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.
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.
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.
Friday, March 16, 2012 How Do You Know If You Need An Estate Plan?
Most people know that they should execute some kind of estate plan eventually, but don’t think that they actually need one right now. On our blog we spend a lot of time telling people that they do need an estate plan, and that they need one right now—or as soon as possible! But it’s not always easy for a layperson to know for sure if and when the time is right. Answering the following questions will help you determine when your family may need an estate plan, and if now is the time to take action.
Do you own a house?
Owning your own home means you have at least one significant asset, which affects your need for planning in a number of ways: First, a piece of property cannot be split between people, it will have to be sold (which can take months or even years) and the proceeds divided among your heirs—often at a loss, especially if the house was undervalued to sell quickly. Second, many people who feel they have “small estates and won’t have to worry about Probate or the estate tax” are surprised when they find that the value of their home does indeed push their estate over the line. Third, if you are married you may need to make provisions for your spouse if you would like them to be able to continue to live in your home.
Do you have minor children?
If you have minor children and have not made provisions for them in case of your death or incapacity the government will be in charge of their futures. This could mean your children are put in the care of foster parents or become wards of the state. That is not a chance you want to take.
Do you want your heirs to receive their inheritance immediately and in full, instead of having to wait months (or years) before receiving what may be only a percentage of what you left them?
Probate is a long and expensive process. Without a plan in place your assets will have to be probated before they can be distributed. Not only does this often take years, but the probate fees (which can be considerable) are taken out of your estate—leaving less for your heirs.
Do you know how you want to spend your final moments?
Most people don’t die quickly and quietly at the ripe old age of 98. Most people fall victim to accidents, illness or dementia—unable to make their own health care decisions. Without a healthcare directive or living will that specifically outlines your wishes and instructions for your health care and nominating an agent to carry out those wishes, you could end up in a Terri Schiavo situation—costing your loved ones both financially and emotionally.
If you answered yes to any of these questions then NOW is the time to get started on your estate plan. You may need something small and simple, or you may need a plan that is more comprehensive. Not all plans are created equal, and our office can help you design the one that will be the right fit for your individual family needs. Contact us today.
Monday, March 12, 2012 Estate Plan Forgery: How to Tell and What to Do
The question of will forgery or undue influence of a testator is not a common question, but one that does come up periodically in an estate planner’s office. The movies have given people certain expectations when it comes to a death in the family and probating a will: a book-lined office, the entire family assembled for a formal reading of the will, shocked and angry reactions as a loved one’s fortune goes to an unknown and unlikely character...
This Hollywood portrayal may be generally off base, but the basic premise is based on the very real feelings that come with the death of a loved one: helplessness, confusion, familial bonds, and sometimes even betrayal. A will doesn’t have to be forged for there to be strong feelings of anger or suspicion when the contents end up being different than the family was led to expect. And while forged or secret wills may not be as common as the movies would have us believe, they aren’t completely unheard of either.
So what should you do if you suspect that the will of a loved one has been forged or tampered with? First of all, don’t try to deal with the situation alone. Dealing with the death of a loved one is stressful and emotional, and everyone—including you—is likely to be quicker than usual to react without thinking. Instead, seek the advice of a trusted third party (an estate or probate lawyer is ideal,) someone who can help you distance yourself and look at the situation objectively.
Will forgeries are very rare, but incidents of testators (especially elderly testators) being unduly influenced by a selfishly motivated caregiver or family member are much more common. If you suspect foul play was involved in the creation of a loved one’s will, make an appointment with an estate or probate specialist. We can help you work through your suspicions in a safe environment and explore your options should you feel the need to take action.
Monday, March 05, 2012 Pre-Planning Your Funeral Can Remove the Burden from Your Loved Ones
A funeral comes at a time when the death of a loved one is recent and close, and many people are still in shock and in some cases struggling with the reality of loss. Funerals help grieving loved ones come to terms with death and say their final goodbyes… but for the person planning the funeral the experience can sometimes be a frustrating, painful, and expensive experience. Planning ahead for your own funeral—discussing it with your loved ones and even including your wishes in your estate plan—can remove this burden from their shoulders when the time comes.
Although pre-planning a funeral is essential, pre-paying for a funeral can actually be detrimental. According to The Funeral Consumers Alliance there are just too many things that can go wrong, “[prepaying for] funerals may not cover every item of service you and your family expect, and there's often no guarantee the money you pay today will keep up with inflation to pay the cost of the service you've picked out.” In addition, “many state laws don't offer much protection for your prepaid funeral money.” If you change your mind or move out of the area there’s no assurance that you’ll get your money refunded. That being said, although pre-paying may be a no-no, setting aside funds for a funeral—in an account, CDs, or a specially designated insurance policy—is always a good idea.
In just about every will or trust you will find something about the estate “paying the deceased’s final expenses,” otherwise known as funeral and/or memorial costs. As a small portion of what can sometimes be a very large and intricate document, this “final expense” clause can seem unimportant—but our firm knows better.
Talking about your wishes for “final disposition of your remains” is something that should always be discussed with your estate planning attorney. Whether you choose to pre-plan your funeral or not, having some basic instructions in your will or health care directive for your preferences regarding burial, cremation, organ donation and so on will be a huge help to your loved ones during a difficult and emotional time.
Monday, February 27, 2012 How Long Has It Been Since You’ve Updated Your Estate Plan?
Many people think that there’s no need to update your estate plan documents if none of your beneficiaries or fiduciaries have changed, but that’s exactly the kind of thinking that can lead to disaster. Estate planning documents are based not only on your own wishes, but also on federal and state tax laws. When an estate planning attorney drafts your documents we take into account a number of different factors, which means that you get the best possible result and an estate plan that should work like a well-oiled machine when the time comes; but it also means that your estate plan needs periodic review, just as your car needs an occasional tune-up.
Over the past few years income tax, estate tax, gift tax and IRA rules and regulations have gone through some sweeping changes. These changing tax laws—and your own changing financial situation—could mean that language originally meant to apportion assets in the most efficient manner could now result in leaving your surviving spouse, children, or loved ones without any assets at all.
The only way to ensure that this is not the case with your estate plan is to have your documents reviewed every few years. Fortunately, depending on the extent of the update, the cost of a simple review and update is much less than the initial cost of creation. But the longer you wait between reviews the more likely it is that the changes needed to bring your plan up to date will be extensive—and thus more expensive.
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 astronomical. Call our office today to schedule your “tune-up” meeting.
Friday, February 24, 2012 How To Have Fun Planning Your Estate!
Creating a will or trust, healthcare documents, powers of attorney, etc., can sometimes seem overwhelmingly sad and serious. Well, the act of protecting your loved ones is very serious, but it doesn’t have to be sad. In fact, planning your estate can even be enjoyable! Here are 5 ways you can enjoy planning your estate:
1. Let the process of choosing and informing your fiduciaries (the people you will trust to be your executor, your guardians, your agents) forge stronger bonds with the people you love and trust the most. It can be the perfect excuse to spend more time with the friends and family you will be naming in your documents.
2. Make it a time to go crazy with your dreams for the future: Your own retirement, goals for your children, and plans for your grandchildren. Have fun imagining the wonderful old-age you want—and then make it happen.
3. Take the opportunity to learn more about your past—and record that past for your children and grandchildren. Talk to your parents and grandparents about their history and experience; then write it down—along with your own memoirs—and include it with your EP docs for your children to find.
4. As long as you’re gathering important financial information and documents, keep the momentum going and use the time to organize your important files and information. Not only will this help you with your planning, it will make life easier for you every time tax season rolls around, and it will save your family and executor a lot of headache and heartache as well.
5. The biggest reason to enjoy planning your estate is the simplest—it has to be done and it’s the right thing to do. When your estate plan is signed and complete it will be a weight off your shoulders because you will know you have done what is necessary to protect yourself, your family, and the people you love.
Wednesday, February 22, 2012 Benefit Your Loved Ones by Bringing Life to Your Estate Plan
We often tell our clients that there is far more to a legacy than money. A will and a trust are essential documents to have—but there’s more to protecting your loved ones than just those documents. With these important documents (plus the lesser-known but just as important ancillary documents) you’ve provided for your loved ones financially, but what about emotionally? What happens during those difficult months when your dependents must learn to live without you? You’ve worked hard to build a full, comfortable and happy life for your loved ones; preserving (as much as possible) the comfort and stability of that life is at least as important as preserving your financial estate.
One of the best ways to do this is with a memorandum of intent. A memorandum of intent is a letter that you write to the guardians of your children, or to the caretaker of your special needs relative or elderly parent. A memorandum of intent is a document that details the crucial minutia of your daily life. In it you can express the things that might be considered too small, or the things that change too frequently, to include in your trust—but are essential to the daily fabric of your life. This includes details such as:
* An overview of daily schedule and activities
* Names and phone numbers of friends
* Your family’s religious beliefs (if applicable)
* Unique holidays and traditions celebrated by your family
* Name and phone number for primary physician (or other health-care providers)
* Favorite foods, comfort objects, books, etc.
* And much more.
These things may all seem small right now, but it is these comfortable people, places and activities that will help your family through a difficult transition should tragedy strike. You can’t be sure that you will always be there to provide comfort and care for your loved ones, but you can ensure you do your best for them now, to ease their suffering during difficult times later.
Monday, February 20, 2012 Dementia and Alzheimer’s: Is It Too Late For Mom Or Dad To Execute Legal Documents?
The question of competence has become a very big issue in the estate planning/elder law world over the past few years. As the population ages, and awareness of Alzheimer’s and dementia diagnoses grow, more and more adult children are questioning the ability of their elderly parents to make legal and financial decisions. Some children are unhappy with the choices their parents make; but most are simply concerned, and want to ensure their parents are not working in confusion against their own best interests, or being taken advantage of by others.
Estate planning attorneys must assess the competency of every client before they sign any documentation, and most attorneys can confidently make this assessment based on observation, experience, and instinct during the course of interaction; but every once in a while a situation arises that is not so clear, or a family member will express concern about the principal’s ability to understand and sign legal documents.
If you are worried about the competency of your loved one here are a few things to consider:
* Does he have the ability to articulate the reasoning behind a decision?
* Is his state of mind fairly stable, or do his moods and opinions change frequently and without cause?
* Does he appreciate the consequences of any given decision?
* Does he understand when a decision is irreversible?
* Does he recognize the substantive fairness of a transaction?
* Is his current decision-making consistent with his previous lifetime commitments?
In order to determine whether or not a person is competent to sign a will or trust, however, an assessment should be much more focused:
* Does the principal have a clear knowledge of his assets?
* Does he have a full knowledge of the persons to whom the estate is being left?
* Is he able to reasonably formulate and express a plan for the disposition of the estate?
The unfortunate truth about elderly illness is that competency in a person afflicted with the beginnings of Alzheimer’s or dementia can often change from day to day or even hour to hour. If there will be any question at all about the competency of the principal the safest thing to do is to express your concerns to your attorney, and have mental examination performed by a doctor. Of course the very best way to ensure mental competence is to create your estate plan early, before age or dementia becomes a factor.
Friday, February 17, 2012 Divorced Couples Can Still Benefit from Joint Estate Planning
Creating an estate plan to protect your minor children is one of the most difficult—and most important—things you will ever do; this is especially true if you and your child’s other parent are separated or divorced. Relationships don’t always end amicably, but if you do have children it is definitely worthwhile to put aside your differences with your ex long enough to discuss estate planning for the sake of your kids.
There are three major things to consider when estate planning during or after a divorce:
1. Guardianship: According to the law, if you pass away guardianship passes to your child’s other biological parent; this is the case even if you had full custody (unless it is determined that the surviving parent is unfit). This is something to keep in mind when you are nominating guardians. If you and your ex can sit down and discuss guardians together and agree on a few alternates it will make everyone (including your child) feel more secure about the future.
2. Financial Inheritance: Although many divorced couples may feel comfortable with their ex as guardian, most are dead set against their ex having any control over their finances. How then can you leave your estate for the benefit of your child without leaving it in the hands of your ex? The solution is to put your child’s inheritance in trust until they come of age, with a person you know and trust acting as trustee. Your trustee will have the responsibility to keep and maintain the trust, giving distributions to the guardian for the benefit of your child. Keep in mind that your trustee and guardian will have to work together quite often, if you and your ex can agree on someone with whom you both are comfortable it will make the process much easier on your trustee, your ex, and your child.
3. Remarriage: When you marry there is an inevitable mingling of finances, and this is no different for a second or third marriage. However, if you don’t make provisions for your children in your estate plan your assets will end up going entirely to your new spouse when you die, leaving your child(ren) out in the cold. This can be easily addressed in your estate plan (or your ex’s estate plan, if he or she is the one getting remarried) as long as you talk to your attorney and take action now, before it’s too late.
If you are going through or have gone through a divorce please call our office and let us help.
Wednesday, February 15, 2012 Is It Always In Your Best Interest To Accept An Inheritance?
Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with all the recent changes to estate tax law, some plans that were drafted years ago and never updated by their creators won’t work as intended anymore—and heirs may end up looking for a way to protect themselves against the unintended consequences of these well-intentioned estate plans. This is a subject that we have touched on before on our blog, but is worth mentioning again as we close in on 2013.
This article in the New York Times explains what it means if you disclaim (or turn down) an inheritance, and when you may want to employ this tactic.
“Historically, lawyers have recommended disclaimers to repair estate planning oversights that bring negative tax consequences — as when parents left money to already affluent adult children. In such a case, the children could disclaim, so the inheritance would go their own children instead, rather than facing the possibility that this money might be taxed in their own estates.”
Although this is an interesting solution to be considered in some cases, there are no easy answers to the question of what to do when you are the beneficiary of an estate that has taken an unexpected turn. If you have any questions whatsoever about an inheritance—or about your own estate plan—call your estate planning attorney for help.
Monday, February 13, 2012 5 Basic Tips for Trustees
Naming someone as trustee of your living trust is quite possibly one of the most difficult decisions you’ll ever make. The trustee is involved in just about every aspect of the administration of a trust; and although it is considered a great honor, it can also be a great responsibility.
Most people choose someone close to them to serve as trustee: a best friend, son or daughter, brother or sister. Choosing someone who knows you and your family to serve in this role can be beneficial in many ways, but if that person doesn’t have a financial or legal background the responsibilities can be overwhelming! It is important that the person you nominate as trustee knows not only what is expected of trustees in general, but also knows what you expect of them as a trustee. For this reason, you may want to consider giving your nominated trustee these 5 Basic Tips for Trustees—and don’t forget to add your own personal requests as grantor.
1. Make sure you read and understand the entire trust document. If you don’t have a legal background it is okay (preferable, in fact) to ask for help from an attorney.
2. Always remember that the beneficiaries of the trust are your first priority and responsibility. Once you are trustee you have what is called a “fiduciary duty” to always act in the best interests of the beneficiaries.
3. Make sure that the trust has its own separate checking account. If the trust is a living trust you as trustee will likely be the person who creates that separate account after the death of the grantor. Under no circumstances should a trustee mingle personal finances with trust finances.
4. Maintain regular contact with the beneficiaries; not just to provide them with regular accountings of trust activity or investments, but also so you yourself can remain aware of the lifestyle, needs, and feelings of all the beneficiaries.
5. Be sure you have a support team that will benefit the trust and the beneficiaries. Get investment advice from a financial professional; have a trusted attorney help with any legal questions you might have; hire a mediator to help if there are irreconcilable differences amongst the beneficiaries. The goal here is not to spend the trust funds frivolously, but to protect and preserve trust assets as the grantors would have wished for their beneficiaries.
Friday, February 10, 2012 Providing for Pets in Your Will or Trust
According to a recent article on BusinessInsider.com, there are some surprising new figures about American households and their pets. “In 2011, Americans spent a record $50.8 billion on pets, according to the American Pet Products Association. We share our homes with an estimated 86 million cats, 78 million dogs, 16 million birds and 160 million fish.”
These numbers perhaps aren’t so shocking when you consider how the role of animals in our lives has changed over the past few decades. Animals have gone from being mere pets or farm animals to being companions, guides, status symbols, and in most cases beloved members of the family. As such, most pet owners want to provide for them as they would a human member of the family.
Unfortunately, as mentioned in the article, “While we may consider our pets family members, our legal system considers them property. And because estate law prohibits us from leaving property (money, real estate, etc.) to property, we must instead provide for our pets through human intermediaries.” The best way to do this is through a pet trust, in which you can nominate a loving caregiver for your pet, as well as set aside some money to be distributed to the caregiver—either in one lump sum or in smaller distributions throughout the life of your pet.
A pet trust may be the most reliable way to ensure your pet will be provided for, but it certainly isn’t the only way. Another option is to simply name a caregiver for your pet in your will or trust and then include the caregiver as a recipient of funds in your will. For example: "If my cat Fluffy is alive at my death, I leave $3,000 for her care to Mary Johnson." If you have more than one person who might serve as caregiver you should consider also naming back-up caregivers in the event that your first choice is unwilling or unable.
Pets provide so much unconditional love and support during our lives, the last thing we want is to leave them without a friend to care for them after our deaths. The next time you review your estate plan or talk to your attorney, be sure you’ve included a provision for your pet.
Friday, February 03, 2012 529 Plans Are Useful for College Tuition AND Estate Planning
As the cost of college tuition rises, so do parents’ stress levels. According to one website, the cost of tuition for one year at some schools can be enough to make a decent down-payment on a house. By the time you’ve paid for your child to spend 4 or 5 years at a university you could almost have bought a vacation home!
This is why 529 plans are an appealing savings tool for many parents. Parents and grandparents already know most of the benefits of a 529 plan: Money inside the plan is outside of the parent’s taxable estate; additionally, funds held inside a 529 plan belong to the parent, not the child, which means not only that parents can choose to reclaim the money if needed in the future, but also that the money in a 529 plan won’t count against the student when he or she applies for financial aid.
What many parents (and grandparents) may not know, and which this article on Investors.com points out, is that 529 plans can also be a useful estate planning tool. “In 2012, the annual gift tax exclusion is $13,000. If you wish, you can put $65,000 into a 529 account for, say, your grandson now. That contribution will be treated as five annual installments of $13,000 in a row for gift tax purposes.” This can be quite a boon for parents or grandparents looking to provide some financial help to their college-age loved ones and avoid gift-taxes.
As beneficial as this sounds, it is important to always remember that no two families are alike, and what may be a useful strategy for one family can be detrimental to another. Please contact your financial planner or estate planning attorney for more information about how a 529 plan may benefit your family.
Wednesday, February 01, 2012 You Can Help Your Child Become a Homeowner—But Do Your Research First
American culture is one that respects independence and self-reliance; but with the current tough economic situation, and the fact that more young adults are graduating from college without jobs, or living at home until well into their 20’s, many families are opting to do things the old-fashioned way—with parents giving kids the financial help they need to buy their first home.
Helping your child make such a significant purchase, however, requires foresight and planning in order to do it without hurting your own tax- and estate-planning potential, and without creating family conflict later on. This article from CNN Money has some good advice for would-be parental mortgage-lenders.
The first thing to remember ANY time you make a monetary gift is that the federal government will only let you give away so much each year without incurring a gift tax. “In 2012, a taxpayer can give $13,000 to an individual without triggering so-called gift taxes. Married couples may underwrite their child to the tune of $26,000 a year.”
If you’d like to contribute more than $13k or $26k toward your child’s first home there are ways to go about it without hurting your own tax status later on. Your best option in this case might be to “lend money to your child -- and you can offer terms far more generous than any bank's. To make sure the money is considered a loan and not a gift for tax purposes, you'll need to charge interest based on the IRS's ‘applicable federal rate’ minimum for various loan maturities.” These rates are generally very good, “as low as 0.19% for loan terms of three years or less to 2.63% for loan maturities of over nine years.”
Of course, if you become your child’s mortgage lender the government isn’t going to just take your word for it; you’ll want to be sure you have the proper contracts drawn up and signed, and that you keep good records of all payments. “If the loan is properly structured as a mortgage and filed, the interest will be tax-deductible for your child. Having a contract also makes estate planning easier.”
Monday, January 30, 2012 How to Ensure Your Valuable Antiques Don’t End Up in Someone’s Yard Sale
Have you seen Antiques Roadshow? It’s a PBS television show in which antique experts travel around the country to critique and appraise antiques brought in by local people. Quite often on the show someone will bring in an old knick-knack they found in grandma’s attic, only to find out it’s actually worth hundreds or thousands of dollars! Now imagine that for every person who makes this valuable discovery on television, there are at least three people who end up selling their own unrecognized treasure for a few bucks at a yard sale. It’s painful to consider.
How can you ensure that your family recognizes the value of your treasures? The first step is to talk to your attorney about creating the right estate plan to protect ALL your assets, and provide for their distribution upon your death. Your next step is to make a list of assets and keep it with your estate planning documents, where it can be easily found. Your list of assets should include not only real estate property and financial accounts, but personal property as well—the artwork, historical artifacts, and antiques you value so highly. Your list should include a description of each item, an approximate value, and the name of the person you would like to inherit the item (if applicable.)
This list is called a Personal Property Memorandum, and can be an essential component in your estate plan. Very often the person named as executor of an estate is the most responsible and organized member of the family; this is just what you need in an executor, but it’s not always the person who will look at a 200 year old, somewhat worn, antique bureau and recognize its value. Having a list of assets included in your estate plan will ensure that the valuable pieces are recognized and appreciated—regardless of who is named as the executor of the estate.
For more information about personal property memorandums, or about creating the best estate plan to protect your family, please contact our office.
Friday, January 27, 2012 The Joys and Sorrows of Gift-Giving During Your Lifetime
“You can’t take it with you.”
These are good words to keep in mind as we go through life, they remind us not to take ourselves too seriously, not to hold onto things we don’t need, and to be generous to those less fortunate than ourselves. Whether you’re thinking about estate planning or gift planning, however, there are a few other words to keep in mind: How much should I give away?
Fortunately, this article in Smart Money—and the advice of an experienced estate planner—can help you answer the questions of how much to give away, when to give it away, and to whom.
The article wisely counsels that two of the most important things to remember when considering your gift-giving questions are the estate tax exemption and the gift tax exemption. The estate tax exemption is the amount you can leave, tax free, to heirs upon your death. “For 2011 and 2012 you can leave bequests worth up to $5 million free of any federal estate tax ($5.12 million for 2012)... If you're married, both you and your spouse are entitled to separate $5 million (or $5.12 million) exemptions.” This is something that should be planned for and taken advantage of in your estate plan.
The gift tax exemption is the amount you can give away during your lifetime. “You can give away a cumulative total of up to $5 million to relatives, friends, whomever during your life without owing any federal gift tax or $5.12 million for 2012... If you're married, both you and your spouse are entitled to separate $5 million (or $5.12 million) gift-tax exemptions.”
There is also an annual gift tax exclusion amount of up to $13,000. “[Annual] gifts made under the so-called $13,000 tax-free-gift rule will not trigger any federal gift taxes, nor will they reduce your federal gift-tax or estate-tax exemptions.” However, as the article points out, any gifts made in excess of this $13,000 amount in any given year will begin to cut into your estate tax exemption or your gift tax exemption. So if you plan on making any large financial gifts this year you would be wise to contact your estate planning attorney first for advice.
Wednesday, January 25, 2012 Republican Primary Inspires Discussion of Trusts
If you follow current events at all it is impossible to ignore the fact that we are now in the thick of the Republican primary race—and that the Presidential election will not be far behind. With the political machine in full swing there have been quite a few news stories about the candidates’ financial backgrounds, and more than a little talk of “blind trusts.”
Many of our readers will already know that a blind trust is a vehicle which holds the wealth of a candidate (or a politician serving in office) in an effort to avoid any conflicts of interest. We thought this might be a good opportunity, however, to discuss trusts in general: Which trusts are out there, what are the differences between them, and what purposes do they serve?
Revocable Trust: A revocable trust is one of the most commonly used trusts because it is able to be revoked or changed so long as the grantor (the person who created the trust) is still living. There are many other trusts that fall under the category of “revocable trust”, including a pet trust (which addresses the physical and financial care of your pets), an education trust (which provides for your child’s educational expenses), and many more.
Irrevocable Trust: An irrevocable trust, logically, is one which cannot be revoked or changed after it has been signed. The irrevocability is what makes these trusts useful for tax planning and asset protection. Some types of trusts which fall under the category of “irrevocable trust” include life insurance trusts (which save the beneficiary on the policy from paying exorbitant estate taxes), spendthrift trusts (which reduce the beneficiaries' estate taxes and protect trust assets from creditors' claims), and more. It is important to note that any revocable trust becomes irrevocable upon the death of the grantor.
Charitable Trust: A charitable trust is one in which at least one of the beneficiaries is a charity or non-profit. These trusts allow the grantor to claim a portion of their contribution as a charitable deduction under income tax laws. A charitable trust can be either revocable or irrevocable to begin with, but if distributions will be made during the grantor’s lifetime the trust must be irrevocable.
Special Needs Trust: Sometimes also called a “Supplemental Needs Trust”, is a trust created for the benefit of a person receiving government benefits—this usually includes someone with a physical or mental handicap—and its purpose is to allow outside sources to provide the beneficiary with supplemental funds without endangering their right to receive government benefits. A special needs trust can be either revocable or irrevocable, but usually includes a clause instructing that the trust be dissolved if its existence disqualifies the beneficiary for government benefits.
We have only discussed some of the most commonly used trusts here, but there are many, many different kinds of trust which can be valuable for estate planning or asset protection. If you have any questions about trusts or estate planning, please contact our office.
Monday, January 23, 2012 The Bum Rap of Prenups: Why They Are More Romantic Than You Thought
Valentine’s Day is only a couple of weeks away, and love and marriage are in the air; but going hand in hand with love and marriage should be the wisdom to protect yourself and your beloved with a prenuptial agreement. We know that most people don’t consider prenuptial agreements a very romantic gesture, but here are 5 reasons why the bum rap of the prenup is undeserved.
1. Prenups encourage couples to think and talk about the future. The process of writing a prenup includes talking about what each party brings with them to the marriage, and how each partner envisions that contribution fitting into the whole as they create their lives together.
2. Agreeing to a prenup is often the very thing that makes marriage possible for two people who come from complicated backgrounds or disapproving families. This is not only true of young people from families with “old money,” but also of elderly couples whose grown children may disapprove of a blending of finances so late in life.
3. Having a prenup means that a couple has studied their finances separately, dealt with any lingering trouble spots before the wedding, and can now move forward in their marriage together, with clear minds and bright futures.
4. A prenuptial agreement bestows security because it requires the agreement of both partners. This mutual agreement ensures that both partners feel they will be provided for as they desire and deserve, no matter what happens.
5. A prenup is the perfect lead-in to an estate plan. The information-gathering and decision-making process for creating a prenup is very similar to the process of creating an estate plan. Couples who execute a prenup before they marry have a head start on creating the estate plan they will want to protect their family after they’re married.
The bottom line is that prenuptial agreements will help protect you, your beloved, your family, and your future... and there’s nothing more romantic than that. Our firm can help you decide if a prenup is right for you and your partner—contact us today.
Friday, January 20, 2012 The Other Side of “Putting Your Affairs in Order”
Everyone knows that because 2012 is the last year on the Mayan calendar it is thought by some to be “the end of the world as we know it.” Most of us don’t believe that the end of the world is nigh, but that doesn’t stop us from contemplating how we’ve lived our lives, what we might put on our “bucket lists,” and what words of wisdom we’d like to pass on to the next generation. For estate planning and elder law attorneys—as well as our clients and readers—this is most likely something we’ve already considered, and hopefully something we’ve planned for as well.
Many people believe that “putting your affairs in order” simply means making your financial arrangements and updating your legal documents; and although these tasks certainly are of immense importance, putting your social, familial and emotional affairs in order is just as important. We’ve written often on our blog about how to put your financial and legal affairs in order, so today we’d like to talk about the other side of things. Some of the suggestions you’ll see below may strike you as small or obvious, but when dealing with the day-to-day tasks and challenges that life brings it’s sometimes all too easy to lose sight of the little things.
1. Tell your family how you feel. If you’re close to your family you may think you do this all the time anyway; but even if you speak to your family often, writing a letter letting them know what they mean to you and how much you love them can make a different kind of impact. A letter is also something tangible your family can keep and treasure after you’re gone.
2. Make family history a priority. How much do you know about the lives of your grandparents and great-grandparents? How much do you wish you knew? Most of us don’t think that our lives or our stories are all that important in the grand scheme of things, but your grandchildren and great-grandchildren may feel differently. Take a shot at writing your memoirs for the benefit of curious future generations. If you think you’re not a writer, or have trouble knowing where to start, there are plenty of books and resources to help you get going.
3. Do something just for you. Whether it’s written it down or not, everybody has a bucket list, a catalogue of things they dream of doing before they die. Well, there’s no time like the present. Nobody lives forever, and the time to do the things you love and see the places you dream about is always right now. Whether you’re taking big leaps or baby steps, don’t let another year go by without making one of those dreams on your bucket list a reality.
Monday, January 16, 2012 The Family Vacation Home: A Place to Make Memories or Enemies?
A family vacation home—whether it’s a summer house on the beach or a winter skiing bungalow in the mountains—can be just the thing that brings a family together. Unfortunately, it can also be just the thing that tears a family apart when parents pass away and the time comes to decide what to do with this wonderful family treasure. This article in the Wall Street Journal mentions that “Tensions often mount when a family figures out what to do with a property that could be a lightning rod for sibling rivalries—not to mention a sizable chunk of an estate.”
There are a number of issues that can be brought to the surface when adult children or grandchildren try to share a family property. “One big friction point in such an arrangement is how to pay the costs involved in maintaining a home—including taxes, insurance, utility bills.” But that’s only the beginning. “Other factors to consider: How the family gets along, where they live, what happens when the children who inherit a home get married and who is going to use the property.”
Fortunately, this is one family fight that can be prevented (or at least softened) by a little bit of forethought and planning. One of the first suggestions in the WSJ article is to leave family property to the next generation in a trust funded by life insurance. “That way, a professional trustee can manage the property, and the insurance proceeds can cover expenses.” A Qualified Personal Residence Trust (QPRT) or a Dynasty Trust can both be perfect for this purpose.
Another beneficial safeguard is to form a Limited Liability Company (LLC) for the property. An LLC can help establish an operating agreement to “cover rights of use and property management,” as well as shield heirs from estate taxes.
Having a good plan in place for your family vacation home can be the determining factor which allows the property to continue to serve as a place where your entire family can come together, to create happy memories that will last a lifetime.
Wednesday, January 11, 2012 Beware of Mistakes in Your Old Estate Plan
Do you already have an estate plan? Or perhaps you don’t have an estate plan per se, but over the years you’ve collected all of what you feel are the necessary documents to provide security and protection for your family and your assets after your death? Well, you may want to take a moment to review that existing estate play of yours. According to this recent article there are five common mistakes made in estate plans, and just one could end up derailing your goals for yourself or for your family.
Some of the common mistakes listed in the article are things that are very easy to fix once you’re aware of them—listing the wrong beneficiary on an old retirement account or life insurance policy, for example. All too often people get a new job or new policy and list the right beneficiary at the time, then that policy goes in a drawer or filing cabinet for years. During those passing years you may get married or divorced, or you may have children. Any of these big life events require changing those beneficiaries. Luckily, making that change is generally a quick and easy fix.
If you aren’t worried about your retirement or life insurance beneficiaries, consider what what will happen to your children in the event of an emergency. Many clients agonize over who to name as guardians of their minor children, but forget to review those decisions every few years. The energetic young couple you chose 7 years ago might now have children of their own, or have moved to another state, and may not be as ideal a choice as they once were. If you listed your parents 10 years ago you might decide in the intervening years that an aging couple is not quite as able as you thought to take on so much added responsibility.
The fact of the matter is that our lives are not static or stagnant, they are constantly growing and changing, and estate planning documents will need to grow and change with them. If it has been more than 2 years since you last reviewed your plan, it’s time to get out the magnifying glass and give your documents another good look. Chances are you won’t have any big changes to make, but those little details can turn into glaring problems when left neglected for too long.
Monday, January 09, 2012 Women and Finances: Looking at Money from a Different Angle
We’ve all red the disquieting statistics about girls and math: That they’re less likely to participate in math and science in school, and that they’re less likely to choose one of these as a major in college. Happily, great strides have been made by girls in these subjects in the past few decades, but apparently there is still one subject in which women continue to trail behind men—talking about finances and retirement planning.
According to a recent article in Business Insider, “when the Transamerica Center for Retirement Studies asked women in their 50s and 60s if they ever discussed saving, investing and financial retirement planning with friends or family, the answer they got was a big NO from 30 percent of respondents and a tepid ‘occasionally’ from 62 percent. Only 8 percent said ‘frequently.’" Clearly women need to find a way to become more comfortable discussing their financial futures—either with their friends and families or with trusted financial advisors.
What is most interesting about this from an estate planning perspective is that in our line of work women are often the driving force behind a family or couple coming in for an initial consultation. Women may not feel comfortable talking about finances, but they are obviously very aware that—when coupled with future and well-being of their families—it is an important issue that needs to be addressed.
The Business Insider article mentioned above closes with 5 questions that might help get the financial conversation started among women; we would only add to this that a discussion of family finances, as well as personal finances, may be a good way to get the ball rolling.
We understand that not everybody has the same concerns when it comes to financial and estate planning. Contact our office today and let us know what your concerns and goals are for your future, and for the future of your family. We can help.
Friday, December 30, 2011 Don’t Forget the Final (And Crucial) Step to Setting Up Your Trust
Once you’ve worked with your attorney to create the perfect trust to protect your family, you’ll need to re-title any assets you’d like to be protected into to name of your trust. This is called Funding. Funding a trust is not difficult at all, but when you don’t know where to start it can seem daunting. The result is that even the best of us may be tempted to procrastinate, sometimes to the point of negligence.
Here are a few tips to get you started on the process. Each trust will be different, but the following suggestions are a foundation to begin funding just about every revocable trust:
Bank Accounts: For this you will need your Certification of Trust. This is the document your bank will require to put your account(s) in the name of your trust. With this document it’s a quick matter to stop by the bank some afternoon and ask them to make your trust the owner of your accounts. NOTE: You should NOT be required to change the name on your checks or bank cards!
Real Property: Check your records to make sure your home is in the name of your trust. Even if you know you transferred your home into your revocable trust, refinancing will often result in your home being taken out of it. If your home is not owned by the trust, contact your attorney to have it put back in.
Stocks and Investments: Contact your broker, financial advisor, or transfer agent to change the title of the investment accounts to the name of the trust. For stocks owned outside of an investment account, ask for the certificate to be re-issued in the name of your trust.
Personal Property: Tangible personal property such as antiques or artwork often cannot be titled in the name of a trust. But you can tell your attorney you’d like to sign an Assignment of Personal Property, sometimes called a Comprehensive Transfer Document. This states your intention to hold all of your tangible property in the name of, and for the benefit of, your revocable trust.
Don’t let your trust turn into an empty shell. The funding process is much easier than you think. Once you get started you’ll gather momentum quickly. Before you know it your assets and your family will all be safely protected, and you can truly heave that big sigh of relief.
Wednesday, December 28, 2011 3 Steps to Help Protect Your Family and Your Future in 2012
We all want to ensure our loved ones are protected and provided for, but sometimes the process of doing so can appear overwhelming, and prevent you from even taking the first steps. When it comes to protecting your family and your future with an estate plan, the process can actually be as easy as 1... 2... 3...
1. Assessment. The first step to creating a plan that can protect your family, your future, and your family’s future begins with simply taking stock of what you have and where you are. Begin by making a list of all your assets, including your house, stocks, investments, bank accounts and personal property. Next consider your responsibilities and goals: what are your plans for the future or for retirement? Who do you wish to provide for in your will? Do you have a spouse or children who might benefit from a trust?
2. Implementation. Now it’s time to put all that information you gathered in step one into play. The particulars of your estate will have a great impact on how you build your estate plan: A small estate and straightforward inheritance plan may require only a well-drafted will, while a larger estate may benefit from the asset protections found with a trust. Your goals for the future and your wishes for your family will have an equally large impact on your choice of estate planning strategies as well, including whether to include an education trust for young students, a pet trust for your furry family members, or a retirement trust to protect your own investments. An estate planning attorney can help you understand your options and implement the strategy you feel works best for your family.
3. Follow-Through. Once your estate plan is drafted, signed, and tucked safely away you’ll want to ensure that it continues working as you intend it to. The best way to do this is to review your plan with your estate planning attorney every 2 or 3 years. Your family and financial situation is likely to change over the years—estate taxes and laws change as well—and all the hard work you put into creating your plan can be undone if you don’t keep up with the changes.
Friday, December 23, 2011 New Year’s Resolutions: Protecting Your Minor Children
Parents of young children always seem to be busy, and we know that it can be difficult to find the time to think about something that you hope will never happen. With all the “To Do’s” and distractions out there, too many parents simply avoid thinking about a will, trust, or guardianship for their children; hoping that it will never be needed. But your children deserve more than good luck and crossed fingers, and we recommend making 2012 the year that you take the (sometimes difficult) steps necessary to ensure that your minor children are protected no matter what the future may bring.
1. Create a nomination of guardians for your children. The single-most important step you can take to ensure the well-being of your children is to execute a nomination of guardians. This is the document that names who you believe are the best and most loving people to parent your children if something should happen to you. This document is your children’s best protection against unqualified guardians or the foster care system.
2. Talk to your attorney about protecting your children’s inheritance (and in some cases protecting your children from receiving an inheritance too soon) with a trust. With a trust you can ensure that your children will be provided for financially until they reach adulthood, as well as leave a legacy for your children which includes your financial, philanthropic, and educational values.
3. Invest in your child’s higher education. Education is more important than ever in our current economic situation, and parents can resolve in 2012 to secure their child’s education by setting up a 529 education savings plan. This is something that parents can contribute to regularly, as well as grandparents, aunts and uncles, and more. A 529 plan that you set up today will be there even if you can’t be. After all, protecting your child’s future doesn’t stop when they reach 18.
If you have other questions or concerns about how to protect your minor children please contact our office today. We can help ensure your children will be provided for—and that you will have the peace of mind you deserve.
Monday, December 19, 2011 New Year’s Resolutions: Achieving Your Financial Goals for 2012 and Beyond
As the old year draws to a close and the new year approaches, many people are taking the time to reflect on 2011 and look forward to 2012, making the traditional New Year’s Resolutions for the year ahead. Many of these resolutions will be very personal—having to do with exercise, work, or personal habits, but there will be some resolutions that can be made which will benefit not just an individual, but their family and loved ones as well. The focus of our blog this week will be on which resolutions you can make to benefit your family and loved ones in 2012, and how we can help.
Times have been tough financially for a lot of people over the past few years, and although things are finally beginning to look up, many people will still be making New Year’s resolutions that focus on fiscal responsibility and financial security. Below are three financial resolutions that can help your family in 2012:
1. Take stock of your current financial situation. Being well-informed and keeping good records of your income, expenses, investments and assets is absolutely essential for good financial health. If something happened to you tomorrow would your spouse or family know what to do and have access to the documents or information needed to protect or pass on your estate? Make a list of all your assets and investments, including account numbers and contact information and keep it in a safe place where your financial agent (or someone else you trust) can find it if and when necessary.
2. Make an investment plan for the future. As with anything in life, it’s important to be prepared for what the future may hold. Having a five year, ten year, and fifty year plan for your financial future is one of the best things you can do for yourself and your family. When making your plans take into account your current situation, your future goals, and your wildest hopes and dreams for the years ahead. Consult with a knowledgeable financial advisor who can help you plan for and achieve these goals.
3. Protect your assets. We live in a litigious and uncertain world and protecting the assets you have is of the utmost importance. Our firm can help you evaluate and implement the many options available to you to protect your assets. The asset protection strategies you choose will depend on the nature of your assets, the situation of your family, and your goals for the future.
Taking the right steps in 2012 can mean a strong financial base now, as well as a bright and secure future in the years ahead for you and your family. Our firm would like to help protect that future. Call us today.
Wednesday, December 07, 2011 Could A Trust Be Good For Your Family?
The answer to the title question is that just about every family can benefit from a trust. The rich and famous tend to utilize trusts because of the privacy they provide, the long-term asset protection, the tax benefits, and their flexibility; but each and every family, regardless of fame or income, can reap the exact same benefits making a trust a part of their estate plan.
According to this article on the CNN Money website, you can benefit from a trust “if you have a net worth of at least $100,000 and meet one of the following conditions...
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“A sizable amount of your assets is in real estate, a business or an art collection;
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You want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death. For example, you may want to stipulate that they receive their inheritance in three parts, or upon certain conditions being met, such as graduating from college;
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You want to support your surviving spouse, but also want to ensure that the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies;
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You and your spouse want to maximize your estate-tax exemptions;
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You have a disabled relative whom you would like to provide for without disqualifying him or her from Medicaid or other government assistance.”
The article goes on to explain that depending on your assets, your family, and your goals you may have a number of different trust options to choose from. The article gives very helpful explanation of the various types of trusts you may have available to you, and will give an idea of just how powerful and flexible a trust can be.
What the article doesn’t mention is that some of these trusts can be used in conjunction with each other, to provide layers of protection and control of your assets. The world of trusts is complex, but full of potential. Please contact our office (or your own local estate planner) to learn more about trusts, and determine how a trust might be good for your family.
Wednesday, November 30, 2011 The Smart Way to Leave an Inheritance to Unprepared Children
Most parents (even parents of adult children) want to provide for their children—but not necessarily right away, and maybe not all at once. According to a recent article in Barron’s, “A growing number of parents are shunning the time-honored practice of handing big inheritances to their children when they turn 21. Instead, they're waiting until the kiddies are in their 30s and 40s.”
The reason for this is that more and more parents are coming to realize that there is a learning curve associated with handling large sums of money, and dropping a large inheritance in your child’s lap may be giving he or she more than they can reasonably handle all at once, essentially setting your child up for failure. “Premature distributions to heirs can have the same effect as the jackpot has on lottery winners... The money becomes a burden, and your child may not fully develop into the adult you hope to raise.”
Luckily, if you don’t want to bequeath a fortune to your children all at once, you have a number of options for ensuring your children are provided for and eventually receive the inheritance you intend for them. As mentioned in the Barron’s article, some of the most popular strategies include passing an inheritance through either a revocable or an irrevocable trust. A trust allows a parent to transfer assets to their children while still retaining control of when and how the assets will be distributed. Of these two options, a revocable trust can provide more flexibility, while an irrevocable trust can provide more asset protection, although both kinds of trusts provide a measure of each. You will want to discuss with your estate planning attorney which option will work best for your family.
With either trust option parents can choose to simply keep the inheritance in trust until the child reaches a certain age, or distribute funds slowly over the course of time, to better acquaint the recipient with the responsibilities of wealth. However you choose to structure your estate plan, our firm can help you accomplish your goals for yourself and for your children.
Wednesday, November 23, 2011 This Holiday Season an Estate Plan is the Perfect Gift
The holiday season is upon us, and as others rush about the malls and the internet looking for gifts, we can recommend a unique, useful and memorable gift that will be perfect for any loved one: An Estate Plan!
Before you roll your eyes at the idea, consider this: An estate plan is something every person needs, whether it’s your single younger nephew, your older sister with her two young children, or your retired, aging parents. Furthermore, although everyone needs an estate plan, many people (wrongly) consider it a luxury, and put off creating one—often until it’s too late.
You may be thinking, No, an estate plan is too personal (too expensive, too morbid) to give as a gift. But we can safely say that not one of these excuses is true. If you feel an estate plan is too personal a gift, we recommend giving a gift certificate good for the cost of a basic plan, which the recipient can then design and add to according to his or her needs. If you feel an entire estate plan is too expensive a gift, you may want to consider paying for a portion of the plan, or for the first consultation with an attorney, just to get your loved one started. And if it’s morbidity that you’re worried about, perhaps giving a “Loving Family Legacy Plan” sounds more appealing.
This year, don’t give a gift that will impress for a moment but be forgotten within a week; instead, give the gift that will protect your loved one—and their loved ones!—and will last for years to come. Give the gift of an estate plan.
Wednesday, November 16, 2011 Not All Families Are Warm and Happy—How to Disinherit a Family Member
Much is made every November and December about spending time in the warm presence of your family, appreciating and caring for each other. If you belong to a close family we have plenty of posts on our blog about how you can protect and care for your family with an estate plan. But the sad truth is that not all families are happy, and estate planners learn that not everybody wants their parents or siblings (or even, on rare occasions, their children) to benefit from their wealth upon their death.
It’s not as unusual as you may think for someone to ask “How do I make sure my money won’t go to my family when I die?” The answer to this question is actually very easy—if you’ve had the foresight to create some kind of estate plan, that is. Without any kind of estate planning (a will or a trust, for example) the law automatically distributes your estate to your closest living relatives upon your death. But the simple act of creating a will or a trust can prevent this automatic distribution from happening.
A will or a trust can be as basic or as complex as you choose. Simply naming the people or organizations of your choice as your heirs is often enough to ensure that your wishes are followed, but if you are worried about relatives who may contest your wishes you may want to ask your attorney about stronger measures, such as including a disinheritance clause or a no-contest clause in your will or trust. This can be as simple as including a single sentence stating “I have specifically chosen not to provide for my brother John.”
We understand that not all families are the same, and not all people will want their wealth distributed in the usual manner. If you have a unique family situation, or unusual circumstances or requests, please don’t hesitate to contact our office. We can help.
Monday, November 14, 2011 How to Give Help to Family without Neglecting Your Own Financial Needs
As the cost of a college education skyrockets, and the unemployment rate for new college graduates holds steady at a depressing 17 percent, more and more grandparents are feeling the pressure to help their college age grandchildren pay for college expenses, or help with student loans after graduation.
While college students (and their families) could certainly use the help, is lending financial assistance a good idea for grandparents? This article in the Wall Street Journal says maybe not. “Some grandparents are making financial mistakes that could put their own financial future in jeopardy. Promising too much to grandchildren, not saving enough for their own possible health-care needs and paying off their grandchildren's loans are some of the mistakes well-meaning grandparents are making”
For grandparents who would like to lend a helping hand to their children and grandchildren, but are worried about neglecting their own financial futures, our office would like to suggest that there are a number of ways to help without shortchanging yourself. The WSJ article suggests that grandparents can “give support in other ways such as volunteering with their grandchild or encouraging them to pursue an education.”
Another option is to spend your money wisely during your lifetime and make arrangements with your estate planner to leave the remainder of your fortune where it will do the most good after your death. If your grandchildren are still young you may want to have their inheritance used to fund an education trust, or specify that it is to be used to pay off any existing student loans. If you have older grandchildren you can provide invaluable financial assistance by specifying that an inheritance should be used to pay for their children’s college education, giving them some breathing room during those lean financial years.
However you choose to be of assistance to your children, grandchildren, or even your great-grandchildren, our office can help you accomplish your goals. Call us today.
Monday, November 07, 2011 5 Things To Discuss With Your Doctor On Your Next Visit
Ensuring you get the medical care you want in an emergency is a team effort which includes your attorney, your doctor, your healthcare agent, and your family and loved ones. But none of these people can be part of the team if they are unaware of your preferences. Here are five things to discuss with your doctor to make sure he or she is in the loop:
1. Your Advance Health Care Directive or Living Will. If you have already created a health care directive or living will we strongly suggest you give your primary care physician a copy of the document. It can be even more helpful to briefly discuss the document with your doctor and have him or her sign off on it, if possible. This prevents any unwelcome surprises, should an accident occur.
2. Your wishes for medical treatment if you are incapacitated. Part of creating an Advance Health Care Directive is outlining your wishes for medical treatment if you are incapacitated. This is more than just making a decision about a DNR (discussed in item #5), this also includes what medications or treatments you would like to receive and under what circumstances, it includes where you would like to receive long-term treatment if necessary, and it includes who you would like to be involved in medical decision-making (from your spouse, to your parents, to your favorite doctor or doctors.)
3. Your health care agent. This is the person who will be making medical decisions for you if you are unable to make them for yourself. We are not suggesting you bring your chosen agent in to meet your doctor, but briefly telling your doctor who the person is (your spouse, your brother, your daughter) and why you chose them can make all the difference.
4. Your HIPAA Authorization. This is the document that gives medical staff permission to share information about your health status with certain people. You can sign a generic HIPAA Authorization with your attorney as part of your estate plan, but it is likely that your physician and your local hospital will have their own forms to be signed. Ask your doctor how to ensure that the right people are getting the right information in case of emergency.
5. The inclusion (or lack) of a DNR statement in your medical file. We always hope that this will never be necessary, but we all learned our lesson from the Terri Shiavo case and know that it is better to be safe than sorry when it comes to your end-of-life wishes. Talk to your doctor about under what circumstances you would or wouldn’t want life-saving treatment, and the best way to include these wishes in your health care directive AND in your medical file.
Friday, November 04, 2011 Estate Planning with a Chronic or Terminal Disease
We mention often on our blog that each family will have unique circumstances and unique estate planning needs—this is especially true of families in which one member has a chronic or terminal disease such as cancer, diabetes, or, as mentioned in this article in Forbes Magazine, multiple sclerosis.
For most people, the documents in their estate plan constitute a “someday” or a “what if” scenario, but for those people with chronic or terminal diseases the documents in their estate plan address issues that are much more immediate and certain. For this reason, the advice in the article mentioned above focuses mainly on doing whatever you can to take control of your estate planning, health care, and financial affairs right now. Some of the suggestions include:
* Finding financial and estate advisors who are comfortable discussing your situation, and can help you customize your plans to fit your needs.
* Customizing your estate planning documents, including your will, trust, or living will.
* Signing important forms right now, while you still can.
* Making use of your temporary or limited powers options in your healthcare and financial documents, giving your chosen agents the limited power while you are temporarily incapacitated to “pay your bills and file your taxes but not sell your house or make gifts of your assets.”
Living with a chronic or terminal disease is a unique situation and requires unique planning and preparation—planning that is best done right away, for the good of your family and for yourself. If you have questions about estate planning with a chronic or terminal disease please don’t hesitate to contact our office—we can help.
Wednesday, November 02, 2011 Charitable Giving Through Legacy Planning
Most of our readers and clients are concerned about more than just making a will or trust; they want to leave a legacy which reflects their values and beliefs. One popular way to do this is to make charitable giving a part of your estate plan; but you don’t have to wait until the end of your life to make your charitable contribution, this article from the New York Times reveals how current tax rules can allow any philanthropically-minded person to give more to a favorite charity right now.
According to the article, “One way to increase the tax savings — and consequently what you can afford to give — is to give appreciated assets to a qualifying charity instead of cash.” These “appreciated assets” can include stocks with long term gains, real estate, artwork or collectibles. Giving appreciated assets such as real estate, collectibles, or the like may not be as simple as giving cash—instead it “is complicated with a lot of little rules”—but in the end, “the benefits can be substantial.” Not only for the recipient of the gift, but for the donor as well. “Very large gifts may also reduce a donor’s taxable estate.”
If your interest lies in long-term rather than one-time-only giving then you may want to consider “setting up a donor advised fund through a community foundation or a financial institution... [This] allows the donor to put money in one year and get the tax deduction, but spread the gifts out over several years.” In fact, this particular method of charitable giving lends itself perfectly to the long-term legacy planning that so many clients prefer.
We know that creating an estate plan and financial plan is about much more than simply providing for your family monetarily. Designing these plans can also be about exploring your family’s values, continuing to give to the causes that have been important to you throughout your life, and perhaps encouraging your children or grandchildren to know the joys of giving as well. Our firm can help you design a financial legacy that will last for generations.
Monday, October 31, 2011 Planning for Death Can Be a Celebration of Life
Halloween is the one day of the year when not only is it ok to think about death, it’s expected! So it seems like the perfect time to bring up the subject of funerals—specifically your own funeral.
It has been said that funerals and memorial services are for those who are left behind after the death of a loved one, not the one who has passed away; and while this is true, it is also true that most meaningful service is one which accurately reflects the personality and wishes of the loved one it is memorializing. For this reason, some people are choosing to plan their own funerals or memorial services before they pass away.
A recent article in the Wall Street Journal describes how funerals and “last rites” seem to be going through a change. “While religion and family tradition have dictated last rites for hundreds of years, funerals today are changing dramatically. Baby boomers, in particular, are shifting to more personalized—and less religious—memorial services, often calling them 'A Celebration of Life.'”
The article goes on to describe a new website (MyWonderfulLife.com) which helps people make plans for their own funerals. While we’re glad more people are aware that they have this option, none of this is news to estate planners, who have been helping their clients plan, share, and pay for their own funerals, memorials, and disposition of remains for years.
Thinking about your own death and funeral may sound morbid, but many people are pleasantly surprised at how much of a celebration of life it can be. Please contact our office to get started on your own plans, or for more information.
Wednesday, October 26, 2011 Entrepreneurs, Family Business, and Estate Planning
If you’re an entrepreneur, or a small or family business owner, you have more to lose if you don’t have an estate plan. An estate plan help you protect not only your family and your assets, but also the business you’ve spent years (or decades) building. A recent article at Entrepreneur.com, entitled What Entrepreneurs Should Know About Estate Planning, describes some of the main components of an estate plan and how they can be useful to a business owner.
That article covers eight estate planning components, beginning with a will and a living trust and ending with long term care insurance and disability insurance. All of these components are extremely useful (and in some cases absolutely necessary) and we highly recommend reading through the entire article. We would also suggest that there are three more documents that an entrepreneur should consider to help preserve business and wealth for future generations.
Family Limited Partnership (FLP): A Family Limited Partnership is an asset protection tool which allows parents to take business assets out of their taxable estate and transfer the value of that asset to their children while still remaining in control of the business.
Buy-Sell Agreement: A buy-sell agreement is a formal plan or contract between business partners establishing what will happen to the business should one of the partners die. This document specifies whether a partner may or may not buy your ownership shares for your heirs and for what price, or if you want to block certain family members or individuals from having any ownership share in the business.
Succession Plan: A succession plan should be a key element in any business plan, but especially for small or family businesses. A succession plan is exactly what it sounds like, a formal plan outlining your wishes for passing your business on to your successors. You may design a succession plan to facilitate your retirement, or to provide a smooth transition in the event of your death. In any case, a succession plan is essential for any business owner.
Don’t leave your business—or your family—out in the cold. Take the necessary steps to protect them both in the event of your death with a well-designed estate plan.
Monday, October 24, 2011 There’s No Excuse for No Nomination of Guardians
Children are a blessing... But being a parent is a difficult job! Most parents of young children already feel overwhelmed with the necessary day to day responsibilities, the last thing they want to do in their down time is think about the difficult and emotional subject of guardianship and estate planning. This explains why, as this article from The Huffington Post points out, “over half of the population doesn't have a will, and the percentage only climbs for those with kids -- the group that actually can't afford to live without one.”
The author of the article goes on to explain that most parents will give the same four reasons for not having nominated guardians for their children—and that ALL of these reasons are bogus. The article does an excellent job explaining why parents shouldn’t let any of these excuses (or “myths”, as the author refers to them) stop them from taking the necessary steps to provide for their children.
These “myths” are no surprise to estate planners, who know all too well how hard it can be to think about your own death, and to what lengths people will go to avoid doing so, but the one that is the most concerning is the one the article lists as #3: “A good number of parents say they've stashed a letter somewhere, or have this email on their laptop outlining their last wishes...”
When it comes to your children’s future, there is no substitute for a professionally prepared nomination of guardians. Informal documents such as a letter or e-mail simply may not hold up in court. “No matter how eloquently you've voiced your preferences, your letter or email is not legally binding. A judge could take it under advisement, but he could also come to his own ‘better’ assessment. And why risk it? If you've taken the time to consider the right person, why not just make it official and seal the deal?”
If you have minor children, executing a nomination of guardians may be the most important way to secure their future if something should happen to you. Contact our office for more information about how to choose (and nominate) guardians for your child.
Wednesday, October 19, 2011 When is the Best Time to Plan Your Estate?
The estate tax laws of the past few years have been so inconsistent that many people are still “waiting for things to even out” before they create (or update) an estate plan. This wait-and-see approach seems perfectly reasonable on the surface; after all, nobody wants to spend hard-earned money creating an estate plan only to have it rendered obsolete within a year. Our firm is here to let you know that there’s bad news and there’s good news...
The bad news is that estate tax law doesn’t appear to be settling down any time soon. We all know the estate tax was repealed in 2010, and then reinstated in 2011. And now, as this article from AARP mentions, “federal estate tax rates are slated to change again in 2013, unless Congress decides otherwise.” Furthermore, there are quite a few other mercurial tax laws that have a significant impact on estate planning, including the capital gains tax and the gift tax, to name just two. Both of these factors mean that the future of estate planning is still cloudy.
The good news is that even with all this uncertainty, an estate planner can help you plan for just about any situation. There is much more to an estate plan than just tax planning, including providing for your loved ones, planning a smooth financial transition for your spouse and children, ensuring you’ve nominated the best people to make medical and financial decisions if you become incapacitated, and much more. All of these are foundational elements, and don’t have to change if and when the tax laws do. Making the right plans now means you may have to make only a few small tweaks when 2013 rolls around.
The one thing you can be certain of is that life rarely plays out the way we expect. It’s better to make solid plans now that may change a few years down the line, than to wait unprepared and unprotected for tragedy to strike. Our office can help you build an estate plan that can weather whatever the future may bring.
Wednesday, October 12, 2011 Plan Ahead to Avoid Court-Ordered Conservatorship
Young adults are often urged to plan ahead and take control of their future; whether that means getting good grades and planning for college, searching for internships in their career area of interest, or saving money for the day when they are out on their own. Older adults, on the other hand (aside from being advised to save for retirement) may not know that there is one very important way to plan for their own future: choosing a guardian or conservator.
As the elderly population moves into their 70s, 80s and 90s it is not unusual to lose the ability to drive, manage their own finances, or even care for their own daily physical needs. When this happens, and the ability to care for yourself is lost, the courts will often give care over to a guardian or conservator—someone who will manage your money, medication, household tasks (or all of the above) for you.
If you have not taken steps ahead of time to name the person or people you trust to serve as your guardian or conservator then the courts will name one for you. Often the person named as guardian or conservator is the first person to petition the court for the job—although this may not be the person you would choose to manage your money or your care.
The best way to ensure that you have the right person managing your finances or your health care when the time comes is to plan ahead and execute a Nomination of Conservator, a Healthcare Directive, and a Durable Power of Attorney. Together these three documents let the courts know who you trust with your physical or medical care, and who you feel is qualified to properly manage your money without taking advantage. These three documents will help you take control of your own future, even at a time when losing some of that control may seem inevitable.
Monday, October 10, 2011 Death of Steve Jobs Saddens the World
The recent death of creative visionary and Apple co-founder Steve Jobs saddened the world. News of his death traveled like wildfire, and had the online social networks humming with tributes, memorial posts, and sentiments of grief. Mr. Jobs was very private about his personal life, but through his public appearances and his support of various creative enterprises he touched and changed the lives of many individuals; just as his visionary ideas changed the face of technology.
The sad announcement of his death has many people now wondering “what next?” How will this change the company he started? What will happen with his family? As this article from ABC News relates, “The ever-private Steve Jobs was famously secretive when it came to Apple's new products. As with his personal life, the future of Steve Jobs' wealth [and family] will also stay under the radar.”
The article mentioned above states that “Given Jobs' vast wealth and penchant for privacy, he likely set up private trusts for his family and charitable purposes.” Private trusts would certainly have been the logical thing to do, under the circumstances. Trusts are a much more flexible, powerful, and private tool than a simple will when it comes to estate planning. Trusts are useful under any circumstances, but they provide a much greater amount of control and protection of assets, especially when dealing with very large estates.
If Steve Jobs did choose to create trusts to protect his estate then it is possible that we may never truly know how he chose to distribute his wealth. It is probably safe to assume, however, that in addition to providing for his family and loved ones, he may have left a considerable amount to charitable or visionary endeavors. His words and actions during life provide a clue about how he thought about wealth: “Being the richest man in the cemetery doesn't matter to me…Going to bed at night saying we've done something wonderful…that's what matters to me.”
Friday, October 07, 2011 How to Cope After the Death of a Spouse
Losing a spouse may be one of the most difficult life events that any of us have to deal with. A spouse is a parenting partner, a co-CFO, a best friend and a beloved soul mate. Losing the person who supports you in so many ways can create an emptiness which can be almost paralyzing.
This is why it’s so important after the death of a loved one to have the support you need to get through the detail-oriented and often emotionally draining probate process, which includes tasks such as sorting through a financial history, submitting legal documents to the probate court, contacting creditors and family members, and more. Some people have family or friends to help with these time-consuming tasks, others enlist the help of an estate planning or probate attorney, but one thing is clear: no one should do it alone.
Every family or couple will have a different experience with the probate process, but our firm would like to offer a basic list of universal “to-do” items to remember after the death of a spouse. We hope this will help give our readers a little bit of security during a very emotional and stressful time.
* Obtain multiple copies of the death certificate
* Gather any and all estate planning documents
*Contact an estate planning attorney. Even if you don’t plan to retain an attorney, a brief initial consultation can help you understand the task ahead and prevent you from skipping important steps
* Notify the person named as executor or trustee
* Notify the necessary institutions or agencies (the deceased’s employer, social security administration, insurance company, creditors, post office, etc.)
* Remove spouse’s name from all joint accounts or ventures, such as bank accounts, utility companies, credit card accounts, etc.
*Pay final bills
*Cancel accounts, subscriptions, etc.
Depending on your situation and location, there may be many more tasks to be done. Additionally, if you are serving as executor or trustee (as many spouse’s do) there will be a great number of administrative tasks to be performed in addition to the ones on this list. Under these circumstances even the strongest and most capable people can feel overwhelmed. Remember that you don’t have to go through the process alone.
Monday, October 03, 2011 The Pros and Cons of a Crummey Trust
If you are looking for a reliable way to leave financial gifts to family members you may find that a Crummey trust is the right estate planning strategy for your family. A recent article in the Wall Street Journal explains that “Crummey trusts are used in many circumstances, but are best suited for making gifts to minors—especially when a parent is giving money to a young child who isn't ready to handle a large sum.”
While it’s true that Crummey trusts can be a very convenient and reliable estate planning tool, they do require a certain amount of annual attention and maintenance, and may not be the right strategy for everyone.
Crummey trusts can be used for many different kinds of assets, but they are most commonly used to protect life insurance policies from estate taxes. Your estate planner can help you set up the Crummey trust and use it to purchase a life insurance policy. Then you “fund the premiums with annual gifts... That gets money out of the estate while skirting the gift tax. Since the trust owns the policy, the death benefit ultimately goes to the trust, shielding it from federal estate taxes.”
Once the initial work of setting up the trust and buying the insurance policy is done, “The trustee must send out ‘Crummey letters’ each year, informing beneficiaries that they can withdraw the gifted amount during a window of time, say 30 days. Usually, the beneficiary leaves the money in the trust. But the IRS considers it a tax-free gift only if the person has the right to take it in the short term, and the Crummey letter proves that he has that right.”
Sending letters once a year isn’t a difficult task, but forgetting even once can lead to consequences with the IRS. Our advice is to be very careful to select a trustee you can count on to be timely and detail-oriented with the Crummey letters. Alternatively, the estate planner who set up your trust will often be willing to take over the administrative task of sending annual Crummey letters as well. Contact our office for more information. Friday, September 30, 2011 When “Equal” is not Always “Fair”
Every parent wants to be fair to their children; avoid showing favoritism, give each the same advantages, and eventually leaving each a fair and equal inheritance. But every parent also knows that there are times when equal is not always fair—a dilemma that is often faced by parents drawing up their will or estate plan. This is exactly the issue that is addressed in this recent article in the Wall Street Journal entitled Wills: How to Give One Child Less.
The article mentions that there are a number of different reasons why parents may want to give seemingly unequal financial distributions in their wills, “Many parents want to support children who need more financial help, while others want to repay children who have provided important support or caregiving. Some parents already may have helped one child considerably more than another during his or her lifetime, such as paying for a pricey graduate-school education or providing money for a down payment for a house. Other parents are reluctant to reward a particularly difficult or problematic child.”
There is absolutely nothing wrong with choosing to leave more to one child than another, but problems may arise when children are caught by surprise and feel neglected or betrayed; this happens most often when children don’t understand the reasons for their parents’ seeming favoritism, and can result in one child choosing to contest your will in court.
The WSJ article recommends a few strategies to avoid these hurt feelings and expensive court proceedings, but the first and best strategy is to talk to your children about it ahead of time, if possible. Hearing the news (and the reasons behind it) from mom and dad themselves can be much less hurtful than hearing about it from an attorney. Furthermore, telling your children yourself gives you the opportunity to explain your decision in a sensitive and loving manner.
If you still worry that your decision might be contested there are a number of precautions you can take to help ensure your planning documents will hold, including taking steps to prove your mental capacity is sound, creating what the WSJ calls “serial wills,” including a no-contest clause in your will, and more. Which method you may choose to employ will depend completely on your unique situation, and your estate planning attorney will be able to help you decide which is best.
We all know logically that “equal” is not always “fair,” but the heart does not always understand what seems logical to the head. Breaking the news gently to your kids ahead of time can go a long way toward avoiding hurt feelings later. Wednesday, September 28, 2011 Three Estate Planning Documents You Need During Your Lifetime
There are a number of very important documents in your estate plan which come into play after your death, but as this article in Forbes reminds us, there are two or three estate planning documents that are of the utmost importance while you are still alive: your Healthcare Proxy, your Advance Directive (also called a Living Will), and your Power of Attorney. Together, these three documents ensure that your medical and financial affairs will be taken care of and that your wishes will be followed should you somehow become incapacitated.
Healthcare Proxy: This document nominates the person (or people) who will interact with medical staff, have access to your medical records, and make healthcare decisions for you if you are ever unable to do so yourself. This can be a standalone document, but it can also be wrapped up as part of the next document;
Advance Healthcare Directive (or Living Will): This is the document that describes in as great or as little detail as you wish your preferences for medical treatment, your wishes for resuscitation (or lack thereof) and even your wishes for the disposition of your remains. An Advance Healthcare Directive also often includes a section nominating a healthcare agent (or healthcare proxy) to make decisions for you if you cannot.
Financial Power of Attorney: If you ever become incapacitated you will still have bills to be paid, investments to be monitored, and financial decisions to be made; the Financial Power of Attorney gives the person you nominate the power to keep all those various financial balls up in the air. The person named as your power of attorney will have the power to access your bank (and other financial) accounts, so be sure the person you choose is someone you trust.
The Forbes article mentions that “One in eight baby boomers will get Alzheimer’s after they turn 65. Sure, you hope you won’t be one of them. But the risk of a slow decline and incapacity, meaning that you don’t know what assets you have, what you want to do with them and who your family members are, lurks for us all.” Having the three above-mentioned documents ensures that you—and your family—will be ready for whatever the future may hold. Friday, September 23, 2011 There’s More than One Way to Name IRA Beneficiaries
Do you know the best way to pass your IRA savings on to your loved ones when you die? It sounds like a simple question, but naming beneficiaries for your IRA is not always as straightforward as it sounds. This article in CBS MoneyWatch explains: “Without proper estate planning, you may be reducing your family’s future wealth potential. That’s because improper planning can mean not only a premature end to your IRA at your death, but also assets being inherited by the wrong individuals or entities.”
Deciding who should inherit your retirement savings is fairly simple (although it is not uncommon for an ex-spouse to receive IRA benefits because beneficiary designation forms are not updated after significant life events such as a divorce,) it’s figuring out how the assets should be distributed that poses the problem. If done correctly, inherited IRA assets can be rolled over and stretched out by beneficiaries for years. But without the correct planning your heirs may find themselves paying significant taxes on their inheritance or worse yet, unable to access the funds at all.
The article explains that each of the many options for IRA beneficiaries requires a different kind of planning. Naming a spouse as a beneficiary is fairly straightforward, your spouse can either “Roll the funds into his or her own IRA” or “Open an inherited IRA and take distributions based upon his or her remaining life expectancy.” Planning to leave your IRA to a single child is somewhat similar to planning to leave it to a spouse.
But if you would like to leave your IRA to more than one child, or to a trust for the benefit of multiple individuals or charities, you’ll likely want to contact an attorney or accountant for more significant planning. As beneficial as these options can be, there are regulations and requirements involved with multiple beneficiaries, and “there are a lot of complexities with naming trusts as beneficiaries, so seek a competent estate planner for assistance.” Monday, September 19, 2011 How Important Is Religion When Planning Your Estate?
In a multi-cultural, multi-religious country such as ours the subject of personal faith or religious beliefs is one that many advisors are reluctant to bring up. Some advisors are afraid of offending their clients, other advisors may simply feel that religion has no bearing on the financial service they provide; but a recent article in the Wall Street Journal questions this assumption and asks is there a circumstance under which business and religion should mix?
The WSJ article takes the view that yes, there are circumstances when religious beliefs do have a bearing on financial matters. For example, “Making sure a client's living will and health-care proxy are in line with his or her religious beliefs—or lack of belief—should be a priority for advisers.” Additionally, creating a “‘family values and mission statement,’ which typically includes a section about the family's ‘spiritual values’... [can help a client] gain clarity about their family's priorities.”
When it comes to estate planning, religious beliefs and values are often a very large part of the planning process. Parents and grandparents hope that they can leave a moral and financial legacy, and how you choose to do this will have a significant effect on your estate plan. In order to serve their client to the fullest an estate planning attorney has to know which questions to ask and how to listen with an open mind in order to ascertain the complete scope of a client’s goals and help our client achieve those goals.
Including religious beliefs in an estate plan won’t be a priority for everyone. But for those who do wish to address the subject, they may find it’s not so easy to jump right into the topic with a relative stranger. The most natural place to start is often with a healthcare directive or living will, where you will want to include your end-of-life wishes and memorial instructions. Discussing values in this context can often lead to a greater discussion of how to pass your values on to your heirs through your will or trust as well. Friday, September 16, 2011 How To Give An Inheritance To A Child Who Might Squander Or Abuse It
Giving your children an inheritance can be one of the most generous, most loving things a parent can do... Unfortunately, under certain circumstances it can also be the most dangerous. A recent article in the New York Times addresses a question asked by many parents in estate planning offices all over the country: How to give an inheritance to a problem child who might squander or abuse it?
It is not unusual for estate planners to hear concerns from parents or families about one child or sibling who is not quite as mature, not quite as responsible as the others. In some cases the concern is not with a child or sibling, but with an untrustworthy spouse of a child or sibling. In both cases the estate planning challenge is the same—how to provide for the one you love without feeding any dangerous habits or predatory relationships.
There are actually a great number of ways parents can use estate planning to either protect or motivate an irresponsible child. The one your family chooses will depend on your unique circumstances. The article mentions a few of these strategies, including:
Eliminate temptation by restricting access to large sums of money. “Money does not cause problems, but it can sure accelerate them. The simplest strategy is to choke off that fuel.” Parents can do this through annuities, through specific instructions in trusts, or through a trusted and like-minded trustee. What is not recommended is putting another sibling in charge of the estate and asking that sibling to “parent” the less responsible one. This is a recipe for disaster.
Use your estate plan to give your child incentives to improve. “Incentive trusts can set hurdles for children to receive money or make payments only for set reasons. Pretty much anything can be a trigger, from being admitted to a certain college or matching money children earn on their own to being clean from drugs for a certain number of years.” Your estate planner can tell you how to best set this up.
Keep something in reserve for future years and generations. If your goal is to encourage children and grandchildren to lead productive lives and contribute to future generations then your estate planner can help you design a plan that will last for decades or generations. Recent tax developments have made this an especially good time to create a lasting legacy. “People with substantial wealth may want to take advantage of the $5 million exemption from taxes and 35 percent tax rate over that amount.” Wednesday, September 14, 2011 IRS Announces Another Extension for Estate Tax Filing Deadline
Just a few weeks ago the IRS announced the November 15, 2011 estate tax filing deadline for large estates of decedents who passed away in 2010; but some executors might be relieved to know that the IRS recently extended the deadline to January 17, 2012.
This extension gives executors of large estates more time to determine whether or not its in the best interests of the heirs to take advantage of the 2010 estate tax repeal. The decision facing executors of the 2010 estates is this:
* Choose not to pay estate taxes, but subject the assets of the estate to carryover basis rules (meaning heirs will pay capital gains taxes based on the price of an asset when it was initially acquired by the decedent); or
* Pay estate taxes under the 2011 rules, with a $5 million per-person exemption and a 35 percent top rate, but with a stepped-up income tax basis (meaning heirs will pay capital gains taxes on the price of an asset when it was inherited.)
For any executors who haven’t already made the decision, they can now take more time to weigh the pros and cons, and maybe even enlist the advice of an estate planner, tax planner, or probate attorney to help walk them through any possible unexpected consequences. If you are an executor or an heir faced with this particular and time-sensetive issue, please don’t hesitate to contact our office for assistance. Monday, September 12, 2011 The Dangers of Joint Ownership As An Estate Planning Strategy
Estate planning does not consist of a single, uniform goal or strategy. Instead, estate planning exists on a spectrum, with a simple will on one end and a comprehensive and interconnected series of documents and/or entities on the other. But as this recent article in Forbes points out, joint ownership by itself does not constitute an estate planning strategy.
All too often we see parents in their later years choose to simply add the name of one of their adult children to their bank account, instead of creating a will. “This is often done to help with bill paying, as a will-substitute to avoid probate court (often called a “poor-man’s will”), or simply to help an elderly loved one who needs assistance managing his or her assets. This is a big no-no!”
While adding a child’s name to a bank account can seem like an easy way to give that child power of attorney, it is simply too risky as an estate planning or a financial planning strategy. As the Forbes article points out, there are simply too many things that can go wrong. For example, even if you trust your adult child completely, adding another person as a joint owner on a bank account not only gives that person access to your money, but also gives other (perhaps less trustworthy) people such as creditors, litigants, or ex-spouses access to your money as well.
Family fighting is another tragic and common result of using joint ownership as an estate planning strategy, because it leaves the parent’s true intentions for the distribution of wealth in doubt. Mom may have wanted her account to be shared equally between many siblings, but “if Johnny won’t share, his siblings can sue him and claim that Mom’s actual intent was not for him to keep the money, but she only added his name as a convenience. The siblings have to prove what her actual intent was, and that’s not very easy to do.”
The bottom line is that joint ownership, while it may seem like a quick and easy estate planning strategy, is just too ambiguous, too exposed, and too dangerous to be practical. For other estate planning strategies that will provide your family with strong and lasting protection please contact our office today. Wednesday, September 07, 2011 Leaving an Inheritance to a Special Needs Child
If you have a child with special needs, planning your estate takes on a whole new dimension; especially, as this article in Forbes points out, now that “state and local governments are tightening income restrictions for medical benefits and supportive services, which are typically paid for by Social Security and Medicaid. Those services are tough to find—or afford—in the private sector for many adults with disabilities so severe that they can't live alone... As a result, it's increasingly important to structure an inheritance in a way that won't disqualify a child for such benefits down the road.”
Structuring an estate plan with a special needs child as a beneficiary takes special consideration. Because a direct inheritance could disrupt that child’s public benefits, “some parents simply leave another child all their assets in their will. If there are three children, they might leave two-thirds to the child who lives closest to the one with special needs.”
Unfortunately this particular strategy is rife with possible dangers. The heir may be tempted to use his special needs sibling’s money for his own purposes, or could decide he’s simply tired of being a caretaker. Even worse, the heir could pass away unexpectedly, in which case the entire inheritance would go to the heir’s spouse or children, with nothing left for the special needs child.
The article gives a number of suggestions for safe and reliable ways to leave your special needs child an inheritance, including leaving property to your child in a Qualified Personal Residence Trust, setting up a housing collective, and the tried-and-true option of a Special Needs Trust. But we know that each family is going to have different needs and goals, and there isn’t one solution that will work across the board.
If you have a special needs child your very best course of action is to contact a knowledgeable and experienced attorney to help you understand your options and choose the one that will best protect your child. Friday, September 02, 2011 Make Your Estate Plan a Masterpiece
A recent article in Forbes has shed light on a fact that estate planners have always known: There is far more to creating a good estate plan than just drafting the documents. In fact, according to the article, there is a fine art to putting together a good estate plan. “Estates are often shrouded in some mystery even for the people who plan and manage them. It is logical that an estate plan should offer a clear map of what a person owns, but this isn't always the case.”
The point is made in the article that very few estate plans contain an accurate accounting of what the estate entails. There may be any number of reasons for this; in some cases a person “doesn't have an accurate balance sheet to start with, and chooses not to update it or to share every detail.” In other cases “people may withhold information because they do not entirely trust an adviser, or because they are embarrassed to talk about money.”
The job of an estate planner is to draft a plan solid enough to offer security, but flexible enough to hold up to unexpected surprises—and how to achieve this will be different for every client. “A big part of the job is to value assets properly, and that task is an art, not a science.”
Of course, the clients who come back every few years for an update and review have a much better chance of their estate plan remaining accurate and secure, but not every client will be willing or able to do this, and estate planners do take this into account. However, “even a plan that starts out based on a complete accounting will be thrown out of whack if the estate owner doesn't come in to update it after a big life event like marriage or the sale of a business.”
Whether you are considering creating a new estate plan, or looking for someone to help you update an existing one, contact our office for help. We can help you make sure your plan is a masterpiece. Monday, August 29, 2011 Should Beneficiaries Also Serve as Executor or Trustee?
When someone
creates a will or a trust of course they want to choose a dependable and
trustworthy person as executor or trustee. For most people this means someone
close to them—a family member or friend, or often the most responsible of their
adult children. However, this often means that the person they’ve chosen as
executor or trustee is also a beneficiary. The question that occurs is this: Is it a conflict of interest to be both executor/trustee
and beneficiary?
As executor
or trustee a person has a legal duty to manage the property in the decedent’s
estate for the benefit of the trust or estate beneficiaries. This means that
while the executor/trustee should be compassionate, he or she must act in an
equal and unemotional manner toward ALL the beneficiaries.
A
beneficiary, on the other hand, is often by definition emotional. Even those
beneficiaries who are not concerned with the monetary aspect of their
inheritance (and let’s be honest, many heirs are more concerned with the dollar
amount than they might let on) will likely be emotionally invested in the heirlooms
of the estate. Many family feuds are sparked when siblings can’t agree on who gets
the family silver or great grandma’s engagement ring. And the potential for
conflict only increases when real estate is involved.
If you are
creating your will or trust, the best way to avoid this conflict is to be as
specific as possible in your instructions to your executor and beneficiaries. Spelling
out in no uncertain terms who gets the family silver will decrease the chances that
the executor will be tempted to take advantage of his or her position. You may
also want to consider naming a disinterested party as a trust advisor or
co-executor to provide checks and balances throughout the administration
process.
If you are a
beneficiary who is also serving as executor/trustee there are a few things you
can do to ensure you keep your executor and beneficiary roles separate:
* You may
want to consider contacting a probate or estate planning attorney to mediate or
oversee the process.
* Rely on
random but fair methods (such as flipping a coin, drawing straws, or organizing
a round robin) to distribute unassigned personal property with emotional value.
* Be sure to
involve an impartial appraiser if real property is involved.
* If all
else fails, an executor or trustee is always permitted to step down and hand
the role over to a qualified and disinterested party. Wednesday, August 24, 2011 Some Tax Saving Strategies from the Wall Street Journal
Income, estate,
and other federal tax levies have commonly been a bone of contention between
those with different political ideologies; but the current conflict has reached
unusual heights, with various million- and billionaires publicly expressing
their views (pro or against) about current tax laws. Of course, million- or
billionaires aren’t the only ones with strong opinions about taxes.
If you feel
that you pay too much in taxes, Brett Arends of the Wall Street Journal has some
tips to help you save on taxes in the future. Much of his article is
tongue-in-cheek, but the suggestions are valuable ones. Of special interest to
our firm and our clients are four of the tips nestled in the middle of the
article:
Give to your family. “Until the end of 2012 you can give
$5 million, tax-free... In addition you can give $13,000 a year to each
recipient -- each child or grandchild -- and a spouse can do the same. So a
married couple with, say, three children and eight grandchildren can give another
$286,000 a year, on top of that one-off $10 million. Over ten or twenty years
that really adds up.”
Put your grandkids—and great grandkids—through
college. “Money paid
directly to schools or colleges escapes estate taxes.” Furthermore, if you
contribute to a 529 educational savings account that money can be tucked away—and
eventually used by the student for whom it is intended—tax free (so long as it
is used for educational purposes.)
Buy life insurance. Proceeds from a life insurance
policy can go to your beneficiaries tax-free upon your death, although you may
have to make some arrangements ahead of time.
The article states that “Typically you put the policy in an Irrevocable
Life Insurance Trust... The premiums that you pay annually are gifts to the beneficiaries...
And when you die, the proceeds of the policy go to the trust, for the beneficiaries,
free of estate tax.”
Talk to an estate planner. “There are other moves that can cut
your estate tax, too. A Qualified Personal Residence Trust can slash the estate
taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them
on an investment portfolio. So, too, can setting up a Family Limited
Partnership. Financial planners say this is a great time to put investments --
like stock -- into a GRAT.”
If you have
questions about these tax-saving strategies, or other strategies that can help
you preserve your estate for your heirs, please contact our office. We can help
you determine what your best options
are to help protect your assets—and your family—in the years to come. Monday, August 22, 2011 Don’t Let Tax Laws Limit Your Generosity
The past two
years have been tough on the average American family. The economy has been floundering and the
unemployment rate has been hovering around 9-10% since 2009, not to mention the
roller coaster ride we’ve all been through with the stock market. But through
it all some families and individuals have fared better than others—and many of
these lucky ones are eager to extend a helping hand to their family and
friends... if only the tax laws would let them.
A recent
article in Forbes, entitled 6
Ways to Give Family and Friends Financial Aid, explains that “the tax law
regulates your [financial] generosity... This kind of assistance is considered
a lifetime gift unless it’s for someone whom you are legally obligated to
support, such as a child.” This is important because “lifetime gifts” over a
specific amount (currently $5 million per person) are subject to taxation.
“Gifts of
cash or other assets can count against your $5 million exclusion from gift or
estate tax. If you exceed that limit, you could wind up owing gift tax of up to
35%. Even if you don’t, your lifetime gifts would reduce how much you can pass
tax-free through your estate plan.”
But if you
are willing to work within the system there are
ways to give financial assistance to friends and family without having to pay
gift tax. Here are a few strategies suggested in the Forbes article:
1. Don’t give more than $13,000 (or $26,000 if you are giving as a
married couple) per person per year. $13,000 is the current annual gift exclusion amount, and giving
more than this can count against the $5 million lifetime exclusion.
2. Pay medical, dental, or tuition
expenses directly to the provider. “Without using your annual exclusion or dipping into the
lifetime limit, you can pay for tuition, dental and medical expenses of anyone
you want. Note that you must make the payments directly to the providers of
those services.”
3. Contribute to 529 educational
savings plans. While
contributing to a 529 savings plan does
still count as a financial gift, once in the account the money can grow and be
withdrawn tax-free, “provided it is used to pay for college, a graduate,
vocational or another accredited school, or for related expenses.”
These are
only a few of the suggestions offered in the article, and a consultation with
your attorney or financial planner could reveal even more options available to
you should you wish to offer aid to friends or family without coming up against
the lifetime gift or estate tax. Please
contact our office for more information. Friday, August 19, 2011 Executors of 2010 Estates Have Until Nov. 15 to Make Estate Tax Decisions
Everyone
will remember the “wonderful boon” that was the 2010 estate tax repeal, which
(in theory) allowed decedents to pass on their assets free of any estate taxes. However, the situation was complicated in
December of 2010 when, as
this article in Bloomberg puts it, “Congress extended the tax retroactively
[giving] executors of estates of people who died that year a choice. They could
decide to skip the estate tax or pay the tax with a $5 million per-person
exemption and a 35 percent top rate, the same as in 2011.”
Executors
have had almost a year to consider their options, but now it is just about time
to make the decision, because “the Internal Revenue Service is giving executors
of estates of people who died in 2010 until Nov. 15 to opt out of the estate
tax.” According
to the IRS the forms and instructions for 2010 estate tax returns will be
made available early this fall.
But executors
don’t have to wait until the forms are available to consider which tax option
might be the most profitable one. Many financial planners and estate planning
attorneys have already done their research, and they’ve found that opting not to pay estate taxes may end up
costing you more in the long run. This
article in Forbes explains: “Opting out of the estate tax regime means
opting out of stepped-up basis (for income tax purposes)… and opting into the
modified carryover basis rule… One of
the main plusses about estate tax is that it is paired with a stepped-up income
tax basis. You should not be paying both
estate tax and income tax on the same assets.”
Of course,
each estate will be different depending on a number of factors, including the
size of the estate, the nature of the assets, the preferences of the beneficiaries,
and any previous planning the decedent may have done. Executors should consider
their options carefully, and consult with an experienced estate planning
attorney before deciding whether opting out of the estate tax is really in
their best interest. Wednesday, August 17, 2011 Unusual Things Happen Every Day…
In a recent article in the Huffington
Post financial
columnist Don McNay tells the frustrating, sad, and “unusual” story of how the
greater part of his mother’s and his sister’s estates ended up in the hands of
people they would never have chosen to receive it… all because neither of them
had a will or estate plan when they died.
When McNay’s
mother died unexpectedly in April 2006 neither he nor his sister really worried
about her lack of a will. After all, “her only asset was our childhood home,
and my sister and I were her only children. We would split the ownership of the
house equally.” McNay paid for the funeral, and “advanced the estate money to
pay delinquent property taxes, some outstanding bills, and the mortgage on
Mom's house,” and he and his sister worked out an informal deal to even things
up financially once the estate was settled and the house was mortgaged.
Tragically,
his sister fell down some steps and died in October 2006, also without a will,
and this is when the real trouble began. Although his sister had left her
husband years before, they had never formally divorced; which meant that
McNay’s sister’s share of their mother’s estate now belonged to her ex-husband,
her adult son, and her minor daughter—and none of it would be used to reimburse
McNay for what he had lent the estate.
McNay writes
honestly and persuasively about his experience, and we recommend reading the entire article, but the long and short of it is
this: After several rounds in court, after the involvement of several
attorneys, and after being forced to sell the family home for less than what it
was worth, “the person who got the most money from my mother's estate was my
former brother-in-law.”
Unfortunately,
McNay’s story is all too common. Situations such as this one could be easily
(and inexpensively) avoided simply by consulting an attorney and drawing up a
simple will; and yet more than 60 percent of Americans don't have wills.
Whether it’s because they’re uncomfortable thinking about their own death,
think they’re too young to worry about it, or simply feel they don’t have
enough assets to worry about it, more than half of Americans today refuse to
take the one simple step that can protect their families from heartache and
expense.
We suspect
that most people believe (erroneously) that this kind of thing just won’t
happen to them. After all, as McNay
writes in his article, “My family's series of events was unusual,” but then
again, “unusual things happen every day.” Friday, August 12, 2011 Don’t Inadvertently Disinherit Your Loved Ones—Review Your Estate Plan Regularly
All of our
readers know just how important—how essential—a
will is to protecting your family after you pass away. Leaving clear and
tangible instructions can prevent family infighting as well as hurt or
unsettled feelings; and leaving a legally airtight will can prevent wasted time
and money in unnecessarily long probate proceedings. But for all of this, there are a few assets
that your will may not be able to address.
This
article in CNN Money describes three assets that could cause you to “unwittingly
disinherit intended beneficiaries, including your children, from significant
portions of your estate,” namely your 401(k) plan, your IRA account, and your
life insurance.
You can name
anybody you’d like as a beneficiary in your will, but when it comes to 401(k)
plans it’s your spouse who is entitled to the money when you die. “If you want
to leave a 401(k) to someone else, your spouse must first file a written
statement waiving rights to it.” Even a prenuptial agreement won’t help if you
want to keep your 401(k) assets out of the communal pot, you’ll have to
convince your spouse to sign a waiver after
you’ve tied the knot. “A person can't give up spousal rights to inherit a 401(k)
until actually married. ‘A prenup by itself is not a valid waiver according to
the rules governing 401(k) plans.’"
Who will
inherit your IRA or your life insurance is a little easier to control than who
will inherit your 401(k). In the case of IRA or life insurance accounts the person
named as the beneficiary on the account will always take precedence over a beneficiary
named in your will. The most common inheritance
issues we see with these accounts is when people forget to update their
beneficiary forms after a significant life change such as a divorce or the
birth of a child. In these cases it’s important to review and update your
beneficiaries every 2-5 years to ensure there’s no confusion between your will
and the designated beneficiary on the account.
Having a
will is important, but a will is simply
one piece of a whole plan—a plan that likely includes many pieces. Being
aware of all the pieces of your estate plan, and keeping those pieces working
together and in harmony, is essential to ensuring that your family and your
legacy is protected. Our office can help. Wednesday, August 10, 2011 The Estate Planning Post Every Woman Should ReadAlthough couples usually come into our office together to discuss their estate plans, quite often it’s the women who lead the discussion about planning for the guardianship of children, and the men who lead the discussion about financial planning.
Estate planning is a subject which has a significant impact on women—in fact, this article in Forbes suggests that estate planning may affect women even more than men because “Among Americans 65 and older, 42% of women, but just 14% of men are widowed. Women’s longer life expectancy, combined with their tendency to marry older mates and their lower lifetime earnings means they are far more likely to see their living standards compromised in retirement if proper estate planning isn’t done.”
How can women ensure that this doesn’t happen to them? The best answer is for women to be involved in the estate planning process—not just the issue of guardianship, but financial issues as well. Talk to your partner about what happens if (as is likely) your spouse passes away first leaving you a widow. Talk to your spouse and your family about how the remainder of your estate should be distributed upon your death. And don’t discuss the topic in vague terms, bring your estate planner or financial planner into the conversation and talk about cold, hard numbers.
Our firm understands that this is not the easiest conversation to begin. Talking about money in our culture has generally been considered a “dirty topic,” not to mention that nobody likes considering their own (or their spouse’s) mortality, but the consequences of avoiding the discussion can be disastrous.
If you’d like to start a conversation about estate planning with your family but aren’t quite sure how, the Forbes article mentioned above has quite a few excellent suggestions, including “start with current events or an anecdote about other people. Perhaps it’s a movie you saw, a book you read, a news report about someone your age who recently died or a sudden death in your community.” If you’re trying to bring up the subject with your parents as opposed to your spouse you may want to consider telling them “I just did my own estate plan. Don’t you think you should update yours?”
Alternatively, you may simply want to print out this blog post (or the Forbes article) bring it to your spouse/parent/children and read it together. Getting the conversation started is the hardest part, but it’s also the most important. If you can get the ball rolling, our firm can help with everything else. Friday, August 05, 2011 Blended Families Require Special Estate Planning
With the current high rates of divorce and remarriage—even into the retirement years—many blended families have a lot to consider when they create their estate plans. This article entitled “Inheritance plans for blended families present many options” considers the situations of Alice and Jack, 70 year old common law partners who wonder what is the best way to provide for each other, as well as children they each have from previous marriages, should one of them pass away.
Blended families now have more options than ever when it comes to creating estate plans. All of these options ensure that each family—each person—will have the opportunity to achieve their goals; but be careful, many of the strategies that sound ideal on the surface will have hidden consequences down the road.
Take the spousal trust as an example: “Jack is thinking about having his lawyer draw up a new will to include a spousal trust to hold his investments. If he dies first, the trust could provide cash flow for Alice for her lifetime. Ultimately the capital would pass to his children after Alice dies. Such a trust can defer tax on capital gains and allow some investment income to be taxed at the lowest bracket rate.” But there’s more to it than what is seen on the surface. “What if Jack's children have to wait 20 or more years to inherit? Indeed, Jack's children may never inherit anything if Alice has the power to dip into the trust capital.”
Luckily, a knowledgeable and experienced estate planner can not only help you look into the future to help you see what long-term effects of each planning option might have, but also offer a wide variety of options, many of which can be tweaked and customized to fit your blended family’s unique needs.
When it comes to protecting your family it’s wise to consider all your options... and never settle for less than the best. Monday, August 01, 2011 Planning Your Estate Can Help Loved Ones Cope With Loss
In our line of business we like to think that what we offer our clients is more than a way to minimize estate taxes or avoid a lengthy probate, we like to think that what we really offer our clients is an opportunity for peace and comfort during a time of stress and emotional upheaval.
Sharon Epperson, in her article on MSNBC entitled “How Dad’s Planning Helped Us Cope With His Death” gets to the heart of what we think everybody is trying to accomplish when they contact an estate planner. “By making some important decisions while living, my father helped to lessen the overwhelming stress of coping with sudden loss.”
Epperson goes on to explain that while simple things like a clear-cut will, pre-made funeral arrangements and an up-to-date life insurance policy can make all the difference in the world to grieving relatives, “only 45 percent [of respondents in a State Farm survey] say they've actually made plans.”
The truth is that the hardest part of creating an estate plan is simply getting started. Asking that first question, making the first decision, creating the first document... once you’ve taken the first step the rest comes easily—especially if you have a knowledgeable and compassionate advisor to help you along the way.
When clients come to our office asking about a last will and testament, or a trust for their children, we know that the question underlying the entire experience is “How can I ensure my family will be taken care of?” Our goal is to address ALL of your concerns, and help you provide your loved ones with a port of comfort and security in the storm. Friday, July 29, 2011 Retirement Assets May Be Unpleasant Surprise for Heirs
You’ll often read news articles or blog posts about saving for retirement—when to start, how much to save, what savings or investment plan is best—but there’s an important retirement topic which often goes underreported: How these retirement accounts impact your heirs.
As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”
Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor... but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.
“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”
Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.
“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren. Wednesday, July 27, 2011 After A Tempestuous Life Amy Winehouse Leaves Clear and Certain Will
Following the death of British singer Amy Winehouse there have been a number of news stories and blog posts about her turbulent career and the last few years of her life. In the midst of all this scrutiny, perhaps the most surprising discovery is the fact that Winehouse’s affairs were in incredibly good order, with a carefully crafted will leaving all of her sizeable estate to her parents and brother instead of to her incarcerated ex-husband.
This timely article in U.S. News and World Report remarks that “celebrities and non-celebrities alike often leave their estates in disarray when they die. That lack of awareness and planning can make death more stressful and more costly for family members as they struggle to quickly plan a funeral and think about dividing up family property while grieving.”
All too often our office is contacted by family members who are overwhelmed with the task of probating or administering a poorly planned estate. Sometimes these bereaved relatives are dealing with overwhelming and confusing debt, or terrible family infighting, but more often than not they are simply trying to make their way through the long and arduous process of probating an estate without the benefit of a will or trust.
One of the many things we can learn from the life and death of Amy Winehouse is that even in the midst of troubled times it is possible to think clearly about the future. If you’d like to start planning for your family’s future, please contact our office today. Monday, July 25, 2011 Charitable Lead Trusts Can Benefit Your Heirs AND Your Favorite Charity
2011 and 2012 are good years not only for heirs but also for charities; high estate- and gift-tax exemption amounts (as much as $5 million per person) have many wealthy families exploring their options for gift-giving, and record-low interest rates are prompting many financial advisors to recommend that their clients set up charitable lead trusts to leave money to both their favorite charity and their heirs with little or no tax hit.
When setting up a charitable lead trust the grantor puts the desired assets into a trust for a specified number of years, naming a charitable foundation as the first beneficiary, and a non-charity (children or grandchildren) as the remainder beneficiary. Each year during the specified time period payments are made from the trust to the grantor’s designated charity, once the trust's term expires, what is left goes to the grantor’s heirs.
Charitable lead trusts have fallen in and out of favor with financial advisors over the years, and were most recently popular after Ms. Jacqueline Kennedy Onassis used one to great effect. This recent article in the New York Times describes the pros and cons of the charitable lead trust:
“Over the years, charitable lead trusts have been a way to give money to charity with the possible benefit of passing what was left to children without paying estate taxes.” Although the payout (to both beneficiaries) of a charitable lead trust is highly dependent on the starting interest rate, “the likelihood today that one of these trusts would have money left for heirs [is] 95 percent. The trusts are written so that the assets appreciate substantially over time, but even if they do not, the designated charity — often a family foundation — will still get the money.”
One of the downfalls of a charitable lead trust is that rules and regulations can be confusing, “they are hard for someone who is not a tax lawyer to understand.” Furthermore, some families have “used these trusts to give money to their family foundation. This runs the risk of being deemed self-dealing if the person who set up the trust names his foundation as the recipient and then parcels out the money himself.”
The bottom line is that while a charitable lead trust can be an incredible useful tool benefitting both your heirs and your favorite charity (especially if set up during the next year and a half), it is not something to be done lightly, without the advice and help of an experienced attorney or financial planner. Wednesday, July 20, 2011 How Should A Caregiving Relative Be Compensated?
It is common knowledge in our society of aging Baby Boomers that many adult children end up taking months or even years off from their lives and careers to provide care for their elderly parents. Most children do this out of love and a sense of duty, but even in the closest of parent-child relationships there may be an unspoken expectation that appreciation for the caregiving child’s time and effort may be reflected in the parent’s will or trust. After all, professional caregivers demand a salary, is it too much to expect that a relative serving as caregiver should be compensated as well?
Take as an example the case of Anthony Olivo, who this article in Forbes describes as “a tax lawyer who ended up providing nearly full-time care for his mother and father.” Anthony “worked in law firms from 1976 to 1988 and then opened his own practice. Yet by 1994, given all the time he was devoting to his parents and their health problems, he found it hard to maintain his practice. He lived with his parents and gave them round-the-clock care from 1994 through 2003, during which he earned no significant income from his law practice.”
Now Mr. Olivo is asking that the U.S. Tax Court deduct $1.24 million from the estate of his parents for fees it paid to Anthony while he was serving as caregiver. Mr. Olivo is not challenging his parents’ wishes, he is not asking for more of the estate than his parents bequeathed to him; rather, he is asking that a “salary” for caregiving be deducted from the taxable portion of his inheritance.
Unfortunately, in the absence of a legal agreement, the tax court is unable to rule in Mr. Olivo’s favor: “The court was careful to note that Anthony rendered extraordinary care and that his efforts were commendable. However, the court ruled that his mother’s estate did not establish that Anthony was entitled to that pay. There were no written agreements and scant evidence the family agreed to pay him.” Furthermore, “There was no contract and no firm evidence of how much Anthony’s services were worth.”
We sympathize with Mr. Olivo, and hope that our firm can help save our clients from ending up in a similar situation. Simply leaving the caregiving relative “a little extra” in a will or trust is not enough, we cannot stress enough the importance of a legal caregiver agreement if a family member is providing caregiver services—especially if that family member is giving up time from his or her own career to do so. Monday, July 18, 2011 QPRTs Offer A Chance to Have Your Cake and Eat It Too
Since the burst of the housing bubble a few years ago and the subsequent crash of real property value, many of the clients who have come into our office have bemoaned the lowered value of their homes, but we have good news for these clients: You do have options.
One of those options is a QPRT (Qualified Personal Residence Trust) a specific kind of trust which allows you to continue living in your home, while at the same time removing it from your taxable estate. Sound too good to be true? It almost is. In fact, this article in Reuterscalls it “a chance for clients to have their proverbial cake — a sweet vacation home in Florida, for example — and eat it, too.”
Here is how it works: “In a QPRT, the grantor transfers up to two residences into an irrevocable trust and retains the right to use the home for a pre-determined period, or trust term. Terms can vary widely — 10 years is typical, but can run for 40 — and the idea is to make sure grantors outlive the term... Once the term concludes, the grantor then pays rent to the trust. The beneficiaries become landlords, and open a brokerage-type vehicle to receive payments titled to the trust. There’s no income tax on those payments, a big plus for beneficiaries.”
The reason the QPRT is such a boon right now, while property values are low, is that grantors are able to “gift” the residence into the trust while the value is low and still under the gift tax exemption amount. If the value of the property increases over the term of the trust (which it almost certainly will) the grantor does not have to pay gift tax on that increase, but the recipients of the trust will still benefit from the increased value.
The QPRT appears to be a perfect tool for gifting property to children, but you do want to be careful about how you structure the trust, and consider carefully your relationship with your children. Once the trust term is over the property belongs to the beneficiaries (your children.) Many families arrange to have the grantor continue to live in the home, but begin paying rent to the beneficiaries once the trust term is up; however, the beneficiaries have no obligation to allow the grantor to continue living in the property.
And if you think you can escape the eviction concern by simply making the term of the trust so long you’re likely to pass away before the term is up, think again. “Die before the term’s up and your property reverts to the estate and takes an estate tax hit. That’s why planners stress picking a term you and your spouse expect to outlive.”
If you feel a QPRT may be a good planning tool for your family, give us a call. We can answer any questions you have and help you determine whether a QPRT could benefit you. Friday, July 15, 2011 The Best Laid (Estate) Plans...
A recent story in the Chicago Tribunewill be of interest to anybody who has created, or is considering creating, an estate plan—regardless of state of residence. The article tells of Heather Rooney, the widow of wealthy businessman Thomas McNamee, and her ongoing fight to get the inheritance she believes her deceased husband wanted her to have.
Approximately six months before his death Thomas McNamee found out he had a deadly form of brain cancer. After learning that his cancer treatments had failed McNamee took steps to get his affairs in order; these steps included marrying Rooney, his girlfriend of 15 years, and setting up a $3.5 million trust fund for the benefit of Rooney and other family members.
It seems like he took care of everything—prenuptial agreement signed before the wedding, trust created before he became too sick to manage his affairs—what could go wrong?
Unfortunately, according to Heather Rooney, the arrangements left after his death were not what her husband actually intended. “According to [Rooney’s] suit, [McNamee] intended to leave Rooney a $500,000 trust fund to maintain her at the 24-acre Dundee-area property where the couple lived. He also intended to leave her two parcels in East Dundee, including one with a beauty salon that Rooney operated.” Rooney also claims that she was coerced mere minutes before their wedding into signing a prenuptial agreement that did not accurately reflect her or Thomas McNamee’s true wishes.
At this point, we can’t know for certain what McNamee’s true wishes were. It certainly seems as if he created a thorough plan which would accurately reflect his wishes not only for his widow but also for other family members. But one would think a person as savvy as McNamee would have informed his spouse of his plans ahead of time, eliciting her grudging agreement, if not her wholehearted approval.
Unfortunately, even the best laid plans can be contested by unhappy relatives. But with the help of an experienced attorney you can make your plan as strong or as flexible as you believe is necessary to ensure that your wishes are followed and your loved ones are provided for. Wednesday, July 13, 2011 As Priorities Change, So Does Your Estate Plan
Estate plans have been changing quite a bit over the past few years, not only because of changing laws and new tools for protecting your assets and your heirs, but also because our priorities as a society are changing and growing. A recent article in the Wall Street Journalsums up the situation well:
“Even the simple question of who your heirs will be is getting more complicated. Nowadays more people are considering pets and even children posthumously conceived from genetic material in their estate-planning mix, say financial advisers. That often means setting up trusts that just a few years ago would have been unthinkable.”
Some of these “new” trust arrangements include:
Pet trusts: Money set aside in trust to be distributed to your pet’s caretaker as per your instructions. Some people choose to make the caretaker the trustee of the trust as well, others choose to have a separate trustee who can ensure the caretaker is caring for your pet according to the guidelines in the trust.
Trusts for posthumously conceived children: As fertility treatments get more and more advanced, “a growing number of states are passing laws defining the inheritance and Social Security rights of posthumously conceived children. Earlier this month, legislation took effect in Iowa granting posthumously conceived children the right to participate in trusts. Texas, Washington, Colorado and North Dakota confer similar rights.”
As technology advances, and as the legal system works to keep up with it, you have more and more options when it comes to protecting your family and passing on your estate as you choose. If you have questions about unique estate planning choices please don’t hesitate to contact our office. Monday, July 11, 2011 Joint Ownership A Dangerous Way to Avoid Probate
When asking about how to avoid probate, many clients have asked about the wisdom of adding family members as joint owners to bank accounts. While joint ownership will achieve the goal of avoiding probate, there are many dangers and drawbacks to adding family members—even trusted family members—as joint owners on bank accounts:
Vulnerability to creditors: Your only goal in adding a family member as a joint owner may be to avoid probate, but in the eyes of creditors that bank account is suddenly fair game, and may be used to pay off the debts of your co-owner.
Vulnerability to lawsuits: In the same way that joint accounts are vulnerable to the creditors of both owners, they are also vulnerable to potential lawsuits against both owners.
Gift tax assessment: If a new owner is added to an account as a joint owner, but doesn’t contribute any funds to the account, the IRS may see the move as a monetary gift. If the “gift” exceeds the annual gift tax exclusion amount the IRS will require it be reported on a gift tax return.
Joint ownership can adversely affect Medicaid planning: Even if an account is jointly owned by two people, the state considers ALL the funds in the account to be at the disposal of the owner applying for Medicaid. Furthermore, if your co-owner chooses to remove assets from the account Medicaid could consider this an improper transfer of assets and you could be rendered ineligible for Medicaid for a certain period of time.
And of course, the number one danger of joint ownership for probate avoidance purposes is that your co-owner may act unethically or irresponsibly.
For more reliable—and more effective—estate planning strategies to protect your assets and avoid probate, please contact our office. Friday, July 08, 2011 Estate Planning Challenges (and Benefits) for Same-Sex Couples
There are many changes going on nation-wide for same-sex couples as more and more states legalize gay marriage. But there are still a few areas of the law—estate planning being one of them—which present challenges no matter what your state of residence. This article in the Wall Street Journal points out just a few of the challenges same-sex couples still face, and one of the highest on their list is death and inheritance.
“The biggest problems [for same-sex couples] may not come until death do you part. Although same-sex spouses are legally entitled to inherit assets from each other whether there's a will or not, since inheritance is governed through state law, they don't have federal rights.”
In states which have legalized gay marriage (including Massachusetts, Vermont, New Hampshire, Connecticut, Iowa, and now New York) same-sex couples are still inhibited by federal law in the following ways:
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Same-sex partners aren’t able to inherit retirement plans with the same ease that opposite-sex partners have. “Unlike opposite-sex spouses, same-sex spouses would have to transfer [401(k) and other] accounts to inherited IRAs and start taking distributions each year, rather than allowing the tax-deferred assets to continue to potentially accumulate tax-free earnings.”
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Same-sex partners still won’t get the federal marital deduction—the ability to “leave each other unlimited assets without owing any estate tax”—regardless of their state of residence. These assets may be considered joint by the couple and by the state, but not by the federal government. This means assets will be taxed once upon the death of the first partner, and may be taxed again upon the death of the second partner.
But there may be one opportunity not available to traditional married couples which same-sex couples can take advantage of: gay couples are legally entitled to “set up a ‘grantor-retained income trust,’ a type of trust that family members aren't allowed to create for one another. You put an asset into a trust and retain the right to income from it.”
No matter where they live, same-sex couples are simply going to have more challenges creating estate plans that will hold water on both a state and federal level. The good news is that in spite of these challenges it is possible, with the right help, to plan to protect yourself, your partner, and your family now, and in the future. Monday, June 27, 2011 Frequently Asked Questions About Probate
What is probate?
Probate is defined as “the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate interprets the instructions of the deceased, decides the executor as the personal representative of the estate, and adjudicates the interests of heirs and other parties who may have claims against the estate.”
The definition doesn’t sound too bad, but probate can be a very trying process. Even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.
Do I need a lawyer to help probate an estate?
As a rule it is not necessary to have a lawyer help you probate an estate. However, if you have been named as executor, probate can often become an overwhelming maze of deadlines, notifications and potential liabilities. This is why many executors do choose to hire a probate lawyer to help them through the process.
You may want to think about hiring an attorney if you are serving as an executor under any of the following circumstances:
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There are a number of beneficiaries who are not on friendly terms, or are receiving varying sizes of inheritance.
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The decedent had large estate with many different assets, especially if the assets are not commonly held.
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The decedent was a resident in a different state than your own home state.
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A large number of creditors are making claims on the estate.
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There is a disagreement about the will, or if more than one will was found.
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The will is challenged or contested.
Do Life Insurance or Retirement Benefits Have to Go Through Probate?
The answer to the question above is generally “no”; life insurance and retirement benefits do not have to go through probate if the account has a named beneficiary. Benefits from life insurance accounts can be paid directly to the named beneficiary, and money from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries of those accounts as well. The persons named as beneficiary, however, will most likely want to consult with a financial advisor to determine what needs to be done with the proceeds from these accounts. Another type of account that may not be subject to probate is a pay on death (or POD) account, the money from which can pass directly to the named beneficiary upon the death of the owner.
Probate is a subject most people don’t want to spend much time considering, not only because the rules and requirements can be convoluted and confusing, but also because of the close association between probate and death. If you have any questions at all about the probate process please don’t hesitate to contact our office—or your own local attorney who specializes in probate—for more information. Monday, June 20, 2011 “Trouble” Helmsley Makes Headlines One Last Time
The recent announcement of the death of “Trouble,” the famous canine heir of Leona Helmsley’s fortune, has made the issue of pet trusts once again headline news—something which is likely to bring positive results to pets all over the country. According to this article in MSN Today, “Pet estate planning has grown since Helmsley's will made headlines [in 2007]. Today there are retirement homes for pets all across the country, and at least 45 states allow for pet trusts.”
The growing awareness of pet trusts (or at least the need to make some arrangements for your pets in the event of your death) has benefitted not only pets of all shapes and sizes, but society in general. “A study from the late 1990s published in the Journal of Applied Animal Welfare Science found 1 percent of dogs and 1.5 percent of cats coming into 12 animal shelters had been surrendered because of owner death.”
These days, because of the media’s close attention to the controversy surrounding the inheritance of “Trouble” Helmsley, not only do more pet owners make provisions for their pets in their wills or trusts, but more charitable bequests are mad to animal shelters and other animal care/protection agencies in general. Additionally, some veterinary schools have taken it upon themselves to provide for pets who have lost their owners: “A few veterinary schools offer estate planning options like lifetime care for pets and placement in a home. The Stevenson Companion Animal Life-Care Center, established by the Texas A&M College of Veterinary Medicine, offers a place for pets to live in addition to veterinary care.”
The truth is that making arrangements for your pet in the event of your death isn’t all that difficult to do. While “some owners leave money to whomever they're entrusting their pet to as a way of making sure the animal does not become a financial burden;” this may not be necessary for ALL pet owners. Many owners simply write instructions for the care of their pets into their wills or trusts, somewhat similar to a nomination of guardians for minor children.
As with most estate planning issues, there are many options available when it comes to the care of your pets. The important thing is not what you choose to do, but that you choose to do something to ensure that your pet won’t be left out in the cold if something happens to you. Friday, June 17, 2011 Estate Planning for Beginners Part 6: Funding
The hard part is done. Your estate plan has been created, all the documents signed and witnessed and notarized. But wait, you’re not quite done yet—especially if your estate plan includes a trust. The task of funding that trust still remains. Without the completion of this crucial step all of your hard work could be for naught.
Funding is the process of putting all of your property into the trust. Your trust is more than just a piece of paper, it works like a protective box, keeping its contents private and safe from probate; and funding is the process of filling that box. Without funding, your trust is just an empty box, and doesn’t provide much protection at all.
The first question you may ask is “what should go into the box”? The easy answer is EVERYTHING. Start by asking your attorney to create a deed to help you put your home into your trust. For most people, their home is their greatest asset, and the first and most important to put into the protective box.
The next step is to go to your bank and investment advisor and put your bank accounts and stocks or investments, and any other immediate assets into the name of your trust. To do this you will need your Certification of Trust, which is a short document proving the existence of your trust. Your attorney can provide you with copies of your Certification of Trust.
The third step is to look at all of your tax-deferred assets such as retirement accounts, 401(k) accounts, or life insurance policies. These tax-deferred assets cannot be owned by the trust, but to ensure that the proceeds of these assets are distributed according to your wishes you will need to make your trust the primary beneficiary of the accounts or policies. By doing this you are arranging to funnel the proceeds of these assets into the protective box when the time comes. But keep in mind that not all tax-deferred assets are created equal—ask your advisor before placing these into the trust.
Your last step is to execute a comprehensive transfer document, a simple document stating your desire to put all small or tangible property such as furniture, artwork, antiques, etc., into that protective box, and be considered trust property, rather than subject to probate.
Of course every estate will be different; ask your attorney for a comprehensive list of assets to put into your trust. It is only once you’ve tucked all your assets away under the protection of your trust that you can finally breathe that final sigh of relief. Wednesday, June 15, 2011 Estate Planning for Beginners Part 5: Guardians of Minor Children
Quite often, an individual or couple’s decision to finally create an estate plan is motivated by a strong need to ensure that their minor children will be protected and provided for. This kind of planning for young children often begins with choosing the person or couple who will care for and raise the children if the parents pass away. But what many parents find is that choosing people who will serve as guardians of their young children is not as easy as they first imagine. In fact, it can be the most difficult and most emotional part of creating an estate plan.
For some families choosing guardians is easy—they simply pick a sibling or parent who is close to their children and who shares a similar parenting philosophy, but for other families the choice is not as clear. The following questions may be helpful ones to keep in mind when considering who may be in the best position to serve as guardian for your young children.
1. Is the person someone your child already knows and feels comfortable with?
2. Does the person live in the same state as you and your child, or will your guardian or child have to relocate?
3. Does the person share a similar parenting philosophy with you?
4. Is the person married? Does he or she have children already? Are they in a position to welcome another child into their lives?
5. Does your potential guardian work or stay home? Would this change if they were to accept guardianship of your child?
6. If family is important to you, would your guardian ensure that your child had opportunities to spend time with your extended family?
7. Would this person serve as both guardian and trustee until your child came of age, or would you choose two people for these roles—one as guardian and one as trustee?
These are just a few of the many questions you may want to keep in mind when considering a guardian for your child.
In rare circumstances there may be a person you want to explicitly bar from ever gaining custody of your child—an abusive aunt or uncle, or a sibling with a dangerous addiction. In these cases it may be prudent to create an anti-nomination of guardians, a document in which you name the person or couple who should under no circumstances receive guardianship of your children.
We know that these plans concerning the future and care of your children are possibly the most important you will ever make; and we know you’ll want to ensure you make them with the best information and most trusted guidance available. Please contact our office for more information, or to get started today. Monday, June 13, 2011 Estate Planning for Beginners Part 4: Healthcare Documents
Thus far our “Estate Planning Basics” series has focused primarily on financial documents, but the documents pertaining to your health care are an equally important part of any estate plan.
The most important healthcare document in your estate plan will be your healthcare directive. Depending on where you live, this document naming a healthcare agent and detailing your wishes for decisions made on your behalf and end of life treatment may also be called a living will, an advance healthcare directive, healthcare power of attorney, or a personal directive.
Perhaps the most important part of a healthcare directive is the nomination of your healthcare agent. This is the person who will be making decisions (potentially life-and-death decisions) about your medical treatment in the event that you are unable. The person you choose should be trustworthy, sensitive to the concerns of your other loved ones, and have the strength to ensure that your wishes are followed—even if those wishes are difficult or unpopular.
Like a financial power of attorney, the advance healthcare directive can be very general or very specific in its instructions. In addition to a nomination of agent, most healthcare directives also include (but are not limited to):
· Instructions for life-saving treatment (or your desire for a DNR order)
· Any existing medical conditions
· Your preferences for alternative medical treatment, if any
· The name of your primary care physician
· Your instructions for the final disposition of your remains
While some people have very specific preferences for medical treatment and end-of-life care, others prefer to leave these decisions in the hands of their loved ones, letting those who care about them make the choices that will bring the most comfort. Whether you choose to leave detailed instructions for care or leave the decision-making to others, your healthcare directive should reflect your choice. We all know the tale of Terry Schiavo, whose lack of a living will resulted in a seven year court battle between her husband and her parents over her end of life care... Don’t let the same thing happen to you or your family. Friday, June 10, 2011 Estate Planning for Beginners Part 3: Powers of Attorney
Once you are secure in the knowledge that you’ve provided for your family and ensured that your wishes for the distribution of your hard-earned fortune are clear, it’s time to take steps to ensure that YOU will be protected and financially secure during your lifetime. It is not uncommon for seniors to need help with the finer details of their finances as they age, or in rarer circumstances for someone who is injured or incapacitated to require an agent to make financial decisions for them. A Power Of Attorney is the document that gives your chosen agent permission to make choices on your behalf, as well as giving instructions as to how those choices should be made.
Here are some of the most important things you should know about your Power of Attorney:
· A Power of Attorney is only effective during your lifetime; it gives your agent (or attorney-in-fact) the power to act for you while you are alive but unable to act for yourself.
· A Power of Attorney can be created to go into effect immediately or only become effective when you become incapacitated. This latter Power of Attorney is called a Springing Power of Attorney because it “springs” into effect once it is proven that the predetermined conditions (generally incapacity of the principal) have been met.
· A Power of Attorney can be revokedat any time so long as you have mental capacity.
· A Power of Attorney is for financial and legal issues only, a medical agent or power of attorney is granted in a separate document (to be discussed in our next blog post.)
Because your Power of Attorney grants your agent-in-fact such broad powers it is of the utmost importance to choose an agent who will not only be able to make wise decisions for you but who will also have your best interests at heart. While Power of Attorney does grant an agent very broad powers, there are ways to build a system of checks and balances into the document; some of these include requiring your agent to keep detailed records and present these records to the principal (you) or other named individuals, or using restrictive language in the document itself which sets limits on the agent’s power. Wednesday, June 08, 2011 Estate Planning for Beginners Part 2: Trusts
We’ve said it before on our blog and we’ll say it again: It doesn’t matter whether you’re a billionaire business executive or a teacher with a modest salary, it doesn’t matter whether you’re the patriarch of a large family or a stay-at-home mom of a newborn, a revocable living trust may be exactly what your family needs to protect their assets and their best interests. This is because a trust is probably the most comprehensive and versatile tool in your estate plan, and is a key part of helping you accomplish your goals.
There are two basic kinds of trusts—revocable and irrevocable. Revocable means that it is able to be revoked or changed so long as the grantor (the person who created the trust) is still living. Logically enough, an irrevocable trust cannot be changed once it has been signed. The reason this question of revocability is so important is because a trust is not merely a set of instructions for how your wealth should be distributed, a trust actually owns the property placed within it, with the person or people serving as trustee (usually for a revocable trust this is the grantors themselves, while they are living) controlling the trust property within. It is for this very reason that trusts can be such a powerful and flexible tool for tax planning and estate planning.
The specifics of your trust will vary greatly depending on what you hope to accomplish. Parents of young children may wish to include a general trust for the benefit of all the children, with distributions made to the guardians as necessary. This general trust can be split into separate individual trusts when all of the children have reached a certain age or graduated from college. Parents (and often grandparents) may want to include education trusts under the umbrella of their revocable living trust. Many families feel it is important to include instructions for charitable giving in their estate plan, and may choose to set up a charitable trust with their children or grandchildren as trustees. Pet owners often create pet trusts to ensure that their animals will be well cared after the owner has died.
A trust, much more than a simple will, allows the grantor far greater control over their assets—and for a longer period of time—which is why trusts are particularly useful for anybody entering into a second or third marriage, or for any parent who worries about the choices a beneficiary might make once they come into their inheritance. Unlike a simple will, trusts are designed to withstand the test of time, allowing you to leave a legacy that can last for decades. Monday, June 06, 2011 Estate Planning for Beginners Part 1: Wills
Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will. A will is the most well-known of all estate planning documents, it is generally the simplest and easiest to create (although some wills can be very lengthy and complex), and in most states a will can contain within it instructions for peripheral topics such as guardianship of minor children or the final disposition of your remains.
But everybody knows that the main purpose of a will is usually to dispose of your assets and effects. In its most basic form, a will should include these important parts:
1. The testator’s (creator’s) name and crucial information
2. Nomination of an executor to carry out the wishes of the testator
3. The naming of the beneficiaries
4. Instructions as to how the estate should be distributed to the beneficiaries
5. Signature of the testator and the date signed
6. Signature of witnesses and the date signed
As mentioned above, this is a will in its most basic form, but in fact most wills will also contain instructions for probate, instructions regarding the payment of debts and taxes, the names of any organizations to receive charitable distributions, a mention of relatives who may purposefully NOT have been named, and more.
Because a will can be so basic, many people believe that a will can easily be created on one’s own, without the help of an estate planning professional; in fact, there are plenty of companies who offer “Do It Yourself” will creation software for a fee. However, it is important to understand that while a will itself can be very simple; the federal and state tax and probate laws are rarely so. If you feel your estate is small and your wishes are modest then by all means keep your will short and sweet as well. However, we strongly urge ALL of our readers (even those with small and simple estates) to have an estate planning professional at least review your will and advise you as to its validity before you sign it and tuck it away. Wednesday, May 18, 2011 Even the Most “Normal” Families Require Special Estate Planning Consideration
Many people would like to think that estate planning is a piece of cake: choose your beneficiaries, write up a simple will, and voila - you’re done! The truth is that while estate planning can sometimes be achieved with this amount of simplicity, most of the time there’s more to it than that—a lot more—especially if you have any variables or special circumstances to consider. Variables and special circumstances can encompass just about anything, including:
· Young children
· Adult children with differing financial needs
· Adult children who don’t get along
· A child, parent or sibling with special needs
· A second (or third) marriage
And according to this article in the Chicago Tribune special circumstances also include:
· A non-citizen spouse
· A much younger spouse
· Health concerns
One of the best tools you have in your estate planning toolbox to deal with any or all of these “special circumstances” is to distribute your assets through a trust rather than just a simple will. A trust is comprehensive, plus it gives you the flexibility to you need to provide for every circumstance—even if these circumstances change after your death.
For example, parents with three children ages 21, 17 and 15 would likely not want to split their estate evenly, especially considering that they’ve likely already paid for the 21-year old’s college education, but have yet to pay for college for the 17 and 15 year olds. These parents can place their assets into a common trust which can be used to pay for the needs of all the children at the discretion of the trustee, and then split into separate and equal trusts when the youngest child reaches the age of 21, or when all have graduated from college.
Very few families fit the simple “boiler-plate” description, and even fewer families will benefit from a boiler-plate estate plan. Our office can help you craft exactly the estate plan you need to fit your family’s unique and special circumstances—right now, and years in the future. Monday, May 16, 2011 Take Advantage of Tax Law Changes and Give Grandkids a Head Start
We’ve recently seen a number of news stories with disturbing figures about the rising cost of college education, and the growing inability of graduates to pay off the debt they incur from student loans. In fact, recent studies reveal that student loan debt now exceeds credit card debt in the U.S.!
All of this has motivated many grandparents to find a way to help pay for their grandchildren’s college education. According to this article in the Wall Street Journal “Recent tax-law changes are making it easier for families to help pay education bills for multiple grandchildren and even future generations. But grandparents have to make some tough decisions first.”
For grandparents whose grandchildren are already in school there may be fewer tough decisions to make, these grandparents will find it easy to “pay an unlimited amount of tuition directly to an accredited school for their grandchildren's education without incurring any gift tax or using their exemption.” Additionally, under the annual gift tax exclusion, anybody—including grandparents—can “give up to $13,000 to an unlimited number of people each year free of tax.”
Grandparents with younger grandchildren are finding that they also now have more options if they want to contribute to their grandchild’s future college education. “Under the Tax Relief Act of 2010, the federal gift-tax exemption increases to $5 million from $1 million for individuals, as does the exemption for the generation-skipping tax... The changes make it easier to pass along money for education to future generations free of taxes—at least through 2012, after which the exemption is scheduled to revert to $1 million.” The only question is how is the best way to set aside the money until the child reaches college age?
The most popular method right now is for the grandparent to set up or contribute to a 529 College Savings plan for their grandchild. “Assets you contribute to a 529 account are no longer part of your estate. If you are the account owner, you can withdraw the assets later without penalty.” However, care must be taken with 529 plans because “When the assets are withdrawn they will be counted [for tax purposes] as the student's income.”
Other options for savings include “setting up a ‘pot trust,’ or dynasty trust, which names all of the grandchildren, including any future babies, as beneficiaries. The length of such a trust varies by state but generally can serve at least a few generations of college students.” Of course setting up a trust with such a long intended duration means choosing a trustee who is likely to outlive you. Many grantors choose one of their own children (a parent, aunt or uncle of their grandchildren) or a trusted financial advisor, although corporate trustees (such as a bank) are also an option. Friday, May 13, 2011 Estate Tax Calculator May Provide a Peek into the Future
Everyone who kept up with the recent changes in the estate tax laws—and the flurry of speculation, news stories and blog posts that came with it—knows just how important estate taxes are to estate planning. Although we make it clear on our blog that estate planning should be at least as much about family and personal legacy as it is about money and taxes, the truth is that much of the technical planning that goes into creating your estate plan is hugely affected by the estate tax laws and regulations.
This is why we thought our readers might like to have a little sneak peek at what you might owe in estate taxes were you to pass away under the current laws. SmartMoney.com recently published an interactive Estate Tax Calculatorwhich can help estimate the amount you might owe based on your current financial information.
Although it is certainly interesting to see what you may end up owing in estate taxes, and it is absolutely helpful to see a list all of your assets and liabilities in one place, please remember that what this calculator provides is only an estimate. There is more to estate tax calculation and estate planning than can be provided in one form. What we hope is that this calculator may pique your interest, and inspire you to contact our office for the more thorough planning you and your family deserve; planning based on face to face discussions about your unique goals and situation. Monday, May 09, 2011 The Importance of Estate Planning for New Parents
News sources such as the Washington Post entertainment sectionpromise that this summer will be flush with celebrity newborns and proud mamas and papas. Some of the stars expecting additions to their families include Natalie Portman, Kate Hudson, Jennifer Connelly and more. Here at our office we wonder how many of these new parents will remember to update their wills or estate plans after the birth of their child... and how many of our readers have remembered (or will remember, if they are currently expecting a new child or grandchild) to update their own estate plans after an addition to their families.
Every parent knows that the time after the birth of a new baby can be a tired, busy and chaotic transition, and updating their estate plan is probably the last thing on any new parent’s mind. But after the first few months, when things have calmed down and you’ve settled into a routine, updating your estate plan to include and provide for your new little one should take top priority.
Here are a few things new parents will want to consider as they prepare to update their estate plan:
· Guardians for your child. Who are the people who will raise your child if the unthinkable should happen to you and your spouse? Many people choose close family members, others choose trusted friends.
· Keep your child’s inheritance in trust. Settling your entire estate on a 5, 10 or 16 year old is never a good idea. Consider instead creating a trust for your child which will provide for him until he reaches maturity.
· Trustees of your child’s inheritance. Who do you trust to invest and distribute the estate for your child while she is still a minor? Some parents choose to have the guardians also serve as trustees; others prefer to nominate separate trustees and guardians who will work together, providing a natural system of checks and balances.
· Providing for your child’s special needs. If your child has special needs he will need special planning to ensure that his needs continue to be provided for. Ask us (or your own local estate planning attorney) about a special needs trust.
Guardians, trustees, trusts and special needs planning are the very basics of estate planning for families with minor children, and should serve as a jumping off point for further discussion with your estate planner. Friday, May 06, 2011 How to Protect and Pass On Artwork, Antiques, and Other Valuable Assets
Some assets—such as real property, stocks and savings—are fairly straightforward when it comes to bequeathal to heirs; other assets—such as valuable artwork or antiques—are not so easy. How do you will an asset to a loved one when there is no deed of ownership? And just as importantly, how do these paperless assets figure into the size and administration of your “taxable estate”?
According to this article by Bonnie Kraham, how you dispose of these assets can be extremely important to the administration and taxation of your estate. One particularly dangerous method is referred to as “the empty hook” method, wherein “When the collector dies, the beneficiaries simply remove the artwork (from the hooks) in accordance with name tags on the items for the intended recipients. Thus, the estate is left with "empty hooks" of what may be part of a sizable taxable estate for estate tax purposes.”
The problem that arises with the “empty hook” method is that wealthy families who collect artwork or antiques as investments often have records of their purchases and sales, as well as a list of valuable items for insurance purposes. Any of these documents and records would be reviewed during probate or administration of the estate. “If you don't fully disclose the value of your art collection, or don't properly plan to gift art in compliance with estate tax rules and regulations, you can pass on tax fraud, instead of art, to your beneficiaries.”
Perhaps the best way to hold and legally dispose of your art or antiques collection upon your death is to transfer ownership of these valuable assets into a trust. “Transferring your art collection to a trust may be the most effective, efficient and transparent way to administer your estate after death . . . Trusts are private documents and, although the tax reporting remains the same for trust assets, trusts protect the privacy of an art collector or artist, which can be an emotional protection for the beneficiaries.” Additionally, keeping valuable artwork in trust provides an extra layer of protection from divorce or frivolous lawsuits during your lifetime.
Contact our office, or your own local estate planning attorney, for more information. Monday, May 02, 2011 The Benefits of a Retirement Trust
Most of us start thinking about retirement as soon as we get our first job. Even if we can’t start saving as much as we’d like right away, we know it’s there, looming on the horizon, and we think about it. The closer we get to retirement age the more we begin to consider our options and make specific plans. But even with all these years of thought and planning, U.S. News and World Report thinks that there may be a few things you haven’t considered in regards to your retirement. Although not specifically mentioned in the article, one of the things you probably haven’t considered is how your retirement savings will fit into your estate plan.
The first and most common option for distributing your retirement benefits upon your death is simply to name your spouse or children as the beneficiary (beneficiaries) of your retirement benefit plan; however, there is another way. A Retirement Benefit Trust (or Irrevocable Retirement Trust) can be used to keep retirement assets out of your spouse’s taxable estate upon your death. This may not be a big deal if your retirement assets are waning, but if retirement assets comprise a large portion of your estate then this can be a huge benefit.
A Retirement Trust also has the advantage of allowing your beneficiaries to stretch out the financial opportunities of your retirement assets. Instead of withdrawing the entire amount of your retirement savings right away (and paying taxes on the income) a trust allows your beneficiaries to make withdrawals over the course of their entire lives; not only stretching out the investment opportunity, but also helping to keep them in a lower tax bracket.
For more information on Retirement Trusts, and whether one could benefit you and your family, contact our office today. Friday, April 29, 2011 How Successful CEOs Keep the Family Business in the Family
How long will your family business stay in the family? One generation? Two generations? How about 4 generations down the line?
The truth is that very few family business stay in the family beyond the first generation. Statistically, Only 40% of family owned businesses survive to the second generation, 12% to the third, and 3% to the fourth. There are many possible reasons for this, such as lack of interest by subsequent generations or the evolving market and economy, but one of the main reasons that family businesses don’t survive to the second and third generation is lack of planning.
Which families have been successful with succession planning for their businesses? This article in Business Week profiles the famous families of business, and includes some interesting discussion of why certain families are successful where others aren’t. Parent-child relationships often become fraught with tension when the time comes to pass the baton, but history has shown that succession transitions are much smoother when the occur gradually, and according to a plan created and agreed upon by ALL interested parties.
Business succession planning is a key element to owning your business at any step of the game, not just at retirement age. This is because it is not merely about exit strategy, but about making goals and planning for future success. Leaving the business to your children is not your only option. You may decide to sell your business, or leave it to a partner. The options are out there, if you only know where to find them.
This is where an estate planning attorney can help.
Whether your business is in its first generation or its fifth, whether you intend to pass it on to your children or sell it, planning is essential if you want your business to survive. Our firm can help you do just that. Whether through wills and trusts, or the succession planning described in this blog, it is our business to look to the future. Trust us to help you do the same. Wednesday, April 27, 2011 One Simple Step Now Can Save Time and Money Later
Being named as the executor of the estate of a deceased loved one comes with many challenges, including dealing with the probate system, and refereeing unhappy family members; but one of the most difficult (and least discussed) challenges is sorting through the plethora of paper and information that people collect over the course of a lifetime.
You can save your executor (and your family) time and money later by organizing your important documents and finances right now. If you’re not sure where to begin, or what information an executor would need to know, we’ve assembled a list of information and documents an executor might need quick and easy access to if anything were to happen to you:
Instructions and letter to trustee:Contact information for your EP attorney and trustees, instructions on how to begin the process.
Minor children:Information about your minor children, nearby guardians or relatives, medical and health insurance information.
Personal Information:Birth and marriage certificates, passports, family, friends and contact people.
Estate Planning Documents:Trust, wills, any amendments, personal property memorandum.
Employment/Business Information:Contact information for supervisors, client information if you are a small business owner.
Health Care: Advanced Health Care Directive, HIPAA, emergency contact information, phone numbers for doctors, health insurance particulars.
Financial Powers of Attorney
Real Estate and Tangible Property:Deed to your home, mortgage information, homeowners and fire insurance, vehicle records, artwork and antiques.
Bank Accounts and Investments:Account numbers and locations, contact information.
Monthly Expenses and Bills:A copy of one monthly statement for each.
Information about recent Taxes
Retirement Accounts/Government Benefits: Account numbers, beneficiary information.
Life Insurance:Account numbers, beneficiary information
Memorial and Burial/Cremation:Preferences, pre-paid arrangements, phone numbers.
Memberships/Secured Accounts/Passwords
Once you are organized, keep your information in an accessible place and make your executor aware of the location. This simple act of organization will not only benefit you right now, it will save your family and your executor much time, money and frustration later on. Monday, April 25, 2011 Memories Make Your Legacy About More Than Property Alone
Have you ever wished you could go back in time and know your mother or father as a young person? Have you researched your family history or genealogy and kicked yourself for not asking your grandparents about their knowledge and experiences when you had a chance?
Technology has changed so much in the past century or half-century that never before has the world in which our grandparents grew up seemed so foreign to us. It’s hard for many people to imagine a world without cell phones or the internet, let alone a world without cars, Tupperware, or refrigerators. And it isn’t only technology that has undergone incredible changes: International politics and the great wars of the 20th century have changed the face of the world map many times over. Third world countries have become major world players.
It is for these very reasons that writing memoirs, or a family history, has become very popular in recent years. In the midst of all these staggering world and technological changes, a family history provides a rich cultural education and perspective, and plays a huge part in how we define ourselves and identify with the world around us. Many young people are hungry to know where they come from, and are asking their parents or grandparents to put down their history and experiences in a personal memoir.
Writing your memoirs or a family history may seem daunting, but it doesn’t have to be difficult. In fact, it has become so popular that there are quite a few books and toolsout there to help guide you through either writing your own history or interviewing older relatives to record theirs.
Everyone knows that you create an estate plan to provide for your descendents and pass on your estate: property, assets, and wealth. But this is only a part of what you want to pass on to your children and grandchildren. An Estate Plan can insure that your wealth is passed down, but your history and experience are just as important an inheritance. Your attorney can help you with the former, but only you can preserve the wisdom and experience that makes your history so unique. Wednesday, April 20, 2011 Protecting Your Children with a Nomination of Guardians
Choosing a guardian for your minor child could be one of the most personal decisions you ever make—it’s also one of the most important, which is why many couples turn to an attorney they trust to not only help them draft their nomination document, but also help advise them in this crucial decision. With such a personal matter the decision-making criteria will stem primarily from the heart, but there are some legal factors and implications that may affect the decision, and this is where an attorney can be helpful.
Forbes online recently published an articleoutlining the specific ways in which an attorney can be indispensable when choosing a guardian for a minor child; these include:
Explaining relevant statutory framework regarding guardianship to parents. As the article mentions, guardianship laws vary significantly from state to state. The manner in which you choose to name your guardians will likely be different depending on which state in which you live. For example, will you name just one guardian for both person and property, or will you need to name specific guardians for each of those two areas?
Discussing factors clients should consider when naming a guardian.There are so many criteria to consider when choosing a guardian that many parents get caught up in how to prioritize essential qualities of potential guardians. An attorney certainly can’t tell you which of your friends and family may be most fit to care for your child, but an attorney can help you asses the financial ability, emotional willingness, and compatibility of values of your candidates.
Emphasizing economic implications of the client’s decision. Most parents, when considering guardians for their children, think primarily of emotional attachment, family dynamic, and parenting style; but an attorney will remind you that finances should also be a significant part of your decision-making process. Guardians are not necessarily legally obligated to use their own funds to support their wards, which means that parents will want to discuss with an attorney the best way to provide financial support for their children.
Drafting provisions setting forth client wishes regarding the upbringing of their children.Parenting is an incredibly personal process; hundreds of small choices are made each day which shape the minds and values of our children. Some parents may want to express their wishes for how their child should be raised, even after their death. Guardians cannot be required to follow parenting guidelines when they accept guardianship; an attorney, however, can suggest a few ways that parents can encourage guardians to respect their wishes regarding upbringing.
A nomination of guardians may very well be the most important estate planning document you draft, our firm can help ensure that every bit of information has been considered and addressed before you make your final decision. Monday, April 18, 2011 New Portability Provision Should be Considered with Caution
A new “Portability Provision” in The Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 has some couples excited about the financial possibilities. As explained in this article in the Wall Street Journal, the new portability provision “permits surviving spouses to elect to use the unused portion of the estate tax applicable exclusion amount of their predeceased spouses. This provides the surviving spouse with a larger exclusion amount and allows married couples to transfer a collective $10 million estate.”
The new provision may seem like a boon, but the author of the article advises caution for a few reasons: “First, portability may encourage procrastination rather than planning; second, complications emerge with GST taxes, remarriages, and state exclusions; and third, the temporary nature of the act and the unpredictability of Congress make for uncertainty in estate planning for the future.”
Our readers will know that there are a number of planning tools and opportunities that crop up over the years; this new portability provision is certainly one of them. Our readers will also know that none of these tools will necessarily be the “silver bullet” of estate planning. The fact is that estate planning is like anything else—to do it right and to do it effectively requires intelligence and research; a dedication of time and resources. Most families simply don’t have the time or the resources to devote to researching every new “perfect planning tool” that crops up promising to save your family money.
This is why our firm is here; it is our business to research the best planning tools for your family. We listen to your goals; we take into account your financial history and your current status. We help you create the plan that works best for you. If you think that this portability provision—or any other strategy you’ve heard about—might be your “silver bullet”, please call our office for an appointment. We can give you the resources and information you need to make an educated and effective plan for your family. Friday, April 15, 2011 When It Comes to Estate Plans, How Crazy is TOO Crazy?
We often mention on our blog how important it is to create an estate plan regardless of the size of your estate. We also frequently remind our readers of how flexible estate plans can be to protect your family in all the varied and unique ways you require. Well, just in case our word isn’t enough for you, the San Francisco Chronicle helps us out with this article naming 10 of the strangest wills in recent history, including:
Leona Helmsley, who left $12 million in trust to her dog.
Harry Houdini, who directed in his will that a séance be held every year on the anniversary of his death.
Gene Roddenberry, who requested that his ashes be scattered in space (outside of the earth’s atmosphere.)
Mark Gruenwald, the Executive Editor of certain beloved Marvel comics, who instructed that his ashes be mixed with ink and used to print comic books.
Charles Vance Miller, wealthy Toronto attorney, who bequeathed a large portion of his estate to whichever Toronto woman produced the most children in the decade following his death.
And more...
Aside from the amusement these eccentric estate plans provide, they teach a valuable lesson as well: No estate is too large or too small, no request too strange, no question too crazy to bring to your estate planner. An estate plan (and estate planner) can help you achieve your goals no matter how mundane or unusual they may seem. Wednesday, April 13, 2011 5 Missteps That Can Sabotage Your Estate Plan
When it comes to protecting your wealth and your family creating an estate plan is one of the most important things you can do. An estate plan is your key to ensuring that your hard-earned assets are distributed (or saved or invested) as you designate. An estate plan is your family’s safety net. Unfortunately, too many people attempt to take shortcuts with their plan, and find themselves with a safety net that is falling apart just when they need it most. Below are 5 of the most common missteps that can sabotage your estate plan, and how you can avoid them.
1. Neglecting to fund your trust. A trust can be a wonderful tool for protecting your assets; flexible and customizable, a useful trust can be created for just about every situation. But a trust is like a strongbox—if you don’t fill it up it has nothing to protect. Accounts and assets must be put in the name of your trust for it to work as you’ve designed it to.
2. Not enlisting the help of an estate planning attorney. There are a number of Do-It-Yourself will and estate planning programs out there that promise you a full estate plan for a cheaper price; but estate plans are complicated things, requirements change depending on your state of residence, the size of your estate, the age and situation of your beneficiaries, and much more. If you aren’t able to work with an attorney to create your plan, at the very least we urge you to have an attorney review your plan before you sign it.
3. Neglecting to mention previous estate planning documents, or making unofficial changes in the margins of documents that have already been signed. When creating a will or a trust or any other common estate planning document it is usually necessary to revoke any previous documents so there is no confusion about which document is current and valid. Neglecting to do this can end with your assets tied up in probate court for months or years—or even worse, invalidating both documents completely.
4. Putting your plan somewhere safe—somewhere so “safe”, in fact, that nobody can find or access it! People recognize that estate planning documents are things of value, and as such should be protected in a locked filing cabinet or safe deposit box. Wherever you choose to store your documents, be sure one or two trusted individuals have not only the knowledge of where the documents are, but also the ability to access them. An estate plan does no good if it cannot be accessed when it’s needed.
5. And finally, one of the most common missteps that can sabotage your estate plan is failing to update your plan regularly.Not only do federal and state laws change periodically (as we have recently experienced) but you will undoubtedly experience changes in your own life and fortune. Failing to update your plan to keep up with the law or with your own life can result in an estate plan that is as useful as a car you neglected to maintain—it may look fine on the outside, but it simply won’t run anymore. Monday, April 11, 2011 6 Things You Should Know About Your Healthcare Directive
We have recently seen one or two stories in the news that have brought the issue of health care directives to forefront of people’s minds. Most people know that a healthcare directive is one of the primary documents of any complete estate plan, but not everybody knows exactly what should be included in the document itself. Do you have to specifically name your spouse if you want that person making decisions for you? Is the healthcare directive the place to include a DNR (Do Not Resuscitate) statement? What about funeral arrangements or organ donation—does a healthcare directive deal with things that happen after death?
These are all good questions; here we attempt to answer these questions and more, as well as list some of the important things to know about—and include in—your healthcare directive:
1. Healthcare directives can have many names depending on where you live and the exact nature of the document. Some common names are: Advanced healthcare directive, Advance directive, Healthcare power of attorney, or living will. (Note: These are not all the same document with different names, but they do all serve similar or related functions. Contact our office for more information)
2. A healthcare directive should first and foremost name your healthcare agent: the person you want making decisions for you when you are unable.
3. A healthcare directive should absolutely include your wishes and preferences for healthcare treatment, including a DNR statement, preferences for artificial nutrition and hydration, antibiotics, pain relief, and other medications.
4. Your healthcare directive should include the name of your primary care physician, if you have one, as well as any pertinent medical history or conditions.
5. Healthcare directives can be written to reflect your religious or spiritual beliefs, including religious beliefs relating to blood transfusions, end of life care, and pregnancy.
6. A healthcare directive can and should make reference to post-mortem issues such as organ donation and funeral arrangements. Whether or not your wishes can be enforced may depend on your family and the state in which you live, but including your wishes may be of considerable help and comfort to your family. Friday, April 08, 2011 Understanding Your Last Will and Testament
Although recent news surrounding the estate tax—both its repeal and its reinstatement—has died down, many people are still talking about their estate plans. Most people recognize that now is the time to create their estate plan, or to review and update their existing plan if they have one. This means that many people are asking questions about the primary document in just about any estate plan: the Last Will and Testament.
What is a Will?
A will is, for many people, the cornerstone of their estate plan. In fact, if you only create one estate planning document (which we don’t recommend) that document is probably a will. A will is the document which details your wishes about how and to whom your property will be distributed upon your death. A will can list your property in great detail, or it can make a statement about “all my legal property” in general. Your will names an executor, the person who will carry out your wishes as detailed in the document. And if you have minor children your will can name guardians, the adults you choose to care for your children in your absence.
What is required to make a Will?
At its heart a will is very simple. Requirements will differ depending on your state of residence, but there are some basic requirements that will be the same across the board:
· A will must be created by a testator who is of legal age, who is proven to be of sound mind and judgment, and who is under no duress.
· A will should revoke all previous wills and codicils.
· A will should be signed and dated.
· A will generally needs the signatures of witnesses, and in some states must also be notarized.
It is important to note that there is no requirement that a will must be created by or with an attorney; however, homemade wills have been frequently found to be invalid, or have been contested by disgruntled heirs or potential heirs, so having the help and advice of an attorney is highly recommended.
What happens if you don’t have a Will?
If you don’t have a will your property will be distributed according to the intestacy laws of your state. Property will generally be inherited by a spouse, or equally by a spouse and children. If there are no spouse or children then property will generally go to living parents or siblings, then to nieces, nephews, or other living relatives who can be found. The state will choose an executor for your estate, as well as guardians for any minor children you have. Unfortunately, the people chosen by the state to serve in these roles may not be the people you would have chosen. Additionally, the probate process is likely to be even longer than usual as the extent of your estate, as well as any outside claims to it, are investigated.
Luckily, there is very little reason for anyone to die without a will. Although wills can be designed to be as comprehensive and intricate as you like, they are at heart very simple documents which can provide an incredible peace of mind for you and your family. Contact our office—or another attorney you trust—to help guide you through the process of creating your own last will and testament. Monday, March 28, 2011 Icon, Businesswoman, Philanthropist—What Happens Now to Elizabeth Taylor’s Fortune?
The recent passing of Elizabeth Taylor has many wondering what will now happen with Ms. Taylor’s sizeable fortune? According to this article in Forbes Ms. Taylor’s fortune includes not only the millions she made in the Hollywood movie industry, but the even greater amount made she made with her fragrance line.
“In her most savvy business move, Taylor licensed her name to Elizabeth Arden and came out with several perfumes, including Passion, White Diamonds, and Black Pearls. Her fragrances have reaped a reported $200 million in sales over the years. Perfumes are one of the highest margin products out there, which is why celebrities love them. Taylor was doing it before anyone.”
Furthermore, a recent article in ABC News reports that Elizabeth Arden has no plans to discontinue the Taylor brand anytime soon. "White Diamonds remains a best seller almost 20 years after its 1991 introduction, a testimony to her transcendent and enduring appeal... Our best tribute to Elizabeth Taylor will be to continue the legacy of the brands she created and loved so much."
The question now is, what will happen to this sizeable (and growing) fortune now that Ms. Taylor has passed away? ABC News has some guesses: “On the question of what could happen to her estate now that she has passed away, many speculate it will be distributed to her four children and 10 grandchildren [with whom she is reported to have been on good terms]... And Taylor most likely bequeathed a substantial amount of money to her charitable work. Taylor was a devoted AIDS activist, helping form the American Foundation for AIDS Research in 1985 and the Elizabeth Taylor AIDS Foundation in 1991.”
Thus far no last will and testament has been released, which suggests that Ms. Taylor may have had a trust, an extensive document which protects your family and assets while remaining private. But given what we do know about Ms. Taylor, it is not unreasonable to believe that her estate will be split between her family and her charitable endeavors, especially the AIDS Foundations to which she gave so much in life. Friday, March 18, 2011 Frequently Asked Questions: Does Your Family Need a Trust?
Estate planning attorneys get asked a lot of questions about how to protect every different kind of family and situation, but the questions that are asked the most tend to be about trusts. For this reason, we’d like to take a moment to review with our readers the basic definition and benefit of trusts—which are, for most families, the most comprehensive, most reliable tool for protecting your assets and passing them on to your beneficiaries.
The primary benefit of trusts is their versatility. Trusts are so useful and versatile, in fact, that they serve as the backbone of just about every different kind of estate plan; from the plan created by an elderly grandparent, to the one executed by the new young couple. This isn’t to say that each trust is the same for every estate plan—far from it! Each person and family will be different; from their property and assets, to the people (or charities) they’d like to name as heirs, all the way down to their values and beliefs (which can be expressed and passed on through a trust.) With all of these differences, each living trust must be customized to suit the individual.
This is the beauty of trusts, they are indeed highly customizable. Perhaps the most well-known and commonly-used trusts are the living trust or a testamentary trust, but trusts provide far more options than those three mentioned above. Other options include special needs trusts, irrevocable trusts, retirement trusts, education trusts, gifting trusts, and many more . . . even pet trusts!
If you are considering creating a will or estate plan, or planning to update the one you already have, the best thing you can do is to know your options. Contact our office for more information about trusts, and which of the many trust options may be the right tool to protect your family. Friday, March 11, 2011 6 Things to Have on Your First Visit with Your Estate Planning Attorney
Your first meeting with an estate planning attorney can be daunting. Nobody really enjoys talking about their own death with a complete stranger, and many people mistakenly believe it will be sad or difficult. But creating your estate plan isn’t about your death—it’s about your life. In fact, the very first things you will discuss with your estate planner are the things that are most important to you, the issues that will be at the heart of your estate plan: Your family, your assets, and your goals.
If you want to get the most out of this first visit it helps to be prepared. Of course, every firm will be a bit different, but here are a few universal tips on how to be prepared and get the most out of your first visit to an estate planning attorney.
Have your financial statements.A large part of what an estate planning attorney does is to help you protect your assets. In order to do this, she needs to know what assets there are and what your general financial situation is. Having actual numbers, rather than vague ideas, is a huge help.
Know how the deed to your home is held.For most people, their home is their largest asset. How title is held, and in what the state of ownership, will have a large part in deciding what your best course of action will be.
Have some preliminary thoughts about who you may to be your executor and health care agent.This may change once you know more about what these roles entail, but having one or two people as a starting point will speed the process considerably.
Bring contact information for financial advisors with whom you work on a regular basis.Having your attorney work directly with your financial advisors, if any, is integral to having an airtight estate plan and financial plan. Not to mention that it makes things much easier on you to not have to act as a go-between.
If you’re married, or planning with a partner, come to the meeting together.Planning as a couple really needs to be done as a couple. “I’ll have to talk it over with my partner” only means you’re likely to have to have the same meeting all over again. If you’ll both be signing documents, you both should be there for the initial meeting.
Bring a list of questions to ask the attorney.Even if you only have one or two, and you think they’re naïve, bring your list of questions. Your questions tell an attorney a lot about what your goals are, and will help you get a good read on what the attorney is like as a person and professional. Wednesday, March 09, 2011 A Way to Help Parents and Grandparents in Financial Need
Estate planning is often about how people can pass wealth on to their children or grandchildren, but what if a child wants to give financial gifts to a parent or grandparent? This article from Bloomberg discusses just that: how GRATs Let Children Pass Millions to Mom or Granny Free of U.S. Gift Taxes.
As the elderly population of the U.S. increases, and as the effects of the economic downturn hit, more and more adult children find that their parents or grandparents are not doing as well financially as they had hoped. Many need help paying for medical expenses, home care expenses, mortgage or rent payments, etc. Adult children would like to be able to help, and a properly executed GRAT can be the perfect vehicle for wealthy children to give financial aid to their parents or grandparents without taking away from their lifetime gift-tax exemptions.
“With a GRAT, a child sets up a trust with a term of at least two years and funds the trust with stock or other investments. The trust pays the principal plus interest back to the child over its term as if it were an annuity, based on an interest rate set by the Internal Revenue Service. Any appreciation of the underlying investments above this ‘hurdle’ rate passes on to the GRAT’s beneficiary, in this case the parents, without being considered a gift for tax purposes.”
However, this opportunity may not be around forever. The Obama administration has recommended imposing a 10 year minimum term on GRATs, an act which would make the GRAT strategy significantly less useful for many families. Adult children who would like to use a GRAT to pass wealth up to their parents or grandparents should consult with a financial or estate planning advisor sooner rather than later.
If you do miss out on the GRAT window, however, there are other options for helping elderly relatives, including paying medical expenses for the loved one (so long as payments are made to the service provider directly, rather than to the relative.) Contact our office for other options and more information about helping elderly parents and grandparents. Monday, March 07, 2011 Who Owns Credit Card Debt After the Death of a Parent?
Administering the estate of a deceased loved one can be complicated and emotional under the best of circumstances, but executors who take on this overwhelming task may find themselves facing more than just the demands of relatives and heirs—they may also find themselves facing the illegitimate demands of creditors. This article on the New York Times’ New Old Age Blogwarns readers to “Be wary of collection agencies that try to convince you that you are responsible for payment on a card owned solely by a deceased parent.”
After the death of a parent, children and heirs often receive calls from debt collectors looking for someone—anyone!—to pay off the debts of the deceased, even if the heirs have no obligation to do so. In most situations relatives are not required to pay the debts of the deceased from their own assets. “Spouses, children or other loved ones don’t ‘inherit’ credit card debt unless they co-signed the card... When someone dies, credit card companies have to wait near the back of the line to receive payment. If what’s left over after settling the estate isn’t enough to pay the bill, credit card debt is written off.”
Probate or administration of an estate is a process which follows established steps; heirs and credit card companies alike must wait their turn in line. “Administrative fees (like executors’ fees, filing fees, appraisals of property and tax-preparer fees), mortgages, reverse mortgages, taxes and even funeral expenses have to be paid off before heirs can inherit anything from the estate.” Unfortunately, most bereaved relatives aren’t aware of the laws on this subject, and debt collectors take advantage of that ignorance.
The best way to avoid this painful interaction is to have a proper estate plan. “Most of the headache can be avoided with a will... If you make it well known who owns what, both in terms of assets as well as liabilities, you can prevent a lot of this from taking place outside of your control.” The article also recommends taking preemptive action. “After the death of a parent, send a letter or call the banks and credit card companies to cancel cards and let them know that the cardholder has died.” Monday, February 28, 2011 Where Should You Live to Escape the Estate Tax?
Do you live in a state that has a friendly attitude toward the estate tax or inheritance tax? You may think you do, but according to this article in Forbessome states made changes to their estate or inheritance tax policies in 2010 as a response to the lengthy uncertainty over the federal estate tax: “Congress took so long to agree on what to do about the federal estate tax, allowing it to lapse in 2010, and many states take their lead from the federal system.”
The federal estate tax is set (for now) but you may still expect some states to continue making changes to their own estate tax. The fact is that state governments are caught between a rock and a hard place; “The changing state landscape... reflects a lot of ambivalence by state officials themselves. They want the estate tax revenue, but worry about chasing wealthy seniors across state borders.”
If you’re looking for an estate-tax-friendly state to which to retire you can check out the link to the map in the Forbes article; but before you move be sure to do your research. Just because a state has no estate tax (or a high exemption amount) one year doesn’t mean it won’t change the next. The best strategy is to be familiar with the state’s history. How long has their estate tax been in place? Has there been any legislation proposed recently regarding the tax? How likely is it that their tax policies will remain the same as they are when you move?
Illinois recently made changes to the state laws regarding estate tax, and other states that are most likely to make changes in the future include Hawaii, Ohio, Connecticut and Vermont. “But don’t count on these efforts... even if you get relief one year, the levy can go up again the next.”
As always, the best strategy is to plan ahead, review your plan often, and have a knowledgeable estate planning attorney on your side. Friday, February 25, 2011 How a Special Needs Trust Can Help Your Child
You know how important it is to protect your family with an estate plan, but if you have a child with special needs then taking steps to protect them if something should happen to you is essential. Unfortunately, for families which include special needs children, knowing exactly the best way to protect your child(ren) isn’t always so clear. As Joe Perez, the widowed father of 14 year old Danny, and the subject of this article on the ABC News websitefound out, it’s not as simple as leaving your child with a good guardian and decent inheritance—special needs children need a little more planning than that.
You know what you want for your child, you want him to live as contentedly as possible, with loving guardians and engaged in activities which will bring pleasure and peace. But how can this dream be achieved on the limited assets that Medicaid recipients are allowed to have without losing their government benefits? How can responsible parents safely leave an inheritance to their special needs child? For many parents, part of the answer to that question is having a special needs trust.
Unfortunately, not all parents are aware of the benefits of a special needs trust, or how easy it can be to create one—with the right help. A special needs trust is the vessel that will hold your child’s inheritance (from you or from another source) without disrupting that child’s government benefits. It gives your child the funds they need beyond the basic living expenses provided by SSI or Medicaid.
If your family could benefit from a special needs trust, please contact our office for more information. A special needs trust is not the kind of document that can be found in a software package or created from a standard trust template. The needs of your child are unique, and should be addressed as such. Friday, February 18, 2011 A Will Reveals More About You Than Just Assets and Distribution
We tell our readers quite often that a will is one of the most important documents in your estate plan—an essential document, to be quite honest—but sometimes we like to remind our readers that wills are interesting family and historical documents as well.
Genealogists will often use an ancestor’s last will and testament to determine important details about family members: names and birthdates of siblings or children, extent of property, last known address, etc. Additionally, these are the documents in which we make our final wishes known. This is often where our true selves come out; who we liked best and what we valued most.
A last will and testament can be very revealing indeed. In honor of President’s Day we offer these interesting tidbits relating to the wills of the leaders of our nation:
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George Washington was concerned with the future of our young nation to the very end, and gave some of his estate toward establishing the first American Institutions of higher education, an attempt to prevent young Americans from being “sent to foreign Countries for the purpose of Education, often before their minds were formed, or they had imbibed any adequate ideas of the happiness of their own; contracting, too frequently, not only habits of dissipation and extravagance, but principles unfriendly to Republican Government & to the true and genuine liberties of mankind.”
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Interestingly, President Abraham Lincoln left no will—and he was a prominent lawyer who should have known better!
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President Harry S. Truman included careful tax planning in his last will and testament.
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President Warren G. Harding must have had some kind of premonition when he conveniently decided to write his will 6 weeks before his sudden death.
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The will of President Calvin Coolidge was just 23 words long: "Not unmindful of my son John, I give all my estate, both real and personal, to my wife, Grace Coolidge, in fee simple."
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President John F. Kennedy was a bit poetical in his will, and included this haunting phrase, “being of sound and disposing mind and memory, and mindful of the uncertainty of life…”
Wednesday, February 16, 2011 Estate Tax Laws Aren’t the Only Things That Change
We’ve written before about the importance of reviewing and updating your estate plan, but it’s a topic worth mentioning again—especially in light of the many recent changes to estate tax law. The plain truth is that no matter how perfect your estate plan is when you create it, change is inevitable, and when your life (or the tax law) changes, it’s important that your estate plan change with it.
Reviewing your estate plan every 2-5 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here are 5 key components you’ll want to review:
1. Fiduciaries-How have the people in your life moved or changed?
2. Assets-Are your finances different than they were a few years ago?
3. Distribution and Beneficiaries-Are there any new members of your family?
4. Health Care-What changes have you experienced in your health recently?
5. Legal Updates-Have the laws changed?
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 5 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it. Monday, February 14, 2011 Retirement Advice for EVERY Age
“Retirement”—It’s a word that goes hand-in-hand with “Baby Boomer” these days. After all, as has been pointed out over and over again, retirement is the issue of the hour as the first round of Baby Boomers hits that magic age. But what about the younger set? Is there anything that twenty- or thirty-somethings should be considering regarding retirement at this point in their lives?
Actually, according to this article by Steve Vernon at MoneyWatch.com, it is never too early to start thinking about retirement; and there is plenty for adults in their twenties or thirties to consider right now that can help them get a jump on retirement a couple decades down the line.
According to the article, “The challenge facing most people in their 20s and 30s is juggling competing priorities — usually there isn’t enough money in the budget to do it all... ‘Should I save money for retirement, a down payment on a house, or for my kid’s college education?’... How do you prioritize?” While all of these things are important, Vernon suggests that your first priority in your twenties should be yourself. He suggests that the best investments you can make at this time are in your career, your home, your health, and your spending habits.
What our firm would like to point out is that a large part of investing in those things mentioned above is protecting those things. An estate planner can help you decide how to best protect your home from taxes, lawsuits, or divorce; an estate planner can also help you protect your health with a living will or healthcare directive. Additionally, many young adults (frustrated with the current state of the job market) have decided to take employment into their own hands by starting their own businesses—and many have been very successful! An estate planner can help you with the overwhelming but necessary task of protecting and planning for the future of your small business.
The news may be flush with stories about (and advice for) Baby Boomers entering or nearing retirement, but we know that everybody can use help and advice when it comes to planning for the future. Our office can help you prepare for your best future—regardless of your age. Call us today. Wednesday, February 09, 2011 Estate Tax Lessons from 2010 and Things to Watch Out for in 2011
We all know from the many news stories of last year that estate tax laws are not set in stone, they can fluctuate and change both at the state and the federal level; and as this article in Forbes points out, keeping up with those fluctuations can be of the utmost importance to you and your loved ones.
The many celebrity news stories we saw last year provide all the examples we need of what can happen when you plan well (as was the case with Brittany Murphy’s estate plan) or when you neglect your estate plan—or even worse, when you fail to plan at all. Here are some celebrity examples of common estate planning pitfalls and mistakes:
Failing to update your estate plan.We tell all of our clients how important it is to review and update your estate plan every 2 to 5 years; Gary Coleman provides a prime example of what can happen if you neglect to follow through on those updates and reviews. “[Coleman] created a handwritten codicil to his will in 2007 leaving much of his estate to his wife, Shannon Price. After they divorced, however, Coleman never updated his will or created a new one. That led to a court fight after he died about whether Coleman was still married to Price. Even though they never officially tied the knot for a second time, Price claimed they had a ‘common-law marriage,’ which would mean that the handwritten will would be valid.”
Failing to fund your estate plan.A revocable living trust is a wonderful tool, but it’s just an empty vessel until you fund it by re-titling your assets in the name of your trust. Michael Jackson created what is most likely a wonderful living trust, but his failure to fund it properly means that 2010 saw “The estate of Michael Jackson... dragged on with no end in sight.”
Waiting too long to create your plan.If you are a senior citizen, waiting too long to create your plan leaves you open to the exploitation or undue influence of acquaintances or family members who might try to take advantage of you. Even if nothing of the sort has taken place, just the suspicion of undue influence can land your estate in a lengthy court battle. “Does the Anna Nicole Smith case come to mind? The United States Supreme Court ruled in 2010 that it will hear her case for the second time. Did she wrongly take advantage of her 90-year old husband, or did his son use fraud and other improper means to stop the billionaire from leaving money to Anna Nicole?”
We can all benefit from the very public airings of these celebrity estates. Our office can help you avoid the mistakes listed here, plus many more. The new laws of 2011 provide the perfect opportunity to create a plan (or update your existing plan), and ensure that your family will be well protected now, and in the future. Wednesday, February 02, 2011 Minnesota Health Care Dispute Raises Fears for Everyone
As estate planning attorneys we help our clients plan ahead. We help them create the documents and take the legal action they need to protect themselves and those they love. We help them talk through painful possibilities, and support them as they make difficult decisions. We work to ensure that our clients and their families will be prepared for any eventuality—but deep down we hope that they will never really need to make use of some of these documents and plans.
One of the situations that estate planners (or any compassionate advisor) dreads is one that is happening right now in Minnesota. According to the Minneapolis Star Tribune the family and friends of 85 year old Al Barnes are struggling to make a difficult decision about his end-of-life care—a decision made no easier by the fact that not all family members (or Mr. Barnes doctors and health care providers) can agree on the next course of action.
“Numerous doctors have assessed Barnes in the past year, and agree on his prognosis. According to court records, Barnes suffers from a level of dementia so profound that doctors believe it is pointless to treat his kidney failure and respiratory failure.” But this isn’t the whole story. Al Barnes’ wife Lana Barnes believes that “her husband suffers from chronic Lyme disease, and that antibiotic treatment of the tick-borne bacterial infection would reverse his dementia -- and necessitate treatment for his other conditions as well.”
Mr. Barnes does have a Health Care Directive which lists his wife Lana as his agent, but it apparently goes no further than that, giving no specific instructions or information about what his wishes for end-of-life care would be. And herein lies the dispute. “A Methodist Hospital doctor wants to take decisionmaking rights from [Mrs. Barnes] because he believes she is demanding hopeless and painful treatments. The 56-year-old wife is accusing the doctor and others of misdiagnosis that has left Barnes substantially -- but not irreversibly -- incapacitated.”
The Minneapolis Probate Courts temporarily took away Mrs. Barnes’ authority over her husband’s care earlier this month after the disagreements between wife and doctors came to a head. “Lana and doctors from Methodist Hospital [are] due to resume arguments over his medical care Wednesday in Hennepin County Probate Court... After Wednesday's hearing, a judge will decide whether Lana Barnes remains in charge.”
This is exactly the kind of situation we hope to help our clients avoid by encouraging a little bit of forethought, conversations between family members and loved ones, and by preparing a thorough, decisive, and well-thought-out health care directive. Monday, January 31, 2011 Planning to Make Your Life Extraordinary
One of the best parts about doing the work that our firm does is that we get to help people evaluate their priorities and define for themselves what is truly important. Sometimes it’s too easy to get caught up in the day-to-day stresses and activities and to lose sight of what your true focus is. In the concerns of the ordinary it’s easy to forget to pay attention to the extraordinary.
It may not sound appealing, but planning for your death makes you take a look at life from a very different point of view. Take the typical To-Do list, for example. Most people have a To-Do list filled with tasks such as “pay the bills” or “wash the car”, but don’t these lists evoke a feeling of heavy obligation rather than pleasant anticipation? If you were to take your list of Things to Do and add onto the end of it “Before I Die”, how would that change your list?
This is a large part of what estate planning is all about. It’s about separating the wheat from the chaff, about evaluating your life, realizing what is truly important, and planning to accomplish and protect those things of value.
Of course, nobody can live every minute in this state of heightened awareness. The bills do need to be paid and the car does need to be washed. But as you make that list of ordinary To-Do’s each morning try to include one thing that brings you closer to your extraordinary goal. Keeping the big picture in mind can give you perspective, and keep you focused on what’s really important. Make your own “To Do” list one that will bring you a sense of pleasant anticipation at the dawn of each day, and of happy contentment when you turn the final page. Friday, January 28, 2011 It’s Never Too Early to Make Your First Will
We’d like to share with our readers a recent article in Forbes entitled How To Write Your First Estate Plan. This article supports something we’ve been saying in our blog all along: That everyone needs a will—whether you’re a young couple just starting out, an established family with valuable assets to protect, or an entrepreneurial business owner with succession on your mind. The article reminds us that a will “is the cornerstone of an [estate] plan,” and at whatever stage of life you may be is not too early to make your first will.
“There's a lot more to an estate plan than just a will, even for folks who don't need a more complicated estate-tax oriented version. You might have pieces of it already--a living will signed when you had elective surgery or a beneficiary form filled out for a 401(k) when you got your first job. You need to make sure the pieces fit together.”
Many couples or individuals are first motivated to create a will when they have young children, and the primary purpose of their will is to ensure that their minor children will be cared for and provided for should anything happen to the parents. This is certainly one of the best reasons to create your will or estate plan, but it is not the only reason, not by a long shot. If you drafted your will when your children were young and haven’t looked at it since—or if you never created a will because you don’t have kids and therefore didn’t think you needed one—it’s time to revisit the subject.
An estate plan not only ensures that minor children will be provided for, but also that:
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Older children have the means to continue their education if something happens to you
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Your spouse or children are the recipients of your life insurance or retirement proceeds, and not the tax man or (even worse) an ex-spouse or ex-boyfriend or girlfriend.
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You have someone trustworthy distributing your assets as you wish after you pass away.
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Your business will transfer smoothly if you aren’t able to run it anymore.
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And much more.
“Whatever motivates you, fine. The point is--whether you're in estate tax territory or not, if you don't have an estate plan, you need one. (And if you have a really old one, you probably need a whole new one.)” Any opportunity is the perfect opportunity to start planning to protect your loved ones. Call our office (or your own trusted attorney) to learn what steps you can take toward protecting your loved ones right now. Wednesday, January 26, 2011 Knowledge and Communication is Key to Avoiding Family Fights
Do your adult children know which of them will be your power of attorney if something happens to you? Most people don’t want to think about Alzheimer’s, dementia, or getting old; and those who have thought about it often choose to keep their wishes secret, their documents held under lock and key until the time comes when they are needed. But according to a recent article in Reuters, one of the most critical steps a parent can take toward preventing sibling fights is to state early and openly which adult child is their choice for power of attorney.
“In order to avoid conflict, parents [should] sit down with their children and spell out who has been appointed and why... It’s something that really has to be thought out in advance, hopefully before a crisis has arisen and while the parent is still able to express their goals.”
Open communication can go a long way toward smoothing relationships between family members, but if that by itself isn’t enough to keep the fights to a minimum, the advice of a trusted advisor can often dispel suspicions that may be brewing just beneath the surface. But don’t wait until arguments have already exploded, the best course of action is to consult with your advisor before intervention is necessary. Asking your advisor to sit down with yourself and your family members gives each child a chance to ask questions and voice their concerns; it also gives them a chance to hear from your own lips what you’re planning and why you’re planning it. Monday, January 24, 2011 5 Essential Tips for Executors or Trustees
Serving as executor or trustee of a will or a trust is an honor... but it’s also a job—a BIG job—and not one to be taken lightly. The role of executor or trustee can be one of great financial power, but it carries with it a heavy fiduciary obligation. Fiduciary obligation means that an executor or trustee must act in the best interests of the beneficiaries; it means that although the executor or trustee may be doing all the work, he or she may see very little return on that work, which is all for the benefit of the named beneficiaries.
If you have been nominated (or are currently serving) as an executor or trustee there are a few things you’ll want to remember as you go about your duties:
1. The will or trust is your guide, the mission statement by which you should operate; read and understand the document completely, and have an attorney help you, if necessary.
2. You need to be pro-active—to an extent. If you are managing a large amount of money or assets over a period of time it is probably not in the best interests of the beneficiary to let those funds sit in a savings account. Create (with an advisor, if necessary) a financial plan for the trust assets.
3. Although you may be handling the estate assets, you should not have any personal financial dealings with the trust. You should under no circumstances borrow from or lend money to the trust. Keep your finances separate!
4. Communication and transparency is key! Keep detailed records of all of your actions and transactions regarding the will or trust, and send regular reports to the beneficiaries. Regular communication prevents unhappy surprises or angry lawsuits in the future.
5. You don’t have to do it alone. If you were picked as a trustee because of your financial knowledge and experience—great! But if you were picked because you are the oldest, or the most responsible, or the favorite you may feel overwhelmed by the job ahead of you. Don’t try to muddle through alone, get the help and support of an experienced attorney or advisor. Friday, January 21, 2011 Non-Traditional Couples Face Estate Planning Challenges
The new estate tax laws (with their friendly bent toward the taxpayer) have been cause for celebration for many wealthy and affluent Americans, but there is at least one group which has not had cause to celebrate—gay and unmarried couples. Under current federal law, a married person could transfer an unlimited amount of their estate to their spouse upon death, free of taxes; but this generous marital deduction does not apply to same-sex couples—even if they live in one of the five U.S. states which recognize gay marriage.
A recent article in Reuters explains that “there is no [recognition of same-sex marriage] on a federal level, which means same-sex couples do not get the marital deductions on U.S. taxes. They also cannot make large gifts or pass on assets to each other without paying taxes.”
The new laws may help some same-sex or unmarried couples; for the next two years unmarried individuals may transfer up to $5 million upon their death tax-free. But this isn’t permanent (the law will likely change again at the end of 2012) and anyone with an estate over $5 million will end up leaving their heirs with a hefty estate tax bill.
Luckily, some of these estate tax challenges can be overcome with some good estate planning and by thinking ahead. “If one partner has more assets, he can transfer some assets to his partner each year... Each year, individuals can make gifts up to $13,000 to any number of people. That can even up the two partners' estates and hopefully avoid a big estate tax bill when the richer partner dies.” If it’s clear that estate taxes simply cannot be avoided, the wealthier partner may want to consider setting up an Irrevocable Life Insurance Trust to cover the cost of estate taxes.
Beyond the issue of estate taxes, the article brings up the good point that “same-sex couples are more likely to face challenges to their wills, usually from family members who do not approve of their lifestyle.” This provides more incentive than ever to have a well-thought-out estate plan, which can be drafted with just such a possibility in mind.
Regardless of state of residence, same-sex or unmarried couples simply do not have the same benefits as traditionally married couples, which means that same-sex or unmarried couples have to plan carefully to achieve their estate planning goals. It may require more forethought and effort, but the good news is that with the right kind of planning it is possible for non-traditional couples to protect and provide for the people they love. Monday, January 17, 2011 Excuses, Excuses... Why You Don’t Have a Healthcare Directive
What is keeping you from signing a healthcare directive?
A recent article in Reuters mentions that only 2 out of 5 U.S. citizens have some kind of healthcare directive, and that our own U.S. laws might be the cause. A study done by Rebecca Sudore of the University of California, San Francisco found that “Most states had practical restrictions that could make it difficult for many people to complete an advanced directive... In addition, many of the documents used in end-of-life planning were written in complicated legal language that the average person would have trouble understanding.”
Some portions of an advance directive might be written in complicated legal language out of necessity, but we don’t think that’s any excuse not to have one, especially not if you have a knowledgeable and trusted attorney who is willing to go through the legal language with you to ensure you are comfortable with it. As for the other obstacles, the fact that “many states do not allow oral advance directives, and usually require that written documents have witnesses' signatures, be notarized, or both...” and that currently “40 states do not automatically allow domestic partners and same-sex partners to become the default healthcare proxy;” well, these seem to us to be all the more reason to make sure you DO contact your attorney and get your healthcare directive in place.
A healthcare directive, along with a will and a durable power of attorney, are the three foundational documents of any estate plan. Whether you choose to move on to more advanced planning techniques or not, every person should have these three documents at the very least. These simple documents can end up saving you and your family a world of heartache and expense.
Of course, according to Reuters there is one other possibility about why you might be putting off your healthcare directive, "The biggest issue is that people do not want to do advance directives... There is a fear of planning for how we die." Don’t let superstition keep you from protecting yourself or your loved ones. Wednesday, January 12, 2011 No More Excuses, It’s Time To Plan Your Estate
The dust surrounding all the estate tax law “remodeling” is finally settling, and it’s time now for families to give their old (or future) estate plans some serious scrutiny. For all of you who were waiting until Congress made some firm decisions on the estate tax laws—there are no more excuses. Forbes writers Janet Novack and Ashlea Ebeling explain in their recent article why—now that the estate tax is no longer in flux—it is so important to move quickly on your estate plan.
Many first time planners will be ready to take advantage of the new laws, now that the “hefty $5 million exemption, combined with a new portability provision, should allow many affluent couples to simplify their planning.” Couples with estate plans already in place will be able to take advantage of the new laws as well, but the motivation to update their existing plans may have more to do with the need to undo outdated formulas in wills and trusts that, with the new laws in place, may now do more harm than good.
“Many couples have old wills designed mainly to preserve the estate tax exemption of the first spouse to die, something the law now does. Under these old "formula" wills, when the first spouse dies assets equal to his or her federal estate exemption go into a "bypass trust" for their kids. The surviving spouse has access to the trust's earnings and, if need be, principal, but what's in the trust "bypasses" the survivor's estate. Problem is, with the exemption jumping to $5 million (it was only $2 million in 2008) the survivor could be left with nothing outside the trust.”
The new estate tax laws are much friendlier to middle-income families, but don’t let that fool you into thinking you don’t need to plan at all. “Whatever your age, marital status or net worth, you need a will (saying who gets your stuff); a living will (stating your wishes about end-of-life care); a health care proxy (naming someone to make medical decisions for you if you can't); and a durable power of attorney (designating someone to act on your behalf in financial and legal matters if you can't).” Not to mention you still may have state taxes to contend with in your estate plan.
Now is the time to call your attorney and talk about estate planning in the New Year. There is no more reason to procrastinate, and it’s your family’s legacy that’s on the line. Monday, January 10, 2011 A Low-Pressure (And Fun) Way to Discuss Legacy and Estate Planning
The hardest part of legacy planning or estate planning isn’t necessarily choosing the right fiduciaries, or deciding how to distribute your wealth fairly among your loved ones... the hardest part of legacy planning or estate planning is often simply talking about it with family. In fact, having “The Discussion” can be such a daunting task that many families simply don’t do it, choosing instead to take their chances when the family patriarch or matriarch passes away and the succession plan is revealed.
But avoiding the subject isn’t going to do you or your family any favors. More family infighting takes place after a death than at any other time. After all, this is when loved ones are grieving and emotions are high, when the central family figure or peacemaker may no longer be with you, and seemingly unequal inheritance distributions can no longer be explained.
What if there was a way to have “The Discussion” before it was forced upon you? What if there was a way to make that legacy and estate planning discussion low-pressure and even fun? That is exactly what husband and wife psychologist team Carolyn Friend and James Weiner have done with their book and accompanying card game, The Legacy Conversation: the missing gem in wealth planning.
A review of the Conversation Starters card game in Forbesgives a more detailed description of the game, including 7 or so sample questions to get the juices flowing; obvious questions such as “What cherished possession might your family fight over?” to the not-so-obvious questions such as “Have you ever found wisdom in a song’s lyrics? Name that tune.” The point of the Conversation Starters is not merely to discuss the family legacy, but to get to know your family members better, enjoy each other, and perhaps even grow closer in the process.
If your family has been putting off the necessary discussion of succession and legacy planning, this might be just the game you need. Don’t be afraid to tackle the difficult subjects, you might find you enjoy them more than you expect. And when you’re ready, call our office. We can help your family with the practical details and legal legwork. Monday, December 20, 2010 At Long Last: What to Expect from Estate Taxes in 2011
It has been a long and uncertain year for anybody interested in the future of the estate tax, filled with a few ups, a few downs, and a lot of speculation. But after the recent passage of the new bipartisan tax bill all of the confusion and speculation is finally at an end, and it’s very close to what we anticipated early last week. The bill is good news for most taxpayers; the Wall Street Journal says there are “many winners, a few losers,” and according to the New York Times “Almost no one will have to worry about paying the estate tax under the tax legislation just approved by Congress.”
Here is a brief overview of what you can expect in 2011:
New Estate Tax Exemptions and Rates:The new bill sets the estate tax exemption at $5 million per individual ($10 million per married couple), with amounts over the exemption taxed at a 35% rate. This is opposed to the $3.5 million exemption and 45% rate some lawmakers were hoping for.
Tax Election Option for 2010 Estates:As mentioned in a previous post, this is one of the biggest parts of the new bill. There may have been no estate tax in 2010, but there was also no “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death, as is usually the case. This led to a higher tax paid on the assets if and when they were sold, in spite of the lack of estate tax. Tax election gives 2010 estates the choice of whether to use 2010 or 2011 tax rules—a happy option for 2010 heirs.
Estate, Gift, and Generation-Skipping Taxes: In recent years these three levies have had varying exemption levels, making gift giving and succession planning and challenging exercise at best. The unification of all three makes tax planning and giving gifts to grandchildren much easier than it used to be.
Individual Income and Payroll Taxes: The new bill wasn’t just about estate taxes; it also extends the Bush-era income tax rates; this is good news as it prevents a rise for nearly all taxpayers.
How Long Will It Last? We’re all glad that the waiting is over and we finally know what to expect, but the new law is only effective through 2012, at which point the provisions will “sunset.” This new tax package sets our minds at ease now, but the estate tax issue is far from over. It looks as if we may have to revisit the issue in 2012-2013.
With the threat of high estate taxes out of the way does any reason remain to create (or update) your estate plan? Absolutely!
Estate planning is about more than just planning for taxes, it’s about taking control of your assets and choosing how your estate will be distributed. Divorce, second marriages, planning for college, charitable gifts—these are just a few of the reasons why estate planning is essential regardless of the state of the estate tax.
At the very least, the recent fluctuation of the law means that you’ll want to call our office and make an appointment to have your existing plan reviewed and updated to ensure you don’t have any outdated clauses that could negatively affect your heirs. Monday, December 13, 2010 Estate Tax Update: The End Is Near
It looks as if the long and weary road to estate tax clarity may soon be at an end. Especially if Washington lawmakers vote to approve the tax package negotiated between President Obama and Republican leaders without making too many changes.
Laura Saunders of the Wall Street Journal claims in her recent article that everything looks to be coming up roses, “it seems estate planners got everything they wanted and nothing they didn't.” Good news for estate planners translates into good news for our clients. We recommend you read the entire article for the full story, but here are some of the highlights of what estate taxes may have in store for us in 2011:
Tax Election for 2010 Estates:This is one of the biggest parts of the deal. “The bill gives 2010 estates the choice of whether to use 2010 or 2011 tax rules.” This is good news because “the tax on heirs who sell assets of those who died in 2010 is based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer's death, as is usually the case,” meaning that “taxes were higher if they died in 2010 than 2009 or 2011.”
Unification of the Estate, Gift, and Generation-Skipping Taxes: “In recent years the exemptions for the three levies have been out of synch, complicating succession planning for family businesses and other matters.” With the new deal, however, there would be a simple $5 million per-individual exemption for all three.
And of course we can’t have a conversation about estate taxes without discussing Effective Date and Duration: The effective date of the new provisions is set to be January 1, 2011. As for duration, “The Senate's bill makes this regime effective only for 2011 and 2012, at that point the provisions ‘sunset.’” What this means is that the new tax package may be only a temporary reprieve, and we could be going through all of this again in 2012-2013. Monday, December 06, 2010 Make This Year Memorable: A 2010 Gift-Giving Guide
Fruit baskets, kitchen gadgets, and Kindles aren’t the only gifts you can give loved ones this year (although you’ll see below that video game systems still make the cut.) Instead, why not give something unique that will leave a lasting impression and help protect your loved one? Here are a few non-traditional ideas for friends and family of every age.
Young Adults: What do you get the kid who already has all the video games he could want? How about a meeting with a financial planner? It may not sound exciting, but young adults are leaving home with less financial experience than ever, making it difficult for them to know how to budget for their own household, plan to eventually buy a house, or even stick to a strategy to pay of credit debt or student loans.
Parents of Young Children:A nomination of guardians drafted by a qualified estate planning attorney is an excellent gift for young parents. So also are advanced healthcare directives and a last will and testament. All of these will help protect the young family as well as provide peace of mind.
Baby-Boomer Friends and Family:The big concern among Baby-Boomers right now is long-term care. After paying for their elderly parents to grow old Boomers are now turning a concerned eye to their own futures.
Elderly Parents and Grandparents:Forget your teenage nephew; your elderly grandparent is the person who could benefit from having a video game. According to this story in the New York Times game systems such as the Xbox Kinect and Nintendo Wii Fit help get the elderly up and moving and can significantly improve their balance.
This year, forget about the impersonal gift cards or scented candles; instead give a gift that will leave a legacy. Wednesday, December 01, 2010 A Good Year for Giving
The season of giving is upon us... and thanks to 2010’s unusual tax laws we may see some very large gifts before the year is out! If you are considering being particularly generous this year, this article from Reuters explains why the federal government is making 2010 an exceptionally good year for giving.
Most people know that for this year only there is no estate tax. But the year is almost over, and next year the estate tax is slated to go up to an astounding 55%. The more you can afford to give away now, the less that will eventually be subject to the estate tax. However, “the incentive to give stems not just from a looming increase in the estate tax, but also from the lowest tax rate on gifts in a generation -- a maximum of 35 percent. That top rate was 45 percent in 2009 and jumps to 55 percent next year unless Congress acts.”
Those last three words, “unless Congress acts,” carry a lot of weight. Congress could choose instate lower and more reasonable tax rates in 2011; but right now we just don’t know, and the clock is ticking to the end of this “golden year.” There is nothing wrong with waiting to see what happens, but you may want to at least have the conversation with your estate or financial planner, so you know your options and can act swiftly when the time comes.
Very few people really want to give away their hard-earned money; but as the saying goes, you can’t take it with you, and most people would rather leave their legacy to their family rather than the government. Monday, November 29, 2010 Estate Planning Through the Ages
Can you remember what you were doing in your early 20s? Can you imagine what kind of life you’ll be living in your 70s or 80s? We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.
In Your 20s:You’re young, just finishing school and starting in your career, unlikely to be married yet... the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.
In Your 30s:Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.
In Your 40s:This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning.
In Your 50s:As your children start to become independent you may have more freedom with your income. Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career. Your estate planner can advise and help with all of these.
In Your 60s:Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny. But beyond the basic maintenance, you may want to start doing some simple Medicaid and long-term care planning—just in case.
In your 70s and Beyond: Health is the key word now. Our life-spans are getting longer, but so are our illnesses, you need to be ready. Tighten up your estate plan, invest in long-term care insurance, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions.
The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change. Our firm makes it our business to keep up with you at every stage. Monday, November 22, 2010 How to Avoid Being “Strangers Rather Than Spouses”
Over the past few years certain states have taken steps to legalize same-sex unions, with many same-sex couples joyously taking advantage of the new laws... but in spite of state approval, these newly married couples do not have the same rights as traditional married couples under federal law. This recent article from Elder Law Answers describes how one gay widow is suing the federal government for reimbursement of the estate tax bill she paid after her wife’s death.
“Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. Ordinarily, spouses can leave any amount of property to their spouses free of federal estate tax. But when Ms. Spyer died in 2009, Ms. Windsor, 81, had to pay Ms Spyer's estate tax bill because of the The Federal Defense of Marriage Act of 1996, which denies federal recognition of gay marriages. ‘While New York State considered us married, the federal government did not, so the government taxed Thea's estate as though we were strangers rather than spouses.’"
This story illustrates again how important it is for any non-traditionally married couple to take their estate planning seriously. A properly drafted will, trust, power of attorney and health care directive can help ensure that you and your partner are treated as spouses rather than strangers.
Contact an attorney in your state to find out how estate planning documents can help you achieve your goals. Friday, November 19, 2010 Estate Planning for Adoptive Families
We’ve mentioned in previous posts how important it is to update your estate plan when you experience big life changes; this includes moving, getting married, having a child... and it especially includes adopting a child.
A recent article in Forbes reminds us that “An adopted child only has rights to your estate once the adoption has been finalized. The length of time it takes to finalize an adoption depends on where the adoption was initiated as well as a host of other factors. This process can take anywhere from six months to several years to complete. In the event that you pass away before this process is complete, it is likely the child would not be entitled to any of your assets.”
Creating or updating an estate plan is one way to ensure that the child of an adoption-in-progress receives the rights and benefits he or she needs. An estate plan can not only provide financially for your adopted child through your will or trust, but can also nominate guardians for the child, make provisions for the child’s medical treatment (if necessary), and specify your wishes for the child’s future education or living arrangements.
The article above points out that “Particularly in the case of an open adoption, it is important to establish a good relationship with the individuals outside your immediate family, such as the child’s birth parents, who will have a direct interest in your child’s life.” Making provisions in your estate plan for birth parents or grandparents can smooth the way for your child and for the guardians you’ve chosen if anything should happen to you.
Anyonewith children should have detailed and updated estate plan; but for families with adopted children having a plan in place is of the utmost importance. Wednesday, November 17, 2010 Make It Easy for Your Heirs to Say “No”
People have been known to do crazy things when taxes are as unpredictable as they are currently. No, we don’t mean “offing” their relatives (although there have been plenty of those kinds of jokes going around this year), we’re talking about saying “No thanks” to an inheritance (also called disclaiming.) This article in Investors.com explains that “By disclaiming, one heir can abstain from taking an inheritance, leaving the assets for other beneficiaries. Planning in advance for such a move can save huge amounts of estate tax. That means more money for heirs.”
We realize that with no estate tax in 2010, disclaiming an inheritance is not a likely scenario this year; but next year the tax is expected to come back, although at what rate or with what exemption is still anybody’s guess. That means there are plenty of reasons why someone might want to pass on a large inheritance, including:
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To pass the benefit of the inheritance on to another family member (generally a younger family member who could use the money for college, a first house, etc.)
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To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
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To avoid being bumped into a higher tax bracket.
The best reason to account for the possibility of disclaiming in your will or estate plan is that it provides your heirs with flexibility. “Even if a new estate tax law is passed, uncertainties will remain. You don't know when you'll die. You can't know for sure how much you'll be worth. Congress may create new exemptions, tax levels and other rules.”
You never know what the future may hold—for you or your heirs. When in doubt, it pays to make provisions for any eventuality. Monday, November 15, 2010 Family and Future: The Keys to Top Notch Estate Planning
We write a lot on this blog about what estate planning is truly about: it’s about laws, taxes, assets, and documents of course; but deep down, estate planning is about relationships.
As estate planners and advisors, an important part of what we do is creating the best estate planning or asset protection vehicle we can for our clients; but achieving this goal involves far more than simply writing a document—it also involves listening to our clients, reading between the lines of sensitive family interactions, and it often involves looking into the future to catch potential problems before they happen.
A recent article in the Wall Street Journal describes the unorthodox lengths to which advisors will go to help clients achieve their goals. “For the family with the gridlocked siblings, [their financial advisor] arranged a session of personality-type charting with an outside expert. The tests showed one of the brothers-in-conflict to be a hard-driver who loved to make decisions on the fly. His brother was more analytical, and needed time to reach conclusions... Establishing that these conflicting traits are permanent characteristics has helped the brothers understand each other’s work habits and function better as a team. “
Our firm may not yet have had to arrange personality-type charting sessions, but this “running interference” or acting as a mediator and guide is exactly what we do. Evaluating goals, assessing relationships, identifying priorities and facilitating productive discussions is part and parcel of being a good estate planner and a great family attorney and advisor.
Estate planning and asset protection may sound like it’s about things and wealth, but a good advisor knows that it is always about family and relationships. Consider this when you’re looking for an estate planner: Do you want an advisor who is simply protecting your wealth, or do you want an advisor who is looking out for your future and your family? Friday, November 12, 2010 The Ins and Outs of Incapacity
Most people think that having a trust is about controlling (to an extent) what happens to your assets after you die. This is true, but a trust actually has a much broader scope: a trust can also protect and provide for your loved ones—and more importantly, it can protect and provide for you—if you should ever become incapacitated.
In basic terms, incapacity means that you are no longer able to make decisions for yourself. Sometimes it is easy to determine incapacity: the person is in a coma or unconscious and obviously unable to make decisions. But sometimes it’s more difficult. What about whether or not a person is able to make rational decisions? What if someone is suffering from Alzheimer’s, Dementia, or even a severe mental illness... should that person be making important financial decisions?
It is important to include a discussion of incapacity in your trust, because this one word carries a lot of weight. It is when you are incapacitated that your successor trustee will take over, when the agent nominated in your Healthcare Directive will get the authority to make health care decisions for you, and when your financial Power of Attorney will go into effect. With so much hanging on a single word, it’s important to know exactly what that word means.
Every standard trust should have a definition of incapacity as determined by a court of law. This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs. A really good trust will also include a definition of incapacity as determined by two physicians; which means that two independent, licensed physicians have examined you and have determined that in their opinion you are unable to effectively manage your property or financial affairs.
There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape. While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf. Giving two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.
Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. Monday, November 08, 2010 Estate Planning As A Multi-Generational Affair
Creating an estate plan is a very personal matter; the planning party usually consists of you, your partner, and your attorney. Although you may consider and provide for your extended family, they are not often a part of the planning process itself. However, there are some circumstances under which estate planning should be a family affair—perhaps even a multigenerational one.
Planning as an extended family has its time and place. This year the the generation-skipping transfer (GST) tax exemption means that more people than ever are bringing multiple generations of the family into the attorney’s office to talk about making gifts before the end of the year. But the GST tax exemption is not the only reason extended families might want to plan as a whole unit. Here are some other specific situations in which families might want to consider multigenerational planning:
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Planning for succession within a family business.
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When multiple generations of families own property together.
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If the family is responsible for significant debt.
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If a family has a history of supporting certain charitable foundations and desires to continue doing so.
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To provide for family members who live out of the country.
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To make provisions for a non-traditional family situation, such as unmarried partners.
Planning with your extended family doesn’t necessarily mean you won’t be able to create a private plan for you and your spouse as well. It is quite possible to create individual estate plans for each nuclear family while still respecting the decisions that the extended family made together. Of course, this process will be made much easier if the extended family and each nuclear family works with the same attorney, but it is certainly not necessary so long as each attorney and family is willing to communicate and act together.
If you aren’t sure if you should plan privately for your family or include your whole multigenerational unit in the process, give our office a call. We can help you look down the road ahead and create a plan of action that will make every member of your family feel secure. Friday, November 05, 2010 Estate Planning Is Easier Than You Think
Have you ever seen the “1001 Must Do” books series? 1001 Movies You Must See Before You Die, 1001 Books You Must Read Before You Die, or maybe 1001 Natural Wonders You Must See Before You Die? Let’s face it, 1001 things is a lot of pressure! This is why we like this article in the San Francisco Gate, which lists only 16 estate planning things to do before you die.
Creating your estate plan can seem complicated and scary, but it’s not as daunting as you think—especially if you have the right person helping you. The article mentioned above lists 16 things to do in order to get your affairs in order, but even those 16 things can be pared down to only 5 essential tasks:
1. Make a list of your assets-include your home and other real property, checking and savings accounts, retirement assets, life insurance, investments, as well as high ticket physical items and heirlooms.
2. Make a list of your debts-including credit card debt, remaining mortgage debt, auto loans.
3. Choose your beneficiaries-consider not only children or grandchildren, but also any charities you would like to support. Think about what you want for your legacy beyond the first generation. Also, although it can be difficult, consider what you would want should your children or grandchildren predecease you.
4. Decide who you trust to be your agents/executors to handle your affairs-getting your affairs in order means choosing people to make decisions when you are unable. Agents with power-of-attorney will make financial decisions if you are unable, health care agents work with your doctors to determine your medical care, and trustees will control any assets you place in trust for the benefit of yourself or your beneficiaries.
5. Meet with an estate planning attorney-creating an estate plan is not as simple as checking a few boxes and signing a will. An estate plan requires an evaluation of your assets and goals, careful research into federal and state laws, and a determination of which of the myriad of documents best meets your needs. Have an experienced attorney help make your plan perfect. Monday, November 01, 2010 The Quiet Devastation of Alzheimer’s Disease
According to a recent report put out by the Alzheimer’s Association, 5.3 million people have Alzheimer’s disease. Chances are that you or someone you know has been touched by this illness. In spite of these overwhelming statistics, Alzheimer’s continues to be a disease that sneaks up on individuals and their families, quietly tearing apart lives with uncertainty and confusion. Estate planners and elder law attorneys sometimes see this heartbreaking confusion in our own offices when elderly clients or their families come to us, concerned that a loved one no longer has the capacity to sign or make decisions about legal documents.
A new article in the New York Times discusses the slow and sometimes invisible development of Alzheimer’s disease, and some of the earliest warning signs that your loved one may be suffering. “New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.” This comes as particularly bad news to families who put off their estate planning year after year, each time telling themselves “We’ll do this next year for certain.”
By the time families come into our office with their suspicions about their aging loved one it may be too late for us to help. “Lawyers have guidelines, published in 2005, that include warning signs of diminished capacity, like memory loss and problems communicating and doing calculations. The guidelines instruct lawyers to look at the legal requirements for capacity in specific situations, like making a gift. But many questions remain.”
Plans created after the suspicion of Alzheimer’s or dementia has set in can be fraught with doubt, and often cause conflict among family members. We have seen the rifts and heartbreak the illness causes in even the strongest of families. We urge you to take care of important legal and estate planning issues early, before questions of competence can cast the shadow of doubt over your wishes. Friday, October 22, 2010 Take Care in Making Large Gifts to Heirs
Do you have a provision in your will or trust to pass your house on to your kids when you die? If so, you may want to consider giving the house to them now, before the end of the year. According to this article in the New York Times, doing so could be beneficial to both your heirs and yourself.
It’s easy to see how your heirs might benefit from receiving at least part of their inheritance now. The lapse in the estate taxes only last through the end of the year, “it is scheduled to come back next year with a vengeance. Unless Congress changes current law, the estate tax rate will be 55 percent (60 percent in some cases) on all but the first $1 million, except for what you bequeath to your spouse or charity.”
What may not be quite as obvious is how gifting a large asset right now can benefit you as the giver. “By shifting real estate now, you remove the asset and any subsequent increase in its value from your estate — an especially timely move if your property’s value is depressed and you expect it to bounce back at some point. What’s more, if you wind up owing tax on the gift, the rate now is less than it may be later. Barring Congressional action, the tax rate for 2010 is 35 percent, rising to 55 percent on Jan. 1.”
Making such a large gift is not necessarily without its “hurdles” as the article calls them. Amongst these hurdles include deciding whether you want to continue living in the house, whether to break up interest in the asset or keep it as a cohesive whole, and the potential awkwardness of having a business relationship with family. The article offers a number of thoughtful solutions to these issues, all well worth considering.
As beneficial as such a gift may be to both grantor and recipient, we strongly urge you to discuss the details of such a large gift with your estate or financial planner before you take any action. Monday, October 18, 2010 Can You Foolproof Your Power of Attorney?
“The best laid plans of mice and men often go awry.” Although we hate to admit it, this statement will also sometimes apply to estate planning; and more often than we would like, it happens with powers of attorney.
A power of attorney is the document in which you nominate an agent (or attorney-in-fact) to make financial decisions and take legal action for you when you are incapacitated or otherwise unable. (This does not include healthcare decisions, covered in another document called a health care directive.) Unfortunately, as this recent article on the Elder Law Answers website points out, “many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.”
This difficulty usually has nothing to do with the validity of the document; rather, it is the bank’s attempt to protect itself. But while a little bit of caution is understandable, it can have frustrating—or even tragic—results if not addressed. Luckily, there are steps you can take to improve your chances of having your power of attorney honored. The article mentioned above includes a number of good suggestions:
· Talk to your bank about your plans ahead of time.
· Ask your financial institutions if they have any requirement for powers of attorney, or even their own standard form.
· Update your power of attorney forms or documents frequently (every 2-5 years.)
Talking to a representative from your bank every 2-5 years may seem like an inconvenience now, but imagine the inconvenience if you are incapacitated and your agent is unable to access the funds he or she needs to pay your bills, make your mortgage payment, or provide for the needs of your family. A little bit of time spent now can save a mountain of stress later on. Friday, October 15, 2010 What Is Probate?
With all the recent news about what will happen with estate taxes, the process of probate has come up quite a bit. Sometimes probate is mentioned in a low-key, matter-of-fact kind of way; at other times it is presented as something scary, and to be avoided at all costs. We know our readers have seen the term often enough here in our blog, but under the circumstances we thought it a good idea to go back to basics, and have a discussion of exactly what is probate, and what’s all the fuss?
Probate is the process by which the court determines the legal property of a person who has died, and facilitates the distribution of those assets.It sounds like it should be simple, but even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.
You may wonder why probate can take so long, especially if the deceased person has left a will making their wishes clear. A good will can certainly make the process easier, but even with a will, there are certain steps that must be followed to complete the probate process, some of which can be very time consuming. Some of these steps include:
· The appointment of an executor or personal representative
· Verification of the will
· Taking an inventory of assets belonging to the deceased
· Giving notice to creditors
· Paying valid claims against the estate
· Preparing and paying taxes
· Notifying beneficiaries
· Distributing the assets to the beneficiaries or heirs
If you think that just reading the above paragraph takes your breath away, imagine the confusion of having to actually go through all of those steps—and possibly more!
Whether or not your estate will eventually be subject to a lengthy or expensive probate often depends on a number of factors: the size of your estate, how your assets are held, and how cooperative your next of kin may be. But one way to increase your chances of avoiding probate is to have clear (and clearly valid) estate planning documents, including a will, power of attorney, and possibly a revocable living trust.
If you are concerned about probate, or would like to know more about how you can protect your assets and help your loved ones avoid a lengthy probate, contact our office—or a qualified estate planning attorney in your home state—to discuss your options. Wednesday, October 13, 2010 Prepare Now for an Uncertain Future
There’s a useful saying that goes something like this: “Expect the best, but prepare for the worst.” Never has that saying been as useful as it is right now in regards to asset protection and estate planning. As Laura Lallos mentions in her article in the Morningstar Advisor, “Estate attorneys are trained to prepare for every contingency. But how do you plan for the unimaginable? Who would have predicted a U.S. tax system with no estate tax at all--and no certainty about what the estate tax will look like in 2011?”
Planning for the future when the future is so foggy is a challenge at best, but this unique year for taxes offers some once-in-a-lifetime opportunities for giving and saving as well. This seems to be a time of contradictions. As the article points out, “The best strategy that financial advisors and attorneys can pursue now is to prepare their clients for the worst. On the bright side, some clients can also seize opportunities created by the gaping holes in the tax law for 2010.”
The article suggests a number of strategies that you can implement now to prepare for an uncertain future. Some of these include:
Give monetary gifts now, when the gift tax rate is a low 35%, in order to lessen your taxable estate.
Take advantage of the one-year-only lapse in the Generation Skipping Transfer Tax.
Create a Grantor Retained Annuity Trustbefore the end of October to take advantage of the currently very low Section 7520 rate.
See your estate planner and make sure your estate and asset protection plans truly are “prepared for the worst.” We may not yet know what next year will bring, but that doesn’t mean we can‘t take steps to ensure our clients are prepared for whatever the future may hold. Monday, October 11, 2010 What to Do With Your Estate Plan After a Divorce
When it comes to estate planning, the steps you take after a divorce are not so different from the steps you’ll take after a death—many of the phone calls will be the same, many of the changes you make and details you change will be similar. This all makes sense, because a divorce is basically the death of your marriage, and in the financial and legal world your marriage was an entity all its own.
The first question most people ask is “Who gets the estate plan?” The answer is that both of you and neither of you get the estate plan. Ideally, you both put a lot of thought into your estate plan and it reflects both of your wishes. All of this work was not for nothing. The details of your plan will have to change, this is true, but the basic ideals will most likely be the same.
Your first order of business should be to change your beneficiary designations. Most married couples name their spouses as the primary beneficiary on insurance policies, retirement accounts, wills and trusts, with their children or immediate family members named second. Unless you think your ex-spouse deserves to benefit from all your hard work you’ll want to remove him or her as a beneficiary immediately. (Documents to change: will, trust, ALL life insurance policies, IRA or 401(k) accounts, savings accounts, investment accounts, POD or TOD accounts, credit card insurance policies.)
Your second order of business will be to amend your agent/executor/trustee. It is likely that while you were married you named your spouse as the primary person in all of these roles; you’ll now want to move your secondary nominee to the primary position, or find someone new. (Documents to change: will, trust, All powers of attorney, health care directives, nomination of conservator, emergency contact forms.)
Not necessarily your third order of business, but somewhere in there you may want to change your nomination of guardian. You and your ex-spouse probably chose people you both knew and trusted to be guardians of your minor children if anything happened to both of you. Divorce can bring up many powerful emotions and hard feelings, so although these people are probably still good and trustworthy people, you may want to nominate someone else. Depending on your custody arrangement, your ex-spouse will still be your children’s primary guardian if anything happens to you. This doesn’t mean you shouldn’t execute a new nomination of guardians, but keep in mind that your nomination of guardians will only come into play if your spouse dies first. (Documents to change: nomination of guardians, anti-nomination of guardians, nomination of conservator, emergency contact forms, authorization for custodian consent to medical treatment of minors.)
The most important thing to remember is that the more you put it off, the more likely it is that your wishes will go unacknowledged. As a rule, it’s a good idea to visit your estate planning attorney after any life change, especially one as significant as divorce. Wednesday, October 06, 2010 Power of Attorney from the Agent’s Perspective
In our last post we discussed the importance of choosing the right person as your agent or executor and some of the things to consider as you make your choice. In today’s post we’ll look at the agent/executor situation from a different perspective—that of the person serving in the role.
What happens if you’re named as agent or executor and don’t have what you need to do the job well? In this recent post on the New Old Age Blog, a reader asks the question of what to do if you are named co-agent of a power of attorney and the other agent isn’t doing his share. This is just one example of some of the difficulties that can crop up when you’re serving in a fiduciary capacity.
The first thing to remember is that just because you’re nominated doesn’t mean you have to take the job. Serving as power of attorney can be a weighty job, and if you don’t have the time or energy to put into the role it might be better all around for it to pass to an alternate nominee.
Another thing to keep in mind is that you don’t have to do it alone. This is not to say that you should have a co-agent (although as evidenced by the article above some people do choose to name co-agents rather than just one person), but it does mean that you can ask for help. If you aren’t sure what to do don’t be afraid to ask your attorney (or the testator’s attorney) for help.
Finally, if you know ahead of time that a friend or relative is naming you for a fiduciary role, take the time to talk to that person about their values and wishes. Ask the questions you anticipate might crop up later. Having the conversation when you still can will help immensely when the time comes to make decisions on that person’s behalf. Monday, October 04, 2010 Executors and Agents: Choosing Your Own Replacement
When people think about estate planning they generally think about inheritance, or taxes, or even guardianship—but rarely are the words “executor” or “agent” the first ones that come to mind. And yet, choosing your executor or your agent is one of the most important decisions you’ll ever make.
Your executor is the person who carries out the instructions in your will. You may spend hours (sometimes months or even years) agonizing over inheritance plans and making decisions; but in the end, when the time comes for all of those decisions to be implemented, you’re not going to be around. If there are any questions to be answered or clarifications to be made they’re going to fall to your executor.
Your agent is the person who—depending on whether the document is a health care directive or a financial power of attorney—will make your important financial or health care decisions when you are unable. This person is your proxy during your life, signing checks on your behalf or talking to doctors about your treatment.
Considering all of this, it is understandable why so many people have trouble naming an agent or executor. It’s not easy to choose your own replacement, so to speak. But the most difficult decisions are often the most important. If you are a parent of more than one child then you know about the sibling fights that can erupt seemingly out of nowhere, even in loving and agreeable families. This is especially true when there is any uncertainty about what mom or dad’s true wishes were. The right agent or executor can relieve much of that uncertainty.
So how do you choose the right agent or executor?
First of all, think it through carefully. Choose someone reliable, whose decisions you trust. You’ll want someone who’s careful; and you’ll want to choose someone who isn’t already overloaded, because they’ll need to have time to do a thorough job. Choose someone who knows you and who knows your family; a familiar face will be comforting in hard times. On the other hand, nominating a financial institution rather than a personal friend can work out well under the right circumstances, but research your choices carefully.
If there isn’t one clear choice you may decide to nominate two people to make decisions together. This can be a good alternative, but it can also be a recipe for disaster, so be sure to build in some protections: name an uneven number of agents or executors to prevent tie-decisions, or nominate a mediator or tie-breaker who can step in to prevent serious disagreements from having to be decided in court. Monday, September 27, 2010 How to Keep Your Children from Squandering Their Inheritance
Most parents come into our office with one concern on their minds: protecting and providing for their children. We help these parents select loving guardians and set up solid trust or inheritance plans to ensure that their children will have everything they need. But parents often have another concern as well—how to keep their children from squandering an inheritance received too early.
These parents want to protect their children from the potential disaster of being given too much financial obligation before they are mature enough to handle it; they want to gradually relinquish control as each child reaches the milestones which prove they are fiscally prepared. We are happy to help parents design a plan that helps them achieve this goal.
One strategy to help a child reach financial maturity is to specify an age at which a child may be co-trustee of his or her own trust. The child can then partner with a co-trustee of the parents’ choosing; this could be a close friend of the family, a trusted financial advisor, or even a corporate trustee such as a bank. This gives the child the opportunity to get a taste of responsibility and begin making decisions, but with a safety net beneath them. When the child reaches a certain age (or alternatively, after attaining a goal such as graduation from college, or gainful employment for a specified amount of time) he or she may then become sole trustee of his or her own trust.
Another strategy is to give the child access to the trust principle itself in gradual increments. For example, the child may receive 1/3 upon graduation from college, another 1/3 ten years later, and the remaining 1/3 ten years after that. Of course the ages and amounts are completely up to each client, but the slow distribution of assets allows the child to have a learning curve, something which makes the parents (and the child) much more comfortable.
At our office we understand that there is no substitute for parental involvement, but we can give our clients options that can lay a strong foundation for fiscal responsibility. If you are a parent with similar concerns, contact our office for more information. Friday, September 24, 2010 Lapse in Generation-Skipping Transfer Tax Makes Giving to Grandkids Easier Than Ever
Wealthy grandparents have a unique opportunity this year to give their grandchildren gifts of substantial value without incurring any gift tax. This is a huge savings opportunity!—so why aren’t more people taking advantage of it?
Part of the reason may be lack of awareness. Everyone knows about the Bush administration’s year-long repeal of the estate tax, but very few people seem to be aware that the Bush tax cuts included a year-long lapse of the generation-skipping transfer (GST) tax as well. According to this article in Reuters, “generous grandparents could give away $3.5 million without paying the [GST] tax” during 2010.
But before you call the grandkids with the good news, consider whether or not you feel comfortable giving them such a large sum outright. If your grandkids are still young (and not yet responsible about money and finances) you may not want them having such a large sum to play with; and unfortunately, giving the gift in trust is not an option in this case. “To take full advantage of the GST tax break, assets should be transferred directly to beneficiaries and not to a trust. Money placed into a trust may lead to taxes when distributions are made later on.”
If your grandchildren are responsible adults, and if you’ve been considering giving them a monetary gift anyway, this lapse in the generation-skipping transfer tax could be just the push you need. Talk to your attorney or financial advisor about your gift-giving options. Wednesday, September 22, 2010 Charitable Remainder Trusts: Philanthropy in Death Can Benefit You in Life
If you have a favorite cause or charity you have probably considered leaving some money to that charity in your will. Perhaps you’ve even taken it a step further and toyed with the idea of specifying that the executor of your will set up a trust in the name of your favorite charity, rather than simply giving a one-time gift.
If you have ever considered either of these options you may want to ask your estate planner about setting up a Charitable Remainder Trust, which, according to this Elder Law Answers article, not only supports your favorite charity after your death, it also benefits you during your lifetime.
“A charitable remainder trust is an irrevocable trust that provides you (and possibly your spouse) with income for life. You place assets into the trust and during your lifetime you receive a set percentage from the trust. When you die, the remainder in the trust goes to the charity (or charities) of your choice.”
The altruistic reasons for setting up a charitable remainder trust are obvious, but here are some other advantages you may not have considered:
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Reduction of your taxable income
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Charitable tax deduction at the time you fund the trust
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Diversification of assets
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Income from the trust during your lifetime
In addition to all of these financial advantages, setting up a charitable remainder trust provides you with the opportunity to leave a family legacy and impress your values upon your children and grandchildren.
Please remember that charitable remainder trusts are irrevocable trusts, which means once they’re done they can’t be undone, so it’s not something to take lightly. If you are interested in creating a charitable remainder trust, call our office or talk about it with your own attorney before you take action. Wednesday, September 15, 2010 State Of Washington Takes Action Against Retailers of DIY Legal Documents
There has been lot of hullabaloo in the news recently about Do-It-Yourself Wills and Estate Planning, most notably a debate on Forbes.com with articles presenting The Case For Do-It-Yourself Wills and The Case Against Do-It-Yourself Wills. Well, the state of Washington just weighed in on the subject with a settlement between the Washington Office of the Attorney General and Legal Zoom, a company that offers DIY legal documents online; and the ruling leaves no question as to where the Washington Attorney General stands in his opinion:
“’LegalZoom offers do-it-yourself legal documents online but can’t provide you with legal advice or tell you which forms to fill out,’ Attorney General Rob McKenna said.
Under a settlement with the Attorney General’s Office, LegalZoom can’t compare its costs to attorneys’ fees unless the company clearly discloses that its service isn’t a substitute for a law firm.
Simply selling legal forms doesn’t constitute the practice of law. LegalZoom can only provide an online form service that allows consumers to choose and complete their own legal documents, explained Consumer Protection Division Chief Doug Walsh.
The agreement filed today in Thurston County Superior Court also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution document.”
Regardless of your existing thoughts on the subject of DIY wills and estate planning, the comments and actions of the Washington Attorney General certainly provide food for thought. Monday, September 13, 2010 How to Prepare for Dismaying Changes to Estate Tax Law
This may seem like we’re listening to a broken record, but once again Congress’ inability to act is creating uncertainty in the estate-tax-planning world. We’re little over 3 months away from a major upheaval in the estate tax, and according to the New York Times the upcoming law is likely to cause a lot of grumbling unless Congress takes action. And it’s no wonder when the new law will mean that more families are taxed at a higher percentage:
“The amount of each estate that is exempt from estate tax is scheduled to become $1 million in 2011 (down from $3.5 million in 2009, when the tax was last in effect). The tax on the balance is to rise to 55 percent in most cases (up from the 2009 rate of 45 percent). So now is the time to consider the various tax strategies available.”
What this lower exemption rate really means, however, is that more families will be caught off-guard when a loved one passes away and the survivors are suddenly hit with a massive tax bill.
That is unless families start planning now.
The Times article mentioned above suggests that “the easiest way to reduce the tax bill is to give as much as $13,000 a year each to as many people as you like — which you can do without paying gift tax;” but when you consider how little $1 million really is (especially when the value of your home, retirement savings, etc. are all included when adding up your total assets) we’re guessing that there are a lot of people out there who are over the exemption amount, but don’t feel they can afford to go handing out $13,000 every year. Much more appealing are some of the other planning strategies suggested in the article, including:
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“Buy a one- or two-year [life insurance] term policy to cover the tax billif the exemption amount is only $1 million.” The policy will help your heirs cover what could be a hefty tax bill, but the policy “[could] be canceled if Congress eases your estate tax concerns;” and
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“Create a trust.”The article suggests a GRAT (Grantor Retained Annuity Trust), which is a great tool for high-value assets that are expected to appreciate during your lifetime; but for married couples simply looking for a way to protect their children from a hefty federal estate tax down the road a Credit Shelter Trust may be a better option.
There are a number of other ways you might be able to prepare for the coming estate tax upheaval—the best way to protect your own family is to contact an estate planning attorney and ask about your options. Wednesday, August 25, 2010 A Step-By-Step Guide to Getting Started With Your Estate Planning
You’ve heard all the arguments in favor of estate planning, you know it’s the right thing to do, you want to get your planning done... you just aren’t sure how to get started. This is understandable; estate planning can feel like an overwhelming endeavor when you’re presented with everything at once. The trick to getting started with your planning is to take it one step at a time.
Write down your goals.You may have a number of intertwined goals for your estate plan (this is especially true for blended and multigenerational families), or one simple-but-important goal such as “ensure my minor children have a place to go” or “keep the family business intact.” Knowing your goals from the outset will make all subsequent decisions much easier.
Make a list of the people you trust.Throughout your estate plan you’ll be nominating people to take over financial, healthcare, and guardianship responsibilities if something happens to you. Have a rough list of people you would trust in these roles. Begin with your initial goal and go from there. For example, if your initial goal was guardianship of minors, make a list of people you would trust with the care your child, and move from there to financial decision-makers, etc.
Make a list of people you don’t trust. If you’re having trouble coming up with people for the list above, it sometimes helps to consider the people you would NOT want to be responsible for your child, your finances, or your healthcare. Write down those people and work backward from there. If your kids must be kept from crazy Uncle Joe at all costs, would your cousin Emily be an acceptable alternative, even if she does have a different parenting style?
Know your assets.Make a list of all your assets and their approximate values. This will help your estate planner determine what kind of asset protection you need in your plan. Assets include:
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Your Home
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Investment/Vacation Property
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Bank Accounts
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Savings/Investment Accounts
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Retirement Accounts
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Life Insurance
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Family Owned Business
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Etc.
Bring In the Professionals.Estate planning is a very technical process, and the laws may frequently change, so you’ll definitely want professional help with the details of the process. The good news is that now that you’ve completed the beginning steps, the follow-through with your chosen professional advisor will be a snap! If you already have a relationship with a trusted attorney, insurance agent, financial advisor or CPA you’ll want to start there. Let that person know your goals and that you’re ready to begin planning in earnest; he or she will be able to guide you onto the next steps, or give you the name of an estate planning professional who will help you build your ideal plan.
Although it looks overwhelming from the outset, estate planning is really just a series of small steps, each of which leads you to the achievement of your ultimate goal: Preserving your assets and protecting your loved ones. Now that you know it’s so easy... what are you waiting for? Monday, August 23, 2010 Debunking 5 Common Estate Planning Myths
There are five common myths that frustrate all estate planners—particularly because we know that not only are they patently untrue, but also because their continued circulation can be harmful.
1. Estate Planning is only for rich people.This is probably the single most common estate planning myth there is—and it is a myth. During a normal year the first $1 million dollars of your estate would transfer to your beneficiaries tax-free. (This is also the expected exemption amount for 2011.) By this standard it certain does seem that only “rich people” need estate planning, but when people add up the value of their home, their life insurance, savings, retirement account, etc., etc., etc. they often find that they are much closer to being a “rich person” than they thought. Not only this, but as we’ll get into in more detail below, estate planning is not only about saving on estate taxes, it’s also about controlling your wealth and protecting your own needs when the unexpected occurs.
2. “I have plenty of time.” AKA: Only old people need estate plans.First of all, just because you’re young doesn’t mean bad things can’t happen to you. But you know this, and anyway, this post is not about fear. Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death. A good estate plan will include not only a will, but also a healthcare directive and HIPAA Authorization (both of which are useful if you find yourself facing a surprise stay in the hospital), Power of Attorney documents (which you may need if you ever travel outside the country or are otherwise unable to sign for yourself on financial or legal documents), and legal documents relating to minor children (such as medical authorizations—an essential document if you leave your minor child with a babysitter for any extended period of time.)
3. Married people don’t need estate plans. While it is true that a married person with straightforward wishes for the distribution of their property has less need of estate planning, it does not necessarily follow that they can skip estate planning altogether. Under normal circumstances, any jointly held property will pass to the surviving spouse upon the death of the first spouse... But what happens if the surviving spouse gets re-married? What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up a simple plan.
4. All I need is a quick will and I’m done.A quick will is certainly better than no will. And if you want to be technical, you don’t even need a quick will; after all, your state of residence has a plan already in place for you. The problem is that it may not be the plan you want. There is a saying that “anything worth doing is worth doing well.” This goes for wills (or any other legal document) as well. If you want the basics you can have the basics. But if you want the best, you’re going to need to spend a little more time on it.
5. Estate Planning is only about money.Although money is often one of the main motivating factors behind creating an estate plan, money is absolutely not what estate planning is all about. Estate planning is about people. It’s about your family and doing what’s right for them. Estate planning is not just about saving your family from estate taxes, or making sure Junior gets the house; it’s about leaving them peace of mind. A well thought-out will or trust saves them from a lengthy probate process, but also reassures siblings that they are doing what mom or dad really would have wanted. And a memorandum of intent gives you the opportunity to express the things that sometimes cannot be expressed during life. An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love. Friday, August 20, 2010 Women and Finances: How Estate Planning Can Help
When it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee. Vacations, dinner parties, school activities and celebrations... many of these wouldn’t happen at all if the women of the family didn’t take the lead. Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women. However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.
A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis... they have a time getting a grip on their long term saving and planning." Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.
Here are a few statistics to consider that impact women and their long-term financial decisions:
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Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
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Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
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The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
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Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)
Put all of this together and it means that women need to take control of their finances, not the other way around! Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.
We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime. Monday, August 16, 2010 The REAL Reason to Plan Your Estate
We write often on our blog about specific pieces of the estate planning whole: elder law, retirement planning, estate administration, etc... But sometimes it’s important to pull back and look at the big picture—to remind ourselves why we’re doing all this in the first place. And the plain truth is that there is one main reason we do this: Love.
Now, “love” may sound sappy and sentimental, but when it comes down to it love truly is the only reason we would spend time and money thinking about the unpleasant subject of death, and planning for a time that we won’t be around to enjoy.
Estate Planning Ensures Your Minor Children Have a Home
Part of creating your estate plan includes nominating guardians for your minor children. Without this nomination your children are at the mercy of the court should anything happen to you. Estate planning also allows you to ensure that your minor children and their guardians have the financial security they need to make a smooth transition during a difficult time.
Estate Planning Preserves Sibling Relationships
There are fewer things more stressful to a family than the death of a beloved parent. And it is at this time more than any other that fights are liable to break out between normally loving siblings: Fights over what to do for mom’s funeral, over who gets treasured heirlooms, over who dad would have wanted to distribute the estate. All of these fights can be easily avoided by creating an estate plan that spells out your wishes in clear and loving terms.
Estate Planning Allows You to Provide for Your Children and Grandchildren
You spend a lifetime raising and caring for your children knowing that someday, when you’re gone, they’ll have to fend for themselves. Creating an estate plan allows you to leave a little bit behind, a cushion your children can hold in reserve in case of emergency. An estate plan allows you to continue providing for your children even after you’ve gone.
Estate Planning Leaves an Enduring Legacy
Estate planning is not just about finances and paperwork, it’s about relationships. Creating your estate plan allows you to brush away life’s minor details and minutia and focus on what’s really important, allowing you to connect with your loved ones in a more meaningful and lasting way than ever before. Your estate plan expresses your enduring values, leaving a legacy for your family that will live on for generations to come. Friday, August 13, 2010 Does Marriage Matter in Estate Planning?
How much does “marriage” matter when it comes to estate planning? The recent California court ruling on gay marriage has thrown marriage and its meaning once again into the limelight, and has many people thinking about what marriage means on a legal level.
Anyone who pays taxes knows that your marital status matters to the state and federal government. Your marital status also impacts your rights when it comes to insurance, privacy, pensions, and even probate. For example, the property of a married person who dies without a will automatically passes to their spouse (and children)*—this is not necessarily the case for unmarried couples. Similarly, in an emergency medical situation a spouse will have access to information about his or her injured spouse, but unmarried couples do not always have this same privilege. Although there is good reason behind these privacy laws, it can be particularly distressing when couples who have lived together for years may suddenly have trouble getting medical staff to recognize their partner when a medical decision needs to be made.
Luckily, your estate planning attorney can help circumvent some of the potential problems unmarried couples may face in case of incapacity or upon death. Executing an Advanced Health Care Directive or Health Care Power of Attorney will ensure that medical personnel recognize the authority of a trusted partner to make medical decisions for you. Similarly, by creating a Will or Trust you can nominate the person you want to act as executor of your estate upon your death, and who the beneficiaries of your property will be, regardless of whether you have a marriage license or not.
The issue of marriage is one that is obviously very close to the heart, but estate planners see it on a practical level as well. In the legal world of estate planning our goal is to ensure that your wishes for end of life health care and final distribution of wealth are honored—regardless of your marital status.
*Please note: Probate laws will vary from state to state—be sure to talk to your estate planning attorney about the laws specific to your state of residence. Friday, August 06, 2010 Jane Austen’s Will: It Used to Be So Easy
Many clients are shocked when they see the sheer volume of paper in a truly well-done estate plan. A trust by itself can be hundreds of pages, not to mention the other 6 to 16 documents you may or may not have—depending on your family situation. You may find that the “simple” estate plan you thought you were getting has turned into something of a size that would rival War and Peace!
It didn’t always used to be this way. The last will and testament of the great Jane Austen, for example, was only one paragraph long:
I Jane Austen of the Parish of Chawton do by this my last will I testament give and bequeath to my dearest sister Cassandra Elizabeth everything of which I may die possessed, or which may be hereafter due to me, subject to the payment of my Funeral expences, & to a Legacy of £50. to my Brother Henry, & £50 to Mde de Bigeon - which I request may be paid as soon as convenient. And I appoint my said dear sister the executrix of this my last will & testament.
Jane Austen
April 27 1817
Although this simplicity may have worked in 1817 England, it isn’t practical in the here and now. Things just aren’t that simple anymore. First of all, although Austen appoints her sister Cassandra as the executrix of her will, the will itself neglects to specify what powers are included in that appointment, leaving Cassandra effectively unable to carry out Austen’s wishes. Secondly, the will neglects to make alternative provisions—what if Cassandra had unexpectedly died before Jane? Also notably lacking (from our contemporary perspective) are any provisions for estate taxes. And finally, discerning readers may notice that the will does not include the signatures of any witnesses, something which is absolutely necessary in order to execute a valid will today (with the exception of holographic wills, which are often created in emergency situations, are entirely hand written, and do not require the signatures of witnesses.)
We all may long for simpler times, especially when it comes to something most people think will only benefit their heirs and not themselves; but many of the rules and regulations that are dismissively thought of as “hoops to jump through” are there for your best interest. They exist to protect your heirs and your legacy from fraud, misuse, greed and neglect. Far from being a chore, creating a thoughtful and legally valid will these days is actually an act of love... One might even say it’s a matter of sense and sensibility. Wednesday, August 04, 2010 You Know the Importance of Planning... But Do Your Aging Parents?
If you have been reading our blog then you know that this year—the year without a federal estate tax—is an important year, and that next year—when the estate tax returns—will be an even more important year for planning and reviewing your estate. You know this... but do your parents?
Kimberly Palmer, author of this article in U.S. News and World Report says that “bringing up the estate tax with your aging parents can be as awkward as inquiring after their sex life.” Talking about any kind of estate planning with your parents can indeed be awkward, but as Palmer points out it is extremely important... especially now when the repeal and reinstatement of the estate tax means that “ignoring the issue could mean giving Uncle Sam a big chunk of one's estate inadvertently.”
So how can you bring up the topic of estate planning with your parents without them thinking that you’re more interested in your inheritance than your parents’ well-being? The article mentioned above has a few ideas, including:
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Talk about your own estate planning experienceand how relieved you are that everything is in place.
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Talk about recent celebrity deathsthat have been in the news: George Steinbrenner, Michael Jackson, etc.
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Mention how concerned you areabout the uncertain estate tax situation.
Of course, the best policy is to just be honest. Tell your parents truthfully that you are concerned about their financial stability, about keeping the family peace, about your grasping uncle Mickey taking the antique dining set you’ve loved since you were a child. Explain that you only want to help... but remember that the choice is ultimately theirs. As author Deborah Jacobs says in the article, "if they don't want to talk about money, then you need to drop it and accept that this is not something you should pursue... If you have tense times towards the end of your parents' life because you're talking about estate planning, it will stay with you forever, and it's just not worth it." Wednesday, July 28, 2010 Not Just Estate Tax Anymore
Anyone who has been following our blog knows that the expiring Bush tax cuts (including the repeal of the estate tax this year and the tax’s reinstatement next year) have given lawmakers no end of trouble as they struggle and debate—and debate and struggle—to agree on new tax legislation moving forward. In fact, The Wall Street Journal calls the issue “a ticking time bomb,” while the New York Times warns that “an epic fight is brewing.” It seems that the only thing everyone does agree on is that something has to be done before December 31, 2010.
Unfortunately, according to both news sources, politics takes precedence over legislation. “The tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery,” warns David M. Herszenhorn of the NY Times, “’...this is code for the role of the federal government, the debate over the size of government and the priorities of the nation.’”
According to David Wessel of the WSJ party lines are clearly drawn. “The Obama administration is pressing to extend the Bush tax cuts for everyone with an income under $250,000 a year and to raise taxes on those above. A recent Pew/National Journal poll found that only 11% of Democrats favor extending all the Bush tax cuts.” Meanwhile, “Republicans are happily staking out the no-new-taxes turf, playing to their traditional constituency. Pew says 52% of Republicans favor extending all the Bush tax cuts.”
It would certainly give taxpayers some comfort if legislation could be passed quickly and decisively, but Herszenhorn warns that it’s not likely to happen, “Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that... lawmakers in both parties say could be the worst outcome.”
Either way, the best advice we can give our readers is to be prepared. Just because lawmakers keep putting off a decision doesn’t mean you should. Talk to your attorney about the best way for your family to weather the coming storm. Be aware of changes to tax laws and update your estate plan accordingly. Monday, July 26, 2010 The Comfort That Comes With Planning Ahead
Everybody thinks it won’t happen to them. Or rather, everybody knows it’s going to happen to them eventually, but nobody thinks it’s going to happen tomorrow, or next week, or even next year. The “it” of which I speak is, of course, death. It is this perceived immortality that allows so many people to put off their estate planning until it is too late.
But today’s blog post is not a cautionary tale about a family who put off their planning and regretted it, today’s post is about the peace and relief that forethought and planning brings not just to your family, but to you as the person making the plan.
In this article in Market Watch Chuck Jaffe tells the moving story of his brother Rob, who insisted 2 years ago on creating an estate plan even though he and his wife were both healthy. As Jaffe puts it, “While not pleasant subject matter, it was not morbid... you'd rather be drinking lemonade on the veranda, but it wasn't a sharp stick in the eye.” However, when Rob became unexpectedly ill in May of this year the estate plan turned out to be a comfort to Rob and his family—such a comfort, according to Jaffe, that Rob “made me [Chuck] promise that I would write about him... when his time was up, because his story would help others.”
"People need to understand... how big a blessing it is to know -- when their time comes -- that they have everything in order, that they don't need to stress or worry about how things they worked their whole life for are going to turn out. ... I would not want to waste a minute of my life now having to do estate planning or worrying that I live long enough to get documents filed or whatever garbage comes with it... Focusing on death and dying while you are living, that's easy; having to focus on death when you are dying, that would be unimaginable."
In our business we frequently see how much easier it is for people to create a plan when they’re healthy, as opposed to the stress that comes with creating a plan when they are sick. Thank you Mr. Jaffe for sharing your brother’s moving story. We hope that your (and your brother’s) words will help motivate others to take comfort in planning ahead. Friday, July 23, 2010 Should You Pre-Plan Your Own Funeral?
In just about every will or trust you will find something about the estate “paying the deceased’s final expenses,” otherwise known as funeral and/or memorial costs. As a small portion of what can sometimes be a very large and intricate document, this “final expense” clause can seem unimportant—but we know better.
A funeral comes at a time when the death of a loved one is recent and close, and many people are still in shock and in some cases struggling with the reality of loss. Funerals help grieving loved ones come to terms with death and say their final goodbyes… but for the person planning the funeral the experience can sometimes be a frustrating, painful, and expensive experience. Planning ahead for your own funeral—discussing it with your loved ones and even including your wishes in your estate plan—can remove this burden from their shoulders when the time comes.
Although pre-planning a funeral is essential, pre-paying for a funeral can actually be detrimental. According to The Funeral Consumers Alliance there are just too many things that can go wrong, “[prepaying for] funerals may not cover every item of service you and your family expect, and there's often no guarantee the money you pay today will keep up with inflation to pay the cost of the service you've picked out.” In addition, “many state laws don't offer much protection for your prepaid funeral money.” If you change your mind or move out of the area there’s no assurance that you’ll get your money refunded. That having been said, although pre-paying may be a no-no, but setting aside funds—in an account, CDs, or a specially designated insurance policy—is always a good idea.
Talking about your wishes for “final disposition of your remains” is something that should always be discussed with your estate planning attorney. Whether you choose to pre-plan your funeral or not, having some basic instructions in your will or health care directive for your preferences regarding burial, cremation, organ donation and so on will be a huge help to your loved ones during a difficult and emotional time. Monday, July 19, 2010 Estate Planning Advice for Ex-Pats and World Travelers
Estate planning can be a pretty involved affair, even for people whose lives are fairly straightforward; but if you are an ex-patriot, have dual citizenship, or plan to leave assets to family members in another country the estate planning process can by downright mind-boggling. This is because each country is going to have its own laws regarding heirs and distribution, while some governments (according to this article in the New York Times) will even “require their citizens or residents to pass assets on to people other than those whom they would choose.”
The United States has avoided these “forced-heirship” laws (although your state’s laws regarding distribution of assets in the absence of a will or estate plan may feel like forced-heirship), but these laws “are prevalent in many parts of the world, notably the Middle East, where Islamic law predominates, and continental Europe.” If you are a United States citizen residing in one of these “forced-heirship” countries—or if you are a citizen of one of these countries residing in the United States—you will definitely want to talk to your attorney about how best to protect your family and your assets.
Just how you will go about building your web of protection will depend on a number of variables, including your citizenship, your country of residence, and in which country the assets were acquired or are held. Most estate planners agree that a trust is generally the best way to go about protecting your assets, but a trust may not work in every situation. “The legal systems that have forced-heirship rules tend not to recognize trusts.” You may find that you’ll have to set up a will or estate plan in two places: one in your country of origin and one in your country of residence.
And of course international estate planning is not all about heirs and distribution—especially if you have young children. International guardianship documents should be carefully drafted and should include provisions for temporary guardians, travel arrangements, and medical powers of attorney for minors.
Living in a global community has its pros and its cons—the best way to successfully span two countries or cultures is to be flexible... and be prepared! Friday, July 16, 2010 One Man’s Trash is Another Man’s... Heirloom?
Families have a way of acquiring great numbers of treasured objects and mementos: photo albums, antique books, Wedgewood China... a mounted deer head? You just never know what’s going to end up in the trash-heap and what will be kept and passed on to the next generation. Ellen Lupton mentions in her recent article in the New York Times that she and her husband kept the Wedgewood China and (surprisingly enough) the deer head. But the question she puts forth is... why?
Lupton’s article, entitled How to Lose a Legacy, makes the point that the difference between old stuff as trash and old stuff as treasure lies largely with you and how you choose to leave all this stuff to your heirs. “You can’t buy an heirloom at Pottery Barn or IKEA. It comes via gift, bequest or a heated sibling brawl.”
Lupton says early on in her article that “Even folks in the ‘die broke’ crowd, determined to enjoy their remaining assets rather than leave them to the ungrateful grandkids, may secretly hope the family will love and honor their dearest possessions.” But secret hopes aren’t of any use to your children or grandchildren after you’ve passed away. Part of the job of an estate planner is to help you express these secret hopes to your heirs and leave your treasured possessions in safe and appreciative hands.
Of course your heirs are going to have minds (and memories) of their own, and your treasured silver cake platter could still end up in the local antique store; but the best way to keep your treasures in the family is to make sure your family knows your wishes. If they know how much your grandmother’s English tea set meant to you (and why it meant so much to you) it’s going to mean that much more to them.
You may share a life and history with your heirs, but you can’t expect them to read your mind. If you can put your stuff into context—let each heirloom tell a part of your story and reflect a meaningful relationship—the legacy you leave will be priceless. Wednesday, July 14, 2010 Will Billionaire Steinbrenner’s Death Inspire Congress to Reinstate the Estate Tax?
Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010. It’s hard to deny the significance of such events in a year when there is no estate tax.
According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year. This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene... Already we have four billionaire families who are not paying taxes -- Steinbrenner's being the last one. Many billions are being lost. We have to address that reality right now.”
Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer. One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington. Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate. Wednesday, July 07, 2010 Communication is Key: Talk to Your Doctor About Your End-Of-Life Wishes
Part of creating an estate plan is talking to your spouse, your family—and yes, your attorney—about your end-of-life wishes. A living will or healthcare directive is an essential part of any estate plan. This is the document in which you nominate the person or people who will make healthcare decisions for you when you are unable. It is also in this document that you specify what treatment you would (or would not) like to have at the end of your life. It is in this document that many people specify their do not resuscitate (DNR) orders; and once they’ve created and signed this document they think they’re all done.
Not quite.
Studies have shown that even with perfectly executed healthcare directives many patients receive treatment they specifically did not want; this is because their wishes are unclear or have not been communicated to medical providers. Some states have found a way to prevent this miscommunication... with a program called Physician Orders for Life-Sustaining Treatment, or POLST. “The program involves an innovative medical form that is signed by a doctor, allowing patients to specify what kind of care they want at the end of life, such as feeding tubes and other medical interventions.”
The key here is that the medical form is signed by the patient’s doctor. This requires patients to include their primary care physician in their decisions regarding end-of-life care—or at the very least notify their physician of these wishes—with excellent results. A study published in the Journal of the American Geriatrics Society found that “patients with the Physician Orders for Life-Sustaining Treatment forms had much less unwanted hospitalization and medical interventions.”
This is wonderful news if you’re in a state like California or Oregon, which already has the POLST program in place. But it doesn’t mean you’re out of luck if you happen to reside in a non-POLST state. Even without the official POLST program, the key to having your end-of-life wishes respected is communication; communication with your doctor, with your family, and with the nursing or caregiving staff most likely to be attending you in an emergency situation.
If you are concerned about having your wishes followed, don’t hesitate to talk to your doctor and/or nursing staff about your living will or healthcare directive. Even have them read and sign off on it if necessary. After all, a healthcare directive is a wonderful tool, but it doesn’t do much good gathering dust in your filing cabinet. Make sure your family and medical staff are aware of your end-of-life wishes. Monday, July 05, 2010 Heirs Pay the Price for a Do-It-Yourself Estate Plan
A recent article in U.S. News and World Report has brought the battle between professional estate planners and Do-It-Yourself document proponents out into the open. As author Kimberly Palmer points out in the article, lawyers believe Do-It-Yourself is dangerous when it comes to estate planning, and they will certainly tell you so when asked. But here’s the thing—estate planning lawyers rarely get asked. EP attorneys don’t get D-I-Yers coming into their offices to ask questions; it’s the heirs of the D-I-Yers who will have to come in and hire an attorney when the Do-It-Yourself will doesn’t function properly.
There is a lot of legal knowledge, personalization, and attention to detail that goes into an estate plan, even if you are young and think you have negligible assets. The U.S. News article quotes one Brooklyn-based attorney as saying "Unless you are single and have absolutely no money...you need an estate planner.” There are just too many things that can be forgotten, misunderstood, or just plain go wrong; and a small mistake can lead to big problems, even to the extent of invalidating your entire plan.
For example, did you know that...
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Although a will doesn’t usually have to be notarized, most states do require you to sign it in the presence of witnesses?
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You should always nominate at least one back-up guardian for your minor children in case your first choice is unwilling or unable?
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Although there is no estate tax in 2010, many heirs will actually end up paying more because of capital gains taxes?
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Your will becomes a public document upon your death, leaving your heirs open to criticism, claims and contest suits by predators and disgruntled relatives?
These are issues that could completely de-rail all your good intentions in a Do-It-Yourself document, but would be easy for an estate planning attorney to anticipate and address. Contact our office (or your own trusted, local attorney) to ensure that your estate plan is current, comprehensive, and complies with all state and federal regulations. Friday, July 02, 2010 No Estate Tax Means No Need to Plan, Right? . . . Wrong.
Since the estate tax was repealed at the beginning of this year many people have rejoiced in the thought that there’s no need to create an estate plan. While it may be true that for the moment, at least, your assets don’t need to be protected from outrageous estate taxes, there are still a number of reasons why it is not only beneficial but essential to have a plan in place for your finances after you pass away.
Attorney and accountant Bob Carlson has written an article in InvestingDaily.com in which he enumerates four reasons to create an estate plan even without the motivating factor of estate taxes (he calls this Legacy Planning):
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Financial Security
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Continuing management and caretaking
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Protection (from creditors, predators and lawsuits, if not from taxes)
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Other tax burdens (such as state taxes, capital gains taxes, gift taxes, etc.)
There are many things we do in our lives not because we have to, but because we know it’s the right thing to do. Estate planning is no different. Creating an estate plan is not just about taxes, it’s about you and your family planning for the future. Creating an estate plan is about being there for your children even after you’ve passed away; it’s about protecting them, providing for them, and even teaching them fiscal responsibility.
Will the lack of estate taxes in 2010 lead you to ignore these other important reasons to protect your family and plan for the future? Monday, June 28, 2010 How to Plan for the Future While Estate Tax Debate Continues in the Senate
With all the estate tax proposals currently floating around the Senate the future of the estate tax is anybody’s guess... but that doesn’t mean we’ll stop trying to figure it out. A recent article in the Wall Street Journal touches on some of the more recent (and more controversial) proposals floating around Washington.
The proposal that is currently getting the most attention comes from Vermont independent Sen. Bernie Sanders and three Senate Democrats who say that "It's time for multi-millionaires and billionaires to pay their fair share." And pay they would! According to Sanders’ proposal “the [estate tax] exemption would be $3.5 million for an individual or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.”
Of course, it’s too early to get worked up just yet, Sanders’ proposal is just one of many right now, and the debate still rages in the Senate with no clear winner in sight. Of course, if no action is taken the estate tax will come back in 2011 with a 55% tax rate on estates above a mere $1 million.
Either way, you’ll want to be prepared, and the only way to do that is to keep in contact with your estate planner and make sure that your plan is designed to handle anything. Although it may be tempting to wait to update your estate plan until a clear decision is made, all that really does is leave your family unprepared if something should happen to you while the tax is in flux. Contact our office to find out what adjustments should be made to your estate plan to keep your family protected while lawmakers continue to debate the future of the estate tax. Monday, June 21, 2010 The Estate Planning Needs of Women
We’re all about equality, but the fact is that women have different estate planning needs than men. Whether they’re single or married, have children or no children, women have different things to think about when it comes to estate planning. This means that women need to be involved in the planning process: Express their own wishes, voice their own concerns, and ask their own questions. Here are three of the ways that women are different from men—and how it affects their estate planning.
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Women live longer than men.Among the senior citizen population (65 and older) more than three times as many women as men are widowed. This longer life expectancy means two things; first of all it means that women are the ones who will likely have to deal with taxes. When a married person dies their assets can transfer to their spouse tax free. This doesn’t avoid taxes it merely delays them, and the surviving spouse (the woman) will have to be the one to minimize the tax burden on the children. Second of all, women have to worry more about their retirement savings lasting them to the end. Estate planning is partially about distribution of your remaining assets when you die—it takes careful planning to ensure that you’ll have remaining assets after a long and active life.
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Women are the caregivers.This includes taking care of young children and elderly parents. Statistically, women are the ones who will initiate the estate planning process—mainly because they are concerned about the guardianship of young children. Women are also the ones who will eventually have most need of a caregiver agreement or help navigating the Medicaid application process when they’re caring for their older relatives.
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Women need to be most concerned about loss of primary income.Because men are still generally the primary breadwinners in a family, women are the ones most often left out in the cold when their spouse passes away and they lose that income stream. Women need not only to make sure they and they’re partner both have adequate insurance policies, they need to plan to keep those insurance proceeds avoid heavy taxes upon death.
All of these things can be discusses and planned for with your estate planning attorney—and it doesn’t take away from your spouse or children. In fact, having your own plan in order actually helps the important people in your life. So don’t wait any longer, plan to protect yourself today and in the future. Friday, June 18, 2010 It’s a Dog’s Life
There seems to be some confusion nowadays about whether “a dog’s life” refers to a life of ease or toil, but for these wealthy canine heirs life is definitely the former! Whether it’s a wealthy eccentric leaving millions to a dear canine companion or whether it’s a lover of animals leaving a portion of their estate to charity, more and more dogs (and other animals) are being included in wills and trusts.
Naming your pet in your will or trust may be odd, but it’s perfectly legitimate. Unfortunately, disinherited family members may not always agree. When Leona Helmsley passed away in 2007 she left $12 million to her dog Trouble, but that amount was reduced by Judge Renee Roth of the Manhattan Surrogate Court to a mere $2 million. The current canine court battle is over the will of Miami heiress Gail Posner, which leaves $3 million to her dog Conchita, as well as $26 million split between seven of her bodyguards, housekeepers and other personal aides.
Naming your pet in your will may be perfectly legitimate, but the truth is that there is nothing to stop disgruntled family members from contesting your wishes. If you choose to do something “unusual” in your will or trust, or if you know of family members who are likely to make trouble, it may be necessary to take extra precautions to ensure your wishes are followed. Inform your estate planning attorney of the potential conflict and discuss what steps can be taken to prevent it. In some cases “no contest clauses” can be added to a will or trust to discourage court battles. In other cases a simple meeting of all family members with your attorney to explain your wishes and reasoning will do the trick. Talk to your attorney or call our office to find out what can be done to keep the peace in your family—canine or human. Wednesday, June 16, 2010 More News About the Repealed Estate Tax
Six months into 2010 and the estate tax repeal is still making news. This time it’s a story about Texas billionaire Dan L. Duncan who died in March, leaving all of his billions to his spouse, family and various charitable organizations... and none to the government:
“Had his life ended three months earlier, Mr. Duncan’s riches — Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world — would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher... Instead, because Congress allowed the tax to lapse for one year and gave all estates a free pass in 2010, Mr. Duncan’s four children and four grandchildren stand to collect billions that in any other year would have gone to the Treasury.”
According to the NY Times article this news is meeting with mixed reactions. Opponents of the estate tax (sometimes called the death tax) are hoping to make the repeal permanent. Others, however, don’t agree:
“’The ultrawealthy in this country will still be able to pass on enormous wealth to the next generation,’ said Chuck Collins, who studies income inequality and has worked with billionaires like Warren E. Buffett and Bill Gates to promote an estate tax. Mr. Collins argues that the tax is a ‘recycling program for economic opportunity.’”
Whatever happens in future years, considering that this year is already half over it can only be hoped that heirs and executors won’t have to worry about the tax being reinstated and made effective retroactively; which leaves us free to look ahead and plan for 2011 when the estate tax comes back at a whopping 55%. If you’re wondering how all these changes will impact your estate plan today, tomorrow, or years in the future please call our office. Monday, June 14, 2010 Options Abound With Out-of-State Trusts
If you have a family trust—or are considering creating a family trust—to protect your assets you may want to ask your attorney about creating an out of state trust. It’s a grantor’s market (so to speak) and creating a trust these days doesn’t mean you have to simply accept the tax laws of your state of residence. Creating a trust in another state—with tax laws that are friendlier to trusts—is a perfectly legal option, “the only real requirement is that [you] choose an in-state trustee.”
As we mention frequently on our blog, there are many reasons for families to create a trust: credit protection, keeping assets in the family, estate planning, educational savings, and many more. Furthermore, trusts are no longer an exclusive tool for the rich and famous; trusts are useful for just about everybody, and the states recognize this.
“States such as Alaska, Delaware, Nevada, New Hampshire, South Dakota and Wyoming have modified their trust laws in recent years to make them more attractive to individuals and families, including nonresidents, looking to minimize taxes, shield assets from creditors and preserve family assets in the event of a divorce, among other things.”
If you would like to explore your options for out-of-state trusts we recommend working with your local attorney, someone you trust who can meet with you when needed, who can draft the trust documents for you. Your local attorney can then have a licensed attorney from the state of your choice review the documents for state-specific issues. Friday, June 11, 2010 How To Choose Your Executor or Personal Representative
Serving as someone’s executor or personal representative is a HUGE job, and not for the faint of heart. Although it is commonly considered an honor, there is a lot of work involved, and an executor must have a great capacity for organization, attention to detail, meeting deadlines, and more. You may be tempted to name your favorite sibling or eldest child just to keep from hurting any feelings, but your family and heirs will not be well served if you choose your executor based on emotion rather than ability.
Keeping this in mind, here are 4 things to consider when choosing your executor or personal representative:
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Your executor should be trustworthy.Your executor will be privy to all of your financial secrets: reviewing estate assets, determining your liabilities and paying off creditors, settling outstanding debts, and making distributions to heirs. Chances are you don’t want all that information spread throughout the family or community.
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Your executor should be organized.The person you choose will be in charge of a number of detailed tasks, both large and small. He or she will be making lists of assets, meeting court deadlines, making timely distributions for estate taxes, and more. Missing or being late for one of these many steps can draw out the entire process, costing your heirs both time and money.
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Your executor should be financially savvy.One of the responsibilities of executor is to keep the estate viable (making sure the mortgage and fees continue to be paid) during the probate process. If you have investment accounts you’ll want to ensure they won’t languish and lose their value before they can be distributed to your heirs.
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Your executor should have heart. Although probate is a can be a difficult and detailed process, it is at its core about the people you love. Your executor should have the ability to be caring and compassionate during this emotional time.
If you don’t know anybody you would trust with all of these responsibilities don’t lose faith, there are other options. You can choose a bank or financial institution as your executor, or you can ask your estate planning attorney to partner with the person you choose as executor—helping them with the difficult tasks and ensuring a smooth probate for all involved. Friday, June 04, 2010 Ensure that Your Retirement Savings Goes to the Right People
Do you know how your retirement plan fits into your estate plan? Ideally you would never have to worry about this; you would spend the last penny of your savings on the day you die. But life rarely works out according to ideal circumstances, and the reality is that doing a little bit of estate planning for your retirement savings can save your heirs a whole lot of money and confusion.
The good news is that it’s fairly quick and easy to make arrangements for the distribution of your retirement assets after you die—that’s why you fill out all those beneficiary forms when you start a new job or open a new retirement account. The bad news is that it’s also fairly easy to forget about these forms as the years go by, which is how too many people end up inadvertently leaving their retirement assets to a divorced spouse or aging parents rather than to their current spouse or children. How can you ensure that your retirement savings will go to the right people?
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First and foremost, you’ll want to review your beneficiary designation forms frequently: every 2-5 years, and whenever you experience a major life event.
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Second, always name contingent beneficiaries! You may feel that if you name your spouse as the primary beneficiary you’ve done all you need to do, but in life you should always have a fallback plan, and your retirement assets are no exception.
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Third, don’t count on your will to take care of everything. Your named beneficiaries on your retirement account will override the beneficiaries named in your will. If you are certain you want to leave your retirement assets to your estate, do so through a living trust and under the advice of an estate planning attorney.
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Fourth, if you’ve named minor children as beneficiaries (either primary or contingent), make sure you name a guardian for your kids and a trustee for their assets. You may want to use those retirement funds to provide for the kids if anything happens to you, but minors cannot legally control assets, and they’ll need someone to manage their inheritance for them until they come of age.
If you have more questions about fitting your retirement assets into your estate plan, more information is available in this article from InvestorGuide.com, or call our office for more detailed and personalized information. Friday, May 28, 2010 Planning for the High Cost of Raising Your Child AND Your Family
How much does it cost to raise a child from birth to age 18? Online calculators now estimate the cost at about $250,000 (varying depending on where you live around the country), but any parent will tell you that it costs much more than that to raise a family. This is because children don’t grow up in a vacuum. Raising a child includes the cost of food, clothing, diapers, child care, and other necessities... Raising a family includes all of the above plus college education, insurance, retirement savings for mom and dad, and let’s not forget a little bit of estate planning.
Does estate planning really rank up there with college savings and retirement? If you have a growing family the answer is an absolute yes. Financial experts such as the one quoted in this article in the Boston Globe will agree; your estate plan is a kind of family insurance, and is just as important as your homeowners or life insurance policy.
Raising a family and creating your estate plan both require the kind of split thinking that allows you to look at the long-term future while still keeping yourself firmly grounded in the necessities of the here and now. Just as parents must consider both onesies and universities, roller skates and retirement—so must your estate planning take into consideration what your family would need if you were to disappear today, as well as planning for the possibility that you could be alive and well and spending your money long past the age of 85 or 90.
If you have a growing family—or are a young couple about to jump into the joys of parenthood—don’t let the demands of the here and now blind you to the needs of the future. Schedule time every few months or so to sit down with your partner and re-evaluate your current financial situation as well as your future financial portfolio and your estate plan. Make sure they continue to reflect your long-term needs and desires. Wednesday, May 26, 2010 Stay Current and You’ll Stay Protected
In many of our previous posts we’ve stressed the importance of keeping your estate planning documents up-to-date. Changes to the law, as well as changes to your own personal, medical and financial status can wreak havoc on a well-crafted estate plan if these changes aren’t addressed. A good rule of thumb is to have your attorney review your estate planning documents every 2-5 years, but are there other changes or life events that might necessitate a more immediate review or update? The answer to that question is YES!
Andrew Chan has written a short article for the Boston Globe in which he lists 13 significant life events that should have you reaching for the phone to call your attorney. To go to the article and read his list click here. To Mr. Chan’s list we would add just a few more life events that could have an effect on your estate plan:
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A change in residence—especially if you move to a new state.
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Children or grandchildren turning 18 or graduating from college—this may or may not change your estate plan, but at the very least your young adults will now need their own health care directives and privacy forms.
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If you anticipate one of your relatives or heirs disagreeing with your wishes and challenging your will.
There are of course a great number of things which could impact your estate plan, not all of which can be named in one article or blog post; but if you stay aware—and stay in touch with your estate planner—you can rest easy that your plan will continue to function exactly as you intend. Monday, May 24, 2010 Back to Basics: Forethought and Planning Prevent a World of Hurt
Wills and estate plans are always touchy subjects among family simply because they can have so much hidden meaning... at least that’s what heirs often think:
I got mom’s jewelry but my sister got a cash gift—does that mean mom loves her more than me?
What’s wrong with me that Dad didn’t choose me as executor?
I never really liked the vacation home, but is my brother trying to cheat me by buying me out?
If I ask my parents about their estate plan now will they think I’m eager for them to die?
Wouldn’t things be so much easier if we could just lay all the estate planning issues on the table and discuss them openly and without judgment? Well, that is exactly what this article on abc.com suggests we do.
The article includes 3 “Estate Planning 101 Inheritance Lessons” to help your family become better prepared for the inevitable: 1. practice honesty and transparency, 2. plan ahead and update often, and 3. think through your own wishes and the wishes of your heirs. Three simple suggestions that can save you and your heirs a world of fighting, hurt feelings, and high legal fees later on.
But it’s not always easy to start such a sensitive conversation with family—that’s where our firm comes in. We can help you with the tough questions and decisions, and when the time comes we can help you discuss those questions and decisions with the rest of your family. Although it’s tempting to simply bury your head in the sand, the longer you put it off the more difficult it becomes. Let us help your family find a peaceful solution today. Friday, May 21, 2010 Senate Considers Option to Prepay Estate Taxes
2010 has been anything but ordinary as far as the estate tax is concerned. First there was the unexpected repeal of the estate tax (unexpected not because the repeal was unplanned, but because nobody expected it to actually happen), then the idea that congress could reinstate the estate tax and make it effective retroactively, and now there are rumblings that certain Senators are considering a prepaid estate tax!
According to this article in the Christian Science Monitor, “News reports suggest that the Senate may soon consider restoring the estate tax with an option allowing people to prepay their tax before they die. Details are apparently still in flux as senators negotiate. We—and maybe they—don’t know yet what they’ll propose for the basic estate tax but it’s unlikely to be harsher than the 2009 version.”
If something like this gets passed, a visit to your estate planning attorney will be more important than ever, especially if you have the wealth to protect and the means to spend some money now to save a lot of money later.
Of course, this is all just speculation right now, but even the idea of prepaid estate taxes tells us just how much the government is counting on that revenue—one way or another. If you were under any illusions that the repeal of the estate tax might turn into a permanent thing this should be more than enough to convince you that the estate tax is here to stay. Wednesday, May 19, 2010 Harvard or Shady Oaks? How to Choose Your Financial Priorities
There are any number of things for which you can be earning and saving money: investments, retirement, college, a home, a car, the current high-tech gadget... The thought of it all is enough to make a person dizzy! So how do you decide what are the most important things for your family’s financial happiness and security right now, and years down the road? Choosing your financial priorities requires taking stock of the present, a lot of thought about the future, and a little bit of help from trusted advisors.
Robert Brokamp has written an article entitled “Should You Save For College Or Retirement”, which focuses on helping families and individuals organize their financial priorities. In spite of the title of his article, what Brokamp really stresses that there is more to good financial health than just college or retirement; a good financial future means taking care of your finances now by paying off credit cards, building an emergency fund, and having adequate insurance.
Building a strong financial future includes more than just planning for college and for retirement, it should also include planning to ensure your family’s financial security should something happen to you. Brokamp alludes to this in his article when he mentions purchasing an adequate life insurance policy, but he neglects to mention how little that policy will actually provide if your assets are eaten up after your death by estate taxes, probate fees, or a young and spendthrift son or daughter.
When it comes to your financial health, our firm may not be able to help you with the credit card fees, but we can help with the rest—especially ensuring that your efforts to save right now will not go to waste years down the line. Wednesday, May 12, 2010 Trade Like A Man, Save Like A Woman
How will you be planning for your retirement? According to CNBC your gender could play a bigger role than you think in your retirement plan. While of course not everyone will adhere to gross generalizations, studies have shown that men and women do have a tendency to take a different approach to saving and investing for retirement. Which way is the right way? Well, as John Ameriks points out in the article, “It's not a matter of one gender being right and the other wrong... You just need to be aware of the differences when you're making investing decisions.”
The differences may not be as surprising as you think. Here are some of the things CNBC had to say about how men and women invest and save:
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Men tend to be overconfident about their investing and retirement planning skills.
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Women generally prefer less risky investments.
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Men don't plan for a long retirement.
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Women save more over time.
Considering the fact that our society still tends to view the stock market as “a man’s game”, and one with which women aren’t quite as comfortable, it makes sense that a man would be more confident with frequent buying and selling, while a woman might tend to go for the safer investment requiring less action and attention over the long haul. But lack of attention doesn’t necessarily mean lack of awareness. Women tend to worry more than men about security in their Golden Years. The article posits that this is because many men don’t expect to live much past 80, but another possibility is that men have more confidence in their ability to earn a living at any time in their lives; whereas women (who are often the ones to leave the job market in order to care for family) are more afraid of having to depend on an outside source for their livelihood.
Part of planning for your retirement is planning for your estate. Whether you are a man or a woman, adventurous or conservative, a trader or a saver—your retirement plan and your estate plan need to be in line with each other. Our office can help ensure that your retirement and estate plans are compatible... both right now and decades down the line. Monday, May 10, 2010 Robin Hood Lives On: Tax Breaks to Help Your Family
It may seem like you just can’t catch a break when it comes to paying taxes, but according to this article in the Wall Street Journal there are a few little known tax breaks that could end up saving your family money. Some are new—so new, in fact, that it is still before the Senate—such as the tax exemption for employer provided cell phones and smart phones; and some—like the tax free income homeowners can earn if they rent out their home for 14 days or fewer during a year—have been around for a few years.
Of particular interest to our clients is the gift tax exclusion (another lesser known tax break that has been around for a few years.) As stated in the article, “Anyone may give anyone else up to [$13,000] per year in cash or property, free of gift tax. One partner of a married couple can double the gift and the exemption. So a couple with three married children and six grandchildren could give away over $300,000 a year, tax-free.”
We say that this gift tax exclusion may be of particular interest to our clients because if you are looking for a way to lower your estate tax, or anticipate applying for government medical services in the next few years, giving gifts to loved ones right now may help you achieve your goal—if you go about it the right way.
Contact our office for more information on how any of these “Robin Hood” tax saving techniques may help your family this year. Friday, May 07, 2010 Take Action in the Face of Estate Tax Uncertainty
If you’ve been reading our blog regularly then you know that the 2010 estate tax repeal has caused no end of confusion and uncertainty; not only for those who have been dealing with probate and trust administration since the tax was first repealed, but also for those who are trying to think ahead and do the right thing for their spouses and children. Many people have come to the erroneous conclusion that they have no choice but to stand by and wait until the Washington politicians make up their minds about whether or not to restore the estate tax retroactively—but we’re here to tell you that you don’t have to wait to protect your assets and your family.
Forbes.com recently published an article entitled How to Protect Your Family From Estate Tax Uncertainty. This article suggests that there are a number of steps you can take right now to protect your heirs and your assets, even if you don’t know what changes lawmakers may enact tomorrow or 2 months from now. Their suggestions include everything from working with your estate planning attorney on contingency plans to account for anomalies such as no estate tax or minimum exemptions, to common sense action items such as taking the time now to track your cost basis for assets (to help your executor and heirs determine the change in value for tax purposes.) The Forbes article also suggests that some people may want to plan to save by giving—taking advantage of the gift tax exemption amounts.
There are always steps you can take to ensure that your estate plan is up to date, our firm can be your compass and your guide; we can help your family prepare for whatever the future may have in store. Monday, May 03, 2010 Recent Deaths Bring Home the Consequences of No Estate Tax in 2010
There was too much confusion to be much rejoicing when the estate tax was repealed for a year on January 1st, 2010. Although the words “no estate tax” may sound good, nobody really expected the state of affairs would last. Most experts believed that Congress would never actually let it happen in the first place; then when ’09 became ’10 without any action on the estate tax repeal that the George W. Bush administration had put into place experts warned people not to get too comfortable, that a retroactive estate tax would likely be implemented.
Well, we’re 4 months into 2010 and there is still no retroactive estate tax—but there is also still no rejoicing. This is because the lack of estate tax has actually created more problems than it has solved for the wealthy and affluent. According to this article in Financial Advisor Magazine the recent deaths of Texas billionaire Dan Duncan and Taco Bell founder Glen W. Bell, Jr. have only made it clear to tax attorneys that “lawsuits of various kinds will blossom in the estate-tax vacuum. The more money left on the table when the wealthy die, the more likely heirs are to fight for years over who should inherit.”
And you don’t have to be a billionaire to feel the consequences of the lack of tax. This article in Bloomberg Businessweek explains that those who think they’re catching a break on the estate tax could instead “...wind up paying stiff capital-gains taxes on inheritances. That's because of the disappearance of what's known as the "step-up" in basis, which allowed assets to be revalued for tax purposes at the time of death.”
But even this is preferable to finding yourself unintentionally disinherited by standard estate tax clauses included in older wills and trusts, a scenario that is more likely to happen than you may think if your spouse or parent hasn’t had their estate plan reviewed yet this year.
What is the bottom line? Every silver lining has a dark cloud, and you want to take every precaution possible to keep your heirs safe from the storm during this “gap year” in the estate tax. Wednesday, April 28, 2010 Family Feuds: Your Estate Plan Can Save Your Kids’ Relationship
Parents want to think the best of their children, but the fact is that many adult children lose their perspective in the wake of the death of a parent and end up permanently damaging their sibling relationships. When mom or dad dies the hurt and emotion takes over; insecurities come out, deep-seated rivalries make themselves known, and logic goes out the window. What all of this can lead to is years and years of brothers and sisters taking each other to court, spending thousands of dollars of your estate fighting over mementos and heirlooms, and lifetime relationships in shatters. . . Unless you have an estate plan.
A recent article by Scripps Howard News Service explains that the best way to prevent this from happening to your children is by creating a good estate plan. A good estate plan can be a great comfort to your children, and can save them thousands of dollars in probate and legal fees; and most importantly, a good estate plan is very clear about your intentions for your assets, leaving no room for court battles or ugly disagreements. But getting that good estate plan takes time and forethought—and the help of a professional.
A good estate plan takes into account the relationships and personalities of your heirs, as well as your own wishes. If one of your children has a problem with substance abuse, or if two of your children had a fight 10 years ago and still don’t speak, those things are considered in the creation of the plan. A good estate plan deals with small items and family heirlooms with emotional value, as well as real property and valuable liquid assets. A good estate plan is created with the idea of creating the best future for your heirs; it doesn’t leave the difficult decisions to be made by others when you’re gone.
If you would like to know more about how to smooth the way for your children and grandchildren, contact our office. We can help you create not just a good estate plan for your situation, but the best future for your family. Friday, April 23, 2010 Your Family Is One-Of-A-Kind; Your Estate Plan Should Be As Well
According to statistics the average U.S. family size is 3.2 members. The median age of a man upon his first marriage is 28.1, the median age of a woman is 25.9. Also according to statistics, approximately 60% of couples own their home, 70.7% of mothers with children under the age of 18 go back to work, and 6% of men are likely to be unemployed.
Do these statistics accurately portray your family?
“Average,” “median,” and “approximately” may be fine for statistics, but it’s certainly not what you want from your estate plan. Your estate plan should represent your family; your hopes for the future as well as your current needs. This may include a nomination of guardian and education trust for young children, it may include a special needs trust for your disabled adult child, or it may include incentive trusts for unambitious heirs. Alternatively, you may find that you need none of these, and that a will and simple ancillary documents will serve you just fine.
Whatever your family’s needs may be, you want them to be met by a keen, compassionate, and knowledgeable attorney; someone who will meet you face to face and listen to your concerns with an open mind, not a machine which will spit out a standard document based on numbers and averages. Estate planning may be a business, but it’s also an art, and as such it takes a real person to help create the plan that will provide for you and your family now and in the years to come. The members of our firm have our own families, we understand that you want the best for your family, and we want to help. Wednesday, April 21, 2010 Sharing Your Passion With The People Who Matter
What is your passion?
Do you love reading and collecting books? Are you a rabid coin or stamp collector? Do you find peace and tranquility out tending your garden?
Whatever it is that you love to do in your “off time”, you can bet the people closest to you know it. These are the people who give you that antique seed cabinet that you would never buy for yourself; it’s the person who finds the Ted Williams baseball card for a steal at an estate sale and presents it to you for your birthday; or the friend who happily goes with you to the antique car show because he knows hobbies are better when you have someone to share them with. These are the friendships that last a lifetime, the people who sometimes seem to know you better than you know yourself; and yet oddly, these friendships are often forgotten when people create their wills and divvy up their estates.
Many people go to their estate planner with their descendents and their financial assets foremost in their minds, and that is as it should be; but your estate plan can be more than a just a way to distribute property to the next generation, it can also be an opportunity to say thank you to the people who have touched your life by sharing with them the accoutrements and paraphernalia of your hobbies and passions.
You can express how much you appreciate your best chess opponent by leaving her your favorite chess board; or you can encourage the interest of your young philatelist nephew by bequeathing to him your extensive stamp collection; all you need is an estate plan which includes some kind of personal property memorandum. A personal property memorandum is not a difficult legal document to create—in fact, it will often be a very informal document—but it does require some forethought to ensure that your formal will or trust recognizes and refers to the memorandum.
Our office can help you create an estate plan that not only ensures the protection of your heirs and property, it also helps you leave a meaningful ‘thank you’ to the people who matter most. Friday, April 16, 2010 Real Estate Investments Bring Real Long-Term Value to Families
If there is one way to be sure money stays in the family and grows over time it is through real estate. Despite the year-to-year ups and downs of the real estate market, the value of real property continues to grow over the long term.
Real estate is often considered a comparatively easy way to maintain and grow wealth because it doesn’t require the kind of daily attention—or stress!—that a business demands. Depending on the type of property, real estate typically requires duties that are annual or month-to-month, such as maintaining the physical structures, paying property taxes, making insurance payments, getting updates from property managers, and the like.
What real estate investors might be slow to realize is that property ownership carries with it significant liability risks. Unless the precautionary measures are taken, one small misstep can result in the loss of all your real estate holdings. Imagine it, one person slips and falls in front of one of your properties, and suddenly ALL of your holdings are at risk.
Preventing this kind of mess is not as difficult as you might think—for example, putting each of your properties in its own separate legal entity is one technique that can be used to protect all of your properties (and yourself) from lawsuits. Our firm can help you with this and other asset protection techniques.
We know how important it is to keep your family and your finances safe, and we are dedicated to helping you achieve that security. Call our office and let us tell you how we can put our expertise to use for your benefit. Wednesday, April 14, 2010 Questions to Ask When Choosing a Guardian for Your Child
Choosing a guardian for your children is one of the most difficult things you may ever have to do as a parent, and if you have a special needs child the task is even more difficult. From parenting style to living situation to your gut feeling about this person’s ability to love your child as well as you do—there are endless things to consider before you ask the big question.
In honor of Autism Awareness Month, MassMutual has published a list of 10 questions for parents to ask themselves when choosing a guardian for their child with autism or special needs.
Although the list is supposed to be for parents of children with special needs, the questions are a helpful road map for any parent, not just parents of special needs children. MassMutual’s ten questions cover issues such as considering how close the person you are considering as guardian currently lives to your child, whether he or she is financially able to assume the responsibility of guardian, and whether you should name a second or third person or couple as backup guardians. These are important questions that all parents should ask themselves before choosing a guardian.
Having children means always planning ahead and thinking about the future, even as you try to live in the present and appreciate the small moments in every day. Nominating a guardian for your children makes it that much easier to focus on the here and now, because in the back of your mind you’ll know that your children will be protected if something happens to you. Let our firm help you achieve that peace of mind. Friday, April 02, 2010 One More BIG Reason to Have a Health Care Directive
Do you have a health care directive? If not, the Los Angeles Times has just given you one more reason to create one: Advance directives for end-of-life care result in preferred treatment.
That’s right, according to the recent article; those people who have recorded their wishes for end-of-life treatment have their wishes followed by agents and doctors over 80% of the time. According to a health and retirement study done between the years of 2000 and 2006, “researchers found that of the 398 incapacitated people who had used a living will to request limited care at the end of life, almost 83% received it...” and “...Of the 417 incapacitated people who had requested comfort care in a living will, 97% received it.”
Those are huge percentages, especially when you consider how easy it is to create a health care directive or living will.
There is no down side to recording your wishes and nominating a trusted agent to help ensure those wishes are followed—it brings you peace mind, it brings comfort to your family members, and our office can help you execute one quickly and easily. Knowing all this, as well as the fact that studies now show how truly effective they are in getting you the treatment you desire... there’s really no reason to delay any longer. Call our office for more information. Monday, March 29, 2010 The Receiving End of Estate Planning
We publish a lot on this blog about preparing your estate plan: writing a will, setting up a trust, choosing beneficiaries and nominating guardians; but there is another side to estate planning, a fun side... the receiving end.
You may assume that the receiving end of estate planning is the fun and easy part, but that is not always the case. Coming into an inheritance presents its own questions and challenges; financial, logistical, and personal.
Financial
Receiving an inheritance always means you have to think about taxes. Estate taxes, income taxes, property taxes... The estate tax this year is not as clear as it has been in the past, and you will probably want to have an attorney or accountant help you with it. Whether or not you have help, you will absolutely want to keep paperwork on everything. This includes paperwork from any transfers of inherited property made by you, as well as any and all of the original paperwork you can find for the inherited assets.
Logistical
There is a lot more to an inheritance than simply getting money and spending it. Are you the nominated guardian of young children, holding those assets in trust for their benefit? Or perhaps you are the beneficiary of a trust, and your receipt of the assets is subject to the terms of that trust. Do you have to use the money for school? Do you need to approval of a trustee before you can spend it? Hopefully you are working with a trustee you know and trust, but if you and the trustee disagree you may need mediation or even your own attorney.
Personal
Inherited property is almost always very personal and fraught with emotion. Should you really sell the house grandma lived in for decades and use the money to take a cruise? (If so, wait until after taxes to buy the tickets.) Would your parents have wanted you to use the money to pay for a wedding, or save it for your retirement? Do you want to take the summer home that’s been in your family for generations and own it jointly with your new spouse, or keep the property on your side of the family?
Whatever you choose to do with your inheritance, it’s likely you’ll need some guidance from a knowledgeable and trustworthy professional. Your estate planning attorney can help. Our knowledge of the probate system, estate taxes, and creating vehicles to protect your assets can answer your questions regarding the receiving end of estate planning as well as the planning. Friday, March 26, 2010 The Cold, Hard Truth
“No one wants to think about dying. But refusing to look at the documents that will determine where your money goes when you pass away will not make you live longer. It will just make sorting through everything more difficult for your heirs.”
So begins Paul Sullivan’s recent article in the New York Times, and we must admit, we couldn’t have said it better ourselves. Most people simply don’t want to deal with what they imagine will be a mountain of decisions and paperwork to create an estate plan, and they especially don’t want to think about their own death. It’s not that they truly believe avoiding it will help them live forever, it’s just that they know they aren’t going to die tomorrow or next week, so estate planning really isn’t a high priority... yet.
It’s time now for some straight talk. Any one of us—including you—could die tomorrow. Or next week. You could be in a car accident, your plane could crash, or you could simply be in the wrong place at the wrong time. If and when that occurs, what will happen to your spouse and children?
There are two answers to that question:
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If you have no planning in place your assets will likely go through a lengthy and expensive probate process, losing some value in the process, eventually to be divided amongst your closest living relatives. If you are married your spouse may have to fight your parents about your wishes regarding burial and memorial. And if your spouse dies with you in that terrible car crash your children will be raised by whichever faintly qualified relative steps up to the plate—your parents? Your in-laws? Your 23 year old sister? And if nobody steps up...
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If you DO have planning in place your assets will transfer quickly and smoothly to the beneficiaries you’ve named, in the amounts you have specified. If you have a spouse that person will be taken care of, while perhaps some of your estate is set aside for your children’s education, or to help them buy a home. Your children will receive their inheritance at a time of your choosing; when you feel they will be ready for the responsibility. Your parents and your spouse will know exactly how to arrange your burial and memorial, and will feel a sense of peace and closure knowing that they are following your wishes.
These are hard truths, and no one denies that they are difficult and uncomfortable to consider, but the heartache that can result from neglecting to think about these things is even more painful to imagine. Wednesday, March 24, 2010 3 Reasons to Discuss Estate Planning With Your Ex
Creating an estate plan to protect your minor children is one of the most difficult—and most important—things you will ever do; this is especially true if you and your child’s other parent are separated or divorced. Relationships don’t always end amicably, but if you do have children it is definitely worthwhile to put aside your differences with your ex long enough to discuss estate planning for the sake of your kids.
There are three major things to consider when estate planning during or after a divorce:
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Guardianship
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Financial inheritance
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Remarriage
Guardianship:According to the law, if you pass away guardianship passes to your child’s other biological parent; this is the case even if you had full custody (unless it is determined that the surviving parent is unfit). This is something to keep in mind when you are nominating guardians. If you and your ex can sit down and discuss guardians together and agree on a few alternates it will make everyone (including your child) feel more secure about the future.
Financial Inheritance:Although many divorced couples may feel comfortable with their ex as guardian, most are dead set against their ex having any control over their finances. How then can you leave your estate for the benefit of your child without leaving it in the hands of your ex? The solution is to put your child’s inheritance in trust until they come of age, with a person you know and trust acting as trustee. Your trustee will have the responsibility to keep and maintain the trust, giving distributions to the guardian for the benefit of your child. Keep in mind that your trustee and guardian will have to work together quite often, if you and your ex can agree on someone with whom you both are comfortable it will make the process much easier on your trustee, your ex, and your child.
Remarriage:When you marry there is an inevitable mingling of finances, and this is no different for a second or third marriage. However, if you don’t make provisions for your children in your estate plan your assets will end up going entirely to your new spouse when you die, leaving your child(ren) out in the cold. This can be easily addressed in your estate plan (or your ex’s estate plan, if he or she is the one getting remarried) as long as you talk to your attorney and take action now, before it’s too late.
If you are going through or have gone through a divorce please call our office and let us help. Wednesday, March 17, 2010 Estate Tax to Again Become an Issue in the House
Could it be that some movement finally happening in the House of Representatives with regards to the estate tax?
It looks like it may be, if we are to believe this recent article in Bloomberg Business Week. According to the article, the House Ways and Means Committee has plans to begin discussions in April (after the spring break) about former President George W. Bush’s tax cuts benefiting the middle class.
Of special interest to our clients is the section about the estate tax, found at the bottom of the article:
“...The committee would begin work to retroactively reinstate a federal tax on multimillion-dollar estates that expired Dec. 31. The legislation would likely seek an extension of a 2009 law, which applied a 45 percent tax rate on the value of estates that exceeded $3.5 million per individual... One possibility being considered... would let heirs choose to pay the capital gains tax that replaced the estate levy if that is more beneficial.”
Just one more reason to be sure you see your estate planner as soon as possible in 2010. Wednesday, March 10, 2010 Ensure Your Wishes for Medical Treatment are Followed: Share Them With Your Doctor
This time of year often involves spring cleaning for many families: reorganizing the closets, clearing the weeds and brush from the yard, and getting rid of all those boxes in the garage or basement. Spring seems to be a time to take stock and start fresh... at least in the home. But what about with your health?
We’re not talking about the diet you vowed to follow in your New Year’s Resolution, or trying to look good in that new bathing suit for summer; what we’re talking about is your annual checkup—taking stock of your health with your primary care physician and making sure you’re both on the same page with your instructions for health care and your advanced healthcare directive or living will.
When clients come into our office for an estate plan, we ensure that their healthcare instructions are completed as well; but the job doesn’t end when the document is signed. Your health care providers need to be aware of your wishes as well. The best way to ensure that they know and understand your wishes is to take a copy of your advanced healthcare directive or living will with you to your next check up and talk to your physician about it, then ask them to keep the copy on file.
A rule of thumb with healthcare wishes is to give a copy of your living will or healthcare directive to each of your primary care physicians, give a copy to each of the healthcare agents you’ve nominated, AND keep a copy or two on file to take with you if you ever need to go to the hospital. And of course keep the signed original in a safe place with the rest of your estate planning documents. Monday, March 08, 2010 Do You Need A Will Or A Trust?
When it comes to estate planning there are two major vehicles for the distribution of property: A will and a trust. Both are very useful tools and can accomplish specific goals—but how do you know which one is best for your family? Which document you will need depends on a number of factors, some of which may seem completely irrelevant at first: the size of your estate, your goals for that estate, the age of your children, your marital status, your retirement account, and many, many more. But the first step to understanding which tool may be right for you is to understand what each document does.
A Will:A will is a formal declaration of your wishes. It is a document you create to declare the extent of your privately held property (it does not cover jointly owned property) and what your wishes are for the distribution of that property. You name an executor to carry out your wishes, and you can even include a nomination of guardian for young children in your will. A will does not go into effect until after you die; before then it is simply a piece of paper containing your private wishes. However, once you have passed away your will no longer remains private, it now becomes a matter of public record, available to anybody who would like to view it, and overseen by the court in a sometimes lengthy and expensive process called probate.
A Trust:A trust is a far more extensive tool than a will. In fact, there are many different kinds of trusts, each of which may be used for specific situations. Most trusts created for estate planning purposes are revocable living trusts (or RLTs.) An RLT is a document created not simply to distribute your property, but to own your property on your behalf, to be invested and spent for your benefit or the benefit of your named beneficiaries. As such, a trust takes effect as soon as you sign it and your property is protected by and subjected to the trust parameters as soon as you place them in the name of your trust. There is a lot of flexibility available with a trust, and yours can be created to fit your unique situation. Most RLTs name the trust creators as the initial trustees, nominating individuals or banks to take over as trustee when the creator becomes incapacitated or passes away. The benefit of a trust is that when the creator passes away, property is not merely distributed and that’s the end of it; the creator can instruct the trustee to distribute the money slowly and in any number of ways, even to the extent of creating new trusts for each beneficiary. Trusts can last for generations, as evidenced by the enduring Kennedy trusts.
Wills and trusts are necessary tools in estate planning, each one working in unique situations. Your attorney will be able to tell you which one is best for your family. Friday, March 05, 2010 5 Ways to Enjoy Planning Your Estate
Creating a will or trust, healthcare documents, powers of attorney, etc., can sometimes seem overwhelmingly sad and serious. Well, the act of protecting your loved ones is very serious, but it doesn’t have to be sad. In fact, planning your estate can sometimes be downright enjoyable! Here are 5 ways you can enjoy planning your estate:
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Let the process of choosing and informing your fiduciaries (the people you will trust to be your executor, your guardians, your agents) forge stronger bonds with the people you love and trust the most. It can be the perfect excuse to spend more time with the friends and family you will be naming in your documents.
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Make it a time to go crazy with your dreams for the future: Your own retirement, goals for your children, and plans for your grandchildren. Have fun imagining the wonderful old-age you want—and then make it happen.
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Take the opportunity to learn more about your past—and record that past for your children and grandchildren. Talk to your parents and grandparents about their history and experience; then write it down—along with your own memoirs—and include it with your EP docs for your children to find.
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As long as you’re gathering important financial information and documents, keep the momentum going and use the time to organize your important files and information. Not only will this help you with your planning, it will make life easier for you every time tax season rolls around, and it will save your family and executor a lot of headache and heartache as well.
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The biggest reason to enjoy planning your estate is the simplest—it has to be done and it’s the right thing to do. When your estate plan is signed and complete it will be a weight off your shoulders because you will know you have done what is necessary to protect yourself, your family, and the people you love.
Wednesday, March 03, 2010 Filling in the Blanks of Your Estate Plan
Do feel like there’s more to your children’s inheritance than money? Does your will or trust seem good but... not quite enough?
You’re right. A will and a trust are essential documents to have—especially if you have minor children—but there’s more to protecting your children than those documents. With those documents (plus a nomination of guardian, of course) you’ve provided for your children financially, but what about emotionally? After all, you’ve built a full life for your family and children, one in which they are comfortable and happy. Preserving (as much as possible) the comfort and stability of that life is at least as important as preserving your financial estate.
One of the best ways to do this is with a document called a memorandum of intent. A memorandum of intent is a letter that you write to the guardians of your children. This is a document that details the crucial minutia of your daily life. In it you can express the things that might be considered too small, or the things that change to frequently, to include in your trust—but are essential to the daily fabric of your life:
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After-school activities
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Names and phone numbers of your children’s “best friends”
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Your preferences for religious upbringing
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Unique holidays and traditions celebrated by your family
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Pediatrician name and phone number (or other health-care providers)
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Your discipline style and parenting resources you find helpful
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Your children’s favorite foods, favorite toys, comfort objects
These things may all seem small right now, but it is these comfortable people, places and activities that will help your children through a difficult transition should tragedy strike. You can’t be sure that you will always be there to guide your children into adulthood, but you can be sure they will always know your hopes and wishes for them.
(*A memorandum of intent is not necessarily just for parents of young children. Memorandums can be especially helpful if you have a special needs child or are the caretaker of an elderly parent. Some people have even chosen to leave memorandums of intent along with a pet trust to the caretakers of their pets.) Monday, March 01, 2010 Facing the BIG Picture
We frequently urge you here on our blog to create the documents necessary to protect yourself in case of emergency, and to ensure that your family and loved ones know your wishes for health care if you are ever unable to make those decisions yourself. But a recent article on MSNBC reminds us that creating the documents isn’t always enough.
The article by Susan Brink details the final days of Bunny Olenick, 87-year-old mother and grandmother, whose massive stroke in December of 2008 threw her family into a state of confusion... in spite of the fact that she had done all the right things.
“Olenick had done all she could to give her family instructions about her death. She had spoken to her sons about her wishes, filled out an advance directive, a living will, and had named her sons as health care proxies — all legally accepted documents and procedures designed to insure that a person’s end-of-life wishes are spelled out and honored. Yet even they weren't prepared for the many difficult questions they faced.”
The questions they faced were a surprising mixture of technical and metaphysical: Did “life-support” include temporary nasogastric tubes for nutrition?—How exactly does one define “Quality of Life?”—Was a short-term oxygen mask okay, even though a respirator was against her wishes?—And Bunny’s own heart-breaking question upon waking up in a hospital bed, “Why am I still here?”
Bunny’s story illustrates for all of us the importance not only of creating the appropriate legal documents, but also creating the time and space to talk to our loved ones about these difficult situations. Our firm can help you to create an estate plan that will protect your loved ones and guide your agents in your wishes... but the documents are only a small part of the process. Talk to your family about the process of creating your estate plan: the how and why of your important decisions. Knowing why you made the choices you did will help your family accept your decisions and follow your wishes when the difficult metaphysical questions come up. Monday, February 22, 2010 When and Why You Might Turn Down An Inheritance
Would you ever turn down an inheritance?
Your first reaction might be “Of course not!” But don’t speak too soon. Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with the estate tax in a confusing state of flux this year some of these plans won’t work as their creators intended—and heirs may end up looking for a way to protect themselves against the unintended consequences of well-intentioned estate plans.
This article in the New York Times explains what it means if you disclaim (or turn down) an inheritance, and when you may want to employ this tactic.
“Historically, lawyers have recommended disclaimers to repair estate planning oversights that bring negative tax consequences — as when parents left money to already affluent adult children. In such a case, the children could disclaim, so the inheritance would go their own children instead, rather than facing the possibility that this money might be taxed in their own estates.”
The article goes on to explain why some people might consider using this strategy this year, when—due to the expiration of the estate tax—“a formula clause could wind up allocating all the money to one [heir] or the other, rather than dividing it between the two.”
Although this is an interesting solution to be considered in some cases, there are no easy answers to the question of what to do when you are the beneficiary of an estate that has taken an unexpected turn. If you have any questions whatsoever about an inheritance—or about your own estate plan—call your estate planning attorney for help. Saturday, February 20, 2010 The Not Quite Empty Nest Syndrome
It’s that time of year when many high school seniors are starting to prepare for graduation and eventually to head off to college; these seniors are close to turning—or in some cases have already turned—eighteen. It’s almost time to spread their wings, leave the nest, and be on their own...
... Except that most 18 year old college freshmen aren’t actually ready to be on their own. They still rely on their parents for financial support, emotional support, credit card payments, physical transportation... even clean laundry! And just about all of them still rely on their parents’ medical insurance when they need health care. You would think, then, that you as parents would be able to make medical and financial decisions for these fresh 18 year olds when they need help... except you can’t.
Once your child is 18 you as a parent are no longer their legal guardian. No longer will you be able to easily call the shots in the hospital or doctor’s office. You may pay the credit card bill, but you may not always get a representative to talk to you if there is a problem with that credit card. Likewise you may not make decisions regarding their bank account, or have legal dealings on their behalf with their landlord. Not unless your child gives you permission, that is—written permission in the form of a durable power of attorney and/or a healthcare directive.
By naming you as his agent in a durable power of attorney and/or a healthcare directive, your brand new 18 year old is giving you the power to keep doing what you’ve been doing all along... be his loving parent and help with the tough decisions; or—heaven forbid—step in to take charge in case of an emergency.
Durable powers of attorney and health care directives are documents that can be easily executed by our office or your own trusted attorney. Creating one of these documents for the first time is a good opportunity to discuss responsibility with your child, and encourage him or her to begin thinking of these decisions that you have helped them make all these years as their own. We know, however, that this isn’t always an easy subject to discuss with your young adult. If your child is resistant to discussing this with you, perhaps he or she will be willing to discuss it with your family estate planning attorney instead. This is an important subject, not only for you as a parent, but also for your young adult’s safety and well being.
Thursday, February 18, 2010 10 Tips for Potential (or Existing) Trustees
The creation of a trust and estate plan includes spending a certain amount of time choosing the people who will be your fiduciaries—the people who will carry out your wishes. One of the most important fiduciaries is your trustee, who is involved in just about every aspect of the administration of your trust. Most people choose someone close to them to serve as trustee: a best friend, son or daughter, brother or sister. Choosing someone who knows you and your family to serve in this role can be beneficial in many ways, but if that person doesn’t have a financial or legal background the responsibilities can be overwhelming!
If you want to give your trustee a head start (or if you’ve been nominated as a trustee and need a little help yourself) this article from the Elder Law Answers website shares “9 Do’s and 1 Don’t” of being a trustee. These suggestions will help a potential or new trustee better understand their responsibilities and the scope of the job to come. Advice such as #1, “Do read the trust document”; or #3, “Do keep the best interests of the beneficiaries in mind at all times” may seem obvious now, but it’s not always so clear when you’re beset by insistent and emotional relatives. The more technical tips such as #2, “Do create a checking account for the trust”; and #9, “Do file income tax returns for the trust” are invaluable starter-steps for someone who has never done this before.
But the most important tip to remember is the one don’t: #10, “Don't fly solo. Get professional advice to make sure you are correctly fulfilling your role.” If you or the people you’ve chosen as your trustee are ever in doubt, please don’t hesitate to call our office for help.
Tuesday, February 16, 2010 News and Updates About the Estate Tax
A month and a half into 2010 and Congress’ failure to stop the lapse in estate tax is still making waves. These two trusted news sources explain why having “no estate tax” this year should worry you.
One of the first reasons you should be worried, as revealed by this article in the Wall Street Journal, is that a larger base of estates will actually end up paying more this year rather than less; “Under last year's law, estates up to $3.5 million, or $7 million for married couples, were exempt from federal tax. This year that law has been replaced by a fiendishly complex levy raising taxes on the assets of those with little as $1.3 million. It will affect the heirs of at least 50,000 U.S. taxpayers who die this year, whereas the old law affected only about 15,000 estates a year.”
Another main cause of worry, explains the New York Times, is the possible reinstatement of the estate tax by congress, effective retroactively; “The general view is that Congress wants to, and should, re-enact the estate tax retroactive to the beginning of this year,” [says tax specialist Ian Shane] “In January, February or March that’s easy, but as the year goes on it becomes more difficult.”
Of course the biggest worry estate planners have is the effect this year-long lapse will have on existing plans. Couples who already have an existing estate plan are advised to get their documents reviewed—and possibly revised—to prevent “standard clauses” from having unanticipated effects. As Joanne Johnson, head of the American wealth advisory service of J. P. Morgan explained to the NY Times, “It’s common to find language like ‘I hereby fund this trust to the maximum amount I can shelter from federal estate tax.’ The rest can then pass tax-free to the spouse. Such wording is risky as long as the estate tax is off the books... because there is no maximum.” What ends up happening is that everything goes into the trust for the kids, leaving the spouse with nothing.
What is the lesson here? The lapse in the estate tax may not be the boon it first appears to be. Talk with your estate planning attorney to find out how the new laws may affect your family.
Friday, February 12, 2010 Make Your Memoirs a Part of Your Legacy
As members of a melting-pot nation, Americans place a high value on family stories and history. We love to know when and why our ancestors came to this country from “the home land”; but we also enjoy the simple stories about how mom and dad met, or how grandpa served in the military. These stories help us define who we are and where we came from—they give us a sense of belonging.
But the sad fact is that most of us don’t think about asking our parents or grandparents about their stories and histories until it’s too late. All too often it’s after grandma passes away and you’re going through her belongings that you find old books, photos or letters and wish you could ask about them.
This is part of the reason why writing memoirs, or a family history, has become so popular in recent years. Although the thought of “writing your memoirs” may seem daunting, it doesn’t have to be difficult. In fact, it has become so popular that there are quite a few books and tools out there to help guide you through either writing your own history or interviewing older relatives to record theirs.
Nothing seems more natural than including your memoirs as part of your estate plan. When you create an Estate Plan you plan to pass on your estate (property, assets, and wealth) to your loved ones; but that is only part of what you’ll want to pass along. An Estate Plan can also include your history and experience as part of that wonderful inheritance. Our firm can help take care of your assets, but only you can preserve the wisdom and experience that makes your history so unique. Don’t wait until it’s too late.
Wednesday, February 10, 2010 Make your Estate Plan About Values
It’s easy to see, when creating an estate plan, how important it is to protect and pass on your assets, but a good estate planner knows that a will or a trust is not all about assets. In fact, for all of the technical and financial language you may find in your will or trust, the most important part of the document is if—and how—it reflects your values.
You may think that values are something you’re more likely to discuss with your spiritual advisor than your estate planner, but we know you’ve worked hard to give your children and grandchildren a foundation of knowledge and belief to serve them when you’re not there. We want to help you create a thoughtful and comprehensive Estate Plan can help you continue doing just that.
There are a few ways in which you can use your estate plan to pass on your values:
- You can impress upon your grandchildren the importance of education by leaving an inheritance to them in an Educational trust.
- Help your kids learn to follow their dreams by earmarking part of the trust principal to be distributed should they want to start their own business.
- Pass on your belief in the value of family by creating a special trust to support stay-at-home parents.
- Teach fiscal responsibility by choosing to have distributions made gradually, helping your beneficiaries learn how to handle their finances responsibly and with maturity.
With the help of a caring and attentive attorney, you can leave a deeper legacy than mere money; you can impart your closely held values for generations to come.
Monday, February 08, 2010 Handing Over the Keys to the Kingdom
It goes without saying that nobody wants to give up control of their finances and put themselves at the mercy of someone else’s decisions; which is why most people spend hours and hours considering who to name as their agent when they sign a power of attorney. But what happens if you pick the wrong person? This article about an elderly mother and the daughter who stole from her is a sad example of just how important it is not only to choose your agents wisely, but also to relinquish control wisely as well.
It is commonly believed that simply adding your “agent” as a joint owner on your bank accounts is the easiest (or cheapest) way to gradually “hand over the reins”; but giving someone else unfettered access to your bank accounts is a dangerous risk in the best of circumstances—all too often it leads to the tragic exploitation and abuse mentioned in the article above.
The good news is that there are safer ways to give your agents the powers and access they need without completely handing over the keys to your kingdom:
A Durable Power of Attorney that goes into effect when two doctors have declared you incapacitated
Naming more than one person as your agent (This can lead to a slower decision-making process, but it does provide you with checks and balances and oversight. If you’re worried about disagreements between agents, name a third party to serve as a mediator or tie-breaker.)
Naming a financial institution as your financial agent
Choose a professional advisor or overseer through whom all decisions must be approved. This has the added benefit of giving your agents someone to whom they can go for advice in a tough situation.
Any of these options may be safer than joint ownership of your bank accounts, but every family and financial situation is unique, so ask your trusted attorney about which options may be best for you.
Wednesday, February 03, 2010 The Question of Competence
One of the things estate planning attorneys have to deal with in their line of work (most often with elderly clients) is the question of whether or not a client is competent to sign their legal documents. Every principal (or person executing the documents) must be competent, and most attorneys—most people—can make this assessment based on observation, experience and instinct during the course of interaction; but every once in a while a situation arises that is not so clear, or a family member will express concern about the principal’s ability to understand and sign legal documents.
How can you tell if a person is competent? In her book Senior Moments author Jacqueline D. Byrd quotes law professor Peter Margulies’ six factors to determine capacity:
- Ability to articulate reasoning behind a decision
- Variability of the client’s state of mind
- Appreciation of the consequences of a decision
- Irreversibility of a decision
- Substantive fairness of a transaction
- Consistency with lifetime commitments
Byrd goes on to say that for the purposes of determining whether or not a person is competent to sign a will or trust, however, the requirements may be slightly different; more focused on whether or not the principal has a clear knowledge of his or her assets, has a full knowledge of the persons to whom the estate is being left, and is able to reasonably formulate and express a plan for the disposition of the estate.
The unfortunate truth about elderly illness is that competency in a person afflicted with the beginnings of Alzheimer’s or Dementia can often change from day to day or even hour to hour. If there will be any question at all about the competency of the principal the safest thing to do is to have mental examination performed by a doctor, and even perhaps include a video will. Of course the very best way to ensure mental competence is to create your estate plan early, before age or dementia becomes a factor.
Monday, February 01, 2010 Living in a Digital World
Do you have an e-mail account?
Do you participate in Facebook or other Social Networking sites?
Do you do any of your banking, bill paying or investing online?
If you answered yes to any of these questions then you might want to think about this next question... what will happen to all of your online assets and accounts when you die?
As we move further into the 21st century more and more of our lives are moving into the digital realm. This includes friendships, networking, business and banking. The beauty of this is that it gives us unprecedented freedom and global access; the downside is that huge portions of our lives are locked away behind password protected accounts, many of which our friends and relatives aren’t even aware. Online accounts are incredibly convenient, but they can create huge problems if your executor or agent has no way to retrieve your online passwords, assets or contacts after you die.
Some large online service providers are developing policies to deal with the transfer of accounts upon the death of the user, as noted in this article by Alejandro Martínez-Cabrera, “but the process is rarely a simple one.” Some companies require a death certificate before they will agree to shut down an account or turn over the contents, but rarely will an online company transfer actual ownership. It could take months or years of headaches and frustration before your heirs have access to any assets or information locked behind these online protections.
What this means for estate planning is that when you talk to your attorney about your will or your trust it’s not just about physical assets anymore; digital and online accounts and assets must be part of the conversation.
Friday, January 29, 2010 What Does “Do Not Resuscitate” Mean to You?
Everybody seems to know (from popular TV shows, if nothing else) that DNR means “Do Not Resuscitate”, but do you know what “Do Not Resuscitate” means in your own personal healthcare directive or living will? Too often, when talking with clients about the healthcare documents in their estate plans, they don’t know the extent of their own (or their parent’s or grandparent’s) instructions.
“Do Not Resuscitate” can cover a wide array of options, which is why it is so important to define what “life-saving procedures” means to you, and exactly when you would like your DNR to go into effect. Here are some examples of “life-saving procedures” that you (or your elderly relatives) should talk about with family, medical staff, and your estate planning attorney:
Artificial Nutrition and Hydration When grandma decides to stop drinking fluids orally and begins to dehydrate, does the nursing staff have permission to keep her hydrated via IV fluids? What about if you are in a non-reversible coma and unable to drink liquids on your own?
Antibiotics or Other Medicines Do you include antibiotics in your definition of “life-saving procedures?” Do you still if you have been declared irreversibly brain-dead by two independent physicians? When you are 102 and confined to a bed in a nursing home, do you want to be given medicines to combat pneumonia or other illnesses?
Chemotherapy A point similar to the paragraph above; if you are 102, afflicted with dementia and confined to a bed, do you want to receive expensive and painful chemotherapy treatments if the doctors discover cancer?
Blood Transfusions Blood Transfusions are fairly universally considered “life-saving procedures”, and they should be addressed in your healthcare documents. Do you have religious reasons for refusing a blood transfusion? Do you still want one if you are severely and irreversibly disabled?
Organ Donation Though obviously not considered a “life-saving procedure”, organ donation is a topic you should discuss with your family, medical providers, and estate planning attorney to prevent any misunderstandings or delays in treatment if and when the situation arises.
A healthcare directive is one of the most important documents in your estate plan. State-specific healthcare directives or living wills can often be found for free online or at your doctor’s office, and in a pinch these will work; but they cannot take the place of a conversation with a knowledgeable estate planning attorney who will ensure that all aspects of your decision-making process are addressed and put down in writing.
Wednesday, January 27, 2010 Your Estate Is Ready For The Kids, But Are The Kids Ready For Your Estate?
Many parents spend a lot of time and money ensuring that their estate will go to their children exactly when and how they want it to; they work with the best advisors to create a plan that will transfer their assets as smoothly as possible to their children and grandchildren when the time comes. Ninety-nine percent of the time these parents have in mind that the inherited estate will be used responsibly to help their children and grandchildren pay for schooling, make it possible for one parent to stay home with young children, be put away for retirement, etc. But according to Pamela Black at financial-planning.com, “while estate planners are 98% effective at preparing these assets to be passed on, that preparation goes to waste in 70% of the cases... [because] no one is preparing the heirs for assets.”
When considering how to pass your estate on to your heirs, it is important to take the time to consider how your heirs are likely to handle the new responsibility. While many parents have numerous discussions with their advisors about how they would like their money to be handled, they neglect to have these important conversations with their children because they assume (often erroneously) that they and their children share the same financial values.
Death and money are two of the most uncomfortable subjects for discussion between parents and children, and many families will simply avoid these conversations. But financial advisors and estate planners have seen too many cases of families and carefully crafted estate plans falling apart in the wake of the death of a parent; we know how important it is to have these difficult discussions.
Do you need to spend more time preparing your children for their eventual inheritance? Pamela Black has included in her article a preliminary “Wealth Transition Checklist” to give you an idea of how well prepared your family is for the transition. Bring your kids in with you to your next appointment and let them share in the process of planning for their future. The more they know the better prepared they will be.
Monday, January 25, 2010 The Importance of Being Earnest
Do you have a will or a trust?
Has your will or trust been reviewed or updated in the past 3-5 years?
If you answered yes to these questions then you are two steps ahead of 2/3 of the rest of Americans. But the next question is the big one:
Does your family or executor know where your legal documents are stored, and are they able to access them?
Having a will or a trust is essential, but it doesn’t do any good if nobody can find it after you’re gone. Olympic medalist Florence Griffith Joyner (“Flo-Jo”) supposedly had a will when she tragically passed away at the age of 38, but because her husband was never able to locate the original document, a neutral administrator had to be appointed by the court to execute the estate; and whether her estate was executed according to her wishes is anybody’s guess.
A will or a trust often contains sensitive and emotional information, and for that reason many people (understandably) want to keep these documents private; but spending any amount of time or money on your estate planning documents won’t help your family if they can’t locate—or don’t have access to—those documents after your death.
We suggest having an earnest conversation with your family (or one or two select members at the very least) about the existence and location of your personal documents. Although they don’t have to know what is in your will or trust, knowing where those documents are can ensure that the time and money you spent creating them isn’t wasted.
Saturday, January 23, 2010 Your Will May Be a Ticking Time Bomb
The recent repeal of the estate tax is having unintended consequences for responsible husbands and wives who already had a will or trust in place to protect their spouse and family—instead of protecting them, that existing will could now end up leaving surviving spouses with nothing. Jonnelle Marte at the Wall Street Journal has this to say:
“It's a common practice for people to use formulas in their wills designed to send the maximum amount of assets not subject to the estate tax into a trust, often for their children. The remaining assets are usually left to the surviving spouse. But this year, there's no limit on the assets people can pass to their heirs without being subject to federal estate tax. So all of the assets could go into a trust and the surviving spouse would get zero.”
Does this mean you’ll have to get your will or trust updated every year? No. But it does mean that you’ll want to get your will or trust reviewed by an estate planning attorney this year. A review of your estate planning documents is a quick and easy process, especially if you don’t have any other significant changes to make. One thing is for sure, the small amount of time you spend making sure your documents are current is well worth the protection and benefit your spouse and family will receive from it.
Tuesday, January 19, 2010 Another Kind of “Bucket List”
Among the many changes in tax law to go into effect in 2010 was the change in cost basis for inherited assets. Previously, all inherited assets were “stepped-up” from their original value at date of purchase to their fair market value at date of death. In this way, if inherited assets were sold shortly after death, no capital gains tax was owed. However, in 2010 inherited assets do not receive this automatic “step-up”; instead they will be valued at the lesser of the decedent’s basis or the fair market value as of date of death. The result is that for decedents dying in 2010, the decedent’s tax basis and the fair market value as of date of death will have to be determined for every asset. As you can imagine, this will cause paperwork nightmares for heirs.
What we suggest is making a list of your assets and their values and tax basis information now, while you are still alive and your memory is fresh. This is not a list that has to be shared with anybody until after your death, but the mere existence of your list of assets will save your family and heirs hours of headaches (and heartache) later on.
If the thought of taking the time and energy to sort through files and records to gather this information makes you want to run for the hills, imagine how your heirs will feel! To ease the burden, try making your list one asset at a time, over the course of many days. However you choose to create your list, you can be sure your heirs will thank you.
(Note: There is an exemption amount of $1.3 million of gains from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse.)
Tuesday, January 12, 2010 Part of the Family: Planning for Pets
Creating an estate plan often involves serious discussion with your advisors about tax planning, asset protection, and charitable giving; but it is important to remember that at its core, estate planning is about protecting your family—and as this article in the Wall Street Journal reminds us, for many people the word “family” also includes our four-legged friends.
Some people will be tempted to roll their eyes and joke about Leona Helmsley at the mention of including your pet in your estate plan, but most will agree with article author Max Alexander that ensuring your pet will be taken care of after your death is not a frivolous indulgence but a simple matter of responsibility.
Providing for the care of your cat or dog does not necessarily mean leaving millions of dollars in a pet trust, what it really means is taking steps to ensure your pet doesn’t end up out on the street or in a cage in the local animal shelter. The Wall Street Journal suggests four simple steps pet lovers can take when planning their estate, including:
- Choosing a “pet guardian”
- Deciding whether or not to provide financial assistance for the care of your pet
- Adding language to your will or trust regarding the care of your pet
- Writing down a list of instructions for your caregiver
Over 50% of U.S. households own a dog or a cat. Those pet owners know that in return for companionship, love, and devotion pets rely on their owners for the basic necessities: food, shelter and protection. Why gamble with the future when ensuring their care can be so easy?
Friday, January 08, 2010 Keep Your Estate Safe in 2010
Now that it’s 2010 and congress has failed to take action regarding the repeal of the estate tax, we see a lot of articles discussing whether the lack of taxation for a year is a good or bad thing; sometimes these articles go even further, arguing whether estate tax in general is a good or bad thing. These are all interesting discussions, but our firm is more concerned with how your estate plan will hold up this year when it was likely designed to weather very different circumstances.
To this end, we have found that CBS’s Money Watch.com has published a very useful article about what the lack of estate tax in 2010 could mean for you and your family. The entire article is educational, but if you scroll about 1/3 of the way down the page you get to the crux of the article, a section titled “Steps to Take Now.” This section provides you with practical advice on what you can do, and what in your estate plan may need to change in order to keep up with the changing times and taxes:
- Keep good records
- Have an attorney review the “formula clauses” in your estate plan
- Be aware of the tax laws for your state of residence
- Give your estate plan a “check-up” as soon as possible!
As you and your attorney are reviewing your estate plan, keep in mind that the estate tax situation is likely to change again in 2011 (and may even change before 2011, effective retroactively), and try to plan accordingly. As Money Watch author Deborah Jacobs writes, “Whatever might be happening in Washington, no one should postpone the necessary steps. Just because Congress is inefficient and disorganized doesn’t mean that you must follow suit.”
Monday, December 28, 2009 No Estate Tax in 2010!... But Don't Break Out the Champagne Just YetThe question on everybody's minds the past few months has been "what legislative action will be taken regarding the expiration of the estate tax in 2010?" Well, Congress has adjourned for the year and the answer to the question is... Nothing. With Congress home for the holidays and no action taken, the estate tax is still slated to disappear on January 1st, reverting in 2011 to the old rate of 55 percent for estates worth more than $1 million.
But before you get too excited, take a moment to read what this article in the New York Times has to say:
"Jere Doyle, wealth strategist at Bank of New York Mellon, said the wealthy should not get their hopes up for an end to the estate tax. He pointed out that an estate did not have to submit its first tax bill until nine months after a person’s death. The Senate could wait, then, until the summer to decide on the estate tax and make it retroactive to the beginning of the year. This would wreak havoc on estate planning. Even if the Senate acted early in the coming year, it could still lead to a flurry of legal challenges on the constitutionality of reinstating a tax that had disappeared."
It turns out the Congress's failure to act has not made it easier for you to pass your wealth onto your children, it has only made things more uncertain than ever. The best action you can take during this "in-between time" is to have your estate plan reviewed by a professional to ensure that you've taken the right steps to prepare for whatever the future may bring; and most importantly, do not submit the first tax bill for a deceased's estate in 2010 without talking to your estate planning attorney first! Wednesday, December 23, 2009 Celebrity Gossip Can Save Your Estate!
- Did you know that Jimi Hendrix’s estate took twenty years to finalize because he didn’t have a will?
- Have you heard about Heath Ledger’s two year old daughter who got nothing when he died because Ledger neglected to update his will after she was born?
- Can you imagine how difficult it would be to sit down and try to talk about your estate plan with twelve of your children from nine different mothers? That’s what Ray Charles (brave man) did.
We make no secret on our blog of how important we think it is to talk about estate planning to friends and family; we also admit that we know how difficult a subject it is to broach, and we’ve tried in the past to offer advice on how to make the discussion a little easier. Now we can recommend a book that can help you not only come to a better understanding of the ins and outs of estate planning, but also provide fun and interesting topics to serve as conversation starters with your family over the holidays.
The book, Trial and Heirs, by Andrew and Danielle Mayoras, “uses real celebrity stories to help you avoid estate ‘errors’ as you plan for your ‘heirs’... and gives you a front row seat in the courtroom while the authors replay the scenarios and point out what went wrong, the winners and losers, and what you can learn from it.”
Probate, estate planning, and trusts may seem like something for the rich and famous—something removed from the lives of the average Joe; but the truth is that there is nothing more universal than death and the process of dealing with the aftermath. Rich or poor, famous or unknown... we all have to plan for the inevitable.
Monday, December 21, 2009 How to Pick the Perfect Health Care Agent
Cicero said “In nothing do men more nearly approach the gods than in giving health to men,” a quote which underlines the important role of anyone involved in your health care, whether it be a doctor or an agent. A health care agent is the person who makes medical decisions for you if you are unable to make them for yourself, decisions which often pertain to life and death, and can include the very difficult decision of whether or not to continue your life with artificial means. You certainly want to have someone in this role who is close to you, someone you can trust, but that is not the only criteria you may want to think about. You’ll want to make sure your agent is also someone who will ask smart questions, work thoughtfully with your doctor, and take an active role in making sure that your wishes are followed. The role of health care agent can be very “close to the gods” indeed, and should be taken seriously as such.
If you have a vague idea of what a health care agent is and does, but aren’t quite confident in the fact, the California Office of the Attorney General has provided this very informative article on the subject, which addresses not only the definition of health care agent, but also includes helpful tips on how to choose the best person for the job, as well as important things to keep in mind if you are the person who is acting as agent for someone else.
Monday, December 14, 2009 Estate Planning Lessons Learned in the Holiday Bustle
Most of us look forward to these winter holidays as a time to spend with family, enjoy the spirit of giving, and even relax a few days away from the stress of our jobs. Every year we hear about how stressful the holidays are, and yet we look forward to them anyway. Why is it that estate planning—another activity rife with benefits that admittedly comes with a little stress—is often avoided at all costs? In truth, the things we do to make our holiday planning more enjoyable and less stressful can be applied to estate planning as well:
1. Don’t wait until the last minute. Not doing our shopping (or planning) ahead of time often means we won’t get what we want. The same can be true of estate planning. Some areas of planning (specifically planning for Medicaid, retirement, and long-term care) must begin at least a few years before you think you’ll need it.
2. You can’t please everybody. Just as blended families have to come to terms with the fact that they won’t please every in-law every year, you have to accept that you may not be able to please all of your children or heirs in your estate plan. In the end, an estate plan is about your assets and your wishes.
3. Planning ahead makes execution easier. Everyone knows that braving the stores at the height of the holiday season is much easier if you’ve thought ahead and already know what you’re getting. Estate planning also benefits from a little bit of forethought, and the whole process runs smoothly if you go into your attorney’s office already having made a list of assets, goals, and people you trust.
4. Expect to get what you pay for. Paying $5 for the tree in the corner of the lot doesn’t mean you’ve gotten a deal; more often it means you’ve gotten a tree that will lose all its needles in the next 2 days. Don’t make the mistake of getting a “deal” on an estate plan that won’t withstand the test of time.
5. Don’t forget the extras. That radio controlled car looks nice under the tree, but it’s not much fun if you’ve forgotten the batteries to make it go. Your estate plan may also require some “extras” to make it work: funding, memorandum of intent, letters of notification to fiduciaries, etc.
With a little planning your holidays—and your estate—can be easy and stress free. Contact our office to get started on your estate plan before the year is over.
Monday, December 07, 2009 New Developments in the Estate Tax Arena
The question on every estate planning attorney’s mind (and on the minds of our clients) is what will happen to the estate tax next year? There is less than a month left before the estate tax expires, and although nobody expects our representatives in Washington to actually let that happen, as of yet there are no firm resolutions regarding the matter. We are, however, getting closer.
The House recently voted not to let the estate tax expire, but instead to let it continue indefinitely at the current rate. Unfortunately the legislation has yet to make it through the Senate, and considering the gridlock that body is experiencing over health care reform, holding our breath for a decision on the estate tax before year’s end isn’t recommended.
The issue that estate planners are most concerned about at this time is not actually what the final decision will be (although that certainly is important), but how long it will take our government representatives to reach that decision. It is generally assumed that any decision reached in 2010 regarding the estate tax will be retroactive, which means that any estates opened next year before the decision is made might at some point have to pay estate taxes retroactively. The possibility of retroactive estate taxes means that holding off on your estate planning until after the legislation has passed is not as wise a decision as you may think.
We know our lawmakers have a lot to think about as 2010 approaches, but so do you—the taxpayers. Let us help you start the New Year off on the right foot: Making your own decisions about your estate planning, and keeping one step ahead in the game.
Friday, December 04, 2009 Tax Moves to Make Before the End of 2009
Why do people give so many charitable gifts in December? The holiday spirit may not be the only thing inspiring people to give to the less fortunate this month, it may also have something to do with lowering your 2009 tax bill. If it’s taxes you’re worried about, there are a few other moves you can make after you’ve done your charitable giving. Ashlea Ebeling of Forbes has a whole list of things you can do to lower your 2009 tax bill before year’s end, we’ll mention just a few of them here:
- Fund those retirement savings accounts. As the article above points out, you can fund your 2009 retirement accounts up until April of 2010, but if you have an employer who will match your investment it’s likely they’d like to know before the end of the year what amount they’ll be matching. If you’re self employed you’re on a tighter schedule because the deadline for setting up a solo 401(k) is December 31.
- If have plans to receive any expensive medical procedures in the near future that won’t be covered by your insurance, you may want to consider having them done before January 1st. Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income are deductable.
- If you’re in the market for a new home, the homebuyer credit has been expanded from November 30th to May 1st 2010. This credit used to be only for newcomers to the real estate market, but is now available for both new homebuyers and longtime homeowners looking to purchase a new home.
- A different—but related—course of action is making upgrades to the home you already own. Certain energy efficient improvements to your home can also get you a credit on your taxes... if you get the improvements done before the end of the year.
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One more way you may save money on your taxes this year that you won’t find mentioned in the Forbes article is to create an estate plan which includes a trust. To the extent that the legal planning services cover tax advice or regard income producing property, the fees you invest in establishing and operating a trust are deductible from your federal income taxes.
All of these are good ways to save money on your 2009 taxes, but action needs to be taken before the end of the year. That gives you only... 24 days left to take action!
Wednesday, December 02, 2009 Going Beyond Legal Language with an Ethical Will
Estate and Legacy planning documents are often seen as difficult, and boring pieces of paper—which in some ways is exactly what they have to be in order to someday withstand tough legal scrutiny; but unless you’re an attorney who is practiced at reading the sentiment between the lines of dry legal jargon, these documents don’t make for sentimental family heirlooms. This is why some families and individuals are choosing to make (in addition to their legally binding estate planning documents) personal ethical wills to leave to their loved ones.
An ethical will can be anything from a letter to your children expressing your love and hope that they carry on your values, to a novella length memoir detailing your life experiences. But what about those people who don’t have the ability or inclination to articulate their thoughts in pen and ink? Well, more and more these people are turning to the camera and making their ethical wills on video.
A video will, as suggested by this article in the Wall Street Journal, is an unparalleled way to let the younger generation know about your feelings and values. "No matter how clear your memories of someone may be, if you have them on the screen in front of you, talking to you, there's a qualitative difference." And a video will, if made correctly in the presence of your estate planning attorney, can have the added benefit of preventing disputes and bickering between your heirs later on.
What we like best about the idea of ethical or video wills is the personal touch. Although we work every day with the “dry and boring legal jargon”, we know that underneath all that an estate plan is about love and values—it’s about family. And ethical or video will is a way to leave not just assets and property to your heirs, but a meaningful part of yourself behind as well.
Monday, November 30, 2009 Test Your Knowledge: An Estate Planning Quiz
How much do you know about estate plans? And how do you know when you need one?
Many people have a vague feeling that they should execute some kind of estate plan eventually, but think (hope) that they really don’t need one right now. On our blog we spend a lot of time telling people that they do need an estate plan, and they probably need one right now—or yesterday!—and we hope we do a good job of explaining why you need one. But maybe it’s time for you to decide when the time is right. This quiz will help you determine just when (and if) you need to do some estate planning.
Do you own a house?
Owning your own home means you have at least one significant asset, which affects your need for planning in a number of ways: First, a piece of property cannot be split between people, it will have to be sold (which can take months or even years) and the proceeds divided among your heirs—often at a loss, especially if the house was undervalued to sell quickly. Second, many people who feel they have “small estates and won’t have to worry about Probate or the estate tax” are surprised when they find that the value of their home does indeed push their estate over the line. Third, if you are married you may need to make provisions for your spouse if you would like them to be able to continue to live in your home.
Do you have minor children?
If you have minor children and have not made provisions for them in case of your death or incapacity the government will be in charge of their futures. This could mean your children are put in the care of foster parents or become wards of the state. That is not a chance you want to take.
Do you want your heirs to have to wait months (or years) before receiving an inheritance that is only a percentage of what you left them?
Probate is a long and expensive process. Without a plan in place your assets will have to be probated before they can be distributed. Not only does this often take years, but the probate fees (which can be considerable) are taken out of your estate—leaving less for your heirs.
Do you know how you want to spend your final moments?
Most people don’t die quickly and quietly at the ripe old age of 98. Most people fall victim to accidents, illness or dementia—unable to make their own health care decisions. Without a healthcare directive or living will that specifically outlines your wishes and instructions for your health care and nominating an agent to carry out those wishes, you could end up in a Terri Schiavo situation—costing your loved ones both financially and emotionally.
(NOTE: There is much that goes into your estate plan decision-making; this is only a partial quiz, and not a planning tool. Please contact our office for more information and an in depth interview to determine what kind of planning will be best for you and your family.)
Monday, November 23, 2009 The Overlooked Document that Packs a Punch
Most people are surprised at just how many documents there are in an estate plan. An estate plan is not merely a trust, it incorporates a number of other documents to help protect your finances, your children, your health, and especially your right to make your own decisions. Depending on the size of your estate, feelings of your family, and intricacy of your wishes, your estate plan can be anywhere from 4 to 14 documents—or more!
But there is one document that many attorneys undervalue—sometimes to the point of neglecting to include it altogether—that document is the Memorandum of Intent, sometimes also called the Letter of Instruction.
The Memorandum of Intent is easily overlooked because it’s not a legally binding document the way your will, power of attorney, or other estate planning documents are. The Memorandum of Intent is the letter you write to your heirs and fiduciaries expressing your hopes for the future, the reasoning behind your final decisions, and the practical details your fiduciaries may need. As this article by Bob Carlson states, “the letter of instruction is your last word on a number of issues.”
It is easy to understand why the Memorandum of Intent might be overlooked; if it’s not legally binding, how important can it really be? But the importance of the Memorandum of Intent lies in the personal nature of its contents. It is this document that can prevent family fights and bad feelings by giving an explanation for any surprise inheritances. This is the document that parents can use to leave detailed and loving instructions for the guardians of their minor children. And the Memorandum of Intent is where you let your fiduciaries know that you hope your favorite charity can continue receive an annual contribution in your name. The possibilities are endless.
The Memorandum of Intent is not—strictly speaking—a necessary document; but it is the most personal and heartfelt document in your estate plan. This one document can provide explanation and closure for the loved ones who are left behind. If you have any questions, or would like to include a Memorandum of Intent in your estate plan, please contact our office for more information. Our mission is to provide you and your family with the most comforting and complete estate planning experience possible.
Friday, November 20, 2009 As Time Goes By... Part 3
Our previous installments on how to review your estate plan discussed how and why to review the more financial portions of your estate plan; for this final installment we will cover how to review the documents that may be closer to your heart: your health care documents and documents pertaining to minor children (such as a nomination of guardian.) Also covered is what is perhaps the most pressing reason of all to regularly review your estate plan—changes in the law.
Health Care- Your EP health care documents should include: an Advanced Health Care Directive (or Health Care Power of Attorney), a Nomination of Conservator, and a HIPAA Release. If you have minor children you should also have a document giving a close friend or family member authorization to make health care decisions for your child in case you and your spouse are unavailable in an emergency. Take note of the date these were signed, and any changes in your health status. Health Care documents should be re-signed every 3-5 years to keep them “fresh”.
Minor Children and Guardianship-Documents pertaining to minor children include your Nomination of Guardian, Exclusion of Guardianship (if you have one), and often a Memorandum of Intent. If circumstances or relationships have changed and you are uncomfortable with anybody listed in the documents now serving as guardian, you’ll want to execute a new one. If your minor child is a teen and almost grown he or she may now want to have some input in the process. The Memorandum of Intent is not always an officially notarized document; it is your letter of instruction to your guardians and other fiduciaries. As such, this document will probably change the most over the years. The good news is that you probably don’t need to make changes through our office, however if you do make changes, please let us know or even send us a copy.
Legal Updates- Estate planning is a very fluid area of law. Tax laws have a tendency to change (for example the estate tax law which is slated to expire completely in 2010 and return again in full force in 2011), and attorneys are always changing and improving your documents to keep up, and keep your plan working the way you intend. Call our office and we can discuss with you any significant changes in the law since the signing of your plan.
Reviewing your estate plan is not as intimidating as you might think, especially when you know exactly what to look for. Taking an hour now to review your plan will save your loved ones many long hours in the future. Don’t you think it’s worth it?
Wednesday, November 18, 2009 As Time Goes By... Part 2
In our recent blog post we listed 6 essential components of your Estate Plan that should be reviewed on a regular basis and why it’s so important to keep them updated. Today we’ll go into more detail about the first of these components; what they are, and how to review them.
Fiduciaries- Make a list of all the people you’ve named in any fiduciary role in your estate plan, including Trustees, Executors, Health Care Agents, Financial Agents, Guardians, and Advisors. Has your relationship with any of these people changed? What about the person’s own family or financial situation? Do you still feel confident in each person’s ability to carry out your wishes?
Assets- Look at the schedule of assets you have with your Estate Planning materials. If you don’t already have a schedule of assets, make one right now. Don’t forget to include property, bank accounts, stocks, Retirement accounts and Life Insurance policies. Of all the assets on this list, have all of them been put in the name of your trust or have your trust named as the beneficiary? Have all of your new assets been added to your trust? If you refinanced your home, was it put back in the name of the trust? If you answered “no” to any of these questions, it’s time to call our office.
Distribution and Beneficiaries- For most people, the whole purpose of a will or trust is to make sure that property is distributed according to their wishes upon death. So take your time reviewing that section of your estate plan. Is your list of beneficiaries still accurate? Do you have any new children or grandchildren? If so, your estate plan should reflect these changes.
In our next blog we’ll have more information about the second part of the list of things to review in your estate plan: Health Care, Guardianship and documents pertaining to minor children, and last but not least, legal updates.
Monday, November 16, 2009 As Time Goes By... Part 1
For many people the holiday season brings more than just celebration. Seeing family and friends you may not have seen since this time last year means seeing children who have shot up like weeds, siblings and cousins with noticeably more gray in their hair, and even sometimes seeing an empty place at the dinner table that wasn’t empty last year. In short, for many people the holiday season means facing the passage of time and the changes that passage can bring.
The passage of time is inevitable, as is the change it brings; and when your life changes it’s important that your estate plan change with it. Reviewing your estate plan every 1-3 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here is a list of 6 key components you’ll want to review regularly:
- Fiduciaries
- Assets
- Distribution and Beneficiaries
- Health Care
- Guardianship and documents pertaining to minor children
- Legal Updates
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 6 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.
Friday, November 13, 2009 Is All This Really Necessary? . . . Yes, It Turns Out It Really Is
Jane Hodges of the Wall Street Journal recently jumped in where few would fear to tread—and lived to write about it. Where most people would prefer not to think about taxes and estate planning at all if they could help it, Hodges went through the process of creating an estate plan not only once, but with four different Do-It-Yourself Will or Trust kits, and shared her findings with her readers.
Although Hodges gives a decent description of her experience with the various kits, her final verdict is inconclusive. But what does come through loud and clear in the article is that a “Do-It-Yourself” Trust or Will isn’t as easy as it seems, and that anyone with a significant amount of assets (and by significant we mean a house or life-insurance policies) should not be doing it themselves; “the program presented a pop-up note indicating that people with more than $1 million in assets might need an attorney...” One million may sound like a lot, but as mentioned above, just about anybody with a house or life insurance policy is going to fall into this category.
What Hodges and her husband discovered (and we think this would be the experience of most people looking for a DIY solution to estate planning) is that there is a lot more to creating a will or trust than a simple distribution of assets. Most people have specific wishes for leaving their home to their spouse; for ensuring that the surviving spouse has access to joint assets but does not have the ability to bypass your children and leave everything to a new husband or wife if they remarry; for earmarking a certain percentage of the estate for brothers or sisters, nieces or nephews; and so much more. Add to this the complicated and changing state and federal estate tax laws and DIY estate planning kits can be a frustrating recipe for disaster.
The goal of estate planning is not only to distribute your assets, but also to protect them—and to protect and provide for the family and loved ones who are left behind. Ultimately, no program can understand this and help you with it the way a living, feeling, and experienced estate planning attorney can.
Wednesday, November 04, 2009 The “Second Victims” of Alzheimer’s Disease
The “first victim” is the person who is actually diagnosed with Alzheimer’s disease; the person who finds their memory failing, their personality changing, their past and present fading into a sea of frightening and confusing fragments of recognition. But Alzheimer’s disease affects more than just its victims, it touches the lives of their families and friends as well… especially their spouses.
These are the “second victims”; the spouses and caregivers who find their own lives fading away as well as they sacrifice and struggle to do right by a person with whom they have spent many loving years, who recognizes them—and whom they recognize—with less and less frequency. These “second victims” can suffer from depression and health problems as well, often with tragic results. This article in the Wall Street Journal states that, “A 2006 study published in the New England Journal of Medicine found that spouses of people with dementia and psychiatric diseases were more likely to die themselves within a year of the afflicted spouse's death, compared with similar cases involving colon cancer, fractures or heart problems.”
The WSJ article details the diminished existence of “second victims”, and exposes the controversy around how some of them are choosing to protect their mental health and find companionship again. Although this is at heart a very personal issue, it touches on some legal issues as well:
How can you prepare financially for the full-time nursing care a late stage Alzheimer’s victim often needs? How does government assistance fit into the equation?
How can you ensure that you or your spouse have a loving and trustworthy conservator caring for you when you are unable to understand and make your own medical and financial decisions?
Is there a way to ensure that the wealth and assets you accumulated during your life together will pass to your children and grandchildren if your spouse chooses to one day remarry?
If someone you love is dealing with Alzheimer’s disease please don’t hesitate to let us help by taking the legal questions off your plate. Alzheimer’s disease creates enough loss and confusion without the added uncertainty that comes with these legal issues; and when you’re living day by day, every little bit helps.
Monday, November 02, 2009 The Intersection of Family and Finances
Forget silver, china, or linens; the best gift you can give a newly married couple is an estate plan! This is especially true if the marriage is a second marriage for either of them. Marrying a person means marrying their financial issues as well; this may include children or responsibilities from a previous marriage, a family business, or wealthy and suspicious parents who still control the purse strings. As this article in CNN Money illustrates, the best way to deal with financial issues is to meet the challenge head on, and to do it as soon as possible—preferably before you walk down the aisle.
There will always be challenges when two people merge their finances, but in the case of a second (or third, or fourth) marriage the issues can be particularly delicate. Will it cause hard feelings if part of one spouse’s income goes to pay child or spousal support? Are college savings for step-children the responsibility of both partners, or only the biological parent? And what happens to joint property if one of you passes away—does it belong to the surviving spouse or to the children of the previous marriage?
One of the biggest steps along the path to financial marital bliss is the creation of a clear plan to ensure that the needs of both the new spouse and the children or obligations from a previous marriage are met. This includes an estate plan to provide for their needs if the unthinkable should happen. If you are coming into a relationship with assets and children from a previous marriage, a trust can be written to ensure that your spouse will be cared for financially but that your children remain the ultimate beneficiaries of your estate.
Discussion and planning early on will set clear boundaries and priorities for everybody, and can go a long way toward easing tensions between two merging families.
Monday, October 26, 2009 Imagine No Estate Tax
The federal estate tax is scheduled to disappear next year (in 2010); and although most people expect lawmakers to pass legislation keeping the estate tax alive, they also vaguely hope that the estate tax (also sometimes called the “death tax”) does disappear—at least for a little while. But this article in the Wall Street Journal asserts that for all the noise that is sometimes made about the estate tax, we may actually be better off with the estate tax than without it.
This assertion is not based on what is best for the government, but what is best for the tax-payer, and has to do with something called the “step-up in cost basis”:
“Step-up means that the property heirs receive is valued as of the date of death. So if Grandma leaves a grandchild stock selling for $75 a share that was bought in 1970 for $2 per share, the heir's "cost basis" in the stock is $75. If the grandchild then sells the stock for $80, the taxable gain is $5 per share.”
If the estate tax disappears it is likely that the step-up in cost basis will as well. This means that the stock Grandma leaves you would be valued at the original $2 per share rather than the stepped up $75 per share, and when that same stock is sold for $80 per share the taxable gain would be $78 instead of $5!
The disappearance of the step-up in cost basis is just one of the concerns people have about the possible elimination of the estate tax and Congress’s failure to act. Other concerns mentioned in the Wall Street Journal article include:
- A retroactive estate tax
- A prohibition (or scaling back) of techniques used to trim estate taxes (such as family limited partnerships, grantor retained annuity trusts, and qualified personal residence trusts)
With all of these possible changes on the horizon, the time to take advantage of tax saving techniques offered by your estate planning attorney is now, while they are still available.
Wednesday, October 21, 2009 The Dangers of Neglecting Your Estate Plan
Many people think that there’s no need to update your estate plan documents if none of your beneficiaries or fiduciaries have changed, but that’s exactly the kind of thinking that can lead to disaster. Estate planning documents are based not only on your own wishes, but also on federal and state tax laws. When we draft your documents we take into account a number of different factors, which means that you get the best possible result and an estate plan that should work like a well-oiled machine when the time comes; but it also means that your estate plan needs periodic review, just as your car needs an occasional tune-up.
Our point is perfectly illustrated by an article in the Wall Street Journal entitled Is There A Trap Lurking In The Language of Your Will? As this article points out, new tax laws—and your own changing financial situation—could mean that language originally meant to apportion assets in the most efficient manner could now result in leaving your surviving spouse without any assets at all.
The only way to ensure that this does not happen is to have your estate plan documents reviewed every few years. Luckily, depending on the extent of the update, the cost of a simple review and update is much less than the initial cost of creation. But the longer you wait between reviews the more likely it is that the changes needed to bring your plan up to date will be extensive—and thus more expensive.
Don’t let too much time pass between reviews of your plan. Call our office today to schedule your “tune-up” meeting.
Friday, October 16, 2009 Trust Mill Con-Men Fined $6.4M for Illegal Practice of Law
The Ohio Supreme Court has recently taken strong action against two co-owners in a company participating in an illegal “trust mill” operation. According to this article from the Associated Press, the two owners, Jeffrey and Stanley Norman, have been permanently barred from marketing or selling their trust products in Ohio after they were found to have committed “more than 3,800 acts of unauthorized law practice.”
Unfortunately, Jeffrey and Stanley Norman are not the first unscrupulous characters to try to pull one over on the general public. Trust mills exist in every state, and although seniors are often the main targets, anyone can fall victim if they aren’t careful. These trust mills may offer inexpensive documents, but the cheap product is exactly that—cheap. At best these cheap documents are nothing but generic forms with your name slipped in, they do nothing to reflect your family’s needs or desires. At worst the documents delivered by trust mills won’t even adhere to the laws of your state.
So be wary of any will or trust that is offered at a price too good to be true. Be wary of anybody who tries to sell you a trust or estate plan at a “great price” and at the same time tries to sell you other “related” products such as life insurance or annuities. Be wary of anybody who will come to your home or meet you at a restaurant, but has no local office or local phone number. And be wary of anybody who will have you fill out a form and sell you a trust online.
A good trust should be drafted by an experienced attorney who specializes in estate planning and who practices (and usually lives) in your state of residence. A good trust is drafted after that attorney has met with you, interviewed you, and given you a chance to ask questions as well.
Don’t fall victim to con artists like Jeffrey and Stanley Norman. Be wary, be aware, and be willing to pay for an estate plan that will legally protect your assets and your family.
Friday, October 09, 2009 Guilty Verdict for Brooke Astor’s Son Brings Elder Abuse Issues to the Forefront
The recent verdict by a New York jury finding Anthony Marshall guilty of stealing from his aging mother Brooke Astor while she suffered from Alzheimer’s disease is a hopeful one for elder abuse experts. Elder abuse is an issue that is all too common in our society, but one that rarely gets much attention. And it isn’t only the very wealthy who fall victim to elder abuse. According to the National Center on Elder Abuse “between 1 and 2 million Americans age 65 or older have been injured, exploited, or otherwise mistreated by someone on whom they depended for care or protection.”
Financial abuse of elders in particular goes under-reported in our culture, mainly because it leaves no visible scars to tip off friends and family. It is disheartening to discover that in most cases of financial exploitation of elders the perpetrator is a family member, often the victim’s own son or daughter.
When mom or dad begins to show signs of dementia or Alzheimer’s disease, the child who lives closest is often the one who ends up serving as caretaker—both physically and financially; but that may not be the child best suited to the purpose, and it may not be the child mom or dad would have chosen had they been able. One way to prevent this from happening is to make your own decisions about who your physical and financial caretakers will be by executing a nomination of conservator, health care directive, and durable power of attorney. These three simple documents can allow you to choose the best person to care for you when you are unable to care for yourself.
Don’t let someone you know become a victim of elder abuse. If you suspect a situation of elder abuse please call your local elder abuse hotline for help. If you want to do everything you can to prevent getting into a situation of financial elder abuse yourself, call our office.
Monday, October 05, 2009 Family Gatherings Provide Opportunity for Important Conversations
The anticipated upcoming changes to estate tax laws have many people thinking that now is not the ideal time to create an estate plan; however, now is the best time to talk about estate planning with your family and loved ones. The winter holidays are coming up soon, a time for coming together and spending time with family. This also makes it the best time to bring up any issues that affect the whole family. Estate planning is one of these issues.
It is a common misconception that estate planning is a private and secretive business. While it is certainly true that the estate itself—the assets and property—is a private matter, the planning (or lack thereof) can have a huge impact on the rest of the family, and may require some knowledge and preparation on their part. As Suzie Moraco points out in her article, Estate Planning Can Be a Vital Dialogue, “Relying upon state governments to decide the management and distribution of our assets and property can be an unsettling experience. Probate costs and the time delays associated with municipal court systems may leave heirs financially unstable.”
The best way to protect your heirs is to prepare them. If you are the anticipated heir it is in your best interests to have a respectful conversation about the subject with your parents or grandparents. Because the subject of death and inheritance is not the most comfortable, Moraco has included in her article some suggestions on how to broach the topic with family.
Although a discussion about estate planning may not exactly be a topic of holiday cheer, the holidays are about appreciating family, and part of that appreciation is the understanding that we never know how much time we have left. Don’t put off the important conversations—make the most of the time you have.
Friday, October 02, 2009 At What Age Should You Start Planning Your Estate?
Some people start planning their estate as soon as they have children, others don’t feel the need to start planning until they reach an age where they feel mortality creeping up on them; but according to the Wall Street Journal article “Preparing for the Worst”, it’s never too early to start planning your estate.
As the link above suggests, planning your estate does mean choosing who will receive your assets and care for your children after you die, but even if you have no children and minimal assets it is important to execute some estate planning documents. A 21 year old fresh out of college may not have any significant property to distribute, but chances are they do have an opinion about their medical treatment, and know that they want their bills paid if they’re ever incapacitated in a car accident. Also, if they have a job it’s likely that they have some kind of employer provided life insurance, perhaps even a 401(k); choosing the beneficiaries for those policies is part of the estate planning process.
We urge all of our older clients with children just leaving the home to call our office about minimal early estate planning for your young adults, because the best age to start planning your estate is the age you are right now.
Wednesday, September 30, 2009 Joint Tenancy Does Not Replace a Will
Many people think that owning property in joint tenancy means they don’t have to create a will or estate plan. Why bother with a will when all the property is going to your joint tenancy partner anyway? In fact (some people may ask) why not do away with the need for a will altogether and hold property in joint tenancy with my children? The answer to that question is that although joint tenancy may allow your heirs to avoid probate, it carries with it a number of problems and is NOT a replacement for a well-executed will or estate plan.
One of the primary problems with owning property in joint tenancy with your children is that, in the words of Phil Craig in his article Joint Tenancy: How Not to Avoid Probate, “Joint tenancy sure is easy to create, but sure is hard to end.” As Craig illustrates in his article, owning property jointly with your children may seem harmless at first, but what happens if your child gets married or divorced, gets sued, or even joins a cult?
Beyond the essential question of ownership, joint tenancy as an estate planning method falls short in numerous other ways as well; owning property in joint tenancy with your children does not do anything to minimize your estate taxes—In some ways it may actually increase your taxes. Additionally, owning property in joint tenancy with more than one of your children prohibits the other owners from leaving their share of the property to their own heirs.
Finally, even as husband and wife, holding property in joint tenancy has its dangers. If one of you were to become incapacitated or mentally incompetent, the other would have to obtain a conservatorship from the court before being able to sell or take any other legal action with the property. Having the ability to sell or refinance quickly could become a necessity when medical bills are piling up. Look into owning your home as community property instead.
There are ways to avoid making probate a necessity after your death, but joint tenancy—while it may be quick and somewhat easy to achieve—is neither a quick nor easy solution to probate. Take the time to create a quality will or estate plan. Your assets will be protected in the long run, and your heirs will thank you in the end.
Wednesday, September 23, 2009 Top 10 Mistakes to Avoid When Planning Your Estate
There are a number of mistakes that an estate planning and probate attorney will see over and over again over the course of their career. Many of these mistakes seem small, but can have a huge negative impact on your family after your death. More often than not these mistakes are made by people trying to create cheap and “easy” plans on their own without the guidance of an experienced professional. Luckily, these mistakes can be easily rectified with phone call or a visit to our office.
Have you made any of the following mistakes in your estate plan?
10. Choosing guardians for your children who are far away, with no instructions for temporary guardians
9. Hiding your estate documents (and other important financial documents, for that matter) away “somewhere safe” where no one can find them… not even when they need to find them.
8. Neglecting to leave information about your online accounts and assets.
7. Leaving it to your family to fight over mementos and heirlooms instead of creating a personal property memorandum.
6. Forgetting to coordinate beneficiary designations on retirement accounts, life insurance policies, or other similar assets.
5. Neglecting to review your trust regularly (once every 2-5 years).
4. Not naming backup (or remote contingent) beneficiaries.
3. Naming only one Agent or Trustee, with no alternates.
2. Neglecting to fund your trust.
And the number 1 mistake to avoid when planning your estate is this: Not making a plan in the first place!
Friday, September 18, 2009 The Shortest Will: It May Hold the Record, But It Won’t Hold Water
Have you ever wondered just how little you could get away with in your last will and testament? Aletta Stager of Brooklyn, NY holds the distinction of having executed one of the shortest wills on record—a mere 2 lines long!
“Nov. 29, 1895. I give to my cousin, Nettie M. Cowan, all money that I have in the Bowery Savings Bank.
Aletta Stager, 131 Berkeley Place, Brooklyn, N.Y.”
Of course, things have changed in the probate and estate planning world in the one hundred plus years since Ms. Stager executed her will. A glaring omission from the two lines above is the nomination of an executor. If you don’t nominate an executor in your will the state will choose one for you. Also, even if you have only one person in mind as your beneficiary, you’ll want to talk to an attorney about secondary beneficiaries, who can include charities and non-profits if you don’t have any family or friends to whom you’d like to leave your estate.
Even back in 1895 Aletta Stager’s property ended up going to the state of New York when no heirs—including the named beneficiary—could be found. Perhaps if Ms. Stager had included a couple more lines in her will her estate could have gone to benefit her favorite charity instead of being swallowed up by the state.
Wednesday, September 16, 2009 Women: Take Charge of Your Finances… And Your Future!
A woman today often has to wear many hats: daughter, wife, mother, employee, boss, caregiver, family CFO, etc. Women are unique contributors both within their families and in society at large, often taking care not only of young children but of elderly parents as well; but too often women can forget to take care of themselves, and this includes taking care of their finances.
Whether they are single, married, divorced or widowed, every woman needs to have a good understanding of her current finances and a plan for the future. If you are married your finances (both present and future) will likely be part and parcel of your family finances, but it is still essential that you be aware and involved in the decision-making process, luckily Forbes.com makes it easy for women to plan for the future of their finances with this “how-to” article from their Forbes Woman section.
One of the most important points made by the article is that planning for the future is essential no matter how much you have (or don’t have) in your bank account. "’It doesn't matter how much money is in your bank account’ or what age you are, [says Debbie Whitlock, co-owner of Sound Financial Partners, a financial-services practice in Seattle] ‘Everyone needs to do estate planning. Without it there's a lot of confusion and chaos.’" And don’t let the term “estate planning” fool you, estate planning covers much more than just distributing an estate—especially for women and mothers.
Even if you don’t feel you have an “estate” to distribute, the creation of a very simple will, healthcare directive, and a list of assets and/or debts can save your family hours of confusion in the future; and it can help you have a better understanding of your finances right now.
Saturday, September 12, 2009 Changes to New York Powers of Attorney May Lead to Changes for All
An interesting article in this week’s Time Magazine online addresses some of the weaknesses in the Durable Power of Attorney (POA) document—especially as regards the elderly—and how New York State is addressing these weaknesses. If New York’s experience with the beefed-up POA is favorable it is quite possible that other states will adopt similar changes.
Of all the changes made to the laws surrounding the POA, the most major change is the larger role the agent has in the signing of the document. ”Now both the principal and the agent must sign the POA, and each signature must be notarized. ‘This is a big change,’ [says Ronald Fatoullah, an elder-law and estate-planning attorney in New York]. ‘The document specifically states that when you accept the authority to act as agent, you create a special fiduciary relationship with the principal that imposes legal responsibilities until you resign or the power of attorney is terminated.’"
In addition, and of particular help to elderly clients, is a provision giving the principal the right to appoint a monitor to oversee the activities of the agent. Requiring your agent to work under the advice of a trusted financial advisor or the like may add a slight delay to large financial transactions, but it will prevent crooked relatives or elderly aides from taking advantage of the principal.
As the article mentions, "financial abuse is one of the fastest growing areas of elder abuse", and most of the abuse is perpetrated by people the victims know and trust. Hopefully these changes will help prevent this abuse. If the new POA proves beneficial for New York residents those of us in other parts of the country may find our own Powers of Attorney changing as well.
Thursday, September 10, 2009 How to Leave Meaningful Mementos to the Next Generation
When clients come into our office to design their estate plans one of their biggest concerns is how to dispose of their tangible personal property. Sometimes clients spend more time determining how to dispose of these personal mementos than they do the big ticket items such as bank accounts, real property, and investments. This is completely understandable when you consider that it is these personal items that carry our history and our memories, and in many ways make up the fabric of our lives.
One of the questions we are often asked is if these personal items should be included in the will or trust or if there is an easier way to dispose of them. The answer is that although major items such as the crown jewels should be listed in your will or trust, smaller mementos such as a baseball card collection or grandma’s china (things that are not required to go through probate) can be listed on a much less intimidating document called a personal property memorandum.
A personal property memorandum is a written statement which lists your various tangible personal items along with the people who should receive these items upon your death. (Tangible personal items do NOT include bank accounts, stocks, money, securities, or trade or business properties.) The nice thing about the personal property memorandum is that you can edit and update it yourself, whereas any changes to a will or a trust should be made by a qualified attorney. You must, however, be sure that your will or trust refers to your personal property memorandum if you have one, to ensure that there is no confusion about distribution of property.
A personal property memorandum can be typed up, handwritten, or can be a standard template that you get from your attorney to fill out at home—so long as it clearly expresses your wishes and is signed and dated. It is best to store your personal property memorandum in a safe place with the rest of your estate planning documents; but if you find yourself making frequent changes to the document it can be kept at home, so long as your trustees or executor know where to find it if something happens to you.
For more information about how to leave personal property to your heirs please contact our office.
Tuesday, September 08, 2009 Don’t Wait for Congress to Settle the Estate Tax—Better to Take Action Now
Schoolchildren aren’t the only ones putting their noses back to the grindstone after this warm summer and long Labor Day weekend; Congress is also returning to work, and among the many issues they will be discussing is that of the estate tax, which is set to expire for a year in 2010.
According to The Wall Street Journal President Obama was expected to take swift action when he took office to prevent the scheduled estate tax repeal, locking it in at a permanent rate instead. One of the reasons for this anticipated “swift action” by democrats was that it would be “politically harder to go ahead with their plan to resurrect the estate tax once it [had] disappeared.”
Although action has not been as swift as originally anticipated, it is not likely to disappear. Some ruling on the estate tax is still expected before the end of the year, although it may not be as permanent as people may hope for planning purposes. Here is what Forbes.com has to say about the immediate future of the estate tax:
“President Obama wants to see a permanent extension of the estate tax, but that's unlikely to happen this year. Instead, look for Congress to give it a one-year extension, as it's slated to expire for a year in 2010. For 2009, estates valued at less than $3.5 million are exempted from the tax, which has a maximum rate of 45%.”
If you’ve been putting off planning until a permanent decision on the estate tax is reached, it may be time to bite the bullet and take action now.
Friday, September 04, 2009 Should You Talk to Your Kids (Or Your Parents) About Inheritance?
The subject of inheritance is one that most people studiously avoid for a number of different reasons: superstition, fear, lack of knowledge, or—as this article by Gordon Powers points out—they don’t want to appear greedy. Furthermore, many older adults were raised to believe that money was a private affair, and that talking about it was inappropriate, almost dirty. The difference in how the older and younger generations view money and its place in “polite conversation” has become so great in some cases, that it’s no wonder they avoid any mention of it.
An unfortunate side effect of this disconnect is that a refusal to talk about money or your estate plans with you children means that they will have a difficult time following your wishes in regards to inheritance. According to Mr. Powers (and most of the adult children who come into our offices to create their own estate plans) “most middle-aged adults really want to fulfill their parents' last wishes, regardless of how much money they might or might not see in the end.”
So the answer to the title question is yes, you should talk to your children about inheritance if you can. Talking about it will not only make it easier for them to follow your wishes, it may even help you determine how you want to make a difference in the lives of your heirs.
Wednesday, September 02, 2009 What We Can Learn From the Kennedy Trusts
The recent death of Senator Ted Kennedy has given us an opportunity to reflect on the unique nature of trusts not only as a tool to protect assets for future generations, but also as a way to leave a lasting legacy for your children and grandchildren.
The Kennedy trust—or Kennedy trusts, we should say—are some of the best examples of how comprehensive and versatile trusts can be, as this article by Gerald Posner illustrates. The trusts were first established by Joe Kennedy; one in 1926, another in 1936, and another in 1949. Each trust had its own unique purpose: the trust established in 1926 was for Rose and the children, whereas the trust established in 1949 was intended for his grandchildren. Furthermore, each trust was set up as a blind trust, designed to act independently from any other trust.
The Kennedy trusts were built to last, with each successive trustee working to provide for the beneficiaries while protecting the principal for future generations as well. And last they have, to the extent that today—even taking the recent economic downturn into account—the trusts have survived… and even flourished in some cases.
You don’t have to be a Kennedy to leave a legacy for your children or grandchildren. The Kennedys certainly had a financial head start, but trusts can be designed to protect and build on even a modest estate. Whether your desire is to provide for your immediate heirs, or leave a legacy that lasts far into the future, a trust can help you accomplish your goal.
Friday, August 28, 2009 Blended Families Bring Unique Challenges for Caregivers
A recent study about how divorce may affect your health has been making the rounds in the news sources lately. This article discusses how the added stress of divorce, family upheaval, and tighter finances can be so detrimental to your health that the effects can last years into the future. Because our firm works frequently to help divorced or remarrying couples update their estate plans to protect their new blended families this article sparked our interest. But what was even more interesting was this recent post by Paula Span about the effects divorce can have 20 or 30 years down the road—not just on the couple but on their grown children now acting as caregivers.
According to Ms. Span, adult children of aging parents often find themselves caring not only for mom and dad but also for stepmom, stepdad and sometimes even another stepparent from yet a third (and current) marriage. Dividing time (and often finances) between so many parents with new and special needs can quickly take its toll, as can the family politics that come with adult siblings, half siblings, and step siblings. “It adds another layer of complexity to an already complex and emotional situation.”
With all of this complexity and intermingling family ties, it is more important than ever to have conversations about estate planning and long-term care with parents and siblings before mom and dad (and stepmom and stepdad) get to an age where they need in-home or around the clock nursing care. A good estate plan can eliminate much potential fighting and confusion by clearly defining who will be making financial decisions and who should be making health care decisions when mom or dad become incapacitated. And a caregiver agreement can provide financial assistance to the one sibling who inevitably ends up shouldering most of the care giving burden.
If you are a part of a blended family don’t wait for time to take its toll; talk to your parents and siblings now about any challenges the future may bring—and how to meet those challenges together.
Wednesday, August 26, 2009 4 Goals Your Estate Plan Can Help You Achieve
What is your estate plan all about? Is it about saving your assets from estate tax, or is it about leaving an inheritance for your children? Or is it something even beyond that—providing for your own financial security during your life, thus enabling you to leave a lasting legacy for your family?
Estate planning—or what this article from Investors Insight likes to call legacy planning—can help you achieve all of these goals. The article outlines the four primary goals an estate plan can help you achieve if you and your attorney work together to make your plan more than merely a tax savings tool:
Financial Security
Estate Care and Management
Protecting your Estate
Minimizing the Tax Burden
Tax planning is absolutely an important part of your estate planning process, but tax laws have a tendency to change, and with a new estate tax law expected in 2009 or 2010 it is essential to remember your other goals as well when you plan your estate. Our firm can help you achieve those goals and prepare for whatever the future may bring.
Friday, August 14, 2009 How to Keep Your Kids Out of the Wrong Hands
Many of the clients who come through our offices are parents of small children whose primary goal in creating an estate plan is to protect those children. This includes providing for their immediate financial needs, ensuring they will have the means to receive an education, and so forth, but often the very first question these parents ask is about guardianship. Most often they want guidance in choosing the best person to care for their children when they are gone, but sometimes a client asks if there is a way to keep their children out of the hands of abusive or irresponsible relatives. The answer is a resounding yes.
Of course, the first thing you should do to keep your children safe from an unsuitable guardian is to execute a Nomination of Guardians in which you name the people who would be good and loving parents. But beyond that, you can execute an Exclusion of Guardians (also known as an Anti-Nomination of Guardians). In this document you name the person or couple who should under no circumstances receive guardianship of your children. You may, in the document, state the reasons why your child should be kept out of the care of this person, but it is not always necessary.
For many parents, the excluded guardian is often a member of their extended family, and they fear that executing so strong a document might break the peace. For this reason, you can request that the Exclusion of Guardians be kept completely confidential. Unless and until the excluded guardian tries to gain guardianship over your children there is really no need for anyone except you and your attorney to be aware of its existence.
There are many valid reasons to execute an Exclusion of Guardians; alcoholism, history of abuse, mental illness, extreme financial irresponsibility, and more. How is a judge or court to know of these reasons unless you tell them? And that is exactly what an Exclusion of Guardians does. If you have any fears along these lines talk to your attorney. You hope the document will never need to be used—never even be seen by any eyes other than your own—but the peace of mind it can bring is invaluable.
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