Planning for Giving: An Introduction to Charitable Trusts

By Joyce M. Hillis

There are many ways to support charitable organizations in estate planning. The simplest option is an outright gift to a charity. The more advanced options include certain charitable trusts which provide for both charitable and non-charitable beneficiaries, including family members. While the outright gift is the simplest option to fulfill a charitable purpose, charitable trusts provide additional incentives to act on those charitable inclinations. This blog post provides a brief introduction to the two types of charitable trusts: Charitable Remainder Trusts and Charitable Lead Trusts.

Over the life of a charitable remainder trust (“CRT”), the trustee issues trust income to certain beneficiaries, at least one of which is not a charitable organization. When the trust terminates, the remainder interest of the trust is then transferred to a charitable organization. The settlor of the trust identifies the charitable organization that should receive the balance of the trust’s interest in the trust instrument. A CRT would be beneficial for certain settlors who would like to retain a stream of income prior to a final distribution to a charity.

Like a CRT, a charitable lead trust (“CLT”) provides a benefit to charitable organizations, but its distributions the opposite of those made by a CRT. A CLT makes its initial distributions to a charitable organization for a fixed number of years before the remaining trust assets are distributed to non-charitable beneficiaries. Phrased simply, a CLT “leads” with the trust’s charitable distribution, while a CRT gives the “remainder” of the trust and its principal to the charitable organization. In either case, the settlor has flexibility to provide for both charitable interests and non-charitable beneficiaries in estate plans.

Charitable trusts are a helpful option for clients who wish to diversify the beneficiaries of their trusts. These trusts impose certain limitations, however, for the trust must be administered in accordance with strict regulations imposed by the IRS. To learn more about these trusts and whether they would complement your estate plans, please contact the estate planning attorneys at Cleveland, Waters and Bass.


Estate Planning 101: What about Retirement Funds?

By Cooley A. Arroyo

This blog has examined what happens to various assets upon death. Last week we considered joint bank accounts, and we previously discussed trust property, wills, and gifts. One key type of asset, however, is not included in any of these categories, and yet it is vitally important to countless individuals as they look forward to their golden years: retirement funds.

Many clients have 401k plans, pensions, and IRAs that they have been saving and funding for several years. These are contractual assets, meaning that the terms of an agreement—whether it’s a plan, agreement, or similar contract between the individual and an investment company—will determine the value and terms of the asset. 

Because these assets often gain value over time, they can represent a large portion of an individual’s wealth, and clients are often concerned about how these assets will be handled when they pass away. These assets require the holder to create a beneficiary form, which identifies who will receive the proceeds of the asset after death. These proceeds will pass to the beneficiary without probate administration.

Clients are encouraged to revisit their beneficiary designations from time to time to ensure that the designation continues to reflect their wishes. For example, some may name a parent who has since passed away or a former spouse. Others may wish to include children who were not born at the time the beneficiary form was first executed. Clients with trusts may benefit from naming the trust as the beneficiary of the proceeds, despite certain tax consequences, to ensure that all of a client’s assets will be managed and distributed in accordance with the terms of the trust. 

This is only a general explanation of how these assets might be treated. The method of distribution for the proceeds may have different tax implications for the recipient, so it may be necessary to learn more about estate plan solutions that might better suit your needs.

Please contact the estate planning attorneys at Cleveland, Waters and Bass to discuss your specific needs and how your retirement plan might impact your estate plan.


“Balance” Your Estate Plan by “Checking” Your Accounts

By Joyce M. Hillis

The traditional checking account is a common asset that clients must address when implementing their estate plans. The disposition of a bank account after death is generally determined by the type of account. A traditional checking account owned by a single person will require probate administration to be transferred out of the decedent’s name upon his or her death. In contrast, a joint checking account will automatically become the property of the party who outlives the other account holder(s) without the need for probate administration. 

For example, if a husband and wife own a joint bank account, upon the husband’s death, the wife would automatically acquire sole possession of the account when her husband passes away simply by providing the bank with a copy of the husband’s death certificate. If, however, the husband was the sole owner of the account, the checking account would be subject to probate administration and distributed as an asset of his estate. 

Because a joint checking account is actually “owned” by the various account holders, the effect of such accounts on estate plans can be significant. Consider this example: 

Diana is an elderly woman who is becoming somewhat forgetful in her old age. She opens a joint checking account with her oldest son, Tom, so he can help her keep track of her bills. Diana’s will states that her three children shall each receive an equal share of her estate, but when she passes away, Tom also receives full ownership of the balance of the joint checking account. Accordingly, Tom received a larger portion of the estate than his siblings simply because he was a co-owner with his mother.

Similarly, co-owners of joint checking accounts can be subject to creditors of each other. To build on the example above, if Tom had outstanding debt, his creditors could reach the assets of the joint checking account because Tom is an owner of the account, even if Diana was the only person to deposit money into the account. Accordingly, Diana’s assets could be jeopardized or lost to satisfy the other account holder’s debts. These risks should be considered before opening a joint checking account. 

This is a general summary of how checking accounts are distributed. The specific terms of a bank account may lead to different result. Also, it is sometimes best to transfer a checking account into a revocable trust to accomplish the trust's objectives and avoiding potential pitfalls. To learn more about this concept and how your personal bank accounts might impact your estate plan, please contact me or any of the other Cleveland, Waters and Bass estate planning attorneys.


Reminder: May 15 is the Deadline for Filing Charitable Organizations’ Annual Reports with the IRS

By Joyce M. Hillis

If you’ve graciously volunteered to sit on the board of an organization which is exempt from federal income taxation, we hope you have May 15 circled on your calendar. That’s the date by which tax-exempt organizations are generally required to file annual reports with the IRS. These reports detail an organization’s income and expenses.

The IRS has provided three forms for reporting this information: Form 990, Form 990-EZ, and Form 990-N. The latter form is for smaller tax-exempt organizations. The Form is due every year on the 15th day of the 5th month after the close of the organization’s tax year. Most charitable organizations use the calendar year—which terminates on December 31—for their tax year, and thus their forms are due on May 15. Other organizations may rely on a different fiscal year calendar, and thus their submission date might differ.

Failure to file a timely Form 990, 990-EZ, or 990-N can subject the tax-exempt organization to certain penalties. Failure to file for three consecutive years can lead to revocation of tax-exempt status. Accordingly, timely submission of these reports is a key to maintaining good standing as a tax-exempt organization and the benefits associated with such status.

This Form must be filed in addition to other returns the exempt organization may be required to file, including employment taxes or other business income. Because requirements may vary based on the size, type, or status of a tax-exempt entity, each organization should consult an attorney if it has questions regarding what must be filed and when.


Be Mine: Finding the Romance in Prenuptial Agreements

A Conversation for Valentines

By Cooley A. Arroyo

For the uninitiated, a prenuptial agreement is a written contract executed by two people before marriage; by the terms of the agreement, the parties can decide the distribution and dissolution of their property upon divorce, death, or a similar event. Phrased differently, it’s a simple way for couples to determine what will “be mine” if something should go wrong in the future.

(Valentine’s Day is tomorrow. See what I did there?)

Prenuptial agreements are most frequently drafted to predetermine the distribution of the marital estate in the event of divorce, but for many couples, divorce is the last thing they want to ponder as they prepare for their wedding. Indeed, the media, pop culture, and maybe your great-aunt twice removed would likely insist that nothing pulls the romance out of a moment faster than the word "prenup." However, many people say that a good marriage is founded on honesty and respect, and a prenuptial agreement encourages couples to have honest conversations about what they would want — and how they would want to be treated — if something goes wrong. By making the agreement, the prospective spouses are looking out for each other and considering each other’s needs and wishes. What could be more romantic than that?

Like the other estate planning options discussed on this blog, a prenuptial agreement is a simple and responsible way to plan for the worst while expecting the best. Not every couple needs a prenuptial agreement, but many couples may be surprised to learn how this option could benefit them. A prenuptial agreement is a particularly attractive solution when one or both partners has an interest in a family business, minor children from a previous relationship, or expensive or sentimental assets that must be kept “in the family.” The agreement gives the parties an opportunity to express their wishes and establish how these valuable considerations will be treated just in case something goes wrong in the marriage.

If you think a prenuptial agreement might suit your needs, contact me or one of the estate planning attorneys at Cleveland, Waters and Bass to learn more about this estate planning option. It is particularly important to ensure that your prenuptial agreement is executed well before the wedding date, so contact us to determine how this option might help you and your partner before your big day.


Advance Directives: Planning Ahead

By Cooley A. Arroyo

Estate planning gives individuals the peace of mind that comes with knowing that their wishes will be carried out at the end of life. A robust estate plan doesn’t simply determine “who gets what.” It also includes advance directives, a vital component of estate planning that gives a person the power to choose who will make vital decisions regarding health, personal finances, and medical care in the event of a period of incompetence or an emergency at the end of life.

Advance directives create an agency relationship whereby a principal appoints an agent to act on his or her behalf. The advance directive document outlines the authority that the agent has in executing this obligation. This post focuses on three of the most common types of advance directives.

General Power of Attorney

With this advance directive, a principal appoints someone to serve as his attorney-in-fact to act on his behalf in matters regarding finances, assets, and property. Though the principal can limit what the agent may do on his behalf, this directive often authorizes the agent to buy and sell property, file tax returns, access bank accounts, and otherwise manage assets on the principal’s behalf. Note that this arrangement does not remove the principal’s authority to manage his own affairs; instead, the attorney-in-fact joins the principal in making these decisions by receiving legal authority to act in the principal’s place.

This is a popular option for elderly clients and others who would like assistance in managing their finances, but it also gives the principal confidence in knowing his affairs will be managed responsibly by a trusted person in the event of an emergency or a period of incompetence. The attorney-in-fact’s authority to manage the principal’s finances terminates if the principal passes away. At that point, the rules of intestacy or the terms of the principal’s will or trust will govern what happens to the remaining assets and property.

Power of Attorney for Health Care and Living Will

In New Hampshire, end-of-life decisions for health care and medical treatment are governed by two instruments that are combined into one form. The power of attorney for health care gives an agent the authority to make decisions about the medical treatment a principal will receive if he is not competent to make decisions on his own. These decisions may include the use or withdrawal of medical treatment, medication, and nutrition at the end of life. The principal may also establish his wishes for whether or not this agent has the authority to sign a do not resuscitate order on his behalf.

The second part of the form is the living will. The principal executes a living will to state whether life support should be administered when the principal is certified by medical professionals to be near death or in a permanently unconscious condition. The living will, which was amended by the Legislature effective as of January 1, 2015, also gives the principal the option of directing that nutrition and hydration should be continued even if all other forms of life support have been discontinued.

These instruments are simple and affordable to execute, and they are also invaluable components of any estate plan. To learn more about these options, or to discuss how your existing estate plan might be enriched by creating advance directives, please contact any of the estate planning attorneys at Cleveland, Waters and Bass.


Estate Planning 101: The Pour-Over Will

By Cooley A. Arroyo

Earlier in this series, we examined the differences between wills and trusts. Though these estate planning tools can be used to achieve very different objectives, they are often used together to give a person the best of both worlds. To enjoy the benefits of both a will and a trust, a person executes a “pour-over will.”

The key distinction between a traditional will and a pour-over will is what happens to the property upon the death of the person creating the will. As noted in a previous post, a will is used to determine “who gets what” from a person’s estate; with a traditional will, the testator names the persons or institutions that will receive his property upon his death. A will must be administered through the probate court, which can take a significant amount of time.

In contrast, a pour-over will takes all of the person’s property at death and “pours it” over into a trust. With this estate planning tool, the executor does not need to determine “who gets what” under the terms of the will because the trust gets everything, and the property will be managed in accordance with the terms of the trust. Note, however, that the terms of the trust specify “who gets what” with the same level of detail one might find in a will.

To illustrate this concept in action, consider the following example:
In 2012, Karen executed a trust and pour-over will. She served as the sole trustee of the trust and transferred all of her assets—including her home, bank accounts, car, and other personal property—into the trust. Under the terms of the will, all of her assets which are not already in the trust will be “poured” into the trust upon her death. In 2013, Karen purchased a vacation home in her individual name but did not transfer it into her trust.

Karen passed away in 2014. Her pour-over will was filed with the probate court, and under the terms of the will, her vacation home was automatically “poured over” into the trust to be distributed according to its terms. Thus, although probate was required to transfer Karen’s vacation home to her trust, her other assets escaped probate and the time and expense associated with the probate process.
As demonstrated by the example above, the pour-over will acts like a “fail-safe” to ensure that assets not yet transferred into the trust will find their way to the trust upon death. If you would like to learn more about pour-over wills and how this instrument might satisfy your estate planning needs, please contact me or any of the other estate planning attorneys at Cleveland, Waters and Bass.

See all posts in the Estate Planning 101 series.


New Year’s Resolutions: “Shape Up” Your Estate Plan

By Cooley Arroyo

The New Year is the time for New Year’s Resolutions. Lots of people woke up on January 1 to proclaim plans to exercise or eat healthier, but many people forget that their estate plans also need a “workout” from time to time. This year, in addition to hitting the gym or dusting off the old scale, we encourage our readers to review their existing estate plans to see if any changes need to be made. Staying current with your will, trust, and other estate planning tools will ensure that your wishes and goals are still being met.

Many people think their estate plans are set in stone after the ink dries on the signature lines, but that is hardly the case. Circumstances may require changes to wills, trusts, powers of attorney, and other documents that were created in the past. Consider the following developments that might require a change to an estate planning instrument:
  • The Birth or Adoption of a Child: Many people create wills and other plans before they have children, so their existing estate plans do not contemplate the care for a minor child. Similarly, people who once felt comfortable with the default provisions of intestacy might want more control after a child joins the family. If you’ve recently had a child, you may wish to amend your existing plans to ensure that a guardian has been appointed for your child or that your assets will be managed for the child’s care. 
  • Starting a New Job: With new jobs come new benefits and opportunities. If you recently started a new job, you may have life insurance, 401k, or stock benefits that could impact your estate plan. Similarly, your change in income might have implications on your federal income taxes and the size of your estate. It may be helpful to amend your estate plan after determining how these benefits will impact your existing plans.
  • Purchasing a New Home or Other Assets: Whether you’ve bought a new house, a new car, or a valuable antique, new assets should always be accounted for in your estate plan. Take an inventory of your home and consider what you’ve acquired since you last updated your estate plan; if you have new and valuable assets, a change might be needed to ensure that your property is appropriately distributed upon death. 
  • Getting Older: Many things in life can be controlled, but time is not among them. With another year behind us, the new year is a good time to take pause and ensure that basic provisions for health care and estate management are a part of your estate plan, including financial powers of attorney, advance directives for health care, and living wills. If you already have these instruments, review your documents to make sure that your agents are still up to the task and capable of acting on your behalf when necessary. These simple documents will give you peace of mind in the new year.
This is certainly not an exhaustive list of circumstances that might require a change to your estate plan. Please contact me or the one of the other NH estate planning attorneys at Cleveland, Waters and Bass to determine what adjustments might be necessary to give your estate plan the proper “workout” to stay up-to-date in 2015.


Estate Planning 101: Wills, Trusts, and Intestacy

By Cooley A. Arroyo

In previous posts, the Estate Planning 101 series has introduced you to the basics of wills, trusts, and New Hampshire’s intestacy statute, which determines the distribution of a person’s estate when he dies without a will. This post “puts it all together” to demonstrate some of the key differences distinguishing these estate planning options.


Broadly speaking, the intestacy statute offers the least amount of control one can have over the administration and distribution of an estate. A trust provides the most control, as the settlor can manage it both in life and after death, while wills are a good “middle ground.” A will allows a person to control what will happen to his or her estate after death, but a will cannot be used to manage assets during a person’s lifetime. When assessing your estate planning needs, consider how much control you think you need; for some, the default provisions of the intestacy statute may be identical to their wishes (i.e. leaving everything to a spouse but providing for living parents or children), but others may desire more nuance and detail in their plans.


As discussed in previous entries, a will becomes public record when it is filed with the court. The intestacy statute is equally open to public scrutiny; while there is no formal document for the public to read, a probate record will be created which details the administration and distribution of the estate. A trust, in contrast, remains confidential; usually only those who are involved in the trust—namely, the settlor, trustee, and beneficiaries—will know the details of the trust.

The Probate Process

Another consideration is the probate process, which can be time-consuming and, in some cases, costly. The probate process ensures that the estate is distributed in conformity with the will or the intestacy statute. It also addresses outstanding claims from creditors, so some people may enjoy the extra assurance and safeguards created by the probate process. However, the probate process can delay the distribution of the estate to friends and loved ones.

Trusts by-pass the probate process and are administered under the terms of the trust; in most cases, property is already in the trust, and thus the trustee’s only job is to begin managing it in accordance with the trust terms.

These are only a few of the distinguishing characteristics between these estate planning options, and they are not exclusive. Many people have wills that “pour-over” into a trust, and others create trusts that are distinct from their wills to ensure that assets are used for a specific purpose. It is important to work with an attorney when figuring out which options best suit your needs.

To discuss your specific needs, please contact any of the trust and estate attorneys at Cleveland, Waters and Bass who would be happy to help you navigate these choices and create an estate plan that gives you confidence and peace of mind.


‘Tis the Season — Gifts as an Estate Planning Tool

By Cooley A. Arroyo

When I was growing up, my mother always said, “You can’t wear it, use it, or spend it until the thank you note is in the mail.” That was a rule in my family, but like many people, I was somewhat surprised in law school when I learned that there is actual law that governs gift-giving. The season of giving is now upon us, and so we thought a quick primer on the law of gift-giving would be just what Santa ordered.

Many people think that a gift is simply a gift, but in many cases, a gift can also be used as an estate planning tool. After all, some people prefer to give someone a favorite necklace or a beloved heirloom in life when they can see the person’s joy in receiving it. These gifts — or “donative transfers”— will effectively move an item out of someone’s estate once and for all if the gift is valid.

There are three basic elements to a valid gift:
  • Donative intent — the giver actually intends to give the item to the recipient 
  • Delivery — the giver gives the item to the recipient (rather than merely promising to do it in the future)  
  • Acceptance — the recipient takes the item into her possession
To put these concepts in action, consider the following example:
In 1973, Valerie inherited a beautiful diamond ring from her mother. Her grandson, Patrick, has mentioned his wish to marry his girlfriend of several years, and Valerie thinks the family ring would be perfect for the new addition to their family. At Christmas Eve dinner with Patrick and his parents, Valerie hands him the ring in a velvet box with a handwritten note that reads, “I hope this diamond ring makes you as happy as it has made me. Merry Christmas from Grandma Valerie.” Patrick is touched by the gesture and hugs Valerie, tucking the box into his pocket and thanking her for her generosity.
In this example, Valerie intended to give Patrick the ring. If Valerie had been ill or under anesthesia, for example, there may have been some question as to whether she actually meant to give him the ring, but her actions here demonstrate that she acted intentionally. Handing the ring over to Patrick constitutes delivery, and he took possession of the ring to satisfy the requirement of acceptance. By giving Patrick the ring, Valerie has removed it from her estate, and she will no longer need to consider it in her will or other estate plans. Similarly, when Valerie passes away, her heirs will not be able to contest the ownership of the ring because it was rightfully passed to Patrick during Valerie’s life.

During the holiday season, many people might consider a gift from the heart that comes from the home. Works of art, jewelry, and other treasures are often wrapped up beneath the Christmas tree, but it is important to consider how those gifts might impact one’s estate plan. There may be tax implications for the gift, or the item may already be designated for another recipient in a person’s will. To ensure that your gift makes the perfect holiday memory, consult with your attorney or any of the estate planning attorneys at Cleveland, Waters and Bass before making a gift from your personal estate.

(And if you receive such a gift, don’t forget the thank you note!)


Estate Planning 101: What is a Trust?

By Cooley A. Arroyo

Like a will, a trust may be used to determine “who gets what” from a person’s estate, but a trust is a more dynamic and flexible document that can be used to further a person’s wishes. Unlike a will, which takes effect after the testator’s death, a trust can be used to manage a person’s assets during life and then direct distributions to loved ones upon death. Trusts can be created to further charitable purposes, hold life insurance policies, or provide for a child with special needs.

Simply put, a trust is a very versatile estate planning tool, but its basic components are easily grasped. There are three key players in a trust:
  • The settlor, who creates the trust;
  • The trustee, who is appointed by the settlor to administer and manage the trust; and
  • The beneficiary, who ultimately receives the trust property.
Upon creating the trust, the settlor transfers her property to the trustee of the trust. Often, the settlor also serves as the trustee. Property that is transferred to the trust may include houses, cars, bank accounts, and even everyday items like furniture and appliances. The settlor instructs the trustee to make distributions in furtherance of a certain purpose, and the trustee holds legal title and manages the property for the benefit of the beneficiaries. The trustee will only make distributions from the trust property when it is for the benefit of the beneficiaries. The trustee has a legal obligation and fiduciary duty to carry out this role and make distributions according to the terms of the trust. A trust is also a good option for beneficiaries who might need help managing their funds (e.g., minor children or beneficiaries with spending issues).

To illustrate this concept in action, consider the following example:
Jenna is 75 years old and suffers from poor health. She has an extensive estate that includes two homes and a savings account holding over $200,000. She has ten grandchildren who are under the age of twenty. Jenna would like to provide for the children’s education, but she worries they might squander their inheritance before they graduate from high school.

Jenna can create a trust that provides for the education of her grandchildren; after transferring the title to her homes and other property to the trust, the trustee will manage the property for the benefit of her grandchildren and their education. Jenna could serve as the trustee and appoint another person to take over for her after she dies. This is a good option because it gives Jenna additional control over the estate while also ensuring that a responsible person makes distributions that further her wishes.
A trust also provides a veil of privacy for the settlor; a will becomes a public record after it is filed with the court, but a trust remains a private document. Trusts can be created in a number of ways and for many purposes, but clients often choose to establish a trust for probate avoidance or estate tax mitigation. There is not a “one size fits all” rule regarding whether a will, trust, or other estate planning tool is right for a particular person’s needs.

Please contact me or any of the other estate planning attorneys at Cleveland, Waters and Bass to discuss this option and learn whether a trust might complement your existing estate plan.


Senate Bill 289 Enhances NH's Favorable Trust Laws

By Joyce Hillis

With the passage of Senate Bill 289 in the 2014 legislative session, the New Hampshire legislature has taken yet another step to ensure that the granite state continues to serve as one of the best states to create and administer a trust.

The following are just a sample of areas in which the bill favorably enhanced New Hampshire trust laws:
  • Decanting
  • Trust modification by trustee
  • Lifetime approval of wills and trusts
  • Addressing creditors’ claims
  • Non-judicial dispute resolution
  • Enforcement of no contest provisions

Given the multiple areas that were addressed in the bill, this post will only summarize the trustee modification and decanting provisions. We will address the other notable provisions in later posts.


Since 2008, New Hampshire laws have allowed trust decanting, which is a process where a trustee can create a new trust and transfer assets of an existing trust to the new trust. Decanting has proved to be a valuable technique particularly to fix administrative issues in irrevocable trusts. Senate Bill 289 amended the decanting statute to expand the instances in which a trustee may take advantage of the process and to provide clarification that a trustee cannot use the decanting process to create a new trust that would violate a material purpose of the original trust. The revisions to the law will help assure trust creators that their original intent in creating a trust will be preserved, while allowing increased flexibility to revise non-material provisions of a trust to deal with potential unforeseen issues.

Trustee Modification

While the decanting process has proven to be a beneficial tool, trustees may shy away from the process due to potential adverse effects of transferring property to a new trust, or they simply may not want to go through the sometimes cumbersome process. Senate Bill 289 provides trustees with the authority to modify certain provisions of a trust without going through the process of transferring the assets into a new trust. Trustee modification will provide an additional resource for trustees in New Hampshire to revise outdated or burdensome administrative provisions of an irrevocable trust without court involvement.

Please feel free to contact me if you would like to discuss how either of these techniques may help simplify your irrevocable trusts.


Power of Sale Mortgages: Recent NH Supreme Court Decision Raises Concerns for Estate Plans

By Cooley A. Arroyo

The New Hampshire Supreme Court recently issued a decision in In re Estate of Muriel R. Mills that clarifies the authority of a mortgage lender to foreclose on property after the death of the borrower. The Court addressed two issues; of particular importance to New Hampshire residents is the Court’s holding regarding “power of sale mortgages.”

In 2006, Muriel R. Mills granted a “home equity conversion mortgage” to Financial Freedom Senior Funding Corporation (“Financial Freedom”). The terms of the mortgage permitted Financial Freedom to foreclose upon her property under certain circumstances, including the death of Ms. Mills. It further provided that the “Lender may enforce the debt only through the sale of the Property.”

In New Hampshire, the executor of an estate informs known creditors of the decedent’s death and notifies them that a probate estate has been opened. The opening of the probate estate triggers certain timeframes within which creditors must file claims against the estate.

In Mills, proper notice was provided to Financial Freedom, but Financial Freedom did not file a notice of claim in the prescribed time period. Several months later, Financial Freedom attempted to foreclose on the property under the provisions provided in the mortgage.

The case was ultimately heard by the New Hampshire Supreme Court which distinguished “power of sale mortgages” from other creditor claims that are subject to the notice requirements described above. The Court held that a power of sale mortgage proceeds without any court proceedings and is actually done “instead of [ ] bringing a suit . . .”; the mortgage holder simply gives notices and carries out the acts associated with the power of sale.

Implications for New Hampshire Estates

This case presents an additional consideration for the administration of estates that are encumbered by a power of sale mortgage. Attorneys and clients are encouraged to contact me or any of the other Cleveland, Waters and Bass estate planning attorneys to discuss this ruling in more detail and determine how it might impact property that is currently subject to such a mortgage.


Estate Planning 101: What is Intestacy?

By Cooley A. Arroyo

When a person dies without a will, the local intestacy statute will apply to determine “who gets what.” Unlike a will or trust, which permits a person to tailor the disposition of her estate to her own wishes, the provisions of the intestacy statute cannot be changed or amended to fit a particular person’s wishes; the only way to do that is by creating a will or trust and effectively by-passing the intestacy statute.

Each state has a unique intestacy statute. New Hampshire’s is codified as RSA 561:1. The easiest way to tackle the statute is to first assess what a Surviving Spouse (“SS”) will receive under the statute if his or her spouse (“D”) passes away; that is determined by the particular facts of each case.

The Surviving Spouse will get…
  • All of the estate if D has no children and no living parents;
  • $250,000 + ½ of What is Left if D’s children are also SS’s children and SS has no other children
  • $250,000 + ¾ of What is Left if D has no children but one or both of D’s parents are still living
  • $150,000 + ½ of What is Left if all of D’s children are also SS’s children but SS also has children from another relationship
  • $100,000 + ½ of What is Left if D has at least one child from another relationship
The New Hampshire statute then establishes a hierarchy of “who gets what” after the Surviving Spouse takes his or her share. If the Surviving Spouse is entitled to all of the estate, the remaining heirs will get nothing. If assets are left over after the Surviving Spouse takes his or her share, the distribution of the deceased person’s remaining assets will generally follow this hierarchy:
  • D’s children
  • D’s parents
  • D’s siblings and their children
  • D’s grandparents
  • D’s extended relatives (i.e. aunts, uncles, cousins, etc.)
  • The State of New Hampshire
Note that this hierarchy also applies if a person dies without a Surviving Spouse.

Like a will, an intestate estate will be distributed by the authority of the Probate Court. Some people may like these pre-established rules of distribution, but others may want more flexibility. For example, a person may want to provide more for a surviving parent or stepchild. Others might want their estate to go to a charity or close friend before passing by default to distant relatives.

To best understand how the intestacy statute might apply or affect your estate plans in the absence of a will, please consult me or one of the other estate planning attorneys at Cleveland, Waters and Bass. We’re happy to answer your questions and ensure that your estate plan best suits your needs and wishes.


Estate Planning 101: What Is a Will?

By Cooley A. Arroyo

Estate planning is a unique area of the law because it will affect just about everyone. Many people will live their lives without seeing the inside of a court room or knowing what goes on in the purchase and sale of a business, but most of us will — at some point or another — be involved in a situation involving estate planning law. Whether helping an aging parent with her finances, creating a will to provide for your kids, or planning for retirement, estate planning touches us all, but many people still have unanswered questions about the basics. “Estate Planning 101” will answer common questions in an effort to “demystify” one of the most universal areas of the law.

What is a Will?

A “will” is one of the most recognizable terms in estate planning law, but some people are unfamiliar with the mechanics of a will. At its most basic definition, a “will” is a legal document that a person can use to ensure that certain wishes are carried out after death. Without a will, a person’s estate will be administered under the local intestacy statute.

The intestacy statute cannot be altered or adjusted to fit a person’s wishes. A will is a good option for individuals who want more control over the distribution and resolution of their estates. Wills can be drafted to outline the care of minor children or simply list “who gets what” from the china cabinet. It is a versatile document, and while some people might think that they are not “old enough” to need a will, it is an important estate planning tool for individuals of all ages.

To illustrate this concept in action, consider the following example:
Suzanne is 85 years old. She has a modest estate that includes a savings account of over $30,000 and several valuable antique heirlooms. After some reflection, she has determined that she wants her three adult children to share the money, but she also wants each of her ten grandchildren to have a special heirloom by which they can remember their grandmother.

Suzanne would be the “testatrix” of her will. In addition to describing “who gets what” from the estate, Suzanne’s will would also identify an “executor.” Upon Suzanne’s death, the executor will be responsible for filing the will with the probate court and using the proceeds of Suzanne’s estate to pay off her debts and obligations. The executor will then ensure that Suzanne’s children and grandchildren receive what she has left for them in her will. Once those duties have been taken care of, the executor will have no more responsibilities, and Suzanne’s estate will be closed.
Wills can accommodate estates of all sizes, but it is only one estate planning option available to you. To learn how a will might benefit you, or to discuss the implications of relying on the intestacy statute, contact me or any of the other Cleveland, Waters and Bass estate planning attorneys.

The next installments of this series will provide an overview of the New Hampshire intestacy statute and examine the creation of trusts.


FinCEN Exempts Trusts from Anti-Money Laundering Rules

New proposed rulemaking exempts banks from onerous identity and status requirements of trust beneficiaries and should allow trustee certificates in lieu of full copies of trust instruments

In the wake of the September 11 terrorist attacks, a little known federal agency known as the Financial Crimes Enforcement Network (“FinCEN”) stepped up efforts to prevent money-laundering, in particular as it can be used to finance terrorist activity. FinCEN exercises its authority by imposing obligations on financial institutions to collect information from customers designed to ferret out money-laundering activity. In the last several years, FinCEN has been developing specific rules governing financial institutions’ obligations to collect information from customers who are “entities,” such as corporations, other types of business entities, and, until recently, trusts.

Up until recently, this has caused a great deal of confusion with respect to banks’ obligations to collect information from customers who are opening bank accounts in the name of trustees of trusts such as revocable trusts intended for routine estate planning purposes (for stylistic purposes, the term “banks” is used to describe all types of financial institutions at which individuals typically carry on banking activity). To be on the safe side of the compliance line, banks have routinely required such customers to provide full copies of trust instruments when opening accounts in order to allow the banks to verify the information FinCEN obligated them to collect. This procedure has been objectionable to customers and their estate planning attorneys because trust instruments often contain sensitive information, such as provisions designed to protect a beneficiary’s interest from spendthrift tendencies or divorce concerns. Customers and their attorneys have preferred to provide abstracts of the trust instruments known as trustee certificates. Banks have resisted this practice because it was not clear whether such certificates contained all the information FinCEN required banks to collect. Adding to this tension, in 2012, FinCEN proposed expanded rules that may have required banks to verify the identity and status of all trust beneficiaries, which would have required customers to disclose even more sensitive information, and would have made compliance almost impossible in cases where the full scope of the identity of beneficiaries is not presently known (such as when interests could be divided among people not yet born at a future point in time).

In a somewhat surprising move, FinCEN has now issued further proposed rulemaking that would exempt most trusts from the expanded anti-money laundering rules previously proposed in 2012. You can read the full proposed rulemaking here, and can find the specific discussion about trusts at page 34. This move is especially surprising in light of the fact that the proposed rulemaking generally increases banks’ information collection obligations with respect to other entity customers such as corporations and other business entities.

The new proposed rulemaking would exempt banks from having to delve into the identity and status of trust beneficiaries (the new burden contained in the 2012 proposed rules). However, it appears that banks will still be obligated to collect information regarding the identity and status of trustees of trusts, and other basic information concerning trusts. Hopefully, banks will take the relaxed approach presented by the new proposed rules as a signal that they may rely on trustee certificates for the purpose of collecting this information. But, the rules are still proposed (as opposed to final), and we will now enter a new phase of customers testing banks’ policies. Many estate planning attorneys will be advising clients to present trustee certificates in lieu of full copies of trust instruments, and time will tell how banks will respond to this.


New Bill Governs How Fees and Costs Will Be Paid in Guardianship Cases

Obtaining a guardianship over an elderly or incapacitated person requires the filing of a petition and a hearing in the probate court. This can be intimidating for people who have never been involved in the court process and for this reason, people often seek the advice of a lawyer but wonder how they will pay for it. A new bill (that has been adopted by the New Hampshire House and Senate and sent to the Governor for her signature) makes it clear that court costs, expenses and attorney’s fees will be paid by the proposed ward in most cases.
In 2012, the New Hampshire Supreme Court issued a decision in In re Guardianship of Mary Louise Eaton, and held that the statute that governs the payment of fees in guardianship cases did not require the ward to pay for attorney’s fees incurred by the person petitioning for guardianship over the proposed ward.

After much debate about whether the Eaton decision would discourage people from petitioning for guardianship over an individual clearly in need of one because they couldn’t afford it, the legislature adopted HB426. Under the new bill, unless a petition for guardianship is filed in bad faith, the petitioner’s attorney’s fees and costs will be borne by the ward if: (1) the petition is ultimately granted; (2) the payment of costs and fees will not cause undue hardship to the ward; and (3) the costs and fees are reasonable and were necessary to protect the ward.

If HB426 is signed by the Governor, it will become effective on January 1, 2015. If you have questions about how to obtain a guardianship over a loved one or a friend, please contact any of our estate planning attorneys.


The Trust Docket: Another Benefit of Establishing a Trust in New Hampshire

By Joyce Hillis

In recent years New Hampshire has taken significant steps towards becoming one of the most trust-friendly states in the country based significantly on the notable evolution of our trust laws including the aptly named Trust Modernization Act of 2011. Most recently, the New Hampshire Judicial Branch created a new trust docket within the Circuit Court Probate Division to hear cases with increasingly complex trust issues and/or significant assets. This targeted focus on such a distinct area of the law increases the credibility and utility of establishing trusts in New Hampshire.

A major goal in the development of the trust docket was to allow more complex trust litigation matters to be handled on an expedited basis by judges who have a heightened level of expertise. Thus far the separate docket has proved beneficial by being managed by one judge who specialized in trust law and has allowed a more directed review of complex matters on an expedited basis. This dedicated trust docket will, however, also prove to be valuable for less complex matters by freeing up the existing probate court resources to address the more quickly resolvable estate and trust matters.

What does this mean to you? If you are considering establishing a trust, consider doing so in New Hampshire. Our firm’s estate planning department would appreciate the opportunity to assist you in exploring the potential benefits of using a New Hampshire trust to manage your assets.

Please feel free to contact me if you have any questions.


Tips for Keeping Your Estate Plan Fresh!

By Joyce Hillis

Spring is in the air! After an especially long winter, many New Englanders are spring cleaning with the renewed energy that comes with the first days of spring. After you are done taking out the lawn furniture and cleaning out the hall closet, don’t forget to include spring cleaning for your estate plan by organizing your documents and asset information. It is best to have one file for your important documents, be it in a fireproof file cabinet or a desk drawer. The goal is to put the file in a place where your loved ones can locate everything they will need to understand your estate plan and asset information upon your passing.

Your file should contain several important pieces of information.
  • First, the file should contain a full copy of your current estate planning documents. It is best to destroy any copies of superseded documents to avoid confusion. You should also make note of where your original estate planning documents are located and make sure that they are in a place where loved ones can access them after your passing. 
  • Second, make a list of all of your assets. This list should include real estate, bank accounts, brokerage or investment accounts, and life insurance policies. If you receive paper statements for an account, include a recent statement in your file. If you have online accounts, include your user name and password. If you own assets that have beneficiary designations such as life insurance policies or retirement plans, include a copy of the beneficiary designation form that identifies the beneficiaries of each policy or plan. 
  • Third, include a copy of your last income tax return, and gift tax return if applicable. 
  • Fourth, prepare a list that includes the names of your attorney, accountant, financial advisor, and other trusted agents who are familiar with your affairs and will be able to assist your loved ones upon your passing. 
  • Finally, include any lists or personal notes that you think will help your family through this process.
The work you put into compiling your file will save your loved ones time and hardship in the future. Please feel free to contact me or any of our estate planning attorneys with any questions that may arise in compiling your file.


What If My Ward Moves to Another State?

Once you have been appointed by the probate court as a guardian, you have certain responsibilities with regard to caring for the ward (person under guardianship) and, in some cases, managing his or her estate. But what happens if you are appointed as a guardian by the New Hampshire probate court and your ward moves to another state?
If your ward has permanently moved to another state, you can file a motion with the probate court to transfer the guardianship to the ward’s new state of residence. Keep in mind that if the ward resides in another state for more than 12 consecutive months, the probate court will presume that the ward has permanently moved. The court will only grant your motion to transfer the guardianship if the appropriate court in the ward’s new state has accepted the guardianship and appointed a guardian for the ward.

A motion to transfer a guardianship can be filed once the ward has permanently moved or it can be filed in anticipation of a permanent move to another state. If you were serving as the guardian of your ward’s estate, you will be required to file a final accounting with the probate court before you will be discharged and your bond will be released.

Please feel free to contact any of our trusts and estates attorneys for more information on any aspect of your estate planning or administration needs.