Planning Potpourri

■ Doctor Protection. Whatever happens with the
estate tax, most physicians are more worried about malpractice then they are
the estate tax (and they don’t love the estate tax!). Doc can set up a self
settled trust in any jurisdiction permitting it and remain a beneficiary at the
discretion of the independent trustee. There are obvious risks and issues but this
can protect the dough from Doc’s future malpractice claimants.  A common transaction for Doc to get assets
into such a trust is for him or her to sell assets to this trust. Since it is a
“grantor trust” Doc doesn’t recognize any gain on the sale. The assets, and the
growth in them, should have some protection from claimants. But there’s a
better approach. Dick Oshins, well tanned estate tax maven from Las Vegas,
prescribes a planning approach that he affectionately refers to as a “BDIT,” to
give doctors that restful night sleep.  Instead of Doc setting up a trust and facing
the risks involved, Mom set up the trust.
Mom expressly does not reserve any of the powers that would make the
trust a grantor trust to her (i.e., taxable to her for income tax purposes).
The trust includes an annual demand or Crummey power. This is almost standard
fare for the typical insurance or kids trust. Doc is the only beneficiary of
this trust.  Doc’s Crummy power withdrawal
right makes the trust a grantor trust as to Doc.  Doc can therefore sell assets to the trust
without gain, and obtain the desired protection Doc supposedly gets in the
typical asset protection trust, but perhaps better since Doc didn’t set up the
trust, Mom did. Cool. But ya’d better get your BDIT while you can. Word is that
Crummey powers that are a key to BDITs and many other trusts, might be put on
the tax chopping block. Think about it. Give the Republicans the $5M estate tax
exclusion and 35% rate they want, but eliminate all the fund estate tax toys,
so most folks end up paying higher tax. And for the nervous Nellie’s in the medical
world that will make it all the harder (perhaps impossible) to do asset protection
as well.

■ Family Ties.  If you’re not into the fireworks that accompany
most estate disputes, take some proactive steps to lessen the likelihood of
explosions. Here are a few ideas:◙A letter from the testator explaining the plan,
and guiding heirs, may have a significant impact.  ◙  Some experts recommend
you should dictate a letter the attorney can edit.  ◙Don’t video tape without careful evaluation as
it can preserve mistakes and most estate litigators caution against it. ◙Use a no contest or
mandatory mediation provision.  ◙Add conflict
management provisions to the estate planning documents. ◙Courageously have uncomfortable conversations
with your advisers. Thanks to Paul Fisher
of Pepperdine School of Law.