InterActive Legal Blog

Leave the Gift of True Thoughtfulness to Heirs

by David MacMahan

Few things are more overwhelming, or more emotionally challenging for heirs than the “stuff” left behind; especially in overstuffed garages and storage units.

Today, nearly all of us have been trapped in our homes by Covid for nearly a year, with at least several months ahead of us looking similar. Do you have clients over sixty, have a will or trust set up, and feeling OK about how they will be leaving their family to deal with the estate? Awesome! Now do they have a garage, attic or self-storage unit, with things not seen or thought about in months or years? These represent an amazing gifting opportunity, and useful task during COVID.

Can you imagine how overwhelming the duties will be for their beloved executor trying to let heirs know what personal property is available to divide, sell or donate? They can’t all meet at the house like in earlier times. The tangible assets, aka personal property, furniture, art, jewelry, sentimental items are usually the most difficult and contentious part of an estate to divide. The practical challenges alone of letting all heirs know what is there, getting it listed, sometimes valued are huge. Then how does one go about dividing peacefully? Worst of all, they have typically never done it before, so it is all completely overwhelming.

Reflections on a Year Unlike Any Other

Dear friends,    

     As 2020 draws to a close, and I reflect on a year unlike any other, I find that I am full of contradictions. I marvel at how quickly these twelve months seem to have passed, yet somehow wish that time would move faster. I feel joy for every day that I have with my friends and family, but sorrow for the many who are suffering the loss of their loved ones, their health, or their means of living. My fear of the unknown suddenly seems more present, but so is my awareness of all the many things, big and small, for which I am grateful.

     I am writing this note for three reasons. First, it is a thank you note, to all those who are part of InterActive Legal: Our Advisors, my colleagues, and of course, our subscribers. Thank you for your loyalty to InterActive Legal and to our profession. Your commitment to your craft, your clients, and your communities is proving more important than ever.    

Why Bob Dylan Sold His Music Catalog

 

By Daniel J. Scott, Esq., Scott Law PLLC

This article originally appeared in the Spotlight Advisory Group Blog on December 9, 2020. It is being reposted here with permission from the author.

InterActive Legal subscriber, Dan Scott, has written extensively about a shift in how estate planning will be thought of in the near future.  Instead of an emphasis on planning to avoid taxes, Dan suggests linking an estate plan to one’s life purpose….  More “Legacy Planning” than merely wealth transfer for the sake of retaining generational wealth.  In a previous article that appeared in Forbes, Dan writes:

“Gone are the days of planning for your death. It’s time to plan for your life.”

“The reason traditional estate planning is dead is that it has nothing to do with happiness or helping you live a fulfilled life. Estate planning simply addresses what happens when your die. It only plans for the two inevitable certainties of life: death and taxes. What about planning for all of the uncertainties in life, the choices you make and ultimately control? What about planning to build the life you will ultimately leave behind when you die?”

In the post that follows, Dan conjects three reasons singer-songwriter Bob Dylan may have sold his music catalog…all consistent with his previous musings about making such moves to enhance a living legacy.

If you haven’t heard, it’s true—Bob Dylan sold the rights to his music publishing catalog

Why, you ask? The short answer, and the one that has fans and the internet grumbling, is money.

Estimates put the value of the sale in the $300-400 million range. So, to pull a line from Mel Brooks’ Spaceballs, he didn’t just do it for the money, he did it “for a shit load of money!”

Of course, the question does not (or at least should not) stop there. You see, money has no intrinsic value. The value of money is derived from its application—that is, what we choose to do with the money. In other words, money is really just a tool to be used in order to achieve some other goal.

Look Before You Transfer: Is there a PPP Loan?

by Vanessa L. Kanaga, Esq., President and Director of Content Development, InterActive Legal

An Additional Consideration for Those Advising Business Owners on Lifetime Gifts¹

As we near the end of 2020, many estate planners are doubling their efforts to assist clients with making lifetime gifts to take advantage of the current estate and gift tax exemption ($11.58 million) before its possible reduction following changes in the federal government next year.  As any estate planner will tell you, there are always a number of factors to consider in determining whether lifetime gifting is an appropriate strategy and, if so, what form the gifts should take.  In addition to the "normal" concerns, many business owners looking to make gifts of their business interests in the near future must consider an additional factor:  the possible effects of Paycheck Protection Program (PPP) loans. 

 

Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, PPP loans were intended to provide economic relief to businesses and employees facing threats to their revenue streams due to the pandemic.  The loans were processed by private lenders (the "PPP Lenders") and the funds were disbursed by the Small Business Administration (SBA), which runs the program.  Loan recipients that used loan proceeds on eligible expenses (primarily wages and other payroll expenses) may apply to have the loan forgiven.  Any portion of a PPP loan that is not forgiven must be repaid at a rate of 1% interest over a period of two or five years (depending on the date the loan was approved).² 

Our Most Popular Documents and Where to Find Them

by Teresa L. Bush, Esq., Director of Education and Support Services, InterActive Legal

What are the most popular documents in InterActive Legal?  It’s an interesting question, and one we consider frequently as we work to bring our subscribers the most useful drafting resources.  We could take a survey and the results would vary based on the time of year, the location of those replying, and the current political climate.  In my role as Director of Education and Support Services, I have a unique opportunity to interact with our subscribers and see what documents and planning ideas are trending from time to time.  Right now, at the end of 2020, I find the document asked about most by subscribers is an irrevocable trust for the benefit of the grantor’s spouse, sometimes called a spousal lifetime access trust, or “SLAT.”  Lately, we have also had inquiries about Charitable Remainder Unitrusts (which some are using for retirement benefits planning, since the SECURE Act severely limited the ability to stretch-out distributions from retirement assets).  Finally, we get questions about how best to draft what I consider to be “bread and butter” estate planning documents – your everyday Will or Revocable Trust with no estate tax planning – for clients who just need a good solid estate plan.  Here are some thoughts on drafting in each of these areas.

How to Develop a Law Firm Dream Team

Introduction by Teresa L. Bush, Esq., Director of Education and Support Services, InterActive Legal

 

Hiring needs in 2020 vary across a wide spectrum, with some firms busier than ever before and needing additional hands on deck, and other firms seeing fewer clients, and therefore little need to consider a plan for hiring. The InterActive Legal Content Team felt that the guest blog post below would be helpful to those of you who may need to add resources to your estate planning team now, and that those who are not currently in hiring mode could keep it in mind for when your need to hire returns. The step-by-step approach discussed may be a new way of looking at hiring while considering the bottom line, overall team billing and work efficiency, and best practices.

 

We hope you find this information helpful, as another tool for building and improving your practice.

How to Develop a Law Firm Dream Team

By Wendy Witt, JD

Ugh. Hiring isn’t anyone’s favorite task. I get it. As we dive in to develop your rock star law firm team, I acknowledge that hiring is a crapshoot.

 

This article will improve your odds of hiring the right person at the right time for the right seat – and developing them into a rock star team member. Smart hiring will reduce:  ibuprofen purchases, “why me” crying episodes, the rapid outflow of cash better spent on pepperoni rolls in Pittsburgh’s Strip or the Reading Terminal, and wasted time that could be spent watching the 1978 Steeler season with your bubble mates.

 

Allow yourself a little grace for past mistakes and let’s map out the steps to make good things happen from here on out. The only way to do more of the work you love, have a healthy work-life balance, and make more money is to invest in leverage (i.e. help). There is nothing as beautiful as something getting done when you’re not the one to do it!

 

Executorship Shift to Online Accelerating with Pandemic

By Patrick O’Brien, CEO and co-founder of Executor.org

It’s no secret that the internet has disrupted almost every industry known to man. From investing to tax filing, it has left a trail of both success and failure behind it, with winners and losers in those industries shifting in remarkable ways.

One industry that has been slow to move online is estate settlement. There are many reasons for this, but one that is often overlooked is basic demographics. With the average age of death in the US being 79, and those with wealth typically living even longer, the result is a group of executors who are often over 60 in age and not terribly digitally savvy. As such, estate settlement has experienced very little change thus far during the digital revolution.

The Coming Wave

Simple demographics tell us that there will be a huge increase in executorship in the coming years, spiking as the first of the Baby Boomers, who were born starting in 1946, begin to reach their average life expectancy in 2025.The children of these Boomers, many of whom will serve as executors for their parents, are a much more digitally-savvy group who could approach the process in fundamentally different ways. This is a group that consults Google before they do almost anything and will certainly leverage the treasure trove of free information available online to help them manage this complex process.

InterActive Legal Leaders Co-Author Important Article Addressing How Artificial Intelligence May Affect Legal Practitioners

 

 This article was written by the authors expressly for Trusts & Estates Magazine, and appeared in the February 2020 issue. It is being reposted here with permission from the publisher.

 

AI and the World of Estate Planning

Artificial intelligence symbolizes both a promise and a threat.

Michael L. Graham, Jeff Glickman, Jonathan G. Blattmachr, and Vanessa Kanaga

January 23, 2020

Click Here to Download Article

 

The importance of the advances in science and knowledge over the past several decades cannot be exaggerated.  One area that has been most profound is artificial intelligence (AI).  Virtually, everything we use every day, from our iPhones to our automobiles, is driven by AI.  Its impact on the legal industry is enormous from word processing to computer research to email to Zoom conference calls.  The attached article describes many of these that have occurred and, perhaps, even more important, discusses some that will soon add more to our profession.

Defined Value Clauses: Ensuring No Adverse Surprises

©2020 by Jonathan G. Blattmachr, Mitchell M. Gans, and Vanessa L. Kanaga. All Rights Reserved.

With very limited exceptions, estate, gift and GST (called "wealth transfer") taxes are imposed on property's fair market value (FMV). Only cash and publicly traded securities have definite values for estate and gift tax purposes. All other assets, such as closely held business interests, land, private equity and art, do not and their FMVs are equal to the price at which the property would trade hands between a willing buyer and willing seller, neither of whom is acting under a compulsion to buy or sell but both of whom have full knowledge of the "knowable" facts affecting value (e.g., the price of land is determined without regard to the fact that there is undiscovered gold under the ground).

In fact, the IRS is known to collect more additional wealth transfer taxes on account of challenges to values reported by taxpayers than all legal issues combined. Moreover, penalties of between 20% and 40% may be imposed on the amount of tax underpaid attributable to an undervaluation of property for wealth transfer tax purposes. Section 6662(g). A reasonable cause exception (subject itself to exceptions) to the penalty is provided under Section 6664(c). The requirements for this exception are fleshed out in Reg. 1.6664-4 and are very worthwhile studying. Among other requirements is that the taxpayer must obtain an independent appraisal of the property transferred.

Hence, one way to try to avoid penalties and an additional wealth transfer tax by reason of an undervaluation is to rely on a thorough and complete appraisal. However, that has not, in many cases, avoided an increase in tax even if it did avoid the Section 6662(g) penalty.

How I am Changing My Practice, Client Meetings, Client Planning, and More to Address the Coronavirus

This article originally appeared in the American Bar Association, RPTE eReport 2020 Spring Issue (May 2020).  This version contains non-substantive grammatical edits for clarity.

Authors: Jonathan G. Blattmachr, Barron Henley, Thomas A. Tietz, Martin M. Shenkman, and Mary Vandernack

Prominent Trusts and Estates attorneys Jonathan G. Blattmachr, Barron Henley, Thomas A. Tietz, Martin M. Shenkman and Mary Vandernack provide their valuable tips for practicing and best serving clients during the current Coronavirus crisis. During the pandemic, trusts and estates services are acutely needed, and the authors give us the benefit of their collective experience.

Introduction

We are in the throes of the Coronavirus pandemic, and even though states are loosening stay-at-home restrictions, the impact on estate planning professionals, as well as their families, finances, and our country, will continue for some time. Estate planners have an incredible opportunity to help clients through this difficult time. However, to do so, we have to address how we can operate our practices though the challenges of remote work and more. A business disaster is defined as anything that interrupts the normal flow of business and the severity is a function of how long the business is impaired, and the severity of the impairment.  For most or perhaps all estate planning firms, this pandemic is classified as a catastrophic business disaster. For some, the severity of the impairment is very significant.  There have been numerous blogs and articles published in the last several weeks of firms that have had their partners stop drawing profits from the firm, had to drastically cut compensation for and laid off both associates and support staff, and still may not be able to weather the economic storm we are currently experiencing. Generally, 25% of businesses do not reopen after closing for a disaster.[1] The long-term impact of Coronavirus on the viability of law firms is uncertain, but by taking proactive measures now, firms may reduce the impact.

What steps and considerations should practitioners, and their firms, take in these times?