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HomeMy WebLinkAbout07-24-06 Todd F. Truntz, Esquire Identification No. 83302 Robert R. Church, Esquire Identification No. 40385 KEEFER WOOD ALLEN & RAHAL, LLP Suite 301 415 Fallowfie1d Road Camp Hill, P A 17011 CATHERINE A. MCKINNEY, Settlor of The Patricia M. Kilkenny Family Irrevocable Trust, and PATRICIA M. KILKENNY, IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA '--1 1'<> ., ',.--' :TJ ,_ ,I~: ~~ '"J c;~3 .. ,..", _~:I Petitioners, ~,) VS. NO. 21-06-553 ; -. 0"', ~ ~) COMMUNITY TRUST COMPANY, Respondent. , , , ORPHANS' COURT DIVISION , , '''1 -::] <) i" II _.~ -") , l .( .~J G RESPONSE OF COMMUNITY TRUST COMPANY TO PETITION FOR TERMINATION OF TRUST ~ I AND NOW, comes Respondent Community Trust Company (hereinafter "CTC"), by and through its attorneys, Keefer Wood Allen & Rahal, LLP, to file this Response to the Petition for Termination of Trust filed by Catherine A. McKinney, Settlor of The Patricia M. Kilkenny Family Irrevocable Trust and Patricia M. Kilkenny (hereinafter collectively "Petitioners") and in support thereof avers the following: 1. Admitted in part and denied in part. Admitted that Catherine A. McKinney (hereinafter "Ms. McKinney") is an adult individual. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the remaining averments contained in Paragraph 1; therefore, said averments are deemed denied and proof thereof is demanded. 2. Admitted III part and denied in part. Admitted that Patricia M. Kilkenny (hereinafter Ms. Kilkenney) is an adult individual. Upon reasonable investigation, CTC 1 presently lacks knowledge or information sufficient to determine the veracity of the remaining averments contained in Paragraph 2; therefore, said averments are deemed denied and proof thereof is demanded. 3. Admitted as stated. 4. The Patricia M. Kilkenny Family Irrevocable Trust Agreement dated September 6, 2002 (hereafter the "Trust") is a legal document that speaks for itself; therefore, no responsive pleading is required. The Trust was created by Ms. Kilkenny, as settler, pursuant to the Estate Planning Analysis and Contract of Lowell R. Gates, Esq., a copy of which is attached hereto and incorporated herein as Exhibit "A." 5. The Trust is a legal document that speaks for itself; therefore, no responsive pleading is required. 6. Denied. Paragraph 6 is denied to the extent that the stated value of assets owned by the Trust is inaccurate. The fair market value of the real property, as of December 13, 2004, is approximately $176,000.00; the Metropolitan Life annuity No. 550008223 had a fair market value of $86,652.36 as of March 30, 2006; and, Metropolitan Life Annuity No. 550008217 had a fair market value of $40,414.95 as of March 30,2006. By way of further response, Paragraph 6 is denied to the extent that the Trust assets do not require active management. To the contrary, the Trust created for Ms. Kilkenny is a "Special Needs Trust" that not only requires active management of trust assets, but also imposes a duty upon CTC, as Trustee, to evaluate Ms. Kilkenny's financial needs and make distributions accordingly. 7. Paragraph 7 is denied to the extent that the only duty of CTC as Trustee is the payment of real estate taxes on the house. Along with being legally responsible for the maintenance and preservation of trust assets, CTC periodically reviews trust assets, collects 2 and/or distributes income, directs bill paying, performs accounting and recordkeeping and drafts periodic statements, determines and maintains sufficient insurance, pays required taxes, conducts inspections of property and performs periodic real estate appraisals. Furthermore, the Trust is a "Special Needs Trust" created as a result of the Estate Planning Analysis and Contract attached at Exhibit "A". The Trust was designed to provide for Ms. Kilkenny's financial needs over the course of her lifetime. By way of further response, Paragraph 7 is denied to the extent that CTC has been charging a minimum monthly fee of $400.00. The maximum monthly amount charged by CTC during the course of the Trust is $365.24 and such monthly charges have steadily decreased over time. 8. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 8 regarding the Petitioners' concern about ongoing charges; therefore, said averments are deemed denied and proof thereof is demanded. By way of further response, CTC has consistently charged reasonable fees for compensation to which it is entitled under Section 9.01 of the Trust, as well as under Pennsylvania law. In re Estate of Arthur Salus, 617 A.2d 737, 740 (Pa. Super. 1992) (citations omitted). 9. The Trust is a legal document that speaks for itself; therefore, no responsive pleading is required. 10. Paragraph 10 is admitted to the extent that by letter April 6, 2004, by telephone call of April 7, 2004, and by telephone call on or about October 25, 2005, Ms. McKinney inquired with CTC regarding trust administration fees. By way of further response, CTC's compensation as trustee is governed by the terms of the Trust. See, Estate of William Wikoff Smith, 874 A.2d 131, 134 (Pa. Super. 2005) (citations omitted). Particularly, Section 9.01 of the 3 Trust specifically states that the Trustee shall receive as compensation "that sum of money which the Trustee normally and customarily charges for performing similar services during the time which it performs these services." CTC's normal and customary charges are set forth in a fee schedule that was transmitted to Ms. McKinney via facsimile on October 25, 2005, a true and correct copy of which is attached hereto and incorporated herein as Exhibit "B." 11. Denied. Paragraph 11 is denied to the extent that, upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 11 regarding about what Ms. McKinney and Ms. Kilkenny "became concerned"; therefore, said averments are deemed denied and proof thereof is demanded. By way of further response, CTC has not raised its fees as set forth in the Fee Schedule at Exhibit "B" to Petitioners over the course of its administration of the Trust. 12. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 12 regarding whether, in Petitioners' view, CTC "adequately responded to McKinney"; therefore, said averments are deemed denied and proof thereof is demanded. By way of further response, CTC addressed Petitioners', as well as Petitioners' attorney's inquires over a series of telephone calls and written correspondence beginning at least as early as April 8, 2004. 13. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 13 regarding Petitioners' retention of Michael L. Bangs, Esquire; therefore, said averments are deemed denied and proof thereof is demanded. 4 14. The letter of Michael L. Bangs, Esquire, dated December 27, 2005, attached as Exhibit "B" to the Petition, speaks for itself; therefore, no responsive pleading is required. By way of further response, CTC makes the following response and explanation: A. Mr. Bangs's letter of December 27, 2005 did not constitute a legally effective exercise of the power of appointment granted to Ms. McKinney under Section 5.02 of the Trust because Ms. McKinney never executed a legal document or instrument herself, expressing her present intention to exercise such power of appointment in an immediate and unconditional manner. B. Even if Mr. Bangs's letter of December 27, 2005 is deemed to be an effective and unconditional exercise of Ms. McKinney's power of appointment, the practical effect of removing most or substantially all of the assets from the Trust amounted to a partial or constructive termination of the Trust, for which CTC is entitled to receive compensation, in accordance with its published fee schedule and Section 9.01 of the Trust. C. Section 6.01(E) of the Trust grants CTC the discretionary power to terminate the Trust whenever the assets of the Trust are less than the amount required for CTC's minimum annual fee. Said Section 6.01E of the Trust states, as follows, to wit: (E) If at any time the total fair market value of the assets of any trust established or to be established hereunder is so small that the Trustee's annual fee for administering the trust would be equal to or less than the minimum annual fee set forth in the Trustee's regularly published fee schedule then, in effect, the Trustee in its discretion shall be authorized to terminate such trust or to decide not to establish such trust, and in such even the property then held in or to be distributed to such trust shall be distributed to the persons who are then or would be entitled to the principal and/or income of such trust. If the amount of principal and/or income to 5 be received by such persons is to be determined in the discretion of the Trustee, then the Trustee shall distribute the property among such of the persons to whom the Trustee is authorized to distribute principal and/or income, and in such proportions, as the Trustee in its discretion shall determine. D. After removal of the real estate and Annuity No.1 from the Trust, the remaining assets thereof will be approximately $50,000, which is less than the $136,364 amount required for CTC's annual minimum fee of$1,500. E. At all times material since the receipt of Mr. Bangs's letter of December 27, 2006, CTC engaged in good faith negotiations with the Petitioners (through their counsel) in an effort to satisfy the Petitioners' various requests, while also attempting to secure the requisite release from liability of CTC, as Trustee. Petitioners, through their counsel, declined to agree to satisfactory arrangements for payment to CTC of the compensation to which it is properly entitled under its published fee schedule and Section 9.01 of the Trust, and as provided in Pennsylvania trust law. F. By way of further response, CTC intends to exercise its discretionary power under Section 6.01(E) of the Trust in order to cause the complete termination of the Trust and the distribution of the remaining assets thereof to Ms. McKinney and/or to Ms. Kilkenny, as the beneficiaries of the Trust, as the Court shall determine. To that end, CTC intends to prepare and file a First and Final Account of CTC's administration of the Trust, with the same to filed with the Court not later than September 8, 2006, for adjudication and final disposition ofthis matter. 15. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 15 regarding Petitioners' awareness of Trust termination fees; therefore, said averments are deemed 6 denied and proof thereof is demanded. By way of further response, the letter dated February 3, 2006, attached to the Petition as Exhibit "C" speaks for itself; therefore, no responsive pleading is required. By way of further response, as set forth within said February 3, 2006 letter, CTC expressed its concern that termination of the Trust would defeat the intent of the Estate Planning Analysis and Contract entered into by Ms. Kilkenny, as well as the advice given to her by her estate planning counsel, Lowell R. Gates, Esquire, and could potentially be against her best interests. For the reasons explained in Paragraph 14 above, CTC believes and therefore avers that it has the authority to cause the complete termination and distribution of the assets of the Trust, and further believes and therefore avers that the most appropriate course of action for so doing is the filing and adjudication by this Court of CTC's First and Final Account. CTC's response in Paragraph 14 above is fully incorporated herein by this reference. 16. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 16 regarding McKinney's decisions in response to the February 3,2006 letter from CTC; therefore, said averments are deemed denied and proof thereof is demanded. For the reasons explained in Paragraph 14 above, CTC believes and therefore avers that it has the authority to cause the complete termination and distribution of the assets of the Trust, and further believes and therefore avers that the most appropriate course of action for so doing is the filing and adjudication by this Court of CTC's First and Final Account. CTC's response in Paragraph 14 above is fully incorporated herein by this reference. 17. The letter of Petitioners' counsel dated February 16, 2005, as well as the deed enclosed therewith, attached to the Petition as Exhibit "D", speak for themselves; therefore, no responsive pleading is required. By way of further response, the purported exercise of the power 7 of appointment, by the letter of Petitioners' counsel, dated February 16, 2006, was ineffective for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 18. The letter of Petitioners' counsel dated March 13, 2006 speaks for itself; therefore, no responsive pleading is required. Furthermore, the special warranty deed enclosed with the February 16, 2005 letter was not the proper legal document for CTC to convey the property as a fiduciary; a fiduciary warranty of title should have been used instead. For the reasons explained in paragraph 14 above, CTC believes and therefore avers that it has the authority to cause the complete termination and distribution of the assets of the Trust, and further believes and therefore avers that the most appropriate course of action for so doing is the filing and adjudication by this Court of CTC's First and Final Account. CTC's response in Paragraph 14 above is fully incorporated herein by this reference. 19. Denied. Paragraph 19 contains conclusions of law to which no responSIve pleading is required; therefore, Paragraph 19 is denied. By way of further response, the purported exercise of the power of appointment by the letter of Petitioners' counsel dated February 16, 2006 was ineffective for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 20. The letter of Petitioners' counsel dated March 16, 2006 speaks for itself; therefore, no responsive pleading is required. By way of further response, correspondence from Petitioners' counsel was ineffective for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 21. The letter of Petitioners' counsel dated March 16, 2006 speaks for itself; therefore, no responsive pleading is required. By way of further response, correspondence from 8 Petitioners' counsel was ineffective for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 22. The letter of Petitioners' counsel dated April 24, 2006 speaks for itself; therefore, no responsive pleading is required. The Receipt and Release Agreement, as set forth in Paragraph 22, is attached hereto and incorporated herein as Exhibit "C." By way of further response, correspondence from Petitioners' counsel was ineffective for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 23. Denied. The multiple correspondence of Petitioners' counsel constitutes continuing negotiations and not an effective exercise of the power of appointment, for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. By way of further response, Paragraph 23 contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 23 is denied. 24. The letter of Petitioners' counsel dated April 26, 2006 speaks for itself; therefore, no responsive pleading is required. By way of further response, the April 26, 2006 letter of Petitioners' counsel constituted continuing negotiations and not an effective exercise of the power of appointment, for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. 25. Denied. The maximum monthly amount charged by CTC during the course of the Trust is $365.24 and such monthly fee has steadily decreased over time. 26. Denied. The repeated correspondence from Petitioners' counsel constituted continuing negotiations and not an effective exercise of the power of appointment, for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. On April 24, 2006, CTC sent a "Receipt and Release Agreement," attached hereto as 9 Exhibit "C," to counsel for Petitioners to facilitate the informal termination of the Trust, in lieu of a formal accounting and adjudication by this Court. CTC never received a satisfactory response from Petitioners or their counsel. 27. Denied. Paragraph 27 contains conclusions of law to which no responsIve pleading is required; therefore, Paragraph 27 is denied. 28. Denied. Paragraph 28 contains conclusions of law to which no responsIve pleading is required; therefore, Paragraph 28 is denied. A. Denied. Paragraph 28A contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 28A is denied. By way of further response, repeated correspondence from Petitioners' counsel constituted continuing negotiations and not an effective exercise of the power of appointment, for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. B. Denied. Paragraph 28B contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 28B is denied. By way of further response, CTC responded to communications from Petitioners and their counsel with reasonable timeliness. C. Denied. Paragraph 28C contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 28C is denied. By way of further response, compensation for services performed under the Trust is set forth in Section 9.01 of the Trust, to which Ms. McKinney expressly agreed, as evidenced by her execution of the Trust. 10 D. Denied. Paragraph 28D contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 28D is denied. By way of further response, CTC's compensation for services performed under the Trust is set forth in Section 9.01 of the Trust, to which Ms. McKinney expressly agreed as evidenced by her execution of the Trust. E. Denied. Paragraph 28E contains conclusions of law to which no responsive pleading is required; therefore, Paragraph 28E is denied. By way of further response, CTC responded to communications from Petitioners and their counsel with reasonable timeliness. 29. Denied. Petitioners' requests through their counsel to remove the real estate and Annuity No.1 from the Trust constituted continuing negotiations and not an effective exercise of the power of appointment, for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this reference. By way of further response, it is the position of CTC that this matter be stayed until September 8, 2006 in order to allow CTC time to prepare and file its First and Final Account, and that the adjudication of such Account by this Court is the most appropriate course of action for the disposition of this matter. 30. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 30 regarding Petitioners' legal costs and the cause thereof; therefore, said averments are deemed denied and proof thereof is demanded. 31. Denied. Requests by Petitioners' counsel to remove the real estate and Annuity No. 1 from the Trust constituted an ineffective exercise of the power of appointment for the reasons set forth in Paragraph 14 above, which response is fully incorporated herein by this 11m reference. Additionally, such requests, if legally valid, would have constituted a de facto partial or constructive termination of the Trust, for which CTC is entitled as Trustee to a termination fee pursuant to its published fee schedule and Section 9.01 ofthe Trust. Said requests by counsel for the Petitioners were Petitioners' continuing attempt to bypass the provisions of Section 9.01 of the Trust to avoid paying CTC the termination fee to which it is properly entitled. By way of further response, it is the position of CTC that this matter be stayed until September 8, 2006 in order to allow CTC time to prepare and file its First and Final Account, and that the adjudication of such Account by this Court is the most appropriate course of action for the disposition of this matter. 32. Denied. Upon reasonable investigation, CTC presently lacks knowledge or information sufficient to determine the veracity of the averments contained in Paragraph 32 regarding Petitioners' confidence in CTC; therefore, said averments are deemed denied and proof thereof is demanded. WHEREFORE, Respondent Community Trust Company respectfully requests that this Honorable Court enter the attached Order to stay further action on the Petition pending the filing and adjudication of a First and Final Account by CTC of its administration of the Trust, with such Account to be filed with the Clerk on or before September 8, 2006, so that the Trust can be terminated properly through the adjudication of such Account and in accordance with further Order of this Court. (Continued on Page 13.) 12 (Continued from Page 12.) Respectfully submitted, KEEFER WOOD ALLEN & RAHAL, LLP ------- Date: July 24, 2006 By: Todd F. Truntz, Esquire Identification No. 83302 Robert R. Church, Esquire Identification No. 40385 415 Fallowfield Road, Suite 301 Camp Hill, P A 17011 (717) 612-5800 Attorneys for Respondent Community Trust Company 13 VERI FICA TION I, James E. White, Vice President and Trust Officer for Community Trust Company, declare that I am authorized to make this Verification on its behalf and hereby verify that the statements contained in the foregoing Response to Petition for Termination of Trust are true and correct to the best of my knowledge or information and belief. I understand that false statements herein are made subject to the penalties of 18 Pa.C.S.A. S 4904, relating to unsworn falsification to authorities. Dated: 'l ;)~ d.-O~ ~ep/~ V6ames E. White LAW OFFICES OF GATES, HALBRUNER &-HATCH, P.C: LOWELL R. GATES Also Admitted 10 Massachusetts Bar MARK E. HALBRUNER Also Admitted to New Jersey Bar CRAIG A. HATCH CORY J. SNOOK ALBERT N. PETERlIN Also Admittl'd to Maryland Bar 1013 MUMMA ROAD. SUITE 100. LEMOYNE, PENNSYLVANIA 17043 (717) 731-9600. FAX: (717) 731-9627 BRANCH OFFICE: 3 WEST MONUMENT SQUARE, SUITE 304 LEWISTOWN, PA 17044 171?} 248-6909 WEB SITE: www.GatesLawFirm.com STACEY L. NACE ParalegaVOffice Manager TRACI L SEPKOVIC Paralegal ESTATE PLANNING ANALYSIS AND CONTRACT FOR PATRlCIA M. KILKENNY PREPARED BY LOWELL R. GATES, ESQ. GATES, HALBRUNER & HATCH, P.C. AUGUST 23, 2002 The information contained herein is prepared in consideration for possible contract for services. This analysis has been prepared without cost to the recipients although the cost is calculated into the proposed contract. In exchange for review of this analysis, each recipient, their successors, agents or assigns, agree that they will not provide, copy or otherwise deliver the analysis and/or contract to anyone else other than the recipients or the above listed client. In the event that such delivery is discovered by the law firm of Gates, Halbruner & Hatch, P.c., the full contract price shall serve as the standard of liquidated damages in addition to reasonable attorney fees for collection. PATRICIA M. KILKENNY Estate Planning Analysis August 23, 2002 Page -2- This legal analysis for Mrs. Kilkenny is based on the assumptions listed below. If any of these assumptions are in error, they could adversely prejudice the analysis. Please review these items to determine if they are correct. Primary Residence: Marriage Status: Children: 603 Fairway Drive, Camp Hill~ Cumberland County, Pennsylvania 17011 Widowed Four surviving children; One predeceased child with children Concerns: Mrs. Kilkenny is concerned with the preservation of her assets in the event that she needs long-term nursing care. She would like to assure that her children avoid capital gains taxes and inheritance taxes at her death and that associated costs are reduced as much as possible. Assets: Residence MetLife Annuity (transfer from Allfirst Bank) IRA (MetLife) IRA (All first Bank - 10%) Money Market (Allfirst Bank) MetLife Stock Saturn Seafood Loan Life Insurance (MetLife) Car (1996 Mercury Marquis) Total Assets $175,000* $150,000 $101,000 $ 4,500 $ 8,000 $ 11 ,600 $ 25,000 $ 1,500 $ 6,500 $489,100 *Liabilities: Home equity loan $ 6,000 Total Net Worth $483.100 Income: Social Security IRA Total per month $1,024.00 $ 833.33 $1.857.33 PATRICIA M. KILKENNY Estate Planning Analysis August 23, 2002 Page -3- Recommended Documents and Action 1. Livine Will. It is our understanding that you currently have a living will. This document is vital since it is the written directive concerning artificial support in the event that an individual is terminally ill or permanently unconscious. Many people also consider organ donation at this time. We find that these documents can be very useful to a family at a stressful time. It is our recommendation that you update your living will by executing a new one. One of the reasons for this is so that you can re-designate your surrogate and successor surrogate, since your husband's passing. A living will document provides your family and attending physician with an outline of your wishes should you become permanently unconscious or terminally ill and do not wish to be maintained by life support or other heroic measures. As you know, under this document, you may select an individual or entity to act as your surrogate to enforce your Living Will. You may also make decisions regarding anatomical gifts and Do Not Resuscitate Orders and identify those decisions under the Living Will. 2. Durable Power of Attorney. There is an existing Power of Attorney for you. However, a new Durable Power of Attorney should be drafted. First, you should have a new Power of Attorney in order to re-designate your agent and to name a successor agent. Secondly, your current document does not have the current statutory notice and agent acknowledgment as required by a recent change in Pennsylvania law. While this does not in itself invalidate the Power of Attorney, from a practical perspective, it may since institutions win start looking for the current Power of Attorney document. The document you have is also lacking in other areas of the law according to the new Pennsylvania statutes. Therefore, a new one should be drafted that complies with current Pennsylvania law. The power of attorney also must recognize the ability to make unlimited gifts and to make gifts in revocable and irrevocable trust. This failure can restrict the benefits of gifting in an estate plan. Under the Power of Attorney, the Principal can define and describe the terms of the authority that the agent will have. We generally recommend a very broad authority to the agents so that they can act on behalf of the Principal in every capacity that the Principal would if personally present. 3. New Last Will and Testament With "Pour-over" Provisions. A new Will should be drafted so that it is consistent with either of the Trusts outlined below. The Will is designed to provide a "clean-up" mechanism for the estate to transfer any remaining assets that have not been transferred to the Trusts during your lifetime. This mechanism will transfer those PATRICIA M. KILKENNY Estate Planning Analysis August 23, 2002 Page -4- remaining assets to the Trusts upon your death. Typically this covers items such as cars or personal property. The Will can be set up to automatically transfer or "pour" those remaining assets into either of the Trusts for distribution to your heirs. In addition, the Will also performs all of the traditional duties that a normal Will provides, such as the naming of an Executor or Executrix and making specific gifts to individuals or organizations. The Will is drafted to coincide and work with the Trusts to effectively and efficiently transfer your assets to your heirs. *********************************** OPTION A: 4. Asset Protection Trust. An Asset Protection Trust can be drafted to be the "holding tank" for your assets. This would protect the assets should you ever have to enter a long-term care facility. It will work in conjunction with the "pour-over" Will outlined above to transfer the assets to your heirs at your death. This trust will provide income payments to Patricia Kilkenny for her lifetime. Probate Savines. In addition, this type of Trust accomplishes two (2) objectives. First, it eliminates probate on the amount transferred to the trust. Probate expenses typically range from five (5%) percent to eight (8%) percent of the total estate value, which would be probate fees of $24,450 using a 5% probate cost. The majority of these expenses will be avoided by using an asset protection trust. Assuming you save two-thirds (2/3) of the probate costs, that equates to a savings of$16,300. The Pennsylvania Inheritance Tax is 4.5% on the total estate, and will be applicable to the assets transferred to the Asset Protection Trust. Based on the assumption that the non- qualified assets will be transferred to the trust (House, MetLife Annuity, Money Market, and MetLife Stock), the total inheritance tax assessed against the trust would currently be approximately $15,507.' ($344,600 x 4.5% = $15,507). Correspondingly, there would be no capital gains tax on the sale of any assets after death. This trust will need to obtain an Employer Identification Number (EIN) for tax purposes. We will prepare and submit the appropriate application and obtain your EIN as part of your estate planning process. With this asset protection trust, your assets will be protected no matter the inflation rate of long term care expenses. In addition, you will still maintain a measure of control over the assets in the trust. PATRICIA M. KILKENNY Estate Planning Analysis August 23, 2002 Page -5- OPTION B: 4. Special Needs Trust. For setting up a Special Needs Trust, we recommend a two-step transfer of the house and other assets into this trust. We call this a two-step transfer because the assets will be transferred to a third party (typically a child) before being transferred to the Trust. The Special Needs Trust is established by the third party. Upon your death, the Trust would terminate and distribute the assets to whomever you wish. The purpose of the trust is to provide payments of income and/or principal at the Trustee's discretion to cover the cost of living expenses. In other words, the access to the transferred funds would be limited, however, this protects the trust funds from long-term care costs. The transfer of the assets will create an ineligibility period for Medical Assistance based on the value transferred and the ineligibility period created by the transfer. The transfer of the real estate and the investments to the Irrevocable Trust will create an ineligibility period for Medical Assistance based on the amount transferred to the trust, with a maximum of three (3) years, i.e., thirty-six (36) months. This means that there is the potential cost of long term care exposure for three (3) years following the transfer to the Trust. In addition, the trust will have to pay capital gain taxes on the house upon your death. This will be approximately $19,800, based on the following formula: $175,000 (FMV) - $76,000 (basis) = $99,000 x 22.8% (tax rate) = $22.572. By contrast, however, there would not be any PA inheritance tax on the trust at its termination, which would save $15,507 of inheritance tax. *********************************** 5. Transfer of Deeds to Real Estate. The ownership of the residence needs to be transferred to the Irrevocable Trust. If you choose Option A, only one (1) deed will be needed. If you choose Option B, we will need to prepare and execute two (2) deeds in order to complete the two-step transfer. This allows for easier lifetime sale and transfer by the Trustees. To avoid ,- paying realty transfer fax, it is necessary to file the proper documentation with the deeds. 6. Chanl!e Titles on Accounts and Life Insurance. The owner of any life insurance policies or other beneficiary designation contracts should be changed to have the appropriate trust as the beneficiary of the policy. This serves to provide the same protection from Medicaid spend-down as the Will. You will need to contact your agent to obtain the necessary change of beneficiary forms. For individually held policies, there will be a need for a change of ownership and change of beneficiary forms. PATRICIA M. KILKENNY Estate Planning Analysis August 23, 2002 Page -6- 7. Lone Term Care Insurance. We recommend that you investigate the possibility of obtaining a long-term care insurance policy. As we outlined above, the transfer of your assets will create an ineligibility period for Medical Assistance of up to thirty-six (36) months. Therefore, you should seriously consider obtaining at least a three (3) year policy to cover this period of ineligibility. There are many different variables and features involved in the different types of policies available, and you should consult with a professional in this field. We do not sell long-term care insurance, but we work with reliable professionals who do. We would be more than happy to recommend someone who can assist you in this matter. 8. Financial Plannine. You should prepare (and then keep up-to-date) a written balance sheet and/or financial statements listing all of your assets and property (including checking and savings accounts, securities, real estate deeds, cemetery deeds, motor vehicle title certificates, insurance policies, pension or retirement plan documents, etc.), and their location. Be particularly careful that this list only sets forth those items and their location, and does not describe your intended disposition of those assets upon your death. Your Will and Trust perform this latter function. Such a balance sheet and/or financial statements will be most helpful to your surviving heirs and executor, enabling them to administer your estate more expeditiously and avoid overlooking any assets. I generally recommend that you review the balance sheet or financial statements each year when you prepare your income tax returns. It is usually easier at this time since you will likely receive reports from all of your holdings. The information contained herein may be somewhat confusing. If there are any questions, please do not hesitate to contact us at (717) 731-9 O. er ly, 1 ;," LRG:cjs cc: Dean Martin, MetLife LOWELL R. GATES Also Admitted 10 Massachusetts Bar MARK E. HALBRUNER Also Admitted to New Jersey Bar CRAIG A. HATCH CORY J. SNOOK ALBERT N. PETERUN Also Admitted \0 Maryland Bar STACEY L. NACE ParaiegaVOHice Manager TRAGI L SEPKOVIG Paralega I LAW ()FFICES OF GATES, HALBRUNER &-HATCH, P.C. 1013 MUMMA ROAD. SUITE 100. LEMOYNE, PENNSYLVANIA 17043 (717) 731-9600 . FAX: (717) 731-9627 BRANCH OFFICE: 3 WEST MONUMENT SQUARE. SUITE 304 LEWISTOWN. PA 17044 (717) 248-6909 WEB SITE: www.GatesLawFirm.com PATRICIA M. KILKENl"{"Y LEGAL FEE CONTRACT (OPTION "B") DOCUMENTS PROPOSED ONE: THREE: ONE: ONE: ONE: ONE: ONE: 1WO: 1WO: ONE: ESTATE PLANNING ANALYSIS ESTATE PLANNING MEETINGS DURABLE POWER OF ATTORNEY LIVING WILL WILL [BY-PASS PROVISIONS] LETTER OF INSTRUCTION IRREVOCABLE SPECIAL NEEDS TRUST DEEDS REALTY TRANSFER TAX STATEMENTS OF VALUE PLANNING SUMMARY LETTER FEE FOR PREPARATION AND EXECUTION OF DOCUMENTS $ 2,375.00 ADDITIONAL COSTS FILING FEES LONG DISTANCE TELEPHONE CHARGES MILEAGE LEGAL ASSISTANCE NOT DIRECTLY RELATED TO PREPARATION AND EXECUTION OF LISTED DOCUMENTS PAYMENTS DUE., ON SIGNING OF THIS AGREEMENT ON DELIVERY AND EXECUTION OF DOCUMENTS ~THIN30DAYSOFDELIVERYANDEXECUTION 40% [$950] 40% [$950] 20% [$475] CONTRACT AS LEGAL COUNSEL, THE A TTORNEY(S) BELOW HEREBY AGREE TO PREPARE, DELIVER AND EXECUTE THE DOCUMENTS LISTED ABOVE UNDER THE SECTION DESCRIBED AS DOCUMENTS PROPOSED. CLIENT AGREES TO PAY FOR THIS SERVICE ACCORDING TO THE TERMS LISTED ABOVE UNDER THE FEE FOR PREP .ARA TION AND , CUTrON OF DOCUMENTS AND AT THE TIMES LISTED UNDER PAYMENTS DUE. IN WITNESS "WHEREOF, LEGAL COUNSEL AND CLIENT INTENDING TO BE LEGALLY BOUND, HA VB CAUSED TillS FEE SCHEDULE TO BE DULY EXECUTED TIllS: O__L<---; 2.. L () ,2002 /J X t..:r;c.Li!_~ r'/} ~-L-C.L" -r-r-l r(. 11<,. lJ ,v ! (S) CLIENT SIGNATURE(S) X ~TR...I(? 11'1- M (PRINT) ,,- TRUST COMPANY TO: Catherine McKinney COMPANY: TELECOPIER NUMBER: (717) 705-7241 FROM: Patricia A. Walter, Trust Officer DATE: October 25, 2005 TOTAL NUMBER OF PAGES (INCLUDING COVER SHEET): 2 IF YOU DO NOT RECEIVE ALL OF THE PAGES, PLEASE CALL (717) 731-9604 M E S SAG E: Catherine: Article 9.01 of the Patricia M. Kilkenny Family Irrevocable Trust Agreement indicates, uThe Truste shall receive as its compensation for the services perfor.med hereunder that sum of money which the Trustee nor.mally and customarily charges for perfor.ming similar services during the time which it performs these services." Attached is a copy of our current Fee Schedule. If you have any questions, please feel free to give me a call. ~f, =====================================================~======== The information contained in this facsimile communication is confidential and intended only for the use of the person to whom it is addressed. Such information may be privileged and exempt from disclosure under applicable law. If the reader of this communication is not the intended recipient, or the employee or agent responsible for its delivery to the intended recipient, you are hereby notified that the reproduction, distribution or disclosure of any part of this communication, other than to the intended recipient, is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone, and return the original communication to us at our mailing address above by United States First Class Mail. I ~07 Market Street Camp Hill, PA 17011 Telephone 717.731.9604 888.442,9604 Fax 717.737.7834 www,communitytrustco.com COMMUNITY TRUST COMPANY Irrevocable and Revocable Trusts Guardianshios MARKET VALUE FEE: 1.10% on the first 1.00% on the next 0.90% on the next 0.80% balance over $ 500,000 $ 500,000 $ 500,000 $ 1,500,000 MfNIMUM FEE: (per year) Standard Trusts $1,500 Plus an Annual base fee $ 250 STANDARD ADMINISTRATIVE SERVICES A. Investment Management 1. Investment management of stocks, bonds, money market instruments 2. Periodic review of assets and portfolio 3. Execution of security trades B. Administrative 1. Determination of beneficiary needs 2. Communication with beneficiaries 3. Safekeeping of assets 4. Collection/distribution of income 5. Deciding discretionary distributions 6. Bill paying services and medical claim filing services. C. Accounting ] . Recordkeeping 2. Periodic statement of activity 3. Periodic statement of asset values OTHER FEES · Fees quoted are annual fees. They will be prorated and charged to the account monthly. Fee will be assessed based on the market value of the account on the last business day of every month. · Grantor Directed Trusts (outside investment advisor) will be charged a 20 basis point premium. · Federal Reserve wire fees at cost. Broker and SEC commissions for trades at cost. · Account Termination Fee: Equal to the average fee charged over the prior] 2 months, annualized. (If account open less than 12 months, average oftotal fees charged, annualized.) · Trust Company receives a 25 Basis Point commission from fund provider on money market balances. · Fiduciary Income Tax Preparation fee is not included in the Trustee fee. · Fees quoted are for the standard asset management and administrative services as noted above. CTC reserves the right to charge additional reasonable compensation for extraordinary services based on time, expertise and reimbursement of costs and expenses. 3907 Market Street Camp HilI, PA 1701] Telephone 717.731.9604 888.442.9604 Fax 717.737.7834 www.communitytrustco.com AHsr\lISSICN \/Ef~:IFICATIO~~ REPORT TIME 10/25/?00514:55 DATE, TIME F A:>< NO. /NAME DURATION PAGE(S) RESULT MODE 10/25 14:54 7057241 00:00:50 02 OK STANDARD ECrv1 I ,. IN RE: THE PATRICIA M. KILKENNY : FAMILY IRREVOCABLE TRUST Dated: SEPTEMBER 6, 2002 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY ORPHANS COURT DIVISION RECEIPT AND RELEASE AGREEMENT THIS RECEIPT AND RELEASE AGREEMENT is signed by the Undersigned, Catherine A. McKinney, on this day of April, in the year Two Thousand and Six (2006), WHEREAS, Catherine A. McKinney, as Settlor, entered into an Agreement with Community Trust Company, as Trustee of the Patricia M. Kilkenny Family Irrevocable Trust, dated September 6, 2002; and WHEREAS, under Article 9.02 of the Patricia M. Kilkenny Family Irrevocable Trust, the Settlor may remove the Trustee at any time or times, with or without cause, upon thirty (30) days' written notice given to the current Trustee. WHEREAS, Settler, Catherine A. McKinney, through her attorney, Michael 1. Bangs, Attorney at Law, by his letter dated December 27, 2005, notified the Community Trust Company of her intent to exercise her general power of appointment over all principal of the trust; and WHEREAS, Settlor, Catherine A. McKinney and her attorney, Michael 1. Bangs, have been advised of the consequences of transferring the assets to her mother, Patricia M. Kilkenny, by letter dated February 3, 2006; and WHEREAS, Settlor, Catherine A. McKinney, through her attorney, Michael 1. Bangs, Attorney at Law, by his letter dated February 16, 2006, notified the Community Trust Company of her int~nt to modify her exercise a general power of appointment. The modified request included exercise of the power of appointment over the residence at 605 Fairway Drive, Camp Hill, PA and a MetLife Annuity No. 55008223, and WHEREAS, Settlor, Catherine A. McKinney, intends to appoint the partial withdrawal of assets to her mother, Patricia M. Kilkenny; thus partially terminating the trust; and WHEREAS, under Article 9.01 of the Patricia M. Kilkenny Family Irrevocable Trust, the Trustee shall receive as its compensation for the services performed hereunder that sum of money which the Trustee normally and customarily charges for performing similar services during the time which it performs these services. Settlor, Catherine A. McKinney is partially terminating the trust; therefore, the Community Trust Company will charge a termination fee, in the amount of $3,098.1 0, on the assets removed from the trust. NOW THEREFORE, the said Settlor, Catherine A. McKinney, hereby states that she received quarterly statements from Community Trust Company and are satisfied that the statements were proper and correct and hereby waive the filing of a formal account in the Orphan's Court of Cumberland County, Pennsylvania and do hereby remise, release, quitclaim and forever discharge Community Trust Company, Trustee as aforesaid, its successors and assigns of and from the duties of saId Trust and of and from all actions, suites, payments, accounts, reckonings, claims and demands whatsoever, for or by reason thereof. SCHEDULE OF DISTRIBUTION EQB THE PATRICIA M. KILKENNY FAMILY IRREVOCABLE TRUST DATED: SEPTEMBER 6, 2002 Residence at 605 Fairway Drive, Camp Hill, P A 17011 (Appraised value as of 12/13/04) 176,000.00 Metropolitan Life Variable Annuity #550008223 (per statement dated 03/31/06) 86,652.36 Total of Partial Termination: 262,652.36 THE UNDERSIGNED, further agrees to indemnify and hold harmless Community Trust Company, Trustee aforesaid, its Successors and assigns, from and against all claims, loss, liability or damage which it may suffer or to which it may be subject by reason of the distribution without the approval of the Court having jurisdiction. In consideration of the distribution described above, the undersigned agrees to pay the fiduciary any amount up to the value of the above-described distribution that may be necessary in the future to discharge any liabilities of the above-described Trust. IN WITNESS THEREOF, I have hereunto set my hand this_day of April 2006. WITNESS Catherine A. McKinney COMMONWEALTH OF PENNSYLVANIA) ) SS: COUNTY OF ) On this, the day of April 2006, before me, a Notary Public, the undersigned officer, personally appeared Catherine A. McKinney, known to me (or satisfactorily proven) to be the person whose name, is subscribed to the foregoing Receipt and Release, and acknowledged that she has executed the same for the purposes therein contained. WITNESS my hand and Official Seal. Notary Public My Commission Expires: " CERTIFICATE OF SERVICE I, Todd F. Truntz, Esquire, of KEEFER WOOD ALLEN & RAHAL, LLP, certify that I this day served a copy of the foregoing RESPONSE OF COMMUNITY TRUST COMPANY TO PETITION FOR TERMINATION OF TRUST upon the person(s) indicated below by First Class U.S. Mail, postage prepaid at Camp Hill, Pennsylvania, and addressed as follows: Michael L. Bangs, Esquire Bangs Law Office 429 South 18th Street Camp Hill, PA 17011 KEEFER WOOD ALLEN & RAHAL, LLP DATED: July 24,2006 14