My general advice is to sign new financial powers of attorney about every 5 to 10 years. Many financial institutions commonly reject older power of attorney documents as a matter of internal policy.
My general advice is to sign new health care powers of attorney at least every 10 years. The health care directive forms in Arizona regularly adapt to law changes, so regular updates are appropriate.
If a client begins to show signs of diminished mental capacity, then annual updates to the powers of attorney are appropriate.
Although many states permit self-settled asset protection trusts, Arizona law does not. But you can still establish an Arizona irrevocable trust with asset protection features:
You may contribute assets to an irrevocable trust for benefit of your children. The trust assets will be protected under Arizona law from the creditors of you and your children. Unless you need to exclude the assets from your taxable estate for estate tax purposes, you may serve as trustee and also retain a power to redirect the assets to different beneficiaries upon your death. This is called a testamentary limited power of appointment. The trust assets will be included in your taxable estate, but they will get a full step-up in income tax basis upon your death.
If you are married, you may include your spouse as a lifetime beneficiary of an individual irrevocable trust as long as contributions are separate property. This would permit your spouse to have continued access to the trust assets during your lifetime.
You can also give an independent trust protector the power to move the trust to a state that permits self-settled asset protection trusts, which would permit the trust protector to add you as a beneficiary.
Although I support the passage of Arizona Senate Bill 1439, which protects physicians, nurses, and other health care workers from employment discrimination if they choose not to participate in medical treatments or procedures that could end a patient's life, it is worth noting that this may make it more difficult in some cases for a health care agent to fulfill a patient's wishes as expressed in a living will declaration.
The definition of discrimination includes taking or threatening any adverse action including, but not limited to, termination of employment, transfer, or demotion, and adverse administrative action.
Sen. Katie Hobbs, D-Phoenix, who opposed the bill, told the Arizona Republic that, "A hospital could say it's the policy of this institution that we are not going to provide morphine doses to alleviate pain if the morphine dose could shorten the life of the individual in our care."
Senate Bill 1439 was passed and signed into law by Governor Doug Ducey in March 2017.
I am currently only accepting new estate settlement projects if I drafted the deceased person's will or living trust.
In 2016 the IRS released proposed regulations to the Section 2704 valuation rules, which would end the longtime practice of discounting the fair market value of closely-held business entities for gift and estate tax purposes. But President Trump's January 20 freeze on all pending regulations put a halt to that. While possible the Trump administration chooses to revise the regulations, I find it more likely that the administration will abandon the proposed regulations altogether. This would avoid the loss of a major benefit of using family limited liability companies for estate planning.
No. There is a sample form available, but it is not a prescribed form. It is perfectly fine to sign a Living Will using a different form or even no form at all.
There are, however, specific rules for how a Living Will must be signed and witnessed. A valid Living Will must be signed in the presence of at least one witness or a notary public. The Health Care Agent is not an authorized witness, nor is anyone involved with providing health care to the signer.
President-elect Trump has proposed a repeal of the estate/death tax for all, but his plan would limit the step-up in income tax basis to $10 million.
Trump has proposed a 15% income tax rate for all businesses, including LLCs and S-corps. This could be a huge tax cut for high income self-employed.
Summary: Proposed regulations signal death of a popular estate tax savings technique.
For approximately 25 years, wealthy individuals and families have retained estate planners to create corporations, limited partnerships, and LLCs to own and hold assets including family-controlled businesses, real property, mineral interests and securities with the objective of reducing estate tax liability. However, proposed IRS regulations effectively eliminate the use of valuation discounts in this context. Until now, a valuation discount was available when an ownership interest in one of these entities was valued less for estate and gift tax purposes than the actual value of the underlying assets. A qualified appraisal was needed to substantiate the discount, which was usually for lack of control and/or lack of marketability. The size of the discount depended on many factors, but ranged as high as 50%. Now that valuation discounts will no longer be available, the golden age of family limited partnerships and family LLCs may have ended. However, family-owned business entities are still useful for other reasons including centralization of management and asset protection planning. This is the time for individuals and families who have established these types of business entities to take a fresh look at whether to keep, reconfigure, or eliminate them.
 The new regulations clarify the application of Section 2704 of the Internal Revenue Code.
 Also known as the minority interest discount.
Summary: Recent Arizona case exposes weakness in many inheritance protection trusts.
If your estate plan includes inheritance protection trusts for your children or other beneficiaries, you may want to consider an amendment in response to a 2016 Arizona legal case. The case involved an inheritance trust established for a child by his Mother’s will upon her death. The IRS filed a tax lien against the trust because the beneficiary owed substantial personal income taxes from prior years. The beneficiary argued that the inheritance was a “purely discretionary trust” and therefore not a personal asset subject to the lien. The judge ruled against the beneficiary based upon a careful review of the specific trust provision regarding distribution of income and principal.
The relevant provision stated, “The Trustee shall pay to [the beneficiary] so much or all of the net income and principal of the trust as in the sole discretion of the Trustee may be required for support in the beneficiary’s accustomed manner of living, for medical, dental, hospital, and nursing expenses, or for reasonable expenses of education, including study at college and graduate levels.”
The judge interpreted the phrase “shall pay” as a mandatory fiduciary duty owed to the beneficiary by the Trustee, although he also noted that specific calculations were left to the discretion of the Trustee. This approach is sometimes referred to as a “discretionary support” or “hybrid” trust. The combination of the Trustee’s duty to make distributions (“Trustee shall pay to the beneficiary…”) and the inclusion of guidelines regarding how to define support (“in the beneficiary’s accustomed manner of living…”) gives the beneficiary an underlying right to distributions from the trust – at least to the extent of the support guidelines. The judge applied this logic to permit the IRS to attach a lien to the beneficiary’s interest in the trust.
For maximum protection of inheritance you leave to others, it may be appropriate to amend your will or living trust to clarify your intent that a Trustee’s power to make distributions is purely discretionary and not mandatory. Otherwise, a creditor could use the above-described case to establish a legal argument that diminishes, or worse, eliminates the protections you intended to create.
If your trust was drafted by a Wealth Counsel attorney using its industry-leading WealthDocx software, it probably does not include the type of extraneous wording (“in the beneficiary’s accustomed standard of living”) that contributed to the adverse ruling in this case. However, WealthDocx, by default, uses the phrase “shall pay” and that may be enough to give creditors a slight opening to argue that you actually intended to create a discretionary support trust. Thus, in response to this recent Arizona case, I recommend an amendment that does the following:
 Duckett v. Enomoto, U.S. District Court, D. Arizona; April 18, 2016.
 A purely discretionary trust does not grant a property interest to the beneficiary because the Trustee is not legally obligated to make any distributions to the beneficiary. See A.R.S. §14-10504(E).
 Whether the IRS could immediately seize assets from the trust to pay the lien is a different matter and was not ruled upon in the case.
 Bouman Law Firm has used WealthDocx software exclusively since October 2006.
Starting October 18, the office phone number (520-546-3558) is compatible with text messaging. Please include your name in your initial message and I will reply when time permits.
Thomas J. Bouman