Is What You Want Truly What You SHOULD Want?

Posted on August 23, 2011 by Craig R. Hersch

Since I’m now in my 23^rd year of practicing estate planning law, I’ve come to realize that what many clients say what they want isn’t really either achievable, realistic or truly what they really want. What I’ve found that nearly every client wants (but doesn’t really outwardly say) when discussing their estate plan is:

not to die;
not to become disabled;
to retain total control over their assets forever;
to make no changes to the estate plan that they already have; and
for me (the attorney) to magically make their current estate plan minimize taxes, avoid lawsuits and best provide for the client and the client’s family.

They also want the estate planning process not to cost much, if anything.

These goals are common to the human condition. None of us wants to die or become disabled, nonetheless make a plan for such eventualities. So the common goals I lay out above everyone knows are not reasonable, but are evident when you start looking behind what’s being said at that initial client conference.

I mentioned that the clients don’t really say (or even realize) that these are the “wants” that they are expressing. But these wants become evident when you closely examine some client’s directions. I’ll have a client who will say, for example, “put in my trust that the trustee should never sell XYZ Stock” or another common example would be “put a direction that the trustee should not invest in any stocks other than the S&P 500 Index”. These clients who want to impose a myriad of conditions on the investments– or those who impose similar conditions on trust distributions – are really doing so because they do not ever want to die or give up control of their assets.

While XYZ stock may have performed well over the client’s time of ownership, to impose a restriction in perpetuity invites problems. We can all point to companies that, in their heyday had fantastic returns only to falter because some new technology or company came along. Similarly, imposing harsh restrictions on trust distributions might seem prudent now – but if you ever look at a trust from several decades ago that does the same thing you would find how outdated those wishes can become, and what trouble such restrictions cause future generations.

So my first job in the estate planning process is really to first address our common fears – examine what realistic goals a client might really be after – and then to conform their current plan to meet those goals. In order to do this, we must first all realize that there is a greater likelihood than not that each one of us will suffer a period of disability prior to our deaths. Most of us are not fully capable and competent to handle our affairs all the way up to the moment of our death and then just expire.

Instead, most of us experience a period of gradual physical and mental decline. This is where an estate plan that doesn’t properly anticipate this eventuality will fail. But these failings are not unavoidable.

Much of this process is an educational one. Anyone can take a complex situation and make it sound complex. A good estate planning attorney has the ability to break down a complex situation into understandable choices – each of which has a distinct set of advantages and disadvantages.

Allow me to give you one example. Assume that Barry and Linda are married and are creating trusts. At Barry’s death – should his trust distribute all of its income to Linda or should the income also be available to their children? While the first inclination might be to have all of the income distributed to the surviving spouse only, there might be good reason to allow the trustee of the trust (who may be Linda herself) to “sprinkle” the income between Linda and the children.

One of those reasons might be that Linda’s trust estate is large enough that she might have an estate tax problem of her own. Distributing Barry’s income to Linda following Barry’s death might exacerbate a tax problem that already exists. Another reason to sprinkle the income might include the fact that Barry and Linda each make $13,000 annual gifts to the children – allowing for $26,000 of tax free gifts each year. Once Barry dies the amount that Linda can give tax free is reduced to $13,000. But if Linda has the ability to distribute income from Barry’s trust directly to her children, then she can replace the gift with the income distribution. Moreover, if the children are in a lower income tax bracket, the family unit will save on income taxes as the income distributed directly from Barry’s trust to the children will be taxed at their rates as opposed to Linda’s.

Depending upon their answer to this question above – the next issue centers on who the trustee of Barry’s trust should be following his death. If the trustee has the ability to sprinkle the income, should the trustee be Linda? If it is, then certain provisions need to be built in to avoid Barry’s trust from being taxed in Linda’s estate. But what if Linda becomes disabled? Should one or more of the children become the trustee? Do we have a problem with the children wearing two hats – and might they have too much self interest since they are discretionary beneficiaries? This depends largely on the family relationships and how Barry and Linda view their children (and their spouses!).

These issues should not be overwhelming – but they need to be addressed in such a way that the client can digest them and come up with a solution that is best for his or her own family situation.

This is just one example – and may or may not apply to your circumstance. But my point is that there are a number of different choices with almost every decision in every estate plan – each of which might end up with a different answer than what you might have first thought – provided your attorney takes you through your options systemically and understandably. Once you review your plan this way, you may discover what you REALLY want and adjust your plan accordingly.

New Durable Power of Attorney Law Affects Everyone

Posted on August 16, 2011 by Craig R. Hersch

On October 1, 2011 a new Durable Power of Attorney law took effect. Most people have Durable Power of Attorney documents as a part of their estate plan – so today I thought I would review some of the highlights of the new law.

Most of us know what a Durable Power of Attorney is, although some may be confused when it is used and when one becomes invalid. A Durable Power of Attorney document allows you to name someone to effectively and legally sign for you for a variety of commercial and legal transactions. You can grant someone the power to buy, sell and transfer stocks, bonds, money, real estate and almost anything else you can think of. A Durable Power of Attorney can be used to grant someone else the authority to make gifts on your behalf, or even establish and fund trusts – including estate planning and/or Medicaid trusts.

On your death, however, the Durable Power of Attorney document ceases. Then your will takes over. The “durable” in Durable Power of Attorney means that the powers you grant someone survive your incapacity. But the powers are not applicable after your death.

In years past, the law allowed you to create a “springing” Durable Power of Attorney meaning that it could be drafted to only take effect upon your incapacity. The new law does not allow “springing” Durable Powers of Attorney, meaning that when you sign the document it becomes immediately effective. Practically speaking, “springing” Durable Powers of Attorney weren’t very useful, since the banks and financial firms that would have had to rely on them are wary of “springing” powers because the banks and financial firms don’t want to be liable if the contingency that creates the power hasn’t occurred yet.

One of the more notable changes to the law includes the fact that a general grant of authority, such as “I grant ‘Joe’ the power to do anything that I could do” is now insufficient for most actions. In other words, if you want Joe to be able to write checks from your bank accounts, he needs specific banking powers. If you want Joe to have the ability to sign a deed conveying real estate, then the document specifically needs to grant him that power.

In fact, the law states that the authority to grant certain gifting or estate planning powers not only need to be included in the document, but each specific power needs to be initialed by the principal (you). This requirement applies to certain matters involving trusts, gifts, rights of survivorship, designation of beneficiaries, beneficial interests under annuities, disclaimers and powers of appointment. So if you want to give someone the power to change the beneficiary of your IRA, for example, not only must that actual authority be designated in the Durable Power of Attorney, but you need to initial right next to that specific power for it to be valid.

Failure to have such specific powers inside of the document may render the document useless. Documents that were signed before October 1, 2011 are referred to in the statute as “legacy” documents and are supposed to remain valid even if they don’t necessarily comply with the new law, however for all practical purposes they will be more difficult to use since the banks and brokerage houses, among others, are going to require a document that complies with the new law for the bank or brokerage house to honor it.

The new law contains provisions that require banks and financial institutions to accept or reject a presented power of attorney within a certain amount of time. The new law also provides third parties who are relying on the validity of the power of attorney to be protected if it later turns out that the power of attorney was not valid for one reason or another but the third party had every reason to believe that the power was valid.

What this new law is going to do is increase the complexity and length of Durable Powers of Attorney. The specificity required to act – coupled with the fact that no one knows what specific actions may be required of your power holder in the future – requires lawyers to draft powers of attorney to contain almost anything imaginable.

The bottom line is that you’ll want to contact your estate planning attorney in the near future to update your Durable Power of Attorney to comply with the new law.

Shades of Gray

Posted on August 9, 2011 by Craig R. Hersch

Most of us tend to look at the world in black and white. Iran bad. United States good. Luke Skywalker good. Darth Vader bad. Spending bad. Saving good. It seems that by looking at things in such stark contrast it provides certainty. Certainty good. Uncertainty bad.

We all also know that the world isn’t really black and white is it? Instead it’s many shades of gray. When we have a disagreement with our spouse we know that we may be partially right, and she might be too. The phrase “there are two sides to every coin” reminds us that in any conflict there are two different sides to the story – neither of which is entirely right or wrong.

The same holds true with estate planning – particularly when one embarks on advanced estate planning. When clients ask me how do they reduce estate taxes – or how do they protect the inheritance that they leave their children – I tell them that there are a number of options. Sometimes this frustrates them, because they want the “right” answer. They want black and white. But most options have different sets of advantages and disadvantages. There usually is no right or wrong answer – just different possibilities with a wide range of outcomes based on a number of different variables.

Regular readers of this column know that the estate, gift and income tax laws are in a constant state of flux. What’s true today may or may not be true tomorrow. Yesterday we had a $1 million federal estate tax exemption. Today we have a $5 million estate tax exemption. Tomorrow it is scheduled to return to a $1 million exemption – but will it? How your plan allocates your exemption will have to change as the law changes to meet whatever goals you set out to accomplish.

Today, for example, we may be able to use certain strategies that the Congress and the IRS don’t like (like zeroed-out GRATs or discounted family limited partnership gifts) and want to outlaw. Tomorrow they could pass legislation or issue rulings that would remove those weapons from our arsenal. So the next day we come up with different strategies.

Your net worth also drives the use of certain strategies. But it’s not static, is it? The stock market rises and falls with increasing volatility. Yesterday the value of our properties made us all feel rich. Now too many of us are overleveraged and “underwater”. What does tomorrow bring?

Tomorrow brings uncertainty. If we knew what the tax law will look like ten years from now, if we knew what the value of our holdings will be, if we knew that our health was going to hold out, if we were certain our adult children would never get divorced and that our loved ones would not suffer from any medical or financial hardships – then it would be very easy to construct an estate plan.

But we don’t know those things. What we do is take our best assessment of where we are today – determine what our goals are – and come up with strategies that will help us accomplish those goals given everything that is true today. You don’t want to get too far ahead of yourself predicting what tomorrow brings – but it is still important to build as much flexibility as possible into your plan so that you can adjust it when the tide changes.

All of this uncertainty causes confusion – and for some it scares them into inaction. But that’s entirely the wrong tack to take. You have to enact a plan. If you can get comfortable with the thought that there is no silver bullet – that your plan is fluid in a world of gray –then your family is more likely to find success. You make your best estimates as to what is best for your family right now – but don’t beat yourself up if it turns out that you made the wrong call. Instead you continue to press forward. You adapt to whatever the new realities are – changing those things sin your plan that requires adjustment.

But if you do nothing – or if you let a plan go stale without reviewing it every so often – then you can be certain of one thing. Your plan will become outdated. It won’t accomplish what you originally set out to do. When the only certainties in this world eventually come to knock on your door – death and taxes – you and your family could be unprepared and will likely suffer the consequences.

Posthumous Gifts, Transfers & Payments

Posted on August 2, 2011 by Craig R. Hersch

A few months after the death of her mother, “Janice” continued to manage her mother’s trust as if she were still alive. “Mom used to give each of my kids $13,000 a year – which is tax free – so I thought I would continue that.”

The problem is that once someone dies, the provisions that say who is to get what from the trust following the grantor’s death is what should take place. Any gifts that the grantor used to make during her lifetime should no longer continue. To do otherwise invites a challenge by the rightful beneficiaries – and likely personal liability on the part of the person who is making the improper gifts.

Let’s say, for example, that Mom’s trust in this case is supposed to be divided equally between Janice and her sister Karen. But Janice continues to make the $13,000 gifts to her children that her mother would have made at Christmas. Since Janice is acting as the trustee, she could choose to treat those as gifts from herself to her children and charge them against her share alone. She certainly shouldn’t reduce Karen’s share by those gifts.

The same holds true when paying for travel expenses related to the last illness or funeral. If Janice pays money out of her mother’s trust for her children to fly down to visit with their grandmother before her passing, or to later attend her funeral, these are not valid expenses of the administration. The only person whose travel expenses should rightfully be paid by the trust is any named trustee (Janice) or personal representative (executor) for the estate.

Another mistake that people commonly make after the grantor’s death is when they continue to use the durable power of attorney. The word “durable” in the description of the power of attorney simply means that the power of attorney survives the grantor’s incapacity. No durable power of attorney survives the grantor. When the grantor dies so does her durable power of attorney. So if expenses need to be paid or if checks need to be written then those monies should be paid by the estate or trust by the personal representative and/or the trustee – not by the holder of the durable power of attorney.

When the estate doesn’t have a whole lot of money and it is questionable whether the assets will even cover all of the deceased’s bills and expenses, it is very important that the personal representative follow proper protocol before making any payments – or the personal representative might find themselves personally liable for improper payments.

I can explain this best by example. Suppose that Dad dies with $10,000 of credit card debt, $17,000 of medical expenses, a mortgage in the amount of $120,000 and assets other than the home the total value of which is $50,000? Which bills, if any, should the personal representative pay?

That’s actually a trickier question that you might imagine. Florida law provides that all known and reasonably ascertainable creditors should receive a notice of creditors during the estate administration. Assuming that they all properly file a claim against the estate, if the estate assets are insufficient to pay all of the claims, then Florida law prioritizes the claims as to which should be paid before others.

Secured claims, like the mortgage against the home, usually can’t be discharged in an estate proceeding while credit card debt may be. It all depends upon how the law prioritizes the claims. Moreover, other fees and expenses, such as those associated with probating the estate usually have first priority. The reason for this is that estates with more creditors than assets would not be able to get representation if the legal fees and costs didn’t have priority.

If the personal representative ignores the process and the legal priority, then she is likely to be personally liable for improper payments and may have to reimburse the estate from her own funds.

So if you are managing someone’s financial affairs during their lifetime or thereafter – it is always important to consult your estate attorney before making gifts or paying expenses. If you inadvertently make payments or transfers other than what the law allows, you could find yourself having to reimburse the estate from your own funds.

Does Your Views About Mortality Drive Your Estate Planning?

Posted on July 28, 2011 by Craig R. Hersch

We’ve all heard the phrase “you can’t take it with you”, referring to money, assets and property when one dies. But we all know that the ancient Egyptians constructed elaborate pyramids containing chambers to house mummified pharaohs complete with gold, pottery and other benefits of wealth. The Egyptians believed that their royalty would be reborn into another life, and that they would need their wealth to sustain them in the next world that they would inhabit.

So Egyptian royalty’s estate plan was, in essence, to bury it with them. Unfortunately for them, this didn’t seem to work out very well, as most pyramids were discovered and looted. Even if they were right about the afterlife, their security measures weren’t adequate to protect the bounty they found necessary for future sustenance.

What this points to is something that I’ve thought about for a while – and that is the question whether one’s views on mortality drive what’s most important when constructing an estate plan.

Some, for example, believe that they really don’t own any of the assets that they’ve accumulated during their lifetimes. My mentor, John Sheppard, once told me that we are all only stewards of our bounty – given to us on loan from God for our lifetimes. When one tends to view one’s own wealth in this manner, one is more likely to include charitable causes in an estate plan. There is a corresponding feeling of an obligation to give back to society, and by leaving money and property to charitable causes one could fulfill the divine’s direction to take care of those less fortunate than oneself.

On the other hand there are those that simply refuse to contemplate their own demise. While most of us don’t like to put much thought into the fact that we’re all mortal, some take it to an extreme. These types of people tend to believe that so long as they don’t discuss their own mortality, it won’t happen. There’s almost a taboo about it to the point that if they go so far as to sign their own will – they are tempting fate. I’ve had clients who seem to share this point of view. They would talk about their estate plan, and go so far as to engage me to prepare it – but it would take an act of Congress to get them to actually sign it.

These are the types of people that leave their loved ones totally unprepared when their time comes. Since they refused to do any planning, they leave their spouses and children in a quandary – many of whom have no idea even where to find everything – much less organize it into a coherent plan that would make it easier for their family to carry out. In the worst case scenario, unnecessary expenses are incurred and taxes are paid that otherwise could have been avoided.

Then there are those who don’t believe in heaven or any afterlife – or that any of it matters. They feel no responsibility to those that they leave behind – and view their own wealth solely as a personal resource that can and should be used to fund a “bucket list” of wants and needs before death takes them from this realm.

Laissez les bon temps rouler – let the good times roll – is the phrase of the day. The motto for these folks is to spend their last dime on their last day – which would be great if we all knew how much each of us needed and exactly when we were all going to die. An estate plan is wholly unnecessary as the credit cards will be maxed out and there won’t be any assets to pay them off anyway.

Finally there’s the great majority of the rest of us. We feel torn between our wants against our responsibilities. We’ve worked hard at our careers to accumulate some wealth, and want to enjoy it while we are alive and healthy. On the other hand, we want to preserve enough to take care of ourselves should we get sick, as well as our spouses, children and grandchildren to the extent possible. We feel an obligation to make their lives a bit more comfortable – and we’d like to create and implement a plan that would be easy to carry out with as little stress as possible. We may even share the stewardship ideology, and feel like it would be nice to give a little back if we can.

This is where a good estate plan can balance all of these desires. A “cookie cutter” will or trust will not achieve these goals. It takes a careful analysis of current assets – not only how much they are worth – but how they are owned and what tax liabilities might be inherent within them – income and estate wise – to arrive at a thoughtful, balanced plan. The good estate planner will ask a lot of questions about goals – and try to ferret out which goals are most important comparatively speaking.

Then the estate planner will balance the current asset and income situation against the goals – creating a plan that works – practically – legally and tax effectively.

But it all comes down to which type of person you are. What are your feelings about your own mortality – and what is most important to you. Without answering those questions first, one really can’t even begin to construct an effective plan.

UNRELATED SIDE NOTE – A very big BRAVO to Angie Ferguson – her group of volunteers, sponsors and to the South Seas Resort for putting on a fantastic inaugural triathlon this past Sunday. It was very well run and the atmosphere was electric. People of all ages participated – many for the very first time. I had a good race, finishing the 440-yard swim, 10 mile bike and 3.1-mile run in one hour and nine minutes, meriting an 11^th place finish in my age group. I hope the Galloway Captiva Triathlon becomes an annual event – showcasing Southwest Floridians’ gusto for our outdoor lifestyle, health and fitness – and how it is our people that make up our fantastic island atmosphere.

Too Many Chiefs

Posted on July 21, 2011 by Craig R. Hersch

Anyone who has ever sat on a board of directors for a church, synagogue or charity is familiar with the phrase – “too many chiefs and not enough Indians”. Most who are sought out for board posts are community leaders – they are asked to sit on the board because they are successful at running things. They are often called “centers of influence”. But when you get all of these “chiefs” on a charity board – you typically also have a lot of people who are used to directing, but don’t particularly like taking direction.

So there are a lot of good ideas floating around the room – but nothing ever seems to get done. To implement them requires those who are predisposed to “follow-through” and actually do the work. The chiefs, in other words, need Indians. This problem is exacerbated when the chiefs disagree over which idea might be the best avenue for progress. All of the chiefs are used to being right and having their best ideas implemented. It frustrates them when another chief professes to have a better idea.

The “too many chiefs and not enough Indians” analogy extends to your estate planning documents. Some parents, in an effort to treat all of their children equally, decide to name all of them together as successor trustee, personal representative and power of attorney. This may mean that there are two, three or even four children named to make decisions for Mom, Dad – or both – if the parents should encounter a disability and can’t serve for themselves.

They may have named all of their children because they didn’t want to upset any one of them. But what Mom and Dad don’t realize is that naming someone to serve in a fiduciary role for them isn’t so much an honor as it is a big responsibility. It’s a job. And the job’s a hard one at that. Bills need to be paid, investments need to be followed, life-care decisions need to be addressed, and budgets need to be reviewed. And in most cases, the children lead busy lives of their own.

Moreover, most adult children don’t live near their parents. They have had little or no interaction with their parents’ advisors. They may not know where the bank and investment accounts are held, or how much Mom and Dad need on a monthly basis to live.

Imagine a scenario where Dad – the patriarch of the family – has run his finances competently for years. Suddenly he suffers a heart attack or stroke that renders him incapable of interacting with his accountants, financial advisors and attorneys. In his legal documents he has named all three of his children to succeed him in making these decisions. The three adult children couldn’t be any more different in their outlooks on everything from politics to money to life.

We now have the classic case of all chiefs and no Indians. Not only that, but there’s likely a lot of baggage that’s being dragged into the decision making process. A time of emotional distress may aggravate old grudges and tensions. And now the adult children – because they are all named to act – must somehow come together and agree what courses of action are in the best interests of their parents. If this doesn’t sound like a recipe for disaster – I don’t know what is.

So what’s a parent to do when deciding who to name as a successor trustee, personal representative, power of attorney or health care surrogate? My suggestion is to divide the duties up into different categories. The successor trustee, personal representative and power of attorney post are all mostly financial in nature. Here you probably want to name the child who is most likely to make wise financial decisions. The health surrogate on the other hand, might name the child who is most likely to act as the parent would act in a given situation.

Unless it’s absolutely necessary – or unless the children themselves request it – I would not suggest naming two or more children concurrently in the same post. Name one chief. You can give that chief the power to name a co-chief with him by including such a power in the document itself. But let him or her make that decision. It’s also a good idea to name a successor to the chief you name – in case he or she is unable or unwilling to act.

It also might be a good idea to communicate your intentions, rather than letting the kids find out after the fact. This obviously can be considered on a case-by-case basis given the personalities involved, but it’s been my experience that the more up-front you are, the less back-end problems you’ll encounter. You just might even hear something or other that you haven’t considered before once these matters are addressed with all concerned.

Just remember that when you’re talking about planning your affairs – YOU are the chief – and have the right to make the decisions you feel are in your best interests.

When to Throw it Away

Posted on July 14, 2011 by Craig R. Hersch

My father-in-law Ronald is a pack rat. He and my mother-in-law can’t park their cars in the garage of their condominium because of all his stuff cluttering it up. There are old transistor radios, televisions (the black and white variety), kitchen appliances and a host of other things that you couldn’t sell on eBay if you tried.

“What’s this?” I asked picking up a large plastic bottle off of a folding table overflowing with all sorts of junk.

“Vitamins!” Ronald replied, “I got those on sale at Eckerd’s!”

“Eckerd’s hasn’t been around in how many years?!” I asked examining the faded label on the old bottle. “These expired in 1994! Why don’t you throw them away?” I said tossing them into the garbage can. From the look on my father-in-law’s face, I could tell he wasn’t happy with me.

Which leads me to today’s topic – when to throw away old estate planning documents. Often when I update clients’ documents they ask me what of their old documents should they get rid of.

Let’s address ancillary documents first. Generally speaking, you can get rid of most old durable powers of attorney, health care surrogates and living wills if they have been updated. The one thing that you have to be careful about in this group is the durable power of attorney. Generally speaking it’s okay to get rid of old durable powers of attorney. Where this general rule doesn’t apply – and you need to take other action – is when one of three things has happened: 1) the power holder has a copy of it; 2) it has been used; or 3) a copy of the power of attorney is on file with a bank or financial institution.

If any of those three things are true, then you should have your attorney go through the legal steps necessary to actually revoke the power of attorney. Florida law provides step-by-step instructions that must be followed to properly revoke an old durable power of attorney, including sending notice to the power holder as well as to the proper offices of any financial institution where it has been used. Failure to legally revoke an old durable power of attorney could result in its continued use by the power holder – and unintended and possibly adverse consequences.

Next let’s talk about wills. When you update your will, you might update it by adding an amendment to it – called a “codicil”, or you may revoke the old will in the new one, and create a whole new will. When you amend your will with a codicil, you should retain the old one, since it (or parts of it) remains valid. When you update a will by restating it in its entirety and revoking the old one then it is usually okay to throw out the old one.

The only reason you may wish to keep an old will (or a copy of it) when it has been restated in its entirety is when you want to show a history of some act – such as disinheriting a certain friend or relative.

If you have a revocable living trust, you usually want to retain the old trusts, even if they have been restated in their entirety. This is due to the fact that new trusts usually build on old ones. As an example, let’s say that I have a trust dated January 1, 1996. I restate that trust in its entirety on July 1, 2011. I want to keep the old trust because it has a provision in it that allowed me to amend it – and usually the new trust keeps the date of the old trust so that I don’t have to re-title all of the assets that have been transferred to it. So if the IRS or a financial institution needs to see the old trust to make sure that the new one amending it is valid – it’s a good idea to have that old trust around for that proof.

When you’re like my father-in-law who likes to keep things – then this column is of little use to you. But if you are like me and like to clean out useless clutter from your life- then you should ask your attorney which documents you can safely dispose of.

And – by the way – if you would like an old blender that won’t work – give me a call. I can get you a great deal on one.

Don’t Write in the Margins

Posted on July 8, 2011 by Craig R. Hersch

My great grandmother, who I was very close with growing up (I called her my “Bubby”) used to have this old cookbook. Worn from years of use, its tattered pages held the recipes that made family meals more than special. Bubby experimented by adding and deleting ingredients, or even changing some.

“I use schmaltz here instead of butter,” Bubby would instruct stirring the rendered chicken fat into a pot, “because to use butter isn’t kosher – and you need to add some flavor.” Schmaltz rendered from a chicken or goose (but not pork) is popular in Jewish cuisine, it was used by Northwestern and Eastern European Jews who were forbidden by kosher dietary laws to fry their meats in butter or lard. Even when I was growing up in the 1970s, other kinds of cooking oils that would be kosher, such as olive and sesame oil, were not yet widely used.

Bubby wrote the changes to her recipes in the margins of that old book. When she died – that book contained the secrets to her cooking. Without it, there would be no real way to replicate what she made and how she made it. So it was very fortunate that she wrote down her methods – scrawling through and adding her notes to the published recipes which created her own.

But scrawling changes on your legal documents normally isn’t a good thing. I usually ask new clients who are visiting me in my office to bring with them their current wills and trusts. From time to time I’ll see that the original documents have been crossed through, with notes or changes written in the margins much like my Bubby used to in her cookbook.

“What’s this change?” I’ll ask.

“Oh, that?” new client will respond, “I decided to change the bequest to my grandchildren from $10,000 to $20,000.”

“Do you realize that this change that you have written into the margin of the document has no legal effect?” I’ll ask.

“Really? I had it witnessed!” is a typical response.

Sometimes the change is more drastic – such as writing out a beneficiary. Other times the margin notes are intended to update the will because a beneficiary has died. Unless the will specifically directs who is supposed to get what in that event, Florida law will dictate who is next in line. Often the law is in conflict with the margin notes.

So my first challenge is educating the client that the margin notes have no legal significance. Unless a change to a will or trust is signed with the same formalities and under the same rules as the law directs when signing a new document, then the change will be disregarded. Such changes, do, however, often breed litigation between the beneficiaries – some of whom may have an economic interest in the change.

In such disputes the result is usually large legal fees to the attorneys representing the parties – with the usual result that the hand written margin notes are negated by a court of law. It’s a rare instance when a court upholds any margin notes or changes.

So if you happen to have original will or trust documents that you’ve added your own notes to – you may want to restate the document – or have a proper codicil or amendment made that accurately reflects your intent.

74-Year-Old Triathlete Thinks Anyone Can Do It

Posted on July 1, 2011 by Craig R. Hersch

Regular readers of this column know that I am a “weekend-warrior” triathlete in addition to being a full time estate-planning attorney, husband and father – and today I would like to introduce you to a very interesting and inspirational man I met this past weekend while competing in the USA Triathlon’s National Age-Group Championships in Burlington Vermont.

Bill Reese, age 74 – counters the stereotype that only young people compete in triathlons – which are widely thought of as extreme human endurance challenges consisting of an open-water swim (typically in a lake, river or ocean), bike race, and then a run. He didn’t pick up the sport until his early 60’s – but has qualified for and competed in several national championship as well as world championship races since then, including this year’s world championship that will take place in Beijing, China.

Amateur triathletes are called “Age-Groupers” because they are segregated by gender and 5-year age segments for competition – such as Male Age 70-74. “There are only a few people I have to beat in my age group,” he smiled modestly, “so it’s not that big of a deal that I’m in all of these championships.”

The top finishers in regional qualifiers are invited to the national championship race. Then the top finishers from the national championship move on to compete in the world championship event.

“I was a nerd growing up,” Bill answered when asked whether he’s always been athletic, “I played a few sports as a kid but didn’t do anything particularly well. Then I worked in the federal government and raised a family. So my pedigree is really nothing special to speak of.”

He got into triathlons after he watched one in his hometown near Monterey, California – and shortly thereafter decided to compete in a sprint distance event that consists of a 500-yard swim, 13-mile bike, and then a 3.1 mile run. “I was hooked after that,” he says. Bill graduated on to longer triathlons, including this past weekend’s national championship that was an Olympic distance event (.9 mile swim; 24.8 mile bike; and 6.2 mile run). He’s also competed in half iron-man distance races (1.2 mile swim; 56 mile bike; and 13.1 mile run) and full iron-man distance races (2.4 mile swim; 112 mile bike; and 26.2 mile run).

His wife Emmy sometimes travels with him, especially to the major competitions held in some of the world’s best vacation spots. “She tolerates it okay,” he chuckled.

And like most triathletes, Bill has suffered through his share of bumps and bruises. “I didn’t know whether I was going to be able to compete in today’s event,” he said, lifting his shirt to reveal a very nasty bruise and fresh scars running under the length of his right arm. “Bicycling accident from last week when I was training doing hill climbs,” he explained, shrugging his shoulders. “I was reaching back to get something out of my jersey pocket, wasn’t paying attention to what was in front of me, and ran into a parked truck blocking the bike lane. Didn’t know whether my arm would be limber enough to do the mile swim with all this bruising and scar tissue, but I did it!”

When I asked what advice he would give to others of his generation – he simply said, “Anyone can do it. You do have to put the time in to get into shape and then to train. After you get past age 65 your VO₂ max [volume of oxygen/time – aka your aerobic capacity] falls off a cliff so you just have to deal with it. I walked part of the run course today and still qualified for worlds!”

I’m so glad that I had the opportunity to race in nationals this past weekend and meet people like Bill Reese. If you are interested in watching a triathlon in person, there’s a Sprint distance event being held right here on Captiva on Sunday September 18^th. Get up early as the race starts at 7:00 a.m. sharp with a 500-yard swim in the Gulf of Mexico at the South Seas Resort. A good place to watch the event will be along San-Cap Road as the triathlon’s bike route loops from South Seas to Blind Pass and then back. The run portion is through and along South Sea’s golf course with a beach run finish.

I am registered to race – as is one of my law partners, Michael Hill. I should be easy to spot as I usually wear a University of Florida Gator triathlon singlet – complete with my orange and blue-framed sport sunglasses! So please give me a big Gator chomp as I go by and be sure to cheer all of the competitors on! (It’s traditional to ring cowbells to root for the competitors – bring yours if you have one…) Maybe you’ll be inspired like Bill Reese was to try a triathlon for yourself one day – no matter your age!

The Importance of Nuptial Agreements in Estate Planning

Posted on June 29, 2011 by Craig R. Hersch

Did you know that if you get married (or remarried) and then die without ever changing your will to include you new spouse that he or she is entitled to as much as half of your estate? This is true whether or not you intend to leave your new spouse anything at all. Moreover, your spouse is entitled to and receives a life estate in your Florida primary residence regardless as to whether you intend for him or her to have a life estate.

Florida law presumes several things and then changes your will for you if you don’t ever get around to it. As I mentioned above, let’s say you did your will a few years back. The will leaves everything to your children as your prior spouse has predeceased you. Then you meet someone that you would like to share the rest of your life with. You talk about your financial future together and decide that what’s yours will go to your kids when you die and what’s hers will go to her kids when she dies.

But you never have a nuptial agreement prepared before you got remarried (or even after) that reduces those promises to writing.

Then you die.

Florida law calls your spouse a “pretermitted spouse”. What this means is that Florida law (like many other state laws) presumes that if you had only gotten around to changing your will after you got married then you would surely have included your spouse as a beneficiary. The law further allocates an “intestate share” to your spouse – which translates to half of your estate plus a life estate in your primary residence.

This presumption can be rebutted if you add a codicil to your will that states you do not intend to give your spouse anything (but read further to find out what problems this creates) or if the there is a valid nuptial agreement in place where the spouse waives his or her rights to any share of the estate.

So let’s talk about giving your spouse a nominal gift in the will. Will this cut off all of your spouse’s rights to your estate? Hardly.

Because Florida law also imposes a minimum amount that you need to give your spouse absent any agreement between you and your spouse otherwise. That minimum amount is thirty percent (30%) of the value of your estate at the time of your death.

Going back to my example – let’s say that you and your spouse have agreed not to take anything from each other’s estate. What yours is yours for your children and what’s hers is hers for her children. You also amend your will to reflect this understanding. “I intentionally do not leave any amounts or bequests to my beloved spouse Jane, not for a lack of love but due to the fact that we both have agreed to leave our respective estates to our own families and not to each other.”

Like Lee Corso on ESPN’s College Football Gameday show, Florida law says “NOT SO FAST HOMBRE!”

Absent a validly written nuptial agreement then your spouse still gets a life estate in your primary Florida residence plus thirty percent of the value of your estate, including assets held in a revocable living trust. Which assets and how is that thirty percent calculated you might ask? That answer is very complicated under the law which is quite detailed on the matter and is beyond the scope of the room that I have in this column.

You should know that if you leave a Marital Trust that gives your spouse income for the rest of his or her life but then reverts to your children – then thirty percent of your estate in the Marital Trust is probably insufficient to cover what the law demands. The law treats assets in trust differently than amounts that you leave outright to your spouse. Again – these are topics that you need to address with competent counsel before deciding what is best.

The bottom line? If you and your spouse have agreed not to be beneficiaries of one another’s estate – or if you have agreed to something that is less than what Florida law would have provided – then you really should codify that agreement in a nuptial agreement. To do otherwise flirts with an unintended change to your wishes.