Category Archives: Estate Planning


future-focusThe famous psychologist Carl Jung once said that, “enlightenment is not imagining figures of light but making the darkness conscious”. So how can business people do that? Every business decision is based on a model of projected facts and circumstances and then ultimately a strategy to resolve the matter. But to create a great strategy requires a great decision-making model. Simply stated, decision models are designed to create a structure of thinking and dialogue so that you are better prepared to create a sustainable competitive strategy. Have you ever heard of the expression “that’s a solution in search of a problem” or “we’re climbing the right ladder but up the wrong wall”? These expressions come about because too often the decision-making model is not known, much less ever discussed. So a critical decision model is replaced sometimes with such a superficial approach such as the “traditional” model of “that is the way we have always done it” to the “different” model of “its new and improved” – and every construct in between. Yet, looking back, it’s the decision-making model itself that sets the course for the ensuing disastrous results [i.e. think Titanic].

So what are some of these key decision models. Some of my preferred decision-models are the following:

1. Johari- window
2. Flow
3. Long Tail
4. Black Swan
5. In-On Model
6. Avoiding Practical Drift
7. Mechanism Design Model
8. Balcony – Dance Floor [or System 1 & 2]
9. Deciding How to Decide
10. De Bono 6 Hat Model

It is important to know is that these are key tools to help you make decisions beyond what you are perhaps unconsciously using now. So if you don’t know, don’t use, or don’t KNOW HOW to use, these various models, then you are perhaps accepting more risk by not taking advantage of some key tools that will allow you to make better decisions. ”So what” you may say? Have you ever said to yourself “What happened”? The more tools you have at your disposal, the less often you will need to ask the question.

Carl Jung would concur that decision-making requires one to shine the light on the darkness of the way you think.

Is Family Estate Planning a “SLOW IDEA”?

ImageIn his most recent article entitled “SLOW IDEAS”, the author and famous physician Atul Gawande addressed the issue of why some medical innovations were implemented quickly – and other innovations implemented only very slowly.  He looked at it in the context of several medical discoveries, all had phenomenal upside potential, but not all had quick implementation. Briefly, the simple question he asked was whether there was a common thread to those ideas that did not gain quick traction.  He researched the “barriers to change” and then looked at possible solutions. He eliminated traditional strategies [i.e. penalties versus incentives] as less than satisfactory for various reasons.  He then analogized the solution to the time honored salesperson touch mantra of the “rule of seven” [i.e. reaching out to a person at least seven times].  He then created a  “mentoring” program as the antidote to the less effective “turnkey” approach that he believes is the cultural norm today in America.

         So how may the SLOW IDEAS model apply to family estate planning by analogy?  Let’s start by identifying the “barriers to change”. Allow to me to suggest some recent empirical data from two brief.  First, I met a Fulbright scholar from India that was studying at MIT last year.  In our conversation I asked her what was a key difference between the culture of her country and the U.S.A. She told me that since she has lived here she observed how much Americans were preoccupied with “ownership” [i.e. accumulation of wealth].  She said, aside from basic necessities, she owned practically nothing – nor did she feel a need to own anything.  She did not understand why our culture was so focused on ownership.  The second conversation I had was with a very distinguished expert on the Democratic Republic of the Congo.  When discussing health care issues he stated to me that a big barrier to improving health care conditions was that many citizens of the DRC did not wish to discuss death.  For whatever reason, even though there was a prevalence of death due to war, disease, famine, etc., death was not a subject that a conversation would lend itself to even for the purpose of promoting health care. Why?

Statistics show that, despite very important reasons to do an estate plan, more families elect to not do so?  Could it be that we are all so focused on owning more stuff, as George Carlin’s skit “The Importance of Stuff” would suggest?  Could it be that we simply do not want to speak about the “D” word?  Or could be some other explanation, viz.; too expensive, too time consuming, or too complex?  No matter what reason we have for not wanting to deal with estate planning, what is a better framework to have a reasonable dialogue on the subject matter?

I think that the best way to start the conversation is to simply ask why you are not having the conversation. Why? As Dr. Atul Gawande, wrote in his article “[t]o create new norms you have to understand people’s existing norms and barriers to change.  You have to understand what is getting in their way.  . . .  Human interaction is the key force in overcoming resistance and speeding change”.  So if you have not asked – ask!  And if you have asked, and not had a satisfactory conversation, ask again until you understand the solution to the problem, or at the least the barriers that keep your family from creating an estate plan.


BAD NEWS In his seminal book the author Mark Nepo quotes a well-known African saying “If you don’t know where you’re going, turn around and make sure you know where you’re coming from.” So where is your business coming from the last 6 months?  Here is a simple “look back” test that I call the “bad news test”.  Take some recent bad news at your company and carefully analyze how it was addressed at all levels. From the minute the bad news was learned ask the following questions: How did you get the bad news in the first place [e.g. customer, an employee, a report]? How did your organization handle the bad news initially?  After more information was uncovered, what bottom up system was enabled to address it specifically?  Was there also a top-down, high-level strategy to address this particular bad news in relation to other bad news throughout the year? Who was invited to those strategy sessions?  What was the follow-up to see if the specific fix was accomplished?  Finally, what overall new organizational system [“lesson learned”] was instituted to avoid a similar pattern.  Bad news is possibly the single most important front-line means to improve your company.  Why? You really can’t do quality strategic planning without looking back at your bad news data.

Fourth of July holiday is an important holiday for many reasons.  Time to celebrate and recalibrate.  As Ron Heifetz and Marty Linsky say in their book “Leadership on the Line”, make time to get off the dance floor, and instead get on the balcony. Put another way, having just spent half a year working IN your company, you need to spend some time working ON your company.  A serious mid-year review provides the opportunity to look at your operational, organizational, financial, asset protection/estate and strategic/risk management plan.  How are doing so far this year?

So celebrate your successes, and search for objectives that have not tracked your mid-year goals. The good news is that there is still half a year left to make the corrections you need to achieve your annual goals. The bad news is that you realistically can’t delay any longer.  So really declare your independence by taking stock of where you are – and compare that data to where you want to be by year-end.  Ask “What are your mid-year top three [3] challenges”?  Then really make them a top priority by meeting with your team of trusted advisors.  Why? Your greatest risk is simply what you don’t know.  So start by simply asking strategic questions to your strategic teammates.

A Quick Look at the new Massachusetts Uniform Trust Code

A major law entitled the Massachusetts Uniform Trust Code [“MUTC”] has been enacted as of July 8, 2012.  It generally replaces and expands upon Article VII: Trusts of the MUPC [which became effective April 1, 2012].  The MUTC applies to ALL trusts regardless of when done, EXCEPT AS OTHERWISE PROVIDED IN THE ACT [see §§ 61 to 65].  [So, for example, §502 on spendthrift clauses, §602 on revocable trust presumption, §703 majority co-trustee decisions, apply only to trusts created AFTER the effective date.]  An act done BEFORE the effective date shall not be affected by the MUTC.  But all trusts will be legally reviewed henceforth by the MUTC provisions. There are new useful tools for estate planning, new clarifications, and several new rules that affect trust creation and operation.

Some highlights of the 10 MUTC Articles is as follows:

Article 1: General Provisions & Definitions:  This section adds a new definition for Qualified Beneficiaries who are entitled to certain notices, and Spendthrift Provisions which require restraining transfers both voluntary and involuntary.  This article makes it clear that the terms of a trust prevail over the MUTC with the exception of 10 key areas listed in Section 105.  So the rules of the MUTC are default rules that apply subject to modification by the Settlor.  An interesting new concept is the Non-Judicial Settlement Agreements that encourage settlements amongst parties without court intervention or approval provided the terms are legal [e.g., trust interpretation, approval of accounts, trustees liability and powers, etc.]  The MUPC rules of construction apply to the MUTC for documents that are affected by both.

Article 2: Judicial Proceedings:  This section provides rules for a court intervening in the administration of a trust and personal jurisdiction over trustees and beneficiaries regarding trust matters.  However, this section also makes clear that a court has no authority to intervene or have continuing supervision of a trust unless it is invoked by an interested person or by law.

Article 3: Representation:  This section introduces a new MUPC concept known as “virtual representation” [see also MUPC 1-403].  Generally speaking, a guardian can now represent a ward [or protected person if no custodian], and a parent may represent a minor [or unborn child] if no guardian/conservator appointed.  A person with a substantially identical interest can represent minors, etc. provided there is no conflict of interest.  This reduces the need for guardian ad litems.

Article 4: Creation, Validity, Modification, and Termination of Trust: sets forth the requirements for creating a trust and, if created in another jurisdiction, is valid if it complies with the law of the jurisdiction where created and executed or where the Settlor was domiciled, had a place of abode, or was a national; where a trustee was domiciled or had a place of business; or where any trust property was located.  A new section allows trusts for animals [a/k/a “PET TRUSTS”] and the court may appoint a person to enforce the trust if necessary.  [This law replaces MGL c. 203 §3C.]  This section also now allows a so-called Purpose Trust – a non-charitable trust without an identifiable beneficiary but with just a purpose only [e.g., vacation home].  This section liberalizes trust modifications and terminations. It has means for a trust to terminate automatically and new methods to modify or terminate trust with certain parties consent [even if irrevocable] provided it is not inconsistent with a material trust provision, and if for unanticipated circumstances, the trust is uneconomic, or to conform the trust to the Settlor’s intentions.  A trustee can also now combine or divide a trust.

Article 5: Creditors Claims:  This section sets out the traditional rule that the assets of a revocable trust are generally subject to Settlors’ creditors during their life.  It also makes it clear that a creditor can reach trust assets if there are no beneficiary spendthrift provisions in same – but the court can limit the amount. Under the MUTC, a spendthrift provision in a trust created after the enactment of the MUTC is valid only if it limits both voluntary and involuntary transfers [“subject to a spendthrift trust”] of a beneficiary’s interest [Creditors can’t REACH and Beneficiaries can’t ASSIGN].  There are also new rules on how much the creditors can reach an irrevocable trust and that trust property is not subject to a Trustees personal obligations.

Article 6: Revocable Trusts:  This section states that trusts created after the date of the MUTC are presumed revocable unless the trust states otherwise [MUTC reverses old default rule].  While the Settlor is still alive, the trustees duties are owed to the Settlor.  This section includes a time limitation to contest a revocable trust after the Settlor’s death to provide finality.

Article 7: Office of Trustee:  This section includes a comprehensive approach to how a trustee accepts or declines the office, vacancies, resignation and removal, and compensation and expense reimbursement rules for Trustees.  For trusts created after the MUTC, it allows majority vote decision if it can’t be done unanimously UNLESS the trust requires unanimous decision.  [MUTC reverses old default rule].  Section 706 has a comprehensive list of reasons why a trustee can be removed.

Article 8: Duties and Powers of Trustees:  This section addresses the conflict of interest issues that have dogged trusts to date.  It includes defining the duty to administer the trust, duty of loyalty, duty of impartiality, duty of prudent administration, and delegation of duties. It also includes rules for administration costs, powers to direct, protection of assets, record keeping, duty to inform and report [i.e., “reasonably informed”], distribution upon termination.  It also allows for “Directed Trustees”. New trustees have 30 days after acceptance of trusteeship to inform qualified beneficiaries of their name and address.  Trustees must send annual statements of account to current beneficiaries [except those who waive same] and upon request to other beneficiaries.

Lastly, and very importantly, it includes a comprehensive list of 27 specific powers of a trustee and general powers [§815] as well.  The new duty to “inform and report” to beneficiaries adds transparency by “reasonably informed” notice compliance requirements. Ergo, we should discuss your trust terms regarding same.


Article 10: Liability of Trustee and Rights of Persons dealing with Trustee:  The first part of this section lists 10 things a court can do in case of a breach of a trust which is not new but now is specified. The next part deals with the statute of limitations for a beneficiary to file a lawsuit.  Generally speaking, a trustee is NOT personally liable with certain exceptions, and trust terms exculpating same are allowable and enforceable except for such things as bad faith, reckless indifference, or abuse of a confidential relationship with the Settlor.  This section deals with liability of third parties dealing with a trust, and trust certifications related thereto.

Remember, the purpose of an effective strategy for estate planning is the following:  (1) to choose your heirs, (2) avoid probate, (3) eliminate or reduce federal estate taxes, (4) avoid conservatorship, (5) maintain control over your assets, (6) maintain flexibility, (7) maintain privacy, (8) provide for health care and other decisions if you become incapacitated, (9) provide for funeral and burial instructions, and (10) make the administration of your estate as quick, inexpensive, and easy as possible for your family.

The above information is strictly highlights only and not specific legal advice so take a look at the new law and see if there are issues that may impact your trust and then speak to your attorney about updating it.

How to restart the economy

The term is written on the back of a dollar bill. D.H Lawrence wrote a love poem about it. Stephen M. R. Covey wrote a famous business book about the “speed” of it. Ronald Reagan used it to describe our nuclear arms position with Communist Russia. General Robert E. Lee used the term to describe leadership traits. And lastly, Mother Theresa used it to describe her relationship with God. What is this term that all these powerful people have used so eloquently? The term is simply “trust”. Why has Wall Street still not convinced people to get back into the investment game? Simply stated, they lost our trust.  How do you regain trust?  As they say in my wife’s home state: “I am from Missouri – you have got to show me.” And each year Wall Street Christmas bonus press is not one of them.