Valentine & Valentine 2021 Newsletter

VALENTINE & VALENTINE, P.C. WISHES YOU HAPPY VALENTINE’S DAY 2021 The pandemic reminds us of the truth of this quote from Gabriel Garcia Marquez in his work, Love in the Time of Cholera : “The weak will never enter the Kingdom of Love.” We are immersed in a time of dramatic change in the law. This may be an uncomfortable reminder: In a time of change, one must not remain passive. Duty prompts a need to learn and to take measured action. Recently passed and pending legislation has and will dramatically change how your family is impacted by income tax, retirement plans, inheritance, capital gains, asset protection, death tax, disability, special needs trusts and probate disputes. Our firm can help you investigate, understand and implement strategies regarding your estate, business or asset protection plans. These strategies may help you avoid dispute, dilution or delay in the administration of your own affairs. You remain passive at your own peril. Take action : Call our office or visit our website (valentineandvalentine.com) if you have questions regarding these issues. In light of all of the above changes in the law, it is likely to be extremely important that you complete and update the funding of your existing plans, implement new strategies, otherwise update your documents, business agreements, or retirement plans. We have attached additional articles to this newsletter to help you learn about the following: A. What is a Living Trust B. How a Qualified Personal Residence Trust (QPRT) lowers exposure to death tax and provides asset protection for a personal residence. C. How a Charitable Remainder Trust may compliment your Financial Plan. D. How a Medicaid Trust may help an ill spouse qualify for Long Term Care or other Government Benefits. E. How a Family Limited Partnership can provide a structure to integrate the next generation in the family business, ranch or farm, while keeping control in the older generation. We will continue to add informative articles to our web site. However, all these strategies must be customized to fit your family. OUR FAMILY On June 19, 2021, Mark and Patsy Valentine will be married for 38 years. During these years Mark and Patsy have both been busy working and raising four sons. Our eldest son, Christopher, has now been practicing law for over seven years in our firm and is an excellent lawyer. He and his wonderful wife, Noella, are expecting our second grandchild in April. Noella is a lawyer in the Public Defenders office. Our second son, Alexander, is also a lawyer and is gaining great experience as a judicial clerk in Federal Court and as a new father. Alexander and Katerina are amazing parents to our first grandchild, Evi. She is a bright and energetic two year old.And yes, everything they say about how great it is to have grandchildren is true! Our third son, Marko is now a lawyer practicing in a large international law firm in California. Our youngest, Niko, is a freshman at Catalina Foothills High School. Starting high school in the time of COVID has been a challenge for Niko but all of his brothers have stepped up to support his efforts. We are still crossing our fingers that he pursues a career in engineering or medicine rather than the law. We choose to believe that his argumentative nature is due to being a teenager rather than an affinity to the law. We’ll keep you posted! As always, we love to hear from all of our clients and their families. OUR FIRM Many families have lost loved ones recently , and so have we. Mark’s father, Harold Valentine died last year of kidney failure. After surviving World War II, Harold Valentine attended law school on the GI Bill and started our firm in 1949. His passion for the law was only surpassed by his passion for ballroom dancing. He remained bright, wise and articulate until death. He loved to engage in Socratic dialog with our boys. Near death, he noted that if he died on the Fourth of July he would “ get fireworks” every year. He died on July 4, 2020. Ever the dramatic, Harold was born on Christopher Columbus Day, he took credit for Valentine’s Day and died on the 4th of July. He is sorely missed. The firm he founded has continued to remain busy due to the continued confidence of several generations of clients and business associates. Our lawyers have practices which are focused in the following areas: Estate and Business Law, Trust Litigation, Guardianships, Conservatorship, Probate, Asset Protection, Business Law, Business Succession Planning, Real Estate Law, Second Marriage Planning, and Pre and Post Nuptials. THE LAW There have been important changes in Trust and Estate Planning, Real Estate Law, Asset Protection, Business, Tax and Elder Law recently. Furthermore, your circumstances, asset profile or goals may have changed in your own life. Please call us to advise us of new assets, discuss asset protection, update your estate and/ or business succession plan or to learn about new strategies available to protect you and your family. This shall also serve as a reminder that your Trust must be properly funded. In the event you have refinanced your residence, make sure that your property is still titled in your Trust. In the event your home is titled in the name of your Trust be sure that your Trust is named as an additional insured on your homeowner’s insurance policy. Although our firm has recently prevailed in Real Estate, Business, Probate and Trust litigation, you are well advised to structure your affairs to avoid litigation. Recent case law has clarified your rights regarding privacy and identity theft. The courts have also reinforced certain strategies to protect the value of your personal residence and investments in the event they are titled within a properly drafted asset protection trust. SCAMS During difficult times, there are many scams trying to take advantage of unsuspecting victims. Please contact our office in the event you receive something by the mail, email or phone solicitation that seems questionable. Do not send money or give any personal information. DEATHBED LAWYER Why was the lawyer skimming the Bible? He was looking for a loophole! Seriously, a client recently asked me, ( Mark Valentine): " What happens to my file when you die or retire" First of all, although I have a LOT of grey hair, I don't plan on retiring anytime soon. I am only 64 years old. My dad did not retire until he was eighty. Secondly, my son, Christopher is an excellent lawyer and is now practicing in the firm. Our firm has remained open during the entire COVID pandemic. Valentine & Valentine has extensive succession planning and you can be assured that you and your family will have access to knowledgeable counsel in the future. OUR LAWYERS The Arizona Bar Board of Legal Specialization has again certified Mark Valentine as a Specialist in the Area of Estates and Trusts. Attorney Catherine Keenan and her team continue to effectively handle, guardianships, conservatorships, probate and real estate law. Our Trust and Estate Administration Division are always developing new ways to handle Probate, Trusts and Estates in a cost effective manner. Our client referrals have made it possible to grow our firm and expand our range of services. We thank you for your confidence and support. There is no end to the brave, wise and humorous ways our clients approach end of life issues. We are proud to help families by providing a wide range of legal services. Our Valentine wish for you is to have good health, happiness, and love. We want to thank you for your patronage, referrals, and the support you have shown us, both on a business and personal level. Remember, initial consultations for your referrals are free. Call our office to see if you need to update your documents, business agreements, or retirement plans. Please note: Your financial and retirement plan must be consistent with your estate plan. Be proactive: please call our staff to schedule an updating meeting. We wish you and your family a very HAPPY VALENTINE’S DAY. Articles: A. What is a Trust? A Trust is a legal arrangement in which you (as the trustor or grantor) place property in trust for the benefit of one or more individuals (beneficiaries). A Trust is established via a Trust document in which you name someone ( including yourself) to manage assets placed in trust (a trustee) and give instructions on how distributions are to be made. Assets of all kinds can be placed in a Trust, including bank accounts, real estate, securities, mutual fund shares, limited partnerships and personal property such as cars or jewelry. Some assets are not appropriate to place in a Trust so be sure to consult with your attorney. With a Trust you can: • Maintain ownership and control of your assets during your lifetime, if you wish. • Provide a vehicle for the management of assets for your beneficiaries, such as a spouse, minor children or incapacitated or inexperienced individuals. • Stipulate the circumstances and timing under which distributions are to be made. For example, you can specify that your children should receive a certain amount solely for educational purposes or specify that a child is to receive a certain lump sum at age 21, receive income from the remaining trust investments until age 35 and then receive an outright distribution of the balance. • Arrange for your spouse to receive investment income for life with the principal distributed to your children at his or her death. • Protect your assets from the claims of the creditors of your beneficiaries after your death (protect your bloodline). What is the difference between a revocable or an irrevocable Trust? Trusts can be broadly categorized into two types, revocable and irrevocable. They are created for different purposes, but both types may be included in an estate plan. A Revocable Trust allows you to change the terms or cancel the trust at any time during your lifetime, but the terms become irrevocable at your death. Since most people want to retain control and ownership of their assets during their lifetime, they often choose to create revocable living trusts. Because you retain ownership and control of the trust assets during your lifetime, there are no immediate gift or income tax consequences when you create this type of trust. An Irrevocable Trust can never be altered or revoked once it is established. With this type of Trust, you relinquish beneficial ownership of the trust’s assets and thus remove them from your taxable estate. Common uses for irrevocable trusts are to support an incapacitated family member, to establish an education fund for children or grandchildren, or to fund a Charitable or Life Insurance Trust. However, any assets transferred into the Trust will be subject to gift tax, if applicable, at the time of transfer. What are the most common estate planning trusts? The two most common forms of estate planning trusts are testamentary trusts and living trusts. A Testamentary Trust is established and becomes effective only at death and is established according to the terms of your Will. Before assets pass into the trust, they are subject to the probate process. When the probate procedure is complete, assets will be placed in the trust, and the person named as trustee will take over their management. It will be the trustee’s responsibility to distribute trust income and/or principal according to the directions in the testamentary trust. Because a testamentary trust is created after your death, it is irrevocable. A Living Trust becomes effective the moment you sign the agreement and fund the Trust. Living trusts can be revocable or irrevocable. A revocable living trust is typically chosen by individuals who want to create a flexible estate plan, retain control of their assets during their lifetime, minimize estate taxes and protect their assets from the hassles and costs often associated with the probate process. A testamentary trust can offer the same tax benefits and asset control for a surviving spouse as a living trust, but because assets must pass through probate before being placed in a testamentary trust, many people choose to have a living trust drafted instead. In addition, during the trustor’s lifetime, a living trust can also provide incapacity planning that cannot be addressed solely by a Will that creates a testamentary trust–as a Will becomes effective only after death. Because of these two factors, the remainder of this section will focus on how a living trust works during life and at death. How is a living trust established? If you decide to set up a living trust, you should work with an estate planning attorney to write the terms of your trust in a legal document called a Trust Agreement. As an effective estate planning tool, a living trust should: 1. Contain a specified purpose (i.e., the management and distribution of assets) 2. Contain specifically identified assets 3. Provide for ongoing management of the trust’s assets should you become incapacitated 4. Indicate one or more easily verifiable beneficiaries 5. Spell out the terms under which the trust will terminate How are assets placed in a living trust? Unlike a testamentary trust, where assets are transferred to the trust after you die, assets are placed in a living trust while you are alive, after your trust agreement is complete. For your trust to be effective, as soon as you sign your trust agreement you should change the title of the property you want to place in the trust. If your assets are not titled in the name of your trust at your death, your assets will not pass according to the terms of the trust agreement–a common but potentially costly oversight. Implementing a trust (and overall estate plan) may include the following actions: 1.Preparing a new deed for the transfer of real estate (newly acquired property can always beadded to your trust during your lifetime) 2.Changing title on bank and brokerage accounts 3.Changing title on stock certificates 4.Changing beneficiaries on retirement accounts and life insurance policies What is a pour-over Will? A pour-over Will can direct any assets you may have neglected to place in your trust during your lifetime to flow into your Trust at your death. While assets passing under a pour-over Will are generally subject to probate, transfers of a small amount may be excluded from this procedure. This amount varies from state to state. How does a revocable living trust work during lifetime? With a revocable living trust, you can manage trust assets the same way you would manage your personal investment portfolio. A revocable living trust gives you a great deal of flexibility because: 1.You or anyone you name, who is competent and of age, can act as trustee 2.You can retain full control of the assets in your trust 3.Income tax filing procedures remain the same during the grantor’s lifetime 4.You can change the terms or revoke the agreement at any time should your financial circumstances or family relationships change 5.You can identify one or more successor trustees in your trust document should you become incapacitated or no longer wish to be the trustee B. Qualified Personal Residence Trusts (QPRT) The IRS has given one’s house a special exclusion from the rule that a GRIT cannot terminate in favor of a family member. (Treas Reg § 25.2702-5) A GRIT may be established with the remainder to a child or grandchild. a) May hold the personal residence, on other residence if used primarily as a residence, cash enough to cover six months of expenses, cash intended to be used for improvements within six months, sale or insurance proceeds for up to two years pending replacement or repair and an insurance policy on the house. Nothing else can be placed in a QPRT. (Treas Reg § 25.2702-5) b) The value of the interest going to the children or grandchildren for gift tax purposes is the value of the entire trust minus what the parent retains. c) The parents’ remainder interest would include the sum of the value of the right to use the house during the term (income interest) in addition to the value of the contingent right to receive the house back if the parent dies before the term is up. d) Only a limited amount of land is deemed to be residential land and can be transferred. (Private Letter Rulings 9328040 and 9442019) e) The key benefits of the QPRT are that it obtains a significant discount for transfer tax purposes; requires no annual filing of trust income tax returns because the residence doesn’t produce income, allows the parent to continue living in the residence after the trust has terminated, it allows the parents to transfer rental income to the children, free of gift tax. Valentine & Valentine, P.C. 6831 N. Oracle Road, Suite 145, Tucson, AZ 85704 (520) 498-0088