Beware the Frozen Asset Period

Most folks have heard that a properly designed and implemented revocable trust based estate plan will allow trust heirs to avoid Court supervised (and attorney accompanied) Probate proceedings at death. While this is true, the avoidance of Probate may not be the most important attribute of a properly implemented revocable trust based estate plan.

While in most circumstances the minimization or elimination of Probate proceedings is certainly advisable to control post-mortem administration expenses, the most important benefit of avoiding Probate may well be the ability of the successor trustee of the revocable trust to avoid having to await a Court order before the successor trustee is able to commence management of trust owned property. In Probate settings, it is not at all uncommon for a Personal Representative to have to wait for weeks or even months for the Court to issue orders allowing the Personal Representative to exercise authority over assets subject to the Probate proceeding. A properly designed and administered trust allows the named successor trustee to have almost immediate control over the trust owned assets rather than having to wait for the Probate Court to enter orders granting control authority.

While this difference in “time of control” may not seem that important, consider the recent volatility we have experienced in our stock markets. While awaiting the Probate Court order granting control authority during a period of extreme volatility, the personal representative has no ability to sell (or purchase) Probate estate assets. Imagine the damage that could be done to a Probate estate marketable securities portfolio in an extreme down market while the personal representative is waiting for the Court to grant authority! The period of time that the personal representative of an estate has no authority is what is often referred to as the “frozen asset” period.

On the other hand, marketable securities held by a trust at death are immediately controlled by the named successor trustee once evidence of authority is presented to the account custodian. Accordingly, in most trust administrations, effective control is passed to the successor trustee within no more than a week of a death, thus significantly reducing the “frozen asset” time period. This significantly decreases the risk of being caught in a down market with no ability to react in a timely manner.

The ability to avoid the “frozen asset” problem is just another good reason to design and implement a revocable trust based estate plan that avoids or minimizes Probate proceedings! Contact us today by visiting or call (772) 489-4901 to learn more!

Estate Planning = Risk Management

When recently challenged to describe “what I do” in a few words, it occurred to me that I could refer to myself as a “risk manager”.

It is commonly accepted that insurance is the “go to” tool to manage every day risks. Life insurance, liability insurance and property insurance are all commonly used tools to plan for life’s “bumps in the road.”

So why equate estate planning with risk management? Think about the risk of becoming incapacitated during lifetime and needing to rely upon others to attend to our living needs and to care for and manage our financial assets. Incapacity is of course a risk that cannot be controlled by “estate planning”! That risk is managed by the medical profession to the extent possible. In the estate planning context, the “risk” to be managed is the risk of not having appropriate and capable “helpers” armed with legally effective and efficient tools to allow them to attend to our needs without having to resort to the expensive and time consuming use of our court system. This “risk” is “managed” with the design and implementation of a thoughtfully designed and deployed Durable Power of Attorney. Similarly, the “risk” of being unable to properly direct our medical care is “managed” by appointing appropriate “helpers” and arming them with legally effective powers via a thoughtfully designed and deployed Health Care Surrogate instrument.

What about liability risk that we face in our everyday life? Driving a car is a classic example of an activity that can unexpectedly give rise to liability exposure. In the estate planning context, we help to “manage” this risk by appropriately utilizing state laws to protect assets from unknown and uncontrollable liability exposure. Establishing tenancy by entireties ownership between married couples is one easy example of managing this risk. Properly “lining up” beneficiary designations of retirement assets and life insurance also helps minimize exposure to unintended liability exposure.

What about the “risk” of delivering “too much” wealth “too soon” to an heir who may be ill prepared to handle wealth in the event of an untimely death? A well designed estate plan can effectively “manage” this risk by thoughtfully designing “beneficiary protective trusts” for our young or incapable beneficiaries. What about managing income tax and estate tax exposure, managing the risk of beneficiary disputes at death and managing our loved ones wealth exposure to failed marriage or creditor exposure?

While there are plenty of other examples – the overriding risk that we seek to manage through a thoughtfully designed estate plan is the “risk of chaos”! Minimize the risk of chaos by taking the time to design and implement an estate plan that is appropriate for your personal life situation!

On Being 98% Perfect

Have you ever been faced with the need to address an important task but have “put it off” out of indecision as to how to best handle the matter? It is human nature to want to “get things right.” Often, when faced with difficult decisions, it is easy to procrastinate to avoid having to make difficult choices.

When it comes to defining and describing your estate planning objectives, we often find that difficult and emotion laden decisions need to be made. In more complicated settings, sophisticated and often complex transfer tax and income tax paths need to be explored and considered. Concerns over making the right choices often lead to procrastination (at best) or having no plan implemented at all when the plan is needed (at worst).

Rather than waiting to design and implement an estate plan to accomplish your important planning objectives until you have pondered and analyzed each and every minute detail (advanced transfer tax planning, income tax planning, charitable planning, etc.) – in other words, “getting things 100% perfect,” I have found that a “safer” approach is to encourage clients to “climb the planning ladder!” This involves first designing and implementing a plan that addresses the most fundamental and critically important components of a good and comprehensive estate plan – designating your legal “helpers” (personal representatives, agents under durable power of attorney, successor trustees, health care surrogates, etc.) and providing basic asset disposition instructions (“Who gets what, when and how”).  Then, with a recognition that these fundamental plan implementation documents are “revocable” and may be “tweaked” and modified over lifetime, leave the matters that are impeding any planning progress from being accomplished to subsequent plan revisions. In other words – start with the fundamentals (the ladder bottom) and move “up the ladder” as the more difficult issues are resolved.

In short, I refer to this type of “incremental planning” as being “98% perfect.” Obviously, a good estate planning professional should always strive to assure that your plan is 100% perfect, and you should certainly deal with professionals who ascribe to that standard. However, failing to implement your fundamental planning until your plan is “100% perfect” may well result in a situation (no plan) that is simply “100% wrong!”

To learn more or to get started today, visit or call (772) 489-4901.

Don’t Waste Your Time With Estate Planning!

Let’s face it, when that ‘nagging little voice’ in the back of your mind suggests that you might want to ‘get your affairs in order’ by designing and implementing an appropriate estate plan — a common pushback to this entirely sensible thought is that the effort is simply a ‘waste of time.’ Well, let’s examine that thought. You are probably correct if you are assured that:

(a) state laws designed by legislators will be a perfectly fine “plan” for your family;

(b) your heirs (typically children) will peacefully co-exist and get along perfectly when it comes time to divide assets, deal with co-ownership of real property, dividing personal effects, etc.;

(c) your heirs will never experience a “bump in the road” (divorce, lawsuit, etc.) during their remaining lifetimes;

(d) estate tax and income laws will not change in the future;

(e) the right ‘helper’ will volunteer to wind up your affairs upon your passing (file final tax returns, clear up and pay valid debts, collect and gain control of assets, etc.);

(f) in the event of your incapacity, the right ‘helper’ will step forward (unfortunately, with an attorney required) to have a Court arm them legal capacity to act for you as your guardian; and

(g) your family will be able to find an attorney to take them through the probate process in a cost and time efficient manner . . .

If you believe that the above are true, you certainly won’t understand or appreciate the need for a thoughtfully and carefully designed plan to assure that you will be properly taken care of by the persons you trust to ‘do the job’ and that all of the assets that you have worked your life to build and accumulate will pass to those you love in the way that you intend and in a way that protects them from life’s uncertainties.

For those who understand and appreciate the uncertainties of life, the desire to have an orderly and thoughtful plan for the transfer of wealth, the desire to have the proper helpers in place armed with the legal tools to allow them to help in a cost and time efficient manner – the planning effort is most certainly NOT a waste of time, and completing the process provides “peace of mind” for the entire family. The planning effort does not have to be time consuming or expensive – there are many planning options and “paths” that available to achieve planning goals and objectives. The only way to learn and to understand what path is right for you and your family is to start the process with a qualified estate planning professional.

Don’t Forget About Asset Alignment!

Congratulations! You have just signed your Living Trust or Last Will and Testament! If you are like most folks, this is a meaningful and satisfying moment. A thoughtfully designed and implemented estate plan is the critical step to assuring that your planning goals and objectives are reached and that the wealth that you have taken a lifetime building is thoughtfully delivered to your loved ones in a cost efficient manner. Having completed this important step, it is critical to FINISH THE JOB! In order to assure that your plan actually “works as intended,” you must now assure that all of your assets are properly “aligned” with the intended plan. If the asset alignment “step” in the process is not carefully attended to, the entire plan could be significantly and unintentionally altered.

To understand why asset alignment is critical, understand that many individuals have a significant portion of their “wealth” held in what are commonly referred to as “beneficiary designation assets” – assets such as IRAs, annuities, life insurance, or cash/securities accounts that have been registered as “transfer on death” accounts; real estate holdings that are titled either jointly with other parties “with rights of survivorship”; real estate interests that have been bifurcated into “life estate” and “remainder” interests; or bank deposit accounts that are jointly owned with other parties “with survivorship rights.”

The critical factor to understand is that the Will or Living Trust based estate plan documents will be “trumped” by the actual beneficiary designations and “survivorship right” documents/accounts that are in place as of date of death. As an example, assume a securities account designates Child A as a 100% “transfer on death” beneficiary, and the Will/Living Trust directs that all assets be divided equally between Child A and Child B. In this case, Child A receives 100% of the securities account. While this may have been the intended result, it is important to at least verify that this is in fact the desired outcome. Simply “trusting” Child A to voluntarily share the account with Child B is clearly not reliable planning, and could have significant transfer tax implications to Child A, even if Child A decides to “share”!

Always remember that effective planning has two phases – document implementation followed by asset alignment! Take the time to “complete” your estate plan implementation by thoroughly reviewing all of your “asset alignments” to assure that your assets will in fact pass as intended and planned!

Protect that Inheritance!

One of the important elements of a thoughtfully designed estate plan is not “how much” is left to a particular heir – but rather “how” the inheritance is left to the heir. With no estate plan implemented, there is only one outcome. The heirs (determined by state law) will receive the inheritance outright. For many estate plans, outright distributions to heirs are often specified, either immediately upon death or when younger beneficiaries reach certain ages (age 25, etc.).

While providing for outright transfers may be appropriate in some circumstances – outright transfers leave the assets exposed to heir’s “uncertainties of life.” In many situations, an heir would be much better off receiving the inheritance in the form of a trust share – perhaps controlled and directed by the beneficiary – rather than receiving the inheritance outright. A well designed estate plan will assure that assets that are left to an heir will be protected from the heir’s potential lifetime creditors, including a spouse in a failed marriage. Outright transfers do not have this protection.

Here is a “real life” example. Assume “Parent” (unmarried) has a $1,000,000 estate that is to be left to his only child (“Child”). If Parent had no estate plan, at Parent’s death all assets will pass to Child outright (albeit through the probate process). Assume that Child was “underwater” on a real estate mortgage (owed more than the property than the property is worth) and was involved in a foreclosure proceeding. At the moment of Parent’s death, Child is entitled to the $1,000,000 and the $1,000,000 is instantly exposed to Child’s creditors, in this case, the foreclosing lender. If the foreclosure sale of the property does not fully cover the liability on the mortgage note, Child could be liable for what is referred to as a “deficiency judgment” which the lender could collect against the inherited assets.  If instead Parent had left Child’s inheritance in a trust via a properly designed estate plan, Child’s creditors would be unable to reach the $1,000,000! Note that this is the case even if Child has substantial control over the Child’s trust.

Imagine the implications in other real life situations that could confront your heirs over their lifetimes – failed marriages, business creditors, automobile accident liability, etc. Which way do you think your heirs would want to receive their inheritance – outright (not protected) or in a controlled trust share (protected)? This is just one of many reasons why thoughtful estate planning matters! Contact our office today at 772.489.4901 to discuss your estate planning needs.