Tuesday, July 26, 2011

On July 1, 2010, the provisions of a completely revised Georgia trust code became effective. This month we celebrate its first anniversary, so it seemed to be a good time to reflect on what were the top “attention-getters” of the new code. In thinking about this “top three” list, we’re reminded of the last time we trained a new puppy. The theme was: reward the good behavior, ignore the bad. Fortunately, the new code will help you take care of your dog and rewards good trustee behavior, but there could be serious consequences for a trustee not complying with some of the new provisions. (more…)

Monday, July 25, 2011

Life insurance is an important estate planning tool that many people buy to provide financial support for loved ones and to ensure that their estate will be able to pay estate taxes when they pass away.

The “Insurable Interest Requirement”. In the U.S., a life insurance policy can only be acquired by a person (or entity) who has an “insurable interest” in the life of the insured. This means the person who acquires the policy must have some reason to wish for the insured’s continued life. This requirement for an insurable interest originated in England in the 18th century when Parliament enacted a law requiring an insurable interest to stop the popular practice of wealth investors purchasing life insurance policies on elderly persons and persons accused of capital crimes so they could reap the profits when the person died (by natural or unnatural causes). This law remains in effect in England today, and has been adopted in all of the U.S. states (and the District of Columbia), at least in some form.

Who has an insurable interest? State law in every state (and the District of Columbia) establishes that an individual has an insurable interest in his or her own life and, therefore, may purchase an insurance policy on his or her own life. Most state’s laws provide that a third party who is related to an insured individual by blood or law has an insurable interest in the life of the insured because such relationships are presumably based upon love and affection for one another, which is thought to protect the insured from someone gambling or wagering on the insured’s life. (more…)

Friday, July 22, 2011

For years, estate planning practitioners have encouraged Congress to pass a bill authorizing portability of a married couple’s estate tax exemption (allowing a surviving spouse’s estate to add her deceased spouse’s unused estate tax exemption to her own). Now, with the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “2010 Act”), estate planning practitioners are now wondering if, instead of being grateful that Congress finally listened, they should be thinking “be careful what you wish for.” Here is our take on the good, the bad and the ugly of portability.

The Good:

Prior to the passage of the 2010 Act, (more…)

Thursday, July 21, 2011

I’ve noticed a trend in our estate planning practice — an increasing interest in establishing private non-operating foundations. This is interesting given the advantage that donor-advised funds provide over foundations, most notably the reduced administrative burdens on a family who opts for donor-advised funds over foundations. There are also extremely well run donor-advised funds to pick from, funds with great track records and high customer satisfaction ratings. So what is the reasoning? I think it stems from a desire of a parent to teach philanthropy to their children, grandchildren, and possibly great-grandchildren. Family members are typically on the board of directors of the foundation so they are forced to come together and make decisions about how grants are made. The hope is having family members convening in one place and spending time discussing charitable gifts will provide a springboard for other charitable giving. Even though the foundation document typically provides family members with fairly easily methods of terminating the foundation, at least a vehicle is in place for family philanthropy that can last generations.

Wednesday, July 20, 2011

To ensure your estate is distributed according to your wishes.

If you die without a will and have assets in your own name, your assets will pass by your state’s law of “intestate succession,” which sets forth who in your family will receive your estate and in what order. This distribution may be contrary to your wishes and may result in your child being denied eligibility for public benefits (generally, an individual may not receive SSI or Medicaid if they have more than $2,000 in assets). For example, if you die without a will in some jurisdictions, the law requires your assets be divided between your spouse and your child, even though you may want your assets to go to your child only if your spouse is not alive. In addition, a court would have to appoint a legal guardian that is accountable to the court to invest and manage your minor child’s inheritance, until your child reaches age 18. At that time your child would have full control of the assets, which may not be your desire.

 To maintain your child’s eligibility for public benefits.

If your child receives an inheritance that causes your child to exceed the $2,000 allowable asset limit, he (more…)