What, you may be wondering does that have to do with estate planning? (Although I warn you that I plan to blog periodically on matters that have very little to do with my legal specialty.)

A recent article in The New York Times points out some of the issues and gets many of the estate planning principles correct. (I would expect the NY Times to get that much right and they even used the words “family trust”.) The article spends a lot of time talking about issues related to passing co-op board interviews, and how to make sure that the other children are taken into account if the property is just for one of them.

The writer didn’t go into, however, any of the issues of whether a step-up in basis was preferable to a carry-over basis in the property if you title it in joint name between the parents and kids….but, then again, that doesn’t make for compelling reading, evidenced by the fact that your eyes likely rolled back into your head the moment I mentioned “basis.”

In fact, if you understand any part of what I just said, please call my office, I might have a job for you.

One thing the Times article got exactly right was its clear support for involving legal counsel before you engage in the real estate transaction. I can’t tell you how many times I’ve told clients, prospective clients, and planning partners that when they bring me an issue early, I have many more options than if they bring me an issue after decisions have been made. I try to encourage that kind of proactive attorney involvement by not charging clients in my Client Family Program for phone calls or strategic planning meetings. I figure that if I can take the cost element out of the occasion, then it’s easier for clients or their advisors to pick up the phone.

I did think they could have spared a few words about whether or not to leave the apartment to their kids as an outright distribution. There are some situations in which an outright distribution is a good choice, but many other times there are tremendous advantages to leaving the property protected from future ex-spouses, creditors, or as a means to protect vulnerable children from themselves. Whether or not that’s the right decision can be determined in a legal counseling session with a well-trained estate planning attorney, but I think it should have been mentioned in the article.

In any event, mark the day! Estate planning has gone mainstream and landed squarely on the front page of the Real Estate section of the New York Times – Sunday Edition!

Next: Estate Planning! The Musical.

Posted by Victor J. Medina, managing attorney
The New Jersey Estate Planning Center
Medina Law Group

Thanks to my wife’s tireless research, we’ve been able to fill the boys’ days with fun, low-cost activities – like Vacation Bible School (affectionately known as “VBS”), a golf academy, tennis camp, and swim lessons. The swim lessons have been the best “investment” since we’ve been spending countless days at Camp Margary (also known as “the in-laws”) because they have a pool, and cold drinks, and a steady supply of grill-able items like hamburgers, hot dogs and sausage.

Back to the swim lessons for a moment, my wife found _THE_ Mercer County swim instructing guru. Blessed with almost mythical powers, legend says that she can teach any child to swim in less than one summer and there are whispers of the Phelps-dust that she sprinkles at the end of the summer to give your child a shot at Olympic stardom.

For my older son, that has translated into a decent freestyle stroke, the “torpedo,” and the confidence to jump into the deep end of the pool. For the younger son, the results haven’t been quite as striking, but he’s learned not to attempt to breathe underwater – which means a lot less gagging on pool water and a lot less freaking out by his parents or other pool attendants – and when the goggles are properly positioned, he can tell you how many fingers you are holding underwater.

I’m also happy to report that there are two new additions to the Medina family.

On June 24th and June 25th after 9 hours of “labor” and weighing in at 4.8 oz., my wife and I welcomed 2 new iPhone 4s into the fold. Lovingly selected, we’re proud to report that they’ve acclimated well into our lives, requiring just 2-3 hours per day of swiping and tapping to keep them happy. We’re also looking forward to the arrival of the free cases Apple has decided to give out in late-August/early-September. I can post pictures of the iPhones if anyone is interested. For pictures of my kids, you’ll have to talk to my wife.

Posted by Victor Medina, Medina Law Group, LLC

First, in New Jersey, you can’t submit a Will to the court or begin probating estate until 10 days after the date of death. So, even if you have a simple estate and are ready to move forward, you can’t take the first step until the waiting period has expired. This can be an extremely frustrating holding pattern to be in. For many people, the act of distributing their loved one’s possessions is helpful to the grieving process. Unfortunately, you’re stuck in limbo for over a week.

After the first waiting period is finished, the WIll can be submitted to the court and Letters Testamentary or Letters of Administration can be issued. These are the papers you need to be able to step into your loved one’s shoes and begin administering the estate. That process typically takes 15 minutes of in-and-out at the Surrogate’s Office.

Then, you have to start sending out certain notices to the beneficiaries and dealing with outstanding debts and creditors of the estate. Most folks find themselves stuck again as they wait for certain claim and notice periods to expire. Before you know it, it’s been 4 months since you lost your loved one and you’re just getting around to listing the house up for sale.

Our clients are surprised to learn that all of these waiting periods exist and that they won’t be done as quickly as they imagined. Making sure that they comply with all of the notice and time requirements is one of the main reasons that our clients engage us to help them with probate. Sometimes it’s easier to turn everything over to professionals with experience in the field.

Posted by Victor Medina, Medina Law Group, LLC

This article by the New York Times focuses most of its analysis on the impact of the estate tax repeal and the timing of this death.  In my educational seminars, I spend a few minutes telling folks tongue-in-cheek that Choosing The Wrong Year To Die is a “common estate planning mistake.”  My point, besides making a joke, is that the law is ever-changing.  The estate plan that is right on target today may be obsolete or rendered ineffective by changes in the law in the future.  That’s why it is so essential to engage a lawyer who has a consistent and deliberate formal updating process as an integral part of their practice.  Some estate planning attorney call these “client maintenance” or “client care” programs – whatever the name, make sure your attorney has one.  

However, timing is just one element of an effective estate plan.  The other part is finding a professional who understands the law and the rules who can work them to your benefit.  There’s a saying that there are two tax systems in this country.  No, not one for the rich and one for the poor – rather, it’s one for the informed, and another for the uninformed.  Without the proper planning, couples with an estate of $2MM could pay $550,000 in federal estate tax if they both passed away next year (2011).  With proper planning, the total federal estate tax due by that same couple drops to zero ($0).

As with income taxes, there are some people who (legally) pay much less than folks who make the same amount per year.  The difference is that the couple who paid less income tax engaged the services of a profession who understood the rules and how the system works, identifying opportunities and benefits that are not self-evident – and which would never occur to the lay person.

The value of a professional is not in the documents he creates. It’s in the knowledge and experience that enable him to tell you what you should do.

No matter what you year you may die.

Posted by Victor Medina, Medina Law Group, LLC

Making the estate planning news recently is the inheritance by Conchita the Chihuahua of a $3 Million dollar trust fund and a $8.3 Million dollar mansion in Miami Beach.  You can read the full text from the Wall Street Journal here, but the WSJ starts out:

Her name is Conchita, a thin, spa-loving, diamond-draped heiress, and she’s at the center of one of America’s nastiest estate battles.

She is also a dog—a chihuahua who was the favorite of the late Miami heiress Gail Posner, a daughter of the corporate takeover artist Victor Posner.

Here’s a picture of Conchita.  She’s on the left.

(I’m not sure that’s Conchita’s real hair.)

How do I know this?  Because this decedent, Gail Posner, left $26 Million to seven of her bodyguards, housekeepers, and aides, along with the inheritance to Conchita, under a Will – which is quite public so everybody knows about it.  It’s also now the subject of a challenge by Gail Posner’s only living child (of the two-legged variety), who is alleging undue influence by the beneficiaries of the Will.

There are a couple lessons here about “undue influence” and the privacy benefits of not leaving millions of dollars to a non-human via a Will – but honestly, I can’t stop chuckling long enough to go into detail about it.  I’m not sure my clients, current or future, would ever find relevance in the story of Conchita the Chihuahua. Suffice it to say that even the rich, famous, and loony can’t get it right.  For the record, when it comes time to depart this Earth, I will not be leaving any non-human my cherished iPhone XG-5000.

Not to discriminate against the cold-blooded, Posner also provided for the care of her….turtles.

Moral of the story: When you make your own estate plan, don’t put your head into your shell….or any other orifice, for that matter.

Posted by Victor Medina, Medina Law Group, LLC

Photos by The Daily Beast, and courtesy of Flikr user whitepebbles and the CC license.

The answer, of course, is: Medina Law Group, YourLawyers4Life.

Here is the video:

Posted by Victor J. Medina, Medina Law Group

The Power of Story-based Planning Part 2

For at least the last decade, the hottest buzzword in the planning professions has been “values-based.” You couldn’t turn around without running into “values-based” selling, financial planning, estate planning, you name it. But what in the world is “values-based planning” anyway?

Looking under the label and behind the question is helpful, I believe. In truth, all planning is based on someone’s values, so the question behind the question is whose values? To acknowledge our professions’ dirty little secret, the truth of the matter is that in the “pre-values-based planning era” nearly all planning was based on the professional’s values or, at best, on the values we assumed the clients held.

If the professional was selling life insurance, lo and behold, one of the key values was “tax-free liquidity at death.” If the professional was selling living trusts, it was generally assumed the clients valued “avoiding probate,” “reducing estate taxes,” and “distributing the assets” in some orderly fashion, usually in a way consistent with the drafter’s trust templates. If the professional was selling investments, every financial plan was based on the premise that the client wanted to pay for his kids’ college and then retire comfortably a few years before he turned 65.

Not surprisingly, every plan a planner created looked strikingly similar to every other plan he created: they were all based on the planner’s values and assumptions, not the client’s.

What the term “values-based planning” was trying to communicate was the notion that each client has a personal set of values that ought to be ascertained early on in the planning process and then used to fashion a financial plan or estate plan that was unique – truly unique – to that client. The real question then became, for those planners actually trying to create plans based on client values, “how do you ascertain the client’s values?” At least now the issue was correctly framed.

This breakthrough led to the advent of what I call “questionnaire-based planning.” Client values, the planning professions assume, can be ascertained through a cleverly designed multi-page questionnaire. But while “questionnaire-based planning” is far better than its predecessors, it still fails in its primary objective: to develop for the planner and the client a clear understanding of what’s in the client’s heart – the client’s deepest purposes for planning. For that you need story-based planning.

In the next installment I’ll outline why “questionnaire-based planning” is merely masquerading as genuine values-based planning. It looks good on the outside, but inside it has no real power to get to the heart of the matter.

Original post by Scott Farnsworth. Published on February 24, 2010 on New Jersey Estate Planning by Victor Medina, Medina Law Group.

One of my “secret weapons” is my association with the Sunbridge Legacy Builder Institute and , run by Scott Farnsworth in Harmony, FL. You can learn more about Sunbridge by clicking on their name. I wanted to share something that Scott wrote on the difference between Story-Based Planning and “Numbers”-Based Planning.

This article is written as a note to other advisors and planners, but I share it with you because I think it is an excellent illustration of the gap that I referenced at the beginning of this post. I want to comment further on all of this, especially regarding why I’ve adopted this model in my practice, but I don’t want this post to run too long. For now, enjoy Scott’s article.

The Power of Story-based Planning – Part 1 – By Scott Farnsworth

Virtually all my “official” training as an estate planning attorney and a Certified Financial Planner has been about numbers. Tax rates, code sections, rates of return on investments, asset allocation models-the unwavering focus has been on something quantifiable. The underlying message always came through loud and clear: unless something can be tallied on a ledger sheet, it isn’t worthy of our professional attention and probably isn’t all that important. Only “numbers-based planning” is real planning.

But my gut-and my real-life experience-told me something different. They told me that when numbers-based planning collided with human beings, i.e., our clients and their children and grandchildren, either the planning was never actually implemented by the clients, or the wheels came off when the planning landed with a thud on the succeeding generations. They told me that the most clever and tightly-wound estate or financial plans could and would be unraveled by the people they were designed to “help” or “protect.” They told that we planners ignore the human issues at our peril, and at the peril of the beautiful numbers-based plans we crank out.

My sense was often that with numbers-based planning, the tax tail was wagging the dog-driving the planning instead of riding in the back seat along with all the other significant but not critical factors. One significant study found that the likelihood of a family-based business surviving into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions, Morris, Williams, Allen, and Avila, Journal of Business Venturing 12, 365-401, 1997) In other words, the tax doctors were actually killing the patients they were hired to “save.”

Numbers-based planning might work if we were planning for robots, but we’re not. We’re planning for real flesh-and-blood people. I recall a series of conversations with a couple from New York City who had spent tens of thousands of dollars for one of the premier law firms in the country to draft a plan to care for their estate and their two teenage children. The plan touched all the legal and tax-planning bases, but in the words of the wife it was “cold and impersonal, not what I want to leave for my children.” The expensive, well-drafted plan was never executed but remained nothing more than a pile of paper, glistening with lawyerly brilliance on the surface but empty and meaningless underneath.

Unfortunately, that couple’s experience is repeated all too often. In my view, such outcomes will not change until we take a fundamentally different approach to this whole business of estate and financial planning. They will not change until we spend more time listening to client stories than tallying up their balance sheets; until we tailor their plans to the human hopes, dreams, and fears imbedded in their stories; and until the plans we create help them tell the story of their legacy-of who they really are and what impact they have had and hope to have on the people and causes they love. I call this approach story-based planning.

-Scott Farnsworth

Posted by Victor J. Medina, Medina Law Group, LLC

Trusts come in myriad forms, but for middle-class families, the living trust is popular because the person creating the trust can enjoy lifetime benefits. You can deposit assets in your own trust and ask the trustee to manage them prudently and pay the income to you, so you have more time for hobbies, travel and family.

Later, there are other important advantages. The property in a living trust that survives you can avoid the costs, publicity and delays of probate and speed property distribution to your spouse or other beneficiaries. If you choose, the trust can continue for their benefit in order to provide sound investment management and reliable financial support.

What Is a Living Trust, Anyway?

Unlike a trust you might establish by will, a living trust is set up by a written agreement between you and the trustee, and it takes effect immediately.

While you can be your own trustee, you may prefer to name a professional trustee to manage the trust assets, keep good records, pay you a regular income and—should you become incapacitated—pay your household and medical bills.

A living trust can be revocable or irrevocable. The advantage of a revocable trust is that you don’t give up control—you can amend its terms or even cancel it whenever you wish. On the other hand, you may want to put some of your assets in an irrevocable trust so you can achieve other significant goals.

For example, you could set up a charitable remainder trust to pay yourself a dependable income for your lifetime and then distribute the remaining principal to our organization. The substantial, current income tax savings as well as future estate tax savings of this kind of trust magnify its appeal.

Your Estate Plan, Too

A revocable living trust can be an important part of your estate plan. It’s an ideal vehicle for holding title to real estate outside your home state. You can make your life insurance payable to your trust. And the trust can include a credit shelter trust provision to help minimize estate taxes and other provisions to make gifts to family and charitable beneficiaries.

Along with your attorney, we can show you how a living trust can blend your personal needs, estate plans and philanthropic intentions.

SOURCE: University of Georgia in an article written by Mary L. McCormack