How to avoid being tripped up in family legal, financial planning

When it comes to estate planning, sometimes the most obvious things can be overlooked – like forgetting to consider whether your ex-spouse should be your health care surrogate, says James A. Ballerano Jr, an attorney at Day Pitney LLP.

Ballerano spoke at a Family Office Association event at Four Seasons Resort Palm Beach with Todd Kesterson, director of family office and business services for tax and consulting firm Kaufman Rossin.

One of the topics was the importance of having legal documents issued in the person’s state of residence. For example, someone who has moved to Florida should have a health care surrogacy and estate plans drawn up here to prevent delays and legal issues, Ballerano said. If you have moved to Florida from the Northeast, make sure to file with the Atlanta IRS office so your former state is less likely to say you haven’t moved away in an attempt to claim state taxes. Kesterson said mileage logs and receipts can help document that someone has moved to Florida.

Children and inheritance issues were another topic. Things can be complicated when estate planning forgets to consider children born out of wedlock, Ballerano said. He also had a situation where parents didn’t want their sometimes-troubled son to inherit money if he divorced his wife – they thought she was the best thing that had happened to him.

Ballerano suggests having real estate assets held in individual entities so liability on one doesn’t ripple over to another. A master holding company can be used to provide an umbrella. “The limited liability company (LLC) has become a favorite vehicle for owners of real estate assets who are seeking to establish a level of personal liability protection,” he said. Such protection, however, might not be unlimited.

Kesterson also said it can be useful to put vacation homes in an LLC or trust, especially since drinking is a common activity and friends are often visiting. Certain types of trusts also can be used for residences that still qualify for the homestead exemption in Florida.

Kesterson recommends consolidated reporting of a family’s holdings. Some families can literally lose track of some of their holdings. Also, “If there is a death of a key member and there is an estate tax return, the consolidated report can avoid money spent on attorneys and accountants accumulating information,” he said. Wealth advisors who have an overview of holdings can do a better evaluation of liquidity needs and use the information for budgeting and to keep families better informed.

Ballerano also said it’s important to designate somebody to keep copies of amendments to trusts and successor documents. You don’t want to give notice to someone who isn’t actually the trustee.