This document summarizes the top 10 estate planning mistakes and how to avoid them. It discusses issues like failing to create an estate plan, doing it yourself without an attorney, not properly funding a revocable trust, using a poorly drafted joint trust, leaving assets outright to children instead of in trust, improperly selecting trustees, failing to utilize tax exemptions, and not following formalities of family business entities. The document provides details on each mistake and recommends working with an experienced estate planning attorney to create customized documents and ensure your goals and intentions are carried out.

1. T T E t t Pl i Mi t k d HTop Ten Estate Planning Mistakes and How
to Avoid Them
N b 5 2014November 5, 2014
Lauren A. Jenkins, Esquire Melinda Merk, Regional Trust Advisor
Offit Kurman, P.A. SunTrust Private Wealth Management
8000 Towers Crescent Drive, Suite 1450 8330 Boone Boulevard, Suite 700
Vienna, Virginia 22182 Vienna, Virginia 22182e a, g a 8 e a, g a 8
703‐745‐1821 703‐442‐1534
ljenkins@offitkurman.com melinda.merk@suntrust.com

2. 1. Doing Nothing, or Doing it Yourself
• It’s not “all boilerplate”• It s not all boilerplate
– Most estate planning attorneys spend a considerable amount of time creating and updating
their documents/forms, which are then customized for each client based on their specific
situation and the attorney’s knowledge and experience
• Doing nothing only postpones the inevitable and leaves one’s spouse and family toDoing nothing only postpones the inevitable and leaves one s spouse and family to
resolve matters, during an already emotional and difficult time
– Important to share basic information (e.g., location of documents, account statements,
etc.) with designated Executor and/or Trustee
• Doing it yourself and/or using online forms inevitably leads to mistakes or omissions• Doing it yourself and/or using online forms inevitably leads to mistakes or omissions
that can no longer be corrected once an individual becomes incapacitated or
deceased
– Can lead to unnecessary legal fees, taxes and/or litigation, and otherwise defeat your
intentions and prevent orderly distribution and management of your assetsintentions and prevent orderly distribution and management of your assets
• Failing to periodically update documents to take into account Federal and State tax
and non-tax law changes and upon certain other events (e.g., moving to another
state, getting married/divorced etc.), can also create unnecessary complications
E l i h l f li d di d• Estate planning attorneys can help to foster client understanding and engagement
in the planning process by the following:
– Double-checking correct spelling of client names and other personal information in
document
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– Providing table of contents, summary pages, and appropriate headings within document
– Providing summary flowchart of estate plan and overview letter

3. 2. Failing to Properly Fund Revocable Trust
• Primary purposes of a revocable trust (incapacity
l i idi b i i dplanning, avoiding probate, court supervision, and
preservation of privacy ) will be defeated if assets
are not re-titled into name of revocable trust
• Failing to convey out-of-state real estate to
revocable trust can result in ancillary probate
(consult with out-of-state counsel)
• Don’t forget about re-titling closely-held business
interests into revocable trust
• If retirement account is made payable to revocablep y
trust (e.g., as contingent beneficiary f/b/o minor
children), be sure trust contains necessary provisions.
(see Top Ten Item #9)
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4. 2. Failing to Properly Fund Revocable Trust
(cont’d)(cont d)
• Joint spousal property is generally divided between
d f d h ’ bland transferred to each spouse’s separate revocable
trust (unless Joint Revocable Trust is used, see Top
Ten Item #3)
A i i i d d ’ bl– Assets remaining in deceased spouse’s revocable trust can
be used to fund Credit Shelter Trust (CST) and exempt
from estate tax using the deceased spouse’s unused
exclusion (DSUE) amountexclusion (DSUE) amount
– Portability election may alleviate necessity of funding
CST, but compelling reasons may still exist for state
estate tax, GST tax purposes, and other non-tax benefits
f CSTof CST
– Potential complications after first spouse’s death if
partial interest in primary residence or vacation home is
used to fund CST or Marital Trust
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used to fund CST or Marital Trust

5. 3. Using a (Poorly Drafted) Joint Trust
• Despite any express terms of the trust directing otherwise, separate
shares of joint vs separate property will likely not be maintained whichshares of joint vs. separate property will likely not be maintained, which
can lead to a host of marital and/or tax issues during the spouses’ joint
lifetime and after the first spouse’s death
– Caution: Different rules and advice may apply if the couple was previously
domiciled in a community property state and have a joint revocable trust
• Can result in inadvertent gift tax consequences upon contribution of
separate/unequal amounts of property, if only a joint vs. unilateral
revocation power is retained or if non-contributing spouse is a non-US
citizen
• Can be difficult to determine what portion of the trust assets are
includible in the estate of the first spouse to die (Deceased Spouse) for
estate and income tax purposes
– Consider using “estate equalization” joint trust whereby each spouse is deemed to
own one-half of the trust assets unless the spouses expressly direct otherwiseown one-half of the trust assets, unless the spouses expressly direct otherwise
• Can more easily result in inadvertent acceptance of benefits and
commingling of assets by surviving spouse that could prevent qualified
disclaimer upon death of Deceased Spouse
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6. 3. Using a (Poorly Drafted) Joint Trust
(cont’d)
• Can result in inclusion of all or a portion of the Credit
Sh l T (CST) i h i i ’
(cont d)
Shelter Trust (CST) in the surviving spouse’s estate to
the extent that assets used to fund CST cannot be
traced to Deceased Spouse
• Can be cumbersome or overly restrictive to
administer after Deceased Spouse’s death,
particularly if surviving spouse does not retain
ight t k S i ’ Shexpress right to revoke over Survivor’s Share
– What if surviving spouse has different beneficiaries than
Deceased Spouse, or wants to amend other terms of the
trust?trust?
– If possible, it is generally advisable for the surviving
spouse to transfer his or her share of the trust assets
(Survivor’s Share) to a newly-created revocable trust
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( ) y

7. 4. Leaving Assets Outright, or Requiring
Mandatory Trust Distributions, to Childreny ,
• Mandatory outright distributions to beneficiary (lump sum or
d l tt i i t i ) d t t dgradual upon attaining certain ages) destroys asset and
spendthrift protections otherwise available for assets held in
a discretionary trust
• Including flexibility and express direction to trustee in trustIncluding flexibility and express direction to trustee in trust
document with respect to discretionary distributions is key
– Expressly state material purpose of trust and/or provide side
letter from settlor to trustee (e.g., to favor current vs.
i d b fi i i )remainder beneficiaries)
– Provide milestones for discretionary distributions (marriage,
first home, starting business, etc.)
– Consider including incentive and substance abuse provisions,Consider including incentive and substance abuse provisions,
and specifying whether outside resources of the beneficiary
should be considered
– Consider using independent/professional trustee and/or
distribution committee
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distribution committee

8. 5. Improper Selection of Trustee, and Failing
to Name a Trust Protector
• Duties of a trustee
Manage/preserve trust assets in accordance with trust document and applicable– Manage/preserve trust assets in accordance with trust document and applicable
state law(s)
– Duty of impartiality/good faith
– Determination of trust accounting income and distributable net income (DNI)
• Not the same as taxable income
– Capital gains are generally allocable to principal and taxed to trust
• Allocation of receipts and disbursements between income and principal in accordance with
trust document and applicable UPAIA [Va. Code §64.2-1000, et seq.]
– Trustee commissions and investment management fees are generally allocable 50/50 unless trust
document provides otherwise
– IRA RMDs
» 10% of RMD is generally allocated to income, 90% to principal
» Net income from IRA account must be allocated to income, or surviving spouse must be
permitted to compel trustee to withdraw this amount, under QTIP rules [Rev. Rul. 2000-2)
• Power to adjust and/or unitrust conversion
– Managing impact of higher marginal income tax rate and Medicare surtax on
undistributed trust income and capital gainsundistributed trust income and capital gains
– Recordkeeping and tax reporting/elections
– Providing accountings to beneficiaries as required by trust document and state law
and/or Uniform Trust Code (UTC), if applicable
• Starting statute of limitation for beneficiary claims vs. settlor’s desire for privacy
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9. 5. Improper Selection of Trustee, and Failing
to Name a Trust Protector (cont’d)
• Surviving Spouse may not always be the best or most qualified person to
name as Trustee, particularly in 2nd+ marriage situations with children
f
( )
from prior marriage
• Naming an individual (e.g., spouse, relative, or friend) as sole trustee,
even if the individual is qualified/skilled in the duties of a fiduciary, is
time-consuming and leaves individual open to potential conflicts withtime-consuming and leaves individual open to potential conflicts with
unhappy beneficiaries
• Naming multiple individuals (e.g., children) as co-trustees can create
unnecessary administrative burdens and potential conflicts in trusteey p
decision-making
• Naming individual (or beneficiary upon attaining certain age) and
professional/institution as co-trustees allows family member or other
t t d i di id l t id i t di t ib ti d l thtrusted individual to provide input on distributions and can leave other
administrative tasks to professional trustee
• Important to appoint Trust Protector to remove and replace trustee (with
or without cause)
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or without cause)

10. 6. Failing to Use Pre-Nup and/or QTIP Trust to
Preserve Assets for Children from Prior Marriage
• Use of Marital Agreements (prenuptial and• Use of Marital Agreements (prenuptial and
postnuptial) can prevent disputes during life
and at death
• Qualified Terminable Interest Property
(QTIP) Marital Trust allows surviving spouse
to be (sole) lifetime beneficiary and directsto be (sole) lifetime beneficiary, and directs
distribution of remaining trust assets at
surviving spouse’s death
Lif i l b d id• Life insurance can also be used to provide a
guaranteed legacy/distribution to children
at deceased spouse’s death
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at deceased spouse s death

11. 7. Putting Children’s Name on Bank Accounts
and Other Assets
• Often done as substitute for durable power of attorney and/or
avoiding probateavoiding probate
• Exposes asset to child’s creditors
• May result in unintended and/or unequal distributions of
assets/estate among children/intended beneficiariesg
• May create unintended gift tax consequences
– Adding child as joint owner on real estate (for no or inadequate
consideration) generally results in completed gift of
undivided/allocable interest in the property upon delivery/filing ofundivided/allocable interest in the property upon delivery/filing of
deed
– Adding child as joint owner on bank/investment account generally
results in completed gift when child makes withdrawal from account
not attributable to his or her contribution (if any)( y)
• Depending on whether asset is owned as joint tenants with right of
survivorship or tenants in common, all or a portion of the property
will remain includible in parent’s estate
Generally estate would be entitled to a credit for any gift tax paid
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– Generally, estate would be entitled to a credit for any gift tax paid

12. 8. Failing to Properly Name and Update Beneficiaries of
Retirement Plans and Life Insurance Policies
• If a revocable trust is named as the beneficiary ofy
a retirement plan, care must be taken to ensure
the trust qualifies as a conduit trust or a see-
through trustthrough trust
• Life insurance ownership and beneficiary
designations should be reviewed to confirm theyg y
accurately reflect the estate planning goals (e.g.,
naming an ILIT as owner and beneficiary)
If no beneficiary is named proceeds may be• If no beneficiary is named, proceeds may be
payable to decedent’s estate, subject to probate,
and subject to creditors
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j

13. 9. Failing to Fully Utilize Estate, Gift or Generation-Skipping
Transfer (GST) Exemption and/or Annual Gift Tax Exclusion
• Implement annual exclusion gifting program, via outright gifts or gifts to
qualified trusts to reduce and transfer future appreciation out of estatequalified trusts, to reduce and transfer future appreciation out of estate
– Caution: Donee generally takes carryover basis in gifted asset
• Obtain valuation report from qualified appraiser to provide support for
valuation discounts and adequate disclosure with regard to gifts of closely-
held or other restricted interests (e g LLC interest tenancy in commonheld or other restricted interests (e.g., LLC interest, tenancy in common
interests in real estate, etc.)
– File with gift tax return to start statute of limitations for gift tax purposes
• Consider using life insurance owned by irrevocable life insurance trust
(ILIT) to leverage gift/estate and GST exemptions and to provide liquidity( ) to leve age g t estate a d GS e e pt o s a d to p ov de l qu d ty
for estate taxes and other debts or expenses at settlor’s death
• Multi-generational “Dynasty Trust” (created during settlor’s lifetime or at
settlor’s death) can maximize/leverage use of GST exemption and avoid
additional estate taxation at 2nd generation level
• Designing irrevocable trust as “defective” grantor trust for income tax
purposes (with optional toggle off power) during settlor/grantor’s lifetime
allows settlor/grantor to make an additional tax-free gifts by paying
income tax attributable to the trust
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14. 10. Failing to Follow Formalities and
Operational Requirements of Family LLCp q y
• Family limited partnership or LLC can providey p p p
asset protection benefits and centralized
management of family assets
• Additional estate planning benefits can beAdditional estate planning benefits can be
achieved by gifting interests in the entity to
children and future generations (or trust for their
benefit)benefit)
• IRS has been successful in challenging use of
family entities for gift and estate tax purposes
where the formalities and other operationalwhere the formalities and other operational
requirements of the entity are not respected
• Retaining the advice of a good CPA is essential
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15. Speaker Bios
Lauren A. Jenkins, Esquire, Offit Kurman, P.A.
Lauren A. Jenkins focuses her practice on tax and estate planning, trust and estate administration,
and tax complianceand tax compliance.
Ms. Jenkins represents individuals and families with creating and implementing estate plans to
achieve their personal and financial objectives. Such planning often includes drafting wills,
revocable trusts, and powers of attorney, as well as more advanced estate planning to preserve
wealth for future generationswealth for future generations.
Ms. Jenkins also has experience advising clients who require both domestic and international
components to their estate plans. Ms. Jenkins guides clients through the complexities and nuances
of trust and estate administration. She advises fiduciaries with respect to their powers and
responsibilities, including filing obligations under state and federal law. Additionally, Ms. Jenkinsresponsibilities, including filing obligations under state and federal law. Additionally, Ms. Jenkins
represents beneficiaries who desire separate counsel to ensure their interests are protected and
they receive their full entitlement.
Ms. Jenkins also represents clients before the IRS, including offers in compromise and voluntary
disclosures to resolve noncompliance with respect to U.S. reporting obligations.p p p g g
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16. Speaker Bios (cont’d)
Melinda Merk, Regional Trust Advisor, SunTrust Bank Private Wealth Management
Melinda Merk is a Senior Vice President and Regional Trust Advisor and part of the Greater
Washington Private Wealth Management team at SunTrust Bank. She focuses on providing multi-
l l h f l d d d h h hgenerational wealth transfer planning advice and estate and trust services to high net worth
individuals, families, and business owners.
Ms. Merk has over 19 years experience in the estates and trusts area. Her prior experience includes
serving clients as a Tax Director in the Personal Financial Services group at PricewaterhouseCoopers
LLP and as a Tax Manager in the National Tax Department at Ernst & Young LLP She was alsoLLP, and as a Tax Manager in the National Tax Department at Ernst & Young LLP. She was also
engaged in the private practice of law as a Senior Counsel in the Private Wealth Services group at
Holland & Knight LLP. She has significant experience advising clients with regard to domestic and
foreign trusts, family limited partnerships, grantor retained annuity trusts, dynasty trusts and other
wealth transfer strategies, charitable trusts, estate and trust administration, and asset protection
planning.
Ms. Merk received a B.S. (cum laude) from Shepherd College, a J.D. from the Duquesne University
School of Law, and an LL.M. in Taxation (with distinction) from the Georgetown University Law
Center. She is also a Certified Financial Planner.™ Ms. Merk is a member of the American Bar
Association Section of Taxation, and is a past recipient of the Section’s distinguished John S. Nolan
Tax Law Fellowship She is also a member of the Estate Planning Councils for Northern Virginia andTax Law Fellowship. She is also a member of the Estate Planning Councils for Northern Virginia and
the District of Columbia. In addition, she is a member of the Shepherd University Foundation Board
of Directors, and is an active supporter of the Wolf Trap Foundation for the Performing Arts.
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multi-generational wealth planning, investment strategy, (ii) management of trust assets, investmentg p g, gy, ( ) g ,
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implementation of an estate plan.
These materials are educational in nature. The implications and risks of a transaction may be different
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individual’s unique financial and familial circumstances and risk tolerancesindividual s unique financial and familial circumstances and risk tolerances.
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