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Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

Volume Six Number Seven July 2008

Summer Vacation

I will be on vacation from July 17 – August 4. If you require assistance during my absence, please do not hesitate to contact Bonnie Harris. — Ron Lyster

Adult Education

Adult Education Americans cherish their personal independence. Each of us has the freedom and responsibility to make our own personal, health care and financial decisions upon reaching adulthood (i.e., age 18 in most states). If you have loved ones who are young adults, or soon will be, then you should share this article with them. We will review some of the fundamental threats to personal independence encountered by young adult Americans.

Incapacity

The print and electronic media remind us that life can take some rather unexpected and unpleasant turns. From automobile accidents to tornadoes, people often are seriously injured in unexpected events. Aside from injuries, however, many people are incapacitated due to various illnesses, even though reports of their suffering rarely make the evening news. The threat of incapacity looms over everyone, and disaster does not play favorites. Unfortunately for some, incapacity is both unexpected and permanent.
Whatever the cause, incapacitated Americans may lose more than the ability to care for themselves. In the absence of proper legal planning, they also lose the ability to select their own backup decision-makers for personal, health care and financial matters. By default, a court makes that selection through a legal process that may employ at least three lawyers, cost thousands of dollars and expose private personal and financial information to the public record. Thereafter, the backup decision-maker selected by the court will remain under its supervision, further adding to the ongoing expense and red tape. Truly in these cases, an ounce of legal prevention is worth a pound of legal cure.

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Carrots & Sticks

Carrots & Sticks Whenever someone lacking financial maturity receives an outright inheritance, it is typically good news for sports car (usually red in color) salespeople, travel agents and high-end electronics dealers. [Some have termed this Affluenza.] Is that how you want your hard-earned wealth consumed? And what about the potential long-term damage to your heirs?
The Incentive Trust is one increasingly popular antidote to this dilemma (short of spending your kid’s inheritance, as the popular bumper sticker proclaims).

Incentive Trust Antidote

As the name implies, an Incentive Trust is one in which the Trustmaker sets standards of conduct or achievement that must be met before distributions are made to or for the benefit of a beneficiary of the Trust. These standards may include such incentives as completing a certain educational level, becoming self-supporting through gainful employment, volunteering for charitable causes supported by the Trustmaker and even avoiding drug/alcohol abuse.
However, Incentive Trusts may not include provisions that are considered contrary to public policy. Such provisions include those that may disrupt family relationships by encouraging separation or divorce, foster neglect of parental responsibilities, prevent marriage or discourage the performance of public duties. Otherwise, the scope of permissible incentives is limited primarily by your creativity as the Trustmaker.

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Did You Know?

Did you know that:

While three in ten Americans DO have a plan, the average age of a will coming into a law office for update or probate is nearly 20 years?
A Power of Attorney of similar vintage may be rejected by banks and other third parties?
In three out of four cases, a Health Care Directive (also sometimes called a "Living Will") is unavailable when needed?
Nine out of ten Americans MISTAKENLY believe that life insurance proceeds are automatically exempted from Federal Estate Tax?
The Wills of most married couples control ONLY personal effects?
There are legitimate means of leveraging the $12,000 annual gifting exclusion, of avoiding capital gains tax on super-appreciated low-yield assets, and of ensuring that 99% of assets flow to the next generation in a thoughtful, protected manner?

Valuation Experts

Is it Time to Review Your Plan?

Proper estate planning is a process, not simply a one-time event. Therefore, it only makes sense to periodically review your planning goals and legal instruments. Review this list of life changes that could alter your estate-planning needs. If you notice some areas that might apply to you or your family, it may be time for an estate plan check-up.

Marriage, remarriage or divorce.
Death of a spouse.
Substantial change in estate size.
Death or incapacity of an executor, trustee or guardian.
Move to another state.
Acquisition of property in another state.
Birth or adoption of a child or grandchild.
Serious illness of a family member.
Change in business interest or retirement.
Change in insurability for life insurance.
Marriage or divorce of a beneficiary.
Change in beneficiary attitudes.
Financial irresponsibility of a child.
Change in tax law.
More than two years since review of plan with attorney.

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