Book Review: "Philanthropy Heirs & Values"

"Philanthropy Heirs & Values" written by Roy Williams and Vic Preisser discusses how to help heirs learn money principles during their growing up years so that they can wisely handle their inheritance once parents have died. The book is geared towards more wealthy individuals, but I think the principles they talk about could be used by any family to learn sound money skills and the joy of philanthropy.

Briefly, the authors discuss three general skills children need to learn: values, mission, and accountability. The authors further discuss how these three skills should be taught to children during five developmental periods of a child's life. The five developmental periods are:

Age 5-10 Awakening Years, discovering one's personal influence.
Age 11-15 Exploring Years, discovering self in the midst of change.
Age 16-20 Developing Years, understanding accountability.
Age 21-30 Applying Years, maximizing the value of contributions.
Beyond 30 Mentoring Years, unifying the family through Philanthropy.

You can find "Philanthropy Heirs & Values" here.

The Basic Stages of Life

There are three basic stages of life when contemplating estate planning.

1. Individual is alive and mentally competent



2. Individual is alive and mentally incapacitated



3. Individual has died

Each of these stages is handled differently.

Individual is alive and mentally competent
When an individual is alive and mentally competent, estate planning documents can be in place, but most likely the documents are sleeping (or not being used) during this stage of life.

Individual is alive and mentally incapacitated
When an individual is alive but mentally incapacitated, there are certain estate documents that if prepared ahead of time allow family members to step in and begin acting on behalf of the incapacitated individual. The kind of documents that might be prepared for this stage of life are:

• health care power of attorney



• medical directive (pull-the-plug)



• health care directive



• financial power of attorney



• do not resuscitate (In Utah, an individual can only obtain a DNR by contacting a physician and filling out the DNR with the physician.)

If these documents are not in place before an individual becomes incapacitated, family members will go to court to obtain conservatorship or guardianship appointment in order to act for an incapacitated person.

Individual has died
When an individual has died, any powers of attorney used during incapacity becomes void and family members must turn to any will or trust that has been established to deal with this stage. If an individual has prepared a trust and/or will, family members can begin the process of accessing assets, paying bills, and distributing assets to the beneficiaries of the deceased person. If the person dies without estate documents in place, most likely the family members will need to go through probate to obtain authority to access and distribute any property of the deceased person.

In contemplating estate planning, it is important to be aware of the three stages of life and prepare for each stage.

Definition of the Week: Power of Attorney

Power of Attorney: A power of attorney is a legal document in which you give an agent the power to act as your attorney in the event you are mentally incapacitated and cannot act or speak for yourself. Sometimes people refer to a person as "power of attorney." That grates a little. It is easier and more correct to say, "John is my agent." Finally, you, the creator of the power of attorney, are called the principal. So, in brief, the principal designates a person in his or her power of attorney to act as his or her agent. Use these simple and correct terms on your estate planning lawyer and he will be impressed.

Michael Jackson's Estate Distributions

Michael Jackson's estate has made enough money since his death to pay off large amounts of debt due at his death and still distribute about 30M to his children and their mother. Unnamed charities have also begun receiving portions of the estate assets.

Here is a good article regarding this event.

Foreign Citizen Named as Trustee of Trust

A recent question from a client has prompted this blog. The client asked whether a sibling who lived in another country could serve as the trustee of the client's trust.

Issue: Authority of a Canadian citizen as the duly-appointed trustee of a trust, created pursuant to U.S. and Utah law, to access the trust's Zions Bank account.

Hypothetical Scenario:

• U.S. Citizen and Utah resident--John Smith--creates a revocable trust: "The John Smith Revocable Trust, dated 12/10/2010" ("Trust").



• John Smith goes through the process of setting up a Zions Bank account owned by the Trust. Zions Bank secures for its records a certified copy of the Trust, and the account is set up using John Smith's social security number (the Trust being revocable and John Smith being the grantor and original trustee).



• On Zion's Bank records the account is listed as owned by "The John Smith Revocable Trust, dated 12/10/2010."



• The Trust names John's sister--Mary Smith, a Canadian citizen (not dual U.S./Canadian--only Canadian)--as the successor trustee upon John's death. (We can state without hesitation that nothing in the Utah Probate Code prohibits a foreign citizen from acting as a trustee of a domestic trust.)



• John dies.



• Mary Smith files an SS4, securing a TIN for John Smith's now irrevocable Trust.



• Mary Smith comes into a Zions Bank branch with a Canadian Passport and other identifying documents and the IRS letter showing the TIN, and asks to access the $100,000 Trust account.



• Zions Bank (1) examines the Trust on record to ensure Mary Smith is named as the successor trustee, (2) secures copies of Mary Smith's identification, and (3) confirms or secures a copy of the TIN for the now irrevocable Trust.

Questions:

• Given the above facts, can Mary Smith, as a Canadian citizen, manage the Zions Bank account, withdrawing and distributing funds as necessary and required under the Trust?



• What other procedures would Zions Bank require in this situation to allow Mary Smith to access the Trust account?



• Is there anything in banking law or Zions Bank policies and procedures generally that prohibits a foreign citizen from serving as trustee of a domestic trust?

Answer:
Mary Smith, as a Canadian citizen, can manage the Zions Bank account, withdraw and distribute funds as necessary and required under the Trust after doing the following:

• Fill out a W-8ECI to establish tax residency. (W-8ECI and Instructions)



• Give Zions Bank contact information.



• Prove identity (e.g. passport).

Doritos Creator Taking Doritos to the Grave

Arch West the inventor of Doritos passed away September 20, 2011. He was 97 years old. He got the idea for his chips while on vacation with his family. On October 1, his family will throw Doritos in Mr. West's grave before it is filled with dirt as a tribute to their father.

Here are some articles about Mr. West:
Doritos Creator to Be Buried with Chips
Doritos Creator Dies -- Gets Tastiest Funeral EVER!
Man behind Doritos taking popular chip to his grave, literally
Doritos creator Arch West taking his tasty chips to the grave

Joke of the Week

Jacob, age 85, and Rebecca, age 79, are all excited about their decision to get married. They go for a stroll to discuss the wedding and as they walk go past a drugstore. Jacob suggests that they go in. He addresses the man behind the counter: "Are you the owner?" The pharmacist answers, "Yes."
Jacob: "Do you sell heart medication?"
Pharmacist: "Of course we do."
Jacob: "How about medicine for circulation?"
Pharmacist: "All kinds."
Jacob: "Medicine for rheumatism?"
Pharmacist: "Definitely."
Jacob: "Medicine for memory?"
Pharmacist: "Yes, a large variety."
Jacob: "What about vitamins and sleeping pills?"
Pharmacist: "Absolutely."
Jacob: "Perfect! We'd like to register here for our wedding gifts."

Movie Review: "Topper Returns"

I have been thinking about about good stories based on inheritance issues. I remember watching "Topper Returns" (1941) as a little girl with my family. It is a mystery/comedy that boils down to murder in order to inherit. I remember laughing so hard it hurt. I would highly recommend watching this movie. Take a look here.

Financial Powers of Attorney Cont.--Part 3

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." Financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. Financial powers of attorney are as important as revocable trusts and deserve as much attention.

In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney when being used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.


2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.


3. A Power of Attorney will Not Prevent Family Power Struggles of the Principal's Assets.

In this blog, we will address the third point made by Ms. Whitton.

We disagree with Ms. Whitten's third point. We disagree based on our firm's experience. Yes, Ms. Whitton is correct that a power of attorney in itself will not make controlling family members suddenly loving, giving individuals. However, a well-drafted power of attorney that requires regular accountings and encourages constant communication can keep the urge to control from ranging out of control.

Definition of the Week: Principal (the person)

Principal (the person): In estate planning, this term most generally refers to the person who creates a power of attorney.

Financial Powers of Attorney Continued--Part 2

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." Financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. Financial powers of attorney are as important as revocable trusts and deserve as much attention.

In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney when used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.



2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.



3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, we will look at the second point.

The most dangerous time in a person's life is when they are mentally unable to make decisions for themselves. The chances of being taken advantage of increases during this stage of life. And family members can be the worst perpetrators.

Most often it is family members who are named as the agent for an incapacitated person in a power of attorney. It is crucial that the individual acting as agent is trustworthy.

We have found that in addition to carefully picking the agent, agent accounting requirements adds a safety feature to a power of attorney. If an agent is accounting to the other family members on a regular basis regarding how money is spent for the incapacitated parent, it is less likely the agent will be skimming funds or paying themselves a very high agent fee.

Therefore, it is crucial that the agents are trustworthy. In addition, accounting procedures help facilitate an honest agent.

The Real Pain Of Being The Executor Of An Estate

The Wall Street Journal has an article in today's paper regarding the responsibilities an estate executor. It is more work than glory. We encourage parents to involve their executor child in the beginning stages of estate planning to completion and maintaining the estate plan so that the child executor will be as prepared as possible for the inevitable responsibility of executing the estate. Here is the full article for your review.

Protecting a Child From Him or Herself

The Wall Street Journal has an interesting article today regarding children who are not good with money then receiving an inheritance. The article explains ways of protecting that "spendthrift" child from blowing their inheritance. The full article can be read here.

We are experienced in "spendthrift" issues. Check out our website here.

Joke of the Week

Bumper Sticker: Where there's a will, I want to be in it.

Book Review: "The Parent Care Conversation"

Dan Taylor experienced an emotional five years caring for his father who had developed Alzheimer's. After Mr. Taylor's father's death, Mr. Taylor developed a plan with ways to talk to parents about their financial and health care concerns before the parents actually need help. His book, The Parent Care Conversation: 6 strategies for dealing with the emotional and financial challenges of aging parents is a good book to read before sitting down with loved ones and discussing financial and health care concerns.

Mr. Taylor's plan presents six conversations that need to be made between children and parents. The six conversations are:

• The Big Picture Conversation




• The Money Conversation




• The Property Conversation




• The House Conversation




• The Professional Care Conversation




• The Legacy Conversation

It is not always easy to talk about the future especially when discussing parents financial and health care needs. But it is really crucial for the peace of mind of both the children and parents to be prepared for the inevitable. Therefore, we recommend reading Mr. Taylor's book.

Comparing a Power of Attorney to Dynamite

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." In my opinion, financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. I think financial powers of attorney are as important as revocable trusts and deserve as much attention.
In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney as used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.



2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.



3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, I will address the first point made by Ms. Whitton.

The first point is spot on. If a third party refuses to accept a financial power of attorney, then the power of attorney is not very effective.

A word about this first lesson in terms of Utah law. As of the date of this entry, there is no Utah statute or Utah judicial decision that requires a third parto to accept a financial power of attorney or that offers any statutory redress against a third party for unreasonably refusing to accept a financial power of attorney. Utah statutory law governing financial powers of attorney is quite basic, essentially recognizing and authorizing the use of financial powers of attorney, but not much more. (U.C.A. 75-5-501 to 504.)

Therefore, in Utah, if a client is incapacitated and if third parties will not accept a durable financial power of attorney signed by the client, then the named agent has only two options: the agent can sue the third party to force acceptance of the power of attorney or seek a conservatorship.

So the question is, what can be done in Utah to encourage third parties to accept financial powers of attorney?

I have asked the legal departments of Zions Bank, Wells Fargo, U.S. Bank, Key Bank, and Mountain America Credit Union what they are looking for in financial powers of attorney that encourage them to acknowledge the agent's authority to access the principal's accounts. The responses are summed up as follows:

1. First, are the formalities honored? Is the document signed and notarized? (A few of the legal departments said they would be impressed if the principal's signature was witnessed, even though there is no statute requiring witness attestation.)



2. What is the liability of the third party in accepting or rejecting the power of attorney? The less liable these third parties are, the more likely they said they would be in accepting the agent's authority under the power of attorney.



3. How recent and well-organized is the document? The more "fresh" and readable the power of attorney is, the more likely these third parties will accept it.

With these ideas in mind, I suggest that financial powers of attorney include language at the very beginning of the document that releases third parties from liability for accepting the agent's representatives regarding the validity of the power of attorney (and places liability for abusing the principal or the power of attorney squarely on the agent). I suggest this language include clear language as to what third parties are and are not obligated to do in accepting a financial power of attorney.

Check out our website to learn more about financial powers of attorney.

Craig E. Hughes

Definition of the Week: Agent

Agent/Agents: In estate planning, an agent is the individual whom you (the principal) name in a power of attorney to represent you if you are ever absent or mentally incapacitated.

Frequently Asked Questions Regarding Funerals

What purpose does a funeral serve?

It is the customary way to recognize death and its finality. Funerals are recognized rituals for the living to show respect for the dead and to help survivors begin the grief process.

What do funeral directors do?

Funeral directors are caregivers and administrators. They make the arrangements for transportation of the body, complete all necessary paperwork, and implement the choices made by the family regarding the funeral and final disposition of the body. Funeral directors are listeners, advisors and supporters. They have experience assisting the bereaved in coping with death. Funeral directors are trained to answer questions about grief, recognized when a person is having difficulty coping, and recommend sources of professional help. Funeral directors also link survivors with support groups at the funeral home or in the community.

Do you have to have a funeral director to bury the dead?

In most states, family members may bury their own dead although regulations vary. However, most people find it very trying to be solely responsible for arranging the details and legal matters surrounding a death.

Why have a public viewing?

Viewing is part of many cultural and ethnic traditions. Many grief specialists believe that viewing aids the grief process by helping the bereaved recognize the reality of death. Viewing is encouraged for children, as long as the process is explained and the activity voluntary.

What is the purpose of embalming?

Embalming sanitizes and preserves the body, retards the decomposition process, and enhances the appearance of a body disfigured by traumatic death or illness. Embalming makes it possible to lengthen the time between death and the final disposition, thus allowing family members time to arrange and participate in the type of service most comforting to them.

Does a dead body have to be embalmed, according to law?

No. Most states, however, require embalming when death was caused by a reportable contagious disease or when remains are to be transported from one state to another by common carrier or if final disposition is not to be made within a prescribed number of hours.

Isn't burial space becoming scarce?

While it is true some metropolitan areas have limited available cemetery space, in most areas of the country, there is enough space set aside for the next 50 years without creating new cemeteries. In addition, land available for new cemeteries is more than adequate, especially with the increase in entombment and multi-level grave burial.

Is cremation a substitute for a funeral?

No, cremation is an alternative to earth burial or entombment for the body's final disposition and often follows a traditional funeral service.

Why are funerals expensive?

When compared to other major life cycle events, like births and weddings, funerals are not expensive. A wedding costs at least three times as much; but because it is a happy event, wedding costs are rarely criticized. A funeral home is a 24-hour, labor-intensive business, with extensive facilities (viewing room, chapels, limousines, hearses, etc.), these expenses must be factored into the cost of a funeral. Moreover, the cost of a funeral includes not only merchandise, like caskets, but the services of a funeral director in making arrangements; filing appropriate forms; dealing with doctors, ministers, florists, newspapers and others; and seeing to all the necessary details. Contrary to popular belief, funeral homes are largely family-owned with a modest profit margin.

What recourse does a consumer have for poor service or overcharging?

Funeral service is regulated by the FTC and state licensing boards. In most cases, the consumer should discuss the problems with the funeral director first. If the dispute cannot be solved by talking with the funeral director, the consumer may wish to contact the Federal Trade Commission. Here is there website address.

Do funeral directors take advantage of the bereaved?

Funeral directors are caring individuals who help people deal with a very stressful time. They serve the same families 80% of the time, and many have spent most of their lives in the same community. If they took advantage of bereaved families, they could not stay in business. The fact that the average funeral home has been in business over 59 years shows that most funeral directors respect the wishes of the bereaved families.

Is it right to make a profit from death?

Funeral directors look upon their profession as a service, but it is also a business. Like any business, funeral homes must make a profit to exist. As long as the profit is reasonable and the service rendered are necessary, complete, and satisfactory to the family, profit is legitimate.

Don't funeral directors mark caskets up tremendously, at least 400%?

No. Talking about the mark up on caskets is really not the point. Most items--clothing, furniture, jewelry--are marked up as much or more than caskets. The real question is whether the funeral director is making an excessive profit. And the answer is "No." Profits run around 12.5% before taxes--not excessive by any standard.

Who pays for funerals for the indigent?

Other than the family, there are veteran, union, and other organizational befits to pay for funerals, including, in certain instances, a lump sum death payment from Social Security. In most states, some form of public aid allowances are available from either the state, country, or city or a combination. Most funeral directors are aware of the various benefits and know how to obtain them for the indigent. However, funeral directors often absorb costs above and beyond what is provided by agencies to insure the deceased a respectable burial.

Joke of the Week

An epitaph on a grave marker in England:

Remember man, as you walk by,
As you are now, so once was I,
As I am now, so shall you be,
Remember this and follow me.

To which someone replied by writing on the tomestone:

To follow you I'll not consent,
Until I know which way you went.

Book Review: "Last Laughs"

A fun cartoon book to look at regarding aging, retirement and death is "Last Laughs" edited by Mort Gerberg. For example, there is a cartoon depicting a grocery story with an old man pushing a shopping cart. Two old women discussing the old man say, "A great catch. He's a widower, still frisky, and has fully paid-up-long-term-care insurance." Take a look here.

How Can I Regain My Identity Once It Has Been Stolen?

The most important thing you can do if you find unexplained charges on credit cards, bills on your credit report, an unexplained notice you are being sued, or even an arrest warrant, is to take action quickly. Below are the starting steps of reclaiming your name:

• File a report with the police.


• Place a fraud alert on your credit reports.


• Close any accounts that you know or even think might have been tampered with or opened by someone else.


• File a complaint with the Federal Trade Commission.


• Put a Freeze on Your Credit.

Definition of the Week: Benefactor

Benefactor: A person who wants to benefit someone else. A father who wants to give assets to his children is a benefactor. A peron who wants to give $100,000 to the Red Cross is a benefactor.

How Can I Prevent Identity Theft?

There are many things you can do to reduce the risk of identity theft. The following is a quick guide to simple, but important ways to protect yourself and those you care about.

• Guard your personal information.


• Take your social security number off your driver's license and checks.


• Never carry documents containing personal information with you.


• Secure your mail and trash.


• Ask for a credit report at least twice a year.


• Consider removing your name from phone directories.


• Update computer protection regularly.

Credit reports can be obtained from one of the three major credit bureaus.
Equifax
Experian
TransUnion

Joke of the Week

An older couple was watching TV. The man stretches and says, "Honey, I think I'll go to the kitchen and get some ice cream. Would you like some?"

"Believe I would thanks."

"Would you like some chocolate sauce on it?"

"Yes, I would . . . but now be sure and write that down so you won't forget."

Her husband glares, shakes his head, and marches off to the kitchen. Twenty minutes pass as the husband rustles about. Finally, he reappears, carrying a plateful of scrambled eggs.

"Why," exclaims the wife, "I told you to write it down. Here you've come back and forgotten my bacon!"

Book Review: "Preparing Heirs"

Preparing Heirs by Roy Williams and Vic Preisser gives five steps in transferring family wealth successfully. The fives steps are as follows:

• Assessing Your Wealth Transition Plan


• Taking Action on Plan Deficiencies


• Preparing the Heirs


• The Heir's Self-Preparation Responsibilities


• Continuing Evaluation and Measurement

The book also gives examples of families that have successfully transferring wealth to future generations and those who were not successful. A good read. You can find the book here.

The Cost of Ignorance

By most measures, Larry Hillblom was a smart guy, but he lost his senses when he decided to draft his own will.

Mr. Hillblom was the "H" in DHL Corp., the air-courier giant. His interest was valued at $600 million before he died in 1995. He graduated from Boalt Hall School of Law at Berkeley and argued high-profile international cases before the Ninth Circuit. He was a special judge in his adopted county, the Commonwealth of the Northern Mariana Islands.

But when Mr. Hillblom decided to draft his own will, he exhibited little intelligence. In the will, he left most of his $600 million to university medical centers for research. But, alas, the will lacked one detail: a simple, one-sentence disinheritance clause.

Mr. Hillblom's drafting failure was unforntunate, because over the years he had fathered several children with young women through the South Pacific. The mother of Hillblom's oldest known child named him "Junior Larry Hillblocm." When Junior was ten, an attorney represented him and three other offspring and sued Hillblom's estate, claiming inheritance rights.

The estate, DHL, and the various medical research universities hired over 100 buttoned-down attorneys to fight the paternity claims. After more than four years of litigation, the case was resolved.

The four children won.

A very important lesson can be learned from Mr. Hillblom's mistake. It is always advisable to consult an expert in ensuring your estate plan will be carried out in the way your intended it to. Or pay the price to become the expert yourself. Check out our website.