Gifts To Grandchildren

Gifts given to grandchildren by grandparents can be a great blessing.  Kelly Greene wrote an article in the Wall Street Journal September 14, 2012, titled "Are You Coddling Your Grandkids?"  In her article, Ms. Greene indicates five ways to give to a grandchild something and at the same time not creating a sense of entitlement from a grandchild.
First, Ms. Greene says you must, "Pare your gifts to offset the pain."  In other words, don't give to the extent that you jeopardize your own financial care.
Second, Ms. Greene say you might consider making a gift a loan rather than an outright gift.  If the loan is handled properly, it might be a good way to help the grandchild and at the same time allowing them to make their own way in the world.
Third, Ms. Greene says a grandparent can create teaching moments.  Gifting stock or investments rather than cash can be a way of teaching grandchildren the value of money as an example.
Fourth, Ms. Greene says it is a good idea to delay a grandchild's gratification.  Gifting money at certain dates or events rather than on a regular basis can help grandchildren rely on their own resources first.
Fifth, Ms. Greene counsels to practice equality.  One of the most common reasons for litigation between family members if perceived favoritism. 
As you choose to gift assets, it is wise to take into account the feelings of family members and how said gifts will affect them in the long run.

Choosing The Right Fiduciary--Trustee, Agent, Personal Representative

In an article written September 10, 2012, by Jeanne Skowronski of the Wall Street Journal, Ms. Skowronski writes about the importance of choosing the right trustee to serve as the fiduciary of your estate.  Ms. Skowronski talks about four questions which she feels should be asked in deciding who should serve as fiduciary.  She asks:




- How large and complex are the assets in the trust?
- Can anyone in your family do the job?
- How are the relationships between your beneficiaries?
- Have you explored other options?




Here at Hughes Estate Group, we emphasize the great importance of choosing the right individual or entity to serve as the fiduciary of a person's estate.  We ask a series of questions in order to help you determine the best fiduciaries for your estate plan. 




We feel there should be much more deliberation in determining who should serve than simply naming your first born child for example or even the child most able to handle finances.  The relationships between siblings and many other issues also hold great bearing on who should be named as the individual or individuals to take care of your affairs at your incapacity or death. It is important to ask the right questions in deciding who should serve as trustee of your trust, or agent of your power of attorney, or personal representative of your will or estate. 

New Year's Resolution

At the beginning of this new year, we at Hughes Estate Group wish all a happy and successful year.  We would encourage everyone to set a goal for this year to either get an estate plan in place (if a plan is not in place) or review and update any existing estate plan (if a plan does exist).  Death is something we will all experience.  Ensuring the smooth transition of one's estate to beloved beneficiaries is one of the best gifts a person can give his or her family.

Power of Appointment Types

There are two types of powers of appointment:  a general power of appointment and a limited (special) power of appointment.  Each of these types of powers carries different and significant tax implications.

General Power of Appointment:
In a general power of appointment the donor gives the donee authority to appoint (transfer) the donor's rights, assets, or items to anyone the donee wishes, including the donee himself.  Potential adverse tax consequences accrue to a donee who possesses a general power of appointment: the rights, assets, or items which the donee has power to appoint are considered the donee's property for gift and estate tax purposes.

Limited (Special) Power of Appointment:
In a limited (special) power of appointment the donor limits the donee's authority to appoint (transfer) the donor's rights, assets, or items.  The authority may be limited in various ways.  For example, the donee may be limited in regard the the persons to whom he or she can appoint assets; or the donee may be limited in regard to the times at which he or she can appoint assets; or the donee may be limited in regard to the purposes for which he or she can appoint assets (for instance, the health, education, maintenance, or support of the appointee).  In certain circumstances the donee possessing a limited power of appointment and the appointee may be the same person.  With a limited (special) power of appointment, the Internal Revenue Service usually does not consider the rights, assets, or items subject to appointment to be owned by the donee in determining the donee's own gift and estate taxes.  In estate planning, generally a limited (special) power of appointment is preferred over a general power of appointment.

Power of Appointment

Parties involved with a power of appointment are:
"Donor" is the person who creates a power of appointment.  The donor is usually the owner of rights, assets, or items being ultimately appointed by the donee.
"Donee" or "holder" refers to the person who possesses a power of appointment--who has been named to appoint or transfer all or a portion of an owner's rights, assets, or items.
"Appointee" is the person who receives the rights, assets, or items as a result of the power of appointment being exercised.
"Taker in Default" is the person who receives the rights, assets, or items if the power of appointment is not exercised.

General Definition:
A "power of appointment" is a unique power given to a donee (holder) by a donor to distribute the donor's rights, assets, or items usually at the donor's death to appointees.  A donee of a power of appointment is different than a personal representative or trustee.  A donee of a power of appointment does not have the responsibility of managing a person's estate or trust assets.  Rather, the donee has the authority to appoint the donor's rights, assets, or items to appointees.  There are two types of powers of appointment: a general power of appointment and a limited (special) power of appointment.  Each of these types of powers carries different and significant tax implications.

Estate Planning And The 529 Plan

A 529 education plan is a great way to start saving money for a child's education and can be a valuable estate planning tool. For estate planning purposes, a 529 education plan can be used to reduce estate taxes if estate taxes are an issue for you or prepare for your child's education in the event you die before your child becomes old enough to get a secondary education. In estate planning, it is important to look at all the "what if" scenarios and try to prepare for those scenarios. It is the same with a 529 plan. One "what if" scenario that must be addressed is what if the 529 funds outlast the child's 529 education plan. The Wall Street Journal has a great article covering this very "what if" scenario. The article entitled, "What to Do With Leftovers in 529 Plans," written by Georgette Jasen gives options enabling an individual to make an educated decision if a 529 plan ends up with "leftover" funds.

Moving To A New State With Estate Documents In Place

If you have estate documents (wills, trusts, powers of attorney, etc.) and you move to a new state, it is always good to have an estate planning attorney in the new state review your documents. A general rule of thumb is wills and trusts will less likely need to be amended with a move to a new state. Powers of attorney, especially health care, will more likely need to be amended to meet the new state's requirements.

Basic Stages of Life

There are three basic stages of life. Different estate documents are used for each stage of life.

The first stage of life is when an individual is alive and mentally competent. At this point in a person's life, not estate documents are necessary. However, this is the time an individual should put estate documents in place for the next two stages of life.

The second stage of life is when an individual is alive and mentally incapacitated. At this point, powers of attorney can be used to establish authority and begin acting for a person in the second stage of life. If powers of attorney have not been created, an individual seeking authority to act for a mentally incapacitated person must petition a court for that authority in a guardianship/conservatorship proceeding.

The third stage of life is when an individual dies. Once someone dies, the powers of attorney or a guardianship/conservatorship ends. At the point of death, trusts and/or wills are then used to establish authority and distribute a deceased person's estate to beneficiaries. If there is not a properly funded trust or there is only a will or there is no will at all, most likely authority to act on behalf of a deceased person must be sought through the probate court.

William Shakespeare and Edward De Vere's Estates

No matter which side you take--William Shakespeare is "the" William Shakespeare or Edward De Vere is "the" William Shake-speare--it is of interest to look how their heirs inherited each of their estates.

The Stratfordian Shakespeare's Will

William Shakespeare of Stratford prepared a will before he died.

To his daughter Judith he willed:
- 100 pounds for a marriage portion and another 50 pounds if she renounced any claim to the Chapel Lane cottage.
- An additional 150 pounds if Judith lived another three years, but forbade her husband any claim to it unless he settled on her lands worth the 150 pounds.
- If Judith did not live another three years, the 150 pounds was to go to Shakespeare's granddaughter Elizabeth Hall.
- A silver bowl
To is sister, Joan Hart, he willed:
- 30 pounds
- Life estate with nominal rent in the Western of the two houses on Henley Street, which Shakespeare himself inherited from his father in 1601.
To Joan Hart's sons, his nephews, he willed:
-5 pounds to each of Joan's three sons.
To his granddaughter, Elizabeth Hall, he willed:
- All his silver plates, except the silver bowl left to Judith.
To the poor of Stratford he willed:
-10 pounds to the poor of Stratford.
To his friends he willed:
- His sword and various small bequests to local friends.
- Memorial ring to be bought for his lifelong friend Hamnet Sadler
- Memorial rings to be bought for John Hemynges, Richard Burbage, and Henry Cundell
To his wife, Anne, he willed:
- His "second best bed."
To his daughter, Susanna and Son-in-Law, John Hall, he willed
- "All the Rest of my Goods, Chattels, Leases, Plate, Jewels & Household stuff whatsoever after my debts and Legacies paid & my funeral expenses discarded."

Oxfordian Shake-speare's Estate

Edward De Vere was the 17th Earl of Oxford. He inherited the Oxford estate when his father died. Titled property usually was inherited by the oldest son in a nobleman's family. Edward De Vere had only one living son, Henry, from his second wife, Elizabeth.

Edward did sell some of his estate during his life, and established a trust fund for his three living daughters from his first wife, Anne. His three daughters, Elizabeth, Bridget, and Susan all married men of title as well.

The remaining estate went to his second wife, Elizabeth, and his son, Henry, who became the 18th Earl of Oxford.

Movie Review: Greedy

The movie Greedy (1994, rated pg-13) is about an extremely wealthy uncle (Kirk Douglas) who knows his greedy relatives (Ed Begley, Jr., Phil Hartman, Michael J. Fox) want his money. He puts them through various tests including hiring a beautiful nurse from England. While watching the fun, it is of interest to see all the estate planning issues a family can actually go through.

Purpose Of Estate Planning

The purpose of estate planning is to transfer assets to beneficiaries at the times and in the manner desired by the owner efficiently, with minimal taxes, and without conflicts. This concise definition of the purpose of estate planning involves a lot of issues. The individual participating in estate planning must gain an understanding of all the issues. Look at the following site for an in-depth introduction to the various issues involved with estate planning.

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.

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.

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.

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.

Definition of the Week: Estate Planning

Estate Planning: To understand what estate planning is, we need to first ask, "What is an estate?" The word "estate" simply refers to the things you own, your assets. For example, money in a checking account is an asset you own. If you have a checking account, you have an asset and you have an estate. Equity in your house or a life insurance policy or anything else you own are additional assets comprising your estate.

Estate planning is planning how your estate will be managed when you cannot manage it yourself. If you ever become mentally incapacitated or after you die, an estate plan will control how your checking account and other assets are managed and distributed. If you want to decide who receives your assets, and how and when they receive your assets, when you cannot make those decisions in person, then estate planning is for you.

Estate planning is like building a bridge over a chasm. The chasm is a deep gorge and dangerous river of confusion, wasted money, resentments, fraud, and probate litigation. Point A on this side of the chasm is the date of your incapacity or death. At point B on the side of the chasm stand your heirs, your beneficiaries, those you care most about. Estate planning is the bridge, the road over the deep gorge and dangerous river, which is used to transfer your assets safely, efficiently, and peacefully from point A to those you care most about at point B.

Definition of the Week: Estate

Estate: The word "estate" simply refers to the things you own, your assets. For example, money in a checking account is an asset you own. If you have a checking account, you have an asset and you have an estate. Equity in your house or a life insurance policy or anything else you own are additional assets comprising your estate.

Talking to Your Parents About Their Finances

I read an article in the Wall Street Journal's weekend edition. The article discusses ways for family members to approach talking to aging parents about their financial needs or concerns. The full article can be found here.

Search our website here for our family approach to estate planning.

Do Your Assets Match Your Estate Plan and How Healthy Are Your Assets?

We have found in reviewing many estate plans that a person's assets are not always coordinated with their estate plan thus undermining the plan and the effectiveness of the assets in fufilling the plan.

For example, parents might instruct their executor upon their deaths to set aside money for their children's educations. The parents' assets might consist mainly of retirement accounts. In following the estate plan, the executor would need to liquidate the retirement accounts to pay for the children's educations. In liquidating the retirement accounts, the parents' estate would be faced with paying potential penalties and forced taxes. Careful planning would enable the parents to fund educations while still preserving their retirement account tax status.

As another example, consider an individual who wants his estate to go to his children from his first marriage and still provide for his new spouse. When the assets are reviewed, the estate is real estate rich but cash poor. Without careful planning, the individual's executor might find it impossible to meet the needs of the surviving spouse while preserving the children's interests in the real estate.

We have also found in reviewing clients' assets that many clients' assets have become old and stale. For example, an insurance policy over five years old should be reviewed and possibly updated to take advantage of better premiums and better coverage. The same goes for investments. It is important to have your investments reviewed in order to ensure they are performing at their optimum capacity.

Here at Hughes Estate Group, we make sure our clients' assets match their estate plans. We also offer free evaluations to check the health of clients' assets. Getting estate planning documents in place is crucial. It is just as important to make sure your assets fit your plan and each asset is healthy to meet the needs of your plan.