What is a Disclaimer Provision? 

Posted by on Sep 23, 2019 in Legal News |

It is difficult, when discussing legal concepts, to have the idea explained in plain English so that non-lawyers can understand. Disclaimer provisions are one such concept that seem difficult but don’t have to be. In this article, we will break down what a disclaimer provision in a will is and how it can help you and your heirs.

Some Definitions 

It always helps to understand what the language even means in the first place. First, a trust is a three-party relationship. The donor (you) grants title to the property to a trustee (the second party). This trustee then, at your command or at a specific time, such as when you die, transfers title to the property to the beneficiary. The beneficiary is the third party that you intended to get the property all along. Secondly, as you know, a will is a document that details where your assets will go after your death.

Now, let’s throw the word “disclaimer” into the mix. A disclaimer trust involves this three-party relationship. In a disclaimer trust, your will contains embedded disclaimer provisions. These provisions let your spouse, after you die, put specific assets into the trust by disclaiming them. The spouse refuses and rejects ownership of certain parts of your estate. Those rejected (disclaimed) parts of your estate go into a trust. 

This trust that contains the disclaimed parts of the estate is called a disclaimer trust. The disclaimed parts of the estate are not taxed when they go into the trust, which is why this instrument is preferred by people who want lower estate taxes for their heirs (i.e. all of us). After the disclaimer trust is established, the trust can pay out support benefits to intended trust beneficiaries. 

An Example

An example may (hopefully) help make this a little less confusing. Here is an example, using fake people, of a disclaimer trust: 

Ann, age 93, dies. She leaves her husband, Harry, age 92, her entire estate. Harry and Ann have three children. Harry disclaims his interest in Ann’s savings account, rejecting ownership of the account because he is 92 and doesn’t need the money. The savings account amount of $1 million goes into a disclaimer trust. It is not taxed.

Ann and Harry’s three children each receive payouts of $1,000 per month from this untaxed disclaimer trust. Harry has disclaimed ownership, so he has no interest in the savings account. The support payments come from the disclaimer trust for as long as Harry elects to disclaim that portion of Ann’s estate.

This simplified example is a way to understand how such a disclaimer trust works. There is another term to know, called a see-through trust.  

See-Through Trust 

A see-through trust should not be confused with a disclaimer trust, though the fact that both involve payouts can be confusing and cause to intermix the two. 

A see-through trust is a fund that is treated in the same way as a beneficiary of a retirement (IRA) account. A see-through trust bases its payouts on life expectancy of the beneficiaries. Based on that amount, it will calculate the required minimum distributions from the trust. These distributions occur after the holder of the IRA dies. The IRA holder can pick their beneficiary. The see-through trust payouts are not permitted to continue indefinitely. 

Inheritance Effects 

Every case is different. The effect of a disclaimer trust on inheritance is murky if the disclaimer is not clear and finalized before the death of the grantor. Note that an inheritance tax and an estate tax are not the same thing. The former is applied to the heir, while the latter applies to the estate of the deceased.

This might seem confusing, but just know that the bottom line involves the potential for lower taxes on your estate. Consult an estate planning attorney to discuss setting up a disclaimer trust and the potential benefits that such a trust will grant you.

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The Impact of Mental Instability on Your Estate 

Posted by on Sep 21, 2019 in Legal News |

One of the side effects of age is that it can cause mental instability. This doesn’t always mean a TV movie scenario where the mentally unstable person is wreaking havoc, but it can involve forgetfulness and an inability to think clearly. Every state’s law is different, and this article is not a definitive statement on the law. If you are mentally unstable but still alive, your wealth does not disappear. Here is an overview of the impact of mental instability on your estate. 

Defining A Lack of Capacity 

Needless to say, garden variety depression or even a touch of old age forgetfulness isn’t going to ring the alarm bells. Mental deficiency, to be actionable, requires you to have a lack of capacity, whether that is due to age or insanity. Insanity is a term that seems harsh and antiquated in today’s more enlightened society, but the term is still used by courts to describe an individual that cannot conduct his affairs because they cannot distinguish fantasy from reality or have a similar psychosis precluding them from functioning. 

Age is a more common way to lose capacity. If you have dementia or Alzheimer’s and are unable to conduct your affairs because of the effect the diseases have on your mind, you might be deemed incapacitated. 

The goal of the law is to protect incapacitated people, not harm them. The law recognizes that mentally incapacitated people, as with physically incapacitated people, are at a heightened risk for exploitation. Here are ways to protect your wealth before incapacitation strikes:

Appoint a POA

A Power of Attorney (POA) is someone that will manage your financial and/or healthcare decisions in your name when you are too incapacitated to make these decisions yourself. A POA steps in and acts in a protective mode, behaving as you would behave if you were able to function at capacity. Consult an estate planning attorney to fill out the paperwork to appoint your POA. They do not have to be a family member. Grant POA status to someone who is responsible, level-headed, and can be trusted to act in your best interests when making financial and healthcare decisions.

Don’t Put Assets in Your Kids’ Names 

Another mistake that is easy to make is to put property in your kids’ names. You may think that this will keep the property safe. After all, it’s your kids, so you can trust them. However persuasive that line of reasoning may be, it is not a good idea. If your kid gets sued, divorced, dies, or has something equally unfortunate happen to them, that asset will be at risk and you may lose it. Much as you may trust your kids, external events can happen that may risk your assets and cause you to lose them permanently.

Consider a Revocable Living Trust 

The better idea is a revocable living trust. This instrument can have one or more of your kids as co-trustees. You can set up the trust so that you still make the decisions as to management and use, while your kids get financial statements and the ability to interject if they feel like you are not making sound decisions (which is a risk when incapacitated). There are protective steps your co-trustee can take if they feel like your mental state is causing you to make bad financial decisions. An attorney can explain more in detail about how a revocable trust can apply to your situation.

Get a Lawyer 

Finally, get a lawyer. All of the above points are valid and necessary to preserving financial health, but they require professional help to accomplish. An attorney is the best person for the job.

The last point on this list is perhaps the most important. Consult an estate planning attorney to ensure you are protecting yourself properly. We don’t know what the future holds, but we do know what we do not want it to hold: financial ruin. Mental incapacity can happen quickly or gradually, but, either way, it certainly does not mean you have to be harmed financially. The law can protect you.

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September is Hurricane Season: Are Your Assets Protected?

Posted by on Sep 18, 2019 in Legal News |

It seems like every week, there is a new hurricane. With Hurricane Dorian barreling towards the Southeast Coast, many Americans are taking stock of their possessions and wondering if they are secure and protected. Luckily, that question is one that you don’t need to wonder about with no answer. In this article, we’ll give you a mini-guide on how to protect your assets against life’s (and Mother Nature’s) unpredictability. 

Don’t Wait 

Before getting into some ideas for asset protection, it’s important to stress that you don’t wait. Hurricane Dorian may not have your location in its path, but that doesn’t mean you should forget about asset protection until a huge storm is coming right at you. If you act quickly, asset protection will be one thing that you can strike off your checklist before the next big storm.

Secure Your Data (For Business Owners) 

The number-one thing that you should protect as a business owner is your employees. Prepare an emergency disaster plan and kit in the event that employees are trapped in the workplace. Human life is not replaceable. 

Number two on the asset protection list for business owners should be data. This includes data on computers, hard drives, paper format, and whatever other form in which you keep your records. Destruction of data can set a business back by weeks, if not months. It may even cause irreparable harm. Make sure that the data stored on physical property is protected. Either move the records to a safe location or copy them into a computer system that will be far from the storm. Store the data where the storm cannot reach, whether electronic, real, or otherwise. 

Insurance, Insurance, Insurance 

Insurance is an expense that you don’t know you need until it’s too late. Sure, the extra money spent on insurance could go for something fun, but it isn’t worth the pain that not having it will cause. Acquire insurance on your assets. Home insurance, flood insurance, fire insurance—the policy payments you make are investments in the security of your future. Also, consider life insurance policies. 

Estate Planning

Estate planning can help you prepare for pretty much anything. If you have a trust or a will, you can determine where your assets will go after you pass away. You can also select guardians for your kids. This might seem like an extreme preparation plan, but you never know. It’s better to have a plan in case of the worst possible outcome than to suffer the consequences of not having one.

Some Odds and Ends 

No disaster preparedness guide would be complete without a mention of physical things you can do to protect your belongings. Disaster preparedness kits are available at pretty much any major store, especially in areas that are prone to storms. Don’t forget, before you evacuate or hunker down, to take some concrete, real-labor precautions when it comes to your home, property, and other assets. This takes some good old fashioned elbow grease to complete, but, if you have your family help, it won’t take forever.


When guarding against water flooding your home, barricade the exterior with sandbags and/or urethane foam. Sandbags have been used to guard against floods for a long time. They absorb the water and provide a barrier. Before a hurricane hits, people rush the buy sandbags. This means that, if you buy them now, when your home is not in danger, you won’t be a victim of a lack of supply. 


Another trick is boarding up windows. Shattered glass is hazardous, both at the time it breaks and after, during cleanup. Boarding up windows will block wind damage. While many windows, especially in Florida and other hurricane-prone areas, are made to withstand high-impact winds, you can never be too sure that the storm won’t pick up an object and fling it at your window. Even the strongest window can break if debris is flung hard enough. 

Secure Loose Objects 

Speaking of debris flying around, one way to minimize that is to secure loose objects that the wind can pick up and hurl at your house. This includes your car, kids’ toys, grill, patio furniture, and anything outside that can be moved. While you can’t control what your neighbors do, secure the loose items in your own area to provide some control.

There are a lot of ways in which you can protect your assets during hurricane season, and this list is by no means exhaustive. Natural disasters are not predictable. We know that they will occur, but we don’t know the exact time or location. Don’t wait to secure your assets. Take these steps immediately, even if Hurricane Dorian hasn’t set its sights on you.

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