Estate Planning & Tax Basis Basics

January 27, 2016

by David Zumpano with No Comment Asset Protection David J. Zumpano Estate Planning Drafting Software

When doing estate planning, it is critical that the attorney is aware of the basic tax basis issues and their impact on estate planning.

Tax “basis” is a term related to income taxes. The “tax basis” of an asset owned by an individual can change based upon the type of asset, when it was purchased, and the value at sale or death of the owner. So let's start with the basics. Most principal assets are purchased. This includes stocks, bonds, mutual funds, real estate, and even businesses, among other things. When you purchase a principal asset, the IRS looks at the value of that asset when purchased to determine what, if any, income tax should be paid when and if it is later sold. For example, if you buy a stock at $10 per share and hold it for a period of years and then sell it when it is worth $15 a share, the IRS will identify your tax basis as $10 and your sale value at $15 to net an income taxable amount of $5 per share (aka “capital gains”). Over the years, the government has taxed capital gains differently from ordinary income.

There are additional issues to consider with basis. For example, it can change if you own real estate, and if it is used as a business (rented out to others), you can “depreciate” the real property. Depreciation is a non-cash-flow expense against your income. For example if you buy a commercial building for $250,000 and rent it out, in addition to the regular expenses incurred each year from your cash flow, including interest, taxes, insurance, utilities, and general maintenance, the IRS also allows you to take a depreciation expense that represents a percentage of the value of the real estate. Traditionally, depreciation periods are over 27½ or 39½ years. So a $250,000 building divided by 39½ years provides for the annual depreciation amount of $6,329. While the IRS allows you this deduction, you do not have to pay anybody anything to get the deduction. In contrast, however, the $6,239 depreciation deduction reduces your basis in the real estate. So, for income tax purposes, your building no longer has a basis of $250,000, but now $243,761. As you continue to own the building and take the depreciation expense, your tax basis in the real estate continues to decrease, thereby leading to a greater potential income tax when the property is later sold. If the property had been depreciated for 10 years, the basis would have been reduced by $63,390, netting a new tax basis of $186,710. If later sold for $350,000, a capital gain will be assessed on the difference between the sales price and no adjusted basis ($163,290), not the original purchased price and sales price ($100,000).

Finally, it is important to note as an estate planner that tax basis gets automatically “stepped up” if you own the asset at death. Under the previous scenario, if you bought a stock for $10 that grew to $15 or you owned a piece of property that you paid $250,000 for and depreciated $63,000, when you die, both are revalued at your date of death and the values are included in your taxable estate for estate tax purposes. The good news is their estate tax does not trigger any actual payment requirement unless the estate exceeds $5,430,000. Conversely, while it does not incur an estate tax, the beneficiaries get a “step up” in basis after the death of the original owner to the value at date of death, so any subsequent sale after death will yield no income taxes. When planning, sometimes holding assets until after death has a strategic advantage if they are significantly appreciated.

This is also true in charitable planning. If assets that have been appreciated are donated to charity prior to death, the donor will receive an income tax charitable deduction equal to the fair market value, not the tax basis, but there are limitations on the charitable deduction if the contribution was made from appreciated assets. A charitable contribution made with a full basis asset (i.e. cash) can be deducted up to 50 percent of the donor’s adjusted gross income, whereas the deduction for a charitable donation of appreciated property is limited to 30 percent of adjusted gross income. The biggest advantage, however, comes from individuals waiting until after death to convey their highly appreciated assets, so no capital gains tax is incurred to the client (because they didn’t sell it during life) nor the beneficiary (because they received a “step up” in basis). Understanding tax basics is critical to ensure that you always consider the income tax impacts when signing in the short and long term for a client.

If you are interested in learning more about Lawyers With Purpose and in particular how our Client Centered Estate Planning Drafting Software can make a difference in your estate and/or elder law practice, just click here and schedule a day/time that works for you to discover it for yourself – first hand. Just show up with any questions you have! We've got the answers!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

Will You Be In The Conference Room or The Courtroom Resolving The Estate?

January 19, 2016

by David Zumpano with No Comment Asset Protection David J. Zumpano Estate Planning Drafting Software

Many clients understand the benefits of trusts because of the past 25 years of the marketing of revocable living trusts. Clients, however, don't always understand what makes trusts work. Still today, many lawyers draft simple trusts that are little more than a "fill in the blank" form in an attempt to "avoid probate." Even if attorneys are able to deliver higher-quality trusts, many still fail to fund them. This leads to the greatest challenge of all. After death, will the client's family be in a courtroom trying to resolve the estate or will it happen in your conference room? The worst part is, most attorneys don’t think they have a "fill in the blank" trust, because they have a document creation system from XYZ Estate Planning organization. Surely they know what they are doing!

The key to the answer will depend upon the terms of the trust created, and the integration of the financial assets into the plan to ensure probate is avoided and the full benefits of the trust are accomplished. Unfortunately, most advanced trust systems are nothing more than a higher-level "fill in the blank" trust and usually create around the attorney’s needs, not the client's. That inevitably leads to other challenges.

The next question in trust planning centers around the after-death provisions in a living trust. A lot of control and latitude can be provided to the family members of a decedent if the trust was properly drafted and funded. The specific powers you grant to the after-death trustees, in addition to the specific manner in which the assets can be distributed, can also have a significant impact. For example, a majority of practitioners still continue to deliver the trust assets to the beneficiaries outright after the death of the grantor. While this is simple, it requires a whole other estate planning endeavor for the beneficiary that didn’t have to happen. While that puts more money in the beneficiaries’ pocket, I am not sure it is the best way to meet the client’s overall goal.

Another strategy to consider while drafting revocable living trusts is to transfer the assets to a separate share asset protection trust for each of the beneficiaries. This assures that the client's ultimate goals of protecting their assets for their loved ones – and perhaps from their loved ones – can be achieved. Obviously this can’t be achieved in the "fill in the blank" trusts many lawyers use, and not easily in the lawyer-centered document systems.

Don't go it alone. Let Lawyers with Purpose help you sort this out in a systemized and organized fashion that includes the legal technical training, comprehensive customization of trusts and particular drafting available to accomplish the myriad needs of the clients’ overall planning strategy – and helps them sleep at night. Don't go it alone. Join us for the legal technical, practice management, and marketing strategies to be a comprehensive solution to your client.

If you're at all interested in joining Lawyers With Purpose and making 2016 your best year yet – we'd like to invite you to a webinar THIS FRIDAY, January 22nd at 2 EST. Register now for "How You Can Have the Business, the Income and the Life that You Once Dreamed About When You First Started Your Practice" and see how we can help you make it happen once and for all!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

What David Bowie Taught Us About Personal Care Plans

January 11, 2016

by David Zumpano with 2 Comments Asset Protection Estate Planning Drafting Software

I was in 5^th grade when I got my first ghetto blaster. It was pink and came from Santa wrapped up with a David Bowie cassette tape. I played “Dancing in the Street” on that ghetto blaster, danced around my room and stared at my David Bowie poster what seemed like a million times. He was an icon. His music masterfully took over MTV during the time period when MTV played music videos. He was able to paint the exact picture he desired his audiences to see. A talent he held even in death. David Bowie fought cancer for 18 months privately and died in his home, peacefully, surrounded by family. With the help of his wife, Iman, and children David died exactly as he lived … on his own terms.

As soon as I read of the way that he passed, I instantly knew that David had a personal care plan. He decided exactly who he wanted around him at death. It has been reported that when he got too sick to go to his favorite pub for his favorite sandwiches, assistants would go pick them up for him. When facing a chronic disease, there is so little we can control, but isn’t it nice to know that we can plan to be as comfortable as possible, surrounded by the things and people we love and sheltered from those we do not want around.

Personal care plans are an amazing, yet largely overlooked, estate planning tool. While having our finances in order is critical, knowing we will pass with the comforts and dignity we deserve can offer more assurance than any other portion of a well-made plan. Early in my career, I largely disregarded the personal care plan as an ancillary document not necessary. But, as I watched client after client pass in various ways under various circumstances, I saw over and over not only the comfort it brought to the ill party, but the guidance and assurance it brought to family members that they were honoring their loved one as he would have wanted.

A well written personal care plan allows a client the ability to guide who visits during end stages of life. It guides the determination of when and in what condition the person wishes to be taken out in public. It allows a person to select what food, drinks, television shows, books and entertainment he wants available when he can no longer articulate such things. It lists religious preferences and whether or not one wishes to attend church services.

Personal care plans also offer the ability to appoint one’s own disability panel. This disability panel is a group of individuals in someone’s life who will decide when a person is incompetent for purposes of any trust in which his estate is held. What a power! Now this person has kept his life from going on display as a Judge who knows little about him determines his competence. Instead the decision is made by a hand selected group of loved, trusted people in a private manner.

On his 50^th birthday, David Bowie stood in Madison Square Garden and said, “I don’t know where I’m going from here, but I promise it won’t be boring.” And, it wasn’t. He left us on top of the charts and under his own terms. As LWP attorneys, how great is it that we make sure our clients pass with the same dignity? And we have everything we need to do it right at our fingertips within the drafting software…

If you aren't a Lawyers With Purpose member consider joining our FREE webinar "How You Can Have the Business, the Income and the Life that You Once Dreamed About When You First Started Your Practice" on Friday, January 22nd at 2:00 EST. In just one hour we'll share with you lots of effective techniques – and you don’t want to miss any of them:

Streamline your practice, increase revenue, avoid malpractice – all while working fewer hours and enjoying more time to spend with your family and serving your community.
Create targeted marketing and sales efforts so your practice grows reliably, predictably, and CONSISTENTLY!
Build lasting relationships with referral sources and strategic partners – ensuring your clients stay loyal AND work on your behalf referring their friends over and over again!

All Designed With YOUR Practice And YOUR Success In Mind

Kimberly Brannon, Legal-Technical & Software, Lawyers With Purpose

Revoking An Irrevocable Trust

January 6, 2016

by David Zumpano with No Comment Asset Protection David J. Zumpano Estate Planning Drafting Software

Did you ever wonder if you can revoke an irrevocable trust? The bigger question is, why would you want to? Didn't the grantor set it up to ensure it's not revoked? All good questions, but you never know.

Many clients' biggest concern with creating irrevocable trusts is, “what if something happens” they never expected. As estate planning attorneys, we are able to calm client fears by expressing that an IPug® trust can permit them, as grantor, to retain rights to the income and continue for their life to continue all their assets and retain the complete authority to distribute the principal to anyone they choose at any time, other than themselves or their spouses (if Medicaid eligibility is a goal). Inevitably, there's always one client who worries they might need it.

A typical response is, they can distribute it to their kids and the kids can give it back. While this is true, it is not a foolproof planning strategy, as we cannot be assured that the children will actually give it to them in the manner the grantor so desired. More commonly, the need to revoke an irrevocable trust occurs if the client falls ill and needs long-term care prior to the five-year look-back period running. To “cure” the transfer to the irrevocable trust, one seeks to revoke the irrevocable trust in whole or in part, to ensure funds are given back to the grantor to pay through any penalty period caused by the transfer of assets that remain in the IPug. The question becomes, can you revoke an irrevocable trust?

The answer is, it depends on your state law. In most states, an irrevocable trust can be modified or revoked (completely or partially) if all of the parties consent. In an IPug trust, however, you do not need all of the parties to consent to modify the trust, as the grantor retains a non-generated power of appointment that allows the grantor the full rights to modify the trust beneficiaries in any way, shape or form, including the ability to modify the timing, manner and method of distribution to the beneficiaries. But one unbending restriction is that the grantor can never change the trust to give himself or herself access to the principal.

So who are considered the parties to the trust? Generally, the parties consist of the grantor, the trustee, and all of the beneficiaries. When drafting an irrevocable IPug trust, the grantor and trustee is traditionally the client. Therefore two out of the three can be accomplished with just the grantor. Further, getting consent of all of the beneficiaries traditionally includes the grantor, as they may be an income beneficiary during their life. The distinction then becomes, who else are the beneficiaries?

When considering those who are responsible to consent to a modification or revocation, one must look to the trust terms to determine if an individual is a present beneficiary, a residuary beneficiary, or a contingent beneficiary. Generally, most states require the consent of the present and residuary beneficiaries. Consent will not be required from any beneficiaries whose interest is not affected by the amendment or revocation. Some states, however, require even the consent of the contingent beneficiaries. Contingent beneficiaries are those who would receive the benefit from the trust if the present interest or residuary beneficiaries were not able to. Typically, this would be the children beneficiaries where a "per stirpes" distribution is provided for.

This can become very problematic if you need contingent beneficiaries’ consent, because most would be a minor and unable to consent. Then you would need to look to state law to see if a parent can consent on behalf of a child. In most states, since it's a property interest, parents do not automatically have the legal right to affect the property interests of their children, just guardianship over their “person.” The strategy with an IPug is to utilize the retained power of appointment to remove all beneficiaries except one, and then get that one named beneficiary to consent to the modification. After the modification is accomplished, the grantor can again modify the trust and rename all of the original beneficiaries if desired. Where it can get complicated is if any of the parties are deceased. Generally speaking, if a party is deceased, then the contingent beneficiaries would be required.

The bigger challenge is if the grantor is deceased. While a strong argument can be made that consent of the beneficiaries who ultimately benefit from the trust should be enough, it is very difficult to overcome a challenge that an irrevocable trust in the absence of the grantor who created it was meant to remain unchanged. It is presumed in the creation of the trust that the intentions of the grantor will be maintained in their absence. If you want to ensure that it can be modified after a grantor’s death or incompetence, your irrevocable trust should authorize a modification with the consent of the beneficiaries in the absence of the grantor by virtue of incompetency or death. You must, however, in all circumstances ensure that no modification can be made to permit the grantor to have access to the principle. Doing so would invalidate all of the protections originally sought by the irrevocable trust.

In a handful of states, consent of the parties is not sufficient to modify an irrevocable trust and consent from the court is required. This is a much more difficult approach, if for no other reason than the time it takes to get the court's consent, and the possible consequences or loss of assets caused by the delay. The cost by utilizing courts can be counter to the client's “protection” goal. That's obviously on a state by state and court by court basis. So if you're doing this planning, know your state's rules. The good news is that it is rare, if ever, that you need to revoke an IPug trust, and if you need to, it is quite simple to do by minimizing the beneficiaries through your power of appointment.

Don't miss THE estate and elder law event that is not to be missed this February 24th – 26th in Orlando, FL. We only have 15 seats left and on-time registration ends tomorrow – Friday, January 8th at midnight! Register now and let us show you how Lawyers With Purpose can make a difference for you and your team both personally and professionally. Registration Link: http://retreat.lawyerswithpurpose.com/

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

Irrevocable Trusts After Divorce

December 29, 2015

by David Zumpano with One Comment Asset Protection David J. Zumpano Estate Planning Drafting Software

Many clients I come across as an estate planning attorney have been married for 30 or more years. I recall once when a couple who had been married for 37 years came into my office to engage in estate planning. I encouraged them to plan for remarriage if either of them died. They both giggled and laughed and said, oh my gosh, how silly. We don't need that. We're very confident in each other that each of us will take care of our kids and not be influenced by a new relationship.

In a weird twist of fate, six months after completing their plan, the husband came back in with a blonde bombshell 20 years his junior at his side. He explained to me that, soon after executing the plan with us, his wife contracted cancer and died within three months. Now, three months after that, he had this newfound “friend,” and he was asking me to change his trust to make her a beneficiary and not his children. I reminded him of the planning he and his wife set out, and he was adamant to say, “Nope, we decided we could do whatever we wanted.” Unfortunately, his version of whatever he wanted and his wife’s were different for me than they were for him.

Needless to say, I refused to do the work; he fired me and found another lawyer to make his modifications. The LWP™ Client Centered Software has extensive remarriage planning options – but it also has provisions to address if a husband and wife that we did estate planning for decide to divorce before they die. I've had this happen on a couple of occasions.

The key question you must ask yourself in this situation is, what type of planning did the client do? If your client did traditional estate planning consisting of wills, healthcare proxies, powers of attorney or a revocable trust, then it becomes critical after a divorce to amend those plans to accommodate each spouse’s new goals separately. But, what if your married clients did an irrevocable asset protection trust as part of their planning?

In the Lawyers with Purpose Client Centered Software (LWP-CCS) system, the traditional trust we would use to protect against creditors, predators and to ensure the client is eligible for Medicaid and other needs-based benefits is an IPug®, which is an Irrevocable Pure Grantor Trust®. If you think about it, an IPug trust or other asset protection trust is set up to protect against creditors and predators and to ensure that the client is eligible for state-funded long-term care benefits should the need arise. But what about protecting from each other? A properly drawn IPug protection trust provides the terms for a divorce. The trust clearly identifies the beneficiaries of the irrevocable trust during the couple’s life and after their death. Interestingly, the LWP-CCS has a customized divorce provision in the trust that ensures that, if the grantors divorce, the trust bifurcates and all of the terms and provisions related to each spouse apply to them in the separate trusts. Further, the provision eliminates all references to spouse, and thereby creates the trust for the other beneficiaries as if the spouse were deceased. So, the question becomes, what does it mean when the trust bifurcates and thereafter is managed in accordance with all of the other trust term provisions? That's where the drafting of your IPug trust becomes critical.

In the LWP-CCS trust system, you are able to customize the contributions of each spouse and include them on separate and/or joint schedules. In addition, the question of whether you design the trust to separate a deceased spouse's assets for the benefit of the surviving spouse will be critical in determining what happens in the case of a divorce. By separating assets into two schedules, bifurcated trusts are created. Each spouse then manages his or her funds through the bifurcated trust. This ensures that, when a spouse passes a way, all assets of the individual deceased spouse will be allocated to the separate bifurcated trust, thereby sheltering said assets from the living spouses subsequent remarriage and divorce. The trust further includes protective provisions regarding divorce for the trust beneficiaries through the disability panel, specific bequests and other customizations.

So, as estate “planning” attorneys, we must not only be concerned about protecting the assets from our client's remarriage after the loss of their spouse, we can also ensure that proper divorce planning is accomplished at the same time. Hey, like Prego spaghetti sauce, it's in there. The LWP-CCS has you covered. Hopefully they'll never have to use it, but for those few times it happens, it's nice to know there'll be one less thing to worry about.

In the LWP-CCS trust system, you are able to customize the contributions of each spouse and include them on separate and/or joint schedules. In addition, the question of whether you design the trust to separate a deceased spouse's assets for the benefit of the surviving spouse will be critical in determining what happens in the case of a divorce. By separating assets into two schedules, bifurcated trusts are created. Each spouse then manages his or her funds through the bifurcated trust. This ensures that, when a spouse passes away, all assets of the individual deceased spouse will be allocated to the separate bifurcated trust, thereby sheltering said assets from the living spouses subsequent remarriage and divorce. the trust further includes protective provisions regarding divorce for the trust beneficiaries through the disability panel, specific bequests and other customizations.

It’s time to check out what becoming a Lawyers With Purpose Member would look like for you and your practice. If you’re even at all curious about what we offer in the Lawyers With Purpose program and how becoming a member will forever change your practice, you owe it to yourself to spend a few minutes reading through this page: www.joinlwp.com. Make a change in your practice for 2016 and join us!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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What Are You Thankful For? Some Thoughts from LWP Partners

December 21, 2015

by David Zumpano with No Comment Uncategorized

Dave Zumpano

“[My faith] lets me know there is a reason and a place and a God who ensures that I'm never given more than I can handle.”

It's that time of the year when we look back on what has occurred over the year and begin to get hopeful for next year. As I think about 2015, there are so many things I am grateful for. I have made tremendous progress in my business, continued to develop great relationships with family and friends and built a phenomenal team of individuals who are committed to going beyond their comfort level to help others. Underlying all of this progress is the faith that my parents gave me and that I continue to treasure. It lets me know there is a reason and a place and a God who ensures that I'm never given more than I can handle. My family is a blessing of unconditional love, continuous fun and outward contribution to all those we come in contact with. All of this is made possible by the selfless team that comes to work each day to help carry out the dream we have envisioned, one that others add upon to have impact on the world and help those we can to move them forward to fulfill their needs.

As I look back, there are plenty of challenges in my life over the past year as well, but what I'm most grateful for is that through each one, I was able to grow and learn and enhance relationships necessary along the way. I'm grateful for my business partners, who provide respectful pushback and unique insights. I'm grateful for my spouse, who smiles and supports me in all my endeavors, even those that may seem “out there.” I'm grateful for the community of family and friends and the joy derived by day-to-day interactions and living in the present with all of them.

I'm also grateful for those of you who take the time to open my blog posts and read them. As you look back on 2015 and look forward to 2016, I hope you can find all the things you are grateful for and identify how you want to make your mark on the world in 2016. Happy Holidays, whatever your holiday is, and may your best day of 2015 be your worst day of the New Year.

Victoria Collier

“I have the perfect insider’s view of what my life could be.”

As an estate and elder care attorney, I have the privilege of being invited into the lives of others. Many of them have lived glorious days, while others are still trying to create a plan to survive. While learning about their immediate needs, I also get to see what their family is like, what they have achieved or haven’t, and their attitudes about aging. I have the perfect insider’s view of what my life could be. And for that, I am truly grateful for my spouse, who has supported me through 19 years of life experiences and business ventures, and my children, who make my heart melt just with a smile. I am grateful that we all have good health and good attitudes about learning and living. In full circle, helping families create estate and long-term care plans helps me to be aware of and to be able to help so many more seniors and veterans maintain quality of life as they age, as we all age.

Molly Hall

“The eight-plus hours a day I spend outside my family, sleep and yoga time feels like a daily, hourly purpose-driven mission.”

Family – I know this one can land like it's rather “rogue.” Every award acknowledgment, sporting event and gratitude exercise begins with some rendition of thanking family. Without truly enjoying my family, our time together and all the hobbies and interests we have together, my personality would allow for me to be a workaholic. I know all too many people who hide out in the “busy and important” parts of their work because being intoxicated in work, “overwhelmed and stressed” sounds much more attractive than spending time with their family. I know it sounds horrifying, but it is sadly true. I am so grateful for my family and the amazing year we had: camping, swim team, golf team, lacrosse, softball, hiking, Mexico, skiing, snowshoeing, dinners with friends, and belly laughing at many movies. This year in particular, I don't take for granted the uniqueness of our quality family time and the absolute fun we have together.

Health – Every time I open my smartphone and see a group text from my siblings and/or load Facebook, I would be losing if I didn't silently say a quick prayer this year. It felt like everywhere I turned there was an update with another friend, family member, neighbor or colleague who was faced with some version of an illness, health scare or death. There is a part of me that is in denial around “we're at that age,” but this year in particular it seemed like it was everywhere – young, old and in between. This year I am deeply grateful for my health and my children's health and that we are alive and well. That really felt like an enormous victory this year. I'm already creating and planning for our 2016 health goals and ways we can proactively create up-leveled conscious health goals.

Purpose – What I get to do day in and day out is not “work.” The eight-plus hours a day I spend outside my family, sleep and yoga time feels like a daily, hourly purpose-driven mission. Whether it's in writing, coaching, teaching a webinar, partners meetings, creating marketing content or leading a demonstration for prospective members craving a new way of life and practice, I don't take my part lightly. I owe it to each piece to be fully present and fully coming from a place of passion, purpose and difference-making.

We want to take this moment to say THANK YOU to all our members, their team, our power partners and speakers for a most wonderful and blessed 2015. We look forward to locking arms with you all again in 2016 and making it the best year yet!

I Never Expected This

December 16, 2015

by David Zumpano with No Comment Asset Protection David J. Zumpano Legal Marketing

Recently I finished my first book, “Protect Your IRA: Avoid the Five Common Mistakes.” It was a project I've attempted to do for years, but quite honestly I wasn't prepared for the strategic by-products that came from it. Most interesting was the impact it had on those closest to me – my family – who don't know the details of what I do. They were intrigued by how the book took very complex information and made it simple to understand. After reading it they said, “Wow, I didn't know you dealt with all that stuff.”

The other surprise was how it landed on the professionals I work with. After reading the introduction and closing, they felt as if they were part of the book with me because of the commitment in the book to having professional alliances to help clients attain their goals. Coworkers were also intrigued, and pointed out that as many times as they've heard me say the things that were in the book, they never understood it as a whole, organized in the fashion it was, with such poignant points for clients to understand. In fact, they even suggested it will make them more competent in talking to clients on this very complicated issue of IRAs. Finally, the client’s response after reading it was, “Do I need to get in and get a checkup? Am I all set?”

While this reflection shares the impact my book had on me, the most exciting part is that it can have the same impact on you as a joint author. We've had dozens of attorneys use this book in their community to derive the same benefits and insight that I have been able to derive from it. If you're a Lawyers With Purpose member, and these benefits are something you're looking for in your practice, I encourage you to go to www.lwpirabook.com to find out how you can be a co-author of “Protect Your IRA: Avoid the Five Common Mistakes.” If you aren't a member (this is just one of the hundreds of benefits you do get by being an LWP member) just pick up the phone and talk with Molly Hall at 877-299-0326 x 202 to learn more about becoming a member and launching your book project!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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You’re Doing It Anyway…

December 14, 2015

by David Zumpano with No Comment Coaching & Implementation David J. Zumpano

So you've done an estate plan for a client, you've created a will, a healthcare proxy, a power of attorney or even a revocable or irrevocable living trust. And all is well. The client is happy, you've completed your work and you move on to your next client. Inevitably, a month or two down the road you get a call from that happy client with a "quick question." That's where it all starts to go downhill.

The client asks the quick question, which, after you clarify, does not have a simple answer. Usually, your solution sounds something like, "Well, I would have to look to see what your trust says, and you may have to modify it," or, "Well that's simple, all you have to do is ABC, 123." The trick is, do you charge your client for the answer to this "quick question?" Most lawyers don't, and if you do, you might run into a different expectation with your client, who thought it was “included." If you're not careful, it can be a no-win situation.

So what do you do? The best solution I have found is to engage my clients in a maintenance program. At Lawyers with Purpose, we have our TLC™ Maintenance and Fee Guarantee Program, which allows clients to pay a small annual fee and have access to us year round for their "quick questions." In fact, we even notify them when there are changes in the law and invite them in no less than once a year in group sessions to discuss the changes and allow them to opt to modify their planning to accommodate the new laws.

Along the way during the year, clients can call with any questions that come up, as can their financial advisors and tax advisors. While many lawyers view this as burdensome and time-consuming, consider the opposite – that it turns your transactional relationship with your clients into meaningful long-term relationships, making it likely that they will refer more clients. In addition, when we are taking calls from clients' financial and tax professionals, it's actually a wonderful marketing opportunity. They come to know of our unique asset protection planning strategies and get comfortable with us. They can see how we work, and that encourages them to work with us.

In the 15 years I have had my maintenance program, I can assure you that it has been a great experience for not only our clients, but for us. We actually have two social gatherings a year – one in the summer and one during the holidays – and they are well-attended. Clients ask if they can bring friends and/or family and encourage them to do planning with us so they can join our maintenance client community. We also have quarterly specialty workshops in which we invite outside experts to talk on topics requested by our clients, and each session is recorded and put on the special maintenance member-only section of our website. Our clients feel special, and our maintenance family has grown to almost six hundred families.

The best part of the maintenance program is that it's actually profitable. We charge $595 per year for this all-access benefit. When you multiply it out by hundreds of families, it's quite profitable, as all of the work is done generally in group sessions. In addition, it keeps you connected with your clients and ensures that their plan actually works because, as their life changes, you are able to modify the plans to accommodate them.

The one area you need to guard against with a maintenance program is overtaxing your staff with maintenance work in any given week. Doing so can really crash your short-term cash flow, but you always have access to the maintenance monies that traditionally come in during January and sit in your bank account as a "savings" to finance any new projects or growth you want during the year, or to subsidize the cost in a month where there is excessive maintenance work needed.

So, you're getting calls from clients anyway, why not do it in an organized fashion and turn it into a relationship-building experience for your clients and their financial and tax professionals. Let Lawyers with Purpose show you how. Join me on Friday, December 18th at 2 EST for a FREE webinar on "The Most Profitable Planning You'll Ever Find: For Year End & Year Begin" just in time to kick off 2016 with fierce momentum. Click here to register now and kick start 2016. If you're an LWP Member – you've already got access to these tools – just reach out to your implementation coach or members services on where you can find it on the members website.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

VA Pension Changes Not Likely To Occur Until Spring: How To Prepare Our Veteran Clients

December 9, 2015

by David Zumpano with No Comment Asset Protection Legal Technical VA

In February 2016, the Veterans Administration was set to enact new rules that will limit the availability of pension resources to thousands of veterans in need of care across the country. The February enactment of the new rules was based on information provided on regulations.gov. However, the most recent insider information suggests that the earliest we may see the final rule announced is Spring 2016. Regardless, changes are coming and as elder care attorneys and strong advocates for the senior community we must quickly align our practices with the new VA rules to provide our clients with the optimum result under the changed rules. Currently, the proposed changes to Title 38 of the CFR, include several items worth note.

First, while the current rules allow a veteran or his widow to exempt “reasonable” land as a home place, whether the veteran or widow live there or not, the new rule will limit the home place exemption to 2 acres or less. This will certainly have an impact on farmers and those living in the more rural areas of the country.

Second, under the current rules, information and regulations regarding the deductibility of independent living facilities is contradictory to say the least. Currently, there is enough indication by the VA that as long as a doctor states that the applicant is in need of custodial care and assistance with at least two activities of daily living, an argument can be made that the independent living facility fees should be deductible medical expenses. Under the January 23^rd changes, this “loophole” will be sealed and no independent living fees will be deductible medical expenses.

And, lastly, and most importantly, the proposed rules impose a 3 year lookback for all transfers made for less than value AND subject the applicant to a penalty period of up to 10 years for said transfers. Among the penalized transfers, transfers to trusts and funds converted to annuities are expected to be included.

Where does this leave us as trust and elder care planners? How do we move forward under the new rules? In order to ascertain the answer to these questions, we must evaluate the proposed rule changes along with the rulings the VA has issued on the availability of trust assets.

Currently, there are a number of VA Office of General Counsel rulings indicating what trust assets are not attributable to the veteran. Among these are trusts in which the veteran is the grantor and trustee, but all current and future interest in trust assets and income vest in the veteran’s child or grandchild (Op. G.C. 5-62 (3-2-62), VAOPGCPREC 73-91 (12-17-91)); testamentary trusts established for the benefit of the veteran over which the veteran has no personal control or discretion (VAOPGCPREC 72-90 (7-18-90)); and, third party trusts in which the veteran is an income beneficiary but all trust corpus vests in the trustee (VAOPGCPREC 64-91 (8-9-91)). Another ruling expressly states that any first party supplemental needs trust established by a competent veteran or his fiduciary will count as an available asset to the veteran (VAOPGCREP 33-97).

To indicate the importance of the grantor-trustee not having the authority to access income for himself personally, we can look to a recent VA decision as a case study. A lawyer filed an income only trust (NOT control only) with the veteran as grantor and income beneficiary in November, 2014. The case was denied almost immediately in December 2014. The basis of the denial, while no law or general counsel opinion was provided, was that all assets in the trust are countable assets because the veteran “receives net income of the trust.”

Where do the new rules leave us as planners? As LWP attorneys, we have an arsenal of trust plans available to assist veterans and plan for future Medicaid eligibility at the same time. First, there is the traditional plan that LWP has recommended for years. The home and land can be placed in a My Income Trust (MIT). The MIT is an irrevocable pure grantor trust in which the grantor maintains control and income. We move the home place into a MIT because it is an exempt resource and a low basis asset, allowing us to keep the step up in basis at death and maintains the lifetime exemption of $250,000 under the IRC Code Section 121 at the sale of the home. When the home is sold, the principal from the sale is owned by the MIT and does not then disrupt the grantor’s benefits eligibility. To be extremely cautious, some practitioners will put language in the MIT stating that upon sale of the home, the proceeds therefrom are to become part of another trust, generally a CGT or TAP, in which other assets are placed. Bear in mind that if the home sits on over 2 acres, any land beyond the 2 acres is not an exempt resource under the new rules. So, in that situation, it may be better to place any land over 2 acres into a trust in which the grantor has no income rights. It is not recommended by LWP that any other assets, other than the home place and up to 2 acres of land be placed in the MIT at this time.

After the home is placed into the MIT, the remaining assets can be placed in a CGT (Completed Gift Trust) or TAP (Tax All Purpose) trust. These are both non-grantor trusts. When dealing with veterans benefits, it is more typical to use a CGT trust than a TAP because the CGT does not include the Crummy Powers and GST language the TAP does, and these inclusions are generally not necessary as a person planning for VA benefits does not generally need the estate tax resources the TAP offers. Placing the liquid assets over $80,000.00 into the CGT will start the lookback period under the new VA rules. The CGT has been used by Victoria Collier, and many members, as a fool proof planning tool for VA benefit eligibility. The grantor is not the trustee, has no access to income or principal and the gift is completed for tax and planning purposes.

Further, it is clear that the rules as written do not exclude us from using a FIT to hold client assets. Well planned use of the Family Income Trust (FIT) should not only get a client on VA benefits, but will also qualify them for Medicaid in every state. The FIT, a control only trust, is a grantor trust used when a client has enough income to live comfortably on. The client can move assets into the FIT and remain the trustee. While the grantor/trustee has complete control over the assets in the trust, he personally has no access to the principal or income from the trust. The grantor can keep the assets within his taxable estate for IRS purposes, but has NO access to the corpus or income from the trust for public benefits planning purposes. While the VA has not appeared to have issued an opinion based directly on the use of the LWP FIT, it is clear their issue has lied 100% with the grantor having access to the income thereby making the FIT (a control only trust) a viable and useful planning tool.

If you're a Lawyers With Purpose member, I encourage you to listen to the webcast Dave Zumpano and Victoria Collier did last week, located on the Lawyers with Purpose website. And, if you're an estate or elder law attorney, please join Dave Zumpano, Victoria Collier, Sabrina Scott (Director of VA Services, LWP) and me on Monday, December 14 at 4:00 pm eastern as we have a panel discussion of the 2016 VA changes, VA planning and accept your questions. It is our duty as the leading estate planning attorneys in the nation to be prepared and educated on the VA changes coming in 2016, and we at LWP are excited to make sure all of our members are ready and educated when the changes take place.

Registration Link: https://attendee.gotowebinar.com/rt/8232313303938319617

Kimberly Brannon, Esq, Legal-Technical and Software Trainer at Lawyers With Purpose

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Are You Power In Partnership?

December 8, 2015

by David Zumpano with One Comment Coaching & Implementation David J. Zumpano Systems & Processes

Many years ago, a system designer worked side-by-side with me for three years to design all of the systems and processes that are now known as the Lawyers with Purpose law practice management system. Interestingly, over the course of those three years, this systems analyst discovered another system, a system of how I operate personally. In fact, he was so befuddled by it, he gave it a name: Power in Partnership™.

As the consultant and I worked together and he picked my brain as to how I know what I do when I do it, he identified all of the standards that make up the systems that operate a solid law practice system for an estate planning attorney. It was interesting, however, one day near the end of our project, when he looked at me in amazement after I had recommended a solution to a problem and said, “You know, you always do this.” To which I responded, what? “Every time a challenge comes up you seek to understand the need, to identify solutions, and then you work with me to solve it.” He continued by saying his experience in working with me for three years was impactful. “It always feels like we're accomplishing something and it always feels like we're both meeting our needs.”

But this isn’t about me, it’s about the standards he identified to be an individual who lives by a “Power in Partnership” mindset. He continued on to say, “You know, we have spent so much time creating the system about how to run an estate planning practice, I think what I've hit on here is a whole way for someone to operate their life. I want to call it Power in Partnership.” I looked at him with intrigue and we began to design our final system – what it means to be a Power-in-Partnership-minded individual.

In its final form, someone is Power in Partnership if you are willing and able to get behind the needs of another person and work wholeheartedly to help that individual achieve their goal, need, or objective. I have found countless people who are generous in helping others, but it was the second part of the definition that distinguished a Power in Partnership mindset.

Let me continue. The second half of the Power in Partnership definition continues with the word “and, you are willing and able to enroll the other person into your need and make sure they are able to help you accomplish your goal, need or objective.” Wow. That's where most people fail. They are so good at helping other people with their needs, but they sell themselves out in the process. They fail to set proper expectations and in the end can often fail in their attempt to be generous because there was no “agreement up front.” This is so counterproductive and disheartening.

The consultant working with me defined it by having an approach to meet others' needs that was always followed up with an approach to get the other to ensure that they work within your standards and guidelines. That way, if either party doesn’t, the other can hold them accountable to the agreement to get the intended result so that it's a win/win and benefits the world. That's Power in Partnership! That is the foundation from which all Lawyers with Purpose operate. We are willing and able to get behind the needs of our clients and help them accomplish their goal, need and objective, and we are willing and able to enroll our clients in our needs to ensure they help or support us to get our goal, need or objective accomplished. The key distinction here is we. That is, we must be responsible to enroll ourselves in their need and we are responsible to enroll them into ours. People are not ordinarily wired this way and do not automatically presume to meet your need, nor do they presume that you will meet theirs. That's why Power in Partnership is such an amazing model that leads to great contributions and solutions not otherwise attained.

Are you Power in Partnership? Join Lawyers with Purpose and discover how to begin living a Power in Partnership life. If you would like to know more about what we have to offer you in membership, join us on Friday, December 19th at 2 EST for our FREE webinar "The Most Profitable Planning You'll Ever Find: For Year End and year Begin". Space is limited to reserve your spot today!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center