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Burlington, VT office 802.540.0529
Hanover, NH office 603.643.6072
Rutland, VT office 802.773.3822
Woodstock, VT office 802.457.9492

February 12, 2013 Newsletter Archive


Wonder Bread or Crossett Hill Batard?
Unique Plans for Unique Individuals

I used to teach an adult education English class. On the first day of class I wanted the students to say something about themselves, and I wanted to give them a prompt. So I asked, "If you were a loaf of bread, what kind would you be?" The answer provoked giggles but it was a fun assignment and yielded very diverse answers. Not surprisingly, no one in the class offered that they were a loaf of Wonder Bread, that is, white bread made with the most basic ingredients, sitting on the shelf of every super market. (I realize that Wonder Bread no longer exists, but most of us still know what it was and attach a certain understanding to it.)

Most people went for unique, complex varieties ranging from baguettes to boules, from sour dough to pumpernickel rye. It's a fun exercise and I encourage you to try it.

It is interesting then, that when we talk to some clients they want us to view them as Wonder Bread, very simple, nothing fussy, nothing unique. Yet, explore this same client further and together we learn that they are anything but a simple, white loaf. What we invariably discover is that they are indeed complex, unique, one of a kind, and that they deserve the estate plan that fits their set of ingredients, not their neighbors', not their friends' and not that of the rows and rows of Wonder Bread. It is with this thought that we explore just why DIY estate planning is a bit like Wonder Bread - a place to hold the peanut butter perhaps, but which falls apart if you're making any other type of sandwich.

Do it Yourself Estate Planning Systems:
You Get What You Pay For

When it comes to estate planning, one significant factor is that you understand yourself and what you hold dear. Of course you want to protect your family, but what does that really mean? If your three neighbors ran out and bought a DIY Will kit, should you do the same thing? Would this really meet your needs?

Ask yourself:

Perhaps, if these are your friends you will have much in common, but we can assure you that you are not the same people. When we dig a little deeper we are all a bit more complicated than we might even realize. Our hopes, dreams and aspirations for ourselves and our families are unique, and because we are unique, our planning should be unique too.

With the federal estate tax no longer in flux it could be that more of your colleagues and friends are going the DIY estate planning route, but we caution you. Tax issues remain as do several other factors that require a well thought out plan, and generally an attorney's assistance, to optimize your protection.

Tax Issues are Still Present
To begin, tax issues have not entirely disappeared, even for couples under the federal threshold. Vermont continues to impose a tax on estates over $2.75 million and has not adopted portability. While couples can pass up to $10.5 million free of federal estate tax, they should still be wary of the Vermont estate tax. Bypass trust or disclaimer provisions continue to play a role in estate planning for Vermont couples above the taxable amount, and those with an asset level around this figure should consult with an attorney to make sure they are planning in way that does not generate unnecessary state estate tax.

Is it time for a Joint Trust?
If the $2.75 million value does not apply to your family, the certainty that has come with the recent legislation provides an excellent opportunity to simplify your current plan with a joint trust. In the past, separate trusts for couples were important to ensure that assets could pass to a family or bypass trust to avoid unnecessary taxation; however, couples who are no longer concerned about tax planning can consolidate their separate trusts and transfer assets into a joint trust, benefiting not only from probate avoidance, but also a minimized trust administration at the death of the first spouse. Assets held under a joint trust will simply pass to the surviving spouse at the death of the first spouse, to be fully controlled by that spouse, without any need to retitle or distribute assets.

Transfer your Real Estate into Trust
To some extent, retitling of assets such as bank or investment accounts into trust can be completed without legal assistance. Real estate, however, must be transferred by deed conveying the real estate into trust, which is best handled by a lawyer. Those who own real property located out of state can benefit from placing such real estate into a trust to negate the need for an ancillary probate administration, which is also best handled by an attorney who resides in that state. Also, it is helpful to review with a lawyer how assets are titled and whether an asset has a beneficiary designation, to ensure that all assets are retitled into trust and to prevent the need for probate.

Beyond Probate Avoidance
In addition to probate avoidance, trusts continue to be important tools for couples with minor children, beneficiaries with special needs, beneficiaries with financial issues, or any other issues personal to the individual creating the estate plan. Trusts provide the ability to direct assets to a special needs trust for any beneficiary receiving government benefits. Trusts also provide creditor protection for beneficiaries while assets are held in trust, as well as the flexibility of incremental distributions, permitting a beneficiary to receive partial distributions of principal at various stages of life. Depending on an individual's concerns, trusts can even plan for unknown situations, incorporating provisions for beneficiaries who develop substance abuse problems or financial mismanagement issues.

Other Estate Planning Documents
Because they provide the ability to name guardians, Wills are essential documents for individuals with minor children. Depending on a client's needs, a financial power of attorney might need to include certain provisions such as gifting and Medicaid Planning which must be specified to be effective. Considerations as to whether a financial power of attorney should be effective immediately or only effective upon a doctor's certification of incapacity are issues best discussed with your lawyer.

Follow your State's Execution Requirements
Finally, estate planning documents, whether a Will, trust or power of attorney, must meet certain legal requirements to be valid under the law. Meeting with an experienced estate planning attorney ensures that execution of these documents will be completed correctly. No matter how straightforward, a document will not take effect if it does not adhere to legal formalities.

Despite the decrease in concern over tax issues, estate planning continues to be a nuanced area of law. Undoubtedly, some will use DIY programs to create Wills or other documents without legal assistance; however, this approach promotes a one-size-fits-all end which will necessarily overlook the personal needs of some, if not many, individuals. To be sure your estate plan is tailored to your needs and is effective in accordance with those needs, visiting a lawyer to explore your discreet issues continues to be crucial.

We would love to hear from you! If you are interested in guest writing for our newsletter or simply have a comment to share, please let us know.


Melendy Moritz PLLC is a client centered boutique firm. We focus on your unique needs by providing the individualized legal counseling and advising tailored to your specific situation.

We concentrate on the planning that matters to you.
Call us at 603.643.6072 or 802.457.9492

 

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