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Legal News: Nobody Wants to be Sued (Continued from previous blog)

The previous blog spoke about the 5 requirements common to all 19 DAPT (domestic asset protection trust) states that the DAPT must follows:

Those were the basics. From here there are a few additional provisions that vary from state to state and that are seen as important by "experts" in assessing the desirability of one state's DAPT over another. They include:

  • The period (statute) of limitations within which an action must be brought to challenge a transfer to the trust;
  • "Exception creditors" (such as ex-spouses collecting alimony, child support obligations, and tort creditors), if any, whose claims override the protection of the DAPT):;
  • The level of the creditor's burden of proof in challenging a transfer to the DAPT as "fraudulent," meaning prejudicial to the creditor.

One of the most significant considerations is the statute of limitations, which runs from 18 months in Ohio (currently the shortest) to five years in Virginia (the longest). Almost half of the rest is four years, including Connecticut; and the other half, now joined by Indiana, is two years.

In virtually all the statutes the burden of proof to establish a fraudulent transfer if by "clear and convincing evidence," while Connecticut cut that liberal standard down a bit by requiring proof only by a "preponderance of the evidence" if the transferor is also a beneficiary of the DAPT, which would in fact typically be the case with a self-settled DAPT.

The idea of a period of limitations makes sense in some respects, as it would lead to chaos and widespread uncertainty in commerce and property ownership if creditors could surface and make a claim 10 or 20 years after the claim arose.

Exception creditors are the next important consideration. They are creditors whose claims take priority over the protection offered by the statute. Typically, these are claims existing at the time the DAPT was created, for child support, alimony or marital settlements, which is the law in a majority of the DAPT states.

As more states adopt DAPT statutes and more DAPTs are established, more laws will no doubt develop, but at the moment there are relatively very few reported cases across the country.

Furthermore, there are discussions among legal organizations of establishing a uniform asset protection trust law, which could help unify the laws across the country. But whether or not that occurs, we can unequivocally say that times and concepts have changed, and estate planners need to be mindful of that.

Given the growing trends of the states to adop DAPT laws, when we get to the "full monty" where all 50 states have DAPT laws, it may become borderline negligent for estate planners not to consider a DAPT in every estate plan.

When that happens, if people could really rollover in their graves, Queen Elizabeth would be in the likes of a spin class.

Legal News: Nobody Wants to be Sued

(News Briefs, Lawyer Weekly, 11/25/19)

No one wants to be sued, and everyone would feel better if they knew their assets would be protected if they were sued. It is commonknowledge that we live in the most litigious country in the world. There are more lawyers in southern California than in the entire country of Japan.

A lawsuit is initiated every 15 seconds in the US. Such an atmosphere has motivated a considerable segment of the public to go to some lengths to protect their "nest egg," even to the point of moving it out of the country. Is that necessary? Isn't it possible to protect it while it's here?

In 1977, Alaska, followed quickly by Delaware, became the first states formally to adopt laws that would allow a person to establish a trust for her own benefit, the assets of which could not be reached by creditors. It is referred to as a self-settled domestic asset protection trust, or DAPT.

Of course, the various state DAPT statutes differ somewhat, but following is a brief description of the basics and some of the distinctions among the states' laws, as well as an overview of the laws of the most recent additions.

For openers, there are five requirements common to all 19 DAPT states that the DAPT must follow:

1) The trust must be irrevocable - irrevocable by the settlor, that is. The power to revoke can be given to other parties, such as the trust protector;

2) The trust must have a local trustee (but it could also have a co-trustee elsewhere, such as in the settlor's domiciliary state - generally a bad idea);

3) Some ot the trust assets must be located and administered in the DAPT state;

4) The trust must provide that its governing law is that of the DAPT state;

5) The trust must contain a spendthrift provision (prohibiting attachment or reach by creditors or assignment by the beneficiaries).

 

Legal News: Wills and Trusts (Irrevocable Spendthrift Trust- Judgment Creditor)

(Lawyers Weekly dated 11/25/19)

Where a plaintiff brought a reach and apply action against a Massachusetts spendthrift trust created by his parents' murderer to enfore an Arizona wrongful death judgement against the murderer's estate, a question should be certified to the Massachusetts Supremem Judicial Court concerning whether a judgment creditor of the settlor's estate may reach and apply assets i an irrevocable spendthrift trust after the death of the self-settlor of the trust.

"Harry De Prins brought this reach and apply action against a Massachusetts spendthrift trust created by his parents' murderer, Donald Belanger, to enforce an Arizona wrongful death judgment against Belanger's estate...

"The crux of (defendant Michael J.) Michaele's argument on appeal is that the district court erred in its core legal holding that De Prins is entitled under Massachusetts law to reach and apply the irrevocable trust assets to satisfy the wrongful death judgment. This argument turns on whether in these circumstances, under state common law and state statutes, a self-settled spendthrft irrevocable trust which provided for unlimited distributions to the settlor during his lifetime (and to no one else) protects assets in the trust form a reach and apply action by the settlor's creditors after the settlor's death. Massachusetts law has not resolved this question...

"We thus certify the following questions to the Massachusetts SJC: 'On the undisputed facts of this record, does a self-settled spendthrift irrevocable trust that is governed by Massachusetts law and allowed unlimited distributions to the settlor during his lifetime protect assets in the irrevocable trust from a reach and apply action by the settlor's creditors after the settlor's death?"

 

Legal News:Trust Beneficiaries Sue (Breach of Fiduciary Duty)

In the Lawyers Weekly (11/25/19) under Verdicts & Settlements:

Mimi Greenberg died in 1974 and was survived by her spouse, defendant Nathan Greenberg and their two adult children, plaintiffs Ruthanne Miller and Henry Greenberg.

Mimi had executed a trust agreement with defendant Nathan as one of three initial co-trustees. Years later, following the death of one of the initial trustees, defendant Agnes Kull was appointed as a co-trustee.

The trust provided that there would always be three trustees in office and that, in the event a co-trustee was unable, unwilling or ceased to serve in that capacity, the remaining co-trustees would appoint a replacement.

In addition to being appointed an initial trustee, Nathan was named beneficiary of the trust, as were plaintiffs Ruthanne and Henry. Nathan, as a beneficiary, was entitled to distributions only as the other trustees deemed necessary or advisable for health, comfort, support and reasonable enjoyment in life, taking into consideration any other income or assets available to him, to live in the same manner and enjoy the same comforts to which he was accustomed during Mimi's lifetime. Further, Nathan was prohibited from participating as a trustee in any decision to make such a distribution to himself.

The beneficiaries' claims against Nathan and Agnes principally arose out of:

(1) the distribution of trust assets to Nathan as beneficiary of the trust in violation of the terms of the trust. Specifically, the judge ruled that Nathan enjoyed a much more affluent lifestyle following Mimi's death and therefore, did not require the distributions to maintain the lifestyle to which he had become previously accustomed. Further, the distributions were made in violation of language in the trust instrument forbidding Nathan from making any decisions as trustee concerning distributions to himself as a beneficiary;

(2) the investment of trust assets in different Ponzi schemes. The judge ruled that the trustees' investments were made negligently and in breach of the trustees' fiduciary duties and the Massachusetts Prudent Investor Act. Specifically, the court found that Nathan breached his fiduciary duty to the trust when he failed to investigate adequately the investment strategies and allowed his decision to participate in the risky investments to be motivated by greed. Agnes violated her fiduciary duties by disregarding her obligations to exercise reasonable care, skill and caution to preserve the asets of the trust in that her passive disregard of the risks that Nathan's actions posed to the assets of the trust jeopardized the trusts' interest and led to losses;

(3) the failure of both Nathan and Agnes to consult with the third co-trustee as to the administration of the trust and, when that trustee resigned, to appoint a successor trustee; and

(4) the trustees' failure and refusal to account to the beneficiaries.

The action was originally brought by Nathan and Agnes seeking a declaration that their actions had been in compliance with the terms of the trust, which was ultimately dismissed. The plaintiffs asserted counterclaims, which formed the basis of the judgment. Further, since the commencement of the action, both Nathan and Agnes died and the representatives of their respective estates have been substituted as parties.

Legal News: 8 Life Events that require a change in your estate plans

Estate plans need to be updated periodically, especially by older adults. Frequently revising your estate plans is important as you age because your circumstances change ore frequently than at previous points in your life.

While you and your estate planner should review your estate plan every 2 years once you are over the age of 55, there are several other life events that should also trigger a review.

1. A new addition to the family.

Your golden years may be full of new additions to the family, whether your children get married or have children of their own. Estate changes may not be necessary after a new addition, but you may want to make them to pass down something to your new grandchildren or to a favority daughter or son-in-law.

2. A new diagnosis.

If you have been given a new diagnosis, you'll likely spend some time reviewing what can happen as the illness progresses. A new illness may require you to give new health care instructions to your executor. For example, there may be some treatments you do not wish to receive and some you do. Your loved ones need to know this should you become unable to make your own health care decisions. Communicate your wishes in writing to your power of attorney as soon as you're sure of them.

3. A serious falling out.

Over time, your opinion about the people in your life may change. Or, you may feel the same about them, but their circumstances may make them a poor choice as a power of attorney or trustee. Say you discover you and your daughter feel very differently about palliative care. Or, you find an old friend, whom you're named as trustree, has developed a gambling addiction. When their circumstances or your feelings change, it's best to update your estate plan as soon as possible. 

4. Divorce or the death of your spouse.

If you and your spouse separate, or if they pass away, you may need to set a new estate plan in motion. Critical positions like beneficiary, powers of attorney and trustee may now be left unfilled. Although this is a very emotional time, it's best to make these changes as soon as possible as your estate is very vulnerable following a divorce or death.

5. Increase in assets or liabilities.

If you've added a new asset (or sold one) you may need to account for the change in your estate plans. For seniors, these changes may mean closing a 401k or selling the family home.

6.Moving to a new state.

Laws about estate panning and inheritance differ by state, so if you've made the move to a new one, you'll need to update your plan with state laws in mind. Your estate planner should be familiar with these and how they can impact your specific plan.

7. Remarriage.

Cupid works in mysterious ways and you can find love at any age. Many newly remarried seniors do not immediately realize that remarriage will change existing estate plans by default. A will made before a new marriage is very likely to be contested and the last thing you want is your loved ones in conflict upon your death. Update your estate plans as soon after your wedding as possible and let your children and new spouse know where they stand so they won't be confused at any change of plans upon yourr death.

8. The death of a beneficiary, executor or trustee.

Close friends and even children may pass before you do. In their grief, few people remember that the tragedy leaves their estate plans in disarray. You'll have to fill any position that is now vacant and spell out an inheritance for any widowed children or the spouse of your deceased loved one.

If you update your estate plan regularly and after these life events, you can feel secure that your wishes will be carried out as you want upon your passing.

Plus, when you update your will routinely, there's less likely your family will experience conflict over it, which is an important legacy to leave them.

Legal News: Essential Document Locator Checklist for Adult Children

Adult children of aging parents are often caught without the essential documentation parents need in an emergency situation. Knowing where the official records are located as well as having copies of these important financial legal and health documents can save you thousands of dollars and countless hours of time spent tracking down recods.

PHOTOCOPY ESSENTIAL DOCUMENTS:

  1. Birth Certificate
  2. Driver's License
  3. Social Security Card
  4. Organ Donor Card
  5. Marriage Certificate
  6. Credit Cards
  7. Mortgage Records
  8. Military Records
  9. Medicare/Medicaid/Insurance Coverage Card
  10. Legal Power of Attorney, Healthcare Proxy, Living Will, Advance Directives

CREATE A LIST OF WHERE TO FIND ORIGINAL DOCUMENTS:

  1. Receipts and appraisals for valuables.
  2. Trust, banking, real estate and other investments.
  3. Living will, medical directive or durable power of attorney.
  4. personal loads owed with substantiating documentation.
  5. Tax returns and gift or estate tax returns filed during the period.
  6. Birth certificate, social security card, marriage and divorce certificates, education and military records.
  7. Any letter or instruction listing personal property not disposed of by will and wishes for distribution.
  8. Safe deposit box and key with a list of the contents and names of anyone who has access to it.

CREATE A LIST OF IMPORTANT CONTACTS AND ACCOUNTS:

  1. Name and address of clergy, if appropriate.
  2. Details of desired funeral arrangements, location of burial plot, if any, and deed to it.
  3. Complete list of beneficiaries with current addresses and telephone numbers.
  4. List of active credit accounts such as mortgage, banks, of companies and department stores including name and address of each company, account number and type.
  5. Name, address and telephone numbers of attorney, financial planner, tax advisor, broker and/or anyone else with knowledge of control over trusts, wills and finances,
  6. List of bank accounts, including name, address and telephone number of each financial institution, in addition to account numbers, location of passbooks, checkbooks and certificates of deposits.
  7. List of insurance information including health, life, auto, homeowner and renter policies; any employee benefit or pension plans. Also include name, address and telephone number of each insurance company and agent, policy numbers and locations.

Legal News: Parent and Child (Termination - Visitation)

Where a Juvenile Court judge terminated a mother's parental rights, the judge's visitation order must be vacated and a remand must be ordered, as the judge did not provide a rationale or specific findings to justify four supervised post-termination and post-adoption visits per year.

"...As indicated, prior to the judge's decree, issued in March of 2018, the mother and Zelden had visited regularly, once each week. Zelden testified that if he could not be returned to the mother's custody, he would like to have visits twice per week. The judge found that Zelden and the mother had a bond, but nevertheless the effect of his decree was to reduce their contact significantly. The judge did not provide a rationale, or specific findings, as to this part of the decree...

"Here, the judge found that Zelden and the mother 'maintain a bond,' and that post-termination and post-adoptive contact is in Zelden's best interests. The judge's decree, however, resulted in a significant reduction in Zelden's contact with the mother, from fifty-two times per year to four. The judge's decision does not explain the reasons for this significant reduction, nor does it address how the reduction comports with Zelden's best interests, particularly in light of Zelden's expressed desire for even greater contact, as well as the testimony of the pre-adoptive parents favoring just two visits per year.

"Under the circumstances a remand is necessary for the judge to reconsider the applicable factors, and to more fully explain his rationale. The explanation should address how the amount of any visitation that is ordered furthers Zelden's best interests, in light of the competing views of the child and the pre-adoptive parents. On remand the judge may properly consider evidence of the current circumstances of Zelden, the mother, his siblings, and the pre-adoptive parents."

Legal News: Domestic relations (Alimony - Cohabitation)

Where a Probate & Family Court judge is calculating the alimony awarded to a divorced woman, took into account a pre-marriage 6-year period from 2005 to 2011 during which the parties lived together, the fact that the wife received alimony during that period from a previous spouse did not preclude the judge from finding that the couple had engaged in an economic marital partnership in 2005-2011. Affirmed.

"The husband argues that, as a matter of law, the wife could not have entered into an economic marital partnership with him from 2005 to 2011, because she was receiving alimony payments from a previous marriage during that period. He maintains that the word "marital" in the phrase 'economic marital partnership'  imbues the phrase with a requirement of monogamy, and permits either an alimony relalationship with a former spouse or an economic martial partnership with a current partner, but not both. He contends that to permit otherwise would be to endorse 'financial infidelity,' 'finanical bigamy' or 'financial polyandry'.

"Our jurisprudence recognizes, however, that the receipt of alimony, without more does not place an individual in an economic marital partnership with a former spouse. . . 

"There is no indication that, between 2005 and 2011, the wife and her former spouse shared a primary residence presented themselves to the public as husband and wife or planned their schedules and vacations together...The transfer of payments, itself, does not create a marriage-like relationship, and it does nothing to preclude the recipient from seeking out and entering into an economic marital partnership.

"Indeed, the Legislature expressly contemplated that an individual who receives alimony payment may enter a new romantic relationship, see G.L.c. 208, s49(a), (d), and the formation of a new economic marital partnership is not prohibited by the statute. Rather, if an alimony recipient cohabits, and forms a 'common household' with a new partner for a period of at least three months, a former spouse's obligation to pay alimony may be 'suspended, reduced or terminated.'...Where an individual who receives alimony enters an economic marital partnership, therefore, it is the alimony - not the economic marital partnership - which may give way,,,

"Here the former spouse's continued payment of alimony did not prevent the wife from becoming economically interdependent with the husband, nor did it diminish the extent to which the new pair functioned as a couple and invested in a shared future during the period from November 2005 to February 2012. It was these mutual  actions on which the husband's obligation to pay alimony now rests, without regard to the burdens once borne by the former spouse.

"The judge was aware that the wife had received alimony from her former spouse, a fact that appears repeatedly throughout his findings. In accordance with G.L.c. 208, s49(d)(1)(vi), the judge was permitted to consider this and 'other relevant and materail factors.' Nothing in the record suggests that he neglected to do so...

"The husband contends that the evidence is insufficient to support a determination that the parties cohabited and entered an economic marital partnership. We do not agree."

Legal News: 5 Myths about senior nutrition

Everyone knows you need to think about what it takes to stay healthy. You need to exercise, and if you develop good eating habits too, you should be fine in your later years, right?

Not so fast....

Here are 5 common beliefs about senior nutrition that just so happen to not be true:

Myth #1; Seniors should follow the follow food pyramid.

We are taught our entire lives to follow the food pyramid or the My Plate guidelines of the US Dept of Agriculture. However, these guidelines don't provide for the special requirements of seniors. Some of the foods suggested could interact dangerously with the common senior medications or worsen heart disease and diabetes. Seniors also need more of certain vitamins and minerals.

Myth #2: It's normal for older adults to lose their appetite.

Becase your netabolism and activities change as you become older, you may not need as much food as a younger person. However, it is not normal for an older adult to lose their appetitie. This can be a sign of a serious health condition or dental issues. You should check your weight routinely abd bring any sudden changes in weight to the attention of your doctor.

Myth #3: It's okay to always eat alone.

Seniors who live alone often prepare food for themselves and frequently don't eat as well as they should. Physical limitations can also make it difficult for seniors to prepare a nutritious meal. Eating all meals alone can also contribute to stress, loneliness and anxiety. That's why it is important for seniors to eat at least some of the time with others. Whether that means visiting a senior center or having lunch with a friend, eating with others is important to your health.

Myth #4: Senior communities serve awful food.

If you think that the food served in a senior community is always bad, you might be surprised to know that many of them employ nutritionists and talented chefs to ensure that meals aren't just nutritious but tasty too. Before moving to a senior community, try to experience at least one meal there. This will also give you an opportunity to interact with other people living there.

Myth #5: Seniors need fewer nutrients and have slower metabolisms.

While seniors may need fewer calories they still need as many nutrients, if not more. This is because as we age, our ability to absorb certain nutrients decreases. Doctors recommend that seniors increase their intake of Vitamin D, Vitamin B12 and Calcium.

Just because your body is changing as you age doesn't mean you won't benefit from healthy eating. It's never too late to put in the effort to eat healthy and improve your health.

 

Legal News: Help is Almost here for Retirement Savers

With overwhelming bipartisan support and little public attention, the House of Representatives recently passed the most significant reforms to individual retirement accounts in more than a decade.

But while support in the Senate is also strong and bipartisan, a few recalcitrant Republicans, notably Ted Cruz of Texas, are threatening to hold up passage over small pet issues.

We need the Senate to go along. The improvements are important because the shift away from traditional, employer-based plans that began in the early 1970's has proved deeply flawed tens of millions of Americans are now facing retirement without adequate financial resources.

Most importantly, the legislation would facilitate the ability of holders of 401(k)'s and IRA's to use the balances in their accounts to purchase annuities that would provide a steady, predictable income from retirement until death.

Compare that with the current system, under which Americans with individual accounts must currently decide how to invest their retirement savings as they are accumulating them.

That was an insane idea. Why did we turn ordinary Americans into money managers, burdened with the task of figuring out which funds to invest in or, even crazier, which individual stocks to buy? How many of us would fix our own plumbing or take out our own appendixes?

Steven Rattner, counselor to the Treasury Secretary in the Obama administration.