Arizona Elder Lawyer

Revocable Trusts and Income Taxes

When an individual executes a revocable trust, and properly funds it by transferring her assets to the trust, she will continue to file her normal individual income tax returns. The assets maintain the same tax identification number even though a person has set up a trust. This tax identification number is her personal social security number. There are no changes related to tax information or reporting during her life.

For instance, if Jane Doe properly transfers her bank account from Jane Doe to Jane Doe as Trustee of Jane Doe’s Family Trust, the bank will issue any 1099’s to Jane Doe as Trustee of Jane Doe’s Family Trust. The taxpayer identification number has not changed. So, the income is reported on Jane Doe’s federal form 1040 and whatever state income tax form she regularly utilizes.

Moreover, if Jane Doe were to cease acting as trustee of the Jane Doe Family Trust while she is alive, and the successor trustee was Jack Doe, Jane’s son, Jack should not then change the taxpayer identification number from Jane’s social security number to his. That would be wholly improper. The taxpayer identification number remains Jane Doe’s while Jane is living. That way, the bank continues to send the proper tax information to both Jane and the taxing authorities.

As always, if you have any specific questions, seek legal advice from an attorney in your jurisdiction as any individual’s specific issues are unique to each person.

What To Do When You Need The Trustee To Provide An Account

Trusts are generally executed so that the Trustors maintain financial privacy during their lives and to streamline post-death distributions. Most often, a Trustee will provide information to those beneficiaries who are required to receive it. But what happens when you have an incapacitated income beneficiary (Mom has dementia) and a Trustee who does not think she needs to provide any financial accountings to anyone? For years? While she unilaterally increases the fees she pays herself, without anyone’s permission?

            Arizona Revised Statute §14-7303, effective 1/1/1974 through 12/31/2008, requires the Trustee to keep the beneficiaries of a trust reasonably informed. A beneficiary may receive, upon a reasonable request, a statement of the accounts of the Trust annually and on termination of the Trust or change of the Trustee.

            Some Trustees maintain that this law allows a Trustee to withhold information from remainder beneficiaries. A remainder beneficiary is a beneficiary who takes a portion of the assets making up the Trust after the income interest has terminated (the income beneficiary dies). However, Arizona probate law has followed California probate law through the years. California law permits a Court to require a Trustee to provide an accounting to a remainder beneficiary even though the Trust was revocable during the period for which an accounting was requested. Furthermore, during the time a Trustor was incapacitated, remainder beneficiaries have been entitled to an account for the time one was not previously provided. So, a Trustee may believe that they do not need to provide an account to anyone, but an Arizona Court may compel otherwise.

            The Superior Court has exclusive jurisdiction over the internal affairs of the Trust. A.R.S. §14-7201, effective 1/1/1974 through 12/31/2008. If you are having trouble getting information from a Trustee, you may Petition the Court in the County where the Trustee performs her duties and ask for a specific accounting. If she has acted in any way that might be questionable, she may not comply with such a request without a court order. As always, if you are going to do this, it is best to hire an attorney who handles these matters regularly.

            The above-referenced Arizona statutes were repealed on May 27, 2008, but remain effective through the end of 2008. The Legislature enacted Title 14, Chapter 11 referred to as the “Arizona Trust Code” effective after December 31, 2008. The duty to inform and report appears as A.R.S. §14-10813 in this new Chapter.

Using a Trust Company Instead of Family as Your Successor Trustee

Generally, when a couple creates a Revocable Living Trust, they name themselves as Co-Trustees.  When one Co-Trustee cannot act, due to illness, disability, death, or otherwise, the remaining Trustee is generally to act without the other.  Many times, the next in line to act, after the husband and wife, are either the adult children, grandchildren or a trusted family friend. 

Occasionally, couples are unable to name a family member as Successor Trustee and they do not want to “burden” their friends.  They feel that it would be best to name a neutral outside party, a Trust Company, to handle their Trust when they no longer are able to. 

The upside to an outside Trustee is that they are supposed to remain neutral and not favor any beneficiary over another.  An outside Trustee is generally held to a higher standard by law and usually has more knowledge and resources regarding the requirements of operating a Trust properly.

The downside to an outside Trustee is that if they do not remain neutral and do begin to favor certain beneficiaries over others, it can be extremely expensive to prove this and have them removed.  Furthermore, the outside Trustee does not know your family or the ins and outs of the family dynamics.  The outside Trustee does not have to sit down with you at Thanksgiving or face you when they have made questionable decisions.

Using an outside Trustee is sometimes a very prudent move.  Occasionally families get stuck with rogue Trust company employees who violate the very duties they are supposed to uphold and protect.  As with hiring any professional, most outside Trustees are capable and honest.  Do take care when choosing these companies.  Changes do happen over time.

Right to Control Our Pain as Terminally Ill Patients ~ Arizona Legislation 2007 ~ HB 2357

            In this great country of ours, we have a right to control our medical decisions with our doctors.  To a point.  We have the right to refuse both life-saving medicine and life-saving procedures.  We can refuse to put anything in our bodies, on our bodies, or near our bodies that might heal our ailments.  And, we can also give this right to our loved ones when we cannot communicate our wishes.  We simply have to put it in writing.

            However, we do not have the right to control our pain.  If we are terminally ill and in pain, we are forced to live our last days with undeniable suffering.  We place our loved ones in the extremely difficult position of asking them to help us die.  Our suffering overtakes our minds so completely that we care more about relieving our pain than the consequences which our loved ones would face if they actually helped us get relief.

            In Arizona, we have the right to execute Medical Powers of Attorney, which allow others to make medical decisions for us when we cannot communicate.  We have the right to execute Living Wills, which clarify our wishes for care in the event that we are terminally ill, in a persistent vegetative state, or are in an irreversible coma.  And we have the right to execute Mental Health Powers of Attorney, which allows others to make mental health care decisions for us when we are incompetent.

            But, the Arizona Legislative branch controls how much pain we must suffer if we are terminally ill.  You see, they know better than we do about how much pain and suffering we are forced to endure at the end of our lives.  They believe that they are protecting us from ourselves.  And they see it as their religious duty to protect us from ending our undeniable godforsaken suffering.  Even though we are terminally ill, going to die in the next six months, and have made an informed decision with our doctor and family, we cannot control our pain.  We must lose all of our dignity and suffer unimaginably, because they refuse to allow a hearing on HB 2357.

            This is a bill which, if passed, would allow any competent adult resident of Arizona to make a written request for pain medication, at least three months before the medication can be prescribed, if diagnosed with a terminal illness.  These are fully informed decisions which are made by the individual requesting the relief and her doctor. 

            Apparently, Republicans refuse to allow this bill a hearing, the next step in making this law.  There are some who wrongly believe that it is a license to kill people willy nilly.  This is ignorant and self-righteous.  Anyone who reads the text of the bill cannot make that statement with any legitimacy.  These same people claim that these prescriptions could be abused or recommended to those who are deemed unworthy of living.  Again, this shows the short-sighted nonsense anyone will say to look good in print.  A PERSON MUST BE TERMINALLY ILL WITH SIX MONTHS OR LESS TO LIVE IN ORDER TO RECEIVE A PRESCRIPTION UNDER THIS LAW. 

            I am a lifelong Republican.  I do not understand what the Arizona Republican caucus is thinking about when they deem it their duty, rather than each individual’s right, to be in the business of denying relief from pain for terminally ill patient’s last days of their lives.  Who do they think they are to tell Grandma that she must suffer undeniably degrading and excruciating pain at the end of Grandma’s life?  That Grandma must suffer so deeply that her family and friends will be haunted for the rest of their lives by her agony and torture. 

            This bill deserves a hearing.  Most Arizonans believe they should be able to control their pain with their doctor’s advice and family’s input at the end of their lives.  This bill has been introduced annually since 2003.  The Republicans refuse to allow a hearing.  And they wonder why the voters refuse to give them a pay raise.  They should listen to the will of the people rather than certain religious “leaders.”  This country was built on individual freedoms and the right to be left alone.  Apparently elected Arizona Republican’s would rather have the government be involved in everyday medical decisions which should be left to doctors and patients, because they are protecting us from ourselves.

Credit Card Theft and Fraud

We read about this all the time.  We hear that this sort of thing happens.  We don’t believe it will ever happen to us.  It is rampant.  And, guess what?  The elderly are being targeted more and more as vulnerable in this area.

Just yesterday I was speaking with a fellow in his seventies or eighties about his recent experience at the Cheesecake Factory in Chandler, Arizona.  I was at that meal.  There were about a dozen of us there.  We had a great time.  The service was good.  The food was excellent.  But, the aftermath was extremely disturbing.

            This fellow paid for our meal.  He was going to be reimbursed and thought nothing of paying for our lunch with his credit card.  About an hour after leaving the Cheesecake Factory, he received a call from the Fraud Department on his credit card.  Someone had run up hundreds of dollars in fraudulent charges on that card, which he rarely uses.  The first charge was $1 so that the thieves would know the card was still good.  That was followed by multiple hundred dollar charges.  Now, granted, he ended up not being responsible for any of the charges and cancelled the card immediately.  However, the aggravation and vulnerability of being a soft crime victim after such a lovely gathering was completely unsettling.

            I see this as the new way to mug people.  And quite honestly, the behavior of these “young entrepreneurs” repulses me.  I used to work at a couple of restaurants a long, long time ago.  It is pretty simple stuff: either the wait staff or the host staff ring through the credit card charges.  The managers have access to those receipts as well.  Everyone carries a cell phone these days.  These phones have cameras and some cell phone owners will get jobs in restaurants where they have access to numerous credit cards.  Then they will photograph numerous credit cards, and text message these photos to their scumbag criminal partners during their shift.  “It wasn’t me.  I was at work.”  Scumbags.  Thieves.  Such repugnant behavior.  Shame on the Cheesecake Factory in Chandler, Arizona for not monitoring their employees’ behavior better and for hiring such criminals in the first place. 

            This sort of thing happened to my mom a couple of weeks ago.  She, too, is a bit more seasoned and ripe for these scumbags to steal her information.  I suppose it is comforting that she wasn’t mugged in the parking lot of Coldstone Creamery again, or the Bank of America parking lot, like my grandma was a few years back.  But, it still makes me angry that she was victimized in this way by some loser.  Thankfully, she is very diligent in monitoring her credit card activity online and found these fraudulent charges almost immediately.

            I think these scumbags are targeting older people because they don’t think these folks are savvy enough to check their accounts online regularly.  And, they also don’t have the intelligent foresight that credit card Fraud units will make a call immediately on an irregular charge. 

            My point in this post is to warn people, once again, to be careful with your credit cards.  If possible, watch the card when you hand it to someone else.  Go to the station in the restaurant or store with the card for the swiping of it.  Then get it back immediately.  And, monitor your accounts online regularly so that you can catch any charges that are not yours.  Finally, make a loud stink about this sort of thing if you are a victim and know where the stealing occurred.  Shame companies like the Cheesecake Factory in Chandler, Arizona into better business practices.

Hazards of Storing Legal Documents in a Safety Deposit Box

In the Estate Planning area, many lawyers disagree about where to store your important documents.  Some lawyers feel that wills, trusts, and other very important documents should be stored in a safety deposit box.  I firmly believe that this practice is a very bad idea and should be used as a last alternative only.

The reasons most often given for storing documents in a Safety Deposit Box include 1) safety from house fires and floods, and 2) privacy. 

Let me ask you a few questions.  How often do house fires occur?  What are the odds of total destruction caused by a house fire?  Seriously.  The odds are exponentially higher if there is a smoker in the house, you live in a known fire zone or high wind zone, or you misuse appliances for heating purposes.  Major house fires are more likely to occur when there are no working smoke detectors or fire extinguishers available.  You personally have great control over the odds of a house fire occurrence and the resulting damage by your personal choices.

            How often do floods destroy homes?  This too is fact specific.  If you live in a flood hazard area, obviously your risk increases.  If you live in a cold weather area, the odds of your pipes freezing and bursting increase, but this sort of flooding will not generally destroy a house.  You will generally know if you are at a greater risk for flooding based upon where you live.

            If your home is at a greater risk for fire damage or flood damage, what do you do with the rest of your very important papers?  Where do you keep your tax returns?  Your insurance papers?  Your bank and investment statements?  Are they in a safe place?  Are they really?  If the answer is yes, then your legal documents are likely safe there as well. 

            If privacy is the issue, I ask again, where do you keep your other very important papers?  Aren’t they just as valuable to safeguard?  Do you have them in a drawer?  In a shoebox?  In a box in the closet?  Bank statements and the like are more valuable to a thief or snoop than your will or trust documents are.  A thief can clean out your bank accounts with the information on your statement.  True, a will or trust document can be destroyed by a disgruntled family member, but, well, they too are likely to clean out your accounts while you are living.

            Why do I think safety deposit boxes are a bad place to keep very important papers?  Well, for starters, if the signatory is not able to open the box, it can be extraordinarily difficult for anyone else to access it.  Furthermore, many people are so private that their families do not have any idea they even have a safety deposit box.  The most important documents you have may never be found because no-one knows what bank or branch that little key goes to. 

I think these papers should be easily accessible because the odds of an emergency happening, where quick access to medical directives is vital, is more likely to occur, in my opinion, than a house fire or flood.  In fact, a year or so ago, a friend who was traveling had me go to her home, enter her closet, open her home safe, and remove her husband’s medical directives.  I faxed them to her.  He died days later.  She became a client at that point.  I would not have been able to get into her safety deposit box and neither would anyone else.  She needed those papers immediately and trusted no-one else to get them to her. 

            I am a firm believer of having a house safe.  These can be bolted down in plain sight so that it would be darn near impossible to steal them.  They can be in ground or in a wall and covered so that only those you want to know they exist will know.  They can be fire safe, waterproof, and more accessible than any bank vault.  In home safes are private and a worthwhile investment.  They can also be a vital part of safekeeping important documents and other valuables.  I urge you to consider these as a much better alternative than a safety deposit box.

Beneficiary Deeds

            Some lawyers think these are the best way to handle real property transfers at death.  Others, like me, completely disagree.  I believe they are short-sighted and harmful when used as the sole method of estate planning.  I do feel that they are appropriate to use when dealing with a financial institution that can’t seem to grasp the realities behind revocable living trusts and they are to transfer real property to the trust upon the death of the owner.

            What are the drawbacks to using these as a way to transfer the bulk of an estate?  There are so many.  It really does depend on the client situation.  I will only touch on a few.

            Some of the trickiness comes up with the rest of the estate.  Who is going to pay for the funeral?  For the last illness?  For the bills that may have piled up during the last illness?  What about the mortgage that is attached to the real property?  Are there any property taxes that need to be paid?  What about estate taxes?  What if there is a lawsuit because the deceased created havoc on their way out, whether intentionally or not? 

            What if the real estate is deeded by way of a beneficiary deed to multiple people, say, all the kids who are now adults and cannot stand each other?  Or live in different states?  Is that really a good idea?  Oh, I know.  A lot of people think that death brings the kids back together and they will get over their silly spats.  Think again.  Death brings out the worst in people. 

            What if there are three beneficiaries and one of them decides to move in permanently?  Do the other two get to visit?  Who pays for the upkeep or maintenance when there is a disparate use of the property? 

            What if the three beneficiaries actually like each other and agree to use the property as a vacation home and can actually agree with regard to the division of time.  But, wait a minute.  They cannot agree to whether the place needs to be maintained with fresh paint or new carpet.  Or maybe they can agree to the maintenance.  But they simply cannot agree to the color of the paint or what type of carpet it should be. 

            What if they actually can agree but one of them never has any money to pay for any of these maintenance items?  Or the property taxes?  Or the water bill?  Seriously, why would you put people through this? 

            An estate plan should not consist solely of a beneficiary deed.  It is short sighted and has the real potential to be messy.  Trusts and wills clarify with specificity who will be the decision maker, who is in charge of paying expenses that are due, and who gets the benefit of the assets after liabilities are taken care of.  Beneficiary deeds do none of these things.  Do your loved ones a favor.  Don’t be cheap.  Get to a lawyer who knows what they are doing and get a complete estate plan in place.  You have worked hard all of your life to accumulate your assets.  Why would you want to short change your heirs when they are grieving?

Time Share Investments

These can be a really good thing.  My best friend swears by them.  However, she is in her thirties and buys them from EBay at a fraction of the original purchase price.  And, she and her family actually use them. 

            An estate planning client came by the other day with the good news that she and her husband, both in their seventies, had just purchased another Time Share.  This one was in Oceanside.  They were visiting the city over the Thanksgiving holidays and went to the obligatory one hour informational tour.  Right. 

            They were subsequently strong armed into signing the dotted line on an investment of over $20,000 which they neither needed nor wanted.  They signed to get the heck out of there.  They had the usual slew of people come “talk” to them and weren’t allowed to leave until they said “yes.”  Personally, I think this is outrageous behavior by the sales people and the companies they represent, and the behavior should not be allowed by any reputable company. 

            The contract allowed my clients to cancel it within seven days.  Indeed, they attempted to do just that.  One stated cancellation method was to contact the sales office.  They sent a timely email to the sales person canceling the contract.  No acknowledgement or refund.  Another stated cancellation method was to send a letter.  They sent a timely certified / return receipt letter to the address listed.  No acknowledgement or refund.  A third stated cancellation method was to fax a notice to a certain number.  They attempted to send a fax on numerous occasions.  One finally went through after many, many busy signals.  It too was timely.  Still, no acknowledgement or refund.

            One threat letter from their lawyer resulted in no acknowledgment, but my clients most certainly received their refund within 24 hours of my sending the letter – in all three stated manners.  I think companies who treat people this way should be acknowledged publicly.  This particular company is Fairfield Resorts and the property address is 333 North Meyers Street, Oceanside, California.  Maybe this was a fluke.  After all, these are the holidays.  But, maybe this wasn’t a fluke.  After all, my letter didn’t go out until three weeks after my clients’ attempts to cancel the contract.

            Be very careful when dealing with these time share sales.  Some of the companies are really quite good.  It is just a shame that this sector of companies does not police themselves better.  The bad behavior by one gives the entire industry a bad name.

Estate and Gift Tax Issues for 2007

The article titled “Various Estate and Gift Tax Issues for 2006” is currently pertinent and accurate for 2007.  The applicable exclusion amount for estates is still $2,000,000.  The annual gift exclusion amount is still $12,000.  Those have not changed.

            The interesting thing about this area of law is that many of us who practice in this area did not believe that we would get to 2007 without another major adjustment to the laws.  I believe that Congress has no choice but to tackle this issue sooner rather than later.  They absolutely need to.  If they cannot get to a compromise on this at the beginning of 2007, they will show their continued incompetence to those of us who practice in this area and we will get more vocal.  It will be interesting to see what the end result will be. 

I believe that there will be compromise on the applicable exclusion amount for estates of $5,000,000 with annual adjustments up.  I do not know where the annual gift exclusion amount will end up.  But, I do believe it is absurd at the current level.  It needs to be dramatically increased in order to keep up with the realities of our economy. 

            On a bit of a different note, please consider giving to charities upon your death.  These do not need to be large gifts.  But, do consider giving to those you write annual checks to during life.

Death of a Loved One – The Personal Emotional Aftermath

            There are many experts who have written about the emotional effects of death.  One of the most famous authors on the topic is Elizabeth Kubler-Ross.  Her book “On Death and Dying” lists the five stages of grief which include Denial, Anger, Bargaining, Depression, and Acceptance.  Her book is written with the terminal patient in mind.  However, many people believe that those who are left behind go through these stages as well.  Some believe that emotional healing doesn’t begin until those stages have been worked through.  Others believe that a person must go through each of these in order.  This is simply untrue.

Grief Work is the time when you have to face the reality of your new situation.  It is considered the time after those five stages may or may not have been passed through, which may happen to coincide with people thinking that you should be ok now.  Friends, family, and co-workers don’t ask you how you are doing or if you are ok anymore.  They figure that all is back to normal.  They do not understand that every day is scary or that you are still trying to figure out how to take care of that which the one who is gone always took care of.

Grief work has been described in the acronym TEAR.  T – To accept the reality of loss, E – Experiencing the pain of loss, A – Adjusting to your environment without that which was lost, and R – Reinvesting in the new reality.  Some folks want to fly through these on a straight line.  They see a goal of normalcy and race to it.  When they fall flat, it takes them by surprise, particularly when there are good things happening on the fringe.  The cold truth is that when normalcy is ripped from you, and it was comfortable, change can be tough.  Even if there was a long illness in between.  Suddenly you no longer have to take care of that person.  Now what do you do with your time?  Who do you share your innermost thoughts with?  Do you go back to that person’s favorite restaurant?  Do you keep those deathbed promises?

            Losing a spouse is quite different than losing a child or sibling.  Losing a parent or grandparent can be easier if that person has had a full, long life rather than her being taken at forty or fifty.  Death from a long illness might be easier to accept due to the relief that may come rather than sudden death due to violence or an accident.  Each of these scenarios will impact the ability of survivors to cope.  The age, sex, and life experiences of the survivor are big factors during this time as well.

            The one standard that must be addressed is that no matter how painful it is, in order to heal, it is crucial to allow yourself to feel your grief.  If it is overwhelming, and it will be at times, seek counseling.  You are not weak.  You are not abnormal.  Elder law attorneys should be able to refer you to a few grief counselors.  Find one that you feel comfortable with.  Take care of yourself.  Eat right.  Work out.  Laugh.  Love.  Remember the good times.  Move the empty chair.  You will find your inner strength and you will feel safe again.  The numbness, the confusion, the forgetfulness, and the disorganization will fade and your “normal” will creep back in if you let it. 

            I am convinced that the deeper the hurt and sadness after a loss, the deeper the love was.  Feel blessed that you loved so deeply that you hurt that bad from your loss.  Not everyone has that.