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Wednesday, April 11, 2012 Whitney Houston's Estate Plan Illustrates Use of Testamentary Trust
Whitney Houston's tragic death provides an example of how a trust that takes effect upon death can work as part of an estate plan. But Houston's estate plan has some surprising aspects as well, including why she used such a trust.
The late singer's will leaves everything to her 19-year-old daughter, Bobbi Kristina, but Kristina can't access her mother’s estimated $20 million fortune right away because it is in a trust.
According to news reports , Houston's will sets up what is known as a “testamentary trust” for her daughter. A testamentary trust is a trust created by a will. The will names a trustee and specifies what property will be put in the trust. Such a trust has no power or effect until the will of the donor is probated (processed through the legal system). Although a testamentary trust does not avoid the need for probate and becomes a public document because it is a part of the will, it can be useful in accomplishing other estate planning goals, such as providing for a child or reducing estate taxes in certain circumstances.
The person creating the trust may want to prevent a beneficiary who is a child or young adult from inheriting a large amount of money before he or she can handle it. One option is to pay the beneficiary in stages when the beneficiary reaches a certain age or achieves a specific goal.
This is what Whitney Houston's trust does. It reportedly allows Houston’s daughter to receive a 10 percent payout when she turns 21, another one-sixth when she turns 25, and the remainder of the trust's assets when she turns 30. In this type of trust, the trustee usually has the discretion to distribute trust funds to the child at any time prior to attaining these ages, if needed for education or other reasons.
Will Never Updated
Now to the surprising parts of Houston's estate plan. First, as Forbes magazine columnists note, Houston could have accomplished the same goals through a "living trust," which would have kept the provisions of the trust private because it would pass outside of probate. Second, Houston was relying on a will that was created in 1993, when she was married to Bobby Brown, and it apparently was never updated, even after she and Brown divorced in 2007. The will names Brown as the suggested guardian for Bobbi Kristina. Although Bobbi Kristina is no longer a minor, Brown could still gain control of Kristina through a conservatorship, as was done in the case of Britney Spears. Finally, the will provided that if Houston had no living children at the time of her death, her fortune would be split between Brown and several family members.
Perhaps all this is what Houston wanted, even after her divorce from Brown, but that should have been made clear in an updated will. As it stands, it appears that Houston simply neglected to do something elder law attorneys (and this site) urge all clients to do: update their estate plan after a divorce or other major life change.
Trusts -- either testamentary or living -- can be set up for many different purposes. To decide if a trust is right for you, consult an elder law attorney. We can be reached at (205) 663-0281.
Wednesday, April 04, 2012 Understanding the Importance and Implications of Guardianships and Conservatorships
Often in estate planning, attorneys present the idea of guardianship and/or conservatorship as a bad thing - something to be avoided. In a perfect world, we could move through our lives from cradle to grave without such things as guardianships and conservatorships. But in order to achieve this perfect world, we have to do advance planning to provide for our own care if we become impaired or incapacitated, and we need trustworthy, responsible and financially astute family members who are willing and able to assist us. For some people, these "perfect world" conditions do exist. However, for many others, they do not.
Increasingly, attorneys run into the following situations:
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Seniors come to us, often brought by their children or children-in-law, when mental incapacity has set in, and although they appear to have willing and able family members who can take care of them, assist with making personal care and living decisions, or manage their finances, the seniors do not have the necessary delegation documents in place to empower these helpers as their agents.
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Seniors have documents in place, but the people named are dead or no longer available, willing or appropriate to serve.
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The people who the senior trusted and anticipated would be appropriate have become exploitive and abusive to them.
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Seniors have been conned into paying for, or agreeing to pay for, fraudulent products and/or services.
Elder abuse in its many forms - including fraud by unscrupulous "vendors," financial exploitation, and physical or emotional abuse by "friends" and relatives - is a huge problem in the United States. The topic is being exposed in the 21st century much like child abuse and spousal abuse came into public view and began to receive legislative solutions during the late 20th century.
Crisis Situations
Another increasingly common situation is where seniors do not have agent-delegation planning in place and end up in a medical or living condition crisis where they are putting themselves or others at risk. Loyal family members and friends are very concerned, but nobody has the power to assist once they learn what needs to be done.
Alternatively, seniors may have excellent voluntary delegation planning in place, but the seniors are noncompliant about what they now need to do for their own safety and care. For example, they may need to live in an assisted living community or nursing home, but they voluntarily check themselves out and depart. They are free to make their own decisions, even though imprudent or unsafe, so they can walk right out and put themselves in danger. If they have access to an automobile, they put the general public at risk as well.
Adult Protective Services
In emergencies, where the seniors are unwilling to cooperate and their intransigence is putting themselves or others at risk, often the first call should be to Adult Protective Services (APS). APS is a state agency, typically within the department of "human services" or "social services" of the particular state. APS generally will appoint a social worker or other staff person to investigate, perhaps with local police in order to gain access to the senior and entry into the home.
Seeking Court Protection
Whether or not Adult Protective Services gets involved, and whether or not the case is an emergency or just a situation where the senior needs help and is not willing or able to sign voluntary agent-delegation documents, the solution is often a guardianship and/or conservatorship over the senior, if he or she meets the applicable standards of incapacity. (Less commonly, where mental illness other than dementia is the apparent cause, "involuntary commitment" may be necessary to place the senior is a hospital psychiatric ward for analysis.)
Guardianship
Terminology varies from state to state, but in general, guardianship (sometimes called "guardianship of the person") applies to probate court appointment of a fiduciary ("guardian") to make decisions in regard to the protected person's personal care. The protected person may be called a "ward" under some state laws, but that term is being phased out as unfavorable. A guardian generally does not have control of the protected person's finances, although state law or the specific terms of the guardianship may authorize the guardian to hold small amounts of the protected person's funds if no conservator has been appointed and the protected person does not have a durable power of attorney.
Conservatorship
Conservatorship refers to probate court appointment of a fiduciary ("conservator") to administer the finances and assets of the protected person. In some states, conservatorship may be called "guardianship of the estate." Conservatorship is much like trusteeship, although the powers of and restrictions on the conservator are defined by statute and regulation, rather than a voluntary trust agreement or trust declaration, and are typically are much less flexible than the powers authorized for trustees. Conservatorships are also analogous to durable powers of attorney. However, one of the key differences between conservatorships, trusts and durable powers of attorney is that conservatorships are court-supervised and directly accountable to the court. It is common for conservators to be required by state law and regulations to account annually to the probate court. Such accounting needs to be accurate to the penny.
Conservatorship is also similar to a decedent's probate estate administration. Like a probate Personal Representative or Executor (except where a decedent's will waives bond), a Conservator may be required by law to obtain a probate bond through an insurance company to insure his or her fidelity to proper administration of the protected person's assets and income. The costs of the probate bond and of the administration come out of the assets of the protected person. The amount of coverage of the bond is set by the court to cover the assets under the conservator's administration, and may cost anywhere from just under $1,000 per year to considerably more. The probate judge may have the authority to waive the probate bond requirement under certain circumstances, such as where the spouse is the conservator and is the primary devisee under the protected person's will.
A conservator does not have plenary power to do whatever financial transactions he or she feels are warranted. For example, a conservator needs specific court authorization to sell real estate in most states.
Compensation of Fiduciaries
In most circumstances, the fiduciary is entitled to "reasonable compensation." Reasonable compensation often is based on a list of criteria such as the time spent, lost opportunity to do other work that the fiduciary normally does, difficulty of the work, etc. Unlike provisions under some state probate codes for Personal Representatives of decedents' estates, reasonable fees for a conservator or guardian are not related to a percentage of the value of the protected person's assets that the fiduciary manages.
Imposing Minimum Restrictions
For a guardian and/or conservator of an adult, the probate code generally imposes a standard that the protected person's rights are to be removed to the minimum degree necessary to protect him or her. This is because the removal of personal rights and liberty by the court is analogous to a civil form of imprisonment. Where a protected person is capable of making some kinds of decisions safely and prudently in regard to his or her living conditions, care, or finances, the theory is that his or her rights to make such decisions should be preserved as long as possible. On a practical level, keeping seniors involved in their care and financial decisions also helps to keep them engaged with life, reality, and higher mental functions, so this legal construct is very consistent with practical experience in caregiving for seniors who are in a process of deteriorating mental capacity. There is a growing movement nationwide to maximize decision-making by adults who are under guardianship and/or conservatorship.
Maximizing the decision-making by protected persons can make it more difficult for the fiduciary, since he or she is not able to make unilateral decisions where the protected person retains decision-making power. How this works out in practice depends very much on the personalities of the protected person and fiduciary. When circumstances are such that retained decision-making by the protected person unduly hampers the process of making or implementing needed decisions, the fiduciary can file to obtain guidance or an order of the court.
Conclusion
Although attorneys correctly advise clients to plan to avoid unnecessary guardianship and conservatorship, there are many situations where guardianship and/or conservatorship are appropriate and very beneficial. Court supervision in difficult cases can be beneficial to impose financial accountability and to bring about sound decisions for the care of a protected person. Examples are where the protected person is unwilling to comply with doctor's orders or other considerations that are important for the safety of the protected person and others. Under modern guardianship and conservatorship theory, courts impose the minimum restrictions on protected persons that are needed to accomplish the personal safety and prudent financial management that are the goals of these court-supervised protective measures.
If you have any questions or would like to discuss issues raised in this newsletter in more detail, please feel free to contact our office. (205) 663-0281
Monday, March 26, 2012 Is My Will Still Valid If I Move to Another State?
Among all the changes you must make when you move to a new state -- driver's license, voter registration -- don't forget your will. While your will should still be valid in the new state, there may be differences in the new state's laws that may make certain provisions of the will invalid. In addition, moving is a good excuse to consult an attorney to make sure your estate plan in general is up to date.
Property laws can vary from state to state. It is especially important to have your estate plan reviewed if you move from a common law state to a community property state (Arizona, California, Idaho, New Mexico, Louisiana, Washington, Nevada, Texas, Wisconsin, and Alaska) or vice versa. In a common law state each spouse's property is owned individually, while in a community property state, property acquired during the marriage is considered community property. In addition, states may have different rules about when co-owned property may pass to the surviving owner and when it may pass under the will.
Other things to consider are whether there is any language you can add to the will to make it easier to probate in the new state and whether your executor still makes sense based on your new location. Other pieces of your estate plan may need updating as well. For example, the state may have different rules for powers of attorney or health care directives.
We always suggest a review of your documents by a qualified estate planning attorney licensed in your new state of residence. If you need help locating an attorney, give us a call and we can help you find a qualified professional in the area. (205) 663-0281.
Tuesday, March 06, 2012 Romney Wants to Raise Age of Medicare Eligibility. Good Idea?
Republican presidential candidate Mitt Romney has announced his support for raising the age of Medicare eligibility from 65 to 67. However, research suggests that such a move would increase out-of-pocket costs for younger seniors and raise health care costs overall.
Making baby boomers wait two more years before they’re covered by the highly popular Medicare program would indeed save the federal government $5.7 billion in 2014, according to a study by the Kaiser Family Foundation. But at the same time, Kaiser says the change would mean that 65- and 66-year-olds, their employers, other Medicare enrollees, and states would have to cough up an extra $11.4 billion. It’s robbing Peter to pay Paul, except in this case Peter would pay double what Paul would get out of the deal.
The Kaiser study projects that the change would raise premiums by about 3 percent both for all other Medicare beneficiaries and for those covered by private insurance. Medicare premiums would go up because the program would lose its healthiest beneficiaries – 65- and 66-year-olds. At the same time, private insurers would suddenly get an influx of older beneficiaries, driving up their premiums as well. And this assumes the survival of the health reform law, which requires insurers to cover applicants despite preexisting conditions. If the law is repealed, as Romney and other GOP candidates recommend, large numbers of 65- and 66-year-olds would be uninsurable.
Kaiser found that 3.3 million people ages 65 and 66 would pay more out of pocket for health care if they were no longer eligible for Medicare. This prompted the group Strengthen Social Security to calculate that increasing the eligibility age would consume up to 45 percent of a middle-class senior’s Social Security check.
Raising Medicare’s eligibility age is a “savings” our society cannot afford; it would effectively amount to a tax on all health insureds, especially 65- and 66-year-olds.
Thursday, February 09, 2012 A Letter of Instruction Can Spare Your Heirs Great Stress
While it is important to have an updated estate plan, there is a lot of information that your heirs should know that doesn't necessarily fit into a will, trust or other components of an estate plan. The solution is a letter of instruction, which can provide your heirs with guidance if you die or become incapacitated.
A letter of instruction is a legally non-binding document that gives your heirs information crucial to helping them tie up your affairs. Without such a letter, it can be easy for heirs to miss important items or become overwhelmed trying to sort through all the documents you left behind. The following are some items that can be included in a letter:
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A list of people to contact when you die and a list of beneficiaries of your estate plan
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The location of important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
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A list of assets, such as bank accounts, investment accounts, insurance policies, real estate holdings, and military benefits
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Passwords and PIN numbers for online accounts
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The location of any safe deposit boxes
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A list of contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
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A list of credit card accounts and other debts
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A list of organizations that you belong to that should be notified in the event of your death (for example, professional organizations or boards)
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Instructions for a funeral or memorial service
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Instructions for distribution of sentimental personal items
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A personal message to family members
Once the letter is written, be sure to store it in an easily accessible place and to tell your family about it. You should check it once a year to make sure it stays up-to-date.
Tuesday, January 24, 2012 When Should You Update Your Estate Plan?
Once you've created an estate plan, it is important to keep it up to date. You will need to revisit your plan after certain key life events.
Marriage
Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your heir once you get married. Depending on state law, your spouse may get one-third to one-half of your estate, and the rest will go to other relatives. You need a will to spell out how much you wish your spouse to get.
Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a difficult discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.
Even if you don't have children, there may be family heirlooms or mementos that you want to keep in your family.
Children
Once you have children, it is important to name a guardian for your children in your will. If you don't name someone to act as guardian, the court will choose the guardian. Because the court doesn't know your kids like you do, the person they choose may not be ideal. In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for your children when they get older.
Similarly, when your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.
Divorce or Death of a Spouse
If you get divorced or your spouse dies, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan -- for example, as beneficiary, executor, or power of attorney. If you have a trust, you will need to make sure your spouse is no longer a trustee or beneficiary of the trust. You will also need to change the beneficiary on your retirement plans and insurance policies.
Increase or Decrease in Assets
One part of estate planning is estate tax planning. When your estate is small, you don't usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things.
Other
Other reasons to have your estate plan updated could include:
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You move to another state
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Federal or state estate tax laws have changed
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A guardian, executor, or trustee is no longer able to serve
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You wish to change your beneficiaries
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It has been more than 5 years since the plan has been reviewed by an attorne
Contact us to review or update your plan.
Monday, March 28, 2011 Benjamin Franklin does Estate Planning
Benjamin Franklin is largely known today for his key roles in the American Revolution, the formation of the United States, and his diplomacy with France. But Franklin was also a very successful businessman. Starting with absolutely nothing, he built a substantial fortune. And he capped it off by demonstrating keen skills developing his estate plan. His approach to estate planning is addressed in a posting by my WealthCounsel colleague, Suzann Beckett who practices in Connecticut. I hope you enjoy this quasi history experience while admiring Ben Franklin’s adroit estate planning skills.
Estate planning, the Franklin way
The subject of Ben Franklin came up the other day in conversation. More specifically, the subject of Ben Franklin's visionary approach to estate planning, came up during a discussion of how the average person can make the most of their wealth for posterity.
Benjamin Franklin was many things. Born into humble circumstances, Mr. Franklin very literally ran away from home, then followed up his running away by working, innovating, persevering, and struggling to ultimately become one of young America's wealthiest and most respected citizens. He knew a thing or two about math and the compounding of interest, too.
For those who are truly curious, a version of Benjamin Franklin's Last Will and Testament is available online, from the Franklin Institute. Included is a codicil to the original Will, that should give anyone pause. Franklin's significant wealth is apparent, as is evidenced by the extraordinary number of homes, land, and valuables he details in his Will. But the relatively minor sum of one-thousand pounds sterling mentioned in the codicil, which would be equivalent to roughly $4,000 at the time – is particularly impressive for those of us who would like to make an impact on the generations to follow, even if we do not have the financial capacity to astound the neighbors at the moment.
Franklin specified that the money should be held in trust. Two trusts, actually. One-thousand pounds sterling was provided to the city of Boston, where Franklin was born, and one-thousand pounds sterling was given to Philadelphia, the city that is most commonly associated with Franklin as his home. Both funds were specified to be held and invested, in a specific manner, and maintained for two-hundred years. A significant amount of time, certainly. But Franklin wasn't looking for returns that could be looked down on as small potatoes. He was looking to shake the world. And he did. He has. He continues to, and will for years to come.
You see, Franklin's $4,000 investment has grown to millions of dollars in the interim. The funds he put away for posterity have done exactly what he hoped they would do. And through careful management, they have continued to grow, and expand in value through good times and bad.
Now admittedly, most of us don't think two-hundred years into the future – and most of us don't have massive estates like Mr. Franklin had. But almost all of us can find a way over the course of our working lives to put away a few dollars in the hopes that we can make the lives of our children and grandchildren more comfortable and satisfying than ours may have been.
If Franklin's Will proves anything, it is a tangible demonstration of how a well intentioned gift, well managed, well planned, and well executed, can change the lives of generations to follow.
It's something to think about, isn't it?
Benjamin Franklin exercised far more farsightedness in his estate plan than most of us feel the need for. But Franklin did reveal the powerful benefits to be gained from well thought out plans. His clever employment of the principal of compounding into his estate plan is admired to this day. Bravo to Benjamin Franklin – for executing an estate plan that has spanned several centuries. I am available to assist you with an estate plan to span a decade or two, and I would enjoy the challenge of assisting you with an estate plan for several centuries……if you wished to follow the lead of Benjamin Franklin.
Tuesday, March 22, 2011 Disabled and no Medicare to help!
There is a “gap” in Medicare coverage for those who are disabled and under 65. Richard Wohltman describes his concern about this “gap” below. Wohltman and I are both members of WealthCounsel – a nationwide Community of Estate Planning Practitioners. He is located in Alexandria, VA and I find his views valuable, because he is frequent lecturer on Estate Planning and related issues. And he is also a contributing author of Ways & Means - Maximize The Value of Your Retirement Savings.
"More than 50 million people in the United States have disabilities, a number that is growing rapidly as the population ages. Experts say disability will soon affect the lives of most Americans." Patricia Bauer.
If you are unlucky enough to suffer a disability when you are under 65, you may find that Medicare is the only way your health care costs can be paid. If you or a loved one becomes disabled and are unable to work, you may be extremely frustrated to discover that there is a long delay before you are qualified to receive Medicare assistance. The general waiting period is two years after they start receiving Social Security Disability Income.
Andy Hook is a respected elder law attorney in Virginia who wrote about this dilemma in his article "Waiting for Medicare" in the September 17, 2010 edition of the Oast and Hook News.
"A recent Kaiser Health News article addresses the issue of Medicare and persons younger than 65 years of age who have disabilities. Under current federal rules, such persons are not eligible for Medicare until two years after they start receiving Social Security Disability Income. . . . Congress created the waiting period in 1972 when Medicare was expanded to cover persons with disabilities. The waiting period was designed to control costs and to ensure that only those with ongoing, severe disabilities received Medicare coverage. According to the Kaiser Family Foundation, approximately seventeen percent of Medicare’s 47 million beneficiaries receive disability benefits."
Andy notes that the waiting period is shorter for people with certain specified disabilities, many patients face extreme financial hardship during the extended waiting period. The new health care program may eventually remove barriers for patients to be eligible for private health insurance, the only answer to this unhappy situation is in Congress' hands.
"Edmund Haislmaier, a senior policy research fellow at the Heritage Foundation, said that eliminating the waiting period “is always going to be an issue in Congress. Some of it is money, some of it is politics, too. For members of Congress, irrespective of party or where they stand on the issue, it’s kind of all-or-nothing because if they did it for some diseases, they’re immediately going to be inundated with ‘Why didn’t you do it for us?’” Some groups, however, such as the Huntington’s Disease Society of America, are asking Congress for specific waivers from the waiting period for their diseases. They believe it may be more politically feasible to press for relief for specific diseases, because the cost of doing so would be less than the cost of across-the-board relief."
You can find Andy's complete article at "Waiting for Medicare"
I guess we all assume that health care is something we will be able to obtain if we are disabled. I know that I was upset after reading Andy's article. I think you will be too.
Your local elder law attorney may be able to help you find alternatives and opportunities if you or a loved one has to face this unfortunate situation.
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The fact that my colleague, Richard Wohltman, finds this information upsetting surely means that you may be unaware of this “gap” in Medicare coverage. Please contact me if you have questions….or please comment on this posting.
Tuesday, March 15, 2011 How to Eat an Elephant
Aah, it is the age old conundrum. How to eat an elephant? It is a much used description for the large and seemingly undoable challenges we all face. In our legal practice, it is often the best way to describe the challenge of estate planning. It’s not a simple fast foot dish to take on. Instead, estate planning is the proverbial “elephant” and the successful plan will address your estate plan much like the old “how to eat an elephant answer…….you take it one bite at a time.”
Estate planning is often viewed as the “elephant” challenge for many people. And as an attorney, it is my job to help turn the “elephant” into bite sized tasks. And advise on where to start and where to take the next bite. Since one of the most common comments from a client is, “I just don’t know where to start”, I knew we needed to talk about “eating the elephant.”
You know the old saying, “How do you eat an elephant?” One bite at a time. Most people don’t know how to prepare the elephant (estate planning). After my discussion with Bill and Sally, they understood what it was to create a process where you can reduce the different elements of estate planning into bite sized pieces. This allowed them to take them on, one element at a time – dealing with those that were most pressing first. After they understood it was “one bite at a time,” you could feel a huge “sigh of relief” instantly hit the room.
Just like an elephant, it might take a while to eat it one bite at a time. But with the right plan and persistence, Bill and Sally eventually saw the successful (and less stressful) result. The key is to approach it with a bite sized view of the challenge rather than facing a daunting elephant-sized single project. There is a great article talking about the ways that businesses (as opposed to estate plans) use this approach to take on these types of elephant issues. The article is by E-Myth, and you’ll find it at this location, " How to Eat an Elephant" - might give you some interesting perspectives on applying the “elephant eating solution” to your other business situations. As for elephants, they really aren’t that hard to eat… Wednesday, March 09, 2011 Estate Planning for the rest of us
My WealthCounsel colleague, Suzann Beckett, offers an answer to one of the most often-asked questions I encounter in social gatherings.
An acquaintance asked me about estate planning, not long ago. They weren't asking for professional advice, they were literally asking if I could explain what estate planning is, and how it might affect them. It's a good question, one that I wish more people knew the answer to.
First, it's worth knowing that estate planning is not limited to the DuPont's and Carnegie's among us. Admittedly, Bill Gates and Warren Buffet have amassed fortunes so large as to suggest that significant thought needs to go into the planning of their estates. But estate planning isn't just about money. It's also about security, philanthropy, and control of our own interests.
One aspect of estate planning includes our health care plans. Not only can estate planning help determine our eligibility for Medicaid benefits, it can also allow each of us to issue specific directives about our own future health care. Even if a health crisis leaves us unable to speak for ourselves at some point, our prior planning can provide documentation of our wishes, which enables us to maintain control of our own destiny, even if we are temporarily or permanently incapacitated.
In fact, our estate planning can extend to the appointment of a specific person to act as our health care representative, as well as our desire to donate organs upon your death. It isn't just about our money and holdings. It is in a very real sense about us, as people.
Yes, estate planning allows us to make decisions while in our prime that will come into play even after we are gone (see my previous post about Ben Franklin). And more importantly your decisions are legally binding on those who may, or may not agree with our wishes. Remember, this is your own estate and your own life you are planning to protect.
Beyond health care, estate planning allows us to designate who speaks on our behalf should the need arise. Entering into a power of attorney allows us to appoint the person we trust most to oversee our personal business if we are unable to conduct our affairs ourselves. Many people assume that we must appoint our lawyer when we issue a power of attorney. And you certainly can do that if you wish to. But you can also give that authority to your spouse, or a child, or a close personal friend, or anyone else you wish. A power of attorney is yours to give, or revoke, at your discretion. Estate planning can help you enter into, or terminate a power of attorney, on your terms.
Perhaps the most commonly known aspect of estate planning is the drawing up of a will. But even that can be more far-reaching than most people realize. You have the opportunity to not only decide what happens to your holdings after your death, you also have the chance to establish a trust if you wish to, so that you can provide for the care of a family member, or another charitable cause that is important to you. Trusts can also be used to minimize a tax burden, in some cases. Estate planning can even allow an individual to develop a strategy to avoid probate on some holdings. A practice that allows a well planned execution of our wealth, no matter how big or small, that keeps it all in the family, for lack of a better term – rather than running the entire contents of our lives through the court system before it is distributed to our heirs, or whomever we wish it to go to.
The assumption that only the very wealthy have any need, or the even the option of engaging in estate planning, is incorrect. Almost anyone who has something of value to leave behind can benefit from estate planning. And even those who do not have significant wealth can benefit in terms of health care planning.
Each and every one of us has a unique situation to deal with as we walk through life. There is no blanket answer or master plan that will work for everyone under every possible circumstance. Perhaps the practice of estate planning would be more readily understood of we called it Individualized Planning, instead?
It's worth thinking about, at least.
Many valid issues are raised in this posting. If you have questions related to any of the issues, please call me or leave a comment below, and I’ll get back to you.
Monday, February 28, 2011 "My Mother took care of me, so I'm going to take care of her.
I’m often asked the question, “What are the options for a baby boomer with aging parents?” I was pleased to see this posting by my fellow Wealth Counsel member Suzann Beckett practicing in West Hartford, CT . She offers one answer for the many baby boomers facing aging parents wishing to remain in their homes but lacking the financial means.
Medicare benefits without Life of Poverty
The New York Times recently ran an outstanding article, detailing the basics of Pooled Trusts. Most American's are not familiar with the term, or the tool – but thanks to the Times, a much larger audience had the opportunity to read about a means of caring for aging family members, while intelligently keeping the wolf away from the door.
The unfortunate reality for many of us is that a time may come when we can no longer manage to personally provide appropriate care for a loved one in our own home, or in their own home for that matter. But at the same time, we may not have the financial capacity to afford private care providers that would be able to fill the gap.
Pooled Trusts are designed to bridge that void.
Rather than reiterate the content of a well written and very informative piece, I will simply recommend that anyone with an elderly family member read this piece, if for no other reason than to gain some basic insight into an option that may be available and viable, in certain circumstances.
You can find the story on the Internet at:http://www.nytimes.com/2010/11/05/business/businessspecial5/05TRUST.html?_r=3&adxnnl=1&src=twrhp&adxnnlx=1289307765-CdcouVKW+F0EwVbdadQHMQ
As a woman who has faced these issues in my personal life, with my own family members, I am intimately aware of the emotional and financial drain that advancing age and health issues can impose on a family. In order to deal with these issues to the best of our ability, we need to be aware of our options, and informed regarding the pros and cons of each of those options. This story is a good step in the right direction on that count.
I am so pleased the New York Times published Tara Siegel Bernard's excellent article on this very important topic.
This is good information on one way that baby boomers can prevent their aging parent(s) from going into a nursing home. If this topic of “pooled trusts” is something that you would like to know more about, I am available to meet with you.
Tuesday, February 22, 2011 Compensating Caregivers
One in Seven Americans are Caregivers
There are some serious issues looming on the horizon for baby boomers. Almost one in seven Americans looks after a disabled person age 50 or older. Many compensated and many not compensated, but it is a rapidly growing number (the number has jumped 28% since 2004). It’s an emerging situation that needs the compensation element to be formalized for many.
In the recent November issue of Financial Advisor the article “Compensating Caregivers” quoted a 2009 survey found that 14.5% of the U.S. population – about one of every seven of us – is responsible for the care of a disabled person age 50 or over, up 28% since 2004. Increasingly, the elderly disabled are paying family members to care for them in family home. This raises a number of issues.
This article takes stock of the situation and urges caution and awareness. It may seem odd, unnecessary, or even heartless, but they advise that the arrangement with caregivers be legally formalized, reported, and in some cases even treated as employment. The reason is two-fold.
Firstly, by formalizing and documenting the arrangement, you make it legally acknowledged and transparent for both the care-giver and care-recipient. As the recipient of care, you may be able to claim an income tax deduction all or part of the payments as qualified medical expenses. Additionally, your payments will be well-documented, should Medicaid eligibility ever become an issue. Without this documentation, the unidentified transfer of funds to family members could be seen as an attempt to cheat the system.
Secondly, simply establishing a legal process for payment of care can help open up family dialogue, and raise awareness – especially among non-care-giving family members. Arrangements of this nature are bound to put stress on all parties, but dialogue, contractual understanding, and compensation can help smooth over difficulties for the care-receiver, the care-giver, and other family members. The care-receiver has a vital say in the arrangement, can avoid feeling like a “burden,” and remain a vital part of the family. Family members can discuss who is to administer care or how exactly they can support one another in fairly supporting the care-receiver. For that matter, too, sibling squabbles can be lessened when it comes to inheritance and estate arrangements if the family care arrangement is legally recorded.
I thank my WealthCounsel colleague in Nevada, Lizette Sundvick, for authoring this commentary on “Compensating Caregivers”.
Foresight, solid financial planning, and an awareness of the extent of any care arrangements are vital. I am always available to assist you with long-term care and other legal issues commonly associated with aging. You are welcome to give me a call to schedule a consultation, or leave a comment below this post, and I’ll share the dialogue with all.
Monday, April 05, 2010 Impacts of Staying Older Longer
It’s common knowledge that people these days are living longer than ever, with life expectancy approaching 80 years of age (especially for women), and over-85-year-olds being the fastest growing segment of our population for some time now. Now a new study by the prestigious MacArthur Foundation says that we ain’t seen nothing yet — that the mid-21st century is going to see men and women routinely living into their late 80s and early 90s, respectively, and 100-year-olds numbering nearly 2 million!
Richard Peck of SANAPSeniors.com gives his opinion of the impacts of this longevity revolution at:
http://www.snapforseniors.com/Blogs/tabid/417/EntryId/25/Staying-Older-Longer.aspx | |
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Located in Pelham, AL the attorneys of Bailey & Holliman Estate Planning Law Firm assist clients With with Estate Planning, Advanced Estate Planning, Wills and Trusts, Elder Law, Pet Trusts, Special Needs Planning and Veterans Benefits in Birmingham, Fairfield, Pleasant Grove, Bessemer, Gardendale, Pinson, Helena, Alabaster, Maylene, Chelsea, Oxford, Weaver, Alexandria, Jacksonville, Heflin and Edwardsville in Shelby County, Jefferson County, Calhoun County and Cleburne, County.
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