Announcing New Video Release — The HYCET Trust® “Have Your Cake & Eat It Too”

Dear Clients, Colleagues, and Friends,

In 2011, in response to the new $5M gift tax exemption, we introduced The HYCET Trust®. This trust allows you to reclaim the gift if you later need or want it back. The popularity of this trust has been nothing short of remarkable because of its multipurposes — flexibility, asset protection, and estate tax savings.

We have just released our new video on The HYCET Trust. Click here to view. Feel free to share this video with your CPA or financial advisor.

What is The HYCET Trust?

Ask yourself, wouldn’t it be great if you could make a gift and still reclaim the gifted assets if you need or want to? Well, you can with the “Have Your Cake and Eat it Too” HYCET Trust.

The HYCET Trust is the trust for today’s times. Since the estate and gift tax laws have now been made permanent, the right trust vehicle can help you make the $5.45M gift tax exemption in a way that your trustee can accommodate you should you have donor’s remorse, or later need or want to recapture all or part of the gifted assets. Conventional irrevocable gift trusts do not afford the donor the ability to reclaim the gifted assets once made. This is why you get to have your cake and eat it too!

We invite you to contact us for additional information on how you can protect your assets and legacy with The HYCET Trust.

Protecting the Prodigal Child from a Problem Marriage

Dear Clients, Colleagues, and Friends,

The doorbell rings around midnight. Heading to bed, James and Victoria worriedly check the peephole. Their grown son Brian and his much disliked girlfriend-of-the-month Elle wait outside.

James opens the door asking, “Aren’t you supposed to be in Vegas for the weekend?”

Elle thrusts her hand in their faces. “We were!” she screams, showing off a huge diamond ring.

“You’re engaged?” asks Victoria, crestfallen.

“No, silly, we’re married!” screeches Elle, jumping up and down.

James and Victoria’s hearts drop as they realize that Brian’s uncouth, classless, gold-digging girlfriend is now part of the family. They can see it plain as day, like a freight train bearing down on their son: this marriage is doomed. But what can they do to protect him?

Parents cannot prevent a grown child’s disastrous marriage, but they can protect their assets against their son’s future contentious divorce.

James and Victoria consult with their lawyer and learn that they can create a spendthrift trust. These types of trusts are generally managed by an independent but friendly trustee with authority to decide how trust funds are disbursed. Hundreds of years of trust law has held that because funds are not under the control of the beneficiary, the trust cannot be invaded to benefit the beneficiary’s creditors or in the case of divorce, their money-grubbing ex-spouse.

While this trust vehicle has been effective at preventing care-free beneficiaries from quickly blowing through trust funds and keeping family money from falling into the hands of creditors and greedy exes, recent court cases signal a sea change that such protective “firewalls” are being eroded, even after hundreds of years of solid case law.

Take the Massachusetts case of Pfannenstiehl v. Pfannenstiehl, for example. Curt and Diane Pfannenstiehl were married in 2000. At Curt’s request, Diane left her career to take care of their two children just two years before her military pension would have vested. Curt could not support the family on his salary, so the trust his father established for he and his siblings made regular distributions totaling half their yearly income under its “health, education, maintenance and support” (HEMS) clause. Right before their divorce was filed, trust distributions ceased. Diane argued that the trust was a “support” trust and not a traditional spendthrift “discretionary” trust, and that she was entitled to one-half of Curt’s share of the trust. In a 3-2 decision, the Massachusetts Court of Appeals agreed, reasoning that Curt could not hide behind the trust to shirk his familial obligations.

This is a cautionary tale that opens the door to similar results in other states, like “touchy feely” fair minded California judges. With a jurisdiction focused on the equities of the case, a highly sympathetic ex-wife, and — like many trusts formed today — HEMS language that blurred the line between “support” and truly “discretionary” trusts, the court’s decision put into question the viability of thousands of similar trusts that have been in place for decades.

So if your spendthrift trust has the standard HEMS clause, it may not be so iron clad as you may have thought or your lawyer may have advised. After all, how would he or she have known a case like Pfannenstiehl could have happened? So, what can parents do to protect grown children from a contentious divorce?

The answer lies in hiring a highly qualified lawyer who can draft a trust using language aligned with the law that would have prevented the outcome of the Pfannenstiehl case and advising about the proper way to administrate such a trust. If your spendthrift trust is already in place with the dreaded HEMS language, fear not. It can be fixed. We fix broken trusts all the time using the Decanting statutes of our neighboring state, Nevada. After all, don’t we want our trusts to survive a child’s spouse’s matrimonial challenge? If the trust has weaknesses, we can determine whether it is a candidate for decanting, allowing it to be more favorably structured.

Whether you want to form a new trust or evaluate the efficacy an old one, we can help. Protecting the prodigal child from a problem marriage is achievable, and for parents like Brian and Victoria just makes good sense.

Silicon Valley’s Dirty Little Secret

Dear Clients, Colleagues, and Friends,

Silicon Valley has been such a leader in technology for over two decades that it has sported a dizzying number of IPOs and huge stock option payoffs creating enormously wealthy entrepreneurs and its own class of marital problems when their marriages breakup.

As a community property state, California divorce law generally holds that property obtained during a marriage is fair game, while separate property brought into marriage belongs to that person and isn’t part of the community estate when the marriage ends. It sounds simple, but for affluent entrepreneurs living in the boom and bust economy of Silicon Valley tech start-ups, it’s anything but fair.

What happens when you make your fortune at a very young age and then get married and start a family?

Common sense dictates that your pre-marriage fortune would be separate property as long as it was not co-mingled. Unfortunately, family court judges have broad discretion to determine whether a division of community property is fair and equitable based on the facts of each individual case.

Take the case of In Re Marriage of Christopher Ross Larson v. Julia Larson Calhoun. The Washington State trial court awarded the ex-wife of an early Microsoft employee 100% of the couple’s community property worth $139 million, no debt, and an additional $40 million in cash and stocks of separate property. Ex-husband Larson appealed the court’s decision regarding the award of his separate property to no avail. The Court of Appeals upheld the trial court judge’s award of the husband’s portion of his separate estate to “achieve a just result,” citing the wife’s intangible marital contributions and the desire to ensure her financial security because the community property consisted mainly of illiquid assets and no cash.

This frightening case proves that a family court judge’s broad discretion can result in the invasion and award of separate, pre-marital property in divorce proceedings.

With this in mind, how can tech entrepreneurs protect considerable pre- marital wealth from divorcing spouses? Prenuptial agreements are difficult to negotiate and can be defeated by a skilled litigator on claims of lack of “full disclosure.” And as seen above, one cannot rely on the fact that property is defined as “separate.”

Former Chief Justice of the West Virginia Supreme Court Richard Neely has recently litigated these types of cases and believes the answer lies in well-constructed foreign separate property trusts created prior to marriage. There are several benefits to such trusts. First, there is no need to negotiate difficult prenuptial agreements with a potential spouse because the trust would already be in place. This could keep the romance and mystery of getting married intact and prevent contentious legal negotiations from straining relationships before marriage even begins. Next, inquiring spouses will learn that the trust is in place to protect the “family” from lawsuits by greedy plaintiffs’ lawyers, which is in fact one added benefit of such trusts. Lastly, these trusts protect the settlor against overreaching courts and vindictive ex-spouses attempting to take them to the cleaners by invading their separate property in divorce proceedings. It’s a win-win-win solution.

If you have amassed considerable wealth, whether prior to marriage or have wealth following a divorce, don’t let your faith in the courts or your reliance on the “separate property” doctrine give a future ex-spouse the opportunity to take you to the cleaners. Our team of specialists are available to help you design the right “firewalls” to protect what you own. You have nothing to lose but half of your assets.

See No Evil Hear No Evil Speak No Evil

Dear Clients, Colleagues, and Friends,

The weather was gorgeous, the food was delicious, and the conversation had been informative. While the topic was not anyone’s favorite to engage in, Rich and Alice had just updated their two children, ages 23 and 27, on recent changes they had made to their estate planning documents. While the four were waiting for dessert, Rich asked his children, Chris and Chelsea, if they had done any planning for themselves.

Chris looked up from his phone and gave Chelsea a side glance before asking his parents why in the world they would need estate planning documents. He and his sister are “Millennials” after all – neither is married or has children, one lives at home, the other rents an apartment, and their savings, while growing, do not yet amount to much. Rich and Alice had anticipated the rebuttal and asked their kids an uncomfortable question – if either child were in an accident and became incapacitated, did they know who would be making medical and financial decisions on their behalf, and if the person making those decisions had interests in alignment with that of their own? That got the kids thinking about the subject, which they had never thought of before – and the answer for both was no.

Millennials have many worries on their mind ranging from the climate, the state of world affairs, how to pay off student loans, which concert festival to attend this year… the list goes on. Many of their worries are seemingly out of their control to solve. But one issue they can easily control is who will make their medical decisions and handle their financial affairs should they become incapacitated, and they can outline what those decisions should look like before they are unable to make them autonomously. Two simple documents – an Advance Healthcare Directive and a Durable Power of Attorney – are all that are needed to appoint an agent, or co-agents, and to explain one’s wishes, easing decisions of the appointed agent in what is bound to be a very emotional and difficult time.

We urge parents and grandparents to engage their adult children and grandchildren in a conversation about putting an Advance Healthcare Directive and Durable Power of Attorney in place. Both documents may be updated over the course of one’s lifetime, but the earlier they are adopted, the sooner everyone can have peace of mind.

To discuss these, or other estate planning needs, please contact our office.

The Loaded Question

“Dad, are we rich?”

Ethan’s father drops his fork mid-bite. “That’s an unusual question,” Roger carefully responds.

Ethan, who just turned 16 and still fears his father’s disapproval, hesitates before continuing. He knows there is an unspoken rule in his family to never speak about money. Despite his nerves he plows on determined to get to the bottom of the wild claims his classmates made.

“So, the guys said I didn’t need to get a summer job and I was like, ‘yeah, right,’ and then they asked if I had ever Googled you – I mean us – as a family. I hadn’t so I did.”

“Ah,” responds Roger, “You want to know if it’s true.”

Ethan shrugs, embarrassed. “I guess,” he mumbles, eyes locked onto his plate.

Roger sets down his fork, gently folds his large hands and looks Ethan in the eyes. “Yes, it’s true, son. But that changes nothing. You are to work, you are to study hard and you are to go to college. You are to find a career – any career – and you are to live a productive life. An inheritance changes nothing. I know from experience, understand?”

Ethan nods.

“Now that this nonsense is cleared up, we will never speak of it again,” and true to Roger’s word, he didn’t.

The Fallout

Unfortunately, just eleven short years later, Roger and his newest wife die in an airplane accident on their honeymoon, and Ethan suddenly inherits the responsibility of his late father’s estate.

What Ethan quickly learns is that an inheritance does, in fact, change everything.

Ill-prepared, Ethan must suddenly shoulder a nearly half-billion-dollar empire consisting of several closely held businesses, a myriad of trust funds for his multiple half-siblings, step-siblings and cousins, and properties around the world about which he wasn’t even aware. He fails to fend off vultures purporting to give advice and guidance under the guise of feigned concern, which he realizes too late are really efforts at grabbing as much cash from his family as possible. His family’s businesses slide downhill as key personnel jump ship without the consistent vision of a well-
prepared leader. And, because money is a magnifier of all things, family infighting leads to mistrust, lack of communication and eventual lawsuits.

Feeling that his father threw him like a screaming lobster into a pot of boiling water, Ethan drops out of veterinary school to try to manage the estate. He’s not dumb, so he should be able to learn on the go. But as lawsuits mount and his family falls apart, Ethan becomes clinically depressed. Furious at being forced to change his life for this unexpected, stressful burden, Ethan blows through money like water, supporting a lavish lifestyle with several marriages and overly-entitled children. In defiance of everything his father wished, Ethan, who knows nothing about his family’s history, lets the estate’s businesses fail and real estate investments depreciate. At this rate, the next generation will be lucky to inherit anything.

Think something like this can’t happen to you or your loved ones? Think again.

Wealth Transfer Today

The United States is currently experiencing the largest wealth transfer in history. According to the Boston College Center for Retirement Research, two-thirds of baby boomers will inherit family money over their lifetime to the collective tune of $7.6 trillion, and over the next 46 years, the Boston College Center on Wealth and Philanthropy (CWP) estimates that over $59 trillion will change hands. Yes, that’s trillion with a “T.”

So, affluent families should expect to inherit huge estates that will keep generations rolling in it for years to come, right?

Wrong. Worldwide, including the United States, 70% of all wealth transitions fail. Used in this context, “wealth transition failure” means that financial “reversals” remove the estate’s assets – involuntarily – from the control of the beneficiaries. These reversals can occur due to poor financial or legal planning, taxes, economic downturns, litigation, mismanagement, inattention, incompetence, family feuding and simple financial loss. Furthermore, 70% of heir families lose family cohesion after receiving an inheritance, and only one-third of family businesses successfully make the transition from one generation to the next. This consistent failure rate gives rise to the phrase “shirtsleeves to shirtsleeves in three generations.”

Ethan’s story isn’t so unique after all.

Researchers at the family-wealth consultancy, The Williams Group in San Clemente, California, conducted a study of over 3,250 affluent families and asked why the 70% failure rate was so consistent around the world. Their results are eye-opening.

The reasons for wealth transfer failure most often cited by lawyers and financial planners, high taxes and poor investments, surprisingly only account for 15% of all failures. In fact, the single biggest factor of wealth transfer failure in 60% of all cases is poor trust and communication among family members. Additionally, the failure of parents to prepare their heirs for their wealth resulted in 25% of wealth transfer failures. Doing the math, a full 85% of wealth transfer failures are due to family dynamics rather than poor legal and financial planning.

So, it’s not enough to prepare your assets for your heirs….You must also prepare your heirs for your assets.

Talking about wealth transfer means talking about death and money, which are admittedly two of the most highly sensitive and uncomfortable subjects for families. But not talking about it risks your entire estate. Don’t let Ethan’s story become your own.

While our law firm has always prepared our client’s assets for the heirs, we now have a comprehensive program to prepare the heirs for the assets. The program is called the Heir Estate Education Program. We invite you to contact our office to learn more about the program. Let us help you start the conversation to preserve your wealth, and your family unity, for generations to come.

For more information about any of the information discussed in this Client Alert, or any other income or estate tax planning or asset protection planning assistance, please contact the Jeffrey M. Verdon Law Group at 949.333.8150.

Biblical Trial: The People vs. Moses

The Destruction of the Tablets of the Ten Commandments

Guilty? Not Guilty? You Decide

Dear Clients, Colleagues, and Friends,

Each year, the University Synagogue located in Irvine, CA, presents a hugely entertaining and informative Biblical Trial Program. Two of the legal profession’s most esteemed law professors, Erwin Chemerinsky, Dean of the UCI School of Law, and Prof. Laurie Levinson, present their legal arguments involving iconic events from the Bible.

Details for attending this very special and entertaining event on March 13, 2016, from 1 p.m. to 3:30 p.m. can be obtained on the link below.

This year’s trial: The People vs. Moses – The Destruction of the Tablets of the Ten Commandments. Moses, the man who freed the Israelites from slavery, just can’t catch a break! Several years ago at this same venue, he was on trial for murder. Now he is accused of theft by embezzlement and vandalism for the destruction of the tablets of the Ten Commandments. Was it an issue of anger management or something more insidious? Come see for yourself.

This intellectually stimulating presentation hits upon timeless and timely moral, ethical, and philosophical themes. After the submission of evidence, there will be a lively panel discussion.

For the People: Loyola Law School Professor Laurie Levenson
For the Defense: UCI Law School Dean Erwin Chemerinsky
Presiding: Hon. Richard Fybel, Chief Judge 4th District CA Court of Appeal

The program has been approved for 2.50 hours of general credit by the State Bar of California.

To access the flyer outlining the full program, click here.

Writing Emails That Get a Response – Webinar Added!

Dear Clients, Colleagues, and Friends,

Due to overwhelming demand by people who are not able to come to the office for Writing Emails That Get a Response, Elizabeth Danziger has added a webinar on April 13, 2016. The in-person program remains on April 5, 2016.

During the presentation, you will learn:

• Techniques to grab your reader’s attention with every subject line.

• How to engage your reader’s interest in every email.

• Strategies to persuade the recipients of your email to respond promptly.

In short, you will find out how to get readers to understand what you want and act on it promptly, so that your business will prosper.

About the presenter:

Elizabeth Danziger is the author of four books, including business writing text Get to the Point!, originally published by Random House. She has taught business writing for 28 years throughout the United States. Satisfied clients include: Sullivan & Cromwell, NixonPeabody, CohnReznick, PragerMetis, Rentech, Netapp, Starwood Hotels, Pacific Mercantile Bank, WindCreek Hospitality, Brighton Collectibles, Southern California Edison, and many others.

I loved this presentation. I especially want to apply the Three Ps, using the subject line wisely, and knowing whether email is the right medium.” — Manager at Brighton Collectibles

The program includes:

• Training in Writing Emails That Get a Response

• PDF of training handouts for use as a reference

• Extensive opportunity to ask questions during the presentation

• Customized individual review of one email, sent to the instructor within 30 days of the program

• Unlimited questions for the instructor within 30 days of the program

To register:

For in-person program on April 5, 2016:

Save $100 on her program if you register by March 15!

Click Here

For live webinar on April 13, 2016:

Click Here

Corporate Inversions: The Good, The Bad, and The Ugly!

Dear Clients, Colleagues, and Friends,

We are all familiar with Charles Dickens’ classic novel, A Christmas Carol. Ebenezer Scrooge is visited by the Ghosts of Christmas Past, Present, and Yet to Come. By reliving his memories and peering into the future, he grows as an individual, developing a more kind and compassionate mentality, thereby benefiting his employees and community. Well, in this 2015 season of the holidays, a different phantom may be visiting you – it is called Phantom Income Tax. But by heeding this warning, you could avoid its fate.

In late October, pharma giants Pfizer and Allergan announced preliminary merger discussions and, on November 22, 2015, the boards of the two companies unanimously voted to approve a merger agreement – a stock for stock swap which will involve $160 billion. The merger, if it goes through, will be what is called an inversion, with the new company headquarters and tax domicile in Dublin (where Allergan is already based), in order to take advantage of friendlier corporate tax laws than those currently offered by the United States. However, this inversion would come at a cost to Pfizer shareholders unless they take action.

As a result of the merger, Pfizer shareholders would recognize taxable gain, not a loss, for federal income tax purposes. This merger may therefore result in phantom income, since the tax effect will be the same whether the shareholder sells or not.1 Shareholders will be given an option to cash out, but the cash-out budget will be prorated among shareholders who elect the option if more than $12 billion of stock would otherwise be cashed in. But there are ways for the shareholder to handle this phantom.

First, it is important to understand that gifts or transfers to other taxpayers, including charity or trusts, must be done before the deal’s closing date to exploit any opportunity in order to avoid the “assignment of income doctrine.” If the deal is practically certain to proceed, any transfers are treated as if the donor held the asset at the time of sale and, therefore, the donor would still incur the tax. Pfizer and Allergan expect the deal to close in the latter half of 2016, but shareholder and regulatory approval must still be secured, and politicians and the Treasury are none too pleased with this sort of corporate tax maneuver. So, while the deal may not be certain to proceed, it may, and therefore a prudent planner would begin the planning process now.

Some of the planning opportunities include gifting shares to family members (through well designed trusts) whose income tax bracket is lower than that of the donor-shareholder or who has capital loss carryforwards or expects additional capital losses in 2016. Another option would be to create a family LLC or Limited Partnership (LP), with noncontrolling minority interest, non-voting, or LP interests that hold the Pfizer transfer, with the donor-shareholder retaining control over the management of the entity controlling the amount of distributions the entity makes to its owners. The Pfizer shareholder could make outright gifts of the stock to charity or a Donor Advised Fund (a form of charity that qualifies as a public charity with low formation and operating costs), thereby allowing for a charitable deduction of full fair market value, up to 30%2 of adjusted gross income, with any unused deductions carried forward for up to five additional years. Or they could make gifts to a charitable trust, thereby retaining an income interest for themselves.

Pursuing a different trust option, the shareholder could create an Incomplete Gift Non-Grantor Trust (an ING Trust, usually in Delaware “DING”, Nevada “NING”, or Alaska “AKING”). While these trusts do not help avoid estate taxes, they can be used to avoid state income tax until distributions are made from the trust.

There are solutions for these tax traps, but the prudent shareholder should act now to best heed the warning of the new holiday “phantom”. To discuss these, or other estate and income planning options, please contact our office.

Happy Holidays!

Death and Taxes: Two of life’s Surest Things

Dear Clients, Colleagues, and Friends,

“It’s a beautiful home,” the well-coiffed realtor gushed to Sally and Ned. “How much did you say you paid?”

Ned proudly told her what he spent on their “dream home” over 30 years ago.

The realtor’s eyes shot up in surprise, “You could get 30 times that today.”

The couple stopped short, shocked. They had no idea their residence could be worth so much. With such a highly appreciated asset, they wondered how capital gains taxes might affect their decision to sell.

When Congress finally passed permanent estate tax exemptions in 2013, many people popped open the proverbial champagne. But as Benjamin Franklin once said, “In this world nothing can be said to be certain except death and taxes.” That’s never been truer than with appreciated property, and estate planners and tax professionals are shifting focus from reducing an estate’s overall assets to finding new ways to lower income taxes on those assets.

Section 1014 of the Internal Revenue Code of 1986 provides an incentive to retain appreciated assets until the death of at least one of the spouses. Under this section, in certain situations, a married couple can avoid capital gains taxes on appreciated assets through a tax-free step up in basis upon the death of a spouse. However, whether the surviving spouse benefits from that tax-free step up in basis depends entirely upon the asset’s title and order of death. For example, if the spouse holding the appreciated asset dies first, it will normally qualify for the tax-free step up in basis, but if the other spouse dies first, the tax basis does not change and a sale or other disposition of the asset will trigger a capital gain1 . This type of crap-shoot has forced professionals to look for alternative methods of providing a step up in basis at the death of either spouse, regardless of who dies first. The GRISUT or grantor-retained interest step-up trust does just that. This strategy retools familiar estate planning techniques (like QPRTs, GRITs and GRATs) for income tax basis planning purposes.

A GRISUT is an irrevocable trust funded with appreciated property2 of one of the spouses. The donor spouse retains an interest in the trust for a period that will terminate upon the death of the first spouse. When that death occurs, the property of the trust is paid over to the donee spouse or his or her estate. It is included in the deceased spouse’s gross estate, though planning would necessarily need to be put in place to take advantage of the marital deduction, and the property receives a step-up in basis, resulting in zero capital gains should the property then be sold by the survivor before further appreciation occurs.

To achieve the double basis step up for their personal residence, Ned and Sally would form a SUPRT, known as a step-up personal residence trust or “SUPRT.” The SUPRT is designed to meet all the requirements of a standard qualified personal residence trust or “QPRT.” For example, Sally retains the right to the rent-free use of the property during the term of the trust and is entitled to all of the income. In addition, the terms of the trust provide that, upon the first to die of Ned and Sally, the property shall be paid over to Ned (if he survives Sally) or to Ned’s estate (if he predeceases Sally). This vested remainder interest (to Ned or his estate) means there will be no gift or estate tax benefit to Sally’s SUPRT. In his will, Ned leaves the property of his estate to or for the benefit of Sally in a form that qualifies for the estate tax marital deduction.

With this strategy, if the law’s requirements are satisfied, Ned and Sally’s home would qualify for a tax-free step-up in basis upon either of their deaths. The surviving spouse could then exercise easier decision-making about whether to sell the house because the house’s disposition would no longer trigger an onerous capital gain.

While death and taxes are still two of life’s surest things, taxes can be decreased with the help of a qualified professional. If you own highly appreciated assets or a personal residence or vacation property and would like to discuss the benefits of the GRISUT or SUPRT strategy for your estate, call our law offices now to schedule an appointment.

For more information on these and other comprehensive estate planning and income tax planning techniques, contact us for a complimentary consultation.

Lessons Learned: Frank Gifford’s Estate Planning

Dear Clients, Colleagues, and Friends,

So your estate planning is in order. You have a will; every loved one is accounted for; and your estate will be passed on in accordance with your wishes.

Or will it?

The great Frank Gifford died on August 9, 2015. He was 84 years old. He was a football player for the New York Giants, and then a television sports announcer and commentator. He was a resident of Greenwich, Connecticut at his death. He had three marriages, and five children from two of them, one with special needs. His latest marriage was to Kathie Lee with two children, Cody and Cassidy. His estate is estimated to be worth more than $20 million. Gifford left a will dated July 29, 2014.

As we explore the what-if’s in the article below, there are a few teaching moments and lessons learned about estate planning and asset protection afforded by wills, blended families, non-community property law states, tax exemptions, trusts, and trustee powers. For the full article on Frank Gifford’s estate planning by Bruce Steiner from Steve Leimberg’s Estate Planning Newsletter #2361, click here, though highlights and excerpts are found below:


A will is a public document. As can be seen in the article, every detail of a will becomes public knowledge when a will passes through probate and a court oversees the administration of the will to ensure that the will is valid and the property gets distributed the way the deceased wanted. A will covers any property that is titled in your name when you die. So use a living trust to hold your property and there is no probate required for the assets titled in the name of the trust.

Blended Families

Since Gifford had children from a prior marriage, he had to consider how he wanted to divide his assets among Kathie Lee, the children of his marriage to Kathie Lee, and his children from his first marriage. If Kathie Lee had children from her previous marriage, she may have left them a share of her assets, including what she inherited from Gifford. In that case, Gifford might not have wanted to give Kathie Lee the same degree of control and access over his assets.

Connecticut Estate Plans

In larger estates, the typical estate plan for a married person in Connecticut, where there is only a $2 million estate tax exemption, is to shelter the entire Federal estate tax exclusion amount ($5,430,000) and then to leave the balance of the estate to the spouse, either outright or in a QTIP (Qualified Terminable Interest Property) trust. While that results in the payment of some state estate tax in the first spouse’s estate, it shelters from death taxes the maximum possible amount, together with the income and growth thereon during the spouse’s lifetime from Federal estate and gift tax. A life insurance policy could quite simply cover the state death taxes.

Tax Exemptions

The Federal estate tax exclusion amount of $5,430,000 is indexed for inflation. It is scheduled to increase to $5,450,000 in 2016. There is no tax on transfers between spouses. There is also portability for Federal estate tax purposes, so that if Gifford did not use his entire estate tax exclusion amount, Kathie Lee could get the benefit of the DSUE (deceased spousal unused exclusion) amount. However, the DSUE amount is not indexed for inflation, and there is no portability for the generationskipping transfer (GST) tax or for Connecticut estate tax purposes. But there are various planning options to be considered here.

Trusts and Trustees

A will does not cover property held in joint tenancy or in a trust as property owned in joint tenancy with right of survivorship passes to the survivor by operation of law, and assets owned in a trust are governed by the terms of the trusts. Assets held in a living trust pass outside of probate, so a court does not need to oversee the process and your neighbors, friends, and the public will not get to see what you owned when you died. Unlike a will, which becomes part of the public record, a living trust can remain private. If Gifford wished to keep his affairs private, a trust would have accomplished his goals.

Conclusion: The ultra-affluent family and successful business owner should take the opportunity to review the many options for estate planning. Expert advisors are available to help make the best choices. Annual attorney review of your planning is essential. Please contact us for guidance in pursuing connections to the best-inbreed strategic advisors as well as guidance with comprehensive estate planning and asset and lifestyle protection.

Jeffrey M. Verdon, Esq.