Wealth Management Update - April 2020

Proskauer Rose LLP

Assisting Your Clients in the COVID-19 World

Dear Advisors:

We at Proskauer wish you health and safety during these tumultuous times. It is our hope that you are handling this new reality with as much normalcy as is possible.

We are sending you this communication to share with you some thoughts as to how you can assist your clients and add value during these tumultuous times:

Funding Revocable (Living) Trusts

Many of your clients' estate plans consist of "pour over" Wills into revocable living trusts. Many of these revocable trusts are unfunded which means a Will would still need to be probated in court when an individual dies. However, Probate or Surrogate's Courts in many states are shut down. Even if they reopen soon, it could take months to probate a Will due to the backlog. Without probate, your client's family will not be able to access the deceased's accounts. Therefore, you may want to suggest to your clients that they fund their revocable trusts now. Even with stay at home orders, clients and institutions are able to re-title accounts into trust name. By doing so, you will help your clients avoid long delays in obtaining probate of a Will because of Court closures and allow for uninterrupted access to accounts in the event of a death of the account owner. We are available to help you accomplish this funding.

Review Estate Planning Documents

Suggest to your clients that they review their estate plans to make sure it reflects their wishes (including Executor, Trustee and Guardian appointments). They should make sure their health care proxy/living will and power of attorney are current. Suggest that they prepare a list of all accounts and passwords. They should locate all deeds, titles, etc. to real property. And if your clients have some extra time now it would be an ideal time to update letters distributing tangible property and letters of intent.

Additionally, we are hearing from our clients that they want to modify their estate plans and amend their wills and trusts. Each state has special rules as to how this can be accomplished, and we are able (in most cases) to arrange for those changes to be made.

Please contact any of us and we can help you help your clients.

IRAs and Retirement Plans

Review your clients' beneficiary designations with them to ensure it reflects their current wishes. Remember that IRAs and retirement plans do not pass under your client's Will or revocable trust and instead passes under their beneficiary designation form which perhaps they have not updated in a long time. Especially with respect to children and grandchildren, we can assist you in coordinating your client's retirement plan beneficiary designations with trusts that may have been established in their Wills or revocable trusts for those same individuals.

Also please note that under the recently passed CARES Act, required minimum distributions are suspended during 2020.

Estate Planning Opportunities

The primary focus of estate planning is to transfer assets when they are not worth a lot, so that when they become worth a lot there is no 40% transfer tax imposed on the transfer of those assets by gift.

The significant pull back in the stock market allows the transfer of assets. Therefore we suggest that you continue to remind your clients to use:

  • Interfamily loans and promissory notes (For a detailed analysis of estate planning using promissory notes, please see our recent client alert devoted solely to promissory notes that can be retrieved at this link.)
  • GRATs (For a detailed analysis of GRATs, please see our recent client alert devoted solely to GRATs that can be retrieved at this link.)
  • Outright gifts to spousal lifetime access trusts (SLATs)
  • Sales to SLATS
  • Charitable Lead Annuity Trusts (CLATS)

Stay safe everyone!

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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