When the client wants to leave it to the cat.Some tips to help make sure unusual bequests withstand scrutiny.
CPAs and lawyers who specialize in estate planning Estate Planning
The overall planning of a person's wealth, including the preparation of a will and the planning of taxes after the individual's death.
Contrary to popular belief, estate planning involves much more than preparing a will, and it is not only for the provide help with the most serious undertaking of life: dying. How to disperse resources that soon will be left behind is a sensitive and private decision. In planning what to do with their wealth, clients acknowledge their mortality and consider what goals they posthumously want to fulfill. They may wish to do good, give pleasure and provide for loved ones--and even ensure that companion animals will be properly cared for.
The practitioner who is asked to help has to have sensitivity to the client's feelings as well as know where to steer him or her. In educating people about the possibilities, the CPA's involvement may extend from analyzing the client's overall finances to consulting with the lawyer who prepares the will to acting as executor of the estate. The role will depend on the client's wishes and family dynamics.
To safely and legally guide someone in making an unusual bequest bequest: see legacy. , a CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. may need to think creatively and develop techniques to comply with a client's priorities--whether it's to leave money to a live-in companion, a nature preserve or a pet. Because estate consulting requires counseling skills counseling skills,
n the acquired verbal and nonverbal skills that enhance communication by helping a medical professional to establish a good rapport with a patient or client. and empathy as well as technical knowledge, "it takes a while to get good at it," says Robert Keebler, CPA and tax specialist at Virchow, Krause & Co., Platteville, Wisconsin Platteville is a city in Grant County, Wisconsin, which is in the southwest corner of the state. The population was 9,989 at the 2000 census.
The city is home to the University of Wisconsin-Platteville. . He breaks the process down into seven steps:
1. Gather complete information about the client's finances and family.
2. Do the financial projections for different ways of leaving the estate.
3. Educate your client about the tax pros and cons pros and cons
the advantages and disadvantages of a situation [Latin pro for + con(tra) against] of each scenario.
4. Have your client define his or her goals.
5. Make proposals on how to implement those goals.
6. Lay all the information out in a comprehensive plan.
7. Implement the plan; have a lawyer prepare the documents and make them airtight.
THE WHOLE TRUTH
The starting point Noun 1. starting point - earliest limiting point
terminus a quo
commencement, get-go, offset, outset, showtime, starting time, beginning, start, kickoff, first - the time at which something is supposed to begin; "they got an early start"; "she knew from the in any estate plan is the inventory of a client's assets, retirement accounts, debts and life insurance--"as well as all his or her secrets," says David S. Rhine, CPA, a Rockland County, New York Rockland County is a county located in the U.S. state of New York, 12 miles north-northwest of New York City. As of the 2000 census, the population was 286,753. The county seat is New City. The name comes from "rocky land," an early description of the area given by settlers. , family wealth planner who has been doing estate work for 30 years.
Because extreme emotions are involved when people talk about death, the CPA must listen very carefully, he says. He cites as an example a client who had been subsidizing his sister and brother-in-law while keeping it from his wife. That continued assistance--and a tactful tact·ful
Possessing or exhibiting tact; considerate and discreet: a tactful person; a tactful remark.
tact way of leveling with the wife--had to be built into the estate arrangements. (The help appeared to begin with the estate plan--prior gifts were not discussed.)
Although some requests may seem frivolous, they are meaningful to the client. "If an 80-year-old with $10 million and a Dachshund dachshund (dăks`hnd, –ənd, dăsh`–), breed of small, short-legged hound developed in Germany over hundreds of years. It stands from 5 to 9 in. wanted me to draft a plan leaving his money to the dog, I'd encourage him to find uses I believe are more beneficial to society," says Jordan Berger, a CPA and lawyer who is a managing director of American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. Tax and Business Services in Chicago. "But it's the client's estate plan, not mine. It's my job to give clients their legal options."
Kenneth Brier brier or briar, name sometimes given any thorny plant, more specifically the sweetbrier, and the greenbrier. French brier, or brierroot, is a name for the root of the European white heath so widely used in the manufacture of smoking pipes. , a CPA and lawyer at Bingham Dana LLP LLP - Lower Layer Protocol in Boston, had such a client--an 85-year-old woman with a large estate who wanted her plan to include several pets. "We carved out a piece of the estate--about $100,000--so the income from it would take care of them. The balance went to charity," he says. "Leaving too much to pets creates a litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.
When a person begins a civil lawsuit, the person enters into a process called litigation. target for family members as well as a perception that the donor is mentally unbalanced," he adds.
EDUCATE YOUR CLIENTS
Once the client's assets have been inventoried, the CPA must do financial projections to establish what parts of the estate will grow--or shrink. To figure out the most efficient way to move the client's wealth--whether to children, grandchildren, a charity, an educational institution or museum, a pet or a special-needs relative--the CPA must apply the tax law to the information. Armed with the understanding of what the balance sheet looks like, how long the money is going to last and the tax liabilities of different instruments, the client can step back, take a big-picture look and use the knowledge to decide what he or she wants to accomplish.
"Typically the role of a CPA is to crunch the numbers, which puts him in a position to quarterback everything that should be done," says Rhine. Many estate professionals are CPAs who hold law degrees, and a CPA estate planner Estate Planner, a professional that creates an estate plan. This professional works with an estate owner to maximize their goals. This is a legal and tax specialty for an attorney or an accountant. who does not will need to work with a lawyer to draft the trust or will. Clients with large estates may benefit from having all the advisers involved early in the planning process. "A team approach gives a better product, especially if insurance is part of the estate," says Berger.
Instruments for bequeathing assets have varying constraints. Giving money outright precludes altering a bequest if the receiving organization changes its policy. In contrast, a foundation managed by a board that periodically reviews whether funds are being used properly can give some assurance that a client's wealth will support the causes he or she intends. In family foundations, members meet to review grant requests, so they provide some control over a charitable function as well as promote family unity (see "The Right Philanthropic Vehicle," page 22).
Donor-advised funds allow a client to contribute money to a fund run by a public charity, conferring a tax advantage as well as control. For the donor's lifetime, the income from the fund is distributed yearly according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the client's wishes. At death it goes to the charity. Organizations such as the American Society for the Prevention of Cruelty to Animals American Society for the Prevention of Cruelty to Animals (A.S.P.C.A.), chartered in 1866 in New York by Henry Bergh to shelter homeless animals, to assist farmers in caring for their livestock, and to cooperate with law enforcement agencies in the prosecution of , the National Wildlife Federation, the Red Cross and the Sierra Club Sierra Club, national organization in the United States dedicated to the preservation and expansion of the world's parks, wildlife, and wilderness areas. Founded (1892) in California by a group led by the Scottish-American conservationist John Muir, the Sierra Club , for example, have "planned giving Planned Giving is an area of fundraising that refers to several specific gift types that can be funded with cash or property. These gift vehicles are based on United States tax law. " departments that will discuss different types of bequests. If they provide documents, a lawyer should review them.
For the client making a bequest others might consider "unusual"--in other words, not immediate family--a living trust is probably the instrument of choice. Revocable rev·o·ca·ble also re·vok·a·ble
That can be revoked: a revocable order; a revocable vote.
Adj. 1. and irrevocable trusts are both "living," but the term living trust means a revocable living trust. "It's private, it's smooth--there's no court involvement--and it's quick," says Deborah Malkin, a Soquel, California-based estate lawyer. "A living trust has the advantage of making probate--the court-supervised process through which assets go from decedent An individual who has died. The term literally means "one who is dying," but it is commonly used in the law to denote one who has died, particularly someone who has recently passed away. to beneficiary--unnecessary. Although it takes effect while the client is alive, he or she can retain control of the assets. When the client dies, they are transferred to the beneficiary."
MAKING SURE THE CAT GETS TAKEN CARE OF
Legally, pets are property--and property can't own property--but the uniform probate code The Uniform Probate Code (UPC) is a comprehensive statute that unifies, clarifies, and modernizes the laws governing the affairs of decedents and their estates, certain transfers accomplished other than by a will, and trusts and their administration. has made it easier to set up funds for pets' care. The simplest arrangement is to leave money to a trustee and impress upon him or her a duty to care for the pet. It is best for the client to choose someone he or she knows rather than a professional trust organization.
James Quaglietta, a CPA and lawyer in Wayne, New Jersey Wayne is a township in Passaic County, New Jersey, United States, located less than 20 miles from midtown Manhattan. As of the United States 2000 Census, the township had a total population of 54,069. , has thought carefully about how to care for his dog, Freckles freckles Ephilides Brown macules, often exacerbated on sun-exposed zones of the skin surface, which disappear during the winter, and most commonly affecting the fair-skinned, especially of Celtic stock. See Macule. Cf Nevus. , if he predeceases her. Because a pet's quality of care can't be completely safeguarded--in New Jersey or any other state--he considered having a separate trustee administer funds to a trustee caretaker. Quaglietta settled on a simpler solution that many pet owners use.
"New Jersey doesn't have a statute about leaving money directly to a pet. A court may or may not uphold an honorary trust An arrangement whereby property is placed in the hands of another to be used for specific noncharitable purposes where there is no definite ascertainable beneficiary—one who profits by the act of another—and that is unenforceable in the absence of statute. , so I decided to go with a lump-sum gift of $50,000 to a guardian of the dog," he says. "The will spells out what the money will be used for. The dog's caretaker will have to fence the yard, put in a doggy door, take her to the vet for checkups, get her groomed and provide a dog walker. When the dog dies, the caretaker inherits what's left. The remainder of my estate will go to an animal charity such as the local SPCA SPCA serum prothrombin conversion accelerator (coagulation factor VII).
serum prothrombin conversion accelerator
n an acronym for serum
"Trusts for pets come up in families that don't have children. In families with children, the clients know the pets will go to one of them," says Malkin. Her regard for animals led her to draft a boilerplate A phrase or body of text used verbatim in different documents such as a signature at the end of a letter. Boilerplate is widely used in the legal profession as many paragraphs are used over and over in agreements with little modification or no modification. protection clause to be inserted in every will or trust. It states, "`Every animal the client has shall be given to good homes if possible,' and if they go to a shelter, `under no circumstances will those animals be euthanized or used for research or testing.' Clients love it. I've done about 500 of them and prepared three dozen honorary trusts dealing with the care of animals as part of a client's estate plan."
If a client uses an honorary trust, or living trust, to provide for a pet, Malkin recommends choosing someone to receive money and hold it for the benefit of the animal. At least one successor trustee should be named in the event the first one can't act. "It's `honorary' because the trustee is on his honor. The animal can't speak to enforce its `rights,' as people can," she says. Because the living trust doesn't have to be probated when the owner dies, the animal can go to its caretaker without any hiatus in a shelter or kennel.
"The trust covers basics such as vet care, but sometimes we'll specify food, kennel, bedding and toys--whatever the client wants," Malkin says. "I recommend budgeting higher rather than lower so that, if something happens to the animal, the caretaker won't hesitate to spend what's needed. The recipient will have the animal live with him and will also be in charge of some money, maybe $5,000 to $10,000, for the animal's expenses."
Malkin runs an ad in the local SPCA newsletter offering to prepare an estate plan for free if a client wants to leave money to the animal shelter "Dog Pound" redirects here. For the rap group, see Tha Dogg Pound.
An animal shelter is a facility that houses homeless, lost or abandoned animals; primarily a large variety of dogs and cats. . One woman who read Malkin's offer in the newsletter left her entire estate--about $500,000--to the SPCA as a result.
Another way to give a pet a safe new home is to "work something out with the local shelter," Malkin says. "Some clients have made a substantial gift in their trust in return for a guarantee to find the clients' companion animals a home. Staff can leave though and the facility may not honor the arrangement, so it's better to line up individuals you know."
Quirky bequests of any sort rightly may give an adviser qualms. A CPA asked to assist with an estate plan that doesn't feel right to him or her is not in the best position to help and should feel comfortable declining it. One CPA decided not to take an engagement for a client who wanted him to draft an estate plan that would have prevented his house from being sold until his dog died.
"Most challenges to a donor's competence occur when a bequest goes against the natural order of distributions," says Rhine. A client who chooses to leave significant assets to a pet is on shaky ground Shaky Ground was a TV sitcom which starred Matt Frewer as Bob Moody, a hapless, but supportive and caring father. Robin Riker played his wife and Jennifer Love Hewitt as his daughter. The show aired on FOX for the 1992-1993 season. at the outset. If there's a conflict with family, the client's competency almost certainly will be an issue. If the advisers think a client's values--as distinct from competency--may lead to a challenge but they are comfortable that the client is rational, they can help him or her line up support through several strategies.
Suggest that the client provide advance notification. A donor leaving money to a longtime companion--human or nonhuman--should prepare his or her family before the will is read.
Build in circuit breakers Circuit breakers
Measures instituted by exchanges to stop trading temporarily when the market has fallen by a certain percentage in a specified period. They are intended to prevent a market free fall by permitting buy and sell orders to rebalance. . To build in balance and hedge fluctuations in the value of holdings, the CPA can suggest the client leave a sum of money but not more than a certain percentage in a special bequest, instead of leaving the money outright. "Try to arrange matters so the bequest doesn't take all the cash--leaving nothing for the family," says Rhine.
Videotape the client. Confirmation of competence can be established by a videotaped interview. The client should establish context by giving rational answers to questions that indicate demeanor, general awareness of surroundings, time, state of health and other pertinent considerations. Then he or she should follow up by explicitly expressing the terms of the bequest.
Get statements from doctors, nurses and caregivers. The evaluations of caregiving professionals who have an ongoing relationship with a donor carry weight. Obtain their supporting statements thoroughly establishing the client's soundness of mind.
Getting organized can be a load off a client's mind. Rhine cites one man who planned his estate after being told he had six months to live. He has been healthy for several years now, but he reviews the plan every six months to keep it in order and make sure he knows where everyone is and what the phone numbers are. Says Rhine, with obvious pleasure, "He's made himself into a poster boy for proper planning."
About 87% of pet owners surveyed said they view their pets as family members.
Source: Delta Society Delta Society
an international, non-profit organization promoting the human-animal bond through the use of animal-assisted activities and therapies. , www.deltasociety.org.
* THE CPA WHOSE CLIENT WANTS TO ensure that companion animals will be properly cared for in an estate trust has to have sensitivity to the client's feelings as well as know where to steer him or her. Extreme emotions are involved when people talk about death--and money.
* ESTATE CONSULTING REQUIRES advanced counseling skills and empathy in addition to gathering information about assets, doing the financial projections, educating the client, having the client define his or her goals, making proposals on how to implement those goals and laying them out in a comprehensive plan.
* THE TERM LIVING TRUSTMEANS A revocable living trust. The instrument has the advantage of making probate--the court-supervised process through which assets go from decedent to beneficiary--unnecessary.
* LEGALLY, PETS ARE PROPERTY--and property can't own property--but the uniform probate code has made it easier to set up funds for pets' care.
* LEAVING MONEY TO PETS MAY create a litigation target for family members as well as a perception that the donor is mentally unbalanced. One way to avoid potential problems is to carve out to make or get by cutting, or as if by cutting; to cut out.
See also: Carve a piece of the estate so income from it goes to pet care while the balance is distributed more conventionally.
* FOR AN HONORARY PET TRUST, a client should choose someone to receive money and hold it for the benefit of the animal. At least one successor trustee should be named in the event the first one can't act.
Providing for a Pet: A Sample Clause
Kenneth Brier, CPA and lawyer with Bingham Dana LLP, Boston, says, "You would need a tailored rule-against-perpetuities [time frame] termination provision in a trust governed by the laws of a state that hasn't adopted a more lenient RAP provision for trusts for pets, such as that in the uniform probate code. It might read as follows:
"`The trust under this Article [trust for pets] shall terminate upon the earlier of (1) the death of the survivor of all of the animals identified in [cite paragraph] or (2) the expiration of twenty-one (21) years following the death of the survivor of [original individual trustees and/or animal caretakers]; whereupon my Trustees shall distribute the property of the trust [to named charity or individuals] [as provided in Article --].'
"As a practical matter, if there are a sufficient number of human individuals named under clause (2), the real limitation would be imposed under clause (1), though one would have to be especially careful for a very long-lived animal species. (The trust also undoubtedly would include somewhere a rule-against-perpetuities savings clause. Be careful that the termination provision for the trust for pets and the RAP savings clause properly mesh.)"
Just Don't Let the Client Leave the Tickets to the Pet
Robert Keebler, CPA and tax specialist at Virchow, Krause, has experienced another estate oddity. He says, "In my practice I've encountered the bequest of Green Bay Packer box tickets. They're very hard to come by, and there's a waiting list of 40,000 people. Often in an estate worth a few million dollars, the item the parents struggle with most are the four or eight Packer season tickets.
"I get the parents to gather everyone so they can come to some sort of agreement on how they are going to share them. I'm a facilitator in such a situation, not a mediator. If brothers and sisters can't agree on something like this, the problems are too deep for me to solve. Some of these people have kept tickets in the family since the 1920s or 1930s. It doesn't get any better than first-row, 50-yard-line seats. The Packers have special rules on how parents can leave the tickets to their children."
The general counsel of any large sports franchise should be able to provide advice if a similar passion has your client's family in thrall.
On the Web
The American College American College is the name of:
"Estate Planning for Nonhuman Family Members" by Gerry W. Beyer. www.professorbeyer.com/Articles/Animals
"Pet Trusts: Providing for Pets" by Gerhard Shipley. www.keln.org/bibs/shipley.html
"Tax and Estate Planning Involving Pets" by J. Alan Jensen. www.weiss-law.com/Pet_Tricks.htm
Complete Book of Wills, Estates and Trusts by Alexander A. Bove. Henry Holt; New York City New York City: see New York, city.
New York City
City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , 2000.
Plan Your Estate: Absolutely Everything You Need to Know to Protect Your Loved Ones loved ones npl → seres mpl queridos
loved ones npl → proches mpl et amis chers
loved ones love npl (5th ed.) by Denis Denis, king of Portugal: see Diniz. Clifford and Cora Jordan. Nolo Press; Berkeley, California Berkeley is a city on the east shore of San Francisco Bay in Northern California, in the United States. Its neighbors to the south are the cities of Oakland and Emeryville. To the north is the city of Albany and the unincorporated community of Kensington. , 2000.
MICHAEL HAYES Michael Hayes may refer to:
See American Institute of Certified Public Accountants (AICPA). . Official positions are determined through certain specific committee procedures, due process and deliberation. Ms. Hayes does not have any pets.