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Who Should Be Trustee?

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting SoftwareLegal Technical

There's a constant battle between lawyers as to who should be trustee of an irrevocable asset protection trust. The primary school of thought is that it should never be the grantor, and some schools of thought believe it should never be the beneficiary. At Lawyers with Purpose, we disagree with both of those positions, but we recognize the concerns and rely on sound principles of asset protection law in making the final determinations.

Bigstock-Who--4420521Let's first discuss the question of whether the grantor should be trustee. Many practitioners believe that allowing the grantor to be trustee makes the assets of an irrevocable trust available to the grantor's creditors. Such a proposition is ludicrous. The challenge with most lawyers is that they do not allow the grantor to be trustee of his or her irrevocable trust. When pushed to explain why, they typically assume that's the way it was always done. Few dig further to see why it was done that way. So let's examine why grantors were not traditionally named trustee. The most adverse impact is that, if the grantor is trustee, they're deemed to retain enough control to have the assets of the trust included in their taxable estate when they die. For many generations, this was the death knell? of an asset protection trust. But in the last 15 years it's become irrelevant because of the rise of the estate tax exemption. Today only two in a thousand Americans have a taxable estate, so preventing the grantor from being trustee because of a potential inclusion of the trust asset in the estate of the grantor is not relevant to 99.8 percent of Americans. So why hold them to that standard?

The next major argument is a theory that if the grantor has control of the trust, then he could direct it back to himself. Well, that depends. What does the trust say? If the trust says that the grantor is not a beneficiary, or similarly the grantor is not a principal beneficiary but is entitled to the income, does that mean that the grantor as trustee all of a sudden gains a super power to violate the terms of the trust and give himself the principal when it's not allowed for? Hardly. In fact, there is consistent case law throughout all of the states, including cases that lead all the way up to the Supreme Court, that supports the notion that a grantor as trustee has all of the same fiduciary obligations as any other trustee and by no means has authority to act outside the powers granted to trustee. I specifically refer you to my Law Review article, "The Irrevocable Pure Grantor Trust: The Estate Planning Landscape Has Changed" in the Syracuse Law Review. In this article, I go through in‑depth review of all of the case law nationwide, and I'm excited to say that it is sound law that a grantor can be a trustee without risking the assets to the creditors of the grantor. One caveat, however, is if the grantor does retain the right to the income, then absolutely the income will be available to the creditors of the grantor.

So are there circumstances when the grantor as trustee's trust is invaded? Absolutely, but in every single case the invasion was not due to the grantor being the trustee, but rather was due to the pattern of behavior by a grantor trustee who violated regularly the terms of the trust in favor of themselves, and the trust was thereafter deemed a sham. In such cases, I concur with any court that makes that decision based on people who try to defraud the system. Irrevocable trusts must be managed in an arm's length manner, and as lawyers we do not plan for someone to become fraudulent. They are fraudulent to their own peril. But a properly drawn trust when the trustee is the grantor in no way, shape or form creates any risk of loss of asset protection if the terms of the trust are followed, as they are required to be in every case whether the grantor is trustee or not.

So at Lawyers with Purpose we encourage our members to do good legal work based on sound law, not fear, conjecture or because that's the way it's always been done. In the end, the client wins. It is silly to deny thousands of clients that we serve the ability to manage and control their own assets for the benefit of their families, just because some rogue case in some rogue state from some vile fact pattern allowed the court to invade against the intentions of the grantor. Protect your clients. Teach your clients. Share with your clients how these work. They are very safe and a great planning tool.

If you want to learn more about Lawyers With Purpose you can find all the information about becoming a member by clicking here to download our Membership Brochure.

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

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VA form 21-8049 – Request for Details of Expenses

by with No Comment Estate Planning Drafting SoftwareLegal TechnicalVA

For all you high Fact-finder/Follow through Kolbe types, don’t panic if the VA form 21-8049 number means nothing to you. It shouldn’t necessarily. If you file non-service-connected pension claims with the VA, you may never have had occasion to use this form, which is formally called a “Request for Details of Expenses.” It is not generally part of what Lawyers with Purpose considers a fully developed VA claim, although there are those who routinely include this form with all their VA claims.

Bigstock-Forms-Concept-with-Word-on-Fol-95979155Purpose of the 21-8049

As the name of VA form 21-8049 suggests, its main purpose is to report monthly non-medical expenses as well as expenses of dependents that otherwise are not typically reported on any other forms one submits with a fully-developed claim. The 21-8049 is usually sent to a claimant to be completed when the VA requires further information after the formal claim is filed. In fact, the VA specifically states in the instructions at the top, “We need additional information to determine whether you are entitled to benefits.” The VA may request this additional information because the adjudication manual directs the adjudicator to determine “whether or not the claimant’s financial resources are sufficient to meet his/her basic needs without assistance from VA. If a claimant’s assets are large enough that the claimant could use these assets to pay living expenses for a reasonable period of time, net worth is considered a bar,” M21-1 Adjudication Procedures Manual, Part V, Subpart I, Chapter 3, Section A.1.e. The 21-8049 may not be requested for every claim you file, but if it is requested, it can delay the claim process. For that reason, some choose to include this form with every formal claim they file. Or, you may decide to complete this form only when your claimant has unusually high non-medical living expenses that you want to make evident to the VA.

How to complete the 21-8049

The current version of this form is dated Aug 2007 in the lower left corner of the first page, although the VA still accepts older versions. It is a two-page form that consists of seven sections. The instructions are minimal, but the VA does provide a toll-free number to call for assistance. Like any other VA form, it is recommended that you complete every section. Non-applicable sections should be crossed out, or you should otherwise indicate that these do not apply. Sections I and II are for listing dependents – both those living with the claimant and those not living with the claimant. Furthermore, you can specify the amount, if any, that the claimant contributes to the support of dependents not living with the claimant so that the VA will consider these amounts when evaluating whether the claimant’s net worth is sufficient.

Sections III, IV, V, and VI are for “Monthly Expenses (except medical) for you and those listed above as living with you,” “Hospital and Medical Expenses,” “Educational Expenses,” and “Expenses of Last Illness and Burial of Veteran, Spouse, or Child and Just Debts of Deceased Veteran or Parent’s Spouse,” respectively. The completion of these four sections is fairly straightforward, but a few remarks should be made to avoid potential problems. Section III lists several possible monthly expenses, like Housing, Food, Taxes, etc., and it also provides blanks for inserting other types of expenses, but this section is only for reporting non-medical expenses. For example, the line item “Housing” should not be used for reporting fees for a nursing home or assisted living facility. Instead, total medical expenses that were reported on the VA form 21P-8416 “Medical Expense Report” with the formal claim should be reported in Section IV, “Hospital and Medical Expenses,” along with a brief breakdown of the medical expenses, or simply refer the VA to the already submitted form 21P-8416. Finally, section VII is for reporting “Commercial Life Insurance Payments” to the claimant. While life insurance payouts are not considered income by the VA if the insured was a veteran, these will be considered as part of net worth and could potentially put a claimant over the asset limit unless you can document to the VA that these assets have been spent down.

What to file with the 21-8049

Documentation of the expenses listed on this form is not required but may assist in your claim. If you decide you want to start including the 21-8049 with all your formal claims, you may decide not to include further supporting documentation unless later requested by the VA. If you do refer to the VA form 21P-8416 in Section IV, you may want at least to include a copy of this form for the adjudicator’s convenience. However, if the VA sent you the form 21-8049 to be completed, they may have requested other information as well. In such cases, ensure that you submit the VA form 21-8049 with anything else requested in the VA correspondence, and that you respond by any deadlines the VA may specify.

If you want to lear more about the Veterans Administration Proposed 3 Year Lookback and Other Law Changes join our FREE WEBINAR on Wednesday, March 16th at 4 EST. Just click here to reserve your spot.  Here's what you'll get:

Discover the Nuts and Bolts of the Proposed VA Changes…and What it Means for Your Practice!

On Friday, January 23, 2015, the Veterans Administration proposed changes in the Federal Register that would…

  • Impose a three year lookback for transfers of assets, including gifts to persons, trusts, or purchases of annuities.
  • Deny claims for up to 10 years due to transfers.
  • And exempt only the home and two acres from net worth. If a claimant's property exceeds two acres, it will count toward the net worth figure for eligibility.

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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Tips For VA form 21-0779

by with No Comment Estate Planning Drafting SoftwareSystems & ProcessesVA

Purpose of the 21-0779

The VA form 21-0779 “Request for Nursing Home Information In Connection With Claim for Aid and Attendance” is used only for certain non-service-connected pension claims, and its primary purpose is to document the level of care required by a claimant or a claimant’s dependent. The VA form 21-0779 is completed specifically for individuals who are residents of nursing homes. The importance of documenting this level of care is twofold:

  1. To support a claim for additional pension above and beyond the base level;
  2. To support the need for certain medical expenses.

There are three levels of non-service-connected pension that a claimant may qualify for: Base pension, Housebound, and Aid & Attendance. The base pension is the lowest pension that a claimant may be awarded. Additional funds are granted if you can document that the claimant is housebound, and even more funds go to those requiring another individual to assist with at least two activities of daily living, or ADLs. The VA also looks at level of care when considering medical expenses to offset income. Therefore, the VA form 21-0779 should document the level of care that justifies the medical expenses being declared. This applies to the claimant’s dependents as much as to the claimant. So for example, the VA will not consider the nursing home facility expense for a veteran’s spouse unless a form 21-0779 is completed for the spouse indicating the need for this level of care.

Bigstock-Forms-Concept-with-Word-on-Fol-95979155Completing the 21-0779

The VA form 21-0779 is just a single page and is mainly to be completed by a third party; that is, the nursing home. All you need to complete the form is the veteran’s – or claimant’s, if other than the veteran – name(s), and Social Security number(s). When you are completing this form for a living veteran’s spouse or other dependent, that person’s name appears in the field that requests the name of the claimant, even though, strictly speaking, the claimant is the living veteran. When downloaded from the VA website at http://www.va.gov/vaforms/, the 21-0779 has no separate instruction pages. The form is fairly straightforward to fill out, but it still provides a toll-free phone number for those who require assistance completing the form. Despite the fact that you are not completing this form yourself for the most part, you should still review all 21-0779s once completed by the nursing home and before submitting to the VA so that you can confirm that every field is answered.

What to file with the 21-0779

Nothing in particular is required to be filed with the 21-0779 form. If you determine that you do need to file this form, it should be submitted as part of a fully developed claim in order to expedite the processing. If you are filing the VA form 21-0779 with your formal claim, then you do not need to file a VA form 21-2680 “Examination for Housebound Status or Permanent Need for Regular Aid and Attendance” because the former documents that the claimant is in a nursing home and requires skilled nursing care and thus by definition has a permanent need for regular aid and attendance. This will, however, not stop some VA adjudicators from requesting the 21-2680 form in addition to the VA form 21-0779, thus we generally request all our VA clients to get a VA form 21-2680 completed as soon as they have retained us.

Always remember that this form can be used for supporting both a claim for a higher level of pension and the need for certain medical expenses. Keep those two purposes in mind when you are deciding whether or not it needs to be included as part of your VA claim, and when reviewing its completion by the nursing home to make sure there are not unexpected results with your claim.

If you're interested in learning more about the Lawyers With Purpose Cloud Based Workflow System join us on Friday, February 26th at 2EST.  Finally…an AUTOMATED law firm system for Estate and Elder Law Attorneys designed to free up your time and get the work out the door quickly and easily!  Click here to reserve your spot for this FREE LIVE DEMO!  We only have a few spots left so grab your seat today!

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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Why You Might Be A Trust Mill

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

Having practiced in the estate planning field for almost 23 years, I'm amazed when I review many trust plans done by lawyers that are still "boilerplate," with nothing distinguishing them other than the names of the client and beneficiaries. Interestingly, even when reviewing trusts created by software systems from well-known organizations in the estate planning industry, I am perplexed about the over-complexity, but also the under-simplicity, of how they work. Most trust systems in the estate planning industry have many options to designate different legal technical phrases and provisions to enter into the trust document. Unfortunately, once an attorney chooses the "standard provisions," nothing else changes in the document but the client names. So while they believe they have a very comprehensive estate planning trust system, they really have a glorified trust mill system (a better mouse trap?).


Bigstock-Legal-Law-Rules-Community-Just-94090013The Lawyers with Purpose client centered document creation system is unparalleled in the industry. It is the only software in the industry that was reverse-engineered. Rather than identifying the specific legal provisions required, it instead identifies the particular needs and goals of the client. Once those goals and needs are determined, the software then allows you to custom tailor every single core element of the trust to accomplish those client objectives. As you complete the client needs and their particular customizations, the software automatically inserts the necessary legal provisions and clauses to accomplish the client goals. No two LWP drafted trusts are ever the same. There are over 5,000 combinations of choices, and that's not even including the customization element in each of the decision levels.

While it sounds scary, the systemization of it makes it quite easy. In fact, it is the only document creation system in the industry that is integrated into a complete estate planning practice module. What does that mean? The marketing, legal technical training, workshop presentation, and client design are all integrated to facilitate and work with each other. Each one supports the other. For example, the initial client educational workshop helps identify the various issues that can be addressed in planning – which flows into the vision meeting, where, based on a series of questions – the client is able to self-select one of five different plans that will accomplish the specific goals the client identified. Next, the design meeting is tailored to focus on the specific plan (legal documents) chosen by the client. Then, the most exciting part: the attorney can customize every single aspect of the general plan to meet the client’s individual needs.

The cherry atop all of this is that the attorney designs the custom plan using specific design templates that permit others in the office to actually draft the trust (the software follows the template, including all customizations). Don't be a trust mill – learn how to put the client first. Client-centered document creation software is the first key. Click here to discover how the Lawyers with Purpose Client Centered Software can transform a mere practice, and discover the impact you can have on your client. Reserve a day and time that works for you now.

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

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(Shhhhh…..) Client vs. Lawyer: TMI

by with No Comment Estate Planning Drafting SoftwareSystems & ProcessesVA

The best way to illustrate the topic of this post is with the following joke:

A man is flying in a hot air balloon when he realizes he is lost. He reduces his altitude and spots a man in a field below. He lowers the balloon toward the man and shouts to him, “Excuse me, can you help me? I am late to meet a friend, but I don’t know where I am.”

The man below says, “I’m happy to help. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees N. latitude, and between 58 and 60 degrees W. longitude.”


Bigstock-Hush-Emoticon-8840545After a brief pause, the balloonist declares: “You must be a lawyer.”

“I am” replies the man. “How did you know?”

“Well,” says the balloonist, “everything you have told me I am sure is technically correct, but I have no idea what to make of your information, and the fact is I am still lost.”

The man below responds, “Indeed. And you … you must be a client.”

“Why, yes, I am,” replies the balloonist, “how in the world did you know?”

“Well,” says the man, “you don’t know where you are, or where you are going. You have made a promise that you have no idea how to keep, and you expect me to solve your problem. The fact is you are in the exact same position you were in before we met, but now it is somehow my fault.”

(From http://www.milwaukee-business-lawyer.com/my-favorite-lawyerclient-joke/)

Funny, right? But how true! Most of our clients and their families come to us for answers or solutions in the form of information, but sometimes the very information for which they pay us, and that they desperately need, is the source of much frustration and confusion for them. Why is that and what can you do to remedy the situation? One of the most common issues that may occur when relaying information to a client regarding a VA claim is giving too much or too little information. You can also have problems if you do not time the release of information correctly, or worse yet, give out the wrong information.

Some of this is undoubtedly beyond one’s control. For example, gauging the amount of information that your client is going to expect and want has a lot to do with that individual’s particular personality or social style. You can often tell from initial contact if your client or client’s family is going to participate actively in their planning and the application process versus how much they want you to just take care of everything and leave them out of it. Thus you may have to adjust your response and the amount of information you provide to meet individual needs on a client-to-client basis. As a good baseline, resist the urge to discuss how the sausage is made. I actually prefer clients who are engaged in the process and seek to comprehend the information they are given. Clients like this can be strong allies in the process of getting a VA claim completed and filed, as well as great referral sources because they appreciate how much work is entailed.

However, regardless of what the client may want, there is obviously a lawyer’s duty to the clients to keep them informed concerning their representation. Per the Preamble of the American Bar Association’s Model Rules of Professional Conduct, a lawyer's responsibilities include the following: “As advisor, a lawyer provides a client with an informed understanding of the client's legal rights and obligations and explains their practical implications. . . . As an evaluator, a lawyer acts by examining a client's legal affairs and reporting about them to the client or to others.” At the very least, someone in the family has to be made aware of the most basic information regarding the legal services you are performing for them: what you are doing, what is happening next, and what to do if circumstances change.

While you can’t always choose the personality of your client, factors like bad timing of information or giving out wrong information are largely ones that you should be able to control. By bad timing, I mean giving information when it is not required at that particular moment. This could be as simple as explaining the VA appeals process when you haven’t even filed an “Intent to file claim” form yet. It could also be giving necessary information too late to be of use. The best way to avoid either is to anchor back to your VA process and advise and inform your client at every major step as to what you have just done and what to expect next. Also systematize what information should be given at each stage using client handouts, correspondence templates, etc., so the client receives the information when needed and not afterwards. While there is no problem with giving the client an overall summary of the process, avoid giving too much information for future stages in the process that may in fact never occur.

The problem with giving a client the wrong information should be self-evident. The rules and laws impacting VA eligibility can be complex, but there is a wealth of resources online, including original sources like the Code of Federal Regulations and the VA Adjudication manuals, both of which are available at the VA’s Web Automated Reference Material System and which should be consulted regularly to ensure the accuracy of what you are telling your clients. Organizations like Lawyers with Purpose are also indispensable for the support they provide in the form of legal/technical learning opportunities and a network of colleagues facing the same challenges who are ready to answer your questions or act as a sounding board for your daily dilemmas. If you choose to make the time to use the resources available, you can ensure that you do not make the mistake of giving the wrong information.

Are you interested in learning more about the Lawyers With Purpose Estate Planning Trust Drafting Software?  If so, click here and we'll hop on a call with you and show you how it works first hand!  We think it's the best thing out there and are confident you will too after you see it for yourself. Click here now and we'll take it from there and start walking you through the difference it will make to your estate and/or elder law practice.

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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Estate Planning & Tax Basis Basics

by with No Comment Asset ProtectionDavid J. ZumpanoEstate 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.


Bigstock-Real-Estate-Concept-9382373There 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

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

by with No Comment Asset ProtectionDavid J. ZumpanoEstate 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.


Bigstock-Conference-Room-412947The 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

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What David Bowie Taught Us About Personal Care Plans

by with 2 Comments Asset ProtectionEstate Planning Drafting Software

I was in 5th 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.

David-bowie-success-anxietyAs 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 50th 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…

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Revoking An Irrevocable Trust

by with No Comment Asset ProtectionDavid J. ZumpanoEstate 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?


Bigstock-Revoked-47094595The 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.

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Getting the Physician Form Right for Aid and Attendance

by with 5 Comments Estate Planning Drafting SoftwareLegal TechnicalVA

Purpose of the 21-2680:

The VA form 21-2680 “Examination for Housebound Status or Permanent Need for Regular Aid and Attendance” is used to document the level of care required by a claimant or a claimant’s dependent. The VA form 21-2680 is completed by a physician based on his/her medical evaluation of the patient. The importance of documenting the level of care is two-fold:

  1. To support a claim for additional pension above and beyond the base level AND
  2. To support the need for certain medical expenses.

There are three levels of non-service-connected pension that a claimant may qualify for: base pension, housebound, and aid and attendance. The base pension is the lowest pension that a claimant may be awarded. Additional funds are granted if you can document that the claimant is housebound, and even more funds go to those requiring another individual to assist with at least two activities of daily living (ADLs). The VA also looks at level of care when considering medical expenses to offset income. Therefore, the VA form 21-2680 should document the level of care that justifies the medical expenses being declared. This applies to the claimant’s dependents as much as the claimant. So for example, the VA will not consider the assisted living facility expense for a veteran’s spouse unless a form 21-2680 is also completed for the spouse indicating the need for the facility to assist with at least two ADLs.


Bigstock-Forms-Concept-with-Word-on-Fol-95979155Completing the 21-2680:

The VA form 21-2680 is relatively short (two pages) and is to be completed by a third party – that is, a physician. All you need to complete the form is the veteran’s and claimant’s – if other than the veteran – name(s), Social Security number(s), and address. When you are completing the form for a living veteran’s spouse or other dependent, it is that person's name that appears in the field that requests the name of the claimant, even though, strictly speaking, the claimant is the living veteran. When downloaded from the VA website at http://www.va.gov/vaforms/, the 21-2680 has no separate instruction pages. It does state its purpose near the top of the first page: “The purpose of this examination is to record manifestations and findings pertinent to the question of whether the claimant is housebound (confined to the home or immediate premises) or in need of the regular aid and attendance of another person.”

Despite the fact that you are not completing this form yourself, you should still review all 21-2680s once completed by the physician and before submitting to the VA so that you can confirm that every field is answered and that further explanation is provided when required by the instructions. Form 21-2680 should be signed by a physician because the signatures of nurse practitioners or physician’s assistants are not acceptable. Errors and omissions of this type should be corrected before filing the claim or you may risk a delay. Most importantly, you should also confirm whether the form 21-2680 does in fact document the claimant’s housebound status or the need for aid and attendance.

Housebound status is documented by the physician’s answer to field 33, “Describe how often per day or week and under what circumstances the claimant is able to leave the home or immediate premises.” A clear indication of housebound status would include a statement from the physician such as, “Patient no longer drives and relies solely on caregivers to attend necessary doctor appointments.” The VA form 21-2680 will support the need for aid and attendance, if it provides clear evidence that the claimant needs assistance with at least two ADLs. Acceptable ADLs are bathing/showering, dressing, eating, getting in/out of bed or chair, and using the toilet. The following are not considered ADLs by the VA: walking, medication administration, meal preparation, and protective environment only. This is very important in the case of independent living facilities, the expense of which will not be considered by the VA unless the 21-2680 documents that such a facility provides a protective environment and custodial care that is supplemented by a third party providing the assistance with two or more ADLs. Otherwise the cost of the independent living facility may be considered merely rent and thus not a deductible medical expense. A clear indication of the need for aid and attendance would be input into box #25, where it asks if the claimant needs a nursing home. The answer to that question may be “no.” However, the physician should write out to the side something like, “Patient needs to live at ABC facility for a protected environment, custodial care and assistance with ADLs.”

Because of the importance of using the right language on the VA form 21-2680, the software developed by Lawyers with Purpose to complete VA claim forms produces a sample VA form 21-2680 with recommended verbiage and other guidance for the most important fields. This sample can be provided along with a blank form to the doctor for guidance with instructions that can be used if the doctor feels it applies. If the doctor does not believe that it applies, it may be that your client simply does not qualify for as high a level of care. You may still be able to file for base pension or plan to follow up with the client periodically to check if medical needs have increased.

What to file with the 21-2680

Other than the regular VA application forms, nothing else is required to be filed with this form. However, if you feel that your completed VA form 21-2680 is weak in areas, but you believe that your client’s medical condition warrants aid and attendance, you can add supporting medical records. This form should be submitted as part of a fully developed claim in order to expedite the processing. As a reminder, you may not need to file a VA form 21-2680 if your claimant is only seeking base pension. And a 21-2680 does not need to be filed if you are filing the VA form 21-0779 because the latter documents that the claimant is in a nursing home and requires skilled nursing care, and thus by definition has a permanent need for regular aid and attendance. This will however not stop some VA adjudicators from requesting the 21-2680 form nonetheless, so we generally request all of our VA clients to get one completed as soon as they have retained us – particularly because it can take some time to get the completed form back from the doctor.

Always remember that this form can be used for both supporting a claim for higher levels of pension and the need for certain medical expenses. Keep those two purposes in mind when you are deciding whether or not the VA form 21-2680 needs to be included as part of your VA claim, and when reviewing their completion by a third party to make sure there are not unexpected results with your claim.

If you want to see first hand how the LWP-CCS Drafting Software works with VA form 21-2680 – along with the thousands of other things it has to offer you're estate and elder law practice – click here to schedule a live software demo.

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.