Like me, I am sure you receive numerous unsolicited invites for you to attend seminars on varying topics related to the financial services industry. I not only receive these solicitations at home but also at work as a financial services professional. One recent solicitation I received at work really piqued my interest, not because I was going to attend, but rather it was the subject matter I found interesting. The title of the seminar was How Offering "High Touch" Bill Pay Services Can Help RIAs (Registered Investment Advisors) Differentiate Themselves. The invitation went on to say, the more value-added services you, the RIA, provide clients, like the aforementioned bill pay services, the harder it is for them to replace you. I found this description particularly interesting because we have always offered secure bill pay services as part of our commitment to lifestyle management for our clients, especially our Revocable Living Trust clients. We are not the type of company to offer services just to make it harder to replace us. Rather, our services are meant to assist and benefit our clients because we are committed to helping make their lives easier and more manageable, especially as they get older and their needs change.
  
Every person's situation is unique. Life's problems are not.

As we get older, there are all kinds of new "firsts" and the support and experience of others is as important as it's ever been. Some of those firsts may be learning one's new limits, others may be relishing the joy in your grandkids faces as they meet Mickey Mouse at Disney World for the first time.

In facing retirement, you need to plan for increasing costs of healthcare and be able to keep track of the financial management of the household when your memory may not be quite what it used to be. You also need to realize that one day you may need to be willing to bring in support when appropriate.

Our living trust clients are most often retired or soon-to-be retired, whether married or solo agers. We understand that every client's needs are different, but we have experience to share, and offer lifestyle management services to help overcome some of the pitfalls associated with the difficult "firsts".
 
Lifestyle Management is going the "extra" mile, and surpassing expectations.

As trustee or as a co-trustee we can be permitted to take over everyday chores such as paying bills or assisting with tax preparation through a CPA firm; however, we are limited in the services we provide. When we can't solve the problems, we like helping clients find someone who can.

Lifestyle management isn't only understanding that changes are going to be needed as we age, it's about well-being. Knowing and understanding the options available, so you can want to make choices, instead of being forced to decide. Each client is going to have different comfort levels when they want or need additional care, and it is awkward facing these choices for the first time.

Some might think of us as access toward solutions beyond the traditional trust services or a gatekeeper for the unfamiliar services that have to do with retirement and aging. We address issues with our clients such as dealing with increasing healthcare costs or downsizing their living arrangements; we've come to know some of those solutions that can help in each area.

That means we could:

  • Arrange and monitor In-Home Care
  • Arrange for Independent or Assisted Living Alternatives
  • Arrange and help with the sale of a home when moving into an Independent or Assisted Living alternative

As I wrote in Our Total Dedication To Our Clients, "We understand that the relationship with each of our clients will evolve and that over time there will be a need for additional services. As our client's needs grow so does our responsibility as advocate and advisor. Like family, we are with you for Life." 
FAMOUS WILL FOR THE MONTH GEORGE HERMAN RUTH
CLICK THE NAME TO READ
CLICK THE NAME TO READ
With the Baseball season just around the corner I thought I would again share the Will of Babe Ruth, the "Sultan of Swat." His Will is interesting because it references a living trust that he established during his lifetime and because it gifted certain property to the Babe Ruth Foundation, which he established.  
©LIVING TRUST NETWORK
In the article Will Contests: A Good Offense Is the Best Defense read about how good drafting and planning can go a long way toward avoiding a will contest. The Biltmore Estate article describes how a controversy over the gift tax value of a mansion is resolved after 13 years.

Spring will be here in a couple of weeks, and this is what Mark Twain had to say about Spring, "In the Spring, I have counted 136 different kinds of weather inside of 24 hours." How true is that? 

Sincerely,
Ira J. Brower, Founder
The Biltmore Estate
George W. Vanderbilt, the grandson of Cornelius Vanderbilt, acquired thousands of acres of land in North Carolina, where he built a mansion from 1889 to 1895. Named Biltmore, the 178,926 square foot building is the largest privately owned residence in the United States.

George had one child, a daughter, Cornelia, who married John Cecil. The Cecils opened the Biltmore to the public in 1930 at the request of the City of Ashville, in hopes of promoting tourism during the Great Depression. It closed during World War II. In 1932 the TBC corporation was formed to own and manage the estate.

The Cecils had two sons, George and William. They worked to make the estate profitable as a tourist attraction. After Cornelia died in 1976, the brothers disagreed on the future of TBC. George surrendered all of his shares in TBC in exchange for 3,000 acres of the estate and the dairy operation, which was more profitable at that time.

In 1995, on the 100th anniversary of the opening of the mansion, William turned management responsibilities over to his son, William Jr. According to Wikipedia, the house is assessed at $157.2 million for property taxes, but that is reduced to $79.1 million thanks to agricultural deferments. TBC has shown a profit every year since 1995, with the exception of 2008 during the Great Recession. Money is earned by selling tickets to tour the house, and from a variety of supporting operations owned by TBC.

William Jr. and his wife Mimi had two children, Bill and Dini. Bill became TBC's president and CEO, and Dini became the Vice Chairman of the Board of Directors. In 2003 Dini started a Family Preservation Program for TBC, which involved meetings of all her and Bill's descendants. The objective was to keep the Biltmore Estate in the family, and to keep it running profitably.

TBC had two classes of stock. In 2010, William Jr. and Mimi made taxable gifts of all their ownership in TBC. They gave the voting shares to Bill and Dini, and the nonvoting shares to the grandchildren. The couple each reported taxable gifts of over $10 million. 

IRS selected the gift tax returns for audit, and disputed the valuation. William Jr. and Mimi each died before the matter was resolved, so the controversy was continued by their estates.

The estates provided two experts for valuing the Biltmore Estate with a discounted cash flow analysis, a guideline public company analysis, and a similar transactions analysis. Discounts were permitted for the lack of liquidity restrictions on stock transfers. The IRS valuation expert's opinions were given "zero weight" by the Tax Court, which sustained the taxpayer's position.

(March 2023)
© 2023 M.A. Co. All rights reserved.
Seven Myths About Trusts
When one is in the business of selling cars, just to pick an easy example, one may take it for granted that everyone knows what to do with a car, why they need one, and the advantages that a car offers over alternative means of transportation. These are just the sort of assumptions that we cannot make as we offer our investment and wealth management services to affluent individuals and families, especially our trust services. Trusts are, for many people, simply quite mysterious. We'd like to change that--the more that people know about trusts, how they work and what their benefits are, the happier we are. Here are seven common misconceptions that people have about trusts. There is a kernel of truth behind many of these myths, but it's important to understand the larger reality.

1. Trusts are just for the very rich.

When one hears a news item with a trust angle, it's often the case that a wealthy family is involved. The Kennedy trusts and the Rockefeller trusts are common knowledge. But trusts are not just for tycoons anymore. Although most very rich families do employ trusts in their wealth management, these families constitute a minority of trust customers. Most of our clients are not multimillionaires, and most don't think of themselves as "rich." They do have some significant investment assets that need careful management--proceeds from the sale of a business, perhaps, or a lump sum retirement distribution, or an inheritance. Or an investment portfolio painstakingly accumulated through a successful career. 

2. Trusts are expensive.

True, there is an expense in establishing a trust; it does cost more than starting an ordinary investment account. The trust documents must be drafted by a lawyer, who will charge a fee for supervision of the creation process. But a trust costs more because it does more. Once the trust is up and running, the annual fees for our trust services are competitive with those of investment advisors and with mutual funds. To learn the specifics, please ask for a copy of our fee schedule.

3. Trusts are for saving taxes.

Some trusts do save taxes. A marital trust, for example, will defer federal estate taxes until the death of a surviving spouse. Charitable trusts generate income and transfer tax savings.

But tax savings is not what these trusts are for, that's just an extra benefit. A marital trust provides lifetime financial protection to a surviving spouse. A charitable trust implements philanthropic objectives. The most common sort of trust, the revocable living trust, does not have tax advantages at all. Instead, it provides for professional investment supervision, financial management upon incapacity, and the potential for probate avoidance.

4. Assets get "tied up" in a trust.

Another term for "tied up" might be "asset protection." Stated that way, the restrictions imposed by a trust might be seen as a benefit, not a detriment. For example, an inheritance trust might be designed to limit access by the beneficiaries' creditors, preserving trust assets for longer-term financial protection.

If you create a revocable living trust for yourself, on the other hand, nothing will be "tied up." You will be free to amend the trust, change trustees or cancel the arrangement altogether. In fact, one purpose of having a living trust is to have more control, to have the choice of delegating investment duties as needed.

5. Trusts must be funded with publicly traded stocks, bonds or other investment securities.

Although investment portfolios are likely the lion's share of trust assets overall, trusts may own any sort of property, including real estate and shares of closely held companies. Shortly after Steve Jobs' death, for example, it was revealed that he and his wife had transferred all of their California real estate interests to trusts in the year that Steve had his liver transplant. Those trusts may be the foundation of his estate planning. Or they may not be, and we may never know. That's because, unlike the terms of a will, the terms of a trust do not normally become a matter of public record.

6. Trusts are invested conservatively, with low return potential.

At one time, trustees tended to be very risk averse with trust assets, which did lead in many cases to very conservative investment policies. In recent years, however, the laws governing the investment of trust assets (the "prudent investor" rules) have been reformed in most states. In most cases "prudence" is determined today on a total portfolio return basis, not on the riskiness of each individual asset held in the trust.

7. Anybody can be my trustee.

There are few legal limits as to who can be a trustee, but the better question is who should be your trustee. Your trustee needs to have financial strength as well as professional investment capabilities. Experience is important--look for someone, or a financial organization such as us, who has handled all types of trusts in every kind of market for diverse sorts of families. You'll also want a trustee who can be fair and impartial in administering the trust, one whose judgment all the beneficiaries will be able to accept.
 
© 2022 M.A. Co. All rights reserved.
Any developments occurring after July 1, 2022, are not reflected in this article
Will Contests: A Good Offense Is the Best Defense
When an elderly grandmother leaves all of her assets to a new beau, or Dad leaves everything to the child who visited most in the nursing home, a will challenge may be in the offing. Will contests generally are brought by unhappy family members who feel cheated out of their legacy. If they have something to gain if the will, or offending provisions, are set aside, a battle may ensue.
 
Will challengers generally have tough legal ground to plow and, as a practical matter, they rarely win in court. Instead, they are often "paid off" by estate representatives who want to minimize burgeoning legal fees and lengthy delays in distributing estate assets. Therefore, having the appearance of a valid claim and threatening to challenge a will may be enough to produce a settlement.
 
Wealthy people may be particularly susceptible to will challenges because of the assets involved. This possibility should be factored into estate plans and will drafting. As with many things in life, a good offense may be the best defense in reducing the risk of a will challenge. 

What is the basis for contesting a will?
Although the unhappiness of disgruntled beneficiaries may be at the heart of a will contest, a legal basis is needed to move forward. These include charges that:

  • The will signer (testator) was not mentally competent. To prove mental competence, most states require a person to understand: (1) the nature and extent of his or her assets and (2) his or her family relationships. A testator who cannot identify a spouse, child or a grandchild at the time that the will is executed, probably will lack legal ability to sign the will.
  • The testator was overreached by some party who benefits under the will. This claim of "undue influence" may arise, for example, when a caregiver takes advantage of an infirm elderly charge by threatening to leave the individual alone and helpless, unless the caregiver is named in the will. 
  • The will was executed as a result of fraud or mistake and was not what the person signed or thought was signed. For instance, if a person signs the will at the end of the document, and new pages are inserted in the will after it was signed, the will could be challenged.
  • The will was not executed properly. For example, if state law requires two witnesses, and there was only one, the will may not be valid.
  • The will being offered for probate is not the decedent's most recent will or was revoked prior to the decedent's death.

Each state has its own laws regarding what it takes to execute a valid will. What's more, state case law will affect determinations regarding mental capacity, undue influence, fraud, duress, mistake and whether a prior will has been revoked.

What can be gained by those challenging a will?
If a challenge is successful, all or part of the will may be disregarded, or a prior will reinstated. If the will is thrown out, and no prior will is revived, the estate is often distributed as if there were no will. These rules, known as laws of intestacy, generally distribute assets among the closest living blood relatives, a spouse and children, for example. More distant relatives (siblings, parents, nieces, nephews, aunts, uncles) may share if no closer relatives are still alive. Consider the following example:

An elderly grandmother, who has outlived her one child, is placed in a nursing home because she suffers from dementia. At her death she is survived by three adult grandchildren. They discover that while in the nursing home, their grandmother had written a new will. Under that will she left all of her property to a floor nurse who tended to her. The grandchildren challenge the will on two grounds: The grandmother either: (1) lacked mental capacity to sign a will or (2) was unduly influenced by the floor nurse. If the will is overthrown entirely, the three grandchildren would share equally in their grandmother's estate, because they are the closest living blood relatives. 

How can a will contest be avoided?
If capacity and undue influence are not at issue, good drafting and planning can go a long way toward avoiding a will contest. For those with significant wealth, wills should not be used as incendiary devices to disinherit relatives or make grand statements that invite discord and challenges. In addition, the more assets that are passed outside of a will (lifetime giving, trusts, etc.), the less there will be to argue about if a challenge arises. Consider the following:

  • "Disinheriting" family members can be an outright call to arms for will challengers. For example, if a wealthy parent plans to disinherit two out of three children, or children of a first marriage, and those children likely will fight the result, it may be worth considering the costs of a will contest and whether small legacies make sense instead of outright disinheritance.
  • Establish trusts while you're alive to provide for the transfer of assets to beneficiaries at your death and avoid having substantial assets pass under your will. Because trust beneficiaries generally are not subject to public scrutiny as part of probate, less discord may result. Also, it is more difficult to challenge trusts with independent trustees. 
  • Insert an "in terrorem" clause in your will. This clause prohibits an heir from challenging the validity of the will. Although these clauses are intended to prevent disgruntled heirs from taking part of an estate, many states will not enforce them because it may put good faith challenges to fraud, duress and undue influence at a disadvantage.
 
© 2022 M.A. Co. All rights reserved.
Any developments occurring after February 1, 2022, are not reflected in this article
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2023. All rights reserved.