Category Archives: Uncategorized

I often consider what clients care about most. First, clients are often looking for the best way to gift to their children or grandchildren.

Clients give to their children and grandchildren in many different ways. Parents and grandparents give to their children and grandchildren in countless ways, from the moment of birth, they are giving of their love, affection, and nurturing.

Parents and grandparents often want to give for education. A 529 plan is designed for this purpose. By gifting to such a plan, the donor can remove the assets from their own estate and yet retain control over the assets. This may be estate planning’s “Holy Grail.” Not only may a gift to a 529 plan qualify for an annual exclusion, with an election, it may qualify for the use of up to 5 years of exclusion. That means that a donor may make a contribution of $70,000 completely excluded from the gift tax.

In addition to gifting to a 529 plan, donors may give an unlimited amount for tuition if paid directly to an educational institution. A similar exclusion applies for the payment of medical expenses directly to a medical provider. These exclusions are provided in the often-overlooked Section 529(e) of the Internal Revenue Code.

Of course, direct gifts to either a child or grandchild will qualify for the $14,000 annual gift tax exclusion (and GST tax annual exclusion).

However, often clients do not want to gift directly to their child or grandchild, but want to keep the assets in trust. An irrevocable trust with limited withdrawal powers can be a great way to obtain the annual gift tax exclusion even though the gift is in trust.

Whether gifting outright, in trust, or via a 529 plan, clients often want to gift for the children’s and grandchildren’s benefit as part of the legacy they leave.

Food for thought,

Bob

The International Cemetery, Cremation and Funeral Association recently held their summer university. I attended the ICCFA University College of 21^st Century Funeral Services and came away with a new perspective on how funerals are changing.

Dr. Alan Wolfelt, a psychologist trained in life transitions who spoke there, said, “More and more people in North America are asking ‘Why have a funeral?'”

People are saying, “When I die, just get rid of me no muss, no fuss. Maybe have a party, but I sure don’t want a funeral.” “Dad said he didn’t want us to go to any trouble, so we are just going to do what he said.” “We just thought it would be easier, faster, and cheaper.”

Wolfelt said that efficiency should not be confused with effectiveness. He said, “We’ve gone from funerals to memorial services to celebrations to parties. In the process, we have lost the connection to grief and emotion.”

People are losing sight of the value of holding some kind of ritual service, a safe place to grieve and mourn. Very often, the people who don’t recognize a death with a funeral or memorial service are in a psychologist’s office six months later with problems related to unexpressed emotions.

We in the U.S. have become an increasingly “mourning-avoidant” culture, where people tend to want to avoid sadness. At a meaningful funeral, people laugh one moment and cry the next as they share stories that cause laughter as well as tears. This experience of “paradoxical emotions” results in what Wolfelt calls the “sweet spot of emotional experience.”

Traditional clergy doing cookie-cutter funerals with little relevance to the deceased or their family have also contributed to the decline of funerals. Wolfelt and Doug Manning, founder of the In-Sight Institute (which certifies nondenominational “Funeral Celebrants”), both noted the declining number of Americans who attend church and the growing number of interfaith families.

The 2010 American Religious Identification Survey estimated that approximately 15% of the American population do not attend religious services or consider themselves church affiliated. If you grouped all the identified “nones” into a state, it would be the second largest state in the union, right behind California and before Texas.

In our highly mobile society with fewer ties to church or a specific religion, there is a growing corps of Funeral Celebrants who can offer families a personalized and individualized funeral or memorial service experience.

A Funeral Celebrant is trained in the specific area of conducting funerals and memorial services for families who are not affiliated with a religion or theology. Celebrants can assist a family with no clergyperson, as well as those uncomfortable with traditional religious funerals, on whom to call when there’s a death.

The use of Certified Celebrants originated in New Zealand and Australia, where 80% of the population chooses cremation and many people do not attend a church. Civil Celebrants, who are licensed by the government, perform over 50% of the funerals and weddings in those countries.

Doug Manning brought the idea of Certified Funeral Celebrants to North America in 1999 when he founded the In-Sight Institute. In-Sight has certified more than 1,600 Celebrants across the U.S. and internationally.

Another 36 Certified Celebrants graduated at the end of this ICCFA University. I’m proud to be one of them.

A correspondent in a recent Dear Abby column posed a great end-of-life preparation question. He or she was a single person with grown children who wrote, “I want to make sure I am not a burden to them even after death. I have a will and no bills. What else do I need to do?”

Dear Abby replied with questions about whether he/she had an advance directive for health care, at least one health care advocate named to carry out those wishes, a cemetery plot selected and paid for and money set aside for a funeral or memorial. If those items were taken care of, the person just needed to make the children aware of it.

That sounds simple enough – maybe too simple. Estate planning attorneys know many of their clients need trusts, beyond a basic will. Dear Abby could have gone further with her advice to reduce being a burden. Here are five tips from The Doyenne of Death® to round out Abby’s advice:

Tip One: Write your own obituary. It’s your life story, tell it your way. Your kids may not know all the details that you’d want known. They can edit it down for the newspaper to minimize print obituary costs or run it free online in all its full glory. Colorful, humorous obituaries can make you famous when they go viral. Plus, you’ll take that burden off the kids’ shoulders.

Tip Two: Decide what kind of disposition method you want, and discuss it. Dear Abby assumed the person would be buried, not cremated. A national average of 42% of Americans are choosing cremation, with rates of 60-78% of populations in Western states opting for burning over burial. You can also donate your body to science, but the paperwork must be filled out while you’re alive and in sound mental shape.

Tip Three: Put your funeral plans and information on file with a reputable funeral home, and let your kids know you’ve pre-planned. If you can afford to pre-pay with a guaranteed funeral trust or insurance policy, let them know you’ve done that and where to find the paperwork.

Tip Four: Don’t assume the kids will be levelheaded about splitting up your personal possessions. If they get along reasonably well, have a sit-down meeting at your home. Story telling about the history of some items can start the conversation. Let siblings discuss which of your items they want. Then put labels on those items to help head off disputes after you’re gone. Or, make an itemized list of who gets what pieces of personal property and attach it to your will.

Tip Five: What about being a burden before death? Very few of us go from being healthy to dead quickly. The idea of going to sleep and not waking up is appealing but unlikely. What insurance do you have in place to help you avoid being a burden if you become a frail elderly or demented person? A health care crisis without insurance is a fast track to bankruptcy. Medicare only covers so much.

It’s also a good idea to make a master file of information on accounts and benefits that you have – everything from attorneys, banks and brokerages to passwords, utilities and veterans information. If you have a will and no bills, these additional five tips will truly help avoid being a burden on your kids.

Bob

Family harmony is important. “The family is a haven in a heartless world.” Christopher Lasch. But, unfortunately, when family disputes arise, they can be deep rifts. “Family quarrels are bitter things. They don’t go by any rules. They’re not like aches or wounds; they’re more like splits in the skin that won’t heal because there’s not enough material.” F. Scott Fitzgerald.

One such deep rift involved an 85-year-old Austrian grandmother who had over $1 million (in Euros). She cut up her money in tiny pieces rather than having it go to her heirs. The story is here: http://www.foxnews.com/world/2015/11/05/grandmother-tries-to-spite-heirs-by-shredding-up-11-million-fortune-prosecutors/

If you want to disinherit some or all of their family, you don’t need to take out the scissors. You could simply say that they are leaving those family members nothing and say to whom the assets should go, like a charity or friends.

Often, when some or all of the family is disinherited, it makes sense to leave those people a reduced bequest and then include a “no contest” or “in terrorem clause”. Such a clause leaves the person nothing if they challenge the estate plan, which all of my Trusts include. By doing this, the people to be cut out have an incentive not to make trouble by contesting the plan. In order to be effective, the reduced bequest should be significant, so as to discourage them from losing it if they were to challenge the estate plan.

Perhaps the best way to make sure wishes are carried out is for the you to communicate those wishes during life so that heirs are not surprised after you are gone.

As estate planning attorneys know, parents usually leave their assets equally to their children. However, we also know, both personally and professionally, that sometimes an equal division is definitely not fair. Sometimes children have different needs and abilities. For example, one child might be a successful physician, while another might be an award winning teacher. Both professions are valuable and have merit. However, society values those contributions disproportionately.

Another situation warranting an unequal division of assets might be where one child worked for decades on the family farm, which represented the majority of the value of the assets.

A recent article in The Wall Street Journal examined various reasons and may be found at http://online.wsj.com/article/SB10001424053111903648204576554620047917688.html.

There are still more reasons parents might choose to treat their children unequally. For example, one child might have cared for the parents in their declining years. Another child might have special needs. Whatever the reason, the estate planning attorney’s job is to ensure that their clients’ wishes are carried out. It is important to remember that an unequal distribution might trigger a challenge to the estate plan.

There are various ways to discourage such a challenge. First, an in terrorem, or no contest clause may be included in the Will and/or Trust. With such a clause, a challenger will take nothing. This is an especially potent device when the would-be challengers are given something, even if a smaller share. Another way to encourage children to honor the parents’ wishes is by having the parents write a side letter as to their reasons for the unequal treatment. It is better to have this as a side letter so that it is more difficult for would-be challengers to use external evidence to show that those reasons do not exist and, therefore, the distribution should be equal after all.

Historically, states have had legal frameworks for dealing inheritance rights in the not uncommon situation where a baby is conceived during its father’s lifetime but born after his death. At common law, a baby born within 280 days after its father’s death was presumed to be the father’s child, and therefore entitled to inherit from the father’s estate. Of course, this rule was established during a time when it was only possible for conception to occur during the father’s lifetime. 

But what happens when conception occurs months or even years after the father has died? Each state has its own way of approaching this very modern issue, and the outcomes can be vastly different. 

In Florida, for example, the posthumously conceived children of parents who die intestate don’t have any inheritance rights. A child conceived after a decedent has passed away is ineligible to inherit from the decedent’s estate unless there’s a will specifically providing for that child. 

Louisiana takes a much different approach, providing that a child conceived after his or her father’s death has inheritance rights, if two conditions are met: 1) The father must give written authorization for the use of his sperm for the purpose of conceiving a child after his death, and 2) The child must be born within three years of the father’s death. 

The law often lags behind technology, and this is an area in which that gap is likely to exist for quite some time. The status of current legislation is unsettled at best, which presents an opportunity for attorneys, as counselors, to provide an invaluable service to our clients. Do you have provisions in your documents concerning posthumously-conceived children? How do you approach this issue in your practice? 

Estate planning is not only about having a plan in place to deal with what happens at your death, it is also about having a plan in place to deal with what happens if you become mentally incapacitated.  In this issue you will learn:  

• What happens without an incapacity plan.
• The essential documents for managing finances during incapacity.
• The essential documents for making health care decisions during incapacity.
• How to choose the right person for managing finances and making health care decisions during incapacity.
• The importance of keeping your incapacity plan up to date.

If you have any questions about incapacity planning or whether you need to make updates to your incapacity documents, please call our office now.
 
Court-Supervised Guardianship or Conservatorship:  How to Lose Time, Money, and Control During Incapacity Mental incapacity caused by an accident, injury, or illness means you will be incapable of making informed decisions about your finances and well-being.  Without a comprehensive incapacity plan in place, a judge can appoint someone to take control of your assets and make all personal and medical decisions for you through a court-supervised guardianship or conservatorship.  You and your loved ones could lose valuable time, money, and control until you either regain capacity or die. 
 
Planning Tip:  You may believe you are protected if you become mentally incapacitated because you hold your assets in joint names with your spouse, a child, or another family member.  While a joint account holder may be able to access your bank account to pay bills or access your brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners.  Aside from this, adding names to your accounts or real estate titles may be deemed a gift for gift tax purposes.  In addition, if a joint owner is sued, your property could be seized as part of a judgment entered against them.  Only a comprehensive incapacity plan will protect you and your assets from a court-supervised guardianship or conservatorship and the misdeeds of your joint owners.
 
The Essential Documents for Financial Management During Incapacity
There are two essential legal documents for managing finances that must be in place prior to becoming incapacitated:
 
1.      Financial Power of Attorney.  This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.   Financial Powers of Attorney come in two forms:  “Durable” and “Springing.”  A Durable Power of Attorney goes into effect as soon as it is signed, while a Springing Power of Attorney only goes into effect after you have been determined to be mentally incapacitated.
 
2.      Revocable Living Trust.  This legal document has three parties to it:  The person who creates the trust (the “Trustmaker” or “Grantor” or “Settlor” – they all mean the same thing); the person who manages the assets transferred into the trust (the “Trustee”); and the person who benefits from the assets transferred into the trust (the “Beneficiary”).  In the typical revocable living trust situation you will be the Trustmaker, the Trustee, and the Beneficiary of your own trust.  However, if you become incapacitated, then your Successor Trustee will step in and manage the trust assets for your benefit.
 
Planning Tip:  To be part of an effective incapacity plan, your Revocable Living Trust should contain provisions to determine your mental status through a private process (i.e., a disability panel, an attending physician, the opinion of two physicians, or some other method) instead of a public court process.  In addition, the trust agreement should contain specific instructions about how to take care of you if you are declared mentally incapacitated.  
 
The Three Must-Have Documents for Health Care Decision-Making
There are three essential legal documents for making health care decisions that must be in place prior to becoming incapacitated:
 
1.      Medical Power of Attorney.  This legal document, also called an Advance Directive or Medical or Health Care Proxy, gives your agent the authority to make health care decisions for you if you cannot do so because you have become incapacitated.
 
2.      Living Will.  This legal document gives your agent the authority to make life-sustaining or life-ending decisions if you become incapacitated.
 
3.      HIPAA Authorization.  Federal and state laws dictate who can receive medical information without the written consent of the patient.  This legal document gives your doctor or other health care provider the authority to disclose your medical information to the agent selected by you.
 
Planning Tip:  Your loved ones may be denied access to medical information during a crisis situation and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).  Without these three documents, a judge may also appoint a Guardian or Conservator of the Person to oversee your health care, thereby adding further expense and hassle to your court-supervised guardianship or conservatorship. You should have these three documents examined and updated frequently to ensure they accurately reflect their wishes.
 
How to Choose the Right Agents for Your Incapacity Plan
There are two very important decisions you must make when putting together your incapacity plan:

1. Who will be in charge of managing your finances during incapacity; and
2. Who will be in charge of making your medical decisions during incapacity.

Factors you should consider when deciding who to name as your financial agent and health care agent include:  

• Where does the agent live?  With modern technology, the distance between you and your agent should not matter.  Nonetheless, someone who lives close by may be a better choice than someone who lives in another state or country.
• How busy is the agent?  If your agent has a demanding job or travels frequently for work, then they may not have time to take care of your finances and medical needs.
• Does the agent have expertise in managing finances or the health care field?  An agent with work experience in finances or medicine may be a better choice than an agent without it.

Planning Tip:  Choosing the wrong person to serve as financial or health care agent will result in an ineffective incapacity plan.  You can pick different people to fill each role, that is, one person in charge of health care decisions and someone else in charge of financial matters. In order to create an effective plan, you need to carefully consider who to choose as your agent and then discuss your decision with that person to confirm that they will in fact be willing and able to serve. 
 
Is Your Incapacity Plan Up to Date?
As time passes by and your life changes, your incapacity plan will become stale and outdated.  It is important for you to have your incapacity plan reviewed every few years or after a major life event (such as a divorce or a death) to insure that the plan will work the way you intend it to work if it is ever needed.
 
Please contact my office to discuss your questions about incapacity planning and to schedule your plan review.

Estate planning enables someone with Power of Attorney to take over financial management for someone who can’t do the job anymore. Post-death, the executor handles this job for the estate. In real life, managing someone else’s finances is incredibly complicated.

My parents, currently ages 88 and 89, split their time between residences in Florida and New Mexico. They summer in New Mexico, where they can be close to their two eldest children, one of whom is me, the only daughter. I’m also the executor for their estate and trust.

The trials of aging are apparent this summer. So many doctor appointments: the primary care physician; the cardiologists (both “plumbers” and “electricians”); the dentist; the endocrinologist; wound care and eye specialists.

Dad has been diabetic for decades. The feeling in his feet is fading with neuropathy, and saddest of all, he is losing his vision to macular degeneration. He can barely sign checks, and he can’t see well enough to handle the financial accounting in his Quicken program. Thankfully, both he and Mom are mentally sharp.

I’ve become Dad’s executive assistant, reading the credit card and bank statements, paying bills by check and online, replying to emails, and trying to reconcile his complex web of record keeping. It’s a frustrating challenge.

I’ve used the Quicken program to track my own finances for many years. I’ve kept it pretty simple, even with four different checking accounts. I’ll admit there’s a lot I don’t know or use in this program.

Dad has multiple bank accounts to be reconciled against bank and credit card statements as well as the entries in checking account registers. Expenses must be assigned to various rental properties, as well as categories such as medical, groceries, two households, etc. He wants everything to balance perfectly. In our last session, we were off by more than $600.

He has a system, but I don’t understand it yet. At least he has been tracking his finances and there’s a way for me to eventually step in to effectively handle them. In this way, his fading eyesight has been a blessing for me as the future executor of the estate.

I feel for those people faced with handling finances for parents who aren’t as organized. How will they know the income, the outgo and the financial obligations? It’s something for estate planning attorneys to consider as they work with their clients to prepare for the future.

Probably the biggest inspiration for estate planning by parents is their children.  Developing an estate plan that will protect your children in the event of your untimely death or incapacity, however, is more complicated than just choosing a guardian.

You also need to consider:

1. Who your kids should live with and if that person(s) is financially, physically and mentally able to care for your children. 
2. You should also consider how your children feel about the person(s) you choose as their guardian.
3. If the person(s) you choose to raise your children is the same person(s) you would choose to manage their money or should you select a financial advisor as well?
4. Discussing your selection with your other family members and, most importantly, with the guardian(s).
5. If your children have any special needs that may dissuade your chosen guardian(s) from taking care of them.
6. Naming alternate guardians in case something happens to your first choice and they are unable to fulfill their duties.
7. Ensuring you have the proper financial instruments in place to provide for your children’s physical and educational needs.

It began with the best intentions. 

Ann Aldrich, a resident of Keystone Heights, Fla., wanted to protect her assets in the event of her death so she went online and created her will using the “E-Z Legal Form”. 

As she filled in the blanks on the form, in the section labeled “Bequests,” she wrote that her sister, Mary, was to inherit all of the “possessions listed.” This included Aldrich’s home and all of its contents, a rollover IRA, a life insurance policy, her Chevy Tracker and all of the accounts she held at a particular bank.

In addition, in her own handwriting she specified that if her sister Mary died before she did, “I leave all [items] listed to James Michael Aldrich,” her brother.

As fate would have it, Mary died first, and she left Aldrich a piece of land and $122,000 in cash.

Aldrich then duly added a page entitled “Just a Note” to her E-Z Form will where she reiterated that “all my worldly possessions pass to my brother James.” She signed this handwritten addendum. Acting as a witness, James’ daughter, Sheila, also signed it. Five and a half years later- in October 2009- Aldrich died.

That’s when things got expensive.

Two other nieces- daughters of a different (deceased) brother- claimed the addendum to Aldrich’s will was invalid and that her will did not cover the property she inherited from Mary. They wanted a piece of it. Naturally, James disagreed.

The case started out in the local Circuit Court, got appealed to the District Court and went all the way to the state Supreme Court.

In the end, the nieces won on a technicality. The assets Aldrich inherited from Mary had to be distributed according to Florida law covering “intestate” property, or property not covered by a will.

In essence, at every level the justices hearing the case agreed that Aldrich fully intended for her brother to inherit everything she owned at the time of her death, but their hands were tied for the following reasons:

• When she wrote her will, Aldrich listed in great detail the real estate and accounts that she wanted her sister to inherit. She specifically said that if Mary pre-deceased her these items would pass to James.
• The E-Z Form will said nothing about any other property she might have acquired after the will was written. This is known as the “residuary estate.”
• Aldrich undoubtedly intended that the distribution of her residuary estate- primarily the property she inherited from Mary- was covered by the “note” she attached to her will. However, Florida law requires two witnesses; hers had only one.

A codicil is an amendment to a will, which is usually done when you have some change to make and don’t want to re-write the whole thing.  However, even if the changes are written in your own handwriting, you still need to comply with what are called the “will formalities.” These are the conditions each state requires for a will–or changes to one–to be considered valid. The standard in Florida is two witnesses.

Every state has its own quirky rules.  In Illinois, we do not allow holographic wills (handwritten).  We are also required to have several other formalities for a will to be valid.

The problem is, you don’t know what you don’t know. If you’ve got a form titled “Last Will and Testament” you assume that if you fill in all the blanks, you’re covered. It gives you a false sense of security.

In fact, using any kind of one-size-fits-all legal document is risky. And yet, these forms are advertised on television and all over the internet. While some providers purport to “customize” your will based upon your state’s laws and perhaps even have the document reviewed by a “real” lawyer, it probably isn’t advisable unless you’ve only got a few simple possessions and a relatively small estate (e.g. you just graduated from college, are living in an apartment and maybe own a car). 

Let’s face it, there are just some issues in life that are best handled in a face-to-face conversation with a qualified professional. 

In the words of Florida Supreme Court Justice Pariente, the outcome of Aldrich’s will illustrates “the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. [This] decision can ultimately result in the frustration of the testator’s (the person leaving this world) intent, in addition to the payment of extensive attorney’s fees- the precise results the testator sought to avoid in the first place.”

“You’re dead, so you don’t realize the mess you left behind.”

Bob