Author Archives: Robert Mondo

We all know the importance of advance directives in making clients’ healthcare wishes known.  Unfortunately, research tells us that creating such documents does not necessarily ensure that their wishes will be known when it counts.

Consider this: According to a study in the Journal of the American Medical Association, advance directives were not available in three out of four cases when a patient was admitted to the hospital.

Or this: In 67 to 74 percent of cases, physicians were not aware that their patients even had advance directives.

What explains the unavailability of these documents and the lack of knowledge about their existence by the medical professionals who need them?  For one thing, people tend to file away their directives, store them in a safe deposit box, give them to family members, or even leave them in the estate plan binder I may have given. And why wouldn’t you? Who goes out in the morning thinking “What if I get into an accident or suffer a stroke today… better bring my advance directives with me just in case.” Thus, the documents are not readily available in emergencies, the very situations in which they may be most needed. 

To address this problem, a number of electronic registries now provide instant access to advance directives. Utilizing the vast capacity offered by electronic storage and high-speed data transmission, these services permit advance directives to be obtained from just about anywhere, so that these documents can do their intended job at a moment’s notice. 

Registries can also help protect clients’ advance directives from being unwittingly superseded — another benefit not widely recognized.  Here’s how: if a patient does not have his or her advance directive in hand when hospitalized, the hospital typically offers the patient the opportunity to complete a new directive, right there on the spot during the admissions process.  This directive is typically the state’s statutory form.  Patients often comply with the hospital’s offer (which is sometimes heard as a request) to complete a new directive -because they want to be cooperative.  But, any new directive the client executes will negate the previous directive that you created.  Any non-statutory language that may have been carefully drafted to further clarify and protect the client’s wishes will be undone.

So how do registries work, and what should you look for?  More on this is forthcoming.

Bob

In the past two months, my college student son has known – by just 2 degrees of separation – 6 college students who have died. (In other words, he knows someone who knows the deceased.)  Two were students at his own college. Three were the victims of a single car accident. All deaths were sudden.

The car accident comes on the 1-year anniversary of my son’s own highway accident that could have easily killed him and his passengers. Instead, they all walked away with barely a scratch.

I don’t know what to make of all this. Why some are fortunate and others not so. Why some parents are forced to endure the unendurable and others are spared. As one of the spared, it feels awkward or inappropriate, at some level, even to discuss it.

There are many lessons that we can choose to draw from such events. An obvious one: to love our children and to hold them close. To not take them for granted and to savor our relationships and our time with them. To keep their difficulties, and ours, in perspective. They are still alive and breathing. They can overcome. They can have a fresh start. We can have a fresh start with them.

But I also want to linger a little longer over the tough stuff. Unlike the situations above, sometimes these tragedies do not end suddenly. Especially from traumatic car accidents (one of the prime causes of death and trauma in young adults), people can hover between life and death for days and even months. And the lives that hang in the balance can teeter somewhere between relative health and major impairment/disability from physical and/or brain trauma. It’s ugly to think about, I agree.

This is why it’s so important for you to press clients to have their young adult children do just a little planning. They need a financial power of attorney. And on the medical side, they absolutely need a health care power of attorney and a HIPAA release. Because they are over 18, they need these, at the very least, so that their parents can easily get information from doctors and hospitals in an emergency. (For more about why this is essential, read my prior post on this topic.)  And if your client is divorced from the child’s other parent (regardless of whether they are on good terms), the HCPOA takes on additional importance.

I agree with most experts that young adults don’t need a living will (though a discussion never hurts). A talk about organ donation, on the other hand, is important—especially because car accident victims are often candidates to donate. Even if the child’s driver’s license already indicates that he/she is an organ donor, it’s worth having clients talk with their child briefly about this, so that the parents understand their child’s mindset, especially if the parents are not personally in favor. Such a discussion can also be a gift to parents should the unthinkable happen.

So use this as an impetus to reach out to your existing clients and to your community as their children turn 18.

• Do consider a college student/young adult mini-planning package (and invest in a new relationship with the next generation in the process). If you’d like to see a sample client letter inviting clients to create a HIPAA Release and HCPOA for their college students, feel free to email me.
• Do consider reaching out to local high school PTAs and Home/School Associations to speak on this topic.
• Do offer graduating high school seniors a document package at an affordable price. (And planting seeds of relationship with the young adults AND their parents.)
• Do consider using National Healthcare Decisions Day – April 16—for prepared materials and as an additional marketing hook.

But whatever you do, please DO it.

People are interested in the lives of the famous. But, there is one thing that estate planning attorneys know that their clients probably do not: the type of estate plan you have dictates how much information will be available about your affairs to the general public after your death.  If a client dies with a Will, it is very easy to find out all about their assets and dispositive wishes. For example, George Washington’s Will is available to anyone who walks into the Fairfax County, Virginia, courthouse.

And it is not just the Wills of historical or political figures that are available. Except in the rare instance of a local law to the contrary, the Will of every person (who died with one admitted to probate) is available for inspection in the locale in which they resided at death. The assets controlled by the Will are inventoried and that inventory is also a public record.

With a trust, the terms are private. The assets are private. Some clients may not care about costs or delays after death. However, many of those will care about the privacy. Recently, the privacy of differing plans was illustrated by the deaths of Lauren Bacall and Joan Rivers. Bacall’s estate plan utilized a Will as the primary vehicle while Rivers’ plan utilized a Trust as the primary vehicle. While the details of Rivers’ plan and the extent of her assets are not available because it utilized a Trust-based estate plan, Bacall’s plan and assets are laid bare for all to see. Lauren Bacall utilized a Will-based estate plan. Her assets will be inventoried and that inventory, along with her Will, will be available in the “Surrogate’s Court” in Manhattan, where she lived.

While some people may not care about privacy, others would be startled to think that a listing of their assets would be available to their nosy neighbors, distant relatives, and anyone trolling through public records.

If you are concerned about privacy, a Trust is the only way to go.  Call me to discuss.

Bob

The 2006 film The Queen, starring Helen Mirren as Queen Elizabeth II, brilliantly illustrates the complications of funeral planning for a notable person.

Estate planning clients may not be royalty, but perhaps you treat them like kings and queens. Clients need to consider the implications of not creating their funeral plans. Issues can include how to handle the death of an ex-spouse and conflict over holding a private family affair versus the community’s need to mourn.

After Diana, “The People’s Princess,” dies in a car accident in Paris, The Queen decides the Royal Family should hide their mourning behind the closed doors of Balmoral Castle in Scotland. Her aim is to protect her grandsons, the young princes William and Harry, from the press.

At this point, Diana was divorced from Prince Charles for a year. This put the Royal Family in uncharted territory for holding a funeral for an ex-Royal.

The Queen views the funeral arrangements as a “private affair” best left to the princess’ own family, the Spencers. However, with the public’s overwhelming reaction, the Queen’s inclination to hold a private family funeral with a “stiff upper lip” may not be the best way to mourn.

The heartbroken public doesn’t understand the Royals’ aloofness. In the days following Princess Diana’s death, millions of British people in London erupted in an outpouring of grief, crowding around Buckingham and Kensington palaces to leave floral tributes and notes. Mourners flocked to sign the dozens of condolence books set out in London and at U.K. embassies around the world. The press went wild with demands that The Queen comfort her people, and when there was no response, started calling for an end to the monarchy.

The newly-elected Prime Minister Tony Blair and The Queen negotiate throughout the film to reach a compromise between private family mourning and the public’s demand for an overt display. After days of building pressure, Blair calls The Queen at Balmoral and urgently recommends a course of action he believes is needed to regain the public’s confidence in the monarchy.

These measures include attending a public funeral for Diana at Westminster Abbey, flying a Union flag at half mast over Buckingham Palace (the flag was only flown when royalty was in residence and had never been used as a sign of mourning), and speaking to the nation about Diana’s legacy in a live, televised address from the palace.

In one scene, officials gather around a long table to discuss what form Diana’s funeral will take. The man who calls the meeting says, “I think we all agree that this is an extraordinarily sensitive occasion which presents us with tremendous challenges, logistically, constitutionally, practically, diplomatically, and procedurally.”

The Queen and The Queen Mother are informed that the public funeral will be based on “Tambridge,” the code name for The Queen Mother’s eventual funeral plans. It’s the only one that has been rehearsed and could be put together within a week’s time. Instead of 400 soldiers, 400 representatives of the Princess’ various charities would march behind the coffin. Instead of foreign heads of state and crown heads of Europe, the guests would include “actors of stage and screen, fashion designers and other celebrities.”

This film shows the coordination needed to create a funeral for a notable person. It also shows that a public recognition of loss is needed, especially when the person is highly beloved. The Queen is an entertaining way to start the funeral planning conversation.

A 529 plan, otherwise known as a qualified tuition plan, is a tax-sheltered way of saving for education expenses. 529 plans are sponsored by states, state agencies, or educational institutions.

A contribution to a 529 plan is not federally income tax-deductible, though it may qualify for a state income tax deduction in some states. Assets in the plan may be invested in various ways, depending upon the particular plan. Income earned in the 529 plan is not taxed currently. In fact, it may never be taxed, depending upon how it is distributed.

Distributions from the 529 plan, if used for the beneficiary’s qualified education expenses, including tuition, books, and other education-related expenses for students at colleges, junior colleges, technical schools, and even at primary and secondary schools (up to $10,000 per year) are income tax-free.

If the distributions aren’t used for qualified education expenses, the earnings would be taxable and may even be subject to a 10% penalty.

Contributions to a 529 plan may qualify for the gift tax annual exclusion (currently $15,000 per year per person). In fact, an individual may utilize up to 5 years of annual exclusions up front. If the donor dies within 5 years, the value of the annual exclusions for the years into which the donor did not survive would be brought back into the donor’s taxable estate. However, any growth on the funds would be out of the donor’s taxable estate.

Typically, if a donor retains control over assets, those assets are included in the donor’s taxable estate. Uniquely, the donor of the 529 plan can keep control of the plan during their life as the owner of the plan and yet the assets in the plan are still removed from the taxable estate. The account owner can change the identity of the beneficiary. So, if you select a successor owner, they could direct the funds away from the beneficiary.

If you want to lock down the 529 plan to make sure your successor doesn’t redirect the funds for themselves or beneficiaries whom they prefer, you could use a trust to hold the 529 plan. However, if you do that, you would be limited to one annual exclusion at a time.

An added bonus of 529 plans is they may even be exempt in bankruptcy, as long as the funds were contributed at least two years before the donor’s bankruptcy filing, the 529 plan is established for the donor’s children, grandchildren, step-children, or step-grandchildren, and contributions don’t exceed the 529 plan’s maximum contribution limit per beneficiary (which can be in excess of $500,000).

Thus, uniquely, a donor can keep complete control over 529 plan contributions, they may be completed gifts for gift and estate tax purposes, and they may be protected in bankruptcy.

The ranking listed the following states:

10. Alabama

Alabama ranked poorly because of low life expectancy and high crime. Alabama does not have a state estate tax.

9. Michigan

Michigan ranked poorly due to economic factors, crime, and many other reasons.

8. (tie) New York

New York ranked poorly due to high income and property taxes and a high cost of living, as well as harsh winters. The fact that New York’s separate state estate tax is phasing out may help in future rankings.

7. (tie) Maryland

Maryland, too, ranks poorly due to a high cost of living and higher than normal taxation. As with New York, the fact that Maryland’s separate state estate tax is phasing out may help in future rankings.

6. (tie) Georgia

Georgia ranks poorly in most categories besides weather. It should be noted that Georgia does not have a state estate tax.

5. Nevada

Nevada made this list due to a high crime rate and low life expectancies. The state has neither a state income tax nor a state estate tax.

4. Illinois

High property taxes contributed to Illinois’ appearance on this list. Illinois does have a separate state estate tax.

3. Tennessee

Tennessee ranks poorly due to high crime and low life expectancy. Tennessee has no tax on income except dividends and interest.

2. Louisiana

Louisiana ranks poorly due to high crime and low life expectancy.

1. Alaska

Alaska is ranked as the worst state for retirement due to harsh winters and its high cost of living. Alaska has no state income tax and no separate estate tax.

This listing in USA Today, based on a survey by MoneyRates, demonstrates that taxes are only a small part of the equation. Three of the five worst states for retirement have no state income tax, Alaska, Nevada, and Tennessee (except dividend and interest income tax). Many of the 10 worst states have no state estate tax. This list demonstrates that taxation is not the primary consideration for most people.

Last week, I wrote about the 10 Worst States for Retirement, based on a piece in USA Today. This week, let’s look at the 10 Best Places for Retirement in 2014, according to Bankrate.com.

The ranking lists the following states:

10. Virginia

Virginia ranked well because it had relatively low taxes, cost of living, and crime and a moderate climate.

9. Iowa

Iowa ranked well because of exceptional health care and low costs.

8. Idaho

Idaho ranked well because of a low cost of living, low crime, and plenty of sunshine.

7. Montana

Montana fared well because of abundant sunshine, good health care, low taxes, and low crime.

6. Nebraska

Nebraska ranked well because of low costs, low crime, good health care, and abundant sunshine.

5. Wyoming

Wyoming broke into the top five due to the lowest taxes in the country (according to Tax Foundation and considering taxes at all levels), low crime, and lots of sunshine.

4. North Dakota

North Dakota made the number four spot due to low cost of living, low crime, low taxes, good health care, and making the top of Gallup-Healthways’ Well-Being Index (which is a comprehensive measure of happiness).

3. Utah

Utah ranked well in every measure, including the Well-Being Index.

2. Colorado

Colorado took the penultimate spot with low costs, low crime, good health care, low taxes, and good performance on the Well-Being Index.

1. South Dakota

The top spot went to South Dakota which did exceptionally well in almost every category, including good health care, good performance on the Well-Being Index, extremely low taxes, low cost of living, and low crime.

The Bankrate.com listing, like the listing in USA Today, demonstrates that taxes are only part of the equation. Surprisingly, colder climates seem to predominate and the southern tier of states, from California to Florida, did not make the list at all.

Although estate planning may not be the top priority on your daily to-do list, it’s something that should be addressed before it’s too late. Completing the process ensures your wishes are fulfilled and your family is taken care of upon your death. It also keeps you covered if you’re still alive but become disabled or incapacitated. Here are four documents you will need.

1.  Trust

The last thing you want to do is leave it up to the courts to determine who receives your assets. Accordingly, it’s critical that you have a Trust in order to specify who gets what and other details. You don’t want to create strife between two or more family members because of a lack of clarification. That’s why it’s usually best to tell individuals ahead of time of what will be passed on to them. You should also choose a successor trustee to be in charge of paying taxes, managing assets and distributing them to beneficiaries.

2.  Durable Power of Attorney

In the event that you’re unable to make your own decisions while still living, you will want a person who you trust to make your decisions for you. You will give this individual the authority to act on your behalf to cover financial and legal transactions. Because this person will have a lot of power in their hands, it’s important to think carefully before choosing a durable power of attorney. This person should not only have your best interest in mind but should be financially responsible and capable of effectively managing money. Having a backup in place is a good idea in case something happens to your initial power of attorney.

3.  Medical Power of Attorney

This is a legal document that gives another person the ability to make your medical decisions for you if you’re unable to do so. They will act as your medical power of attorney and will essentially have your life in their hands. Consequently, making your choice isn’t something to take lightly. The person you choose should want only the best for your health and well being. They should also be able to remain calm during a stressful situation. Subsequently, objectivity is a good characteristic to look for.

4.  Living Will

Drafting a living will isn’t always a pleasant thing to do, but is nonetheless an important part of estate planning. In this document, you will specify what you want for end of life care and ensure that you remain relatively comfortable. For instance, if you develop a terminal illness that’s incurable, you could dictate what type of treatment you receive, if any. You could also determine whether or not you want artificial respiration to keep you alive. Having a talk with family and loved ones about your living will and medical power of attorney should make it easier in case of a difficult situation in the future.

Due to the emotional nature of estate planning, it’s sometimes put off. Even though death and medical issues aren’t something that we like to think about, much less put at the forefront of our minds, it’s better to take care of legalities in advance to make the process easier later on.

“Where’s That Advance Directive?” In the New York Times recently, Paula Span interviewed a hospital social worker about the unavailability of people’s advance directives at the hospital. She faces this problem at least once a week: patients—who have already signed advance directives—arrive at the hospital without them.

This social worker paints a picture of the fallout from not having the documents in a timely manner: delay of medical treatment, a near-miss in having the wrong person make health care decisions for the patient, and more. Frustrated, she concludes with the obvious: we waste our hard work making these decisions and having the difficult conversations with our loved ones if the documents aren’t there when it counts.

Taking up where Ms. Span left off, here are six of the most common myths people rely on when they assume that their advance directives will be available at the hospital—and why they are mistaken.

1. “My family has a copy and will remember to bring it to the hospital.” Well, it’s unlikely. In an emergency, the last thing on your loved one’s mind is your paperwork. In a time of crisis, your most capable loved ones will remain calm and focus their energy on you. Others may simply panic. An estate planning attorney admitted to me that, in the midst of his father’s heart attack, he didn’t think to get his dad’s advance directive before they left the house. “If I can’t remember to do this,” he observed, “how could I possibly expect my clients to remember?”
2. “If I forget it, my family can just go home for it.” Maybe—but at potentially great cost. Your loved one may have to leave you alone in the hospital when you are at your most vulnerable. Andgoing home to get it can hold up your treatment. On the flip side, in cases of serious trauma, there may not be enough time to get it. Emergency medicine physicians talk about the “golden hour,” essentially the first 60 minutes during which vital decisions may need to be made about your care. You could run the risk of your wishes not being honored if they are not known right away.
3. “My family knows where I keep it and will be able to find it.” Aside from the very neatest among us, does this one need a lot of debunking?
4. “My hospital has it already.” Irrelevant. This may be surprising, but don’t expect your hospital to look for your advance directive just because you gave it to them previously. (It would take too much time for them to go dig it out of your old chart from a prior hospital admission or episode.)  Even with an electronic medical record, an advance directive can be hard to find, because some of these systems don’t have a designated place for it. And some hospitals may have multiple electronic medical record systems that don’t talk to each other.
5.  “My advance directive is on a USB key (thumb drive) that I keep with me.” Useless. A hospital worth its salt in patient confidentiality and virus protection is not going to plug your thumb drive into its computer system.
6. “My doctor and my lawyer have copies if I need a backup.” Don’t rely on either of theseas yourprimary emergency backup. They can help you Monday–Friday during business hours, but are their offices open at 2 am? On Sunday? Doctors’ and lawyers’ offices are only open about 20% of the time in a whole week.

Most people aren’t familiar with the terms professionals use in discussing who administers their estate and affairs and what those responsibilities are. The following are terms that are often used in estate planning:

Beneficiary: The beneficiary receives something of value from the estate. For that reason, choosing the beneficiary to administer the estate or trust may present a conflict of interest. Typically, this conflict of interest is not of primary concern. If you wish to put a check on the beneficiary/trustee/executor, you may wish to add someone to serve as co-trustee or co-executor.

Trustee: A trustee can be either an individual or a corporation who manages property or assets held in trust. Trustees must make decisions regarding investments and distributions, while fulfilling the terms of the trust. When choosing a trustee, it’s important to choose someone who is able to follow instructions. They should be willing to seek help and able to choose those who have the legal or financial expertise which they may not have.

Durable Power of Attorney for Financial Affairs: Under this document, the “principal” can delegate to another person, called an “agent” or “attorney-in-fact,” the power to make decisions regarding assets, real estate, and other property titled in their own name, rather than the trust.

Medical Power of Attorney: Your “healthcare agent” will be making medical decisions for you when you are no longer able to do so. Choose someone you can talk openly and honestly with about your wishes beforehand and, most importantly, whom you trust to honor those wishes when the time comes.

Guardianship of Minor Children: A guardian makes decisions on behalf of an individual who is “legally incapacitated.” Someone who is not of legal age is a “minor” and is an example of someone who is legally incapacitated. While you can express whom you would like to act as guardian for a minor child, the ultimate decision lies in the hands of the court. The judge will make the determination guided by what is in the best interests of the child. Certainly, the judge will give your suggestion substantial weight.

With a little basic knowledge, most people are able to make informed decisions about who is best-suited to fill the various roles in their plan.

Bob