes a long way to giving me insight into grandpa and, just as importantly, into the little storyteller.

My Great Grandpa

Today I’m going to be telling you about someone that is a very important person in my life. His name is Ray Parker and he is my great grandpa. He was born on May 9, 1927 in Minco, Oklahoma. When he was little his mom dropped him and his older brother off at the orphanage and she never came back. This is something that he still remembers today and will for the rest of his life.

My grandpa has many memories from the orphanage. First, he broke his arm and the owners of the orphanage didn’t set it right. Then one kid got lice so they shaved every ones head and, it didn’t matter if you were a girl or a boy. When he was older, a woman wanted to adopt him so that he could work on her farm. He wouldn’t let her adopt him because he wanted to keep his name. Then when he was of age he joined the Coast Guard.

A Very happy time in my grandpa’s life is when he got married to my great grandma, Kathryn Parker, an older Norwegian woman from a wealthy family from Iowa. They had two children Alan and Lynn. A very sad time in his life was out living his son. Alan had three children and three grand children and now my great grandpa can enjoy spending time with all of them. His daughter Lynn is my grandma.

His job at Stern’s Oil Company took him all over the world and he lived all the way from Alaska to Israel. His pictures have enabled me to learn the ways of life and cultures of many countries. After traveling for so many years they are now happy to be retired and living in Grand Junction, Colorado. My grandpa has led an exciting life and I hope someday that I will too.

Meaningful Estate Planning – More on Text Boxes

2011-09-08T13:32:00.000-06:00

Here’s another example of story based planning. This time, Carole was very interested in finding and selecting a “care manager.” This also was inserted directly into her trust as a “text box.” It didn’t come directly from any story or stories, but it did result from the learning we all obtained from all of her stories.

She said:

Our trust provides for the involvement of an outside person we call a Care Manager. We recognize the strong possibility that we both will be alive for a number of years beyond our ability to make our own decisions and see to our own care.

We think of a Care Manager as someone who will spend time understanding us and what is best for us. At a minimum, our Care Manager needs to understand the systems, be someone we would trust completely, and who is very interested in us as persons. There could well be a separate Care Manager for each of us.

In Article Four of this trust we have tried to address that time to come in our lives. We see the use of an official Care Manager as a significant addition to those bare provisions. The Care Manager should be an independent person, who is either particularly trained or has the experiential skills to evaluate our needs, to assess our emotional and psychological circumstances and to assist in finding the very right personnel to meet those needs. We would expect the Care Manager to be intimately involved with our trustees and to provide input into budgets and distribution plans, and to provide a bridge between our family, our medical team and our financial team and who will undertake and find a good care agency and then monitor the plans or programs carefully.

Finding a person who has the caring attitude we need for this very personal position, and the willingness to enjoy the work and being in relationship with us is more important than the person’s credentialed qualifications.

We have a friend, and this is by way of example, who could be a very good Care Manager if the need were today. Her name is Samantha. Our son, Sean, knows Samantha, so we would hope that Sean would use Samantha as an example in Sean’s search for our Care Manager.

Meaningful Estate Planning - Text Boxes

2011-09-08T13:23:00.000-06:00

I asked my client, Carole, to answer a couple of focused questions about her early memories of money. The result was some stories that, after we condensed them, produced the following. I put this, word for word, into her Trust in the form of a “text box.” This is what story based estate planning is all about.

She said:

If we could spend our money with a solid golden guarantee of results, here’s how we’d spend it: we’d use it to get our children out of debt and to instill in them the value, and the means, of staying that way.

Children need to learn the tough lessons of not having money and yet surviving that. Too often, the availability of credit smoothes over rough spots and disguises reality. It makes people believe all is well, when, in fact, the downside has just been deferred.

I remember lessons taught me by my Dad and Mom. They were very frugal people who had almost nothing in their early days in Mead. Dad was the Justice of the Peace during the 1940’s and then became a public accountant. He also began investing in the stock and bond market. He did that on his own and was very much self taught, although my Uncle Bob, who was in the dry goods business, was very much into investing. I remember him imparting his wisdom and the how-to to Dad and to his employees in the dry goods store, those who wanted to listen. Dad would also teach me. The employees did well and so did I. Dad would teach me how to select a stock and then he’d buy it in his name but with the understanding that it was my investment and I made the decisions. As it paid dividends, he’d pay those to me. I know that these lessons formed the basis for my fairly successful investment activities over the years.

Mom came from a quite poor family in Cheyenne. Mom always would pay cash for anything she needed. If she wanted a new refrigerator, she’d set that as a goal and simply save up until she could buy it. Later on, they did have credit cards, but rarely used them and paid them off in full each month.

There were years in my own life when I was extremely poor. But these lessons saw me through and, more importantly, taught me the value of money so that when I actually had enough to be more comfortable, I never lost sight of the need for and the value of frugality. Being frugal when it isn’t absolutely necessary to be is one of life’s most important lessons.

Actually having enough to be comfortable has given me the freedom of generosity. That’s something I think I didn’t realize until more recently. We are certainly not wealthy, but we have enough that we can give and enjoy the giving. What a blessing. The real value of money is to take care of you and to benefit others who are less able to do that. More money than that is just not necessary.

Meaningful Estate Planning - Who’s the Expert?

2011-09-08T12:58:00.000-06:00

What happens when new clients appear at my office for our initial appointment. Actually, let’s harken back to Bill and Carole Nelson (my fictitious clients introduced to you in one of my very first blog postings). We begin with some stories, small talk designed to introduce to Bill and Carole who I am, what my motivations for being an estate planning attorney were, how I became aware of those motivations, what I did to actually get there, how I view my role as the planning attorney, and just what they can expect from me if we go forward. This is my “Steve” story and one I use with many clients. It is a true story.

By then, Bill and Carole have interjected some of their own thoughts and opinions and we’re having a quality conversation. If that hasn’t happened, I may ask focused questions such as, “How did you two meet and come to get married?” Stories follow and at some point I may insert a new thought: “What do you see as issues or problems or just plain old considerations that have caused you to decide to seek my help today?” It’s been years since I started a conversation with a client by asking, “What do you want to do with your stuff when you die?”

If I’m lucky I begin to scratch the surface of learning who Bill and Carole are and what their hopes might be for the rest of their lives and for their children. We establish whether we want to move forward together and what our relationship will look like both now and over the years to come. Do I like them and think I can help them? Do they like me and want me to help them? If we are going forward, the next step will be describing and then setting up a story telling session. I’ve described that in detail before.
The Mattie Story

We also have established just who the expert in the room is. Many estate planning attorneys and clients believe that the attorney is the expert. That’s why the client is in the room in the first place. That obvious, but simplistic conclusion has led many an attorney to force a plan design that is contrary to the clients real goals (which were likely never understood by the attorney in the first place). It has led many clients to discover they have an estate plan that they can’t read, that they hate, that they never look at and that simply doesn’t work.

Yes, I as the planning attorney am an expert in certain very important respects. I can teach Bill and Carole that some of their goals are just simply not legally effectual. For example, they can’t legally give everything away right now, yet keep complete control over it-at least if they also want to avoid taxes and creditors. And I can teach them how to modify their goals into ones that will work and will satisfy. And then, I can legally implement a design to accommodate all that.
That’s my expertise. Lots and lots of lawyers have that to one extent or another.

But the real experts in the room are Bill and Carole. They are the only people, maybe in the world, who know Bill and Carole. While my skills may help them recognize something that they never realized about themselves, the values and principles revealed through stories of deeply entrenched events, are only available to me through Bill and Carole. That’s their expertise.

I read an article recently by one of the leading estate planning attorneys in the Country. His view is that most attorneys try so hard to accommodate the clients’ wishes that the clients end up with a plan that is a disaster, that can’t legally work, and often can lead to attorney malpractice litigation. He concludes that clients know only what they want to do; and only we attorneys know what the clients should want to do. Howard Zaritsky: How Important Really Is What the Client Wants? LISI Estate Planning Newsletter #1857 (August 29, 2011) Copyright 2011

I hate that thought, but in the stereotypical lawyer-client relationship where the lawyer simply doesn’t take the time to educate his or her clients, who doesn’t particularly want to delve deeply enough inside the client to learn who he or she really is, or to teach them, he is right. And so, in that typical attorney-client situation, yes, the attorney is the only expert in the room, at least that counts. And the clients will end up with a plan that they likely can’t read, likely don’t care about, and likely won’t ever look at.

If I as the attorney can’t or won’t take the time to learn Bill and Carole, then I should never accept the engagement regardless of my need for fees.

Time To Think and The Thinking Environment

2011-08-23T14:53:00.000-06:00

This blog is all about estate planning, from basic to highly advanced. Over the years, I’ve included in almost every posting planning issues that extend way beyond just designing and drafting estate documents.

Stories and story telling concepts are directly related to well thought out, successful estate plans; stories and story telling extend to non monetary legacy and dynasty relationships between people of different generations. I have long emphasized the power and necessity of story in estate planning.

Just this month, I received my international certification as a Time To Think Facilitator Consultant. What does that mean for me and even for you?

About six years ago, I became fascinated by the Thinking Environment as taught by Nancy Kline, founder, president and CEO of Time to Think, Inc. You’ve seen my reference to her books at the bottom of this blog. I have become a devoted student of the concepts and applications.

One can’t successfully capture the stories of another without understanding how to listen, how not to guide, what questions to ask to gain real insight and how to allow one to tell her own stories without interruption or direction.

So, mastering the ten components of the Thinking Environment and its nine applications provides the pathway to successfully eliciting and hearing stories and then capturing the values of people. That will lead to effective estate plans –ones that work.

This site will tell you much more in a ten minute visit than this blog article can. Please check it out. http://www.timetothink.com/us/

The Nine Applications of the Thinking Environment far exceed just the one on one, and one on two, interview as I’ve described in earlier postings. My studies have taught me the fine art of facilitating meetings, small and large, almost regardless of the individual agendas and personalities of the participants.

How many business or church meetings have we attended where the leader had an agenda with solutions to be dictated regardless of others' thoughts? An hour or more later, after much bickering and mud chucking, angry people leave the meeting swearing they will find a way to never attend another. There are a lot of schools out there teaching how to hold meetings without too much mud being cast at one another; only the Thinking Environment, to my knowledge, teaches how to hold meetings that result in happy, contented people who have spent the hour intentionally and with honor toward one another, yet solving seemingly impossible issues in a much shorter time.

The difference is whether we just get through the meeting alive or whether we get the very best, the very deepest, individual thinking of each person contributing.

The Thinking Environment is not a list of “how-to” or “how not to.” The Thinking Environment is really “a way of being in the world.”

My Certification means that I can now teach to groups and to individuals. It is my choice to do it for monetary compensation or for free and as an outreach to my community.

Everyone I’ve shared this with in a classroom setting or in practical demonstration, has been taken with the wonder and simplicity of it all and how completely successful it is. Contact me to learn more.

THE GIFT TAX EXEMPTION - $5,000,000—WOW!

2011-07-21T15:49:00.000-06:00

So here’s the conundrum. With a lifetime exemption on taxable gifts of $5M coupled with the knowledge that the exemption amount may very likely be reduced by act of Congress in less than a year, you’d think everyone would be giving away as much as possible right now. And many are. And I think they should. But it’s not a given that it’ll work. So what to do?

If you can’t afford to actually lose the asset, then you can consider gifts to trusts that will allow you some income from, and some use of, those gifted away assets. If you can afford to give up the asset, then just make the gift. So, that’s not the problem, is it?

No. The problem is the question of what happens after the exemption amount is reduced by law in 2012. You thought your gift was fully tax free. Is it still tax free after the exemption changes?

You won’t be surprised to know that the best minds in the estate planning arena can’t seem to agree on the answer. There are very brilliant and experienced people on both sides. Those commentators who say you will lose out on the big exemption if Congress reduces it before you die point to the manner in which gift tax is calculated and paid. They claim that procedure requires you to use the exemption in place at the time of death.

Others (myself included, except for the brilliant mind part) disagree and think that, among other things, logic requires that once a gift has been made and a gift tax return filed, it’s a done deal regardless of a change in the law. One can assume, I believe, that Congress was aware of this potential when it passed the law and didn’t intend to create a trap. That might even smell of fraud.

I think that logic is pretty sound and also allows for a reasonable amount of fair play (although the tax code hasn’t always cared much about that). So, I am advising my clients to proceed with gift planning now but with a good understanding of the consequences if we are wrong. This is truly one of the greatest opportunities we’ve ever had to do meaningful estate planning.

Incidentally, I’ve had one taker on my 10% discount on story based planning that was announced last month on this blog. See below. And that particular client is moving forward with a major gifting plan.

A Very Special Opportunity for Story Based Estate Planning

2011-06-17T14:09:00.001-06:00

As a precursor to the reading of this post, please take a minute to read the one posted immediately before this one. You can scroll down or just click on this link:
Earlier postcast

Done that? Okay. Between now and the end of August of this year, we are offering a truly wonderful opportunity to people who recognize now as the time they got serious about doing some meaningful estate planning, or who want to update and upgrade their existing planning.

If you are an interested potential client, we’ll sit together for an hour or more, get acquainted and determine if we mutually want to go forward together. That will be at no cost to you so long as it is done in our office.

The offer will include a recorded interview similar to what you found on the Pod Site. Normally, our retail price for one of those interviews is between $300 and $500. That likewise will be at no cost to you so long as it is a part of the overall estate planning process. In fact, not only will you not have to pay for the recorded interview, you will receive a 10% discount off of the total estate planning fees otherwise payable to this office.

So, the interview is free, and your estate planning fees will be reduced by 10%. This opportunity is good only until the end of August and is being offered primarily to encourage and teach the value of story based estate planning. Experience it firsthand. As an added bonus, you’ll also receive a copy of my book, Your Legacy, Meaningful Estate Planning.

Of course, once the interview is finished, you’ll have a nicely packaged CD which will be yours to copy and distribute to your loved ones as you choose. You’ve heard the saying, “So nice to hear your voice.” What will your children and grand children say when they hear your stories in your own voice long after you’re gone? What would you give to have the stories of your own parents, in their own voice? Everyone is a story waiting to be told (don’t recall who to credit with that, but it isn’t mine).

You can call me or email me or simply comment to this post advising of your interest. I’ll get back with you in short order. You can also link to my website. The link is found on this Blog page. The website allows you to email me.

Our Story Telling Podcast Site is Available to Enjoy

2011-06-17T13:58:00.000-06:00

By now you well understand story based estate planning and you’ve likely even heard about our Podcast Site. Here’s the link: http://j111s22g3333.podbean.com/

It’s new and so far holds only seven out of about 20 storytelling interviews we have ready to post.

This Legacy Blog has been focused since its inception on the use of stories in the design and implementation of modern estate plans and the Podcast Site is a natural outgrowth of that. Not only can you enjoy listening to wonderful stories told by people you may know, you can also enjoy the depth and richness found in the storyteller. How better to learn who someone is and what is most important to them in life?

If you are an estate planner or a financial services professional advising clients, if you are a person interested in learning more of just what estate planning is about, this Pod Site is for you. If you are just one who enjoys hearing other folks’ life stories, this Pod Site is for you.

As a perfect example, just Tuesday we posted an interview with Chris Muhr and Jen Taylor describing what their life has been like as outdoor enthusiasts living in Western Colorado. Their stories were exciting in revealing the richness and depth of these “just everyday folk.”

First, the listening experience alone is interesting and exciting. And second, you’re going to feel as though you are friends with Chris and Jen. One listener, Claudia, said she felt inspired to “dust off my ol’ bike.” Another, Don, observed that one of the things he also heard in the stories was that Chris and Jen felt that connecting with other people in need was very high on their list of value sources.

So, here’s the challenge for you: go to the site. Pick one of the seven and spend 30 minutes just listening and enjoying. No agenda. Just enjoy.

And also, if it interests you, read the next post to this Blog, which I will be posting almost immediately after this one. We are offering a very special opportunity to those who may want to learn more about story based estate planning.

The New Tax Law – Unique Opportunities in the Face of Pitfalls.

2011-05-19T13:36:00.000-06:00

Clear back in January, I wrote an article on the use of spousal access trusts. See the article

Although they’ve been around for awhile under various names, they are again becoming popular as a hedge against the possibility of lowered tax exemptions in two years. Of course, they offer other great benefits, such as creditor protection, asset valuation freeze, access to income and principal, and so on—the same benefits they have always offered to both high and very low net worth folks.

Here’s a somewhat different twist. Recently, my favorite clients, Bill and Carole Nelson (remember, these are imaginary people) came in with Bill’s brother Doug. Bill and Doug inherited a very profitable farm from their grandmother’s trust. The trust provided for the boys’ father during his life, but at his death the entire farm passed outright to Bill and Doug.

Bill and Doug have a manager that does all the work, but they call the shots and realize the net profit. All is well, right?

No one has even considered what will happen when either Bill or Doug passes away or becomes disabled and can’t make decisions. And what about potential taxes? Bill and Carole had recently attended my seminar, the one I called “Build a Fence or Buy an Ambulance,” on the beauty and the pitfalls of the new tax law, and realized they had a great planning opportunity plus a strong need for some tax protection.

“What will be the consequence if the exemptions are substantially reduced in two years and we have this farm sitting here? We need the income we’re used to getting from the farm and we certainly want to maintain control and make the important decisions. So, can we realize these goals and also keep the farm in the family? Can we protect our children and also meet our family needs?”

Consider this: Let’s create two nearly identical irrevocable trusts. Bill creates one for Doug and gifts his half of the farm to it. Doug is the trustee (maintains control) and the lifetime beneficiary (maintains income). Upon Doug’s death, the farm stays in that trust for the benefit of Doug’s wife and children in the manner provided in the trust – (remember, stories will answer this latter part).

At the same time, Doug creates a trust for Bill with essentially the same terms and gifts his half of the farm to it. Bill is the trustee and the beneficiary (control and income) and on Bill’s death, Carole becomes the beneficiary and at her death, the farm stays in that trust for the benefit of Bill’s and Carole’s children in the manner provided in the trust.

The value of the farm is frozen in that any appreciation in value will belong to the trusts and not to Bill and Doug. The farm’s value is totally removed from Bill’s and Doug’s estate. Both Bill and Doug have used a part of their unified credit (estate and gift tax exemption) by making the gifts to the trusts, but they’ve used that gift exemption when it is at a $5 million dollar level, the highest in history, and before it can be reduced by changes in the law.

Just another example of some creative thinking taking advantage of the wonderful opportunities of the new tax law while protecting against the pitfalls of that law.

Couldn’t you also do this with an investment portfolio? With a couple of rental properties? With other assets?

Estate Planning for Immediate Crisis-Right Now!

2011-05-18T13:29:00.001-06:00

Here are a couple of examples of things that actually happen. What advice can you give yourself or others if you were to be the one it happened to?

Mom and Dad have two small children, ages 12 and 10. They are home alone while Mom and Dad get in the car and drive to the mall to do the week’s shopping. This is a Saturday routine for the family. Mom and Dad run some errands for an hour or so and the boys do some chores.

This time, there is a terrible automobile accident. Mom is killed and Dad is taken to the hospital in a coma. The kids don’t know yet, but be sure they will. Pretty soon, an officer will phone or show up at the door.

If this is you:

· Do you have anyone to come get the kids and take care of them temporarily?
· What about helping them maintain their routines: school, soccer practice until more permanent arrangements are in place?

Maybe you have set up permanent arrangements for guardians and etc, but what about the immediacy? Right now! Do you have plans in place and people in the know to be contacted?

Or,

An elderly man retired to a “gentleman’s farm” a few years ago. He’s now a widower with two horses, a pig, some chickens, and a dog. He has a heart attack and passes away in the night.

· Who’s going to know?
· Who’s going to feed and water the animals and when?
· Who’s going to shut off the irrigation water – and when?

This is an area of estate planning that is seldom addressed until it’s too late. Awareness and a little careful planning can bring a wealth of relief. There are some terrific ideas and simple systems out there.

Build a Bridge or Buy an Ambulance

2011-04-22T13:28:00.001-06:00

A couple of weeks ago, I presented at a seminar on the topic of the new estate, gift and GST tax law (transfer tax) as enacted by Congress and signed by the President on December 17, 2010. I planned a two hour presentation to be held in the evening on a Thursday night.

It was quite an undertaking, as I discovered, because there is so very, very much to report on, teach about and then discuss in a way that lay people could grasp it, but not need to learn nitty-gritty detail and store it in their memory banks.

The thrust of the new law, basically, is that never before in recent history in this Country have we had the freedom and opportunity to engage in meaningful planning that we have now. The exemptions are large, giving our clients the chance to look at what is really in their hearts in terms of leaving their legacies to loved ones without being totally driven by the need to avoid transfer tax.

The other side is that the tax is not totally eliminated; under the current law, it will expire, or “sunset” or just plain go away in two years. Should that happen, our transfer tax burden will be far greater than it is now and it will have popped up unexpectedly and snapped us. This wonderful new law has other, hidden, pitfalls that most people are not being educated to prepare for.

So, we have the makings of a powerful, and badly needed educational opportunity. I have the pleasure to report that ours, our seminar, went splendidly. How do I know that? Well, we met at 7:00 pm, on a work night, we served only decaf coffee and tea and we held the attention of 40 people for two hours. At the end of the evening, people were as engaged as they had been at the beginning. That tells me people recognized a need to know about this.

I did manage to have the entire presentation videoed. I am considering editing it and then making it available to those who might find it interesting or want to use it to educate their own clients and professional advisors.

By the way, I named it “Build a Fence or Buy an Ambulance,” to illustrate the critical difference between proactive and reactive planning.

If you have an interest in learning more about the possible DVD, just contact me.

Estate Planning at its highest level

2011-03-23T16:24:00.000-06:00

I came across an article, one that I find almost unbelievable, in a furniture magazine! The content is not at all unbelievable; that a business owner (not even close to a financial services professional) would have the insight to talk about business and estate planning on this level is surprising. A non lawyer stressing the need to plan business transition in the family and to do early-on estate planning. This is absolutely making my day!

The article is in Furniture World and can be found here: http://www.furninfo.com/absolutenm/templates/NewsFeed.asp?articleid=12525.

It’s written by David Lively. According to the short bio in the magazine, he is, in part:

David Lively, partner at The Lively Merchant, has over 20 years hands-on experience in the home furnishings industry, from the warehouse to the sales floor to the boardroom. He has walked the walk and talked the talk from the family-owned, single-site store to the multi-state, multi-million dollar operation; from sales training to computer programming; from warehouse construction and operations to financial management; from new store construction to complete renovation. Twice named to the "Beyond the Top 100" list of independent retailers and 1997 "Ohio Retailer of the Year."

So you ask, “what’s so surprising?” Here is a man with a lifetime’s experience in the home furnishings business writing about business exit planning and estate planning with knowledge and insight that puts most planning attorneys to shame. Literally!

He talks about this kind of planning from a visionary’s perspective, from a relationship point of view. He talks about the need to learn and know your children, heirs, employees well-- long before you include them in a “will.” Plan carefully and way ahead of time, he urges.

I’ve soapboxed for a long time that most people come to us planning specialists having done almost none of this kind of thinking—they often don’t even know they ought to. Mr. Lively points out,

Your will allocates assets, not responsibilities. You must also plan to transition daily responsibilities to your heirs and employees….Experience has shown us time and time again that people do not (all) have the same skills to manage wealth, let alone the ability or desire to run the family business. Transitioning responsibilities is harder than dividing dollars and cents or distributing stocks and bonds….Do your heirs want to run the family business? Even if they possess the skills, do they have the desire? Will this be a satisfying, fulfilling career for each heir?

The article is a bit long, but if you are at all interested in effective and meaningful business and estate planning, well worth the read. It gives serious credibility to what some of us attorneys have been preaching. Mr. Lively talks about wealth reception planning without ever calling it that; he talks about learning who your heirs really are and what their dreams may be. I use stories to do that, but he and I are spot on the same page.

“One of your (kids) may have been dreaming of running the show ever since he played ‘furniture store’ as a child, while another wants to be a dentist or join the circus.”

What happens to these dreams when your will divides the estate equally between your three children, and just to sweeten things, there was no succession plan whatsoever?

Stories—The Gift of Ourselves. Our Legacy

2011-03-03T14:20:00.000-07:00

These thoughts came to me earlier as a way of explaining and teaching story telling techniques. And in an estate planning context, they are very relevant today. Whether you’re the planning professional or the client, consider….

We ask a question—but are we really interested in the answer? And when a person launches into a story in response to our question, do we view it as an irritant? When we are sincere in our quest for an answer, we are blessed many fold if that person begins to relate an experience.

Stories matter and telling stories matters. Stories represent who we are. They disclose our life experiences, our values, and why we are who we are. And they help us to capture, preserve and then pass on our true legacy. Who we are is our legacy; our wealth is not much more than a piece of us, and for many, an insignificant piece.

For me, to learn what a client believes about the meaning of success in learning and education, for example, is enlightening and interesting. I am fascinated by education on all levels and am strongly opinionated about
the different approaches taken to education by various politicians.

But the true value of these stories is just listening to the person behind them. At some point down the road, of course, the content and the stories will begin to gather dust. Ah, but what if that dust could be blown off? What if the child or grandchild of the story teller could listen again or for the first time?

What would that child or grandchild give, or pay even, for the opportunity to hear the stories in Grandmother’s own voice years and years from now?

I remember my Granddad Graves sitting in his rocker “a pickin' at his banjo” and singing some old Tennessee hill song. He had left Tennessee on foot with his big brother when he was a very young man. Since his passing, I’ve heard a few stories about some of his life’s adventures and lessons. But I’d heard none from him. I was too young and he was too old. I suspect many of us would look with sadness on those missed opportunities. What I would give to hear him talking again, and to sit with him while he talked about life growing up in the Tennessee hill country. I wonder how different my own life might have been had I learned from him, just as earlier generations learned life and death lessons at the feet of the old ones.

The libraries represented by your parents, your grandparents, and even yourself are at high risk. Let’s get out the fire extinguisher! Purchase a small, inexpensive, digital recorder. Sit down with one of your important libraries and ask one or two very focused questions.

When did you and grandma first meet and what initially attracted you to her?

If this were your last day on earth, what would you want to tell her?

Finish this sentence: I come from a people who….

What are two or three of the most significant changes you’ve seen in the world during your lifetime?

If you had an abundance of time, energy and money, what are some of the things you would you do with the rest of your life?

Once someone begins a story, it goes on and on. Concentrate your attention on Grandpa; let him know you are really interested, and be very careful not to interrupt him. Interruption will guide his conversation where you want it to go instead of where he wants it to go. Digression and “rabbit trails” are a blessing. Burn the recording onto a compact disc and pass copies among loved ones as gifts.

Most of us never realize the fortunes that lie within our library.

The New Estate Tax Law

2011-02-10T16:07:00.001-07:00

The new estate-tax law has created a window of opportunity. Though the law expires in only two years, the time is right to learn the details-to take full advantage of the benefits while avoiding huge pitfalls.

You are invited to a workshop, The Estate Tax and You

Thursday, March 31, 2011—7-9 pm

The new Fruita Community Center, 324 N. Coulson St., Fruita, Colo

RSVP.... 970-858-9135.

Andrew Sigerson, a colleague of mine in Omaha, reports that since the new tax law took effect on January 1, he and his firm members have interviewed about 25 potential new estate planning clients. Here’s a quick summary of what appears to be on most peoples’ minds.

1. Most do not know what the law says or means

2. Those that do understand the new law are still very cynical that the new law will become permanent. In fact, virtually everyone thinks it will get worse after 2 years

3. Most people believe we will be messing with this every few years for at least the next decade

4. Financial advisors have continued to stay motivated to set appointments because uncertainty creates opportunities for them to become more “trusted.”

5. Anyone who understands asset protection planning is opting to include the AB trust planning (credit shelter or family trust) anyway

6. People are very open to creating or joining a maintenance program

7. Virtually every trust or estate administration will now require a 706 (estate tax return) which is a great opportunity for us to help families

If you live in our area, I hope you’ll take advantage of this workshop. It’s hard to believe the number of good and bad features to this law.

Irrevocable BERT Trusts, as promised

2011-01-17T11:41:00.000-07:00

Since my last post, less than two weeks ago, the commentators and pundits have had a field day talking about the new transfer tax law. I read a blog this morning by a CPA firm that seemed to be all atwitter about how friendly this all is for the taxpayer. They were celebrating that now one could leave his entire estate outright to his surviving spouse and at her later death, there’d still be no tax because the survivor gets the benefit of both spouse’s exemptions.

Maybe! And in some situations. I see a few very dangerous pitfalls in this new law, to say nothing of the fact that the whole thing goes away and reverts to pre 2006 rules in two years. That alone will be a complete devastation for those people who’ve not considered that likelihood. I’ve been a strong advocate for zero estate tax (or very little tax) for years now, but this law doesn’t do that or even promise it. This law is a trap for the unwary and a boon for those who are wary enough to plan carefully.

Taxes aside, what about all the other reasons to engage in quality estate planning such as asset protection and wealth reception? I’m afraid people are being misled. Some commentators are implying that things are rosy and no thinking is needed. To the contrary, my friends, to the contrary.

If you don’t remember Bill’s and Carole’s concerns as I expressed them in my last posting, scroll down and read them again. They’re short. We explored BERT trusts (sometimes called, Build-up Equity Retirement Trusts).

BERT trusts are a type of “spousal access” trust that can offer great flexibility. The following description is, of course, a very general one. The rights and obligations created by the trust document will govern all of the results and it obviously takes a trained specialist to effectively set up this kind of an estate plan.

Without getting into too much legalistic gibberish, under the right circumstances, Bill can establish an irrevocable trust for Carole’s benefit. She can be the beneficiary and possibly the trustee. Bill can fund the trust with, say, his half of their joint investment accounts. That trust property then, and all its future growth, can be removed from Bill’s estate. As beneficiary, Carole can receive income and principal from the trust. She probably will choose to spend that money on supporting Bill’s and her lifestyle.

Carole can establish a nearly identical trust for Bill’s benefit.

Properly drafted, these two trusts can allow Bill and Carole the use and benefit of the trust property while removing assets from their respective estates. If the tax law remains the same, the trusts provide asset protection and wealth reception benefits for the children. If the law reverts to a much lower exemption, Bill and Carole have the added benefit of a significantly reduced taxable estate. Each taxable estate will not include the property in either trust.

There you have it in a nutshell: flexibility in uncertain times.

Spousal Access Trusts and the New Tax Law

2010-12-30T12:45:00.000-07:00

There is a type of irrevocable trust that is becoming increasingly popular with people, including those with less than “high” net worth. There are a number of these trusts carrying different names and differing somewhat in what they feature and allow depending on what we’re trying to accomplish.

The reason for the current surge in use comes mostly from the confusion we face in trying to plan for the estate tax exemption. No one can predict with any degree of certainty at all what that exemption will be in the next couple of years. We can rightfully point fingers at our Congress, but that begs the question.

Bill and Carole were in my office in October. Bill said, “Nothing is happening with the tax law. Carole and I won’t have enough left to support our lifestyle over the duration of our life expectancy if we give a substantial part away to our children or charity right now. It looks like that’s what we’re going to have to do if Congress doesn’t act before the end of this year. The tax law is so ‘up in the air’ and our congressional representatives just don’t seem to care about that at all. What’s going to happen to our estates and our children if we don’t find a way to plan around this uncertainty?” Without congressional action, the exemption would suddenly become $1 million in 2011 and thereafter.

Their earlier plan, which we did in 2008 and 2009, had retained enough assets for them to live comfortably yet made what we all thought was a reasonable assumption: although the state of the law is somewhat uncertain, it will likely end up in 2010 providing for a permanent estate tax exemption of $3.5 million to $5 million.

Well, that isn’t what happened. We didn’t know this in October, but in December, Congress did act and made significant changes in many aspects of the transfer tax law, some good and some not so much, depending on your own perspective. But permanence wasn’t one of the good points.

The really bad news is that Congress actually exaggerated the uncertainty: the basic exemption is increased to $5M, but the entire law goes away (sunsets) in two years! That’s exactly what we had before but now with a higher exemption so that more people will be caught in the trap when the law expires in two years and the exemption suddenly reverts to $1 million.

So Bill and Carole, and many like them, are frustrated and confused.

Spousal access trusts can help. They can allow the transfer of assets to and even between spouses in a way that allows use of the assets during life. Some of them carry funny names like BERT Trusts and Defective Beneficiary Trusts, and each meets different needs in differing ways.

We’ll look at a couple of these, including the BERT Trusts we set up for Bill and Carole, over the next two blog issues. So stay tuned.

THE KENNEDY DETAIL

2010-11-22T19:20:00.000-07:00

Believe it or not, this posting does belong on a Legacy Blog. What was Kennedy’s legacy to us all?

I just spent a week on the beach in Puerto Rico! One of the things I enjoyed doing the most (besides helping Grandsons Daniel and Jake play important games in the sand and surf) was to read Jerry Blaine’s new book, The Kennedy Detail. I read it very carefully and with tremendous interest as well as emotion because I lived through that time. I, like you, got nearly all of my “facts” over the past fifty years from the media.

Incidentally, for all you conspiracy theorists out there, Jerry will be interviewed on December 2 on the Discovery Channel. I believe it is in the evening at 7 PM. I also understand that the Channel will discuss some of those conspiracy theories before that time, although I can’t seem to find out when. Here’s a suggestion (an obvious one, at that) from one (me) who is always intrigued by conspiracy but who long ago determined that such avenues in regard to the Kennedy assassination were simply not true ones, but were part of our culture’s need to make sense out of the insensible. So, don’t draw any conclusions about conspiracies until you hear Jerry’s interview or read the book. He pretty well disposes of them all.

Jerry was one of the special agents serving in the United States Secret Service and was assigned to the Kennedy Detail. In other words, he was there. After nearly fifty years, he decided it should now be okay to share; time to tell the story, factually and from an insider’s notes and personal recollection. Actually, I need to pluralize that. Jerry got the notes and personal recollections of all the special agents on that Detail. It took him years to put it all together.

This posting is not to be a book report. Already there have been short interviews of Jerry and Clint Hill (another “he was there” special agent) on Fox, on CNN and CNBC that I know of. Shortly I expect most of America will have read the book for themselves and I urge you to be one of the readers if you have any interest in what happened to the President, why it happened, if there is fault to be found and what happened to the hearts of the agents who were there and were charged with protecting the President but who, through no fault of their own, failed. What became of each of them afterward, and what it was like to have that sort of job. If you want more inside detail, vidoes and a list of interviews Jerry has given and will be giving, go to his website, www.kennedydetail.com.

President Kennedy became a personal friend to most of the agents who served him. What do you suppose it was like to lose him suddenly and in the way that it happened, yet be given absolutely no time to grieve because your job required you to immediately throw your shoulders back and assume the same role in protecting the new president and to make it be seamless.

I do have a couple of thoughts that I want to share. The first has to do with President Kennedy’s legacy to you and to me. Since his death, I’ve seen the media and lots of authors deliberating and communicating opinion as to Kennedy’s worth as a president. What I saw them doing is to chronicle the good accomplishments, chronicle the less than good ones, total them up with a resulting score card that says he was either a “great,” or “good,” or “mediocre,” or “not-so-good” president. That’s okay. That’s the way our society grades people. What did they achieve? And were the positives heavier than the negatives? To me, as one interested in real legacy, it’s all irrelevant!

I prefer what I read by looking between the lines of Jerry’s work: when John F. Kennedy came to office, he offered us all hope. That’s not to imply we particularly needed it after our previous president-- but just a sense of beautiful hope nonetheless. That is, after all, a core need of human beings and Kennedy offered that to all of us.

When he left us three years later, notwithstanding the grief and outrage we all felt, he left us with that same hope. His life, his presidency, brought you and me blossoming hope. He loved us and we believed him. That’s his legacy to his people. And what greater one could there be?

Another observation I drew has to do with the integrity of the guys (and gals) who serve in the Secret Service. You know they’ve got a code of silence. They can’t talk about things. It’s just how it is. Yet our media folk need someone to blame when tragedy happens. Maybe it’s not just the media; maybe it’s all of us. When our beloved is taken away or when national tragedy happens, we need to find out who messed up, whose fault is this anyway. And so it was with this one. I remember the press and the television pointing fingers at the Secret Service and saying that since it was their job to prevent this, the occurrence had to mean the Service is at fault. A little simple investigating would have nipped that conclusion in the bud. Yet not until now has the Secret Service been able to speak up.

I think it’s the media’s prioritizing it’s desire to sell product over the need for honesty—to check facts. But that’s just me.

Counselling Based Estate Planning Or, What is the Three Step?

2010-11-05T15:40:00.000-06:00

I’ve taught a lot on this blog about story based planning. Today, I’m going to go backward to a time before “story” was even a consideration in my practice… maybe fifteen years ago.

There was dawning a critical need for a follow up, or on-going maintenance, program in most all living trust estate plans. (I could spend this entire post talking about why that was revolutionary and quickly became the solution to “why most estate plans don’t work.”)

The “Three Step Strategy” takes ongoing maintenance a leap beyond even that. Here’s an article from my recent newsletter. It’s been more than fifteen years since I’ve done any estate planning that wasn’t based on this concept. If you’re a planning professional and would like to learn more about it, just comment on this post or give me a call.

>>>

Why Counselling? Why the Three Step?

Many people think of estate planning as a way to save estate taxes and perhaps a way to avoid probate. There are many more important reasons for estate planning.

For example, have you asked your clients: How do you want to be cared for when you can’t take care of yourself and who gets to make those decisions? Who gets to say that you are no longer able to care for you? Who gets to handle your money and investments when you’re no longer able to do so, but you aren’t yet deceased? Do you want to make sure that your guardians know how to share your values while they finish raising your children? If you are disabled rather than deceased, don’t you have the exactly same guardian question? If your wife remarries after you die, do you want to make sure that her new husband can’t spend your money? If your husband hits a van full of lawyers after you die, do you want to make it harder for those creditors to collect your money when they sue him? If your wife divorces her new husband, do you want to make sure that he doesn’t get half of your money?

I suggest that most of your clients’ answers to all these questions is “yes”. So how is their plan accomplishing these things?

Problem #1 with Traditional Estate Planning: Most estate plans are upside down! They focus on tax planning instead of personal concerns, protections, and goals.

Problem #2 with Traditional Estate Planning: Most estate plans just don’t work! A plan works when every expectation of the client is met. These expectations aren’t met because clients and professional advisors see estate planning as a transaction ending in documents, instead of a process ending in results. Things change. Estate plans should too.

I think that your client families will achieve the best estate planning results with a Three Step Strategy^TM; one that uses clear, comprehensive, customized instructions for their own care and that of their loved ones. The instructions might include a will, a trust, a power of attorney, a living will, and other documents.

Here’s the “Three Step:”

Step #1: Work with a Counselling-Oriented Attorney as opposed to a word-processing attorney. Most estate planning in the US is little more than word-processing. You don’t need a professional for that! The professional’s value comes from counsel and advice based on knowledge, wisdom, and experience.

Step #2: Establish and Maintain a Formal Updating Program. There is constant change in personal situations, both family and financial. Tax laws and other laws change every year in ways that will impact many estate plans. Finally, because attorneys don’t know everything, the attorney’s experience and expertise change. Without updating, plans won’t work the way the family intended them to. Without a Formal Updating Program, any updating at all rarely happens.

Step #3: Assure that Your Wisdom is Transferred Along with Your Wealth. In many families, the parents have an abundance of wisdom that has often been earned the hard way. Through Wealth Reception, an approach that prepares children and grandchildren (or nephews and nieces, or godchildren, or friends) to receive wealth, parents’ wisdom can help make money a benefit instead of the burden that it often is. Most financial windfalls, including inheritances, disappear within 18 months. Your clients can avoid that unfortunate conclusion to an otherwise worthy inheritance with proper Wealth Reception planning.

<<<

Next time, we can explore this further or I will go forward with my introduction of Bert Trusts.

What? What just happened to my estate tax exemptions?!

2010-10-06T15:18:00.000-06:00

[OMG! I just realized I haven’t posted to this thing since mid August. What happened to my superman resolve to post at least twice a month? Oh, well. It is what it is.]

I have a plan to make three or four consecutive posts about a particular quandary we find ourselves in now. Who is “we?” Not just the lawyers and more wealthy clients. The “we” is all of us who have fairly modest estates and who believed for sure that one thing we didn’t need to worry about was paying estate tax. Well, think again!

The Congress of the United States, in its collective wisdom (?—there probably isn’t such a thing), seems to have decided that it may just be politically sound to do absolutely nothing about the “sunset” of the estate tax law. To refresh: the exemption from estate tax, that amount one can pass to heirs free from transfer (estate) tax, was $3,500,000 in 2009. So a married couple, with careful estate planning, could shelter a total of $7,000,000 if both deaths occurred in 2009. Then, as you know, the existing law provided that for those passing away in 2010—right now—there was no estate tax at all.

Ah, but what else did the existing law say? That this tax law would “sunset’ in 2011. That means that the “no tax at all” would just be gone from the books for those who die after 2010. It further said that what would take the place of this “gone” law was the law in effect in 2006. You know what that was?? So unless Congress passes a new tax law for this issue, in 2011 the estate tax exemption will be $1,000,000!!

So, let’s say you have a competent estate plan in place—competent for when your lawyer drafted it-- that exempts all your assets at death. But that was when the exemption was $2.0M or more. Suddenly, you’d better be re-visiting that whole thing.

How do you get an estate worth more than $1.0M? Pretty easily. Just count up your asset value. What’s your house worth? How about your IRA account balances? Your other investment account? And don’t forget the boat—and especially don’t forget your life insurance policies. The death benefit value is includible

Well, remember Bill and Carole from the early days of this blog? They came running into the office last week. Not for themselves, but for one of their children and his wife. The estate is definitely going to be slightly more than the allowed $2.0M. It’s a modest estate, but guess what. It’s going to be lots more modest if son and wife both die in 2011.

Of course, Congress could get real, a little less political, and legislate a reasonable solution. There is that time AFTER the elections next month and before the end of the year. But, I’m not holding my breath.

Next posting, I’ll talk about some “split interest” trusts that are modestly priced, easy to operate and can help a lot in this new vista we seem to see approaching.

BUREAU OF MISSING ESTATE PLANS: CASE FILE #2: THE BUSTED BUY-SELL

2010-08-19T10:02:00.004-06:00

The story you are about to read is true. The names have been changed to protect the guilty. I am a cop, assigned to the Bureau of Missing Estate Plans. My captain is Giuseppe Venerdi, my partner is Jose Viernes. My name is Joe Friday.

It was a balmy spring day when Captain Venerdi called us into his office. The captain started right in. "I need your help with a determination of probable cause. The decedent, Vic, was in business with his partner Tim. They had a lawyer draw up a cross-purchase buy-sell agreement so that if anything happened to Vic, Tim would buy his shares at a price to be set in the agreement, and vice versa. Vic and Tim were required to buy insurance on the life of the other to provide money for the purchase."

"Sounds good." I said.

"Yeah", the captain continued, "there was nothing wrong with the document. But there is a blank spot in the agreement where the price was supposed to have been filled in. It's been 10 years since the agreement was signed, and the amount of insurance has never been adjusted as the value of the business increased, and to top it all off, each partner purchased a policy on his own life, and Vic made his policy payable to his wife. Vic died unexpectedly two weeks ago. He was only fifty years

old."

José interrupted. "So the wife has the money, the estate has the stock, and Tim has an obligation to buy the shares, but no money to do it with."

"You got it" the captain said. "Vic and Tim had a cross-purchase agreement, but they never funded it correctly, and never updated it, so they never had a business succession plan that would work. Tim says its Vic's fault because he gave the insurance proceeds to his wife; the widow says it's Tim's fault because he was supposed to buy a policy on Vic's life, not his own. The widow doesn't want the stock, but doesn't want to make a gift to Tim, and other creditors of the estate don't want a sale at less than fair market value. So, who is responsible for the missing estate plan? Vic? Tim? The lawyer?"

I was silent. I was calculating the legal fees to straighten this mess out, and wishing I'd gone to law school.

BMEP CRIMESTOPPER TIPS:

Clients tend to believe that their planning, be it estate planning or business succession planning, is complete as soon as the documents are signed. They need to be informed, and reminded, that no plan is complete until it is properly funded.

Like any other estate plan, business succession plans need to be reviewed regularly, especially if the agreement itself sets the purchase price. A change in the tax laws may make a redemption agreement more favorable than a cross-purchase, or vice versa.

A review of the funding of a buy-sell is also critical. As the business increases in value, additional insurance may become necessary. And as new insurance products are introduced, or as mortality tables change, the old policy may simply become a bad investment.

The client's advisory team needs to have a process for reviewing and updating the plan as things change. Without a formal plan, it is likely that the updating will never get done.

Remember, once it’s too late, it often really is too late! Reviews are cheap. Too late fixes are not.

What Kind of Estate Planning Lawyer are You?

2010-07-23T10:43:00.000-06:00

That’s a really great question and one you need to ask whenever you are interviewing me or anyone else you are considering as your estate or business planning attorney.

I am a lawyer; I am an attorney; I have pieces of paper on my walls that say so. I’m also a people and my clients are, too.

I am expert at what I do; my clients are experts, even if they don’t realize it, on who they are. I most certainly am not that expert and that, my friends, very clearly makes my client the expert in the room----and I had better never forget that.

Below is a little bit about how I view myself as an estate and business planner. But first, I heard a story and then read a blog and then an article about a man who discovered his death was imminent. His concern was over who would teach, raise, love, and care for his daughters. That brought back memories of my own daughter discovering she had an illness and might well not survive. She did survive and her two very young daughters were spared from losing their mom. But I remember that her hurt and fear was centered on who would be the mom for these young children.

Check out the blog (link immediately left), North Carolina Wills and Trusts and then the link,which is found in that blog, to the article itself. It points out the importance of who you are rather than what you have.

What do you think of the idea of a “Council of Moms” or a “Council of Dads?” Professionally, I haven’t yet done that, but I’m sure very much open to the idea for the right clients. What a wonderful opportunity to do some real good and to think outside-the-box.

That’s the kind of estate planning lawyer I want to be!

And, in that vein, here’s some information from my website.

Welcome

We focus only on people who are:

progressive, proactive thinkers
concerned about legal tax avoidance
more concerned about children and descendants
more concerned about how children will receive inheritance
more concerned about creating and preserving their non financial legacy
looking to become clients for life
looking for the perfect advisors
looking to become the perfect client

If you think you fit this, we invite you to continue browsing...

* * *

My book, "Your Legacy Meaningful Estate Planning", is written for sophisticated planning professionals, as well as lay persons. It teaches, briefly and simply, the necessary tools, strategies and new paradigms for the 21st Century. Copies can be purchased by contacting us.

My book, “Success…Swimming in a Sea of”, is written to demonstrate the deep value in discovering your life’s values and goals, the why, the when and the where. www.stevegammill.com/book

“If you had an abundance of time, and an abundance of money, and your good health, what would you do with the rest of your life?”

Think on that question carefully. Think about asking someone else that question. Can you see how you’d learn about yourself and other people just by answering that question carefully and listening to someone else’s answer?

There are two, and only two, foundational questions in all estate planning:

What will you be leaving behind to your heirs and loves ones?
What will your heirs and loves ones be receiving from you?

The answer to both questions should be: Your wealth, and Who you are

How do I hire an estate planning attorney?

2010-06-27T14:04:00.000-06:00

This is the kind of question most don’t think to ask. But it is a critical one and worthy of taking up this post.

Most attorneys, unless they concentrate almost exclusively in the arena of estate planning, are not good at it at all---but they don’t realize that.

So here are some guidelines we’ve developed for clients to actually insert into their estate planning documents that can assist their heirs, children and trustees in finding a good estate planning attorney. They apply equally as well to those persons seeking to find a good attorney to begin the estate planning process.

* * *

this is a quote directly from our instruction documents:

We have designed our estate plan utilizing a three-step strategy which involves:

(1) receiving attorney counselling as opposed to mere word processing;

(2) formally updating our estate plan on a predetermined and ongoing basis; and

(3) controlling the settlement process (including costs) of our estate plan after the death of each Trustmaker.

Hopefully we will have completed the first two steps during our lifetimes. After the death of each Trustmaker, it is the responsibility of our Trustee to implement the final step.

In order to control the settlement process (including costs) of our estate plan after the death of each Trustmaker, we see the proper role of the estate planning attorney as a counsellor for our family. Our estate planning attorney should counsel our family on how to implement and utilize our estate plan for their benefit. With this goal in mind, we leave the following instructions regarding financial arrangements after the death of each Trustmaker:

a. Instructions Regarding Trust "Settlement" (Asset Transfer)

With only minor exceptions, the process for transferring trust assets after death mirrors the initial trust funding process. We believe the fees for the transfer of assets after the death of each Trustmaker should be similar to those incurred during our lifetime.

We direct our Trustee to utilize the services of an attorney to assist in counselling regarding how to implement the transfer process. We see the proper role of the attorney from that point forward in the asset transfer process as a resource to be used only when problems arise that are beyond the capacity of our Trustee to solve without professional assistance.

We would like our Trustee to hire an attorney to assist in the asset transfer process who will charge on a fixed fee basis, quoted in advance of the beginning of the work. Should the attorney base the fixed fee on a percentage of a Trustmaker's estate, care should be taken that the fee is below that customarily charged in probate matters.

If no attorney can be located that will charge for asset transfer services on this basis, our Trustee may hire an attorney who will charge on an hourly basis. The attorney should provide an estimate of the total costs before the work begins, and preferably a "cap" on the total cost.

b. Instructions Regarding Death Tax Returns

In order to reduce the settlement costs of our estate plan, it is imperative that the cost of preparing and filing the tax returns due upon the death of a Trustmaker, whether Federal Estate or State Inheritance, or both, be controlled.

We would like our Trustee to hire an attorney or Certified Public Accountant ("CPA") to prepare and file the tax returns who will charge on a fixed fee basis, quoted in advance of the beginning of the work. Should the attorney or CPA base the fixed fee on a percentage of a Trustmaker's estate, care should be taken that the fee is below that customarily charged in probate matters.

If no attorney or CPA can be located that will charge for preparation and filing of the tax returns on this basis, our Trustee may hire an attorney or CPA who will charge on an hourly basis. The attorney or CPA should provide an estimate of the total cost before the work begins, and preferably a "cap" on the total cost.

c. Instructions Regarding Probate Services

Our estate plan is designed to avoid the necessity of a probate after the death of a Trustmaker. If assets have been left out of our trust inadvertently, however, a probate estate may need to be opened. Because the amount and nature of the assets left out of trust cannot be determined in advance, our Trustee will need to hire an attorney based on estimated costs.

Under these circumstances, we would like our Trustee to hire an attorney either on a fixed fee basis (quoted in advance of the beginning of the work) or hourly (with an estimate of the total cost before the work begins, and preferably a "cap" on the total cost).

Should the attorney base the fixed fee on a percentage of a Trustmaker's estate, care should be taken that the fee is well below that customarily charged in probate matters.

d. Unrelated Attorney or CPA

Any attorney or CPA hired by our Trustee pursuant to this Section should be unrelated by blood or marriage to any beneficiary under this agreement.

What's the difference between a will and a trust?

2010-06-01T13:18:00.000-06:00

Here are some frequently asked questions. They are answered by Chapter 3 in the Legacy Book:

What is a Revocable Living Trust?
What is a Will?
What is the difference between a will and a trust?

PART II: THE BASIC SOLUTIONS

Chapter 3: The Revocable Living Trust

People often wonder if they need a will or a trust. You can read magazine and newspaper articles, you hear radio ads, or get direct mail advertisements filled with information and opinions on the need for wills and trusts, and why one is better than the other. This Chapter will discuss the legal documents you can use to control the distribution of your property when you die. You will learn what a will is and what a revocable living trust is, and how they each work.

What is a will?

A will is a document by which a person can name the person to have control of his or her property when he or she dies. The will also names the people or organizations that a person wants to receive his property when he or she dies. The person who is in control of the property is called the personal representative; the people who receive the property are the beneficiaries.

Here are a few important things to understand about wills: A will gives no one any power to do anything with any of your property as long as you are alive. A will just “sits there silently” until the day you die. At your death, if you have a will, your personal representative’s power will only become effective after the personal representative gets permission from a judge. The process of getting permission from a judge is called probate. Also, your personal representative does not have power over everything you own; certain types of property are not subject to wills and probate. What types of property are subject to a will, and what types of property are not are discussed later in this Chapter.

What is a trust?

Very simply, a trust is an arrangement between three people; the trustmaker (sometimes called the “grantor“ or, in old language, the “settlor“), the trustee and the beneficiary. A trust is created when a trustmaker turns property over to a trustee, who holds it for a beneficiary.

So, the trustmaker is the person who puts property in trust by giving it to the trustee. The trustee is the person who holds the property (lawyers call this “having bare, legal, title”); the trustee has a duty to only use the property for the benefit of the trust’s beneficiaries, and not for him or her self. The beneficiary is the person who is entitled to receive the trust property, or the benefits of the trust property (lawyers call this “having beneficial title”).

One person alone can play one, two, or all three of these roles. For example: In a situation where a mother or father sets up a bank account for a minor child, the parents are the trustmakers and the trustees, and the child is the beneficiary. (Accounts such as these are known as Uniform Transfers to Minors Accounts.) This is also an example of a common trust that many people set up (sometimes without realizing that they are establishing a trust!).

What makes a trust a “revocable living trust?”

There is nothing special or mysterious about “revocable living trusts.” It is actually very simple. A living trust is any trust that is set up while the trustmaker is alive. The alternative is a testamentary trust, a trust that is set up when the trustmaker dies. A testamentary trust is set up if a person declares in his or her will that he or she wants to leave property in trust for a loved one.

A trust is revocable if the trustmaker can go to the trustee after he or she has given property to the trustee and take the property back or change the terms on which the trustee makes distributions to the beneficiary. (This is in contrast to an irrevocable trust, where the Trustmaker would create a trust where or she cannot take the property back or make any changes to the terms on which distributions are made to a beneficiary—these types of trusts are set up for special purposes only and are discussed later in this book.)

So, a revocable living trust is simply a trust that is set up while the trustmaker is alive, and that allows the trustmaker to take back his or her property or make changes to the terms of the trust at any time he or she wishes.

It is very common in the revocable living trusts for the trustmaker to also be the trustee and the beneficiary of the trust. For example, if you were to set up a revocable living trust and place your bank account “in the trust,” you would change the name on your bank account to yourself as trustee of your trust, to be administered for your benefit during your lifetime (and your specified loved ones’ benefit after your die).

What is the difference between a revocable living trust and a will?

The difference is that in the world of estate planning the revocable living trust can solve two major challenges: First, the issue of who will handle and take care of your property if you are mentally incapacitated (disabled) and, second, when you die, who will take control of your property and make sure that it goes to the people you choose? The revocable living trust solves the first problem by naming a successor trustee, someone to act as trustee of the property if the trustmaker (who was the initial trustee) becomes mentally incapacitated, and can no longer act as trustee. The revocable living trust solves the second problem by declaring who will become the successor trustee when the Trustmaker dies, and who will be the trust’s beneficiaries.

It is important to understand, however, that the successor trustees will have control over only the property that is actually owned by the trust. For example, suppose Bill Sample owns a house, but the deed shows “Bill Sample” as the owner. Suppose Bill also owns a bank account but the bank account shows “Bill Sample, Trustee of the Bill Sample Trust” as the owner. If Bill becomes mentally incapacitated, whoever Bill has named as successor trustee of the Bill Sample Trust will be able to take control of the bank account and use the money in the account to take care of Bill. However, because the house is owned by Bill, not by Bill as trustee of Bill’s trust, the successor trustee of Bill’s trust will have no ability to do anything with the house. In the same way, when Bill dies, the trustee of Bill’s trust will be able to access the money in the bank account and give it to whoever Bill wished to receive it (as set forth in the trust), but the trustee will not be able to administer the house as Bill wished. (Of course a good estate planning attorney would ensure that this does not happen—but it is important to understand that a trust only controls the property which is owned by the trust—if Bill and his attorney had taken the additional step of titling the house into the name of the trust, the trustee could also administer the home as Bill wished, easily and inexpensively.)

A will, on the other hand, is much more limited. In a will, a person declares who he or she wants to take control of her property when he or she dies, and who he or she wants to receive his or her property. Here in Colorado, we call the person who is nominated in a will to take control of property the “Personal Representative.” The Personal Representative has no ability to take control of any property as long as the person who made the will is alive. Also, a will does not give anyone any ability to access or manage a person’s property when the person is mentally incapacitated. For example, if Bill Sample prepares a will and names his wife, Mary Sample, as his Personal Representative, if Bill became mentally incapacitated, Mary would not be able to access any money in an account owned by Bill or sell any property owned by Bill.

Generally, a Personal Representative has no control over property that the deceased person owned as a joint tenant with another person or that was owned under a contract. “Owned under a contract,” includes property such as life insurance, annuity contracts, IRAs, or 401(k) plans. These are arrangements where the owner names a beneficiary to receive the property upon his or her death directly—without the involvement of the Personal Representative.

Finally, Personal Representative must get permission from a District Court Judge to be able to take control of the deceased’s person’s property. The process of getting this permission from a judge is known as “probate.” (One major advantage of trust-based planning is that the successor trustee of a revocable living trust does not have to get permission from a judge to deal with any property in the trust.)

In summary, a revocable living trust:

· Can provide a means for you to name a person to handle your property if you are mentally incapacitated;

· Can provide a means for you to decide who will receive your property when you die, and who will make sure those people receive that property;

· Controls all property that you title in the name of your trust; and

· Does not require the successor trustee to commence any form of probate proceedings or obtain permission from a probate judge in order to manage and administer the trust property.

On the other hand, a will:

· Provides a means for you to name a Personal Representative to control your property when you die and to name the people who should receive the property;

· Only allows the Personal Representative access to your property after you die, not during any period that you are mentally incapacitated;

· Only works with property that you own in your own name alone, not with property you own jointly with another person, or as a contract, or that you own in a revocable living trust; and

· Requires the Personal Representative to get permission from a probate judge in order to deal with your property.

I have heard that I don’t need a trust because probate is simple in Colorado. Is that true?

It is true that Colorado’s probate process is less complicated than the probate process in some other States (such as California or Florida), but that does not make it a “simple” process. There are still various legal requirements that must be dealt with, filings with the Court that must be made, and deadlines that must be observed (for a complete discussion of probate proceedings in Colorado, see Chapter 14). Therefore, just because the probate process is less complex in Colorado than it is in some other states, that fact does not necessarily mean that you don’t “need” a trust in Colorado.

If you want to minimize the time, expense, and hassle of settling your affairs when you die, then what you need is to work with an attorney who is committed to providing you the counsel and advice necessary to create a plan that will result in minimized costs for your family, in most cases, because it can avoid the expense of a probate proceeding, you will choose to use a revocable living trust as your planning instrument.

In addition, the time and expense of settling someone’s affairs are minimized if a family has reasonable expectations of what must be done in the process, how they will do what must be done, and how much it is going to cost them to get it done. This happens best if the deceased person left clear instructions, had organized what she owned and how she owned it, maintained his or her plan over time, and if the family had a good relationship with the deceased person’s professional advisors.

Will I lose control of my property if I put it in a trust?

If the trust is a revocable living trust, and you are the trustee, the answer is “No.” If you are the trustmaker of a revocable living trust, and you give your property to yourself, as trustee, then you will retain control of it. You retain full control during your lifetime, as the trustee of the trust. You also retain control because, as trustmaker, you have created a revocable trust. Because the trust is revocable you have the power to either amend the trust or to have the trustee (you) return all of the trust’s property to you.

If I can’t be the trustee of my trust anymore, then what happens?

There are only two situations where you may have to stop acting as the trustee of your revocable living trust: One is if you become mentally incapacitated; the other is if you die. To prepare for both of these situations you should name successor trustees to take over as the trustee of your trust.

Your next question may be, “Who should I name as trustee?” The choice of trustee to care for your property while you are mentally incapacitated and after you die should be made carefully. Most people immediately consider some family member. The clients reason that family members are familiar and believe they will take on the role out of a sense of duty and not in order to make money.

However, you should realize that being a trustee is a great responsibility. The trustee of a trust has a duty to protect the trust property and use it only for the trust’s beneficiaries. A trustee must be very careful to keep any trust property totally separate from his or her own property. For example, a trustee cannot move the money in a trust’s bank account into his or her own bank account “because it would be easier to deal with it there.” If the trustee did that, it would be difficult, if not impossible, to keep straight how much of the money in the account belonged to the trust, and how much belonged to the trustee. The trustee must keep good records of all property that the trust started with, money paid to the trust, and any expenses paid out of the trust. Therefore, anyone acting as trustee must have an ability to keep good records and be able to prepare a trust tax return.

For these reasons, it may be a good idea to have a professional fiduciary (trust company, CPA, etc.) act as trustee. A professional will, of course, charge a fee for this, although it is usually less than most people imagine. The most important fact is that the professional trustee will be well prepared to do a complete and thorough job of managing the trust assets. Another option is to have a family member and a professional trustee serve together. A well drafted trust will allow the family member and professional trustee to divide up the trustee duties. For example, the professional trustee could be responsible for trust administration (keeping the books and records of the trust), and for making distributions from the trust, whereas the family member could be responsible for determining how to best invest the trust assets.

It is also important to look at the conditions under which a successor trustee could be removed and replaced. Circumstances and conditions change over time, and a person who would be an appropriate trustee today may not be appropriate ten years from now.

Therefore, there are many options in choosing a successor trustee for your revocable living trust. This is where working with a good, counseling-oriented attorney will provide value for you and your family.

Do we have to file any special tax returns?

As long as you are alive, the trust will use your social security number and any income from property in the trust will be reported on your income tax return—in other words, from an income tax standpoint, nothing changes.

On the other hand, after you die the trust will become irrevocable. At that time the trust will need its own taxpayer ID number from the Internal Revenue Service, and will need to file a separate tax return. The tax return for a trust is a Form 1041

If I set up a revocable living trust how much will a bank charge to be trustee?

As long as you are alive and not mentally incapacitated and are serving as the trustee of your revocable living trust, the trust company will not be acting as trustee and there is no reason to pay any trustee’s fees. If you list a trust company to serve as a successor trustee, it will only begin to collect fees when it begins doing the actual work of being the trustee (i.e. if you become incapacitated or die).

Basic Beginning Questions

2010-05-04T16:24:00.001-06:00

Here are a couple of questions I addressed in my first book, Your Legacy: Meaningful Estate Planning, which was published in 2008. If you would like a copy of the book, go to my site, www.stevegammill.com, go to the “contact us” page and tell me that. I’ll get one to you.

Why is goal setting important in estate planning?

This is a very common question and a very good one. Many people understand estate planning primarily as a death distribution mechanism, a will. “When I die, what happens to my stuff?” You cannot read much of this book without becoming aware that real planning, the kind that gives you that pure satisfaction of a job well done, involves more than simply a pattern of distributing assets after death.

It follows then that defining your goals and objectives and learning what each really means to you is important. Discover where your heart is as well as where your pocketbook is. It also can be a lot of fun. Often, people with very little money or tangible assets become every bit as enchanted with this process as people with significant financial resources.

The use of the terms goals and objectives sounds a little hackneyed. Put another way: Discover what is truly important to you and what you’d like to see happen. Most of us would be hard pressed to sit down and define our goals and objectives beyond a short version of an obvious: “I don’t want my property to pass to the state and I don’t want my three children fighting over it.”

Throughout this book you will learn the value of selecting the right lawyer, and you’ll be introduced to how you might go about it. If you recognize the importance of goal setting and realize

· that your true goals may be buried beneath the surface,

· that you are going to need skilled help in pulling them up, and

· that the importance of being able to articulate them, especially when some of them appear to conflict with others, then

you will recognize the need for an estate planning lawyer who also possesses an ability to listen to your unique concerns and who is willing to facilitate your unique goals.

What does this have to do with creating a Legacy?

Understanding and determining your goals is part and parcel of Legacy planning and the extent to which one is included in the other depends greatly on your interest in leaving a Legacy.

According to the Oxford dictionary, the word “Legacy” is simply defined as: a thing left to someone in a will, or handed down by a predecessor. Synonyms in that dictionary include: a bequest, heritage, inheritance, patrimony.

This definition probably does not surprise you. Nor will it surprise you that most of us think of that definition in terms of money or property. The money you leave to your grandchildren is your Legacy.

Sometimes a Legacy is thought of as a sort of reputation. “He was always known as a tough old weather beaten farmer who spent his life learning and teaching self-sufficiency. That was his Legacy.”

Your “Legacy” may include your money, or it may not. It definitely includes all of “who you are” and how you choose to disclose that to those who come after you.

You’ve probably heard, “Mom and dad are just like two peas in a pod.” That is not so in this arena. No two people will have the same goals and objectives once they have spent a little time thinking on the subject. That is why your Legacy will be your own unique Legacy.

Home Ownership Accelerator®—what an estate planning strategy!

2010-04-19T14:07:00.003-06:00

A few weeks ago, Carole and Bill were in for some final tweaking on their plan design. Carole happened to mention that at their bridge group the night before, someone was talking about a “new kinda mortgage” she and her husband had discovered and were looking into. Carole had never heard of this thing before and was asking me what I knew about it. She called it a Home Ownership Accelerator®.

Well, turns out I have heard about it. Of course I don’t know how it’s going to pan out and I don’t yet have any clients who have experienced it. But, I can tell you I have been exposed to an in depth explanation and have even participated in a webinar explaining it. I am about as sold on this as I have ever been on something I have not actually experienced. David Vindiola tells me they have quite a few clients that have subscribed to the program. He is excited and if you know David, he will explore a new idea to its very depths before he will recommend it to his beloved clients. He doesn’t “shoot from the hip,” and an income “ticket” is not his primary motive in life. Before I give you a short, bullet type of synopsis, let me point you to a website. http://mvmmortgage.com/blog/?m=201003 This particular link should take you directly to Dave and Mandy Vindiola’s blog and the particular posting that describes the Home Ownership Accelerator ®.

You apply for and obtain from the Bank a line of credit which is based on the market value of your home or other real property. You pledge your property as collateral, just like a home mortgage situation.
The Bank uses part of the line to pay off your existing mortgage; the balance of the line is available to you.
You open a bank account with the Bank and deposit your income (pay checks, social security, whatever) regularly into that account. Those entire deposits are immediately credited toward your line of credit balance (your mortgage), first to interest and then to principle.
You pay your bills and spend out of your “checking account” (write checks, use your debit/credit card) just as you normally would except that you are drawing on your line of credit (because your income deposits went to reduce your mortgage and pay interest).
In your normal situation, you deposit more income into a checking account than you spend out. The same applies here but the result is different: your mortgage (line of credit) balance reduces much faster than it otherwise would and your interest payment is less than it typically is because principle is less and because there are fewer days in the month that the principle is accruing interest).

I am certainly happy to give you more information on this, but I urge you to go directly to Dave and Mandy Vindiola. They can be found at the link above and also at Wealth Balance which is a blog you find right here on this blog page—off to the left.

I am definitely putting Bill and Carole in touch with the Vindiolas. They have more than one property they could use on this program. They have a residence, a vacation condo and some income producing properties. They can use one, more than one, mix and match, whatever.

What a way to access the equity in real estate without having to refinance each time you have a need, plus paying off the mortgage faster and with less interest, overall.

I have added this to my estate planning quiver.

Story Telling and Story based planning

2010-03-31T14:46:00.002-06:00

I’ve been walking us through plan design for Bill and Carole using story telling as the foundation. Here is an example that I think will take us back to square one on why and how this is such a powerful tool.

About three months ago, I was engaged by a new client to design a revocable living trust. The couple’s purpose in seeing me was, “…our concern with our sons’ not having the maturity to handle the small inheritance that would be theirs should we die.” As with most clients, the goals and objectives were ambiguous yet objectively stated.

I told them that my process would include a purposeful or pricelessConversation™. I explained what that meant and what was involved. I did not indicate it was voluntary, but I did explain that only through that medium are we (and the “we” includes the clients themselves) able to become aware of and articulate what they really want to see happen. Only then can we discern their true dreams. They were a bit skeptical, but polite. I discussed what “purpose boxes” are and how we would use one, two, or many of them in the trust and why. I said that we’d (first I would, then they would, then we would) pull a tapestry containing the threads of their hopes, passions and dreams for themselves and their boys from the stories they told during the conversation.

The next meeting was devoted entirely to the conversation. I also made it clear that they would receive a CD of the conversation, professionally packaged and with enough copies for each of their children. It was part of the estate plan and would not be an additional fee. For the next hour and a half, I asked a few, a very few, questions and they each responded with some of their life’s stories, a few of which had been forgotten. As we progressed, they became more and more interested and occasionally even corrected the other’s story.

Toward the end, the wife made a remark about one of her sons that she then wished she had worded differently. It was not derogatory, but didn’t accurately say what she wanted to express. I assured her I could edit the recording, remove that sentence and replace it with a new one. She immediately provided “the new sentence” and we moved on.

The next day, I listened to the recording, made some notes and compiled them into a pretty good purpose/text box for the trust. I thought it was articulate, said what they wanted it to say, and was “good to go.” I sent it to the clients with instructions to make whatever changes they wanted and then return it to me. I would then put it into an appropriate place in the trust document.

Typically, only a few clients will actually make changes. Sometimes they simply approve what I’ve written. While that’s acceptable, the sadness is that the purpose boxes are then in my voice and not the voice of the clients.

Some clients will actually get engaged and make wonderous changes. That’s this client! They kept the manuscript for a couple of weeks. I even asked about it and was told they were working on their “homework.” When I finally got it back, it was a masterpiece. They had used my language where they thought it good and had put everything else into their own voice entirely. They kept my outline, but it will be clear to their boys that “Mom and Dad actually wrote this to us.”

An issue of concern, of course, is whether in a litigation situation a court might be influenced by the client’s text box and misinterpret the language of the trust itself.

In the many times my clients have done this, I always review their final language, and I have yet to see language that I think might cause interpretation problems.

This is what Purposeful, Story based planning is all about.

Being All that You Can Be

2010-03-19T13:34:00.000-06:00

Some of you may not know this, but I belong to a particularly wonderful professional organization. It’s the National Network of Estate Planning Attorneys. I refer to it as particularly wonderful because it in fact is a very unique and inspirational organization. When I joined, about 14 years ago, it touted itself as Changing the Way America Plans. And, truth be known, it has been doing that effectively since its inception in the ‘80s.

To see that, all one needs do is look at the websites and blogs of its members (this being one) and then look at the content on the sites of other estate planning professionals, be they attorneys or not. The Network (as we like to call ourselves) is all about relationships, about helping regular folks (aka clients) actually understand, like and appreciate their estate plan and to believe that when the time comes for the rubber to meet the road, their estate plan will actually work! Believe it: that is an extremely unique concern. Most estate plans, truthfully, don’t work; those designed by a Network member usually do.

Bill’s and Carole’s approach to their plan is classically Network philosophy: let’s use counselling to understand who Bill and Carole really are and what they would like to see happen with their plan. After we learn as much as we can about that, then and only then will we begin to create some choices, some legal technical work designed to meet those goals.

If you’ve been reading this blog, you know the process, the story telling, the extracting of threads of the tapestry.

At the end of April, I’ll be going to Indianapolis to attend the Network’s semi annual conference. We call it the Collegium. As always, I will be learning (not teaching this time) lots and lots of new things, solutions to new issues such as what in the world to do with the tax questions arising out of estates of clients who pass away in 2010, and many others. There will be classes on storytelling, on Purposeful Planning and on all sorts of technical legal issues. It’s an exciting time for me.

The Network is also introducing a brand new Advanced Education Program. I am one of the three "deans" of that program. We’ll be starting off on Wednesday with a discussion session on the best use of trust protectors. Trust protectors have been around for only a short while and an awfully lot remains for us to learn as we go forward. Nearly all of the trusts I design nowadays use trust protectors—not so five years ago. We’ll be sitting at the feet of Alexander Bove, a nationally recognized teacher of advanced techniques. I expect that when I return, my trust protector clauses will look differently than they do today.

The Advanced Program will continue with twice a year “retreats” in a comfortable, inviting retreat setting. In July, we’ll be in Denver. For those readers of this blog who are National Network members and interested in “being all that you can be” (or, “being on the cutting edge”), you need to consider signing up for this two year program as a student or faculty member.

Bill's and Carole's Purposeful Planning

2010-03-11T07:28:00.001-07:00

Bill and Carole, although by now pretty accustomed to storytelling, still were somewhat reluctant to “take charge” of the finished product and incorporate it into their trust documents. The idea, of course, is to expand upon the Trust by including purpose narrative, instructional material, admonitions, encouragement and more enhancement of Bill’s and Carole’s deepest held values, wishes and hopes for their children, all in non legalese, non binding, inspirational messages. (Take a look at Seedlings blog. The link is immediately to the left)

I’ve been doing this long enough to not be surprised by that reluctance. It’s one thing to tell stories in response to focused questions; it’s far more to extract deep meaning from the stories and put that into a written, legal document. So, I did as I usually do. I sat alone one morning and listened to one of the pricelessConversations we’d recorded. I selected the one about Mattie (remember their autistic son?) and listened to about 40 minutes of it. I made some notes as it progressed and finished with about two pages worth.

I read my notes and compiled them into my version of Bill’s and Carole’s deepest feelings toward Mattie and the concerns they had over his comfort and welfare when the time rolled around that they would no longer be there as his safety net. It was surprisingly easy and quick. The end result was a 600 word “text box” all ready to implant appropriately into the revocable living trust. I even had some text appropriate for a couple of other places in the document.

So I put it all together and then shipped it off to Bill and Carole for review. I always do that—after all, it’s their trust and we certainly don’t want some lawyer language in there that doesn’t reflect their intentions. Most of the time, people just leave the narrative as I have worded it.

Guess what! Bill decided to see what he could come up with using my text as a template but trying to put it into his own words. He got excited. The result was amazing and was exactly how I hope to see these things work out. Bill understood what he and Carole were trying to say better than I did and we ended up with a beautiful tapestry depicting real depth and meaning. They have their own voice into that legal stack of paper—it’s theirs! It’s not the lawyer’s.

That ownership concept is terribly important for even another reason. Do you think there is much chance their trust will sit on a shelf and stagnate? It’s no longer just a sterile old estate plan—it’s their estate plan. That pretty much guarantees that when the time comes we’ll have an estate plan that really works! Believe it or not, that’s rare.

Our Libraries are burning!

2010-02-21T15:37:00.004-07:00

The other day, someone posted on Facebook a truly moving video about a WWII P-51 pilot reunited with a replica of his plane and a bunch of other WWII P-51 vets. This man had 55 missions under his belt, all in one plane, February. Here’s the link if you’d like to spend about 30 minutes wiping your eyes and listening to a few powerful and wonderous stories. http://www.asb.tv/videos/view.php?v=1bf99434&br=500%3E

There’s an old saying (I’m not sure where it originates, but as with most truths, it doesn’t matter). “When an old person dies, it’s like a library burning down.” When I’ve talked to groups about storytelling, that saying has proven pretty powerful. You know, we’re losing our WWII veterans in ever greater numbers, daily. Soon, there just won’t be any libraries left.

WWII vets may be unique in another way, as well: they just aren’t, it seems, inclined to tell their stories. They are pretty humble people, at least about that. I’ve sometimes asked a child or grandchild what their dad experienced during the War. They all say, “I don’t know—he just didn’t talk about that much.” That was certainly my experience with my own dad. He was in Normandy at the time of the invasion. I never did learn whether he was in the invasion itself. I think I just failed to ask—but he never volunteered any stories either.

Twice now I’ve interviewed WWII men. Both times were memorable. One’s son thanked me and said he’d learned things he’d never known about his dad. That man was a survivor from a ship sunk by a Japanese submarine. The other man had never left stateside, but spent the entire war training young pilots how to fly fighter aircraft in Europe. His impact on our war effort was pretty obvious.

But, be careful. It was “shell shock” in those days—today it’s PTSD. I’ve learned not to ask a direct question about combat experiences. It can inadvertently trigger some devastating consequences. I’ve learned how to ask more subtle questions that allow a person to “go there” if he wants to.

Do you know any veterans? Maybe it doesn’t matter if they are from The War, or from a more recent one, but we’re losing libraries. Get yourself an inexpensive recorder. If you contact me, I’ll send you a copy of my question list. Collect those stories and pass them on to loved ones who would love to have dad’s (or granddad’s) stories, in his own voice.

Comments and Testimonials

2010-02-11T15:05:00.001-07:00

We’re beginning to get some really helpful responses to this blog, and by helpful I mean the comments will carry some meaning for you. I’m going to use today’s entry to post a couple of them.

I also will try to make more frequent postings. I’m shooting for next week, and even if things get hectic, I’ll be back much more quickly than I have in the past.

In my most recent posting, February 2, I was talking about the current quagmire we’re in because of the Congress’ inability (read, unwillingness due to political and monetary pressure) to deal with the transfer (the estate) tax and how it has confused estate planning professionals and lay people alike. If you wonder whether I am fairly representing the concerns we have nationally among the better estate planners, it’s a legitimate concern. Here’s a comment that was posted by John A. Warnick after attending one of the most prestigious estate and tax planning conferences in the Country.

John A. says:

Steve, I had the privilege (BURDEN is more accurate) of attending the Heckerling Institute last week, the nation's largest and most prestigious symposium dedicated to estate planning. The points you are making in this blog are EXACTLY what I heard from speaker after speaker at Heckerling. THANKS for caring about your clients...and about the public. Hopefully, Congress and the President will demonstrate that same level of care and quickly act to end the planning uncertainty we are in right now.

I recommend you click on John A.’s blog, Seedlings, just off to the left. http://www.johnawarnick.com/ See for yourself his views on quality planning.Additionally, if you are an estate planning professional (attorney, CFP, CPA, etc), you need to seriously consider joining his professional organization, Professional Planning Institute. Contact me about that if you like.

And here are some remarks from Michael and Christina Baker, authors of Chronicles of Applewood Square, again just click off to the left. Michael and Christina, while not necessarily my first clients for story based planning, were definitely fellow pioneers in my early foray into using trust text boxes as taught by John A. I was able to use their own words, not mine, in their business documents. One colleague commented, after reading the text boxes, that his eyes teared up and he could actually hear Michael and Christina as he read their words.

Michael says:

Wealth Stategies Planning attorney, Steve Gammill is one of the pillars of your overall wealth creation strategy. Through Steve's awesome and introspective programs, you will discover things about yourself that may have been dormant or hidden and through the process of story-telling are now brought to light to get on the road to your destiny of what God created you for, and find true purpose in your life. For Christina and I, it was the love for our children and yet to be born grandchildren and our goals and dreams of giving them every opportunity to have a joyful and robust life. To re-discover we have a rich heritage and lineage. To make an impact on society through Judeo-Christian values. Merely giving back what we have merely been stewards of. Thanks, Steve. You helped us form the basis of our thinking and discovery of who we really are and what was passed down to us through our grandfathers and mothers down to us. It was through your amazing programs of introspection that helped spark a fire in us and believe we can fulfill our God-given destiny.

So I’m again asking for your comments. I enjoyed commenting back and forth. I’ll be telling you more about why I choose particularly to follow the blogs and sites listed off to the left. These are wonderful, quality people with something to say.

Congress says, “Surprise!! No estate tax.” But, wait!!......

2010-02-02T15:07:00.003-07:00

Before I get into my main thread for today, I want to point out that if you’ve been on either of my blogs recently, you may have noticed a new aspect. Off to the side, the left side on this one, is a listing of blogs I am following. I do this for one reason only: they are very good . There are lots and lots and lots of estate planning blogs out there. Just google estate planning and see what you see. These particular ones support the philosophies I advocate and are, for the most part, authored by true professionals, people you could do business with. As an example, take a look at Karen Brady’s (legacyplannerblog). Karen understands people, what makes us tick, and the need to understand us well, before undertaking to help us with our most important plans. I love this blog and think you will, as well.

So, to business.

Bill and Carole came in the other day. They were responding to a letter I sent out to a great many of my clients warning of some huge tax traps that are looming. And, looming doesn’t mean they are all yet known to us.

We do know that the estate and transfer tax has taken a very surprising turn, but we don’t know if or when the Congress will decide where it should land and if the landing should be retroactive to 2009 and if the landing can be relied on for planning in 2011 and beyond. Rich Shapiro’s blog post (NY Estate and Wealth Planning) recently outlined the current state of the estate/transfer tax. It’s what Congress said some years ago it might do, but what all we knowledgeable people said it would never do. So, this year, 2010, there is no estate tax. But in 2011, the tax comes back in with an exemption of only $1M. Everything over that $1M is taxed at 2001 rates. This news is, of course, right after people got used to 2009’s exemption of $3.5M. What all does that do to folks who planned for the large exemption?

But there’s yet another, maybe even bigger, hidden trap.
Most people have a trust or a will that sets up a separate trust at death to shelter the decedent’s assets from estate tax up to the amount of decedent’s unused tax exemption regardless of whether the estate is large or smaller. Those trusts are often, very often, funded through a “fractional” formula calculation that is based on the amount of decedent’s assets subject to tax. Using a formula technique is usually a very good plan because of the impact it has on IRA accounts and for other very practical reasons.

But…

If there is no estate tax, and there isn’t in 2010, and if the amount going into that trust is based on there being an estate tax, the chances are pretty high that NOTHING will go into that trust. And why, pray tell, is that bad? After all, no tax is good news, right?

There are many reasons to use that separate trust besides estate tax avoidance. It can provide asset protection otherwise not available. If that trust doesn’t exist, my spouse and loved ones will inherit property that is suddenly available to their creditors; or, because those assets are available, my spouse and loved ones suddenly lose their ability to qualify for Medicaid and other governmental assistance programs—or to remain qualified for the programs they were benefiting from just before I died. This, all because nothing went into the “protected” trust.

Many times, the beneficiaries of that separate trust are different people than the beneficiaries of the rest of the property and for a variety of valid reasons. If Bill and Carole want Mattie to receive his inheritance differently than their other children, they may choose to provide for him in that separate trust. So now, we risk Mattie not inheriting anything at all, because nothing at all went into that trust.

I could list horror story after horror story all happening to people who thought their plan was just fine, “thank you very much.” Fortunately, most people who did their planning with a really good professional, since about 2001, have trusts that specifically provide for this “no tax” contingency. But I can’t tell you the number of trusts I’ve reviewed over the years drafted by other, well qualified, estate planners that are going to crater!

If you are among those who are breathing a sigh of relief because there is no estate tax for year 2010, and you are, therefore, “just fine” in doing no planning today, I suggest you do a “do-over” in your thinking and at least invest in a consultation with someone.

Success...Swimming in a Sea of

2010-01-11T15:48:00.002-07:00

www.stevegammill.com/book.

Some of you know I recently published my second book. This one’s called Success…Swimming in a Sea of and you can preview and purchase it at a number of sites.

           www.stevegammill.com/book

or        http://www.trafford.com/

or        http://www.amazon.com/

or        http://www.barnes&nobel.com/

This blog for the past few months has been about story telling—story based estate planning—and why I believe so strongly in it that I say, whenever anyone will listen, that effective planning today can only take place in an environment that encourages people to think for themselves, to discover their own unique talents and the special gifts that we all have. I’ve been developing the idea that story telling is pretty surely the very best way there is to provide that environment.

The “Success” book was produced to help teach that very concept. In it, I ask fourteen individuals how they personally define professional success, success in learning and education, personal success, successful relationships and financial success in their own lives. I never asked the direct question, of course. I asked open ended questions about their own lives; questions that encouraged them to relate recollections.

Their stories are wonderous and amazing. I leave it to you to learn the true meaning of success from these unrelated people. Most of them didn’t even know who else was being interviewed for the book until after it was published and we had our exciting launch party.

When you have read a chapter (and that is one complete interview of one person) I suggest you take the time to sit quietly and consider what you have read (heard). Can you pull out a thread or two—or three or four—that announce clearly, even though subtly, important life principles and values? Of course you can, and that’s what will give you the concepts to help articulate those most deeply held wishes; that’s what will help you create purpose in the estate planning. “What’s the real reason we’re spending so much time and money creating an estate plan? Why is it important to learn how we feel about people, places and things?”

I know you’ll enjoy the book! If you’ve already bought a copy, give me your comments. If you have yet to get one, let me know when you do and what you thought of it.

A couple of comments have suggested that the story based discernment process, although wonderful in concept, is just too time consuming and, therefore, too expensive. What do you think about that? I believe it is a timely and relevant consideration. I also believe it can be planned for including understanding that it may not be for everyone.

One comment that I love came from John Warnick who was quoting Mr. Rogers: "I hope you're proud of yourself for the times you've said ‘yes’ when all it meant was extra work for you and was seemingly helpful only to somebody else." My little time in this particular arena of practice has taught me loud and clear that instant gratification (fees, large and immediate) is rarely what it’s all about.

"You have been the star. Your job now is to make other people the stars." From Ted Ripley

Story telling as a “stand alone” legacy

2009-12-07T10:07:00.000-07:00

Well, it’s been way too long since I posted here. Mostly that was due to the holidays, but it’s also true that I have been really busy with some new avenues. I started a second blog (Steve’s Random Musings at http://stevegammill2.blogspot.com), Jan and I spent some time in a pricelessConversation™ called the Meaning of Success which we are gifting to our kids this Christmas, we also discovered and tried out a new on line survey called Your Flagpage designed to tell us all what motivates us in life. We ended up giving a subscription to that one to our kids and two of our older grandkids as Christmas gifts. If you’re interested in hearing more about that, check out http://www.laughyourway.com/.
And my new book, Success…Swimming in a sea of, has just been released. You can find it on line at Trafford.com, Amazon.com, Barnes and Nobel. You can also order it directly from me by email.

For the next while, I would like to focus on story telling as a way of preserving and passing on a legacy rather than a way of discovering goals and objectives in the estate planning dialogue. I think that latter message has been pretty clear but I’m not so sure the “stand alone” legacy message has. I’ve had some comments that this blog is pretty much confined to estate planning. That’s true, but it would be a sad thing if we missed the message about the value of nonfinancial legacy and the opportunities this method opens for us. You don’t need me or any other professional to help you capture the life lessons of your parents, your grand parents, your children and even your own.

We’ll talk about what’s available to you, how to implement a conversation and how to help the person you’re interviewing discover their most deeply held values and turn that discovery into a series of true life stories that are fascinating, precious and absolutely priceless.

When I first began studying this idea, I was deeply moved by the recognition that I didn’t even know my own parents’ life stories, except just superficially. Both of my parents, their siblings and all four of my grandparents (and their siblings and cousins) are gone! My dad and his father before him had done a little research and put some history on paper. Not much, but more than enough to tell me there is much, much more there, most of which rests in the minds of deceased folk.

My grandfather, my mom’s dad, was born and raised in the hill country of Tennessee. He was, I understand, a cousin of Chet Atkins (who was likely not even born then). He left Tennessee to “seek his fortune” before 1900 and made his way to a life near his older brother who was farming in southwest Nebraska. He became a farmer, a school teacher, a superintendent of schools, a grocer and a retired person who played a pretty mean banjo. That’s about all I know. He did love to talk. So, can you imagine the stories he held in his mind’s library? If they were shared, it was not in a format that I can see or hear. I do know (we learned after his death) that he was a little older than my grandmother had thought, and had hidden that from her. I wonder why. I wonder why he left Tennessee, and what the relationship was with the Atkins family. What would I give today to know those stories? In his day, the best we could hope for was that he, or someone close to him, might have written them down. Today, were he still here, I could actually sit at his feet and listen to him tell me those stories. I could record them. I could transcribe them to paper,I could burn them to a CD in his own voice.

My grandfather’s library is gone as though it just burned down and nobody cared. The same can be said for lots and lots of other libraries that you know of.

I am, fortunately, not the original pioneer of this pricelessConversation™ concept (which I’m going to refer to as RealConversations™ in the future). I have been mentored for some years now by Scott Farnsworth at SunBridge. From the very first introduction to it, I have been keenly aware of the deep, meaningful value we can offer to people by providing the opportunity for them to tell life stories. My hope for you is that you will become excited at the thought of the stories held in your loved ones’ libraries and excited to learn how to discover them, capture and preserve them in voice and content, and then to pass them on “down the line.”

Right away, you’ll see the striking difference between focused story telling and oral histories. You’ll see the excitement in refraining from guiding the conversation in any particular direction; in embracing it when your person takes “rabbit trail” digressions; and in finding the person’s values exposed as threads woven into her tapestry of life.

The starting point is to become, if you already aren’t, a powerful listener. Not as easy as you maybe think. We’ll begin.

Oh, those assumptions we make!

2009-11-13T15:01:00.000-07:00

Both last time's post and this one really focus on why story telling is far and away the best method out there for us as planners --and for our clients as well --to learn the most deeply held values of those clients (and of ourselves, for that matter). Scott shows us the traditional ways we've gone about this and some of the reasons for those shortcuts. It strikes me, more than a little, as pure selfishness when we habitually use the traditional methods. Again, Scott's site is http://www.sunbridgelegacy.com/

Here's a preview of my next posting. I believe you are now convinced of the value of story based planning. It's important now to learn the best and most effective method of enticing those stories, to draw them pouring out of people. If we approach it too directly, it simply won't work --nothing happens and bullet points are the best you can hope for. Approached, however, through the Thinking Environment concepts, it's a snap and there are few additional skills required of us "interviewers." The Thinking Environment and the Time To Think concepts, developed by Nancy Kline, can be previewed at Nancy's website, http://www.timetothink.com/

Now, here's Scott Farnsworth, part 2.

A Thought from Scott...

The Power of Story-based Planning-Part 2

For at least the last decade, the hottest buzzword in the planning professions has been "values-based." You couldn't turn around without running into "values-based" selling, financial planning, estate planning, you name it. But what in the world is "values-based planning" anyway?

Looking under the label and behind the question is helpful, I believe. In truth, all planning is based on someone's values, so the question behind the question is whose values? To acknowledge our professions' dirty little secret, the truth of the matter is that in the "pre-values-based planning era" nearly all planning was based on the professional's values or, at best, on the values we assumed the clients held.

If the professional was selling life insurance, lo and behold, one of the key values was "tax-free liquidity at death." If the professional was selling living trusts, it was generally assumed the clients valued "avoiding probate," "reducing estate taxes," and "distributing the assets" in some orderly fashion, usually in a way consistent with the drafter's trust templates. If the professional was selling investments, every financial plan was based on the premise that the client wanted to pay for his kids' college and then retire comfortably a few years before he turned 65.

Not surprisingly, every plan a planner created looked strikingly similar to every other plan he created: they were all based on the planner's values and assumptions, not the client's.

What the term "values-based planning" was trying to communicate was the notion that each client has a personal set of values that ought to be ascertained early on in the planning process and then used to fashion a financial plan or estate plan that was unique - truly unique - to that client. The real question then became, for those planners actually trying to create plans based on client values, "how do you ascertain the client's values?" At least now the issue was correctly framed.

This breakthrough led to the advent of what I call "questionnaire-based planning." Client values, the planning professions assume, can be ascertained through a cleverly designed multi-page questionnaire. But while "questionnaire-based planning" is far better than its predecessors, it still fails in its primary objective: to develop for the planner and the client a clear understanding of what's in the client's heart - the client's deepest purposes for planning. For that you need story-based planning.

In the next installment I'll outline why "questionnaire-based planning" is merely masquerading as genuine values-based planning. It looks good on the outside, but inside it has no real power to get to the heart of the matter.

-Scott Farnsworth

Why Story-based planning?

2009-10-30T10:17:00.000-06:00

Scott Farnsworth is the founder of SunBridge and Legacy Builders. A few years ago, I wrote about Scott:

"In my years in SunBridge,…its strategies and concepts now form the basis for my entire estate/business planning practice and are providing me with a wonderful, fulfilling, working (40+hours), and remunerative retirement plan. The National Network of Estate Planning Attorneys taught me there was a better way to live my professional life and how to do it; Esperti-Peterson Institute and the Masters Program taught me what was really important to people; SunBridge has taught me what is truly important to people that they don’t even know is important and how to teach them and do it. My professional, and personal, life is far different than if these wonderful organizations and the people behind them had not entered in. My hat is off, as always! "

So, here’s a Thought from Scott that says much better what I would like to be saying to you. I highly recommend that you spend a little of your valuable time at his site, http://www.sunbridgelegacy.com/

A Thought from Scott...

The Power of Story-based Planning-Part 1

Virtually all my "official" training as an estate planning attorney and a Certified Financial Planner has been about numbers. Tax rates, code sections, rates of return on investments, asset allocation models-the unwavering focus has been on something quantifiable. The underlying message always came through loud and clear: unless something can be tallied on a ledger sheet, it isn't worthy of our professional attention and probably isn't all that important. Only "numbers-based planning" is real planning.

But my gut—and my real-life experience—told me something different. They told me that when numbers-based planning collided with human beings, i.e., our clients and their children and grandchildren, either the planning was never actually implemented by the clients, or the wheels came off when the planning landed with a thud on the succeeding generations. They told me that the most clever and tightly-wound estate or financial plans could and would be unraveled by the people they were designed to "help" or "protect." They told that we planners ignore the human issues at our peril, and at the peril of the beautiful numbers-based plans we crank out.

My sense was often that with numbers-based planning, the tax tail was wagging the dog—driving the planning instead of riding in the back seat along with all the other significant but not critical factors. One significant study found that the likelihood of a family-based business surviving into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions, Morris, Williams, Allen, and Avila, Journal of Business Venturing 12, 365-401, 1997) In other words, the tax doctors were actually killing the patients they were hired to "save."

Numbers-based planning might work if we were planning for robots, but we're not. We're planning for real flesh-and-blood people. I recall a series of conversations with a couple from New York City who had spent tens of thousands of dollars for one of the premier law firms in the country to draft a plan to care for their estate and their two teenage children. The plan touched all the legal and tax-planning bases, but in the words of the wife it was "cold and impersonal, not what I want to leave for my children." The expensive, well-drafted plan was never executed but remained nothing more than a pile of paper, glistening with lawyerly brilliance on the surface but empty and meaningless underneath.

Unfortunately, that couple's experience is repeated all too often. In my view, such outcomes will not change until we take a fundamentally different approach to this whole business of estate and financial planning. They will not change until we spend more time listening to client stories than tallying up their balance sheets; until we tailor their plans to the human hopes, dreams, and fears imbedded in their stories; and until the plans we create help them tell the story of their legacy-of who they really are and what impact they have had and hope to have on the people and causes they love. I call this approach story-based planning.

-Scott Farnsworth

What Does Estate Planning Cost?

2009-10-16T15:22:00.009-06:00

I promised a few weeks ago to talk about what all this costs clients. It is, of course, difficult to quote firm numbers in an area of legal work that includes so many variables. Nevertheless, it is worth providing some sense to those considering estate planning.

My hope is to keep this short so as to encourage discussion. Please ask a question by making a comment at the end of this posting. I’ll answer and we’ll get some discussion going.

First, find an attorney that will quote and then stick with a flat fee. Do not ever, if you can possibly help it, engage an attorney that wants to charge you by the hour for this kind of work. If the planning is done right, an hourly fee will become incredibly expensive and the plan may be less than the quality you deserve because of these kinds of factors:

        • You never know what the cost will be—it’s open ended;

        • You’ll (rightly) be afraid to call the lawyer or to stop by---
         the clock’s running;
        • If the attorney is sensitive to your pocket book, he or she will be
          reluctant to do the “extra” work often very
          necessary in good plan design
For a truly good attorney it is usually no problem to quote a flat fee that is fair to everyone. It should take at least one and often two meetings to finally quote, then discuss and agree upon, the fee (and the attorney should be prepared to make no charge at all if the client decides not to go forward when the fee has been quoted. Remember, this is all about relationships; it is not primarily about grabbing fees).

Having a short discussion about fee policies at or before the introductory meeting, will set expectations and thereby avoid clients being blind sided and attorneys wasting their time.

Other factors entering into the “fee” picture would be:

• What the particular attorney brings to the table—skills and experience;
• The uniqueness of the family;
• The story telling;
• The geographic locale of the attorney—what part of the country and what city;
• The size of the estate, dollar wise, and its financial makeup;
• The complexity anticipated.

There are many more. Notice I did not include the number of trusts or other entities as a factor. I do include that when considering complexity, but not in the sense of the “four will be more expensive than three” approach. Remember, we are not selling a group of “its.” We are creating a design, a process, a relationship between us.

With all of that said, I know very qualified attorneys who charge around $3,000 for a basic trust plan. I know of others, also very competent whose minimum fee for the same plan design would approach $9,000.

Mine is $6,000 and includes, in addition to the actual plan documents, one pricelessConversation™ (The Meaning of Money, or The Meaning of Success, or Wisdom/Values) and text boxes regarding the purpose of the plan and the reason for each trust’s name.

The purpose of this discussion is not to encourage or to discourage you. It is to educate you and help prepare you for finding that perfect estate planning attorney.

My web site: www.stevegammill.com

You Won the Child Lottery

2009-10-05T09:45:00.001-06:00

You did, you know. Three times! (if you have three kids) Try this new game with your family as you sit around the Thanksgiving dinner table, or as you sit by the fire with your spouse sharing a quiet time, or the next time you're with your aging mom.

The game was invented, I think, by John A. Warnick and I played it with Bill and Carole after they had told me about Mattie.

Here's what you do. Say to the person who you want to tell a story, "I understand you won the child lottery---three times! Wow! Tell me Why you think that?"

Here's a tip: encourage stories; let them take time to think and talk and meander down rabbit trails. Let them freely love and honor their children. And here's a hidden jewel: if there is a special needs child in the mix, you will be amazed and moved.

If you get to do this while the children are present and listening, that's a good thing.

And, when you try this game, would you comment to this post and tell me what your experience was?

Mattie's Story

2009-09-16T13:59:00.000-06:00

Before we get started, this posting is a few days early. I will be in San Antonio all of next week at a major conference of estate planning attorneys. We will be discussing, among other things, this new shift in planning paradigms. Story based planning is the wave of the future. Purposeful Trusts™ and pricelessConversations™ are integral to that.

“How did you feel when Mattie first came into your life?”

“You know, there was nothing unusual about him that day—if you weren’t his parent. He was just a baby, like all the others in the hospital. But to me he looked like, well, I don’t know, he made me feel filled, and whole, and inspired just like I was looking at the rising sun on a morning in the mountains. He just blossomed me! Physically, I guess….He had this hair—lots of it—all over his head and he lay there with his little arms positioned like he was a weight lifter. Bill came in right after I got to hold him and while I was feeding him. All Bill could see was the back of his head, and he said, ‘Man, that’s a lot of hair!’, but, you know, I saw the tears in his eyes. It was almost like this was our very first child—even though it wasn’t. I told Bill that I still wanted to name him Matthew. I’d always wanted to call my child Mattie.”

So now let’s shift perspective for a minute. What a wonderful and insightful story. How different from what we might expect if we weren’t encouraging stories: “Good. Really good. Just a baby, like all babies are—but I do remember he had a lot of hair.”

Lots of people would give that sort of short, terse answer, especially if they hadn’t been through this adventure with me earlier. If that happened, I would simply ask a more open, and perhaps more focused follow up question:

“Can you think back and tell me what you remember about that very first time? What did Mattie smell like? What did it feel like to actually hold him in your arms? What did Bill say?”

I want to draw out the memories that carry meaning for Bill and Carole. Doing it that way lets us learn what that meaning is—what that story tells us about Carole’s and Bill’s initial love for Mattie.

“When did you first think he was developing differently than you expected and how did you first learn he might have autism? and,

“What have been Mattie’s educational achievements? And, what learning and educational experiences do you want him to have in the future?” and,

“What are your fondest hopes and dreams for Mattie’s future?”

Because we have already entered the story telling arena, their answers to these kinds of questions will be fully rich and revealingly deep. Their direct answers, if there are any, will form a platform for stories that will reveal true and articulated answers. Often, perhaps usually, those answers will surprise even Bill and Carole. Remember when they first told me about Mattie? They sort of wanted to gloss over it; they said he basically was “just fine, now.” People who know much about autism, and since Mattie is nineteen, that certainly includes Bill and Carole, know it is quite rare for anyone to “outgrow” autism. They weren’t in denial. They were just uncomfortable getting too deeply into their feelings toward their beloved Mattie.

By the time the stories are told, I’ll never need to ask about his being “just fine now.” If I even have to ask the last question, about fondest hopes and dreams, the mood of Bill and Carole may be sad, or it will be happy. It likely will be both. It will bring tears of sadness because they will picture themselves deceased or disabled and very anxious about how Mattie will be living and who will be loving him; it will bring tears of joy as they realize they are right now able to provide some strong and enforceable direction. Before we engaged in pricelessConversations™, neither Bill nor Carole had any clue that they could be that lovingly helpful and protective. Certainly their estate planning attorney (me) had even less of a clue as to what Bill and Carole might want for Mattie. It is a very different thing for me, as the attorney, to claim I know how to provide for special needs people, and for me to claim I know what’s best for a particular special needs person.

So, you might ask, if you happen to be a planning attorney, how does all this extra time on the client impact attorney's fees? That’s a good enough question to devote the next blog posting to it. And, if you are a potential client planning to discuss these concepts with your own attorney, you should be very interested.

How I Met Mattie

2009-09-06T15:00:00.000-06:00

Just before the funeral service, the undertaker came up to the very elderly widow and asked, "How old was your husband?" "98," she replied, "two years older than me." "So, you're 96," the undertaker commented. She responded, "Hardly worth going home, is it?"

Bill and Carole have a son named Matthew. When he was about three or four years old, Bill and Carole learned he was autistic. As he matured, his symptoms did too. For awhile, they became worse. He was disruptive in school, needed special attention, was extremely demanding of his teacher’s and classmates’ time and attention, and to the point that Carole spent more time in the “office” than any of the other parents. It seemed no one understood. He didn’t like to be touched and when a touch or a hug occurred, he would sometimes just turn away, but more often would panic and look for an enclosed space, such as under his teacher’s desk, to curl up and hide. One day right after Mattie started kindergarten, another student’s mother observed one of these episodes. She immediately went out to the parking lot to her car and returned with a heavy blanket that looked and felt as though it had lead weights sewn into it. The teacher was trying her best to ignore Mattie, but the kids weren’t. Some were wide-eyed watching what was going on beneath the teacher’s desk and some were actually giggling and pointing.

The mother gently laid the blanket over Mattie’s whole body and quietly suggested to the teacher that the children should stop paying attention to Mattie for awhile. This mother had an older child with the same condition and with her help and experience, this teacher, Bill and Carole and the school’s principal learned more and about modern coping mechanisms. Although Mattie needed a personal aid during school, and eventually got one, after awhile everyone learned not only how to handle the situation, but to actually celebrate Mattie’s time in the classroom. Carole and Bill learned, the other children learned, the teachers throughout the school and the principal all learned. So did Mattie. The kids actually felt privileged to “have a Mattie” as a peer and a friend and soon considered themselves experts.

But how did I learn all of this? And, is there more I needed to know?

It was in one of our earliest meetings that Bill and Carole told me about Mattie. They simply said their son Matthew, now nineteen years old, was autistic. They added that he was “just fine” now and had gradually outgrown that “condition.” He was even in college. I sensed there was much more and that Bill and Carole were a little hesitant to divulge too much about a very painful piece of their life. Carole did tell me that occasionally he seemed to exhibit old habits and body language, but that so long as he remembered his coping skills and what he had learned about dealing with it, he could function adequately.

It was this same meeting that Bill told me his primary goal: to treat his children equally in what they were to inherit.

Because I believe so strongly in story based planning, I immediately knew that we all needed to, and would, learn a great deal more about Mattie, about what he thought of himself and his future, about who Bill and Carole really are in relation to who Mattie really is, and how to deliver his “equal” legacy in a way that would best honor all of that.

So, until next time, consider the following questions. Do you think they might lead to stories told by Bill, Carole, and, yes, even Mattie that could help Bill and Carole design Mattie’s legacy?

1. Tell me about Mattie, especially the things you admire and appreciate about him. What makes you proud to be his parent?

2. What do you see and understand about him that others who don’t know him as well might not see or understand?

3. If you do not survive Mattie, how do you expect him to live out his life?

4. What values and priorities are important to you regarding the financial resources you might leave for him, and what guidance would you like to offer your trustees on how to use these resources wisely? What training about money would you like to see Mattie receive?

5. What are your fondest hopes and dreams for him?

And do you think Bill and Carole might like to have this pricelessConversation™ burned to a CD and delivered to Mattie and their other children?

We scheduled a special session for the conversation about Mattie. It is called, “:: our special child.” I’ll tell you next time what the three of us learned from that pricelessConversation™.

A Purposeful Trust and an ILIT

2009-08-17T13:46:00.000-06:00

Let’s talk a little today about a special type of trust that’s often used in plan design. It’s called an Irrevocable Life Insurance Trust—ILIT for short. There are lots of reasons Bill and Carol might like this tool: there are all the reasons Bill might own a life insurance policy in the first place, and then add all the reasons to craft how they might want the life insurance itself to pass to each other, to children, and so on.

You already know that the answers to all of those kinds of questions have come from our pricelessConversations™ and the resulting threads of value and meaning. What you may not know is that a terrific benefit to this type of trust is that the insurance

can be excluded from Bill’s estate at his death and, thus, not counted in determining the size of the estate for estate tax calculations. Often people think life insurance is exempt from tax. That’s just not true if we are talking about estate, gift, and generation skipping tax—transfer tax. If Bill owns a life insurance policy at his death, its value will be included in his taxable estate.

Life insurance can add tremendous dollar amounts to an estate and that is often unexpected. Many people, especially business owners, will have life insurance worth more than a million dollars. They go through years not even thinking about that, then they pass away and mom discovers a little surprise: dad’s estate has increased suddenly by $1,000,000. But wait! There’s more. Where’s the million? In dad’s estate? Probably not. There

is usually a beneficiary named in the policy. That could be mom, or Aunt Lucy, or the kids, or even dad’s business partner.

So, dad’s estate will pay transfer tax on the $1,000,000, but that money is actually in the hands of someone else!

What if dad didn’t own the policy? Well, we only pay transfer tax on what we die owning (an overgeneralization), so if the policy is owned by an irrevocable trust, such as an ILIT, the $1,000,000 will NOT be included in dad’s estate and NOT subject to transfer tax.

The idea of the ILIT is to have the trust purchase the life insurance on Bill’s life. Then, at his death, the proceeds pay into the beneficiary, the Trust, and are distributed to the trust’s beneficiaries according to the provisions of the trust.

Now there’s an obvious caveat here: this strategy, like any quality estate planning strategy, is complicated and requires a quality estate planning attorney. If it isn’t done with care and competence, it will seriously disappoint you. In other words, don’t try this at home.

So there you have an idea of the basics and the “why.” We were talking last time about Purposeful Trusts™. The ILIT is a classically good opportunity to use Purposeful Trusts concepts.

Bill and Carole inserted a text box into one of their trusts describing the deep meaning behind their choice of the name. Remember the SMITH + JONES LEGACY TRUST? For this ILIT, they will add another box in the section that describes the purposes for the trust. Because the ILIT is such a unique tool and much can go wrong with it, we will need to be careful in what we include in the text boxes. But, with that said, what better way to teach those who follow years afterward why Bill and Carole decided to use life insurance in their plan, why they put it into a trust, how they hope their children will receive the inheritance, what they might do with it, and even why children and other heirs might want to think twice before taking some particular action with respect to their beneficial inheritance.

So far, I am experiencing few of my readers responding with comments. There have been lots of emails, but very little posted on this blog site. Comments not only are appreciated personally, but they can seriously guide the following posts. I’d much rather try to incorporate your interest into a posting.

Anybody interested in what Congress might do with the transfer tax and the impact it could have on you? You know, that’s very likely to be addressed YET THIS YEAR!

A Purposeful Trust

2009-08-03T14:11:00.000-06:00

“Hey Bill! Hey Carole! Why are you two even doing this estate plan?” And, “Carole, how in the world did you come up with that particular name for your trust?” Bill and Carole absolutely know the answers to those questions and could expound at length. After they are gone, though, who will know the answers? Who will be able to expound at all?

The answer is, “Whoever bothers to read the trust.” Not only did we all acquire insight and deep understanding from our initial conversations and stories, but we also acquired tongue to reveal and expound. In the trust document itself, we will insert the words that will tell the world (and especially those who care) exactly why Bill and Carole felt it important that they chose as they did. There will be found strategically placed “text boxes” throughout the trust that will illuminate the otherwise somewhat mundane language found in the trust itself. In my practice, I try very hard to avoid “legalese.” Because of the nature of the beast, that is sometimes difficult to do if we are concerned about clarity.

How potent it is, then, to have an occasional text box filled with pertinent explanation. This concept, which I view as a part of the new paradigm I’ve been talking about, is the brainchild of John A. Warnick, an estate planning attorney in Denver, Colorado. John calls this The Purposeful Trust. Just “google” his name.

Here’s what John had to say recently about the careful selection of a name.

“Why does the name of a trust matter? First, it may be the most visible demonstration to your family of what mattered most to you. If your trust is titled ‘The Jones GRAT’ or ‘The Smith Dynasty Trust’ the name could be a constant reminder that the primary purpose of the establishment of the trust was grounded in tax savings or a desire to rule from the grave. . . Second, the importance of the name can not be overlooked in terms of a link between the beneficiary and the purposes of the trust. . . I’ve estimated that the average beneficiary of a dynasty trust will probably see almost 300 quarterly trust statements in their adult lifetime, all of which will show the name of the trust. That is 300 opportunities to connect the beneficiary with the purpose of the trust as reflected in the symbolism of its name.”

The following is an example that John gives of the traditional naming technique:

THE DOE FAMILY DYNASTY TRUST

THIS TRUST AGREEMENT, effective December 18, 1998, is between John Doe of Summit County, Colorado, as grantor ("grantor"), and XXX Bank & Trust, of Anytown, South Dakota, as trustee (the "trustee").

Contrast that with this approach. Bill and Carole were asked to carefully deliberate what the name of the trust should be and what impact that name would have on their children and grandchildren.

SMITH + JONES LEGACY TRUST

We have chosen the surnames of both myself and Carole and the word “Legacy” to frame the name of this trust. Each surname should remind the beneficiaries of the powerful heritage they have received from both sides of our family. The “+” between the two surnames emphasizes the synergy we feel our family generates because these two family lines came together with our marriage. The word “Legacy” with a capital “L” signifies something deeper than the legal definition of legacy. A legacy in the eyes of the law is money or property bequeathed to another. To us Legacy not only signifies the wealth transmission side of this
trust instrument but it also represents the values that have come to us from previous generations. We hope the name of this trust will cause the beneficiaries to not only appreciate the value passing on to them but that they will always regard the values which were in large part responsible for our family’s financial success as a “Legacy” which they should build on for those who follow them.

Of course, this approach to planning isn’t confined to just trust and will design. Consider a client with whom I am currently designing a business structure plan. That’s part of estate planning as well. After spending time with me in pricelessConversation™, this couple set about naming their new business entities. They recalled, during the conversation, that one of their grandfathers had used a particularly meaningful Spanish name in his business, “Loma Del Fuego” (a knoll or rise, of the fire or light). They decided that one of their limited liability companies will carry that name. It not only honors the family, which is an important value for these clients, but it fits perfectly into their reasons and purposes for doing the planning. While they care about asset protection issues, they are passionate about educating their children in business and financial matters and preserving their own family values.

Here is a quote from another fan of the Purposeful Trust (this also courtesy John A. Warnick):

“I am working on a purposeful trust today, and I must share with you that I love doing this! To me, the marriage of the purposeful language, presented in a narrative fashion, and the legal side, is very fulfilling to work on. Writing a purposeful trust may be, very possibly, my ‘highest and best use’ as an estate planner.”

Depending on the movement of the Spirit, we’ll begin some technical aspects of plan design next time.

Look! Look! Up in the Sky! It’s a will! It’s a trust!

2009-07-15T13:00:00.000-06:00

At some point early in the estate planning process, both the client and the attorney become ready to begin the actual design work. As you have seen, though, that is clearly not the first step in the process.

By now, Bill and Carole, his wife, have spent quality time with me and with each other talking about values and lifetime objectives, the meaning of money, the meaning of success, what sort of people they come from, their accumulated wisdom, who their angels and heroes were, and what significant events they have experienced. They’ve also given thought and conversation to such questions as, “If you had an abundance of time, an abundance of money and your good health, what would you like to do for the rest of your life?”

The family vacation they took through Tracks and Trails solidified their thinking and brought into the mix the concerns and beliefs of the children and grandchildren. Not everyone is like Bill and Carole in this regard, but they became convinced early on that they wanted their children to participate in that part of the process that deals with core values and objectives.

We are now ready to move forward into the actual design of the estate plan, and we will see that the solid ideas resulting from our work so far will be shifted, developed, expanded, contracted, and refined even more until both Bill and Carole and I, as the “architect,” are completely satisfied that the “house” to be built will serve Bill’s family exactly as they want it to.

Estate planning done this way is a process. It is not the it that I for so many years thought it was. Would the best design for Bill and Carole be a Will or should we choose a trust? That question has been debated for years and while there are occasions favoring wills, in my view the arguments for trusts are overwhelming. It is, I think, fair to say that a trust, properly drafted and maintained, will nearly always provide a more effective plan, regardless of a person’s wealth or lack of it. But it is certainly not for everyone and so the argument continues.

One of the advantages of a trust based plan is it’s apparent security from attack by disgruntled heirs. When a person writes a will, puts it in a safe place, doesn’t look at it for a few years and then passes away, that will is sometimes successfully attacked in court by people who believe they should have been included in the will’s distribution of money. We’ve all heard those kinds of stories and some of us have even lived through that kind of litigation. “My dad must have been bamfoozled by my stepmom, because otherwise he would never have made that Will out the way he did.” If the Court believes Dad was bamfoozled, the will can be modified or even thrown out.

Contrast that with Bill and Carole who are going to use a revocable living trust. Think about the time they have spent planning it and the money they have invested, including their family vacation. Think about the care they will put into the design of the concepts and the language that will go into that trust, and then the caution in being sure all their precious assets, heirlooms as well as money, are properly titled into their trust.

What do you think the chances are that some disgruntled heir will successfully convince a court that Bill and Carole didn’t know what they were doing when they executed this estate plan and then actively lived with it for the rest of their years? And, even more, when that heir, or a court, takes a look at the language of the trust, there will be absolutely no question about the deliberate intentions of Bill and Carole.

My next post will discuss how to announce and preserve those deliberate intentions in your estate planning documents.

A banana is just something that's happening at a place in the world.

2009-07-05T13:16:00.000-06:00

We are, each of us, just something that’s happening at a place in the world. Like a banana! A banana is just something that’s happening at a place in the world. Does that mean we each lack importance? I think it means that in the grand scheme of things, we are each of us unique and very important. I believe also that we are never completed, at least in this earthly life. We are important to ourselves, to our loved ones, and most critically we are important to our Creator who has entrusted to us our wealth and our Selves and charged us to carefully and fruitfully steward both. How do we answer the charge?

Rachel Naomi Remen, in Kitchen Table Wisdom, suggests we consider the term “Human Being” as more a verb than a noun. We are, she agrees, a work in progress—unfinished. Perhaps we should add the word, “yet” to any assessment we make of our self and of others: He has not learned humility . . . yet. I have not developed compassion . . . yet.

Think about it. That changes everything, doesn’t it? We can’t judge until it’s over. No one has won or lost . . . yet.

According to traditional models of estate planning, this has little to do with plan design. Back in the day, and for many professionals that day is still today, I would spend an hour or so collecting basic information from Bill. Remember my early question to him, “How do you want to leave your wealth when you die?” And remember his answer was that he wanted to treat his children equally? That was enough information then for me to regurgitate a standard, off the shelf document distributing his stuff outright to his kids in equal shares upon his death. Naturally, if Bill had an estate tax problem, it would necessitate that I, often blindly, also throw in a “credit shelter” device to legally avoid the estate tax. And of course, that tool would be a given; it would never have occurred to me to ask if Bill wanted tax avoidance or if there were other things more important or at least worth consideration.

A number of estate planning attorneys and financial services professionals are beginning to see a major shift in philosophy. Yes, we want to charge fees and make money; but, we are seeing the enormity of the gift of helping our clients realize their own true worth and pass it on in meaningful and effective ways—to leave a legacy that far exceeds simply money. Some of us even insist there is no better or other reason to be practicing this branch of the law. It’s more than just one other approach out of many; it is cutting edge, it is the way of the best and the brightest. For decades, the WIIFM (what’s in it for me) meant fees alone, and lots of them; for many of us today, WIIFM means fulfillment, love of others, a job well done, a better opinion of my Self, and, incidentally, yes, still fees.

A great percentage of new clients who come to me have an understanding of estate planning—their entire understanding—as: “How do I want to leave my stuff when I die?” They display various levels of astonishment when they are asked to consider such things as

--If your spouse is disabled and unable to handle his affairs at your death, how do you want him to receive and use the money?

--If you become disabled, who will take care of you? And if that person can’t, then who? Is it okay with you that that “successor” person is making investment decisions with your money?

--Can your money be spent on people other than just you? (State law says, most of the time,“just you.” Trusts let you say otherwise. What about the needs of your wife and children when you can no longer decide?

--If your family thinks you are unable to handle your money and you think you are “just fine, thank you,” who decides? Do they have to go to court?

--Do you care what your day, your waking hours, looks like if you aren’t in control? Do you think it is worth making some advanced instructions in that regard?

--If your second daughter is receiving governmental assistance when you die, are you concerned that the inheritance you leave her will suddenly disqualify her from that assistance?

--What happens to your business if you die unexpectedly? Will there be a fire sale? Will your spouse be able to financially replace you in the business?

--If you are disabled, do you want that business sold? What if your disability is only temporary? Will your spouse be able to financially replace you if you are disabled rather than deceased?

These questions have very little to do with estate tax issues. They have everything to do with Bill’s personal cares and values. Any estate planning lawyer who believes she can adequately answer these questions for her client after an hour’s information collecting is still in the “olden days” camp. Do you want an estate plan that really works, that will do, when the time comes, what you hope today it will do? Do you, as the planner, want to design one that works for Bill? The answer to those questions puts you in one camp or the other.

That’s why we spent the first three issues of this blog talking about story telling and collaboration. I hope you can readily see that story telling results in epiphanies and revelation.

I talked last time about collaboration among the client’s estate planning team. But what if there is no multi disciplined team? One level of collaboration not really included in the discussion last time is that between the client and the attorney. That’s exactly what we’re doing when we engage in the pricelessConversations™ and the resulting storytelling. Bill and I are combining our very best listening and thinking to learn who Bill really is, what he thinks is important, and how he can pass on his Self and his wealth in the most meaningful and effective way.

This is a major paradigm shift. What do you think about it? Make a comment or two.