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IN THIS ISSUE
A NEW TAX-RELATED SCAM
THE "SANDWICH GENERATION"
DISCRETIONARY TRUSTS
ARTICLES OF INTEREST
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Your Financial Power of Attorney or a Standby Living Trust: Which Provides Better Protection?
Most people understand the importance of signing a Financial Power of Attorney. If you become unable to manage your finances because of illness, an accident, or cognitive decline, someone needs legal authority to act on your behalf.
But few people ask a more important question:
Should that person manage your assets personally, or should they simply transfer your assets into a standby living trust where a trustee manages them according to your instructions?
The distinction can make a tremendous difference.
A traditional Financial Power of Attorney gives your chosen agent broad authority over almost every aspect of your financial life. They may write checks, access investment accounts, sell real estate, sign tax returns, move assets, and conduct business in your name. While most agents act honorably, they often receive little guidance, little oversight, and little assistance.
That can be overwhelming--even for someone with the best intentions.
A standby living trust offers a different approach.
While you are healthy and capable, you continue to own and control your assets exactly as you do today. The standby trust sits quietly in the background, ready only if it is needed.
If you later become incapacitated, your Financial Power of Attorney directs your agent to transfer--or "fund"--your assets into the standby trust. Once funded, the successor trustee assumes responsibility for managing those assets under the detailed instructions contained in the trust agreement.
Rather than relying solely on one individual's judgment, the trustee operates under a written fiduciary framework that clearly defines how assets are to be managed and for whose benefit.
Consider this example.
Mary, an 82-year-old widow, named her son David as her Financial Power of Attorney. David was devoted to his mother but had never managed investments, prepared tax returns, or dealt with long-term care expenses. When Mary developed dementia, David suddenly found himself making difficult financial decisions while balancing his own career and family responsibilities.
Had Mary established a standby living trust, David's role would have been much simpler. Acting under the Power of Attorney, he would have transferred her assets into the trust, allowing the successor trustee to assume responsibility for investment management, bill payment, recordkeeping, tax reporting, and distributions according to Mary's written instructions. David could then focus on being a son rather than becoming a full-time financial manager.
Another significant advantage is continuity.
An individual agent may become ill, relocate, resign, or simply become unable to continue serving. A properly structured trust with a qualified successor trustee can provide uninterrupted management for years if necessary.
Standby trusts also offer greater consistency. Investment decisions, recordkeeping, and distributions are governed by fiduciary standards rather than personal opinions or family pressures. This often reduces misunderstandings and disagreements among family members.
None of this diminishes the importance of the Financial Power of Attorney. In fact, it remains an essential document because it serves as the bridge that moves assets into the standby trust upon incapacity. The two documents work together--not in competition.
For many families, the question is no longer whether someone should have legal authority to act. The better question is whether that authority should be exercised directly over your assets or used to place those assets into a structure specifically designed to manage them.
A thoughtfully drafted standby living trust, combined with a well-crafted Financial Power of Attorney, can provide greater continuity, clearer fiduciary standards, and a more orderly transition during one of life's most challenging periods.
At Garden State Trust Company, we often find that clients gain tremendous peace of mind knowing that, if incapacity occurs, their financial affairs will continue to be managed according to a carefully designed plan rather than relying solely on the discretion of a single individual. Sometimes the greatest gift you can leave your family is not more authority--but less responsibility.
| | MONTHLY QUESTION & ANSWER | | |
Q. I am retired and recently moved from New York to a retirement community in New Jersey to be closer to my kids. I have learned that New Jersey has an Inheritance Tax when I die. What is it?
A. New Jersey's Inheritance Tax is a tax on assets transferred at death to certain beneficiaries. The tax depends on the beneficiary's relationship to the deceased.
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Class A beneficiaries--spouse, children, grandchildren, parents, and stepchildren--are completely exempt.
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Class C beneficiaries, including siblings and children-in-law, are taxed at 11%-16% after the first $25,000.
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Class D beneficiaries, generally everyone else, are taxed at 15% on the first $700,000 and 16% above $700,000.
Unlike New York, New Jersey does not currently impose an estate tax.
| | HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT? | | For general informational purposes only. This information does not constitute legal advice. | | |
When I read the Of Interest Article, Being the Executor of an Estate Is a Thankless Job: Here's How To Do It Well Anyway from Kiplinger.com shared in this newsletter, I was immediately reminded of a poem I read many years ago and have shared from time to time.
THE EXECUTOR
I had a friend who died and he,
On earth so loved and trusted me,
That ere he quit this earthly shore,
He made me his executor.
He tasked me through my natural life,
To guard the interests of his wife,
To see that everything was done,
Both for his daughter and his son.
I have his money to invest,
And though I try my level best,
To do what wisely, I'm advised,
My judgment oft is criticized.
His widow once so calm and meek,
Comes, hot with rage, three times a week,
And rails at me, because I must,
To keep my oath appear unjust.
His children hate the sight of me,
Although their friend I've tried to be,
And every relative declares,
I interfere with his affairs.
Now when I die I'll never ask,
A friend to carry such a task,
I'll spare him all such anguish sore,
And leave a hired executor.
---Today and Tomorrow, Edgar A. Guest
(Chicago: Reilly & Lee Company, 1942)
By now, anyone that has been growing a vegetable garden will appreciate the words of Sarah Kelly - "By August, my garden has given up on me, and frankly, I'm done with it too."
Enjoy the rest of summer, be safe!
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What would you do if you received an apparently official letter from the IRS directing you to enroll in a "Digital Asset Compliance Portal"? The letter includes a QR. Code which, when scanned, takes you to a website that looks very much like IRS.gov. It looks real.
You should not scan the code, warns the IRS in a recent news report. There is no "Digital Asset Compliance Portal," it is an elaborate scam designed to steal personal information, cryptocurrency wallet information, exchange account credentials, and other sensitive information.
Instead, said the IRS, stop communicating with the scam artist, change the passwords on your financial accounts, preserve screenshots, emails and letters, and send a report to www.IRS.gov/SubmitATip.
How did the fraudsters obtain the names and addresses of the cryptocurrency holders? The IRS news report did not speculate, nor did it discuss how many taxpayers may have been duped to date.
You can't be too careful.
(August 2026)
© 2026 M.A. Co. All rights reserved.
| | The "Sandwich Generation" | | |
The "baby boomers" are the generation born after World War II, from 1946 through 1964. The succeeding cohort, born from 1965 through 1980, has been dubbed "Generation X," or Gen X for short. They are the folks age 46 to 61 this year.
The CPA Practice Advisor recently reported on a survey of 1,000 Gen X workers and their experiences with caregiving. This included taking care of minor children (24%), adult children (23%), or older adults, such as parents or in-laws (17%). Of those who are caring for aging relatives, some 37% are also taking care of minor or adult children--hence, the "sandwich generation."
Caregiving involves a range of routine responsibilities, such as:
- providing housing;
- buying groceries;
- financial support;
- paperwork management;
- managing medical appointments and insurance;
- managing medications;
- personal care, such as bathing and dressing.
It can be time-consuming work, almost like a second job without the pay. Some 12% of respondents spend more than 30 hours per week on caregiving, while 31% spend up to 15 hours. There is a pronounced negative impact on the workplace, with 54% reporting that caregiving increases their stress and risk of burnout, 40% have interruptions during the workday for appointments or emergencies, and 37% find it difficult to start and complete their work on time.
Costs are also measured in money. Some 19% reported tapping their emergency savings to cover caregiving expenses, 18% used their credit cards, and 17% reduced their retirement plan contributions. Switching to a lower-paying but more flexible job was the solution for 12% of respondents, and 10% reported turning down a promotion because it would have interfered with caregiving responsibilities.
(August 2026)
© 2026 M.A. Co. All rights reserved.
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A completely discretionary trust is a trust where the trustee has complete discretion with respect to distributions of income or principal. This approach is an alternative to the incentive trust, which may have specific guidance included in the trust document. A completely discretionary trust differs from other trusts in the sense that a mission statement would not be contained in the trust agreement and some of the more formal requirements for meetings, etc., might not be included. Consequently, there would be no provisions in the trust agreement that could be used by a disgruntled beneficiary to challenge the exercise of discretion by the trustee.
Mission Statement. When a purely discretionary trust is to be used, it is important for the family to adopt a mission statement, but the mission statement would not be contained in the trust agreement itself. The creator of the trust, usually a parent, would establish guidelines for the trustee to follow with respect to making discretionary distributions of income and principal, which would be contained in a memo or a letter to the trustee. Subsequent changes to the guidelines could be made by the creator of the trust and perhaps the adult beneficiaries. After the creator's death, subsequent changes to the guidelines could be made by the adult beneficiaries, with or without the approval of the trustees.
Important Provisions in a Completely Discretionary Trust. Exculpatory provisions, relieving the trustee of liability for exercising his or her discretion should be included in the trust document. Such a provision may eliminate a trustee's liability in cases where the trustee perhaps should have been liable, putting a premium on naming the proper person or persons to serve as trustee.
Compensation provisions should provide that the trustee who is playing such an important role in the financial affairs of the family is properly remunerated.
Successor trustee provisions should be included to ensure that there is always a proper trustee. Usually this can be achieved by giving the current trustee or trustees the right to name his or her or their successors. In many cases it will be appropriate to give adult beneficiaries the right to remove the current trustee or trustees and appoint successor trustees, although certain requirements may be included to ensure that the successor trustee is qualified and trustees are not subject to inappropriate pressure from the beneficiaries with regard to the exercise of their discretion.
The use of in terrorem and payment of litigation costs clauses may be advisable. Even though in many states an in terrorem clause, which provides that if any beneficiary challenges the discretionary authority of the trustee the beneficiary will lose his or right to distributions, may not be enforceable, the mere existence of such a clause may discourage such attacks on the trustee's exercise of discretion. A provision requiring that any beneficiary who brings an action against a trustee pay any litigation costs in the event the beneficiary is unsuccessful may also discourage unwarranted attacks on the trustee's exercise of discretion A provision providing for arbitration or mediation may also prevent unnecessary litigation expenses.
Advantages. The completely discretionary trust perhaps provides for the greatest degree of flexibility. Also, the completely discretionary trust, with the proper trustee, mission statement, and guidelines, may achieve the desired objectives of the creator of the trust with regard to influencing the behavior of the beneficiaries. Such a trust may come closest to accomplishing the most important goals of the creator, a replication of what the creator would do if alive.
Disadvantages. The completely discretionary trust puts a premium on the identity of the trustee. The completely discretionary trust may result in litigation over the trustee's exercise of discretion. Although the trust agreement would be clear that the trustee's discretion was not subject to review by the courts, the courts may nevertheless intercede when the trustee's exercise of discretion is challenged by the beneficiary or beneficiaries. The beneficiaries may be able to force the trustee to disclose any precatory instructions the creator provided to the trustee.
To learn more about discretionary trusts, make an appointment to meet with one of our officers at your earliest convenience.
(August 2026)
© 2026 M.A. Co. All rights reserved.
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WALL - MAIN OFFICE
732-255-5000
SOUTH JERSEY / PHILADELPHIA REGION
856-281-1300
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LEBANON REGION
908-287-7188
LINWOOD / SOUTH JERSEY REGION
856-281-1300
| | Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2026. All rights reserved. | | | | |
