Plug 'n Play Estate Planning™

We feel that we have in many respects perfected the revocable trust approach to estate planning, because we have made it a simple system that clients easily understand, particularly when they see how easy it is to implement the “funding” instructions we give them in The One Source Book™.

The problem is that, until recently, we had not perfected an easy way for clients to do a more advanced protection for their children, for example, because we had not figured out a way to make it simple to create simple modules that clients can insert and remove at will. The danger is that the protections needed may sound to the client like a lot of work, causing them to hesitate to take the protective measures. We have now developed a new approach we call Plug'n Play Estate Planning™. This new approach makes it possible for clients to make simple, modular choices that they can make now and not be bound by until both clients have died. That way, they have the flexibility of changing their mind whenever they want to. They don't have to commit to a particular approach.

With Plug'n Play Estate Planning, we create a series of modules “on the back end of” a revocable trust that can be easily “inserted” or removed at any time. A module is simply another way to refer to a particular legal document, such as a special purpose trust or a major chunk of the document that we have moved to an exhibit or a free standing document. With this approach clients can easily change their minds about the “output” from the revocable trust right up until the time they die. One strategy we offer is free-standing modules which consist of unfunded trusts of various kinds, such as:

• the charitable remainder trust
• the QTIP trust
• the generation-skipping trust
• the total return trust

The whole emphasis will be on simple “modules” (exhibits to the main document or separate legal documents) that we can help clients insert and remove whenever they want, just like one can remove a hard drive from a computer and plug in a larger or faster one, plug in a bigger memory chip in a computer, both being examples of the concept of Plug'n Play (rather than throwing away the computer and starting over). This way, when our clients make changes, they don't have to redo everything.

Here are some examples:

• Anyone who has signed a pour-over will (to a revocable trust) has experienced the Plug'n Play concept in the sense that the will simply points its residuary proceeds to another instrument. ( The pour-over will is not unique to us but is a good starting example.)

• A long time ago, we got tired of reading the lengthy trustee powers section in the middle of trust documents and came up with the idea of a single sentence that points the reader to an exhibit, so that one can read through the trust without getting bogged down. The boring, confusing legal language (trustee powers) is tucked away in an exhibit, so that the actual trust document becomes easy for the client to read and understand.

• Our experience is that there is a finite limit to the amount that we can cram into a trust and have the average client be comfortable with it, just as there is a limit to the level of complexity we recommend to a client when doing what we call base level estate planning. As a result, a frequent add on later is to have an affluent child's share changed so that instead of passing outright, all or part passes to a generation-skipping trust (GST trust). We always let it pour from the revocable trust to the GST trust. It keeps each part “bite-sized.” (Some might argue, big bites, but at least it is broken up into bites.)

  • In this approach, the change to the revocable trust is often only a single sentence – all the new stuff is in the GST trust “module.”

Example. (Fictionalized to avoid recognition.) Recently a woman, whose overall plan is complex, wanted to change the distribution of her trust which provided that after a number of specific bequests in her revocable trust, the remainder goes to her husband, outright, otherwise to her daughter. She wanted an amendment to create a total return trust for the husband for life and guarantee that the remainder passes to her daughter, but in trust if she is under 40, otherwise outright. We made a one-sentence change to her trust and then created a simple but separate unfunded revocable trust (the module), which recites the special statute in Wisconsin allowing us to create valid unfunded trusts, and put all the new provisions in it. The result is a new piece that is easy for her to absorb. She can amend IT later, if she thinks of some modification, and the main document is uncluttered. If she later wants a whole new approach, we simply amend the main trust to no longer point to this unfunded trust.

THE FAMILY VISION EXPERIENCE™

Stephen J. Smith
Jessica A. Grundberg
Hostak, Henzl & Bichler , S.C.
840 Lake Avenue
Racine WI 53403
(262) 632-7541
Fax (262) 632-1256

For more information about the estate planning practice, see www.familyvisionexperience.com .

Disclaimer: This article is not intended to offer legal advice in any particular situation but rather is intended solely to alert the reader to a new development and the possible need for individualized advice.