This time of year many companies are tackling the daunting task of tax planning. However, this part of managing your business doesn’t have to be one of those pull-your-hair-out, give-you-a-headache kind of tasks. Rather than looking at tax planning as a chore, try instead to consider this an opportunity to assess your business’ activities and determine year-end profitability.

While it’s always healthy and positive for a business to end the year in the black (profitable), profits also mean taxes and we can all agree nobody likes to pay taxes. Use tax planning as an effective method to help reduce your tax liability.

The best way to reduce your tax liability is to make sure you have maximized your deductions – in other words, you have considered all tax deductions that are applicable to your business. Your accountant will review deduction scenarios with you during your tax planning meeting, but the following considerations are just a few basic areas to get you in the right mindset:

Income now? Income later? Known as deferred income, this is something to review with your accountant and determine if you can reduce your taxable income by recognizing your income after January 1st. Reducing taxable income may reduce your tax liability (and that’s a good thing!).

Write off bad debts. The end of the year is a good time to review your accounts receivable and determine if there are any clients who haven’t paid you in a while. There may be receivables you know are un-collectible and therefore deemed as a bad debt. Writing off those receivables as bad debt will essentially reduce your income.

Now is the time to invest in new technology! Need to stock up on office supplies like updated computers or software? Do it now! Any purchases you can make before December 31st will help maximize your deductions. These can be cash or credit card purchases.

Have you donated lately? Charitable contributions are not only a compassionate act, but they can also help your bottom line! Remember, you don’t necessarily have to give money, you can always donate items. This might be a great time to give away that desk in your office that’s just collecting dust, or some old computer monitors that aren’t being used anymore. Remember when donating to get documentation and keep your receipt.

Every business is different, so certain deductions may or may not be applicable to your business. Be sure to discuss with your accountant the many deductions that may be available to you and have them thoroughly review your company’s financials and tax situation.

The “Secure Act” was part of a larger law that passed with (rare) bipartisan support in late-December 2019. It is effective January 1, 2020, for most purposes. This is a series of articles on the Secure Act. This first article looks at the basics of the Secure Act.

What does it do?

The Secure Act does many things, but here are a few of the biggest changes. First the good news:

• It changes the age at which you must start withdrawing from your IRA or retirement plan. It was age 70 ½ under prior law while under the Secure Act it increases to age 72. This is a good change because it allows you to keep money in your plan longer. Remember, it can grow tax-deferred while it is in the plan.
• It allows you to contribute to a traditional IRA past age 70 ½ if you have “earned income” from employment rather than from investments. Again, this is a good change.

Now the bad news:

• It accelerates the timing of when most beneficiaries must take distributions from your IRA or retirement plans after you die. This is the painful part of the Secure Act. It doesn’t necessarily increase the tax they’ll pay, but it means they’ll have to pay it sooner in most circumstances.

Under the Secure Act, most people designated as beneficiaries of IRAs and retirement plans of people dying in 2020 and beyond must take all distributions from the plan by the end of the 10^th year after the death of the plan Participant. Prior to the Secure Act, the beneficiary would have been required to take distributions over their own life expectancy, which could have been many decades, depending on the age of the beneficiary at the Participant’s death. So, this substantially accelerates distributions for the typical beneficiary.

Some beneficiaries are considered “eligible” beneficiaries and don’t face the 10-year rule, but the old rules continue to apply. Eligible beneficiaries are:

• The spouse of the plan Participant. Just like under the old rules, the spouse can take it as an inherited IRA using their own life expectancy or can choose to roll it over into their own IRA.
• A child of the Participant under the age of majority (typically 18). There are two caveats here. First, it must be a child of the Participant, not just any minor child. Second, once the child reaches the age of majority, the 10-year rule applies at that time.
• A person who is medically disabled or chronically ill.
• A person who is less than 10 years younger than the Participant.

What does this mean for you?

During your own lifetime, you don’t have to start taking distributions until age 72, rather than age 70 ½. Otherwise, you’ll take distributions according to the same schedule as in the past, based on the “Uniform Table” which considers your life expectancy (and the life expectancy of another person 10 years younger than you).

Your beneficiaries will be required to pull out retirement plan benefits over a 10-year period (unless they fit in one of the exceptions above). In other words, they won’t get as much of an income tax deferral as in the past. This means your beneficiaries will be required to pay the income tax due on the assets (if any) faster than in the past. It doesn’t necessarily increase the tax they’ll owe, but it means they’ll owe it sooner.

Have you ever gone to a party, showing up with a bottle of wine as a gift for the hosts, and found they’re not ready yet? Maybe they are still cleaning up or putting the kids’ toys away, the food isn’t ready, or oh no, the bar’s not set up!

Two attributes that set a gracious host apart from an unprepared one are the ability to organize and communicate. Most experienced party throwers know it takes some planning to put together a successful event. Celebrations all have similar elements: deciding on a date, time and place, extending invitations to guests, planning unique features to make the occasion more meaningful for the celebrants, and constructing a menu.

Parties get a bit more complicated as you move up the chain of life cycle events: a birthday for a two-year-old is simpler than a Sweet 16 affair. As families grow, there are graduations, anniversaries, and weddings to plan and celebrate, each more involved than the next.

And then there are funerals. These are the parties no one wants to plan. Yet this is a life cycle event that every family will undertake for every member at some point. They have the same elements of party planning as any other get-together. But if brides and grooms planned their weddings the way most people plan their funerals, they’d be scrambling to pull every element together in three to five days. Talk about stress!

By doing some advance planning, using organization and communication, families can minimize the emotional and financial chaos that often takes hold when someone dies.

Why preplan a funeral or memorial service? There are three very good reasons.

1.   You can reduce stress at a time of grief and minimize family conflict. Think about this:

If you don’t have information on hand needed for a death certificate, like a social security number, place of birth, veteran information, and mother’s maiden name, how are you going to get it when that person is dead? That’s one stress you can avoid by pulling facts together while everyone’s alive and well.

If family members have preplanned, or at least discussed a preference regarding burial, cremation, or other options, you can avoid the stress of wondering what they would have wanted.

Organization and communication can also help minimize family conflict. We’ve all heard of Bridezillas created by the stress of weddings. Funerals can create family feuds over the smallest items.

My friend Roger McManus experienced the death of both parents in very different ways. His dad had ALS (Lou Gehrig’s Disease) and had planned extensively before he died – everything went smoothly. His mom, on the other hand, sat down on the couch to watch TV, fell asleep, and never woke up. She had absolutely no plans in place. The family started fighting over who got the cat, the good china – almost everything.

The experience with his mother’s death prompted Roger to create an organizer called From Here to Hereafter: Everything My Family Needs to Know. As Roger is a frequent flier, in chatting with his seatmates, the conversation invariably turns to funerals and the conflicts they provoke. His first question is usually, “So when did the fight start?”

2.   You can save money, potentially thousands of dollars. Shopping around for the best price is the last thing you want to do when a loved one has died. On top of that, you might make purchasing decisions with your heart – rather than your head – and overspend out of guilt or remorse.

My friend Gary, who doesn’t want a fuss when he dies, wanted a cheap, simple, prepaid cremation, so everything would be taken care of when the time comes. I went with him on shopping excursions to several local funeral homes. His plain request resulted in a $750 price variation between providers for essentially the same services. The difference was due to overhead for the upscale funeral home setting of the highest priced provider.

We also found funeral directors can have a great sense of humor, when there’s no death imminent. When someone has recently died, or is about to die, the conversation has an appropriately somber tone. In addition to saving money, it’s a fascinating shopping trip and a much more upbeat experience.

3.   With advance planning, you can create a really meaningful event that becomes a treasured memory. You don’t even have to wait until the person is dead to hold a celebration of their life. Living memorial services give the entire family a chance to speak words of love and admiration, or to make amends before it’s too late.

In one case, I coached a woman whose elderly father was fading fast. With organization and communication, she pulled the family together before Thanksgiving for an event not unlike a celebrity roast.

While the family wasn’t sure about the appropriateness of this event, her father really enjoyed being the center of attention. Those who did not approve initially came around to see it as a wonderful, memorable time. Her father died six weeks later. Everyone in the family who attended now treasures the warm memories of his living memorial service.

With just a bit of forethought and planning, the life cycle event formerly known as a funeral can be a warm celebration of life. It takes organization and communication to reduce stress at a time of grief, save money, and create a meaningful, memorable event.

When there’s a death in the family and friends come bearing casseroles, will you be the perfect picture of grace under fire? Or will you be the host who scrambles to put everything together at the last minute? The choice is yours.

How does the law treat human remains? It’s not a common topic of conversation, and the answer may be surprising. In most situations, you have more control over what happens to your property after you die than you have over the final destination of your own body.

American law on this topic, as in other areas, is based on English common law. Historically, under English common law, there were no property interests in corpses. The reason for the rule can often be illustrative. If there were property interests in corpses, then those property interests could allow people to bring the dead with them from town to town and repeatedly exhume loved ones. Certainly, the lawmakers in Britain wanted to avoid this gruesome prospect. Eventually, under American common law, a quasi-property right was established. Essentially, the “next of kin” have a limited property right in the remains of a deceased person, but only for the purpose of burying or otherwise disposing of the body.

Who exactly qualifies as “next of kin?” That question has spawned its share of lawsuits. Perhaps the most memorable example from the recent past was the fight over where to bury Anna Nicole Smith’s body. In that case, Howard K. Stern, her long-time companion, argued, as executor of her will, that she should be buried in the Bahamas, next to the grave of her son. Smith’s estranged mother, on the other hand, argued that she was next of kin and thus had the right to bury Smith’s body in Texas, where she grew up. Ultimately, the case was resolved with Anna Nicole Smith’s body being buried in the Bahamas, but only after the fight over who should have control of her remains raged for nearly a month.

What’s the bottom line when it comes to control of a decedent’s remains? Preference is generally given to the decedent’s wishes. However, no one has an absolute right to dictate what will happen to his or her own remains. Because of their quasi-property rights, the decedent’s next-of-kin can overrule the decedent’s wishes and make the final decision; unless, of course, the court denies those wishes based on public health concerns or the norms of society.

What do you think? How should the law develop in this area?

An Advance Health Care Directive is a frequently-overlooked part of the estate planning process. In some states, an Advance Health Care Directive (also sometimes called a “Living Will”) is combined with a Health Care Power of Attorney document. The directive expresses the client’s wishes regarding end-of-life decisions. Unfortunately, it is a reality that all of us will die. We can each choose whether we wish to extend our lives by every means possible, or have a shorter life that may have more dignity. It is best to consider and state wishes on these decisions before the decisions are relevant.

If a person is in a terminal condition, in addition to their Advance Health Care Directive, the person will want to speak with their physician about “no code” orders. In some states, a Physician’s Order on Life-Sustaining Treatment, or “POLST,” might be appropriate.  We do not have such a document in Illinois.

One of my roles is to help my clients plan for their incapacity and their death, including end-of-life decisions. I can help clients prepare for the potentially distressful things that may come their way and thereby reduce the negative impact, both financially and emotionally.

Many published articles demonstrate how proper planning may alleviate a great deal of suffering, not only for my client(s), but of those closest to them, as well. It reminds us that planning to whom and how assets are passed is only a minor part of estate planning, just as money is only a small part of life. The most important things in life aren’t things. The most important things in life are the cherished memories and special moments that the family will treasure throughout their lives. An Advance Health Care Directive allows a person to decide how they will spend their final days. They may choose to spend it battling for extra time on the clock of life. They may choose to spend it at home with friends and family. Stress is reduced for everyone if that decision is made and communicated before it becomes relevant.

Bob

Whether or not we plan to do so, each of us will face death eventually. However, by planning we can make our passing easier and better in many ways for those we leave behind. The first article in the series demonstrated how you could gain privacy from the public by planning and using a trust rather than going through the public probate process. The second article in the series focused on how you can make the transition better through the manner in which you leave your assets to your loved ones. This third article in the series focuses on the importance of communicating your plans to your family to avoid problems after your death.

Death is seldom easy for those left behind. But, it’s even more problematic when inheritances don’t go as expected. Here’s a common situation. A parent, Mary, has three children, Bob, John, and Victoria. Bob and John have lucrative careers, while Victoria is an elementary school teacher. Mary decides to leave all her assets to Victoria because Victoria has greater need. Mary dies without disclosing her plans to her children. When Bob and John discover they’ve been disinherited, they feel hurt. They thought they had good relationships with their mother. So, they begin to look for reasons for this turn of events. Typically, suspicion falls on the child receiving the inheritance. Bob and John think Victoria must have used undue influence or coerced their mother to leave all her assets to Victoria. So, Bob and John accuse Victoria of exerting undue influence and contest Mary’s plan, tearing the family apart in the process. By the time the controversy is finished, Bob, John, and Victoria have frayed relationships and have spent most of their inheritance fighting each other. All of this could have been avoided if Mary had simply disclosed her plans to her children. If Mary had done that, Bob and John would have known Mary still cared greatly for each of them, but simply felt Victoria had greater need. Bob and John would have had an opportunity to ask Mary any questions they had. But, without a disclosure, Bob and John were left thinking the worst.

If you really care about your family and want to help preserve family harmony, communicate your plans to your family. This is especially important if there are any surprises in your plans. Surprises could be: your estate will be divided in unequal shares, your estate is larger than expected, your estate is smaller than expected, shares are being left in trust, etc. Sharing your plans is the loving thing to do, especially if you are planning a disposition that might be unexpected. The next article in the series will examine how to leave an unequal distribution with a lower risk of triggering a challenge to your plan.

Some days are better than others. This day started like every other day, arrive at the office, grab a quick up of coffee and hit the ground running. As the morning was getting up to full steam, one of my employees came to my office and asked if she could share with me a call she had just taken for one of our clients. The following is an account of a call she took that day. 

The phone rang first thing this morning. As my employee answered the phone and started to gather some information to help the caller. As she began asking basic information, she very quickly knew the person on the other end of the line had a story he wanted to tell. He introduced himself and said that his father passed away. When the family arrived at the house today to start making plans they found a portfolio with the words “Estate Planning” on the front. Inside they found a life insurance policy, letterhead with the attorney who prepared the documents with his number, all the detailed information they needed, and what they called “the gift.” Not wanting to be rude, our employee didn’t ask about the gift, but somehow she knew he was going to tell her. 

He began by saying his father was a private man, especially since his wife passed away. He still came to family events but always seemed to feel uncomfortable and like part of him was missing. As he got older and still living alone, they never talked about what would happen if he got sick or passed away. There just never seemed to be the right time to talk about those sorts of things, especially since it brought back such painful memories of losing his wife and their mother. 

There are three siblings and for the most part they are scattered around the United States. He lived the closest and was the oldest child, so he was the one that received the call that their father had been taken to the hospital and had suffered a heart attack. He contacted his brother and sister and all began planning their trip home. As they began to arrive one by one they made their way to the hospital. He didn’t last through the night. 

The next day they gathered at the house to begin to try and sort things out. They really had nowhere to start. They said over and over to each other, why didn’t we talk about this? And remembered when their mother had died, their father was the one that made all of the arrangements. They wondered if that was his way of protecting them. But, nevertheless, there were plans that had to be made.

His sister began by digging through filing cabinets, searching his bedside table drawer, and looking on the bookshelf where they kept the family Bible and family photo albums. That is where they found the Legacy Safeguard portfolio. It was almost like their dad put it there knowing that it would be one of the first places they would look. Not really even knowing what this was, his sister sat down and opened it up. The two other brothers were in various locations in the house all doing the same thing, looking for anything that might assist them with this daunting task. All they heard was, “Oh my gosh! I think I found something.” They all gathered around as their sister started to read what she found. First, they found a letter. Their Dad had written a letter with all their names listed at the top. It started with how much he loved them and then apologized for the last few years. He went on to say that he knew they had been worried about him but he was just so sad. He had tried to make the best of it, but never really got the hang of being without their mother. He talked about their lives together, how much he remembered each of them as children, and what joy they had given them as parents. He talked about their lives after they were grown and left home and how much fun he and his wife had rediscovering things they enjoyed like traveling. He detailed how he had filled out the portfolio they were looking at with all the information we would need to locate everything and then plan for his memorial services, and how he had a life insurance policy that would take care of all the final expenses. He really didn’t want much, just to be laid to rest next to their mother. He closed the letter with what he called “the gift.” For each of them, he made a special box. The caller said this was so much like their Dad because he used to smoke those fancy cigars that came in those wooden boxes. He always saved them for some reason. Now they knew why he saved at least three of the boxes. He said we would find them under his bed. 

Just as if they were kids again, they ran to the bedroom to find the boxes. As they pulled them out each box had our names on the top. Inside their dad had gathered up things that reminded him of each of them or things that were his that we wanted each of them to have. For the son that called in, it was his father’s pocket watch, a ticket stub from their first pro football game they went to together, a picture of the two them when he caught his first fish, his dad’s pocket knife, a Father’s Day card he had sent to him when he was in college when he needed money, and a note thanking him for being his first born son.

They sat that evening and poured through all the memories and made plans to call the number on the Legacy Safeguard gold card the next morning. When the Advisor answered the phone along with this heartfelt story, what the son wanted to convey was thank you. Thank you for giving us this gift of our father and his Legacy. Without this we would have been lost. 

Every day Legacy Safeguard works with families at the most difficult time of their lives. Some are more prepared than others. The person on the other end of the line, no matter what level of preparedness, needs a comforting voice and the ability to take the burden of planning out of their hands, at least for a little while. The gift we want to pass along to our members is the gift of leaving a lasting legacy. This was a good day, and we hope this story helps you leave “the gift” for your family! 

“Don’t have a funeral for me when I’m gone.” People say this, not realizing while the memorial service is about them, it’s not really for them. Funerals are for those still living who grieve the loss of someone they love.

Funeral and memorial service rituals help recognize this transition, socially acknowledge the death, and help start processing grief to move toward healing.

Dr. William G. Hoy, a grief counselor and death educator, explained, “Very often — with those who don’t stop and ritualize the death — six months later, these families are in my office, having a harder time with grieving and healing.”

Dr. Hoy and other counselors believe every good funeral includes these four R’s: Recognize Reality, Remember, Reaffirm, and Release. Use these as a guide towards a “good goodbye.”

Recognize Reality
The bereavement process starts with the recognition and realization that someone has died. To come to terms with the reality of death, someone has to stand up and say, “Yes, so-and-so has died,” or if you prefer, “passed on.” The reading of an obituary written and published about the deceased often serves this role at a funeral.

Remember
Funerals or memorial services provide an opportunity to rememberand share stories about the person. Eulogies by clergy, family members, and/or friends provide insights into the person’s character and family history. Remembrances can also be sparked by tabletop displays of items related to the person.

Reaffirm
An important part of funerals is to reaffirm beliefs, whatever they may be. If you believe your loved one has gone to a better place, say so. If you believe you will be reunited with him or her when you leave this world, say so. If you believe love is a valuable thing, just say so.

Release
Releasing the spirit of the deceased gives the living permission to move on, prompting healing tears and goodbyes. A simple release statement can be, “We now commit the body of (name) to the earth (or sea, fire, or wind) and let his/her spirit go free.”

Psychologists cite a number of reasons for holding funeral rituals. They make the dead “safely dead,” dispatched with proper ceremony to rest in peace. They confirm the deceased and their survivors matter, and that the community will continue. They provide structure in the midst of chaos and disorder, and ensure communal support for survivors during a stressful time.

I’d like to add a fifth R: No Regrets.

Let’s live our lives to the fullest every day. See and hear the beauty in nature. Take time to thank a loved one and tell them how much they mean to you. Share a hug. Enjoy good food and drink. And, of course, stop to smell the roses and admire all flowers.

Live life so that when it’s time to say goodbye, you can die with no regrets. And let your loved ones know it’s okay to have a funeral – they’ll bless you for it.

Call me with any questions,

Bob

Successor trustees are critical to managing the assets during periods of the client’s incapacity and at the client’s death. These successor trustees will make decisions regarding how the assets should be invested and whether they should be distributed and to whom. Successor trustees also make decisions regarding trust administration. As we all know, a trustee who is “difficult” can make everyone’s life miserable, including the estate planning attorney who is hired for the trust administration. 

Clients often default to naming a family member to serve in that role. Sometimes that may be the best choice. However, that may not always be the best choice. Often, clients do not have family members with the ability to serve in that role. In some cases, it may be unfair to ask a family member to serve in that role. For example, a family member serving as trustee may have a hard time refusing to distribute assets to other members of the family who are beneficiaries even if refusing a distribution is the right thing to do. An institutional trustee does not have to sit across from the brooding beneficiary at the Thanksgiving dinner table! 

Sometimes, an independent third party is the right choice for successor trustee. Many years ago, the trust departments of banks were seen as the only choice. Now, there is a trend away from bank trust departments and towards independent trust firms, according to research by Tiburon Strategic Advisors in San Francisco. Banks control 40% of the market of personal trusts. However, independent trust companies and brokerage trust operations now dominate the market for revocable trusts, which represent approximately $4.5 trillion out of $6.8 trillion in personal trust assets.  

Your client needs to be sure to name someone who is up to the task of filling his or her shoes as a successor trustee. Does the potential successor trustee have the financial experience to manage the assets in the client’s absence – or the prudence to hire a financial advisor who does? Do they have the fortitude to make difficult decisions regarding distributions to other beneficiaries? 

Even if your client has an individual who is up to the task, they may want to consider naming an institutional trustee at the end of the line. Whether your client chooses a bank trust department, an independent trust firm, or a brokerage trust operation, an institutional trustee can provide a backstop for the trust. Your client will know that, if the savvy individuals they hoped would serve are unavailable, the trust will still be managed professionally to meet the client’s goals long after the client is gone. 

The U.S. Department of Health and Human Services has begun enforcing HIPAA by imposing large financial penalties against healthcare providers for HIPAA violations. (In the first case, a healthcare provider received a $4.3 million civil penalty for failing to provide timely personal health information to patients upon their request; in the other, a different provider agreed to a $1 million settlement for disclosing patients’ personal health information without their approval).

If healthcare entities intensify their efforts to avoid HIPAA financial penalties, we may see a few things happen:

• Patients themselves may have an easier time gaining access to their own medical information. And some may even get it more quickly. At the same time;
• Patients’ family members — and others whom the patient wants to have access — may have a harder time getting the patients’ information.

What does this mean for your legal needs?

1. Everyone need a Health Care Power of Attorney (HCPOA) more than ever. This document may increasingly do double-duty. In addition to its primary function, the HCPOA also serves as a de facto HIPAA Release. The HIPAA law expressly authorizes the health care agent to receive the patient’s personal health information (called “PHI” under HIPAA).
2. You may increasingly need a separate HIPAA Release designating individual(s) — in addition to the health care agent — who can receive their medical information. Why? Peopleoften rely on someone other than their health care agent to help them navigate the healthcare system. This might be another family member, a friend, or a neighbor. Healthcare providers may be increasingly apt to request written authorization from the patient to deal with any of these folks on your  behalf.
   
   Alternatively, I address this need within the HCPOA document itself, rather than drafting a separate HIPAA Release. I have created a section in the HCPOA naming additional individuals to receive PHI under HIPAA, but who are not authorized as health care agents.

The stricter HIPAA enforcement may also create heightened challenges particular to college students and other young adults.  More to follow.