BENEFICIARY: TODs & PODs

Posted on June 9, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By AI

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A POD (Payable on Death) or TOD (Transfer on Death) account is a type of bank account where the account owner names a beneficiary to receive the account assets when the owner dies.

Key points about these accounts include:

  • Beneficiaries can be anyone, including minors, non-U.S. citizens, and organizations.
  • The beneficiary needs to provide a certified copy of the deceased’s death certificate to the bank or brokerage firm.
  • The assets are transferred immediately upon the account owner’s death.

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BENEFICIARY DESIGNATIONS: Top 10 Tips for Medical Professionals

Pros

  • Probate avoidance: By sidestepping probate, POD and TOD accounts streamline the distribution of assets post-death, allowing beneficiaries to gain access to these funds with greater speed.
  • Simplicity: Setting up these accounts is generally straightforward, often requiring just the completion of a form at the bank or brokerage firm.
  • No additional cost: There’s usually no cost to establish these accounts, aligning with the needs of individuals seeking a cost-effective method of transferring assets.

Cons

  • Joint ownership complexity. When an account is jointly owned, the beneficiary of the account won’t receive the assets until the surviving owner(s) die. The same applies to accounts owned in states with tenancy by the entirety for married couples.
  • Naming alternative beneficiaries: These accounts do not allow for the nomination of alternative beneficiaries if the primary beneficiary or beneficiaries predecease the account owner. This could lead to the assets being subjected to probate if the primary beneficiary is no longer alive at the time of the account holder’s death.
  • Transfers only happen after death: These accounts stipulate that the person must pass away before the beneficiary can access the funds – a restriction that could prove troublesome if the beneficiary requires access to these assets during the account holder’s life or if the account owner becomes incapacitated during their lifetime.

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PHYSICIAN ESTATE PLANNING: Choosing a Personal Representative or Executor for Your Last Will and Testament

Posted on March 14, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd CMP®

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Your Executor or personal representative is named in your Will and is responsible for management of assets subject to probate. A basic checklist of the duties of the personal representative looks like this:

  1. Gather all estate assets;
  2. Collect all amounts owed the decedent;
  3. Notify creditors and paying all valid debts;
  4. Selling assets as needed to pay expenses or as directed by the Will;
  5. Distribute assets to beneficiaries;
  6. File decedents final federal income tax return;
  7. File an estate tax return if the estate is large enough; and
  8. File inventories and annual returns with the probate court, if required.

The position requires a lot of responsibility and involves many duties and a considerable commitment of time. The personal representative must petition the probate court for formal appointment.

Selection of your personal representative should not be made lightly, or as a favor to a friend.  It requires a lot of work and very often for little or no pay.  Friends and family typically will not charge the estate for their time and work.  Outside advisers like attorneys and accountants will not hesitate to bill for their work effort.  A few items for your selection criteria should be:

  1. Longevity – the person should have a likelihood of being able to serve after your death;
  2. Skill in managing legal and financial affairs;
  3. Familiarity with your estate and wishes;
  4. Integrity and loyalty; and
  5. Impartiality and absence of conflicts of interest.

Alternatives to family or friends might be a corporate executor, such as a bank, an attorney, or other adviser.  Similar criteria should be used in the selection of a trustee.

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INHERITANCE: Disclaimers

Posted on February 25, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITION

“Show Me the Money”

By Staff Reporters

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In some situations, an inheritance might complicate an estate and add to the estate tax burden.  If there are sufficient assets and income to accomplish financial goals, more assets are not needed. A disclaimer may be useful.  This is an unqualified refusal to accept a gift or inheritance, that is, when you “just say no”.  You have decided not to accept a sizable gift made under a will, trust or other document. 

When you disclaim the property, certain requirements must be met:

  • The disclaimer must be irrevocable;
  • The refusal must be in writing;
  • The refusal must be received within nine months;
  • You must not have accepted any interest in the property; and
  • As a result of the refusal, the property will pass to someone else.

The property passes under the terms of the decedents will, as if you had predeceased the decedent. If the filer of the disclaimer has control, the property will be included in the disclaimant’s estate and can only be passed to another as a gift for as an inheritance. The intent of the disclaimer is to renounce and never take control of the property.

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ESTATE Planning Basics

Posted on July 17, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

Rick Kahler MS CFP

By Rick Kahler MS CFP®

Supposedly, the most frightening words one spouse can hear from the other are, “Honey, we need to talk.” Even more frightening, however, is, “Honey, we need to talk about estate planning.”

What can you do if you want to get serious about estate planning, but your spouse doesn’t?

Here are a few suggestions:

  1. Consider ways to persuade a reluctant spouse to participate

First, give up nagging. In my years of financial planning, I’ve seen how ineffective it is from either an advisor or a spouse.

Instead, it might be worthwhile to do some research and show your spouse some of the specific consequences of not planning. Depending on the complexity of your circumstances, you may find it worthwhile to consult an attorney, accountant, or financial advisor. You can also find a great deal of helpful information, such as state probate and intestacy laws, online.

If you have no wills, find out how your state laws distribute assets when someone dies without a will. Show your spouse how that distribution would affect your family. In many cases, intestacy laws are still designed around a traditional one-marriage-with-children family structure. They may fail to provide for members of families that don’t fit that mold—for example, by disregarding stepchildren and step grandchildren.

If you have wills but made them years ago, take a close look at their provisions. Show your spouse—with numbers, if you can—exactly who would benefit and who would not. Your spouse may be persuaded to take action if he or she sees the specific ways that yesterday’s wills don’t provide for today’s family. Even if this accomplishes nothing beyond convincing your spouse to destroy an outdated will, it may be worthwhile. An outdated will, in some cases, can be worse than none at all.

It’s quite likely that neither of these approaches will succeed. This leaves you with the next-best option.

  1. Do what you can on your own

With your own separate property, you can do any estate planning you want, including executing a will and setting up a living trust. I would also strongly encourage you to execute powers of attorney for financial and health decisions.

However, you might be surprised at the limits on estate planning for assets you consider yours. One important provision is that married people cannot name anyone except each other as beneficiaries on retirement plans without the spouse’s permission. Suppose, for example, you would like to name your children from a previous marriage as beneficiaries on a retirement account as a way of providing fairly for them if your spouse died intestate. You would need your spouse’s consent to do so.

Also, a will executed by one spouse does not affect assets held jointly or in trust, annuities, retirement plans, or individually held bank or brokerage accounts that have a TOD (transfer on death) provision.

Assuming you cannot persuade your spouse to participate in estate planning, and assuming you have done whatever individual planning you can, there’s one more step you can take.

  1. Educate yourself.

Do your best to create and maintain a complete inventory of assets you and your spouse hold jointly, as well as your separate retirement accounts, insurance policies, and other individual assets. Include account locations, approximate balances, and access information. Having this information will be invaluable if you end up as the administrator of your spouse’s estate.

Ironically, the person who benefits most from your separate estate planning may be your non-planning spouse. Yet doing whatever you can-will also help you be prepared, just in case you need to deal with the consequences of your spouse’s lack of planning.

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Assessment

Some basic; but important thoughts.

Conclusion

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OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

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About Digital Estate Assets

Posted on June 19, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

[By Staff Reporters]

Digital Messages for Loved Ones From Beyond the Grave

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No one wants to die. Even people who want to go to heaven don’t want to die to get there.
And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life.
It is life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away.
Sorry to be so dramatic, but it is quite true.
[Steve Jobs]
Ode to Steve Jobs
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skeleton-jpeg

[What it is –  How it works?]

Life Continues when you pass away

> Ensure your presence – be there when it counts
> Leave messages for your loved ones – for FREE !
> Store for FREE digital assets in designated safes

Learn more: Death in the Digital Age

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[PHYSICIAN FOCUSED FINANCIAL PLANNING, INSURANCE AND RISK MANAGEMENT COMPANION TEXTBOOK SET]

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16th NATIONAL: Healthcare Decision Day 2024

Posted on April 16, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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National Healthcare Decisions Day (NHDD) is an annual initiative celebrated on April 16th. Its purpose is to inspire, educate, and empower the public and healthcare providers about the importance of advance care planning. NHDD encourages individuals to express their wishes regarding healthcare, and it emphasizes that providers and facilities should respect those wishes, whatever they may be.

Here are some key points about NHDD:

Let’s continue spreading awareness about advance care planning and making informed decisions about our health and well-being.

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Keep Medical Directives Up to Date

Posted on November 29, 2018 by Dr. David Edward Marcinko MBA MEd CMP™

On Medical Directives

By Rick Kahler CFP®

One important component of estate planning is a document, usually called a medical directive, which can include a living will, that sets out your wishes for end-of-life care and a health care power of attorney that designates someone to make medical decisions if you are unable to do so. A medical directive addresses important issues that are inevitable, but that most of us don’t want to think about or talk about. Consequently, many people leave their family members and medical providers with no guidance.

If you have not executed a medical directive, I strongly recommend doing so. If you do have a living will, I suggest you review your document periodically to be sure it still provides the best options for carrying out your wishes.

Example:

Recently I’ve encountered two situations where medical directives that had been perfectly valid and appropriate at the time they were executed had become potentially useless. In both cases, a family member designated to make end-of-life decisions had subsequently developed dementia that affected their competency to make those decisions.

This possibility is one reason why, if your medical directive designates your spouse, it’s wise to name an alternate as well. Your spouse, aging along with you, may not be the most capable person to make hard decisions when the time comes.

It’s also a good idea to communicate your specific wishes to both your primary and alternate designees. Discuss with them, as well, whether they believe they will actually be able to carry out your wishes. Unfortunately, I have seen cases where family members, with the most loving of intentions, were so hesitant to make decisions that their inaction violated their loved ones’ last wishes.

These conversations are not easy. Yet they are essential. One of my clients recently was faced with the possibility of making end-of-life decisions for her father. Several years earlier, he had executed a medical power of attorney and living will document naming her as his designated agent. At that time, the two of them had talked about his wishes, so she knew the choices he would want her to make.

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For now, my client was spared the necessity of making these difficult decisions because her father recovered. But, faced with the reality of “someday” contingencies becoming “right now” hard choices, she felt capable of doing what had to be done. She told me that what gave her the strength she needed was not the responsibility of being designated in the living will document. It was the conversations she and her father had had, both at the time he signed the document and during his recent illness.

“I made him a solemn promise that I would make the choices he needed and wanted me to make,” she said. “It felt like a vow that I couldn’t ever go back on.”

It may not be especially difficult for a family member to agree to become the designated representative in a medical directive. If the agent named in a healthcare power of attorney is in good health, the need to make hard decisions is somewhere in the future and can feel theoretical.

But at the time of a medical emergency or a draining final illness, a family member who is frightened, grieving, and exhausted may find actually making those decisions to be the hardest thing they’ve ever had to do.

Assessment

Giving your family members the clarity and direction to make end-of-life decisions for you requires more than putting their name into a document. It requires choosing someone who is willing to carry out your wishes, communicating your wishes to them through conversations, and checking periodically to make sure they are still willing and able to carry out the solemn promise that a living will entails. 

Conclusion

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EXPRESSING YOUR WISHES IN ADVANCE

Posted on May 10, 2016 by Dr. David Edward Marcinko MBA MEd CMP™

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dan

By Dan Dan Timotic CFA

EXPRESSING YOUR WISHES IN ADVANCE

 

It’s not pleasant to think about the possibility of being unable to make your own medical or financial decisions; even for doctors and financial advisors.

That may explain why many people don’t take the time to draw up appropriate documents expressing their wishes.

THINK: Prince.

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death

[NOT today … Death!]

READ MORE

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On Doctors Passing Wealth to Children

Posted on July 17, 2013 by Dr. David Edward Marcinko MBA MEd CMP™

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Limiting your kid’s ability to tap principal

By Rick Kahler CFP® http://www.KahlerFinancial.com

Rick Kahler CFPWhen passing wealth to your kids, some medical professionals should consider creating a trust to limit the later generation’s ability to tap into the principal. Several astute readers suggested this strategy after my recent column citing research that shows 90% of inherited wealth is gone by the third generation.

Preserving Wealth

There is no question that a trust, done correctly, can go a long way to preserve wealth after the death of the wealth accumulator. Let’s explore what “done correctly” means.

1. Trust law is complex. Engage an accountant and attorney with strong skills and expertise in trusts.

2. Be sure the assets you intend to go into the trust will actually transfer.

Retirement plans like IRA’s, 401(k)’s, and profit sharing plans will pass to whomever you listed as the beneficiary. This must be the trust. In addition, the trust must include a number of special provisions in order for a retirement plan to be distributed according to your wishes and not as a fully taxable lump sum.

Annuities, insurance policies, and accounts with a TOD (transfer on death) clause will also pass to the named beneficiary.

Assets held in joint tenancy will not pass to the trust. Many married couples jointly own most of their major assets, such as the family home, investment real estate, brokerage accounts, or bank accounts.

3. Be sure there are enough assets in the trust to justify the trustee fees. Most professional corporate trustees charge $3,500 to $10,000 annually, or up to 1% of the trust assets. If a trust with $100,000 incurs an annual fee of $3,500, your hard-earned estate will benefit the trustee as much as your heirs. A trust probably doesn’t make financial sense if the total fees will exceed 2%.

4. If a trust still seems like a good strategy after the above caveats, the next question is how much to limit heirs’ ability to withdraw money. From an actuarial standpoint it’s fairly simple. If you limit annual withdrawals to 3% of the principal, there’s a strong probability of the money lasting several generations with its buying power intact. Provided, that is, the trustees pay close attention to the next point.

5. To generate sufficient returns to pay out up to 3% annually to heirs and also keep up with inflation, the majority of the portfolio must be invested in assets that will grow over time, such as stocks, real estate, and commodities. It needs to be broadly diversified among many asset classes and countries. The trustees must also limit the fees paid to manage the investments. Many corporate trustees have an inherent incentive to use their own bank’s mutual funds, which can have annual fees as high as 1.5%. One way to avoid this conflict of interest is to instruct the trustee to place the funds with a fee-only investment advisor who has a largely passive approach to managing money. This could cut the portfolio fees by 50% or more.

6. Finally, before setting up any trust, pay close attention to taxes. Congress recently increased the top income tax bracket to 39.6% on wealthy taxpayers. Any trust which keeps more than $11,950 of annual income is considered “wealthy.” So here is the problem. If the trust retains enough earnings to increase the principal to offset inflation, it will have to pay substantial income tax and will probably need to restrict withdrawals to 1 or 2%. All of a sudden a multi-million dollar inheritance becomes simply a source of secondary income similar to Social Security.

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Tax and Financial Strategy 2012

Assessment

Trusts are valuable estate planning tools. But like any other powerful tools, they are best employed by someone with the skills to use them well.

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Helping Physicians Find a Trustworthy Trustee

Posted on May 15, 2012 by Dr. David Edward Marcinko MBA MEd CMP™

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Estate Planning Basics

By Rick Kahler MS CFP® ChFC CCIM

www.KahlerFinancial.com

Trusts are effective financial planning tools based on a structure that is simpler than it may seem. The creator of the trust [doctor-layman, etc] contributes something of value into the trust and creates instructions as to how it will be managed and eventually disbursed. The trustee [third party] is responsible for keeping the property safe and managing and distributing it according to the instructions. The beneficiary [spouse-children, etc ] is the person or entity that eventually will get the property in the trust.

Trusts may be useful in estate planning, asset protection, and providing for elderly parents or other family members who may be unable to manage their own affairs.

Establishing a trust isn’t especially difficult, but it’s not a do-it-yourself project. It’s important to work with an attorney to be sure the trust complies with legal requirements and will actually carry out its intended purpose.

Trustee Selection

What may be the hardest part of setting up a trust is choosing the trustee. Here are a few suggestions that may help. Some of them come from information provided by the Financial Planning Association [FPA]:

1. Be sure you as the creator of the trust understand the trustee’s role. Ideally, trustees will have some expertise in legal matters, taxes, and investments. The specific knowledge needed will vary, depending on the scope and purpose of the trust. It’s important to discuss that purpose in detail with any potential trustees to be sure they have the necessary skills and are comfortable taking on the responsibilities.

2. Consider the pros and cons of choosing a personal or a professional trustee. Generally your choice will come from one of three categories: A personal trustee who is a close friend or family member, a personal trustee who is a professional advisor, or a corporate trustee such as a bank’s trust department.

A family member or close friend may already have inside knowledge of your circumstances, as well as having personal relationships with the beneficiaries of the trust and a personal commitment to carrying out your wishes. The possible downside is that the trustee may have conflicts of interest or find it difficult to enforce some trust provisions.

Professional advisors such as attorneys or accountants will have specialized knowledge that may be important. Even advisors who have worked closely with you will have a level of professional detachment that may make it easier to carry out your wishes, especially any that involve saying “no.”

With a corporate trustee, the relationship is with the firm rather than an individual, which provides continuity and protects the trust even if the original trustee is unable to continue serving. The downside is the lack of detailed personal knowledge and involvement.

3. Evaluate costs. Professional or corporate trustees will, of course, charge for their services. Friends or family members may not charge fees but really should be compensated appropriately. State laws govern the maximum fees trustees can charge and the specific services provided.

4. A commitment to take on the responsibilities of the trust and to carry out your wishes with integrity may be the most important quality for a trustee. Someone without financial and legal knowledge can always get help from professional advisors.

Assessment

Finally, remember doctor, the word “trustee” isn’t used by accident or coincidence. The trustee’s role is to act in your stead when you are unable to, managing the assets of the trust with the same care you would use and making the decisions you would make in the best interests of the beneficiary of the trust. The most essential factor in choosing a trustee is finding someone you can rely on to act on your behalf.

Who is, in short, trustworthy?

Conclusion

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How to Avoid Whitney Houston’s Estate Planning Mistakes

Posted on May 2, 2012 by Dr. David Edward Marcinko MBA MEd CMP™

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Look at Money Scripts

By Rick Kahler MS CFP® ChFC CCIM

Since the death of singer Whitney Houston, I’ve seen several articles from attorneys and financial advisors about the errors in her estate planning. They have summarized three areas where it was badly flawed:

1. Lack of privacy. Ms. Houston had a simple will that was subject to public probate, rather than a living trust that would have kept her affairs private. Anyone with thumbs and access to the Internet can see a copy of her will.

2. Lack of protection from claims, con artists, and circumstances. The estate, estimated to be worth over 20 million dollars, was left to Ms. Houston’s daughter, Bobbi Kristina Brown. A vulnerable young woman just barely of legal age will receive three huge payouts over the next decade and become a multi-millionaire by the time she’s 30. A trust could have given her some limits and structure, as well as providing for advisors to help her learn how to manage her wealth and protect herself from predators.

3. Lack of tax planning. The federal estate tax of 35% on anything over $5,120,000 will apply to the estate, so Uncle Sam will take around a third of it off the top.

Estate Planning – How Time Flys By

Unfortunately, this lack of skilled estate planning isn’t all that rare among wealthy people; or even some medical professionals. So, here are a few of the money beliefs that may be behind inadequate estate planning:

  1. “Complicated estate planning is for rich people, and I’m not rich.” This may especially apply to owners of small businesses – like some doctors – who don’t have a particularly high income or lifestyle but whose land or businesses may be worth several million dollars. Yet good estate planning advice is especially important for them, because their heirs aren’t necessarily aware of or prepared for a substantial inheritance.
  2. “The financial advice that was good enough when I was just starting out is good enough now that I’m successful.” A tax preparer, accountant, or financial advisor who is highly competent with small individual or business matters may not have the knowledge necessary for more complex estate planning. Seeking out different financial advisors as your income and net worth grow is no different from consulting a specialist rather than a general practitioner if you have specific medical needs.
  3. “When you can afford the best, you’ll get the best.” Trying to save money by hiring bargain-basement financial advisors is almost always a mistake. It can also be a mistake to assume that someone who charges top-tier fees will always have top-tier skills and integrity. Even if a financial planner or other professional has a reputation as an advisor to the wealthy, it’s still essential to verify that the person or firm is right for you. Ask for references and be willing to ask hard questions about compensation, investment philosophy, and services. Make sure you are a client, not a customer. Work only with financial advisors who, like accountants or attorneys, have a fiduciary duty to put your interests first.
  4. “I know how to make money, so of course I know how to manage money.” Many highly educated and skilled professionals are high earners but don’t necessarily have the knowledge to manage their earnings well. In order to know whether the advisors you hire are competent, it’s important to learn the basics of investing and money management. Look for advisors who don’t set themselves up as “gurus” but are willing to teach and to work in partnership with you.

Assessment

When it comes to financial advice, it isn’t enough to find someone who will “make you feel like a million dollar bill.” It’s more important to find advisors who will help you take good care of all your dollars.

Conclusion

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The Testamentary Letter?

Posted on November 11, 2010 by Dr. David Edward Marcinko MBA MEd CMP™

More Emotional than a Will or Trust

By Staff Reporters

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Many doctors and medical professionals, on drafting their wills or trust documents, feel that these legal documents do not adequately convey the emotional qualities that may be important when assets are passed after death. A testamentary letter can be used to convey such concerns, as they are impacted by the passage of assets. When unequal distributions of estate assets are given to children, a testamentary letter can outline the reasons.

Example:

The oldest daughter may be an established attorney who does not have the financial need for a large bequest, whereas the youngest son is a struggling artist. A testamentary letter might convey a parent’s wishes that the children use a portion of the assets received to continue the charitable giving programs that the parent has started—a desire that may not be a legally enforceable condition through the will.

Conclusion

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The Total Return Trust

Posted on December 29, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Uniform Prudent Investment Standards

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By Dr. David Edward Marcinko; MBA, CMP™

By Tom Muldowney; MSFS, CFP®, AIF®, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ™, CMP™

The physician-investor dichotomy, income now versus growth for later, is not unique. Trusts; that have the potential to span decades, usually place the interests of the income beneficiary at odds with the remaindermen.

Conflicting Goals

Historically, trustees invested these irrevocable trust assets in bonds so as to generate the necessary income for the income beneficiary.  But this led to conflicts…investing in bonds provides little growth of either the investment asset base or the income generated thereon.  Interestingly, this has also placed the interests of the remaindermen at odds not only with the income beneficiary but with the trustees who have been charged with the duty of stewarding these assets for the benefit of both generations.  This conflict of the generations has led to some surprising results both in practice and in the courts.

“Total Return Trust”

Income beneficiaries want current cash flow, remaindermen want growth and trustees want to minimize the exposure to liability.  Notice the subtle difference … rather than “income” (dividends and interest) income beneficiaries want cash flow. They generally do not care about the source from which the cash flow was generated. Recognition of this subtle but important difference has led to the development of Uniform Prudent Investment Standards and the introduction of the “Total Return Trust.”

Uniform Prudent Investment Standards

The Uniform Prudent Investment Standards (agreed upon by legislatures of all 50 states) identify that for a trustee to be a “prudent investor”, investments that are allocated across a broad spectrum of investment asset classes, provides the greatest protection from investment risk. But; because this allocation across a broad spectrum must – by definition – include stocks, the potential for income in its technical sense (interest and dividends) must be reduced. The use of a “Total Return Trust” addresses and solves this problem.

Combination of Assets

A total return trust thus allows a trustee to manage a portfolio of assets commensurate only with the volatility risk that the trustee identifies is appropriate for the trust.  This gives the trustee the ability to invest in a combination of assets that include stocks, bonds and other investment assets.  The purpose of the total return trust includes safety and protection of the assets with a reasonable growth rate, from which a periodic ‘unitrust’ cash flow may be withdrawn for the income beneficiary.  Unitrust cash flow is based on the recognition that a stated percentage withdrawal from trust corpus, each year, may be made to the income beneficiary without regards to the source of that cash flow, whether it be from income, or from corpus. The Unitrust cash flow recognizes that from time to time volatility in the equity marketplace will cause the trust corpus to fluctuate, sometime below that amount that was originally invested.

Cash Flows

Using this technique, as long as assets of the trust portfolio grow and the long term cash flow withdrawal rate is less than the long term growth rate, several benefits to all of the parties will inure: Cash flow to the income beneficiary will be maintained; cash flow to the income beneficiary will  increase as the asset base increases;  asset growth will satisfy the needs of the remaindermen; the trustee will be secure in knowing that he has satisfied his fiduciary duty to serve both the income beneficiary and the remaindermen.  A substantial side benefit for the income beneficiary is that the cash flow will include not only income (dividends and interest) but will also include distributions of long term capital gains (which enjoy a lower annual tax rate.)

MORE:

https://www.crcpress.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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Re-formatting an Irrevocable Trust

Posted on December 16, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

UPIS and the Passage of Timecycle-of-life-2

By Dr. David Edward Marcinko; MBA, CMP™

By Tom Muldowney; MSFS, CFP®, AIF®, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ™, CMP™

Many trusts, written long ago for physicians, were established when interest rates were substantially higher, certainly higher than they are today. The passage of time and the re-call or maturity of those higher yielding bonds have left bond investors scouring the investment field for anything that will produce a decent income flow … Short of taking a lot of bond risk, they are found lacking.  Thus, these old ‘irrevocable’ income trusts face substantial hurdles in generating the necessary income flow for the income beneficiary and the necessary growth for the remaindermen.

Uniform Prudent Investment Standards [UPIS]

With the acceptance of the Uniform Prudent Investment Standards, many of the several states simultneously implemented trust standards that allow beneficiaries/remaindermen and trustees to request the ‘re-formation’ of these trusts from “Income’ trusts to “total return” trusts on (at least) a statutory basis. By ‘statutory basis’-  we mean that the trustee can reformat the trust and begin making cash flow payments made from total return. This ‘re-formation’ process minimizes or eliminates the problem of ‘income for the beneficiary’ versus ‘growth for the remaindermen.’

Available QTIP Election

How, then, can a physician-investor evaluate a situation in which a QTIP election is available?

The matters to be weighed will include the age and health of the surviving spouse; the projected size of the surviving spouse’s gross estate with and without the inclusion of the QTIP trust corpus; the amount of available unified credit; whether the decedent’s trust includes any precatory language that is intended to guide the trustee in balancing the rights of the surviving spouse with the rights of the trust remaindermen (‘precatory’ language is to provide guidance only…it does not have the force of law) for example, language allowing the trustee to favor the lifetime income beneficiary when making investment decisions); the amount of income that the surviving spouse needs or wants to have generated from the QTIP trust; the relationship between the surviving spouse and the remainderman of the trust (particularly as that relates to the amount of income that the surviving spouse would like to have generated by the QTIP trust and the pressure that would be put on the fiduciary to generate such income); and the likely asset allocation decisions that the trustee would make under the circumstances, given that there is not a single formula that must be applied but that a range of decisions probably are appropriate as the bank or trustee seeks to fulfill its fiduciary duties. In any event, when the long-term view is taken, the most appropriate QTIP election to make is a difficult decision and is best determined by examining a range of alternative outcomes for both the surviving spouse and the remainderman.

Assessment

Of course, this decision is easier if both spouses die before the estate tax return for the spouse who died has been filed (but not all participants are so willing to cooperate.) It has been suggested that with every case, to file an extension of time request for filing the estate tax return in order to delay making the election until the latest possible date.

Conclusion

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Life Insurance Policies and Trusts

Posted on July 30, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Tax and Estate Planning for Doctors

Staff Writers

All subscribers to the Executive-Post know that carefully crafted arrangements may minimize estate and income taxes.

Life Insurance Policies

The simplest way for a medical or other professional to avoid estate tax on the proceeds from life insurance policy death-benefit, is having a properly drafted trust own the life insurance policy. The best approach is for the trust to purchase the policy, but if you already own it, you can transfer the policy to a trust. If the doctor survives the transfer by no less than three years, the proceeds will escape estate taxation [three year throw-back rule]. The settlor can retain the right to remove the trustee and appoint a successor, who is not related or subordinate to the grantor. Most grantors wish to retain such a right.

Periodic Gifting

Generally, the insured provides funds for the premium payments through periodic gifts to the trust. In most cases, the gift qualifies as a gift of a present interest (rather than future interest), qualifying for the $12,000 exemption.

By using a Crummey withdrawal power, the beneficiary is permitted to withdraw property whenever a contribution is made. The right usually is given each year with a specified period (30–60 days). If an affirmative election is not made, the power will lapse. This notice should provide reasonable time for the election and be in writing. Generally, the withdrawal right must be exercised affirmatively. In any event, if the beneficiary does not take action or respond to the letters, the Tax Court has previously indicated that 15 days is a reasonable period of time.

Minor’s Guardian

The Crummey power can be exercised by a minor’s guardian (parents). However, it is best if someone else can exercise the withdrawal right if the donor is also the parent. An unrelated guardian can always have the right to exercise the Crummey withdrawal power.

Last-to-Die Insurance

A popular use of insurance for physicians is the so called last-to-die insurance policy. Such insurance is payable upon the death of both the donor and his spouse.

For a Family Owned Business [FOB], this permits the owner to bequeath or gift the stock to the spouse free of transfer tax when the second spouse dies the insurance proceeds are paid to the trust and utilized to pay the estate taxes on the FOB stock. The insurance proceeds are free from both estate and income tax.

Conclusion

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