Monday, May 21, 2012 The Decision to Exercise Spousal Refusal Can Be Painful, But Often Necessary
Couples who are still married, even into their 70s or 80s are the lucky ones. They’ve made it through the hard times, the ups and downs of life, and still have their companion at their side. But even the most devoted of spouses is sometimes finds it necessary to exercise “Spousal Refusal” to pay the long-term care bills of their spouse when he or she has lost the ability to perform the activities of daily living. This may sound cruel and selfish, but as this article in the Huffington Post points out, exercising Spousal Refusal can sometimes be the only way to save the healthy spouse’s small nest egg for his or her own later years.
Spousal Refusal isn’t about turning away from a spouse in their time of need; in fact, many of the elderly individuals who exercise this option do so only after a long and painful decision-making process, and they do it not out of selfishness but out of necessity. “Those who need help beyond [the first 100 days of nursing or rehab care covered by Medicaid] are facing costs in excess of $100,000 per year in many areas of the U.S. It is not uncommon for someone to lose their house and all of their savings because they had to go into a nursing home.”
As the article points out, couples who choose to pay for a spouse’s long-term care costs won’t be left completely out in the cold. “Anti-spousal impoverishment laws were enacted on the federal level in the late 1980s. In 2012, the well spouse (or community spouse) is permitted to retain up to $113,640 in assets while his or her spouse is covered under the Medicaid program.” Unfortunately, in this day and age, $113,640 doesn’t go a long way, especially if the healthy spouse lives for another decade or so.
The decision to exercise Spousal Refusal is not an easy decision to make. Married couples must weigh the costs and benefits—not only financial costs and benefits, but emotional and ethical as well. No couple should have to go through this alone. The advice of a trusted elder attorney, or an estate or financial planner can help.
Friday, May 18, 2012 Talking to Your Parents About Retirement
Most people consider financial matters a private affair, and only talk about it with their spouse or their financial advisor; but when it comes to retirement and long-term care Americans just can’t afford to be silent any longer. According to a recent article in the Wall Street Journal, “Nearly two in five adult children financially support parents 65 or older... and 86% of millennials expect to care for an aging parent or other elderly person in the future.” This means that while we may not want to talk about finances with our parents or children, chances are we’re going to have to, and the sooner the better.
Some parents won’t initially be comfortable talking about finances with their children, and many children will feel uncomfortable asking; but just because you have a conversation about finances doesn’t mean it has to be invasive. The article suggests starting off by asking your parents any questions you may have about getting your own retirement savings in order. “Ask your parents for advice on your own 401(k) or health-insurance plans and then ask them how they've handled their own. Then share any financial wisdom you have with them.”
Another way to start off the conversation is to simply ask your parents if they have any retirement or estate planning documents, and where you should look to find them if and when the time comes. This can be an opener to asking if there’s anything in their plan that they would like you to be aware of. “These [documents] typically include a will; a living will, which spells out what life-sustaining care a person wants; a financial power of attorney, which authorizes someone to undertake certain financial activities on behalf of a parent; life-insurance policies; information on bank, brokerage other financial accounts; and contact information for any lawyer, trustee or financial adviser.”
As more and more adult children find themselves helping their parents financially during retirement, it becomes more important than ever for those adult children to be involved in (or at least aware of) their parents retirement planning process. If you worry that your parents may need financial help in their golden years, it’s better to broach the subject sooner than later.
Wednesday, May 16, 2012 Facebook Founders Use GRATs to Avoid Excessive Taxation; You Can Too
News sources recently revealed that Facebook founder Mark Zuckerberg—as well as other Facebook top brass—use Grantor Retained Annuity Trusts to protect their assets and investments from excessive taxation. Grantor Retained Annuity Trusts (more commonly called GRATs) are a perfectly legal—and very efficient—way to protect and pass significant assets from one person to another without incurring an exorbitantly high tax bill.
According to the article cited above, "GRATs offer a perfect vehicle for wealthy investors who put money in start-ups, while other trusts don't." But we don’t recommend GRATs only to wealthy startup investors. GRATs are "an excellent way to shift wealth to others at little or no tax cost and with minimal legal and economic risk." As such, they can be the perfect tool for business owners, professional investors, and many others.
Setting up a GRAT allows the investor/grantor to give assets over to the trust for a pre-determined number of years. During this time the assets appreciate and the grantor receives “annual payments adding up to the asset's original value plus a return based on a fixed interest rate determined by the Internal Revenue Service.” At the end of the trust term the assets (at their new value) are transferred to the beneficiary named in the trust with none of the usual gift or estate tax on the appreciation.
This makes GRATs sound like the perfect (and perfectly simple) tool, but nothing is perfectly simple. The pre-determined lifetime of your GRAT will depend on your individual circumstances, as well as the tax laws at the time, so you’ll want to make sure you have the help of an experienced and knowledgeable attorney helping you design your trust. Contact our office for more information.
Monday, May 14, 2012 The Pros and Cons of Long-Term Care Insurance
Do you have long-term care insurance? SHOULD you have long-term care insurance? These are questions that currently plague many forty-, fifty-, and sixty-somethings, as well as some precocious thirty-somethings. We’ve been hearing and reading more and more about long-term care insurance in recent years, but we still don’t seem to have any kind of firm consensus about whether it’s a good investment—whether it’s a necessary investment—or not.
This recent article from CBS online, entitled Why Long-Term Care Insurance Is Important, argues that “LTCI is a tool that can help preserve and protect financial assets, provide flexibility to choose the type of care, offer the ability to choose where care is received, help to ensure high-quality care, and provide financial and emotional support for the family.” This article helps readers not only understand why LTCI might be important, but what are the important questions to ask when considering whether and which long-term care insurance might benefit you and your family.
Of course, not everyone thinks long-term care insurance is necessary. Another article, this one from the Wall Street Journal, provides both sides of the argument. The pro-LTCI writer argues that “For those who buy and keep their policy it is a no-regret proposition. No one who has paid premiums and receives their benefits from the policy regrets having paid those premiums.” You pay a small regular sum over the course of a few decades, and when the time comes you are saved from bankrupting your family by paying as much as $250 a day, often for months or more.
The opposition writer against long-term care insurance argues that the likelihood that you’ll need to use the insurance policy is exaggerated. “It may be more useful to learn that 67% to 70% of seniors who do go into a nursing home are discharged within 90 days, and that after two years, less than 6% of those admitted will still be there.” This is important information to have, but $250/day for even 30-60 days can quickly wipe out a significant portion of a retiree’s savings.
Whatever you choose, make sure you account for your decision in your retirement and estate plans. Talk about the decisions with your estate planner, your financial advisor, and especially with your children. Long-term care expenses can be significant, and it’s always best to be as prepared as you can possibly be.
Friday, April 27, 2012 An Estate Plan Can Highlight Religious Values... Within Limits
All parents hope to pass their values onto their children; and of the many values they hope to pass on religion and spirituality often tops the list. In some cases, religious values are so important to a parent that they will even include mention of these values in their estate plan. Our firm strongly believes that an estate plan is not just about money, but about leaving a legacy, and we often encourage our clients to include mention of their values—religious or otherwise.
Formalizing a legacy of values is not always as easy as leaving a financial legacy, however; and as this recent article in the Wall Street Journal mentions, there is a limit to how far a parent or grandparent can go in dictating religious values to their heirs. The article points out that “being too restrictive in an estate plan in an effort to pass on religious values—say, disinheriting children who marry outside the faith—can create divisions within a family and spark extended, costly legal battles, all while failing to have any impact on the heirs' beliefs.”
One of the most common value-imposing strategies used by parents in estate planning is to require that children marry within a certain faith in order to receive their inheritance. This strategy has worked in some instances, for example, “in a 2009 case that was closely watched by estate planners, the Illinois Supreme Court—overturning the decisions of lower courts—unanimously ruled that a Jewish man, Max Feinberg, and his wife, Erla, could legally cut off their grandchildren who chose to marry outside of the Jewish religion.”
This strategy is often hurtful, however, and quite frequently expensively controversial, causing some heirs to challenge the will or trust; a process which can take many years and thousands of dollars to resolve. It is often better to explore other options as far as passing on values. “One increasingly common alternative to strict provisions that may penalize certain heirs is to leave money for children and grandchildren in a trust and give the trustee discretion to make distributions based on broader criteria that you set out when creating the trust... That way you provide guidance on how you would like your money to be distributed, but you leave some leeway for the trustee to consider special circumstances that you may not have anticipated and to weigh the consequences of each decision on distributions.”
A trusted and sensitive estate planner can talk to you about what is important to you and your family, and help you choose the best and most respectful way to pass on your wealth and your values.
Thursday, April 26, 2012 7 Major Errors in Estate Planning
Good afternoon friends,
You may be interested in the 4/25 Forbes article titled "7 Major Errors in Estate Planning." The seven errors listed are a no-nonsense list of the mistakes I see and discuss daily. They are as follows:
1. Not having a plan
2. Online or DIY rather than professionals
3. Failure to review beneficiary designations and titling of assets
4. Failure to consider estate and gift tax consequences of life insurance
5. Not maximizing annual gifts
6. Failure to take advantage of the estate tax exemption in 2012
7. Leaving assets outright to adult children
The full article is available online at http://www.forbes.com/sites/robclarfeld/2012/04/25/7-major-errors-in-estate-planning/ and I encourage you to share this with your family and friends.
Monday, April 23, 2012 Compassion is Key When Talking to Aging Parents
Being a caregiver is one of the most difficult (and rewarding) jobs on the planet; but sometimes when it comes to strong-willed aging parents, getting them to admit they might need a caregiver is more difficult than the caregiving itself. Take the story of David Solie, published recently in the Los Angeles Times; “David Solie thought he was being a good son and a competent manager. But his strong-willed mother was having none of it.”
According to the article, Mr. Solie (who “had cared for hundreds of elderly patients as a physician's assistant” ) and his mother did not speak for almost three years after he tried to convince her that she “should move someplace easier to navigate -- an assisted living complex, perhaps.” Mr. Solie also expressed that his mother “should relinquish her role as chief caregiver to Roger [Solie’s brother], who could be placed in a group home.”
These kinds of suggestions are often very difficult for independent and strong-minded seniors to hear, and with good reason; after having taken care of themselves, their children, and in some cases taken care of their own parents as well, in their time—it’s not easy to have someone come along and say they can’t do it anymore.
The key, says Mr. Solie, is to recognize and respect a parent’s psychological needs as well as their physical limitations. Once they were on speaking terms again, Mr. Solie started “asking his mom questions about her life and listening intently to her stories. Acknowledging to his mother that there were no longer easy ways to reconcile her safety and her desire to stay put, he asked what would work for her. Then mother and son struck compromises that built a network of support around her and Roger in their home.”
The process of transitioning elderly parents from independent lifestyles they may not be able to handle anymore will be made much easier if you begin the process by asking and listening, instead of simply telling. If the ultimate goal is to increase ease and avoid frustration, shouldn’t that be the goal of each conversation along the way as well?
Friday, April 20, 2012 The Good News and The Bad News About Retirement
The good news is that Americans are living longer, the bad news is that it costs a whole lot more to retire than it used to. But the rising cost of retirement has more to do with just longer life expectancy. As this recent article in the New York Times points out, “Social Security and Medicare are being eyed for cutbacks and 401(k)’s produce ever-varying lump sums.” This means that people are learning to think differently about saving, to think differently about planning for the future, and especially to think differently about when and how they will retire.
Another related article from U.S. News and World Report mentions that “the average expected retirement age and been gradually increasing over the past seventeen years from age 60 in 1995 to 64 in 2005,” and most recently to 67 in 2012. In addition to influencing your financial planning, this shift in the retirement age can also influence your estate planning in some of the following ways:
1. Gift-giving. Parents and grandparents may now choose to hold off on giving significant cash gifts to their heirs; socking that cash away for a longer retirement, if necessary.
2. If your estate plan includes a Retirement Trust you will absolutely want to talk to your estate planning attorney before making any significant decisions regarding your plans for retirement
3. Long-Term Care Insurance. The longer you’re working, the longer you may be able to contribute to a long-term care insurance policy. Consider adjusting your contributions accordingly.
Everybody’s happy about a longer life expectancy, and there are many people who are happy to push off retirement a few years as well, but it does require a little extra planning. “If life expectancy continues its upward curve, you’ll have your work cut out for you, because you may need to think about what you want to do in your 10th and 11th decades.”
Wednesday, April 18, 2012 Transfer of Home Ownership Does Not Replace an Estate Plan
Imagine this: You’re retired, your only significant asset is your home, you’re very close to your child or children, and you don’t want the cost of creating an estate plan. In such cases, what’s the harm of simply putting your home in the name of your child to avoid probate and then be done with it?
We’ve gotten this question more than once at our office, and we almost always advise against it. There are a number of reasons to keep your home in your own name, and this article in the Huffington Post points out two of the biggies: Property taxes and your child’s liabilities.
These aren’t the only reasons to keep your home in your own name, however. Other reasons include:
* Your relationship with your child may not be as great as you think it is. Once the home is in their name they have no obligation to continue to let you live in it one, two or ten years down the line.
* You have more than one child. Putting your home in one child’s name can cause a rift of bad feelings between siblings. The alternative, of putting the home in the names of all your children, only makes it more vulnerable to liabilities and paperwork errors.
* There are other, safer ways to avoid probate. One of those ways is with a Revocable Living Trust. A Revocable Living Trust is flexible and reliable, and doesn’t have to be expensive. In fact, a Revocable Living Trust can actually end up saving your family money in the long run.
Don’t make a mistake that could end up causing you to lose your home. Contact our office to discuss how we can help you protect your family and your assets from probate and liabilities.
Monday, April 16, 2012 A “New Wave” of Lawsuits May Force Children to Pay for Elderly Parents’ Nursing Costs
Many of our clients and readers are caregivers of elderly parents; they have chosen to take responsibility for their parents—whether it be physical responsibility, financial, or other. But what if instead of making that choice, you had responsibility for your aging parents thrust upon you? This is exactly the issue addressed in this recent article from Elder Law Answers.
“John Pittas' mother entered a nursing home for rehabilitation following a car crash. She later left the nursing home and moved to Greece, and a large portion of her bill at the nursing home went unpaid. Mr. Pittas' mother applied to Medicaid to cover her care, but that application is still pending. Meanwhile, the nursing home sued Mr. Pittas for nearly $93,000 under the state's filial responsibility law, which requires a child to provide support for an indigent parent. The trial court ruled in favor of the nursing home.”
The article points out that many states still have filial responsibility laws on the books, but that those laws are rarely enforced. This ruling by the Pennsylvania Supreme Court does not bode well for Baby-Boomers, many of whom are finding themselves caught between caring for elderly parents and for grown children who have not yet left the nest.
Perhaps one of the most disturbing things about this case is that the nursing home was given so much leeway. The Pennsylvania Supreme Court found that “the law does not require [the nursing home] to consider other sources of income or to wait until Mrs. Pittas’s Medicaid claim is resolved.” This would seem to condone (if not encourage) a litigious mind-set among nursing homes. As if this weren’t bad enough, the court “also said that the nursing home had every right to choose which family members to pursue for the money owed.” If you are one of many siblings you could find yourself involved in a lawsuit merely because you live the closest, are the wealthiest, or called mom more often than your brothers or sisters.
The best way to ensure that your family doesn’t find itself embroiled in a similar lawsuit is to ensure that you (or your elderly parents) have a plan in place to pay for long-term care. Contact our office to explore your options.
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