Author Archives: Robert Mondo

The IRS issued Revenue Ruling 2013-17. The Ruling provides that a married same-sex couple, married in a jurisdiction which respects the marriage, will be treated as married for all purposes by the IRS. This is regardless of whether the couple was domiciled in a state that respected their marriage when they got married or later moved to a state that did not recognize the marriage.

Let’s say a same-sex couple residing in Oklahoma travels to New York for the weekend. While in New York, they get married in accordance with the laws of the state of New York. They then return to Oklahoma, where they continue to reside. Since they are legally married under the laws of New York, they will be treated as married for purposes of federal tax law, regardless of where they live. This is notwithstanding the fact that Oklahoma treats them as “legal strangers.”

This goes beyond and is a significant expansion of the ruling in prior cases deciding on the subject. As of today, there is no reason to treat a married same-sex couple any differently when drafting their trust(s), at least from a federal tax perspective. Of course, most states still do not respect same-sex marriages and the couple may face state estate / inheritance taxes, property tax reassessment, etc.

The revenue ruling also provides that a same-sex couple in a Civil Union, Domestic Partnership, or other similar non-marriage institution will not be treated as being married under federal tax law.

Also, if the couple had been married in the past, they have the option (but not the obligation) to amend any prior returns on which the statute of limitations has not yet run.

Going forward, it appears that married trusts are the vehicle of choice. If the couple is in a community property state and intends to stay in that state (Illinois is not), a joint trust is likely the best choice. If the couple intends to move frequently, then separate trusts may be the better option. If the couple is married in one state and moves to another state that does not respect their marriage, it may not be possible to unwind their marriage in any divorce court. The state in which they were married may have a residency requirement for a divorce. If the state in which they live does not recognize their marriage, it is likely they will not hear a divorce case either. Separate trusts would make it far easier to divide the assets without the judicial assistance of a divorce court, if that becomes necessary. Same-sex marriage is too short-lived to have meaningful statistics on same-sex divorce.

Nearly half of all American marriages end in divorce. Accordingly, it is important to consider that possibility when doing your planning.

Impact of Estate Planning on Divorce

Moving assets between spouses can be advantageous for tax planning. For example, often a couple will transmute separate property to community property in order to get a step-up in basis at the death of either spouse. Also, spouses in separate property states often will equalize assets to fund a family trust at the first death (portability notwithstanding). These can be great strategies. However, it is important to advise clients that doing so could change how assets would be divided upon a divorce.

Impact of Divorce on the Estate Plan

In every state I know, the divorced spouse is removed as a beneficiary of a will and trust upon divorce. Typically, this is what the person would want. However, the person and his or her spouse sometimes share a special bond, even if they are divorcing. Thus, sometimes the person will want to keep his or her spouse in the estate plan. Accomplishing this is not as simple as leaving things alone, however. After the divorce, the person should do a new trust reaffirming the bequests to the ex-spouse.

Of course, after the divorce, the person should do new powers of attorney for both financial and health care matters. While some states revoke these designations upon divorce, others do not. The person should also do a new HIPAA form, removing their ex-spouse as a person having access to protected health information.

One item which is often overlooked is beneficiary designations. The person should do new beneficiary designations for all items with such designations. While state law may revoke some designations of the ex-spouse, it cannot revoke the designation on ERISA plans, such as a 401k. It is best to redo all beneficiary designations post-divorce.

Bob

I can’t believe I am going to write this, but here goes.  You may think about estate planning for the first time when you embark on a career path. When you go through a benefits orientation session you may be told that your company provides you with a minimal amount of life insurance. The company pays for this base amount of coverage, and you have the option of paying for increased coverage. Many companies provide their employees with health insurance as well. Some of them pay for the insurance premiums in full, and other companies subsidize health insurance coverage for their employees and their employees’ families.

Your employer may provide access to affordable health care for you and your family. But what about the four-legged members of your family? You might not think about the costs that you could face if your pet, who is just as much a part of your family as your own children, was to get injured or become ill. You may be surprised to hear that many companies are now offering pet insurance to their employees. Veterinary Pet Insurance is the largest provider of pet insurance, and thousands of companies are offering their employees the opportunity to purchase insurance with subsidies and discounts through VPI.

In a recent interview, Deana Single, VPI’s Director of Group Accounts noted, “With more than 63 percent of U.S. households owning at least one pet, offering pet health insurance to employees is both a practical and unique benefit option. Each year we see a substantial increase in the number of large companies and associations that are looking for new and enticing ways to incent and compensate employees. By adding VPI Pet Insurance to their voluntary benefits package, employers can offer a fantastic incentive to pet-loving employees at no cost to the company.” Though VPI is the largest provider, other companies and organizations offer pet insurance as well.

For some people, pet insurance will soften the financial blow if a pet were to ever need expensive treatments or surgery. However, for those of lesser financial means, the insurance could actually be the difference between the life and death of a pet.

Bob

According to a recent study by the Mind Perception and Morality Lab at the University of Maryland, people view patients in a persistent vegetative state (PVS) as worse off than patients who have died. Published online in COGNITION, the study consisted of three experiments. Here is the Abstract: 

“Patients in persistent vegetative state (PVS) may be biologically alive, but these experiments indicate that people see PVS as a state curiously more dead than dead. Experiment 1 found that PVS patients were perceived to have less mental capacity than the dead. Experiment 2 explained this effect as an outgrowth of afterlife beliefs, and the tendency to focus on the bodies of PVS patients at the expense of their minds. Experiment 3 found that PVS is also perceived as “worse” than death: people deem early death better than being in PVS. These studies suggest that people perceive the minds of PVS patients as less valuable than those of the dead – ironically, this effect is especially robust for those high in religiosity.”

The complex views of PVS illuminated in this study further illustrate the importance for clients to be clear in advance about their medical wishes and to not assume that others will be able to infer what they would want. It also speaks to the possibility that people may hold simultaneously conflicting views about PVS when making decisions on behalf of a loved one in a persistent vegetative state.

A Medical Power of Attorney coupled with a Living Will alleviates these issues.  Call me to discuss.

Bob

Recently, the Florida Supreme Court issued a decision of interest both in Florida and elsewhere. The case is Aldrich v. Basile and it is available by clicking the link. The case is instructive on how not to plan your estate. Ann Aldrich decided to save money and purchase a do-it-yourself form Will from E-Z Legal Forms. Through the use of the form, she left many listed possessions to her sister, Mary Jane Eaton, in what was a specific bequest. If Mary Jane did not survive Ann, everything on the list was to go to her brother, James.

Mary Jane predeceased Ann and left realty and other possessions to Ann. After that time, Ann attempted to prepare a codicil which she called an “addendum” to her Will. The codicil left all her worldly possessions to James. However, the codicil was not executed with the proper formalities. In fact, it was not even signed by Ann. Thus, the court disregarded the codicil and looked to the original form Will. Unfortunately, the original Will did not contain a residuary clause. The court determined that the specific bequests would go to James. However, everything else, including the property inherited from Mary Jane (after Ann prepared her Will), would pass via intestacy. The intestate heirs were James and two of Ann’s nieces from a predeceased brother.

Thus, despite the fact that Ann wanted everything to go to James, a substantial portion of her property ended up going to two nieces from a predeceased brother. Why? There were two errors due to her “self-help.”  First, Ann had used a form Will which did not have a residuary clause. Thus, only the specified property was governed by the form Will. Second, Ann did not execute the “addendum,” or codicil, with the formalities required under state law. If Ann had seen a reputable estate planning attorney, her Will would have had a residuary clause and any codicil would have been executed with the proper formalities.

The concurring opinion noted that “this case does remind me of the old adage ‘penny-wise and pound-foolish.’” This case is a tale of caution against self-help and form Wills. Abraham Lincoln famously said “he who represents himself has a fool for a client.”  That’s doubly true when the person representing the client does not even have any legal training. Certainly Ann was rather foolish in this case and her “E-Z” Will did not easily accomplish her goals.

So, don’t try this at home.

Bob

Death is a very real part of life, along with taxes. Yet, funerals are the only life cycle event most folks don’t want to plan in advance.

Despite the fact that humans have a 100 percent mortality rate, we don’t expect to die. If you don’t expect to die, you’re unlikely to preplan a funeral. And that leads to problems like family discord, higher costs, rote rituals devoid of meaning, and unnecessary stress added to grief.

Wedding planning gets way more attention than funeral planning, even though both events can conceivably cost the same, given a modest wedding and a traditional funeral. Yet, if the bride and groom planned their wedding the way most folks plan a funeral, they’d be scrambling to pull everything together in three days–talk about stress!

We are mortal. Our bodies eventually stop working. Many religions teach that the soul, the spirit that resides within our bodies as long as we breathe, lives forever. So, why fear death, and by extension, why fear funeral planning?

To talk about funeral planning, we would have to admit that this joy ride called life has an end. We’d have to look at how we’ve lived our lives, examine how we’ve acted and review what we’ve done with our time on Earth. We’d be forced to look at how we’ve treated others, and think about what others would say about us at our funerals. We’d need to take stock of our achievements and contributions to humanity. Perhaps we are afraid we’ll find ourselves lacking.

There are other reasons. Medical advances have saved so many lives so many times, it seems like death is optional. We don’t like the thought of losing the company of those we love. We avoid thinking or talking about death, perhaps for fear that its contemplation will precipitate the event. And many folks just don’t know what to do anymore when it comes to death.

Robert Fulghum, who wrote All I Really Need to Know I Learned in Kindergarten, also wrote a lovely book called From Beginning to End: The Rituals of Our Lives. Fulghum wrote, “For most of us, once we die, we are no longer in the care of our families and friends, strangers and institutions take over. Death is not in our school curriculum.”

He added, “Instead of a normal part of life, death is treated as an unexpected emergency, something that happens when the medical community fails. We always die ‘of something’ as though if it weren’t for that disease or accident, we could have lived on. ‘Old age’ or ‘worn out’ or ‘life completed’ are concepts not found on death certificates or in obituaries. Death in our time means crisis.”

In fact, according to one hospice nurse I know, no one has died of old age since the 1950s. That’s when death certificates were changed to require listing a specific medical cause of death, such as a heart attack, dementia, or pneumonia.

We use euphemisms for death: passed on; kicked the bucket; gave up the ghost; checked out; left the building; keeled over; took the Big Bus; caught the last train; bought the farm; paid the ultimate price; pushing up daisies; knocking on the Pearly Gates; taking a dirt nap; and gone to the Great (whatever) in the Sky.

You, me, all humanity, we will all need to be disposed of when we die. If you don’t talk about what you want done with your lifeless body, you will leave your family and friends in a world of hurt if the Big Bus unexpectedly runs you over tomorrow and transports you to the Pearly Gates. Do everybody a favor and make some plans. It’s best to put your two cents in now, while you still can.

Just as talking about sex won’t make you pregnant, talking about funerals won’t make you dead and your family will benefit from the conversation. Start a conversation today.

Start the conversation by bringing up estate planning and your need to do it.

Bob

It’s estimated that 20,000 Americans die each year under circumstances that make their organs suitable for transplant. Sadly, each year only about 3,000 people who die with viable organs agree to donate them. That means that 17,000 people die with viable organs that go unused. Meanwhile, there are currently 90,000 Americans on transplant lists. In 1995, about 6,500 people died while waiting for a transplant. What are the laws concerning who controls your body parts, and what things have been done to increase the rate of organ donation? 

Here in the U.S., we have an “opt-in” system, meaning that no one is a donor unless he or she actually agrees to donate body parts after death. The vast majority of states have adopted the Revised Uniform Anatomical Gift Act (Revised UAGA) www.anatomicalgiftact.org. This law is an attempt to make the rules for organ donation and other anatomical gifts consistent from state to state. It also is an effort to encourage anatomical gifts and expand the pool of available donors. 

Before the UAGA, a donor’s family had absolute authority to overrule his or her choice to donate body parts after death. The Revised UAGA makes it more difficult for this to happen, although, as a practical matter, donors’ wishes are frequently overruled. It also provides a prioritized list of people who have the power to “opt in” on behalf of a donor, including the parent of a minor child, and an agent acting under a healthcare power of attorney. 

Our system is in stark contrast to the laws in other countries, where “opt-out” systems are in place. For example, in France, in the most situations, a deceased person is presumed to have consented to donating body parts unless they opt out. Before organs or other body parts are harvested for donation, doctors are required to exercise reasonable efforts to ensure the deceased has not opted out. 

In Austria, the “opt-out” system is taken a step further. Not only does an Austrian citizen have to affirmatively opt-out to avoid donating body parts, there’s no requirement for doctors to find out whether or not the decedent opted out.

There’s no question about the shortage of donors, even under the Revised UAGA. Some states provide extra incentives for opting in as a donor, and there have been proposals that we transition to an opt-out system like our European cousins. 

What do you think? Should we presume that people consent to be organ donors unless they affirmatively withhold their consent? 

As an estate planning attorney, I know the many tax reasons to do estate planning. For example, doing annual exclusion gifts may reduce or eliminate state and federal estate taxes.

But, there are substantive reasons to plan, besides keeping the taxman at bay. It’s good to remember these reasons to need to plan, even if there are not concerns about taxes.

1. Incapacity.  This may be the most important reason to plan. Without planning, health care decisions may not default to the people you want. By doing a Health POA, or similar document, you can designate who will make decisions if you are unable to do so. Expressing your preference regarding end-of-life decisions typically is done in a separate document, which is also important. A Property POA would provide some incapacity planning for property, even in the absence of a trust.
2. Divvying Up Assets.  This is often the first thing that leaps to most people’s minds, so don’t leave this off our list of non-tax reasons. This is especially important if you are overriding the list of intestate heirs provided in the state legislation. For example, if a person wants to leave assets to their unmarried partner, friends, or a charity, this simply will not happen without an estate plan.
3. Avoiding Conflict.  A well-drafted estate plan can go a long way to prevent family discord, especially when the assets are being divvied up in a non-traditional manner.
4. Guardians.  A guardianship appointment is the proper place to nominate guardians to care for minors or incapacitated people (like parents or grandparents) close to them. While they may not care about taxes, they will likely want to protect those close to them.
5. Managers.  An estate plan is how you designate who is to control the assets left behind. This can be done with a continuing trust such as a testamentary trust. For example, they might leave assets in trust for a beneficiary until the beneficiary attains a certain age. Maybe they want their sister to manage the assets until the beneficiary reaches that age.
6. Probate.  In some states probate is a cumbersome process. It’s a very public process by its very nature. When people discover the disadvantages of the probate process, you will want to utilize a revocable trust during life to manage the assets. Many people know that an intervivos trust avoids probate at death. They may not know that a trust also assists with incapacity planning.
7. Coordination.  I always consider the coordination of the estate plan I draft for the client with beneficiary designations that have been or are suggested for certain assets. For example, if a client wants the assets to go 50% to A and 50% to B, simply stating that in the Trust is not sufficient. If beneficiary designations leave the assets in a different proportion or to someone else, those designations will control and the wishes expressed in the Trust will be thwarted. Most people are unaware of this fact.

While taxes are an important element of estate planning, especially for those subject to state or federal estate taxes, the most important reasons to plan are non-tax reasons. Bob

An important new study about advance directives was just released October 5 in the Journal of the American Medical Association (JAMA). You and your clients may have already heard about this in the news.

The study’s findings are generally favorable (and certainly not unfavorable) toward advance directives. But — some of the press coverage has the potential to confuse people or cause them concern about the purpose of the advance directives. Specifically, some of the coverage describes advance directives as a “cost-saving measure” or as “not effective.”  

Here are some of the main points from the JAMA study that may be important for your to understand about this study:

1. This study looked at patients who wanted less aggressive treatment at the end of their lives. It used cost of care as the proxy measure of the treatment received, hence the reporting focus on costs.
2. The findings suggest that people with advance directives who wanted less aggressive end-of-life care did have their wishes met. Specifically:
   • this group of patients did not have everything medically possible done for them, as measured by their lower costs of care.
   • these patients had a higher rate of dying outside the hospital (a measure of less aggressive care)
   • these patients had higher rates of using hospice and palliative care (comfort and pain management) services 
3. In certain areas of the country, advance directives helped patients achieve their goal of less aggressive treatment. In other areas, advance directives were not necessary for people to have their wishes met because of less aggressive treatment norms there.
4. The study did not find or even suggest that advance directives were used as a cost-cutting measure. Nor does it suggest that patients received less care than they wanted for any reason. In fact, the study did not evaluate the care of patients who specifically stated in their advance directives that they wanted the most aggressive treatment possible (to determine if advance directives helped them achieve this goal).

In closing, this study suggests that having advance directives either helped or at worst had no effect on patients getting the less aggressive care that they wanted at the end of their lives. It did not find that advance directives were counterproductive to these patients receiving their desired care.

Call me to discuss at 630-215-3676.

Bob

How fast the changes have come these past few weeks regarding the Medicare provision to reimburse doctors who discuss the options for how patients want to be treated in their final days. 

The New York Times story on December 26 announced a Medicare provision to encourage end-of-life conversations during annual physical exams being instituted by regulation January 1. Then a “death panel” hue-and-cry erupted, crying foul since the provision had been dropped from the 2010 Affordable Care Act legislation. By January 5, the White House pulled the provision, saying there hadn’t been enough chance for all sides to comment on the change. 

I’d like to add my comment about having end-of-life planning discussions. Yes, they are a tough conversation to start. But, just as talking about sex won’t make you pregnant, talking about end-of-life issues won’t make you dead – and the family will benefit from the conversation. 

The conversation is not about “pulling the plug on Granny.” It’s about how you want to be treated when you are older (as we know, Medicare’s for those over 65) and health is failing. It’s an opportunity to speak your wishes and get it in writing, so everyone’s on the same page about your care. 

When you are unconscious, or delirious, or just not able to make your own health care decisions, it allows your family to know and carry out your wishes. In the fluorescent glare of the ER, it’s hard to remember what those wishes are. 

My family’s experience is a lesson in the need for advance directives. My 82-year-old father-in-law had fallen and broken his hip, and he did have advance directives in place. The family was exhausted after his seven weeks of hospitalization, battling pneumonia and allergic reactions during rehabilitation after hip replacement surgery. 

On his third ER admission with difficulty breathing, the doctors told us that my father-in-law’s body was tired and broken beyond repair. They recommended he be admitted under palliative care, where he would be kept comfortable, but not “fixed,” and nature would be allowed to take its course. 

Dad incoherently rambled, refusing a DNR order. Mom, the named decision-maker, was sad and torn. The monitors beeped, the oxygen hissed, the doctors waited for an answer. She looked to my husband and me to help make the decision. Based on Dad’s advance directives, we agreed to the palliative care. 

Dad died peacefully in the hospital a week later with the family gathered around him. But even with the advance directives in place, there was family conflict over his care. 

My husband’s brother, who lived out of town, insisted steps be taken to make Dad better. Nebulizer treatments were ordered, but they could not help a man who literally inhaled everything he ate or drank. A feeding tube was inserted, against written wishes. 

We had Dad’s statement that he wanted comfort care, not heroic measures, to guide us during his last days. Dad had made up these advance directives, under the advice of his doctor, after he barely came through his third open-heart surgery twelve years earlier. 

Would Dad have made up these guiding documents on his own if his doctor had not told him to do so? It’s hard to say. I’m glad we had his advance directives, but real life is messy. 

Even if something is written, if it’s not discussed within the family, conflict can erupt when the end is near. The one thing Congress or the president can’t legislate or regulate is families talking to each other.