Author: Jasper Berg, J.D.

  • Trust Backup Planning

    Trust Backup Planning

    Backup planning for a trust or estate plan can sometimes cause a lot of stress. After all, the process means thinking through dooms day. Sometimes, addressing a contingency plan is confusing. Really though, there isn’t a one size fits all. A backup plan is going to be personal and specific to each individual or trust grantor. As a result, here are a few things people often mean when reviewing their trust backup plan.

    First, a backup plan is going to be different for each estate planning tool. In terms of a trust, a backup plan starts by determining what will happen when or if a trustee declines the opportunity to serve as a fiduciary. Other times, we are talking about the scenario when a trustee dies. Selecting an alternate trustee is the first issue to many unrelated matters that need addressing during the planning process.

    Unfortunately, a well drafted trust agreement also means selecting an alternate and secondary trustees in the event they can no longer serve. If the trust document fails to mention what will happen, a beneficiary might be forced to seek a trust modification under Minn. Stat. 501C.0410. In other words, getting help from a court.

    Seeking court approval to modify a trust due to a failed backup plan is hardly an ideal situation. This is true because for many families, the point of creating a trust in the first place was to put in place a probate avoidance plan.

    Another popular reason for forming a trust is privacy. In other words, we do not want our assets and distribution choices shared in an open forum, like probate court. Because public proceedings breach privacy, modifying a trust in a public forum due to poor planning can feel disastrous.

    Second, a trust agreement or declaration should always close the circle on backup trustees. In other words, identifying three or more people who can serve as a trustee isn’t good enough. Instead, offering a final strategy like a corporate trustee can really reduce the need for trust administration by way of the judicial process. For families who do not like like the idea of engaging a corporate trustee, sometimes selecting the eldest heir can also put the grantor of a trust at ease.

    Again though, backup planning for a trust is more than thinking through dooms day or the resignation of a trustee. Backup planning also means addressing changes to our tax code, accounting for inflation, disabilities encountered by beneficiaries, and marital conflicts just to name a few.

    Therefore, working through the backup planning process to a trust is very much as critical as the primary plan.

  • Hurricane Estate Planning 101

    Hurricane Estate Planning 101

    Hurricane estate planning in a pinch might mean expeditiously:

    • Making sure your loved ones are in a safe place;
    • Addressing care for your pets;
    • Gathering needed medicines and medical supplies;
    • Filling a storage container with drinkable water;
    • Taking exterior photos of your real property;
    • Taking interior photos of your tangible property;
    • Gathering your home computers and power cords;
    • Finding a hard copy of your online usernames and passwords.

    Additional Important Documents to Gather

    Other important documents to gather in preparation of a hurricane includes:

    • Driver’s License
    • Passports
    • Marriage License
    • Birth Certificates
    • Financial Documents
    • Tax Filings
    • Insurance Records
    • Medical Records
    • Motor Vehicle Titles
    • Real Estate Documents
    • Military Records (DD214)
    • Family Photos
    • Estate Planning Portfolio

    Of course, there are many more action items when preparing for a hurricane. That aside, hurricane estate planning strategies is a great opportunity to weigh the pros and cons of storing documents in the Clo

  • Unemployment After A Layoff

    Unemployment After A Layoff

    Unemployment after a layoff is not as easy as it sounds.  With inflation running wild and businesses laying off workers, I cannot help but address a very important point:  unemployment is not a guarantee. 

    The law aside, there are many factors that go into whether or not a person qualifies for benefits.  Even more, an employer’s actions after a job ends can drastically change how you look at application for benefits.

    As a result, when employers confuse or blur the lines, guessing isn’t enough. 

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    As many people are finding out, unemployment after a layoff sometimes comes with strings attached.  Sometimes, this means a job loss is presented with a separation agreement. 

    This is followed with a wink, a nudge, and a monetary sum of money.  Not to fast though, because signing the dotted line can lead to bigger problems down the road. 

    This is especially true when we do not whether the next job is around the corner or light years away. 

    After a Layoff, Prepare For Unemployment

    Before applying for benefits, consider some light reading.  First, look at Minnesota Statute 268.085.  This law outlines all kinds of rules on the framework of eligibility.  In fact, the name of the rule itself is called “Eligibility Requirements”. 

    When trying to understand unemployment benefits, you really cannot go wrong by reading the rules. 

    On the other hand, if a person is trying to obtain unemployment after either quitting or getting fired, consider reading Minnesota Statute 268.095.  Under this rule, you will find all kinds of reasons addressing benefits after a discharge and benefits as a result of quitting. 

    That said, reading each rule isn’t going to be good enough.  This is true because there are nearly 2,000 court cases helping us understand unemployment laws and to the extent benefits are granted.

    I know this is a lot to absorb.  Especially after a job loss.  Start simple.  The process of applying for benefits is just as important as submitting a resume. 

    In fact, some of the same principles apply in either situation.  Every question is a trick and knowing why you are offering specific information is crucial to the bigger picture. 

  • Inflation Planning Within an Estate

    Inflation Planning Within an Estate

    Inflation protection within an estate plan starts here. To begin, consider this brain teaser. How many cookies can you buy with ten dollars? If you are like me, the State Fair Cookie Test is likely the wrong sample type because of the infrequence of the event. That aside, perhaps you already reached this conclusion: prices always seem to rise. This is true for cookies, cars, and commodities.

    Allow me to take the cookie test a little further. Assuming you selected the best person possible to manage your cookie supply, would you want them to make decisions on an empty stomach or defer to a hand selected baker with knowledge about ingredients and time?

    Again, using cookies as an analogy, a revocable trust can require our trusted circle to act prudently. As an alternative, a trust can also be drafted in such a way that demands a trustee to seek advice from a more qualified professional.

    Really, it depends a lot on the trustee’s skills and background. Perhaps your trustee is up to date on iBonds and treasury notes, so you might not have a cookie problem.

    On the other hand, what about the back- up trustee? Are you equally as confident? For this reason, I like the drafting strategy of giving the trustee an option for support. Even better, I like the idea of a Grantor selecting a professional for their trustee, long before the professional is ever needed.

    Therefore, inflation planning starts during the drafting process.

  • Laws Impact Estates, But Which One?

    Laws Impact Estates, But Which One?

    Laws impact estates and plans, but which one applies first? For those keeping track, we have local ordinances, Minnesota statutes, Minnesota Rules, a State Constitution, Federal Codes, Federal Regulations, U.S. Constitution, administrative opinions, letters, and court decisions, and a handful of other rules and laws.

    Also, we have made up rules created by financial institutions, third-party administrators, and employers too. The point is this: we have a lot of laws and most of them impact an estate. So, what should we do?

    As the laws around us become more and more complicated, perhaps simplifying our life is the strongest response to an abundance of regulations. Of course, simplifying is different for each family.

    For some, this means having a conversation about what to do with an inherited IRA. For others, this means restricting financial temptations.

    Another strong response includes a purposeful plan that was designed with triggers and conditions.

    For example, if I die with significant wealth, whether that means my family cashed-in on a life insurance policy or otherwise, I want a document that triggers protection from certain taxation. Or, if I suffer from a heart-attack and succumb to a permanent disability, I want my documents to trigger an opportunity for care that alleviates stress.

    Really though, the best answer to so many laws impacting an estate is a reminder about control. We can make choices today that will have a positive impact on our future. Even better, our choices teach younger generations about serving and protecting our family

  • Free Annual Report For Each Family Member

    Free Annual Report For Each Family Member

    Obtaining a free annual report is critical to the planning process. As the name suggests, this is an annual process recommended for each and every person in your household. This includes persons under the age of 18, including newborns.

    This step is important because it helps reduce fraudulent activity. From a practical perspective, print your free annual report every year.

    Next, add a printed version to your estate planning portfolio. One way to remind ourselves to complete this planning task is to do this around the same time we file our annual tax return.

  • Estate Planning Story about the Gregory Brothers

    Estate Planning Story about the Gregory Brothers

    The Gregory brothers have an interesting story about family dynamics. As told through Minnesota’s Court of Appeals, the Gregor brothers had a sibling “clash” with their sister over a 4th generation farm.

    As the story went, Grandma’s will distributed a 95-acre farm equally between her adult children.

    Unfortunately, the sons disagreed with the sale of the farm and aired their animosity publicly.

    This sibling clash was described in a recent case called A21-1231. Here, we learn about animosity, family problems, and a few key laws.

    Sibling Animosity: Lesson 1

    The first lesson was about animosity. Animosity is rarely a reason for a Court to remove a personal representative. However, an emotionally unstable executor might be enough.

    Certainly, lots of siblings disagree with one another. Even so, would you consider your own sibling as emotionally unstable?

    For those wondering, that was a rhetorical question only . Nonetheless, the above case reminds us that sibling relationships are not always easy.

    Protecting an Estate: Lesson 2

    The second lesson we get is the idea that protecting an estate by seeking a court approval is an aplaudid practice, especially within a probate proceeding.

    On the other hand, had Grandma considered a trust, perhaps the clash between the Gregory brothers and their sister could have been avoided.

    Court Petitions: Lesson 3

    Third, we are reminded that just about anybody can petition a court and ask for the removal of the executor. When this happens, Minnesota law 524.3-611(a) tells us that the court must fix a time and place for a hearing.

    Conflict of Interest: Lesson 4

    The fourth lesson we can learn from the Gregory brothers is the idea that problems sometimes arise when a member of a family wears too many hats, otherwise known as a conflict of interest. For example, naming an adult child as a personal representative, while knowing they are also might inherit property as a beneficiary might be construed as a conflict of interest.

    This case centers on a clash between siblings”

    Scott County District Court, File No. 70-PR-20-9342

    Of course, a lot of times, adult children are the best candidates to serve as our personal representative. despite the risk. Really, it depends on the dynamic of the heirs and communication.

    When there is a doubt, we turn to laws and rules. In Minnesota, the rule is actions inconsistent with carrying out the terms of the wills or delayed, mismanaged, wasted, or misappropriated estate assets causes a conflict of interest. See Munson, 57 N.W.2d at 29; Matteson, 245 N.W at 382.

    Thus, whether a conflict of interest arises during the course of administering a will or trust depends on the circumstances.

    Therefore, learn from sibling clash outlined above and consider engaging an estate attorney.

  • Nuclear War Estate Planning and Cloud Storage

    Nuclear War Estate Planning and Cloud Storage

    Until recently, estate planning for a nuclear war seemed unrealistic. As wars develop and nuclear weapons are threatened, one cannot help but consider their worst case scenario. Believe it or not, this is a topic that most military families have already thought about. Nonetheless, let’s address a handful of issues specific to estate planning for a nuclear event.

    The Best Time to Estate Plan

    Obviously, timing is everything. When it feels like time is on our side, planning can move in stages. In other words, the sense of urgency is different in our 20’s versus our 50’s. Nonetheless, as our timing transitions to an urgent need, panic and stress can negatively impact our decisions.

    Likely, planning our affairs during a nuclear war will feel similar to a health scare. On the other hand, nuclear war is neither inevitable or reversible. Thus, all of us can avoid a timing issue by planning when we appear to feel good, versus waiting until the end.

    Luckily, the planning element can intercept nuclear war when the plan is already in place. After timing, there is still an issue that needs attention.

    Document Storage Prior to a Nuclear War

    Again, we need to make the assumption that a plan was created. Next, where should we store completed documents? Unfortunately, this is a very personal issue many families are unsure of. As a result, lets address a some of the pros and the cons.

    First, locking our documents into the cloud because of nuclear war threat, without having a distribution plan can cause significant damage. We are already seeing this play out with bitcoin.

    Second, which is equally problematic from an estate planning perspective, is the risk of duplicating documents. For example, imagine having a hard copy and a copy stored in the cloud. Then, imagine becoming cognitively impaired and using your favorite marking pen to revise the hard copy, while doing nothing with the digital version. Well, this creates a problem. In fact, it creates a major problem.

    Again though, document storage, estate planning, and introducing a risk for nuclear war is going to take on a different meaning for every person. Perhaps the person in Minneapolis, Minnesota is thinking they are at risk, while the family farm near Funkly, Minnesota thinks otherwise.

    Cloud Storage During a Nuclear War

    When adding online storage and the threat of nuclear war to the estate planning process, here are a handful of issues to consider:

    • What happens if a Nuclear War destroys everything, including family members?
    • Does the Company offering cloud storage have a backup storage site in a remote location?
    • Will a remote professional or family member know about the service provider chosen as the cloud provider?
    • Is there a password recovery process after a customer dies?
    • If the person dies, does the back-up plan die too?

    Unfortunately, a family that chooses cloud storage for their estate planning documents may need to reexamine these issue as a war develops. Therefore, when circumstances change, plans change.

  • Skipping GST Tax or Working Around It?

    Skipping GST Tax or Working Around It?

    GST Tax Audio

    GST Tax or generation skipping transfers are a fancy way of trying to reduce estate taxes when you die.  Because Minnesota is considered a decoupled state and taxes are only going up and up, it does not take very many assets and life insurance benefits to make this a significant issue.  As a result, GST is a proposition that a lot of families are considering when planning for asset transfers. 

    Generation skipping taxes is the process of our government, taxing property that is left for our grandchildren or great-grandchildren.  Unfortunately, this type of trust also applies to property left to unrelated persons who are younger than 37.5 years of age.  Kind of an interesting addition to the rule, but important nonetheless. 

    Most families agree that any way to reduce an estate tax bill should be considered.  For what it is worth, the intent behind the generation skipping transfer tax was to prevent these windows of opportunity.  Luckily, there are other options to consider. 

    From a practical perspective, the GST tax is imposed on all property left, whether through a trust or otherwise.  Historically, these types of estate taxes aligned with the federal exemption amounts.  So, this could reach 40% tax on all amounts above the federal exemption. This calculation doesn’t take into consideration Minnesota’s estate tax.

    Therefore, finding ways to reduce or alleviate estate taxes is the name of the game. 

  • Thrift Savings Plans and TSP Beneficiary Forms

    Thrift Savings Plans and TSP Beneficiary Forms

    Audio for Thrift Savings Plans and TSP Beneficiary Forms

    Thrift savings plans are assets requiring a different attention to detail than other financial products. This is true because TSP Beneficiary Forms are designed and managed by our federal government.

    Families contribute to these types of assets for obvious reasons. On the other hand, long term care issues, grandchildren, litigation, carelessness, and divorce are events that must be considered in various tools outside a beneficiary form.

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    Estate Planning and Your Thrift Savings Plan

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    As a result, veteran estate plans which include thrift savings retirement benefits, should consider the following:

    • The Federal Retirement Thrift Investment Board (FRTI) manages these benefits;
    • FRTI claims, they work flawlessly;
    • FRTI states they spend participant money wisely; and
    • TSP Beneficiary Forms unfortunately use a block lettering system.

    As great as these assets might be for Federal Employees and military families, I am fearful of unintended consequences.

    For example, voiding a beneficiary form because a name could not fit into their block system. Or, placing assets in a trust that isn’t prepared for a TSP asset. In other words, a beneficiary form that is incorrectly completed, might inadvertently get taxed at a higher rate or offered to a nursing care facility. Other times, families incorrectly expose an asset to a divorced spouse or a divorced adult child that had once married into the family.

    I like to see our military and civil service families weigh the following:

    • Has each Thrift Savings Plan or Beneficiary Form been updated?
    • Does the accumulation of wealth make a Bypass or Credit Shelter Trust more significant?
    • How might the SECURE Act impact each TSP Plan?
    • Could an accumulation or conduit trust help streamline a specific goal or outcome?
    • Does a durable power of attorney document address an opportunity to fix or change beneficiary forms in the future?

    Unfortunately, occupational hazards make these issues important for the young and old.

    Therefore, if you have a Thrift Savings Plan and need personal attention or advisement, or need support with certain estate planning tools, please consider the above mentioned issues as an introduction to Thrift Saving Plans.

  • VA Look Back Rule Impacts Benefits

    VA Look Back Rule Impacts Benefits

    The VA look back rule changed in October 2018. Starting October 18, 2018, the VA imposed a new rule that negatively impacts Veterans and their families who are seeking benefits through a nursing home. In general, the new rule requires the disclosure of gifts. When a gift is made inside the new look back period, the VA calculates penalties and ineligibility periods. As a result, the look back rule for VA benefits has positive and negative implications.

    Veterans and military families who transferred assets within three years of applying for benefits may unintentionally subject themselves to a 5 year waiting period. Depending on the gift, it might be preferable to wait three years when applying for certain benefits versus getting hit by a VA penalty. Even worse, the penalty period can start over as of the date of the last gift.

    In other words, taking a lackadaisical strategy to veteran benefits can have long term consequences. Therefore, before spending down assets or making asset transfers, consider weighing long term implications with other processes that might offer more opportunity to protect assets.

  • Tips & Unemployment Go Bad

    Tips & Unemployment Go Bad

    Tips and unemployment benefits have a long history. Of course, by tips I mean money given to a waiter, bartender, server, driver, hair stylist, or just about anybody else for providing a service.

    When we start linking money gifted by a customer to an unemployment benefit, things go bad very quickly. Whether applicants start thinking about their worst case scenario, sometimes there are accusations of misrepresentation. This problem can multiply when you consider the IRS’ interest in the matter.

    If you ask an employer for help, they will often run the other way. Rightfully so, because they hardly know themselves. Thinking about asking the unemployment office for help? You might incur consequences.

    Finding Out That There Was a Problem

    Generally, a person becomes aware of an unemployment claim and a gratuitous tip problem in one of a handful of ways. This includes:

    • Receiving a letter stating there was an overpayment,
    • Learning about an audit,
    • Hearing from past co-workers,
    • Learning that the Department of Labor is auditing wage and hour issues,
    • Receiving a letter from Minnesota’s Department of Revenue,
    • Getting notice of a Federal Overpayment, and
    • Seeing the phrase “misrepresentation” inside one’s online unemployment account.

    All of these methods are scary and require a different legal response. Thus, take their notices seriously.

    Unemployment Laws for Tips

    The word tip appears next to the definition of wages. As a result, consider looking at the 30 plus Minnesota unemployment cases that interpret tip law. Unfortunately, the difference between a tip and wage can be very confusing.

    In the meantime, take a look at Minnesota Statute 268.035 and look at the dozens of unemployment tips I shared in other blog posts.