Estate Planning Lessons from the Movies – Part I

I like to draw inspiration for my blogs from articles and other blogs that I read. Anytime those sources pull from real life, it piques my interest. After all, Estate Planning focuses on real life and the most real and inevitable part of life, death. Earlier this week, a headline titled “Eight Lessons from Killers of the Flower Moon” caught my eye, and the idea for this blog took hold. The article talks about the movie titled “Killers of the Flower Moon” that hit theaters late last month to critical acclaim, but that’s not all it discusses. The article lays out the many real-life Estate Planning lessons that we can learn from watching the movie. This first part of a two-part series will delve into the plot of the movie and start introducing the lessons. The second part will finish exploring the lessons.

Before we get into the lessons, it’s important to understand a bit about the plot of “Killers of the Flower Moon.” The film focuses on the “Reign of Terror” which was the name given to the period when white “caretakers” murdered members of the Osage Indian Tribe to steal their rights to the oil under their reservation. After the oil was discovered, each member of the tribe received a “headright” or share in the oil money. The tribe members could devise or distribute, but not sell, that right. Anyone could inherit the headright which meant that outsiders sought to marry into the Osage tribe or otherwise become an heir to one of the members of the tribe. This led to the murder of countless Osage tribe members. As if the murders were not tragic enough, the federal government decided to impose restrictions on the tribe’s financial autonomy and required tribe members to take a test regarding their competency to manage their own estates. Every tribe member failed, and the Bureau of Indian Affairs assigned each a white guardian to oversee their spending. It’s unclear whether the guardians had any training, but the article makes clear that the guardians were corrupt and completely unnecessary.

The story alone is fascinating, but it becomes even more interesting when viewed through an Estate Planning lens and with an eye toward learning from mistakes of the past. The first lesson we can take is understanding and appreciating the importance of fiduciary duties. Setting aside the question of whether the guardians were necessary, guardians or trustees, as we know them, have fiduciary duties that they must uphold. Without question, those tasked with guarding the Osage failed miserably in this regard, especially because many of them ended up murdering their charges. In the Estate Planning world, fiduciary duties are sacrosanct, and the fiduciary must always put the beneficiary’s needs before the fiduciary’s own self-interest. Choosing the right person to serve as fiduciary makes a plan; likewise choosing the wrong person to serve as fiduciary breaks it.

The second lesson is to know your beneficiaries. Any time that an individual serves in a fiduciary capacity, it’s important that they know and understand their beneficiary. The trustee/guardian relationships served no purpose for the Osage. The government established those relationships in bad faith, and the relationships were borne out of greed and racism. Prior to the creation of these relationships, the Osage negotiated ownership of their land and contracts with the government relating to the oil rights so it’s clear that they needed no help in managing their finances. A fiduciary must recognize what their beneficiary needs and determine how to address those needs either through the trust or another entity. Undoubtedly, a Trustee must exercise their discretion for the benefit of their beneficiaries.

Third, sudden wealth destabilizes. We have all heard stories about how lottery winners end up penniless, or that even those that come from wealth end up losing the family fortune. A sudden change in fortune changes things. People have unique views about money and just because an individual’s fortunes change, doesn’t mean that their view on or relationship with money does. Many a relationship has ended because the parties disagreed about how to spend their funds. If we know how a beneficiary views money, and understand their need for it, we can create a plan that addresses that need and viewpoint. This lesson piggybacks off the first two and underscores why choosing the proper fiduciary and understanding your beneficiary both matter. The relationship between the fiduciary and beneficiary will change because of the money involved.

The final lesson from this first part of the series is perhaps the most sobering. Addiction knows no tax bracket. Some movies and television shows cast alcohol and drug abuse as problems of the poor, but nothing could be further from the truth. Those with unlimited resources or who never hear the word “no” run just as much a risk for addiction as those without resources. Again, this underscores the importance of choosing a proper fiduciary and understanding the beneficiary. If the beneficiary struggles with addiction, the fiduciary needs to know that and the trust needs to have the tools to address that beneficiary’s addiction.

While the movie sounds intriguing because of the plot, I’m excited to watch it through the lens of an Estate Planning professional. The lessons discussed in this first part of a two-part series have real-life application. If you have concerns regarding your Estate Plan or any of its provisions, make it a point to talk to contact me so that we can discuss the nuances.

Take Advantage of Your Annual Per Donee Exclusion Amount

As we gather with our family, friends, and loved ones to celebrate Thanksgiving, let’s take a moment to savor the food and our time together.  This time of the year offers a special opportunity to show our loved ones just how much we care. We can do this in any number of ways, including gifting.

Let’s make this year the year we give gifts that benefit both the recipient and the donor. Annual exclusion gifts provide a benefit not only to the recipient but also to the donor. Annual per donee exclusion gifts allow the donor to make gifts to multiple individuals without incurring any transfer tax consequences provided that the total gifts to an individual are present interests and do not exceed the threshold amount. Internal Revenue Code (“Code”) Section 2503(b) sets the amount that an individual taxpayer can gift to any other person at $17,000 for 2023 ($18,000 for 2024). Giving now allows individuals to reduce the value of their taxable estate without impacting the lifetime exclusion amount of $12.92 million in 2023 ($13.61 million in 2024). In addition to allowing the donor to avoid use of any applicable exclusion amount, annual per donee gifts remove future appreciation on the assets gifted from the donor’s estate as well.

The Code imposes no limit on the number of annual per donee exclusion gifts per taxpayer meaning that an individual taxpayer may gift up to that $17,000 amount to an unlimited number of individuals without ever worrying about estate or gift tax consequences. Gifting the funds or assets removes them from the donor’s taxable estate without ever impacting the lifetime exclusion amount. It’s one of the few totally “free” estate planning techniques. Because annual gifts reduce the size of the taxable estate, they also reduce the potential tax liability. For married couples, the benefit doubles because each spouse can gift the annual per donee exclusion amount to the same individual, and if the recipient has a spouse, then the donors can double the impact of their gifting again. Let’s review an example that demonstrates effective use of the annual per donee exclusion amount.

Assume that Mike and Carol recently met with their attorney who suggested that they start reducing the value of their taxable estate. Mike and Carol were preoccupied with the pending nuptials of their daughter, Cindy.  They realized that they better act quickly to utilize their 2023 annual per donee exclusion amounts. They decided to give each of their six now-married children, Greg, Marcia, Peter, Jan, Bobby, and Cindy an envelope containing $68,000 ($34,000 from each of Mike and Carol to each child, plus an additional $34,000 for each spouse of each child) at Cindy’s wedding on New Year’s Eve 2023. After the clock strikes midnight, the family rings in 2024, and Mike and Carol hand out another set of envelopes, this time, with $72,000 ($36,000 from each of Mike and Carol to each child, plus an additional $36,000 for the spouse of each child) cash in each envelope.

In the example above, in just a few hours, Mike and Carol gave away over $800,000 without incurring any estate or gift tax consequences. Mike and Carol each gave $17,000 to each of their six children and their spouses, totaling $408,000 in 2023, and Mike and Carol each gave $18,000 to each of their six children and their spouses, totaling $432,000 in 2023, for a total of $840,000. In fact, Mike and Carol could each also gift $17,000 to a grandchild in 2023 and $18,000 to that same grandchild in 2024. The foregoing example demonstrates how quickly these gifts can add up and make a huge impact on an estate. In addition to using the annual exclusion gifts, the Code gives taxpayers a tax-free pass when they pay the medical bills of another individual or pay the tuition bills of a student. The Code imposes no limit on the amount of these medical and tuition gifts, as long as the amounts are paid directly to the provider. The Code also allows contributions to charitable exempt organizations. The Code imposes no limit on the amount of these contributions for gift tax purposes, which provides another easy option for those who want to do some easy estate planning. Such charitable contributions may also qualify for a charitable income tax deduction, up to certain percentages of the taxpayer’s adjusted gross income.

The upcoming holiday season presents the perfect time to consider these and other estate planning issues. Options may exist for the use of annual exclusion gifts in conjunction with trusts and a long-term Estate Plan. Giving now, rather than waiting until death provides several estate planning opportunities in the form of tax-free distributions, reduction of the gross estate, and appreciation outside of the taxable estate, not to mention the benefit to the recipient that the donor will witness while alive. I can help you explore these opportunities and to determine whether they make sense for your family situation.

It’s a Great Time to Consider a Donor Advised Fund

Charitable gifts offer a great opportunity to reduce income tax liability. When a taxpayer makes a charitable contribution, typically they get an offsetting charitable income tax deduction. Unfortunately, that offsetting deduction doesn’t always end up reducing the total tax burden. To take a charitable income tax deduction, the taxpayer needs to itemize their deductions. If the charitable contribution and other itemized deductions don’t exceed the standard deduction amount, then it makes sense to take the standard deduction and forego the itemized deductions.

Let’s look at an example. Assume that Charlie Charitable has taxable income of $100,000 each year. He files as a single taxpayer with a standard deduction of $13,850 (in 2023). He has $10,000 of state and local taxes (an itemized deduction and the most one could take as a deduction for such taxes under current law). In addition, he makes a charitable contribution each year of $2,500 to his alma mater. His itemized deductions would be $10,000 plus $2,500 = $12,500, i.e., less than the standard deduction amount of $13,850. It doesn’t make sense for Charlie to itemize his deductions since they would be less than the standard deduction he could take without itemizing.

If Charlie Charitable spoke with an advisor, he would discover that by making several years’ worth of charitable contributions in one year, he would increase his charitable deductions to an amount exceeding the standard deduction amount. Charlie could refrain from making charitable contributions in the “off” years and simply take the standard deduction amount. Charlie likes that idea and decides to make a charitable contribution of $10,000 in 2023. That raises his itemized deductions to $20,000. This saves him the tax on $20,000 (his itemized deductions) less $13,850 (the standard deduction) = $6,150. Assuming he’s in a combined state and federal bracket of 40%, that would result in savings of nearly $2,500. In the “off” years of 2024, 2025, and 2026, he’d take the standard deduction amount each year and the strategy would not impact his taxes in those years. In 2027, he could repeat the large charitable contribution for another itemized deduction.

Another way for Charlie to optimize his charitable deduction would be by using a Donor Advised Fund (“DAF”). Contributions to DAFs give an immediate income tax deduction to the donor while creating a reservoir of assets for distribution to charities in the future. In addition, DAFs provide an opportunity for donors to invest contributed funds and make suggestions regarding which charities should receive the distributions. Donors may change their recommendations regarding the charitable distributions allowing great flexibility coupled with immediate benefits. In our example above, that means that Charlie could continue to make charitable contributions to his alma mater, but Charlie could decide to switch to a different charity altogether. In the interim, Charlie could invest the funds as he determined was appropriate prior to their distribution to a charity.

Donors may combine DAFs with other strategies to produce even better results. For example, if a donor gave highly appreciated public stock to a DAF, the donor would receive an income tax deduction for the full value of the appreciated stock without ever paying tax on the gains. Going back to our Charlie example, assume that Charlie gave $10,000 worth of publicly traded stock in which he had a basis of $1,000 to the DAF. If Charlie had sold the stock, he would have had to pay tax on the $9,000 gain. Assuming a state and federal combined capital gain tax rate of 30%, he’d owe $2,700 on the gain. If he then contributed the proceeds to charity, he’d only have $7,300 to contribute to charity. By giving the appreciated publicly traded stock directly to the charity (or DAF), he increases the amount that he contributes to charity which increases the deduction he receives.

DAFs complement any charitable giving strategy already in effect and provide a great opportunity for those new to charitable giving to discover the benefits it provides. It allows one to maximize the tax benefit from charitable giving, while retaining a say over the timing and distribution of the money. I can help you decide if a DAF is right for you.

The Seedier Side of the Holiday Season

It’s my favorite time of the year. Temperatures fall and spirits rise as we approach the holiday season. While we count down the days to year-end and enjoy gathering with our loved ones, it’s a great time to remind ourselves and our loved ones about the seedier side of the holiday season: scams. Scams run the gamut in ingenuity and range in form from charity scams to debt collection scams and from grandparent scams to imposter scams. Each scam has its own unsavory elements, but the grandparent scams strike me as the most deplorable of all by preying upon a grandparent’s natural concern for the welfare of their grandchildren.

Imagine that you are a grandparent and receive a late-night call from your grandchild pleading with you to send them money. The grandchild admits to having been arrested, maybe in a foreign country, and begs you to refrain from mentioning the call or the arrest to mom or dad because they will be upset with the child. Worse yet, imagine that you receive a call from a stranger purporting to be a lawyer, doctor, or arresting officer and discover that your grandchild has been arrested, hospitalized, or hurt in some other manner. This probably tops the list of nightmare possibilities about which grandparents worry. Many receiving this call would not think twice and be only too happy to help their grandchild by sending funds…except those funds never make it to the grandchild and by the time the grandparent realizes the ruse, the scammer has moved on to their next victim.

The grandparent scam has existed for several years and only continues to grow in popularity. With the near ubiquitous use of social media, scammers have more means through which they can obtain and use personal information both about the grandparent and the grandchild. Some social media sites encourage listing family members and connections which only makes determining pressure points easier. Often, unsuspecting users post private details on public forums without realizing that their privacy settings won’t protect the information from ne’er-do-wells. Some of the most common scenarios include receipt of an email or telephone call from the grandchild or someone pretending to be calling to advise the grandparent of the grandchild’s circumstances. Unfortunately, bad actors know how to use artificial intelligence technology to mimic voices and hold a conversation in that voice which makes recognizing the scam that much more difficult.

How can we help protect ourselves or the grandparents in our lives? First, be vigilant about calls from any number you don’t recognize. Understand that scam calls happen often and seem to happen more regularly during the holidays. Some swindlers manage to spoof numbers known to the target, thus it’s vital to use caution whenever someone asks for money, especially in what seems like “high-pressure” situations. Scammers impose pressure and bully targets into sending money quickly through money orders, gift cards, or cash apps, before the target has time to think and when adrenaline runs high because they are worried about their grandchild. Some may even insist upon receiving money in person. If you receive a call like this, hang up and report the call to local law enforcement, and then call your family members directly to confirm that they are safe. If the call came from someone claiming to be in law enforcement, call the agency to verify the person’s identity along with any information provided in the call. Resist the urge to keep the call a secret.

Next, review the privacy settings on your social media accounts and prevent strangers from accessing posts and photos. These sites have many benefits in allowing us to stay connected, but they provide fertile ground for scammers to obtain private information. Even on the telephone call, refrain from providing any information, such as your grandchild’s name. Force the scammer to say your grandchild’s name and remember to stay calm. Scammers rely upon causing panic and getting their targets to drop their guard and make quick decisions in the heat of the moment.

Finally, increase your awareness about the latest scams. The Federal Communications Commission (“FCC”) publishes consumer guides on spoofed caller IDs such as Caller ID SpoofingStop Unwanted Robocalls and Texts, and Call Blocking Tools and Resources. The FCC’s website has several links allowing a user to file a report about unwanted calls or spoofing or to find information on imposter scams.

The Better Business Bureau website contains consumer awareness articles about scams targeting older Americans, find these articles by reviewing BBB Scam Alert: Top trick used to scam older adults. The American Association of Retired Persons keeps track of scams by location and allows users to either submit a report or see local scams. To report or view scams in your area look at AARP Fraud Watch Network Scam-Tracking Map.

We can combat scams targeting our elders by learning to recognize the more common signs of a scam, educating our clients on scams aimed at the elderly, especially the grandparent scams, and alerting trusted individuals, such as family members and authorities when we suspect a scam, and understanding the resources designed to prevent, intervene, and investigate these scams. These scams will continue to gain popularity as artificial intelligence improves and makes it easier to replicate a loved one’s voice. It’s important that the community continues to evolve with technology and remember that we all have a duty to protect our elderly clients and loved ones.

The Horrors of Dying Intestate

October brings fall, pumpkin-spiced everything, and macabre things. Ghosts, ghouls, and goblins may Monster Mash through your mind; however, when I think of something truly terrifying, it’s dying without an estate plan…it’s the trick in Trick or Treating. Although everyone knows that they should treat their family to a comprehensive Estate Plan, many folks experience feelings of superstition and dread when considering planning for the end of their life, as if by planning for death, they invite it. The chilling truth is that most of us have no idea how much time we have and when we will depart our mortal coil. Accidents happen, and an alarmingly high number of people die without an Estate Plan, which can have disastrous results.

The excuses for failing to create a plan run the gamut, from being young or childless to being single or refusing to face mortality. Many people believe that if their assets do not exceed a certain amount, then they needn’t worry about an estate plan. Whatever the reason, failing to create an Estate Plan causes chaos at your death, leaving your loved ones in the lurch. Inevitably, those loved ones will need to attend to your legal affairs such as paying your debts and transferring your assets, and, without a clear set of instructions that a comprehensive estate plan provides, you are leaving a mess for those grieving your demise.

If you die without a Will or Revocable Trust, that’s called dying intestate. It’s so common that states have created statutes to address the issue of intestacy. Wills and Revocable Trusts address numerous issues such as who will care for minor children or pets, how and when assets will be distributed, who will oversee distribution of those assets, and how taxes will be paid. If you die without any Estate Planning documents in place, state statutes will determine how and to whom your assets will be distributed without any input from you or the loved ones you leave behind. Many states’ intestacy laws give only a portion of assets to the surviving spouse, making no provisions for anyone to whom you were not legally bound. Those same statutes give the remainder to descendants, without regard for the needs of individual recipients. This includes those who may have special circumstances, such as receiving governmental benefits, often leaving these individuals in the lurch.

If you die intestate, then your estate would need to go through probate. An individual would petition a court for appointment as executor, personal representative, or administrator, which would give that individual legal authority to collect and distribute your assets. That individual likely would need to retain an attorney to understand and navigate the complex court system. A judge oversees the many steps involved in this public probate process. The judge would issue Letters of Administration or similar documents that give the executor power to marshal the assets of your estate. If your family disagrees about who should serve in that capacity, then the court would make that decision and could appoint a total stranger. Usually, statutes entitle the executor to take a commission or fee as compensation for their services. Imagine, a stranger and the public knowing your personal business and then that stranger being paid out of your money to give your assets to the people whom you didn’t even select. There’s something incredibly unsettling about that.

The treat in this tale of woe is that you control your destiny, at least with respect to your Estate Plan. By contacting an attorney, you can accomplish your goals, keep your estate out of probate with an Estate Plan that includes a Revocable Trust and a Will, and preserve your legacy. As part of the estate planning process, your attorney will guide you through the perils of failure to plan and make suggestions and recommendations about the legal documents necessary to accomplish your goals. Most people feel relief and well-being upon executing their Estate Planning documents. Creating an estate plan allows you to determine who will care for your minor children, how your assets will be distributed to those children, who will control those distributions, when those distributions should be made, and whether distributions should be made to individuals, charities, schools, or museums. A comprehensive Estate Plan prevents disputes among beneficiaries and provides for tax planning, if appropriate. With a properly created and funded estate plan, you (not a Court) controls what happens to your children, your pets, and your property after your death.

Dying without a Will can haunt your family years after your demise. Even if this ghoulish endeavor gives you the chills, it’s important to undertake this task before it’s too late. Financial trouble, delayed distribution of assets, and stress are just a few of the frightening things in store for your loved ones if you die intestate. Most individuals find the probate process as torturous as touring a sanitorium; however, you can circumvent it. Avoid the tragedy of intestacy by creating a set of instructions regarding what you want to happen when you die, otherwise known as an Estate Plan.

Understanding the Interplay of State Estate and Inheritance Taxes with Federal Estate Tax

Most folks know that the federal government imposes an estate tax on estates with total assets that exceed $12.92 million in 2023. The Internal Revenue Code (“Code”) Section 2010 calls that amount the “Applicable Exclusion Amount” (“AEA”) and adjusts it for inflation annually. Even if individuals do not have that number etched in their memory, they understand that they need not worry about estate taxes at the federal level unless their estate includes assets well into the millions. Some might even understand that the temporary doubling of the AEA sunsets on January 1, 2026, or understand that portability permits the surviving spouse to “port” or use the amount of their decedent spouse’s unused AEA. Most people require only a cursory understanding of estate taxes at the federal level to make decisions with respect to their Estate Plan. If you live in a state that imposes a state estate tax or an inheritance tax, then you need to understand estate taxes at the state level, as well.

Death taxes at the state level fall into one of two categories: estate taxes which are those imposed upon the estate itself, like those at the federal level, or inheritance taxes which are taxes imposed on the individuals inheriting the property. Twelve states plus the District of Columbia impose a state estate tax. Six states impose inheritance taxes. Maryland stands alone in imposing both and is one of only two states that allows portability. Hawaii also gives its residents the benefit of portability.

Most of the states that impose a state estate tax impose a progressive tax which means that the tax rate increases as the value of the estate increases. In 2023, two states, Connecticut and Vermont, impose a flat tax. Connecticut taxes resident decedents whose estates exceed $9.1 million a flat tax of 12% on the value that exceeds the exclusion whereas Vermont taxes resident decedents whose estates exceed $5 million a flat tax of 16% on the value exceeding its exclusion. Seven of the ten remaining states that impose a state estate tax and the District of Columbia all impose a top tax rate of 16%. Hawaii and Washington have the highest estate tax rate at 20%. Maine imposes the lowest rate of 12% for estates whose assets exceed the state exclusion amount of $6,410,000. These states vary in the amount of estate assets that they exclude from tax. Oregon comes in at the lowest, with a mere $1 million exclusion whereas Connecticut follows the federal amount and allows $12.92 million to escape taxation under state law beginning in 2023.

Some states like Illinois, Maine, Maryland, Massachusetts, Minnesota, Vermont, and Washington also recognize a state Qualified Terminable Interest Property (“QTIP”) deduction. The state QTIP deduction, like the federal QTIP deduction found in Code Section 2056, provides an estate with an unlimited marital deduction for property passing to the surviving spouse in trust if the trust meets certain requirements. But for the QTIP deduction granted in the Code, property passing in trust to the surviving spouse ordinarily would not qualify for the marital deduction. Interestingly, while neither Kentucky nor Pennsylvania has a state estate tax, both recognize a state QTIP.

Of the states that impose an inheritance tax, Kentucky and New Jersey have the highest rate of 16%. Iowa has begun to phase out its inheritance tax, with full repeal scheduled for 2025. It has a top rate of 6% in 2023. All the states that impose an inheritance tax exempt surviving spouses from the tax and others fully or partially exempt other immediate relatives. In 1926, the federal government began offering federal credit for state estate taxes. This provided a way to equalize the amount of tax paid by anyone regardless of their state of residence. Some estates paid taxes at the state level, while others paid it at the federal level, but no estates paid it at both levels, which happens now that the federal government has phased out the state estate tax credit and instead gives a deduction for state estate taxes paid. When that happened, many states, like Florida, stopped collecting state estate taxes because their state provisions were linked to the federal credit, while others, like Indiana, repealed their estate tax retroactively.

Obviously, this article only began to scratch the surface of this complex topic. Everyone worries about tax implications both for their estate and their beneficiaries. When residents understand how their state taxes estates and beneficiaries, that could drive high-net-worth individuals to states with lower estate and inheritance tax burdens. If you have questions regarding the implications for your estate and beneficiaries, reach out to me and I can help you understand the impact that state estate and inheritance taxes could have on you and your loved ones.

Exploring Elder Abuse

It’s important to understand that elder abuse, neglect, and exploitation happen frequently across all socioeconomic levels, in every culture.  According to the National Council on Aging, one in ten Americans over the age of 60 has experienced elder abuse.  In almost 60% of those cases, a family member perpetrates the abuse, most of whom are adult children or spouses.  That’s a frightening statistic.   The ones who have an existing long-term relationship with the elder are the ones most likely to abuse that same elder.  Abuse most often occurs in the elder’s home, another’s home, or in a nursing home.  Whatever preconceived notions you have about elder abuse, throw them out.  Elder abuse can occur by anyone, to anyone, anywhere for any number of reasons, none of which excuse the abuse.

Not too long ago, this blog explored the multiple lawsuits initiated by Katherine Feinstein, on behalf of her mother, Dianne Feinstein, the Senior United States Senator from California, Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part IPart II, and Part III.  The most recent lawsuit alleged the acts and lack of action on the part of the Trustees constituted elder abuse by depriving Dianne of property rights granted to her in the Trust of her late husband, Richard C. Blum.  I read a recent article that used the Feinstein matter to dive deeper into the many facets of elder abuse and thought it would be an interesting topic to explore.

The National Center on Elder Abuse prepared a study identifying seven types of elder abuse:  Physical abuse, sexual abuse, emotional or psychological abuse, financial or material exploitation, neglect, self-neglect, and abandonment.  As an estate planning attorney, I encounter these situations in my daily practice.  Elder abuse takes many forms, but I see it when a family member or caregiver gains access to funds through a Power of Attorney or by gifts or transfers in exchange for care or transportation to medical appointments.  It could even take the form of the senior revising their estate plan to provide a larger share to a family member who handles care for the senior.  Maybe the elder updates the estate plan to leave a modest bequest to a caregiver that continues to grow in a short period of time.  Perhaps a family member removes the senior from their home and takes them to a bank, or worse, a new attorney.  While we want to believe that every client walking through our door is there of their own accord, that’s not always the case.  If the attorney notices a senior’s apprehension in speaking in the presence of the individual who brought them to the appointment, that could be a sign of elder abuse or mistreatment.  Even those with feisty personalities may find themselves the subject of abuse.  Many elders experience embarrassment that it happened to them.

If you pay attention, you can spot signs of potential elder abuse.  Look for things such as bruises on the elder’s body, withdrawal from loved ones, poor hygiene, weight loss, untreated health issues, dehydration, unusual changes in financial accounts, hesitation when speaking, a caregiver that interferes with visitation, fearful behavior, anxiety or depression, and unexpected changes in estate planning documents or property ownership.  While any one of these things may occur as part of the aging process, several of these signs together could signal a problem.  If an attorney notices one or more of these issues, speak to the elder individual alone, ask questions, and listen to the answers.

In addition to paying attention to our elderly clients when they visit us, we have other tools at our disposal that we can pass along to others.  For example, each state administers its own ombudsman program established through the Office of the Ombudsmen.  It serves as a neutral third party for nursing home residents.  Look for your local Consumer Voice office. The National Adult Protective Services Association lists local offices that investigate suspected elder abuse.  Finally, the National Center on Elder Abuse provides guidance on reporting elder abuse.  It’s possible to obtain a protective order if an elder lives with the abuser or call 911 if the senior is in immediate danger.

We can combat elder abuse by learning to recognize the signs of elder abuse, educating our clients on scams aimed at the elderly, alerting trusted individuals, such as family members and authorities when we suspect it, and understanding the resources designed to prevent, intervene, and investigate elder abuse.  This area will continue to gain importance as our population ages and technology continues to improve.  It’s important that we continue to evolve with technology and remember that we all have a duty to protect the elderly.

Family Photos

Have you inherited your family’s photo collection? Is it overwhelming your life? What can you do to manage these photos, and how do you deal with the emotional baggage tied to all these things?

Martie McNabb, a personal historian and founder of Show & Tales and Memories Out of the Box, has helped hundreds of people deal with these issues. “It’s sentimental, it’s memories, it’s the stories that people get deeply attached to,” said McNabb. “You can’t keep a house full of stuff, and you can’t keep every photo for multiple generations. What will you do with it for the future as well?” “I encourage people to make choices, just like a museum or a documentary film maker ends up curating what they keep…. That stuff that you let go of, at the very least, you can have a photo or make a video, or even make a book about these objects, saving and sharing the story while letting the physical clutter go.”

It can be too much to focus on details at the very beginning. Set up three boxes:

  • A “Keep” box, for those items you absolutely must keep;
  • A “Maybe” box, if you don’t know for sure but think the photos might be important;
  • And a “Toss” box, for multiple duplicates of photos, blurry images, and unremarkable landscape pictures.

Photo Curating Tips

Here are some key takeaway points from the video conversation with Gail Rubin, The Doyenne of Death®.

  • To help pare down what you keep, save three to five of the best pictures from trips and special events.
  • Organize the “Keepers” chronologically. “We all think, compare, and understand our lives chronologically, generally speaking,” said McNabb. “Don’t get into ‘Is this 1955 or 1956?’ An era range is fine.”
  • Scanning is not the answer to everything. It can be expensive and time-consuming. Ask who are these for? Who’s the audience? Who’s going to inherit them? Who’s going to appreciate this?
  • You can recycle albums that have no personal information like names, birthdates, anything that could be used for identity theft. Shred items with personal details.
  • Old yearbooks can be sent to alumni associations for universities or schools. Sometimes small historical societies, museums or libraries might want them.

Photo managers, professionals who can help you tackle what can be a seemingly enormous task can also be hired to get the job done.

Gail Rubin, Certified Thanatologist and The Doyenne of Death®, is an award-winning speaker, author, podcaster, and coordinator of the Before I Die New Mexico Festival ( She is also a Certified Funeral Celebrant. Her four books on planning ahead for end-of-life issues – A Good Goodbye, Kicking the Bucket ListHail and Farewell, and Before I Die Festival in a Box™ – are available through Amazon and her website,

Let’s Talk Litigation

This post focuses on ways to avoid litigation suggesting things like regular, open, and honest communication with beneficiaries, ensuring that your Estate Plan contains clear directives, naming a trusted individual to serve as Trustee, anticipating potential conflicts, inserting no-contest provisions, and updating your Estate Plan regularly. Those acts may prevent litigation; however, sometimes it’s unavoidable. Let’s review the most common areas ripe for litigation in the Trusts and Estates world.

An often-litigated area focuses on the mental state of the individual who created the documents. Individuals desiring to challenge the mental state of the decedent start with a claim that the decedent lacked the mental capacity to create a Will or Trust at the time the decedent signed the documents creating or updating the Estate Plan. Most states presume competence to make a Will or Trust and place the burden on the contesting party to prove that the testator or grantor lacked capacity. Thus, a beneficiary desiring to question the Estate Plan in this way would need to gather evidence to demonstrate that the decedent lacked capacity. This could include things such as medical records demonstrating dementia, psychosis, or other diagnoses that affect the mind or witness testimony regarding the decedent’s mental state. A court may consider other factors, such as an unnatural distribution, as evidence of lack of capacity.

Even with such evidence, the documents usually withstand the challenge for two reasons. First, the testator need only demonstrate a low level of capacity to create a Will or Trust. In many states, one only needs to understand the natural objects of their bounty, the nature and extent of their property, and the effect of their Estate Plan. One need not understand each asset or the value assigned to it. If the testator lacks that understanding most of the time but executes the Will or Trust at a time of clarity, then the Will or Trust is valid. Second, the challenger typically needs to prove by a preponderance of evidence that the decedent lacked testamentary capacity in the case of a Will and potentially contractual capacity in the case of a Trust. While it sounds easy, it usually proves a high bar for the aggrieved party to clear.

Undue influence presents another potential avenue for challenge of an Estate Plan. In an undue influence situation, the testator may have had capacity, but because of their susceptibility to influence, they changed their planned disposition. Simple enough to explain but understanding what constitutes undue influence requires a close examination of the behavior and the totality of the circumstances. The American Bar Association indicates that undue influence occurs when an individual in a fiduciary capacity or other confidential relationship substitutes their own desires for that of the influenced person’s desires. Put another way, a person influenced the testator in such a way that convinced the testator to alter their Estate Plan, usually in favor of the individual exerting undue influence and to the detriment of the testator’s other beneficiaries. Each state lists certain factors that indicate the presence of undue influence, such as intimidation, physical threat, or coercion. Perpetrators of undue influence use subtle tactics and are often close to the testator. For example, the influencer may stop providing transportation to the testator or otherwise cause the testator to fear for their health and well-being. The emergence of elder abuse and mandatory reporting thereof has helped shine a light on the existence of undue influence and gives families a way to protect against it.

An interested party may challenge a Will or Revocable Trust, or to a lesser extent, a Deed or other ancillary document, by alleging the invalidity of the document. That could mean that the document lacks necessary elements or that the testator or grantor failed to sign the document with the requisite formalities. Most states require the presence of two witnesses who watch the testator sign the Will. Some states require that to occur in the presence of a Notary Public to make the Will self-proving. Although Trusts do not always require that level of formality, a few states require a Trust to be signed with the same formalities as a Will because of the testamentary provisions. Of all the potential attacks on documents, this one finds the most success because it’s a bright-line test.

Finally, many beneficiaries file lawsuits alleging breach of fiduciary duty. Anyone serving as a fiduciary, for example, a Trustee, Personal Representative, or Attorney-in-Fact, has responsibilities and duties to act in accordance with the terms of the document appointing them and in the best interests of the beneficiaries named in the document. The attorney-in-fact needs to act in the best interests of the principal. State and federal laws may impose additional duties and address conflicts between the document and state or federal statutes. If a beneficiary believes that a fiduciary has violated their duties, then the beneficiary may initiate a lawsuit. These types of cases require significant funds to undertake and require hiring a skilled Trust and Estates litigator.

While we all work diligently to avoid litigation, sometimes it’s necessary. In those situations, it’s good to understand the options that exist. If you have concerns about a parent or loved one and either their capacity at the time the plan was created or their ability to create a plan without undue influence, raise the issue with me and we can discuss. Remember it’s less expensive and stressful to address the issues while everyone is alive.

The Magic of Grantor Trusts

An earlier article examined “grantor trusts” and how they are an income tax issue, not an estate tax issue. As that prior aerticle indicated, grantor trusts may be drafted so they are not included in the taxable estate of the grantor for estate tax purposes, yet they are still taxed to the grantor for income tax purposes. These “intentionally defective grantor trusts” can be very powerful estate planning tools.

Let’s look at an example of such an intentionally defective grantor trust. Let’s say the power that causes it to be a grantor trust is the power to substitute assets pursuant to Section 675(4)(C). Such a power does not cause inclusion in the taxable estate of the grantor.

Mary put $1 million of XYZ stock into the Mary Smith Irrevocable Trust, drafted with such a power of substitution. The trust is for the benefit of her children. The stock pays 7% dividends, or $70,000.  Assuming Mary and her beneficiaries are in the top income tax brackets, that $70,000 of income would incur a federal tax of 23.8% or $16,660. Since the trust is drafted as a grantor trust, that $70,000 of income would go on Mary’s Form 1040 and she would owe the $16,660 of additional tax, rather than the trust itself or the beneficiaries. This would allow the assets in the trust to grow tax-free. This is the case whether the trust distributed the income to Mary’s children, the beneficiaries of the trust, or it retained the $70,000 of income and allowed it to grow.

Years go by and Mary gets a terminal diagnosis. Let’s assume the XYZ stock increased in value to $5 million. Since it would be outside of Mary’s taxable estate in the Mary Smith Irrevocable Trust, it would not get a step-up in basis at Mary’s death. However, with the power of substitution, Mary can swap $5 million of cash for the XYZ stock worth $5 million. Since it’s a grantor trust, this exchange of assets would not trigger a taxable event. It’s like taking a dollar out of your left pocket and exchanging it for four quarters in your right pocket. Now, when Mary dies, she’ll have the XYZ stock in her taxable estate, and it’ll receive a step-up in basis, while the Mary Smith Irrevocable Trust has $5 million in cash, which won’t be included in Mary’s taxable estate.

Thus, the grantor trust which is outside the taxable estate is very powerful on two fronts.

  1. The growth of the assets in the grantor trust is not subject to gift or estate tax in the grantor’s taxable estate.
  2. The income earned by the trust is taxed to the grantor, not the beneficiaries or the trust itself. This means the grantor pays the income tax on the income earned by the trust and doing so isn’t an additional transfer by the grantor for gift and estate tax purposes.

This magic of grantor trusts is very powerful and allows assets to grow outside the taxable estate of the grantor tax-free while the grantor pays the income tax on those assets. The power of substitution is a particularly useful power to trigger grantor trust status while not causing inclusion in the taxable estate.