miller nash llp | Winter 2012 brought to you by the trusts & estates practice team Estate Planning Advisor Planning for Yourself: Health Care Representatives, Advance Directives, and the POLST disease or injury. In Washington, the patients with life-limiting advanced designation is made by signing and illness; patients with advanced frailty notarizing a durable power of attorney characterized by significant weak- by Jack B. Schwartz for health care. ness and difficulty with personal-care jack.schwartz@millernash.com activities; patients who may lose the 503.205.2560 Advance Directive. The Oregon capacity to make their own health care advance directive form allows you to decisions in the next year; and persons An estate plan provides an opportu- specify that you would refuse artificial with strong preferences about current nity to spell out in considerable detail life support and similar heroic mea- end-of-life care. A POLST can duplicate who (including the government) will sures in the following circumstances: portions of an advance directive. By get what when a person dies, and when if such steps would not benefit you turning a person’s advance directive they will receive it. But what about but would cause you permanent and decisions into a physician’s order, the the person himself or herself? How severe pain; if you are terminally ill; POLST offers additional assurance are family members and physicians if you are permanently unconscious; that wishes as to end-of-life treatment to know someone’s care preferences or if you are in an advanced stage of a will be recognized and followed. The when the person is in no condition to progressive and fatal illness. You may POLST is particularly helpful in provid- give instruction? Enter the health care also specify that you desire to have representative designation, the advance life support provided in any of these (continued on page 8) directive, and the POLST (Physician circumstances. Completion of the form Orders for Life-Sustaining Treatment). will not prevent continuing care for cleanliness and comfort. Your health Designation of a Health Care Rep- inside this issue care representative is required to follow resentative. Oregon statute prescribes 2 Benefits of a Dynasty Trust your wishes as expressed in the advance a form that includes both the health directive. Washington statute provides care representative designation and 3 The Many Ways That Gifts Can Reduce Estate Taxes for a similar form, called the health care an advance directive. The form must directive, which must be signed before be signed before two witnesses. Your 4 Top Excuses That Owners two witnesses. Your designated health Use to Avoid Exit Planning designated representative, and any care representative should know how to alternate you may choose, must also 6 Attention All Washington access your advance directive, and you sign the form. Once completed, the Trustees . . . should provide a copy to your physician. form authorizes your health care rep- resentative to communicate on your POLST. Both Oregon and Washing- behalf and make your wishes regarding ton recognize the POLST form, which care known to physicians and hospitals is an order signed by a physician. It when you are unable to do so because is intended primarily for seriously ill of temporary incapacity or irreversible www.millernash.com
Benefits of a Dynasty Trust settlor’s descendants do not use all to one or two generations and nothing the funds. A dynasty trust is usually to future descendants. For instance, drafted so that each generation has the the trust can provide incentives to en- by Adrienne P. Jeffrey rights to certain distributions of in- courage each generation to work or to adrienne.jeffrey@millernash.com come and principal but does not have contribute to society by tying distribu- 206.777.7512 any rights that would cause the trust tions to certain behaviors. These trusts assets to be included in any member can also be used to provide a source of A dynasty trust is a special type of of that generation’s taxable estate for funding for the education of the set- trust that allows the client to provide for estate tax purposes. The result of this is tlor’s descendants or to create a fund multiple generations while saving estate that although gift or estate tax may be that can be used as a “family bank” to and state income taxes. A dynasty trust imposed on the settlor when the trust is make loans to the generations, enabling can be created during life or at death. As created, no estate or gift tax is imposed them to fulfill their dreams of creating with any other type of trust, three par- again as long as the assets remain in a business or purchasing a home. Of ties are involved: the settlor who forms trust. This can result in substantial course, a dynasty trust also provides the trust, the trustee who manages the estate tax savings—not in the estate of all the advantages of having assets in trust, and the beneficiaries who benefit the settlor, but in the estates of the set- trust—protection from creditors and from the trust. financial predators; profes- In a dynasty trust, the sional management; and trustee is normally a trust “Of course, a dynasty trust also pro- keeping assets away from company doing business in vides all the advantages of having assets beneficiaries with personal a state that allows trusts to problems such as addiction. in trust—protection from creditors and exist indefinitely and that has fi nancial predators . . . .” If you have a large estate, favorable tax and trust laws. you may wonder whether States have different rules your entire estate can be regarding the maximum transferred into a dynasty trust. Unfor- duration of a trust. In Washington, a tlor’s descendants. These estate tax sav- tunately, the amount you can transfer to trust must terminate 150 years from ings are realized only if the family has a dynasty trust is limited to the amount formation. In Oregon, the period is 21 enough wealth that future generations of your generation-skipping transfer years after the death of the last to die are anticipated to have taxable estates. (“GST”) tax exemption. The GST tax of the trust’s beneficiaries. A number The dynasty trust may also result in is imposed on transfers that are struc- of states have enacted laws that allow state income tax savings. Assuming that tured so that estate tax is not paid at trusts to continue indefinitely. These the beneficiaries live in a state with an each generation or to direct transfers states include South Dakota, Delaware, income tax, state taxes may be imposed to persons more than one generation New Hampshire, and Alaska. The to the extent that income is distributed below the transferor, usually grandchil- laws that apply to a trust are normally to beneficiaries. In many cases, how- dren. The GST tax is imposed at the the laws of the state where the trust is ever, income that is not distributed will same rate as the estate tax, often in ad- administered, even if neither the settlor be subject only to the income tax of the dition to estate tax. But each person has nor the beneficiaries live in that state. state where the trustee is located. If a a GST exemption amount that allows Therefore, by choosing a trustee doing trustee doing business in a state with- him or her to transfer that amount to business in a state such as South Da- out an income tax is chosen, the trust any person without imposition of GST kota, the trust will be considered to be assets not distributed may avoid state tax. If the funding of a dynasty trust is located in South Dakota, and therefore income taxes. limited to the settlor’s GST exemption can remain in existence until its funds amount, no GST is imposed on the are used up. The settlor has great discretion in trust, regardless of how large it grows. drafting the terms of a dynasty trust, The beneficiaries of a dynasty Under current law, the GST exemption and the trust can be used to spread trust are often the settlor’s children, the benefits of the funds over the gen- grandchildren, and future descendants. erations rather than giving all assets (continued on page 8) A charity is often included in case the 2 | miller nash llp | Estate Planning Advisor
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