Maybe -- Read About The Sweet Briar College Nightmare

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Q. I visited my niece, Natalie, last year at the picturesque Sweetbriar College, a liberal-arts women’s institution in rural Virginia. I am a history buff and I remember during a tour of the campus they mentioned how more than 100 years ago, the land was left by the plantation owner's daughter to honor the memory of her own daughter. She stipulated in the Last Will and Testament that the land cannot be sold, and must be used as an educational institution for women. Unfortunately, the college is shutting its doors. Can what is said in a Last Will and Testament be modified under these circumstances? Thanks!

A. Sweet Briar College’s 3,250-acre campus, located in the foothills of the Blue Ridge Mountains, was once the site of a tobacco and corn plantation. As you mentioned, in 1900, Indiana Fletcher Williams, whose father ran the plantation, bequeathed the land to form the college in memory of her daughter Daisy, who had died at 16 and never had a chance to attend college. She stipulated that that the institution would exclusively serve white women.

Now, the school serves all women, and once considered admitting men, as well. However, it took years of legal work just to change the Will to integrate the school in the late 1960s, a decade after Brown v. Board of Education. According to faculty, an additional change to Williams’ will to admit men would have been a legal nightmare.

Although Sweet Briar College has a ninety four million dollar endowment and has been soliciting and collecting donations right up until a few weeks ago, the college's board voted this year that the college will be closing it's doors. Despite the endowment, Sweet Briar, like similar private colleges around the country, had been facing mounting costs, and it was becoming difficult to attract enough students, especially ones who could afford the school's full admission price of $47,095 a year.

Williams' Will stipulates that the land is in a restricted charitable trust and that "[n]o part of the said Sweet Briar Plantation and the two tracts of land adjoining . . . shall at any time be sold or alienated by the corporation, but it shall have the power to lease or hire out such portions thereof as may not be directly needed for the occupation of the school and its surrounding grounds." Therefore, the college cannot sell the land to pay off debts without prior court approval, and it may be extremely difficult to gain this approval because of the stipulation in the Will.

Recently, Virginia State Senator Chap Petersen (D-Fairfax), whose grandmother was an alumna of Sweet Briar, sent a letter to Attorney General Mark Herring regarding the legality of closing of the college. He inquired about the rights of the donors who made gifts to the institution and whether they are eligible for a refund, the obligation of the school to existing students, and what will happen to the land. He is still awaiting an answer to his first two questions, but there is some clarity on what can happen to the land.

A Possible Solution

The legal doctrine of Cy Pres (https://vacode.org/64.2-731/) is a doctrine that originated in the law of charitable trusts, but has been applied in the context of class action settlements in the United States. When the original objective of the settlor or the testator became impossible, impracticable, or illegal to perform, the cy-pres doctrine allows the court to amend the terms of the charitable trust as closely as possible to the original intention of the testator or trust settlor to prevent the trust from failing. So, in the case of Sweet Briar College, a court could rule that the land be sold and proceeds be given to another woman's college, for example. We don't know what the outcome will be for sure, but we at least we know there are options.

What Can We Learn from This?

We don't know what the future will bring, but it is always important to plan for contingencies. A lesson we can take away from this is to make sure we have our estate planning documents in place, and they are updated regularly (at least every 1-3 years, depending on the document) and contain several options for different situations that could possibly occur. This is the only way to ensure that your estate plan truly reflects who you are, what you care about, and what you have. Should changes need to be made after the fact, it may be difficult, but at least you have the peace of mind that during your lifetime, you planned for every possible contingency.

Just as a car needs regular maintenance, your estate planning documents need to be updated or redone, especially if it has been more than 5 years since you have done so. The list below pinpoints certain examples of events that could have a significant impact on your estate:

• You get married or divorced
• Your spouse dies or becomes incapacitated
• You become ill or disabled
• You have a new child
• Your child marries or divorces
• Your child becomes ill or disabled
• You have a new grandchild
• One of your beneficiaries shows signs of being financially irresponsible
• One of your beneficiaries develops a drug or alcohol problem
• The value of your assets has significantly increased or decreased
• You retire or change employment
• You acquire property in a different state
• You move to a different state
• There have been changes in the law (which you'll find out about by always reading our newsletters!) that may affect the language of your documents.

Even if no changes are necessary, you should annually sign updated Powers of Attorney, because some financial institutions won’t accept a Power of Attorney more than a year old. Similarly, the older an Advance Medical Directive is, the less likely it is that it will be honored by a doctor or hospital.

Don’t let too much time pass between reviews of your plan. The cost of a review is minimal; but the cost to your family if you neglect your plan could be disastrous.  If any of these changes have happened to you or if you haven’t updated your estate plan in the last few years, the time is now. Call us at 703-691-1888 in Fairfax, at 540-479-1435 in Fredericksburg, at 301-519-8041 in Rockville, MD, or at 202-597-4847 in Washington, DC to update your estate plan! Ask about The Farr Law Firm’s Lifetime Protection Program, which ensures that your documents are properly reviewed and updated as needed, so that they will have the proper effect under the law.

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Critter Corner: Does a 529 College Plan Count as Part of My Assets When Determining Medicaid Eligibility?

Dear Saki and Alley,

I would like to set up a 529 College Savings Account for my granddaughter, Emma. If I need long-term care in the future, will the plan be counted as part of my assets?

Thanks for your help!

Mona E. Savin

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Dear Mona,

One major drawback to setting up a 529 plan in your name is that if you need nursing home care in the future, the 529 plan that you have set up for your grandchild could destroy your eligibility for Medicaid. Because you control the account and have the right to cancel the account and take the money out, the government considers your 529 plan a "countable asset." That means you'll be required to use that money to pay for your long-term care expenses before you qualify for Medicaid.

Since everyone might need to apply for Medicaid in the future, you should consider contributing to an account in someone else's name as the custodian/contributor/account owner for your grandchild, such as Emma's parent (your son or daughter). That way, the plan won't be considered a countable asset for purposes of Medicaid for you, and will likely be used up by the time your son or daughter needs Medicaid.

However, even this strategy won't get you off the hook entirely. When you apply for Medicaid, the state will review your finances during the previous 60 months. Any gifts made during this so-called “look-back” period, including contributions to a 529 savings plan, could hurt your eligibility for Medicaid benefits. This problem is exacerbated If you plan on making regular, ongoing contributions to a 529 savings plan for your grandchild, because each contribution you make would be new gift that would begin a new 60-month look-back period.

An effective way to prevent this from happening is by setting up an irrevocable trust, such as The Living Trust Plus™ and making the contributions to the 529 plan from the trust. The Living Trust Plus™ functions very similarly to a revocable living trust and maintains much of the flexibility of a revocable living trust, but protects your assets from the expenses and difficulties of probate PLUS the expenses of long-term care while you’re alive, PLUS lawsuits and a multitude of other financial risks during your lifetime. You would make a one-time gift to the trust, starting the 5-year lookback period, and you’re your future contributions from the trust to the 529 plan would not count as new gifts. Please note this is the “short version” – the actual mechanics are a bit more complicated.

The Living Trust Plus™ Asset Protection Trust protects your assets (including the money in the 529 plan) from lawsuits, auto accidents, creditor attacks, medical expenses, and — most importantly for the 99% of Americans who are not among the ultra-wealthy — from the catastrophic expenses often incurred in connection with nursing home care.

If you would like more information about the Living Trust Plus™, please contact us for an appointment, or click here to register for one of our upcoming Living Trust Plus™ informational seminars.

Purrs,

Saki and Alley