Planning for Blended Families Presented to: Georgia Forum Presented by: Lewis W. Dymond WealthCounsel, LLC

Planning for Blended Families Presented to: Georgia Forum Presented by: Lewis W. Dymond WealthCounsel, LLC WealthCounsel, LLC

Planning for Beneficiaries • The “Tail” that Should Wag the Dog. • Proper WealthCounseling. • It is a process; • It is not a transaction. • It involves not only your clients; • It involves those your clients love the most; • And it can influence many generations. WealthCounsel, LLC

Planning for Beneficiaries • Definition of WealthCounseling. • Control my property while I’m alive and well; • Provide for myself and my loved ones if I become incapacitated; • Give what I have; • To whom I want; • The way I want; and • When I want. WealthCounsel, LLC

Planning for Beneficiaries • Proper WealthCounseling. • Care for loved ones as if you were still there: • With your resources; • With your love; • With your wisdom. WealthCounsel, LLC

Planning for Beneficiaries • The WealthCounseling Process. • Education. • Design. • Drafting documents. • Implementation. WealthCounsel, LLC

Planning for Blended Families • Importance of Initial Meeting and Information Gathering are increased dramatically. WealthCounsel, LLC

Planning for Blended Families • Initial (Education) Meeting. • Who needs to be educated? • Levels of communication. • Black. • Blue. • Red. • Green. • SPIN. WealthCounsel, LLC

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Planning for Blended Families • Variety pack of blended families. • Length of marriage. • Clients’ ages and age differences • His; hers and ours. • Children’s ages. • Children’s ages at time of marriage. • Values of separate and joint property. • Incomes and income capabilities. • Insurance and insurability. WealthCounsel, LLC

Planning for Blended Families • Who do you represent? • Both parties. • Conflict of interest? • Advise of right to separate counsel. • Waiver. • Conflict may become apparent during planning. • One party. • Other party represented. • Other party not represented. WealthCounsel, LLC

Planning for Blended Families • Information Gathering. • Asset information: • Separate property. • Joint property. • Does titling confirm this? • Existing insurance. • Existing retirement plans. • Existing estate plan. • Existing prenuptial or postnuptial agreements. • Divorce agreement. WealthCounsel, LLC

Planning for Blended Families • Review of existing prenuptial or postnuptial agreements. • What does it say? • Define separate property. • Define rights at time of death. • Define rights in case of divorce. • What do clients think it says? • Is it valid? WealthCounsel, LLC

Planning for Blended Families • Validity of existing prenuptial or postnuptial agreements in Georgia. • No Georgia statute enacted with regard to prenuptial agreements. • Georgia has long held that prenuptial agreements settling property rights at death are valid. • Made in contemplation and as inducement to marriage. • Division or transfer only to occur if the parties remain married to death. • Death focused instead of divorce-focused. • Nally v. Nally 74 Ga. 669 (1885). WealthCounsel, LLC

Planning for Blended Families • Validity of existing prenuptial or postnuptial agreements in Georgia. • Prior to 1982 Georgia courts deemed prenuptial agreements dealing with divorce contrary to public policy. • Scherer v. Scherer, 249 Ga. 635, 292 SE2nd 662 (1982). • Mallen v. Mallen 622 S.E.2d 812 (Ga. 2005). WealthCounsel, LLC

Planning for Blended Families • Designing, drafting and executing a postnuptial agreement in connection with estate planning. • Need for separate counsel? • If includes what happens in case of divorce? • If only covers property rights at death? • Agreement that asset transfers are for controlling property at death and not in the event marriage terminates other than by death. WealthCounsel, LLC

Planning for Blended Families • The Design Meeting. • The design options for a blended family are far greater than for a first marriage family. • Increases the importance of the initial meeting. • You need to be ready with solutions rather than options. • Family meetings. WealthCounsel, LLC

Planning for Blended Families • Drafting the Revocable Living Trust. • Individual trusts. • Joint pour-over trust. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families Assuming separate distribution plans use individual trusts. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families If significant community property use Individual Trusts AND Joint Pour-over Trust WealthCounsel, LLC

DIAGRAM OF TWO GRANTOR ESTATE PLAN WITHSEPARATE LIVING TRUSTS GRANTORS ASSETS OF GRANTORS JOINT REVOCABLE LIVING TRUST HUSBAND’S SHARE OF ASSETS WIFE’S SHARE OF ASSETS HUSBAND’S LIVING TRUST WIFE’S LIVING TRUST HUSBAND’S ESTATE TAX EXEMPTION AMOUNT BALANCE OF HUSBAND’S ASSETS HUSBAND’S FAMILY TRUST HUSBAND’S MARITAL TRUST Division into separate sharetrusts for wife’s descendants Division into separate sharetrusts for husband’s descendants

Planning for Blended Families • Importance of including statement of the Grantor’s purpose or intent. • Reflect the client’s hopes, fears, dreams and values. • Assistance to the Trustee, even if the beneficiary serves as his or her own Trustee. • It is the client’s trust. • Comment to Uniform Trust Code Section 801 “This section confirms that a primary duty of a trustee is to follow the terms and purposes of the trust and to do so in good faith. Only if the terms of a trust are silent or for some reason invalid on a particular issue does this Code govern the trustee’s duties.” WealthCounsel, LLC

Planning for Blended Families • Importance of including statement of the Grantor’s purpose or intent. • Drafting Guidelines - Precatory or Directive. • Flexibility. • Asset Protection. • Certainty. • Corporate, family member or beneficiary as Trustee. WealthCounsel, LLC

Planning for Blended Families • Importance of including statement of the Grantor’s purpose or intent. • Drafting Guidelines - Suggestions. • While the guidelines are intended to express the client’s hopes, fears and dreams, the client will need help in drafting their guidelines. • Practice drafting guidelines to cover different situations. • Easier to edit than draft. • Keep your drafted guidelines in mind while in the design phase with client. • WealthCounsel Knowledge Base as a starting point. WealthCounsel, LLC

Planning for Blended Families • Importance of including statement of the Grantor’s purpose or intent. • Guidelines – WealthCounsel Knowledge Base. WealthCounsel, LLC

Planning for Blended Families Using the WealthCounsel Knowledge Base. • Contains sample language shared by WealthCounsel principals and members. • Not reviewed, edited or approved by WealthCounsel. • Some of these documents reflect a strong religious influence. WealthCounsel does not promote one set of religious values over other religious or even non-religious values. WealthCounsel welcomes all viewpoints. No matter your religious views, these documents are intended to provide help to all members. • We appreciate you sharing your language. WealthCounsel, LLC

Planning for Blended Families • Providing for spouse vs. providing for children. • Family dynamics. • RLT formula options. • Life insurance. • Retirement plans. • Gifting trusts. • QPRTs. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families Providing for the Surviving Spouse – Formula options WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families Providing for the Surviving Spouse – Distribution options: WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families Providing for the Surviving Spouse – Designing the QTIP Trust: • Income only. • Principal distributions? • Consider Total Return (Unitrust) option when selecting income only? • $5K or 5% withdrawal power? • Testamentary Power of Appointment: • None or limited to descendants. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Blended Families Providing for the Surviving Spouse – Designing the Family (Bypass/Credit Shelter) Trust: • Consider straight to residuary beneficiaries? • Income only? • Principal distributions? • Consider Total Return (Unitrust) option when selecting income only? • $5K or 5% withdrawal power? • Testamentary Power of Appointment: • None or limited to descendants. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Residuary Beneficiaries • GSTT Provisions. • Residuary Beneficiary options. • Common Trust for descendants. • Trust design for individual residuary beneficiaries. • Distribution of Income (Unitrust or Total Return Trust). • Discretionary Distribution Standards. • Discretionary Guidelines. • Withdrawal Rights and Termination. • Lifetime Power of Appointment. • Testamentary Power of Appointment. • Lapse Options. • Distribution if Deceased. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – GSTT Provisions. • Explicit or Permissive. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – GSTT Provisions • Explicit: • Used if you want to have a different distribution pattern or design for the GSTT Exempt and Non-Exempt property. • Exempt property has aGSTT inclusion ratio = zero. • Non-exempt property has aGSTT inclusion ratio = 1. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – GSTT Provisions • Permissive: • The Trustee has the authority to divide any trust into Exempt and Non-Exempt shares. • Exempt property has a GSTT inclusion ratio = zero. • Non-exempt property has aGSTT inclusion ration = 1. • Each share will have the same terms. • Use the “hybrid” power of appointment or the limited power of appointment. • If you use the limited power of appointment, the authority to divide a trust into Exempt and Non-Exempt shares, includes the authority to grant the beneficiary a general power of appointment. WealthCounsel, LLC

Planning for Beneficiaries * If you include Trust Protector provisions, this power will be given to the Trust Protector rather than to an Independent Trustee. WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Residuary Beneficiary options WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Common Trust WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Trust Design Descendants as Current Beneficiaries: WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Trust Design Distributions of Income – Income Options: WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Trust Design Discretionary Distributions:

Planning for Beneficiaries Using WealthDocx – Trust Design Discretionary (Precatory) Guidelines: WealthCounsel, LLC

Planning for Beneficiaries Using WealthDocx – Trust Design Withdrawal Rights and Termination: WealthCounsel, LLC

Planning for Blended Families Presented to: Georgia Forum Presented by: Lewis W. Dymond WealthCounsel, LLC