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Trusts & Estates Law/Acting on aging parent's behalf

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QUESTION: Hello Janet,
My parents are aging and near the point of no longer able to handle their finances.  One parent has no interest or experience in finance and is hard of hearing, which makes conversations with banking officials very difficult. The other is on mind-clouding medications and is becoming physically incapable of walking into a bank. I'm looking for ways to act on their behalf, especially with regard to their living trust and trust accounts.  My parents designated me many years ago as a POA on a statutory POA form, but it listed general financial powers and I understand California law now requires the specific enumeration of powers related to trusts, etc.  Those powers may even need to be listed in the trust document itself. I could declare my parents incapacitated and take over as trustee, but that would deprive my Dad of the dignity of thinking he is still in control of his finances (his financial abilities have always been a point of pride). And I'm not sure I'd be comfortable with the "higher profile" of having my name on all my parent's accounts as trustee.  Short of updating the POAs or amending the trust, are there any other options?  Thank-you.

ANSWER: Thanks for your inquiry.  Updatng the POAs or amending the trust are the only options I know of.  Perhaps the trust could be amended to permit you to be the "co-trustee" and include a "delegation" clause where your father could permit you to speak with the financial advisor and make decisions on his behalf when he isn't "available" ... this is a difficult situation, and I don't envy you.

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QUESTION: Thanks Janet.  Sorry to respond so late.  Over the past few days, things became more serious with my Dad (medically) and I broached the subject of amending the trust along those lines.  He actually was happy to see me doing this.  I think any concerns about dignity are behind us.  The problem I have now is in amending the trust.  I took it to a local lawyer to discuss adding a delegation clause along with updating the trust to reflect the new estate tax laws.  He said the trust was written in such opaque language that it would take many hours just to decipher it.  He recommended using the original lawyer even though that lawyer has moved away.  If you have any hints on doing a long-distance amendment of a trust, esp. in a secure manner, I'm all ears.  Otherwise, I'll just start the process and see what happens.  I just hope the original lawyer recognizes his own language...and can read it.  It IS that opaque! Anyway, thanks for your help.

ANSWER: I don't see any reason why you can't use the original lawyer (although if the trust is written that poorly, it might be better to just pay the new lawyer to do a complete "restatement" and get rid of all of the ambiguity).  If you do go back to the original lawyer, have him make the language simpler (on his own dime - tell him that fixing the language now is cheaper than paying a malpractice award later ... well, perhaps you should be a bit more diplomatic than that, but you get the idea).

---------- FOLLOW-UP ----------

QUESTION: Hi Janet, I actually got a quick reply from the original lawyer.  I had sent him a letter and he responded by phone.  He said that the way the trust was written, it was flexible enough to cover any foreseeable circumstance.  He implied he thought the provisions were written clearly and was surprised I had questions about them!  He indicated no amendments were needed wrt updating for the new estate tax laws, and that all assets could pass to the marital trust with a step-up in cost basis at each parent's passing.  I'm relieved that he is confident that I don't need an amendment and so don't have to pay for such.  But I am still confronted with difficult language. The heart of the division of assets is in the following passage.  If you could help me understand it in plain English, or could point me in the direction of an explanatory resource, I would be very much grateful.  Here is the passage:

"A.  Upon the death of either Trustor, the Trustee shall divide the Trust Estate (including any additions to the Trust Estate as a result of the death of the first Trustor to die) into two (2) separate Trusts, hereinafter referred to as the "Marital Trust" and the "Residuary Trust".

The Marital Trust shall consist of the surviving Trustor's share of community property held in the Trust, the surviving Trustor's separate property held in the Trust and such additional amount that will equal the current maximum marital deduction allowable in the deceased Trustor's estate for federal estate tax purposes, reduced by the final federal estate tax value of all other property which passes or has passed to or for the benefit of the surviving Trustor, either outright or in Trust, which is included in the predeceased Trustor's gross estate and which qualifies for the marital deduction for federal estate tax purposes; provided, however, if the amount is more than is necessary to decrease the value of the deceased Trustor's taxable estate to a level that will result in no federal estate tax liability, after taking into account all other allowable deductions and credits, then such amount shall be further reduced to the minimum amount necessary to result in no such liability.   (snipped)  The Residuary Trust shall consist of the balance of the Trust Estate, and shall be irrevocable after the death of he first spouse."

I'm familiar with the term marital deduction and understand that it allows unlimited assets to pass estate-tax-free to the surviving spouse. The rest I don't understand.   Any help or links would be greatly appreciated.  Thanks!

Answer
What you are quoting is a marital deduction funding formula.  I cannot opine whether it is correct or not.  There are funding forumlas which are considered "pre-residuary pecuniary marital deduction" funding formulas and others which are considered "residual marital deduction" funding formulas.

It looks like this is an attempt to use a residual marital deduction formula(a/k/a Pecuniary Exemption formula).

Here's a powerpoint presentation that discusses marital deduction clause formulae:  http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&ved=0CHIQFjAI&url

I'm not sure what the lawyer who said that the trust was written in "opaque" language knows about estate planning if he wasn't familiar with the use of forumla clauses.  I agree that the language of these clauses is definitely "opaque", but it is also very commonly used.

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Janet Brewer

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BE CAREFUL about taking legal advice from non-lawyers.

I am a licensed attorney in California. I am available to answer questions about probating estates, preparing wills and trusts, administering estates and trusts, forming family limited partnerships and limited liability companies, and establishing a wide variety of estate and gift tax-sensitive trusts (charitable trusts, children's trusts, irrevocable life insurance trusts, etc.).

I can also answer questions regarding the preparation of estate tax returns (Form 706) in taxable estates. Please note that I do not prepare trust income tax returns and cannot provide you with any information about that type of return.

Please note: I am only able to practice law in the State of California. I cannot answer specific questions about other states' laws; I can only provide some "general" information that may or may not apply to your situation.

Experience

I have practiced California estate, gift-planning, and probate law exclusively since 1991. I am certified as a specialist in estate planning and probate law by the California State Bar Board of Legal Specialization (there are less than 125 such specialists practicing in Santa Clara County and fewer than 7,000 practicing in California - out of over 170,000 lawyers statewide).

I have served as an Instructor in the CFP (certificate in financial planning) program at University of California Santa Cruz, teaching the estate planning segment.

Organizations
Silicon Valley Bar Association
Wealth Counsel
Wealth Advisors' Forum
Executive Committee Member, Solo and Small Firm Section of the California State Bar (appointed to a 3 year term by the California State Bar Board of Governors)

Education/Credentials
I received my law degree (J.D.) from University of Denver Law School in 1975. I was admitted to the Colorado Bar in 1975 and to the California Bar in 1977 (NOTE: although I am a member of the Colorado Bar, I am on INACTIVE status there). I earned an M.B.A. in 1982, and I earned a Masters Degree in Taxation Law (LLM) at Golden Gate University Law School in 2010 (with honors).

More at:
http://www.calprobate.com

Awards and Honors
2007, 2008, 2009, 2010, 2011, & 2012 - chosen as a "SuperLawyer" - one of the top 5% of Northern California lawyers practicing in the estate planning and probate area (www.superlawyers.com). Avvo Rating of 10.0/10.0

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