Penny Wise but Pound Foolish
As part of an elder law practice, we assist with a large number of estate plans. Typically, an estate plan is designed to plan for disability and death and the options for planning are quite numerous. There are will-based plans, revocable-trust-based plans, and plans which may involve a number of trusts, all with different purposes. Many individuals use trust-based plans as a means to protect assets for their desired beneficiaries. This may be due to the desire to minimize estate taxes, because of a beneficiary’s special needs, or due to a desire to protect from unforeseen creditors or a divorce.
While clients desire trust-based planning and the asset protection that goes with it, they often want to minimize fees and opt for individual trustees rather than a corporate or professional trustee. While it may seem beneficial to minimize fees, there are a number of benefits to using a corporate trustee.
Some of those advantages include:
- Experienced in managing trusts, they are less likely to make inappropriate distributions
- Experience in investing and developing an appropriate investment policy for trusts
- Methods for properly accounting for trust property and reporting to beneficiaries
- Objectivity in making distributions
- Experience in filing fiduciary income tax returns
- Liability protection in the event of mismanagement
It is important to emphasize the value of experience in understanding and managing trusts. Recently I met with the surviving spouse of a client who was both the trustee and beneficiary of a trust created by her deceased husband. The trust was created to act in a specific manner at the husband’s death and included provisions that had to be specifically followed in order to preserve certain tax benefits for the surviving spouse. At her husband’s death, on the advice of friends and family, she had not returned to the attorney who drafted the document. Instead, she simply continued to write checks off the trust account to pay her expenses and had undertaken no formal trust administration process. In her words, she “was the beneficiary, so why did the formalities matter?” The result is that the assets were available to creditors (unforeseen at the time of her husband’s death) and, in the future, there is the likelihood that her estate will pay an additional million dollars or more in estate tax at her death.
In another instance, a family member was made the trustee of a special needs trust for the benefit of a person with a disability. The family member wrote checks from the trust to the beneficiary’s favorite charity and to several family members as “gifts.” Once discovered, the checks, totaling less than $1,000, caused the beneficiary to lose health insurance and her source of income.
Ask Kit Kat – Babies in the Wild
Hook Law Center: Kit Kat, what should someone do if they see a baby wild animal alone and not tended to by its mother?
Kit Kat: Well, first you need to assess the situation and determine whether or not the baby animal is truly in distress. Some species intentionally leave their baby offspring alone for long periods during the day, and come back at dusk or dawn to feed them. That is the case with deer and rabbits. According to John Griffin, director the urban wildlife section of the Humane Society of the United States (HSUS), fawns are left unattended to protect them. The mother stays away because she is a tall, visible target. So if you see a fawn by itself, first observe it. ‘If the fawn is quiet and in a ball and hiding, don’t do anything. But if he’s running around vocalizing like crazy, that’s when something is going on.’
Rabbits do the same. If you see an unattended nest, don’t panic. You can cover the nest with twigs or yarn in a tic-tac-toe pattern. Come back in 12 hours. If the things you laid over the nest have been disturbed, you’ll know they have been cared for by the mother. If there is any doubt, consult your local wildlife rehabilitation center. They can give valuable advice.
In contrast to the above animals, are birds and squirrels. Their parents tend to be more attentive and watchful. However, if you do see a baby bird on the ground, try to observe its condition. If it appears to look almost like an adult except without long tail feathers, it’s a fledgling that is just learning to fly. Leave it alone. They will figure it out because they can fly. If it has few feathers, it’s probably a nestling, and it may need some help getting back in the nest. Contrary to popular belief, a mother bird will not abandon her baby if humans have handled it. Gently place it back in the nest. The same can be done for squirrels.
In summary, Mr. Griffin has 3 pieces of advice regarding helping wild babies in perceived distress. ‘Don’t put yourself in danger. Don’t feed them. And don’t remove them without knowing where you’re going to take them.’ When in doubt, contact your local wildlife rehabilitation center. They’re the experts. They can advise you how to transport the injured animal should that be necessary. Some sort of carrier or container will be needed for your safety and the animal’s. Good luck, and have fun watching the endless cycle of life. (Kelly L.Williams, “First do no harm,” All Animals, March/April 2018, p.14-15)
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Letha Sgritta McDowell
757-399-7506 | 252-722-2890
Letha Sgritta McDowell is a Shareholder of Hook Law practicing in the areas of estate planning, elder law, special needs planning, estate and trust administration, asset protection planning, long-term care planning, personal injury settlement consulting, guardianships & conservatorships, and tax law. Ms. McDowell’s clients range from high-net-worth individuals with over $75 million in net worth to families with limited assets.
Ms. McDowell is a past President of the National Academy of Elder Law Attorneys and was named as a Fellow of the prestigious American College of Trusts and Estates Council (“ACTEC”) in 2020. She is certified as an elder law attorney by the National Elder Law Foundation (“CELA”) and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization. Furthermore, McDowell is accredited to prepare and prosecute claims with the Department of Veterans Affairs.
Ms. McDowell is currently the chair of NAELA’s strategic planning committee, a member of the Board of Directors for the North Carolina Chapter of NAELA, and a member of the Board of Directors for the Purdue Center for Cancer Research. She is the former Chair of the North Carolina State Bar’s Elder Law Specialization Committee and is the former Editor-in-Chief of “Gray Matters”, the newsletter for the Elder Law Section of the North Carolina Bar Association. She is a consultant for InterActive Legal and has worked on several law and technology initiatives including IBM’s Watson project. Along with her experience practicing as an attorney, she has dedicated much of her time writing for national publications including, but not limited to: Wolters Kluwer, Wealthmanagement.com, the NAELA Journal, Trust & Estates Magazine and many more.
- Elder Law
- Estate & Trust Administration
- Estate Planning
- Asset Protection Planning
- Long-Term Care Planning
- Special Needs Planning